Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States

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Responding to a Resurgent Russia

wwwwwwwwwww

Vinod K. Aggarwal

●

Kristi Govella

Editors

Responding to a Resurgent Russia Russian Policy and Responses from the European Union and the United States

Editors Vinod K. Aggarwal Department of Political Science Haas School of Business University of California Berkeley, CA, USA

Kristi Govella Department of Political Science University of California Berkeley, CA, USA [email protected]

Berkeley APEC Study Center University of California Berkeley, CA, USA [email protected]

ISBN 978-1-4419-6666-7 e-ISBN 978-1-4419-6667-4 DOI 10.1007/978-1-4419-6667-4 Springer New York Dordrecht Heidelberg London Library of Congress Control Number: 2011941361 © Springer Science+Business Media, LLC 2012 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

Preface

Following the collapse of the Soviet Union, the United States emerged from the Cold War as the dominant power on the globe. Since that time, however, other countries have come to challenge American supremacy. The so-called BRIC countries of Brazil, Russia, India, and China are often seen as the rising powers that will alter the landscape of the global political and economic system. This book focuses on one key country, Russia, in the context of a larger project on the transformation of the international system. After the end of the Cold War, Russia emerged as the successor state of the former Soviet Union. Yet while it continued to possess a nuclear arsenal that put it on par with the United States, Russia experienced dramatic domestic political change, social turmoil, and economic decline. With increasing inflation, foreign debt, and budget deficits, compounded by lack of law and order, loss of central control over the periphery, conflicts in Chechnya, rampant corruption, chronic political instability, and a severe financial crisis, Russia’s future looked extremely perilous. Yet over the last decade, it has reemerged as a key international player, driven by a recentralization of power under former president Vladimir Putin, the current prime minister of Russia. Russia’s resurgence has raised concerns, particularly in the United States and the European Union, and created uncertainty about its integration with the Western world. The terms of Russian relations with both the US and the EU have shifted fundamentally since the end of the Cold War, and it is time for scholars to begin looking for new ways to analyze relations between these key actors. This book focuses on two central questions. First, what factors explain and characterize Russia’s resurgence over the past decade? Second, how is the relationship between the European Union and the United States vis-à-vis this rising power likely to evolve? The answers to these questions have important implications for the viability of the current international economic and political order. This project benefited from generous grants from the EU Center of Excellence and the Institute of Slavic, East European and Eurasian Studies at the University of California, Berkeley, CA. The funds we received allowed us to host a conference with all of the authors of the chapters in this volume, and most importantly, to get v

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Preface

feedback from discussants and observers that helped the writers to revise their papers for this volume. Theocharis Grigoriadis played a crucial role in the early planning stages of this conference. At our meeting in Berkeley in April 2009, the participants benefited from the insightful comments of Sener Akturk, Sarah Garding, Danielle Lussier, Bart Watson, Theocharis Grigoriadis, Gail Lapidus, and Ned Walker. This meeting provided opportunities for interaction that also helped us to build enduring ties among scholars that geographically span more than half the globe. The Berkeley APEC Study Center staff proved crucial support throughout the project and book manuscript preparation. In particular, a number of undergraduates who work at the center as part of the Berkeley Undergraduate Research Apprenticeship Program provide invaluable assistance at all stages. We are particularly grateful to Kathy Bowen, Andrew Boyce, Michelle Chang, Daniel Chen, Cindy Cheng, Lauren Dansey, Ren Yi Hooi, Cindy Hwang, Do-Hee Jeong, Cindy Li, Robert Nelson, Alexander Newhall, Michelle Tan, Viola Tang, and Peter Volberding for their work. In preparing the final manuscript, Alexsia Chan and Sara Newland, Project Directors at BASC, helped to shepherd the work along, and we are grateful to them for their help. We are also indebted to the Ron and Stacy Gutfleish Foundation for their generous annual contributions to support BASC’s work. Finally, we would like to thank Jon Gurstelle of Springer Verlag for his help and support. We, of course, remain responsible for any errors or omissions. University of California Berkeley, CA, USA

Vinod K. Aggarwal Kristi Govella

Contents

1

Introduction: The Fall of the Soviet Union and the Resurgence of Russia ................................................................. Kristi Govella and Vinod K. Aggarwal

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How Russia Sees the World ..................................................................... Mikhail Rykhtik

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US–Russia Relations in the Post-Western World .................................. Andrei P. Tsygankov

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Russia’s Integration into the Global Economy: The Route to Geopolitical Harmony ...................................................... Christopher Granville

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Nuclear Power Contracts and International Cooperation: Analyzing Innovation and Social Distribution in Russian Foreign Policy ........................................................................................... Theocharis N. Grigoriadis Reformatting the EU–Russia Pseudo-Partnership: What a Difference a Crisis Makes .......................................................... Pavel K. Baev

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Meeting the Russian Challenge in the Obama Era ............................... Robert Legvold

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Russian Foreign Policy: Challenging the Western Liberal International Order?.................................................................. Kristi Govella and Vinod K. Aggarwal

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Index ................................................................................................................

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Contributors

Vinod K. Aggarwal is Professor of Political Science, Affiliated Professor at the Haas School of Business, and Director of the Berkeley APEC Study Center at the University of California at Berkeley Pavel K. Baev is Research Professor at the International Peace Research Institute Oslo Kristi Govella is Ph.D. candidate in Political Science at the University of California at Berkeley Christopher Granville is Managing Director of Trusted Sources Theocharis N. Grigoriadis is Ph.D. candidate in Political Science at the University of California at Berkeley and Ph.D. candidate in Economics at Saint Petersburg State University Robert Legvold is Professor of Political Science at Columbia University Mikhail Rykhtik is Professor at State University of Nizhni Novgorod Andrei P. Tsygankov is Professor of International Relations and Political Science at San Francisco State University

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Abbreviations

ABM BTC BTE BRIC BRICS CDM CFE CIS CPC CSTO EU FDI FSS GDP IAEA INF ITER NATO NGO NPT NSC OECD OSCE PCA PSA RAO UESR RTS RSFSR SCO

Anti-Ballistic Missile Baku–Tiblisi–Ceyhan Pipeline Baku–Tiblisi–Ezarum Pipeline Brazil, Russia, India, and China Brazil, Russia, India, China, and South Africa Clean Development Mechanism (Kyoto Protocol) Conventional Forces in Europe Commonwealth of Independent States Caspian Pipeline Consortium Collective Security Treaty Organization European Union Foreign Direct Investment Federal Security Service Gross Domestic Product International Atomic Energy Agency Intermediate Range Nuclear Forces Treaty International Thermonuclear Experimental Reactor North Atlantic Treaty Organization Non-Governmental Organization Nuclear Non-Proliferation Treaty National Security Council Organization for Economic Co-operation and Development Organization for Security and Cooperation in Europe Partnership and Cooperation Agreement Production Sharing Agreement Unified Energy System of Russia Russia Trading System Russian Soviet Federative Socialist Republic Shanghai Cooperation Organization

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SMEs START UK UN UNOMIG USSR WTO

Abbreviations

Small and Medium Enterprises Strategic Arms Reduction Treaty United Kingdom United Nations United Nations Observer Mission in Georgia Union of Soviet Socialist Republics World Trade Organization

Chapter 1

Introduction: The Fall of the Soviet Union and the Resurgence of Russia Kristi Govella and Vinod K. Aggarwal

1.1

Introduction

Much has happened in the two decades since the end of the Cold War. In the immediate aftermath of the fall of the Soviet Union, Russia went through a period of dramatic domestic political change and uncertainty in the foreign policy arena. A country that was once a superpower in a bipolar world began to doubt its place in the international system – and not without reason: the collapse of the USSR left Russia in a state of economic, political, and social turmoil, marked by declining economic output and increasing inflation, foreign debt, and budget deficits. Other problems included lack of law and order, loss of central control over the periphery, conflicts in Chechnya, rampant corruption, chronic political instability, and a severe financial crisis. At the start of Vladimir Putin’s presidency, the country’s share of world GDP had fallen to just 1.5%, in contrast to the 21% share held by the United States (Legvold 2001). Moreover, Russia’s economic and political transition during the 1990s was fraught with complications and disappointments. The last decade, however, has witnessed Russia’s reemergence onto the international scene, as well as a recentralization of power under former president Vladimir Putin, the current prime minister of Russia. Although the global economic recession that started in 2008 has made Russia’s position look somewhat weaker, Russia today is undeniably richer and more stable than it was at any point during the 1990s. Russia has also developed a much more assertive foreign policy over the past decade. Its resurgence, as might be expected, has been met with ambivalence from the United States and the European Union, particularly when viewed in light of concerns over Russia’s creeping authoritarian tendencies. While elements of the Cold War undoubtedly continue to define Western–Russian interaction, the terms of

K. Govella (*) • V.K. Aggarwal University of California, Berkeley, CA, USA e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_1, © Springer Science+Business Media, LLC 2012

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K. Govella and V.K. Aggarwal

Russian relations with both the United States and the EU have shifted fundamentally in a number of important ways, and it is time to begin looking for a new paradigm to describe relations between these actors. This book looks at the events of the post-Cold War period and focuses on two central questions. First, what factors explain and characterize Russia’s resurgence over the past decade? Second, as Russia reasserts itself in an international system still governed by a “Western” conception of order drawn from liberal models of capitalism and democracy, how is the relationship between the European Union and the United States vis-à-vis this rising power likely to evolve? The answers to these questions have important implications for the viability of the current international economic and political order. In order to address these issues, we bring together a diverse set of country experts from Russia, Europe, and the United States to analyze three main themes: Russia’s own perception of its rise and its changing relations with the West; Russia’s role in the international political economy; and responses to Russia’s resurgence by the EU and the United States. This introductory chapter provides a general overview of Russia’s domestic and foreign policy during the post-Cold War period. We begin by taking a look at the turbulent political and economic reforms of the 1990s. Then, we turn to the factors driving Russia’s resurgence in the 2000s and the changes in its foreign policy during this time period. We also briefly consider the ramifications of the global economic crisis that began in 2008. In concluding, we outline the chapters that form the body of this book, a set of detailed examinations of economics and security written by experts on Russian, American, and European foreign policy. We reserve our discussion of Russian relations with the United States and the EU for the conclusion of this volume.

1.2

The Collapse of the Soviet Union and the Resurrection of Russia

The end of the Cold War took academics and politicians alike by surprise. As the Soviet Union’s reign came to an abrupt end, Western attention drifted away from Russia. The United States began to ponder what it meant to be the sole superpower in the world, while the European Union turned its attention to moving its integration process forward. Meanwhile, Russia embarked upon a dramatic and often traumatic process of economic and political reform. Much of the academic literature during the 1990s focused on domestic political developments within Russia – and indeed, there was much to talk about. The early post-Soviet period was a time of relative political openness. Yet, rather than building on the gains of the late Mikhail Gorbachev and early Boris Yeltsin periods, Russian democracy faltered. Yeltsin’s political choices and weak leadership played an important role in this process, as did the adoption of a “superpresidential” constitution, which put in place the inauspicious framework for a formidable president and a relatively ineffectual legislature – a framework that, along with a rather weak federal system, paved the way for Vladimir Putin to

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Introduction: The Fall of the Soviet Union and the Resurgence of Russia

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centralize power (Colton 1995; Colton and Skach 2005; Fish 2005; Shleifer and Treisman 2000). In addition, Russian democracy was inhibited by problems such as electoral fraud, weak civil society, and an environment that constricted the development of strong, independent parties (Fish 2005; Hale 2005; Howard 2003; Kitschelt et al. 1999). Contrary to early discussions about the inherent incompatibility of Russian culture with democracy, recent research has embraced the view that the failure of the Soviet experiment created a social environment where it was perfectly rational for Russian citizens and elites to make short-term political choices that ended up being problematic for democratic consolidation (Hanson 2007). Economically, Russia initially embarked upon a similarly ambitious program of “shock therapy” and an embrace of Western-style capitalism after the end of the Cold War. Yet, as with its political transition, by the end of the 1990s it was apparent that Russia’s attempt at economic liberalization had proven to be destructive, leading some analysts to retreat from their earlier enthusiasm for radical economic transformation (Zweynert 2007). Russian reforms started from the mistaken assumption that liberalization and privatization would create a critical mass of actors who would support these reforms and that these actors would begin to demand the development of necessary market institutions such as property rights protections and enhanced rule of law (Hellman 2002). But without strong institutions, privatization and liberalization led to predation by former managers and local officials, and the resultant economic insecurity negatively affected investment and depressed capital formation (Buiter 2000; Frye 2002; Roland 2002; Solnick 1996). Problematic economic reform also had negative consequences for the aforementioned political reforms, though analysts disagree on the precise causal mechanism. Some fault excessively rapid economic liberalization for Russia’s democratic deficit, while others maintain that insufficient liberalization was the problem.1 Much less attention was paid to Russian foreign policy during this period, partially because despite its long period at the helm of the Soviet Union, Russia had emerged as a new nation that was unsure of its own interests and boundaries. Under these conditions, “the things that international relations theory tends to take for granted – states and interests, for example – are themselves problematic” (Holloway 1995:282–283) In particular, the Russian state was in a transitory and weakened condition, leading the government to focus on its pressing domestic problems and the reforms described above. Russia’s identity and its perception of its relationship with the West emerged as a major theme throughout the foreign policy debates of the 1990s. A number of scholars argued that the new Russia would be more open to the West now that it was freed of its Cold War-era constraints, pointing to Russia’s historical fascination with the West and the potential economic gains from closer relations with the latter (Kozyrev 1992; Simes 1991–1992). Yet others looked at Russia as historically imperialist and aggressive and predicted the emergence of a more isolationist or unilateral foreign policy (Beissinger 1995). Moreover, some believed that public sentiment might force 1

For scholars supporting the former argument, see, for example, Cohen (2000), Klein and Pomer (2001), Medvedev (2000); and Reddaway and Glinkski (2001). For an example of the latter, see Fish (2005).

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the government to become more assertive as the Russian populace began to balk at too many concessions to the West (Arbatov 1993). Russian foreign policy went through several stages in the 1990s. The first was marked by “liberal internationalism,” when Russia embraced a generally pro-Western approach under Russian foreign minister Andrey Kozyrev, which seemed to confirm hopes of increased Russian openness to the West (Mankoff 2009). In early 1992, Kozyrev announced that the new Russian foreign policy would make a marked departure from Soviet-era foreign policy. Instead of international class interests, it would be based on Russia’s national interests and on democratic principles that would lead to peaceful policies (Curtis 1996; Lynch 2001). Indeed, for the first two years of the country’s existence, Russian foreign policy was generally low-key, and it often supported Western positions on issues such as international conflicts. This pro-Western and generally benign stance, however, came increasingly under fire as conflicts between the legislative and executive branches, as well as between various bureaucracies, erupted over foreign policy goals and the means of implementing them (Arbatov 1993). Russian foreign policy entered a second stage that proved to be much more ambivalent about the West. The Duma moved further to the right. Hardline factions of Eurasianists and ultranationalists as well as Communists gained power vis-à-vis the “Atlanticists”; these factions opposed Kozyrev’s approach and exercised substantial influence over Yeltin’s foreign policy (Freedman 1998; Sergounin and Subbotin 1999). By 1993, it became clear that Russia was not going to be easily integrated into the Western community of nations. Yeltsin increasingly resisted US foreign policy initiatives, especially in the Balkans. In September 1995, Moscow made a series of threats toward the CIS states with respect to resources and territory in the Caspian Sea, making it clear that Russia would not accept decreasing influence over its neighbors. There was also tension between Russia and the Baltic states, including threats from the former about protecting Russians in the “near abroad.” Russia began to face increasing criticism from the West for these policies, its handling of the First Chechen War, and its growingly apparent drift away from democracy. Russian and Western policies diverged even more sharply after the appointment of Yevgeniy Primakov as foreign minister in 1996, and a desire to reassert Russia’s international independence from the West marked a third stage in Russia’s foreign policy. An element of etatism increasingly dominated Russia’s geopolitical worldview in the mid- to late-1990s, as Moscow embraced the centrality of the state in economic and political life (Mankoff 2009). Russia rejected integration with the West and its institutions as westernizing movements led by those such as Boris Yeltsin, Yegor Gaidar, Anatoly Chubais, and Andrey Kozyrev collapsed. In addition, Moscow viewed the bombing of Kosovo and Serbia despite its fierce opposition as a slap in the face, further contributing to its disenchantment with the West. Primakov sought to establish Russia as a regional hegemon within Eurasia, limiting the influence of the United States in the former Soviet states. His approach found wide-ranging support among the Russian elite during the mid-1990s, and it continued to inform Russian foreign policy into the next decade.2

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For more about the influence of Primakov’s ideas, see Mankoff (2009).

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5

Explaining Russia’s Rise in the 2000s

As Russia moved into the 2000s, it continued to pull away from the West as it sought to regain the power and prestige it had lost at the end of the Cold War. Vladimir Putin’s rise to power helped to push this process forward, partly due to his ability to consolidate his domestic political power. By the late 1990s, Russia had fallen into political disarray, and its struggling economy was further shaken by the 1998 financial crisis and ruble devaluation. Moreover, citizens had come to be deeply disillusioned with “democracy,” equating it with the political, social, and economic turmoil that came to characterize the Russian system during this period. Amidst this chaos, Putin was able to exert strong leadership that appealed to the populace. He also adopted a number of measures to further centralize power under the Russian presidency and reestablish control over the periphery. For example, federal and regional governments were restructured such that appointments, rather than elections, became the preferred method for bringing individuals into government (Hahn 2003; Stoner-Weiss 2006). A variety of checks and balances within the political system were eliminated, limiting the ability of the Russian legislative and judicial branches to challenge the Kremlin (Hendley 2002). Traditional sources of foreign policy influence such as the Ministry of Foreign Affairs and the Security Council were marginalized. Economically, there were clear efforts to place strategic economic sectors under the control of the state, with the Yukos affair being a particularly negative and highly publicized episode in this process.3 With the political opposition marginalized and government authority recentralized, Moscow grew more assertive. Putin’s initial electoral victory and his subsequent 8-year presidency marked the revival of Russian confidence on the world stage. Putin’s foreign policy was influenced by and projected a sense of renewed Russian strength, and as time went on, a feeling of grievance with the West (Breslauer 2009). Russia’s 2000 Foreign Policy Concept and National Security Concept were early signs of a more aggressive and confrontational worldview, as was Moscow’s attempt to wrest control of the Kerch Strait from Ukraine in 2002. This was not without provocation: NATO expansion, the “color revolutions” in the CIS and Balkan states, American withdrawal from the Anti-Ballistic Missile treaty, and the invasions of Iraq and Afghanistan by the United States reinforced Russia’s interest in a multipolar, rather than unipolar, world (Mankoff 2009:19). Russia’s new foreign policy evoked elements of imperial and Soviet tradition and manifested in domestic displays such as Putin’s revival of Soviet-style military parades in Red Square.4 Another signal of Russia’s turn from the West came in 2006, when Putin’s deputy head of administration Vladislav Surkov floated the term “sovereign democracy,” in part as an assertion of Russia’s right to develop its own domestic and foreign policy independent of the West.

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For an overview of the causes and implications of the Yukos affair, see Tompson (2005). Andrei Tsygankov also discusses Kremlin-led actions against Russian oligarchs in Chapter 3 of this volume. 4 Stent (2008) argues that Russia’s new foreign policy is a mix between restoration and revolution.

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In addition to Putin’s leadership, Russia’s economic recovery played a major role in driving its resurgence.5 As the country recovered from its chaotic transition to a market economy in the 1990s, domestic stability and growth spilled over to give Russia more confidence on the world stage. The country experienced strong economic growth, averaging an annual growth rate of 6.7% from after the 1998 ruble collapse until 2007, with the most dynamic sectors including construction, transport and telecommunications, retail and wholesale trade, and financial services (Oliker et al. 2009). This translated into extraordinary increases in personal incomes and consumption; per capita GDP grew from $5,914 in 1999 to $13,216 in 2006.6 Part of this stemmed from increased efficiency resulting from the transition to private ownership, in addition to the creation of new businesses in mobile telecommunications, retail trade, and financial services. Russia’s relations with the EU grew especially close, with the EU buying half of Russia’s exports and supplying over two-fifths of its imports. The most important pillar of Russia’s economic recovery has been its boom in earnings from oil and gas exports. The rise of world crude oil prices in the late 1990s and early 2000s promoted the resurgence of the Russian oil industry (Hill 2004). Earnings from petroleum, gas, and refined-oil product exports rose from $28 billion in 1998 to $217 billion in 2007 (Oliker et al. 2009). High energy prices allowed Russia to build up its currency reserves and start repaying its foreign debts (Trenin 2006). Russia’s oil and gas exports allowed it to increasingly allocate funds towards its military forces and provided it with the leverage to exert pressure on its customers. However, while oil and gas have played an important role in boosting Russian exports and increasing budget revenues via various taxes, their part in economic growth is subject to some debate. Roughly two-thirds of Russia’s oil and gas revenue have been put in its stabilization fund and invested in the US Treasury products and other foreign assets. Thus, while these funds played a major role in cushioning Russia’s economic decline at the end of 2008, they have not directly spurred economic growth. Rather, some argue that the key drivers of Russia’s economic growth have been increases in productivity, the expansion of previously underutilized sectors, and increases in domestic private consumption (Ahrend 2006; Oliker et al. 2009; Tabata 2006). However, energy revenues also affected some of these factors themselves; for example, high oil prices generated rapid income growth, which in turn helped to fuel consumer spending (Gaddy and Ickes 2010). Putin’s consolidation of power also facilitated the adoption and implementation of important tax reforms that improved the Russian state’s extractive capacity and its fiscal health (Appel 2008). Russia suffered serious economic setbacks as a result of the 2008 global financial crisis, with its GDP dropping 8% in 2009 and its stock market falling by 80% from May to October 2008.7 It also experienced a sharp reversal in capital flows, from an inflow of $81 billion in 2007 to an outflow of $148 billion within a year (Sutela

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Christopher Granville provides a detailed analysis of Russia’s post-Cold War economic recovery in Chapter 4 of this volume. 6 OECD (2010). Amounts are denoted in US dollars at current prices at the time of writing. 7 For a comprehensive review, see Åslund et al. (2010).

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2010). Russia responded by promoting a gradual devaluation of the ruble, lower interest rates, and a large stimulus package. Together with the upturn in external demand, in 2010 it experienced a return to growth with an estimated rise in GDP of 3.5% and a predicted rise of 5% for 2011.8 Yet, compared to India and China, its recovery remains slow, and it faces significant problems with its budget deficit, continued reliance on energy exports, and domestic corruption. Politically, power continues to be strongly centralized under the political duo of Vladimir Putin and Dmitri Medvedev, which is supported by the strong pro-presidential “United Russia” party. When Putin stepped down from the presidency at the end of his second term in May 2008 and handed the office to Medvedev, his handpicked successor, Putin became prime minister within the very strong presidential system that he helped create. While Medvedev is generally thought to be constrained by his personal and political loyalty to Putin and the loyalty of those around him, there has been continual speculation about divisions between the two, particularly as Putin’s impending decision about whether to run for another presidential term grows near. Medvedev has shown that he is willing to punish those who question him publicly, as seen in his dismissal of the politically powerful Moscow mayor Yuri Luzkhov in September 2010.9 It seems doubtful, however, that such squabbles will alter the strong centralization of power that has come to characterize Russia and to shape its foreign policy, and public support for the two remains high.10

1.4

Characterizing Russia’s New Foreign Policy

What characterizes Russia’s behavior as a “resurgent” power? Russia’s current foreign policy is focused on bolstering Russia’s prestige, supporting economic recovery and growth, and maintaining influence in its “near abroad.” Russia’s desire to restore its great power status has manifested itself in a number of different ways. For example, Russia has sought to be treated as an equal by its Western partners; the lack of such treatment has been a persistent source of Russian frustration with the United States and the EU. In forums where Russia is already recognized as an important power, such as in the UN Security Council, it has sought to maintain the exclusivity of those groupings. However, in other cases, it has challenged the current order by cultivating ties with rising powers such as China and espousing its support for a multipolar world. It has also tried to counter NATO expansion and other perceived encroachments through the promotion of alternative organizations such as the

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Available from . 9 Luzkhov criticized Medvedev’s decision to halt construction of a highway between Moscow and St. Petersburg and implied that Putin should return as president. 10 For an interesting look at voter attitudes toward Putin and Medvedev, see Hale and Colton (2010).

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Collective Security Treaty Organization and the Shanghai Cooperation Organization. These themes will be explored in greater detail in the conclusion and in the individual chapters of this volume; here we briefly address Russia’s limited military resurgence and its use of resource politics. Russia’s rise has been characterized by many Western observers in an aggressive light. At the heart of these assessments is apprehension that the Soviet menace of old might return. Russia is still one of the two great nuclear powers in the world, possessing nearly half of the world’s nuclear weapons. However, the modernization of Russian military forces has proceeded slowly; its core missile force is aging and its conventional military force is largely outmoded. Putin succeeded in reviving somewhat of the Russian militarist tradition and increasing military spending; from 2000 to 2008, its national security budget rose from 214 billion rubles to 1,017 billion (Savic 2010). From 2008, Russia began to acquire new military hardware such as nuclear submarines, strategic bombers, ballistic missiles, and tanks (Mankoff 2009). Its efforts appear to be focused on building a strong internal security apparatus and the military capacity to win small wars, which reflect the country’s most probable sources of danger: low-level internal conflicts and small-scale actions nearby (as in Georgia in 2008, as we discuss below) (Oliker et al. 2009). However, security budgets remain far below Soviet levels, and although Putin undertook some structural reform of the Russian military, serious problems with hazing, inadequate training, criminal behavior, and poor quality draftees remain (Herspring 2005; Stent 2008). As in the Cold War era, military conflicts involving Russia have been few and far between. Aside from the Balkan crises and the Chechen conflicts in the 1990s, Russia largely avoided military action until the summer 2008 Georgia crisis, which presented the international community with a troubling display of Russian power.11 This crisis rapidly escalated in July, with Georgia responding to Russian flights over the separatist province of South Ossetia by threatening to shoot down its planes. By early August, Russia responded to Georgia’s deployment of troops in South Ossetia’s capital, Tskhinvali, by launching an air attack on Georgian troops near the city of Gori, and then sending tanks into Georgia and engaging in bombing raids near its capital, Tbilisi. On August 15, President Saakashvili signed a ceasefire brokered by the EU, but Russia refused to withdraw its troops from South Ossetia and continues to have a military presence there at the time of this writing. Moreover, its recognition of South Ossetia and a second breakaway province, Abkahzia, has led to widespread international condemnation. Many analysts see Russia’s actions as a signaling effort to countries of the former Soviet Union of its interest in maintaining a sphere of influence in the region and countering the United States and NATO expansion. Aside from this military foray, however, Russia has largely sought to reassert its influence through diplomatic and economic means; Russia’s abundant oil and natural gas reserves have played a key role in this process. All of the chapters in this volume deal with the role of energy in Russia’s foreign policy. Russia has actively used its energy production and transportation systems to reassert its primacy in domestic and

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For an overview of the Georgia Crisis, see King (2008).

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international affairs, causing some analysts to evoke the term “resource nationalism” to describe Russian policy.12 This approach is partly a result of the close relationships between energy companies and the state (Poussenkova 2010; Ziegler 2010). In some cases, energy issues have drawn Russia into dialogue with its neighbors, particularly when the construction of new pipelines was involved. However, in other cases, Russia’s oil strategy has been to threaten other countries with increases in energy prices if they act in ways that are diplomatically unfavorable. This has tended to backfire, even in cases where countries were almost totally dependent on Russia, as seen in Russian relations with Georgia and Ukraine, for example. Russian–European energy contracts have strongly affected the broader relationships between these two regions. However, while Russia’s abundant resources and Europe’s energy demand make them natural trading partners, Russian rhetoric invoking potential cutoffs of energy resources has worried European customers. During his time in office, Putin was able to balance competing interests in the Russian foreign policymaking process or largely bypass them as a result of his centralization of power within the presidency. Medvedev now faces the challenge of consolidating his control over factional elite interests.13 Robert Legvold, Pael Baev, and Mikhail Rykhtik present preliminary analyses of Medvedev’s attempts to improve relations with the West in their chapters, and we also return to the subject in the conclusion to this volume.

1.5

The Outline of this Book

To provide a thorough examination of Russia’s post-Cold War resurgence, this volume brings together a number of country experts to discuss three main themes. The first part of the book deals broadly with how Russia sees the world, providing Russian perspectives on the country’s changing foreign policy. The second part looks at Russia’s role in the international political economy from two very different angles: trade flows and nuclear power regulation. Each provides an insightful lens on the contemporary Russian political economy and its consequences for both the Russian people and the international community at large. The final section of the volume deals with responses from Europe and the United States. In Chapter 2, Mikhail Rykhtik kicks off our examination of “how Russia sees the world” with an overview of Russia’s changing foreign policy outlook. He argues that, despite losing some of its financial security as a result of the global financial crisis, Russia should still be considered a resurgent power, partly because Russia’s power was never historically dependent on economic stability. Accordingly, Rykhtik delves into an examination of what he considers to be the four pillars of Russian

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See, for example, Domjan and Stone (2009). Mankoff (2008) provides a more detailed discussion of these camps, which he separates into ethnic nationalists, neo-imperialists, centrists, and Westernizers. 13

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power: geography, the socio-political system, natural resources, and nuclear weapons. He devotes the second portion of his chapter to a discussion of the different understandings of “security” held by Russia and the West, which he claims have led to misunderstandings, and concludes by outlining regional priorities of Russian foreign policy. In Chapter 3, Andrei Tsygankov looks at US–Russian relations since the end of the Cold War, with special attention to the period after the terrorist attacks of September 11, 2001. He argues that the United States needs to reengage Russia but emphasizes that doing so requires the United States to embrace a stance that is more respectful of Russian interests, given the “increasingly post-Western” state of the world. Tsygankov traces the respective strategic visions of the United States and Russia, focusing on their perceptions of political changes in the former Soviet region, security issues, and energy relations. The concluding section reflects on causes underlying the lack of cooperation between the United States and Russia and suggests possible ways to move forward. The second section of the volume addresses Russia’s place in the international political economy. In Chapter 4, Christopher Granville examines broader trade and capital flows such as strategic and portfolio investment, and cross-border lending. He argues that this less visible aspect of Russia’s role in the global political economy creates powerful underlying realities, as international companies, lenders, and financial investors have responded to these economic opportunities. Contrary to standard international perceptions, the trade and capital flows associated with Russia’s decade of domestic demand-driven growth make a positive contribution to the international economy, in the sense of contributing to global demand in a way that moderates economic imbalances. This pattern of Russian integration into the world economy has had the underestimated consequence of mitigating the deterioration seen since the mid-2000s in the country’s political relations with the EU and United States. Yet, Granville argues that the continuation of this trend in the new post-2008 global economic environment of recession and chronic crisis will require intensified net direct investment inflows into Russia, particularly in the energy sector. In Chapter 5, Theocharis Grigoriadis analyzes the political economy of nuclear power regulation in Russia and its implications for Russian foreign policy, specifically with regard to cooperation with the advanced and the developing world. Grigoriadis argues that nuclear power contracts are pivotal instruments of Russian foreign policy because they provide the innovation incentives necessary to facilitate sustainable development, contribute to social distribution by preserving low electricity prices, and consolidate Russian political influence in critical advanced and developing economies. He claims that Russia’s international business activity in the nuclear sector has concrete positive implications for its domestic economic policy. Moreover, the centralized nature of nuclear power regulation allows the Russian government to pursue nuclear alliances based exclusively on its material interests, without the interference of domestic or global regulatory norms. The third section of the volume looks at the flip side of relations with Russia, tackling these issues from both a European and an American perspective. In Chapter 6, Pavel Baev addresses the economic and security dimensions of the complex Russian–European

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relationship. He emphasizes the disjointed nature of Russia–EU political dialogue, particularly with regard to the Russian preference for dealing with the most powerful EU states and the complications presented by the accession of eight East European states to the EU in 2004. Baev then examines the balance of energy trade and economic ties between Russia and Europe more generally before assessing the security agenda with specific attention to the postwar landscape on the Caucasian front. In Chapter 7, Robert Legvold discusses the challenges of the US–Russia relationship in the Obama era. He begins by outlining different perspectives on the state of US–Russian relations. Legvold emphasizes the difference between “conflicting” and merely “different” interests, arguing that this distinction has important implications for the US–Russian relationship. He describes the general failure of past US administrations to fully understand the stakes involved in maintaining healthy relations with Russia or to have a clear strategic vision of what they would like US–Russian relations to look like in the future, also addressing the troubled past of strategic dialogues between the two countries. Legvold concludes by examining the Obama administration’s multidimensional and multilevel approach to US–Russian relations. Though the Obama administration can claim significant progress on its issues of priority (e.g., START, Afghanistan, Iran, nuclear nonproliferation), Legvold argues that whatever progress might be achieved may remain constrained by the difficult, elemental questions left unanswered about what the United States wants from its relationship with Russia and vulnerable to negative developments in the domestic or foreign policy of each country. In the conclusion, we draw together points from these chapters and devote our attention to a discussion of three aspects of Russia’s foreign policy. First, we consider Russia’s changing involvement with international institutions. Second, we analyze the current state of Russia’s relations with the West, examining specific issues in its dealings with Europe and the United States, respectively. Third, we consider Russian promotion of alternatives to the current international order through partnerships with other rising powers and with developing countries. We hope that this volume will contribute to the understanding of Russia’s continuing economic and political development as well as its relationships with other key powers. Given Russia’s importance to the global economic and security environment, understanding these issues remain a pressing concern for both analysts and policymakers. Acknowledgments The authors would like to thank Sarah Garding, Maria Vassilieva, and Theocharis Grigoriadis for their helpful comments and feedback. Kathy Bowen, Peter Volberding, and Robert Nelson provided valuable research assistance.

References Ahrend, Rudiger. 2006. Russia’s Post-Crisis Growth: Its Sources and Prospects for Continuation. Europe-Asia Studies 58 (1): 1–24. Appel, Hilary. 2008. Is It Putin or Is It Oil? Explaining Russia’s Fiscal Recovery. Post-Soviet Affairs 24 (4): 301–323.

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Arbatov, Alexei. 1993. Russia’s Foreign Policy Alternatives. International Security 18 (2): 5–43. Åslund, Anders, Sergei Guriev, and Andrew C. Kuchins, eds. 2010. Russia after the Global Economic Crisis. Washington, D.C.: Peterson Institute for International Economics. Beissinger, Mark. 1995. The Persisting Ambiguity of Empire. Post-Soviet Affairs 11 (2): 149–184. Breslauer, George. 2009. Observations on Russia’s Foreign Relations Under Putin. Post-Soviet Affairs 25 (4): 370–376. Buiter, Willem H. 2000. From Predation to Accumulation? The Second Transition Decade in Russia. Economics of Transition 8 (3): 602–622. Cohen, Stephen F. 2000. Failed Crusade: America and the Tragedy of Post-Communist Russia. New York: Norton. Colton, Timothy. 1995. Superpresidentialism and Russia’s Backward State. Post-Soviet Affairs 11 (2): 144–148. Colton, Timothy and Cindy Skach. 2005. The Russian Predicament. Journal of Democracy 16 (3): 113–126. Curtis, Glenn. 1996. Russia: A Country Study. Washington: GPO for the Library of Congress. Domjan, Paul and Matt Stone. 2009. A Comparative Study of Resource Nationalism in Russia and Kazakhstan. Europe-Asia Studies 62 (1): 35–62. Fish, Steven M. 2005. Democracy Derailed in Russia: The Failure of Open Politics. Cambridge, UK: Cambridge University Press. Freedman, Robert. 1998. Primakov and the Middle East. The State of Russian Foreign Policy and U.S. Policy Toward Russia. The Heritage Lectures (607). Available fromhttp://s3.amazonaws. com/thf_media/1998/pdf/hl607.pdf. Accessed 15 November 2010. Frye, Timothy. 2002. Private Protection in Russia and Poland. American Journal of Political Science 46 (3): 572–584. Gaddy, Clifford and Barry Ickes. 2010. Russia after the Global Financial Crisis. Eurasian Geography and Economics 51 (3): 281–311. Hale, Henry E. 2005. Why Not Parties in Russia?: Democracy, Federalism, and the State. New York: Cambridge University Press. Hale, Henry E. and Timothy Colton. 2010. Russians and the Putin-Medvedev “Tandemocracy”: A Survey-Based Portrait of the 2007–2008 Election Season. Problems of Post-Communism 57 (2): 3–20. Hahn, Gordon. 2003. The Impact of Putin’s Federative Reforms on Democratization in Russia. Post-Soviet Affairs 19 (2): 114–153. Hanson, Stephen E. 2007. Rationality, Structure, and Agency in Post-Soviet Russian Democratization. Perspectives on Politics 5 (4): 793–802. Hellman, Joel. 2002. Russia’s Transition to a Market Economy: A Permanent Redistribution? In Russia After the Fall, edited by Andrew Kuchins, 93–109. Washington, DC: The Brookings Institution Press. Hendley, Kathryn. 2002. Suing the State in Russia. Post-Soviet Affairs 18 (2): 122–147. Herspring, Dale. 2005. Vladimir Putin and Military Reform in Russia. European Security 14 (1): 137–155. Hill, Fiona. 2004. Energy Empire: Oil, Gas and Russia’s Revival. London: The Foreign Policy Centre. Holloway, David. 1995. The State of the Field: Soviet Foreign Policy. In Beyond Soviet Studies, edited by Daniel Olovsky, 269–286. Washington, DC: Johns Hopkins University Press. Howard, Marc. 2003. The Weakness of Civil Society in Post-Communist Europe. Cambridge: Cambridge University Press. King, Charles. 2008. The Five-Day War: Managing Moscow After the Georgia Crisis. Foreign Affairs 87 (6): 2–11. Kitschelt, Herbert, Zdenka Mansfeldova, Radoslaw Markowski, and Gabor Toka. 1999. PostCommunist Party Systems: Competition, Representation, and Inter-Party Cooperation. Cambridge, UK: Cambridge University Press. Klein, Lawrence R. and Marshall Pomer, eds. 2001. The New Russia: Transition Gone Awry. Stanford: Stanford University Press.

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Kozyrev, Andrei. 1992. Russia: A Chance for Survival. Foreign Affairs 71 (2): 1–16. Legvold, Robert. 2001. Russia’s Unformed Foreign Policy. Foreign Affairs 80 (5): 62–75. Lynch, Allen. 2001. The Realism of Russia’s Foreign Policy. Europe-Asia Studies 53 (1): 7–31. Mankoff, Jeffrey. 2008. Russian Foreign Policy and the United States after Putin. Problems of Post-Communism 55 (4): 42–51. Mankoff, Jeffrey. 2009. Russian Foreign Policy: The Return of Great Power Politics. Maryland: Rowman and Littlefield Publishers, Inc. Medvedev, Roy. 2000. Post-Soviet Russia: A Journey Through the Yeltsin Era. New York: Columbia University Press. Poussenkova, Nina. 2010. The Global Expansion of Russia’s Energy Giants. Journal of International Affairs 63 (2): 103–124. OECD. 2010. OECD Stat Extracts. Available from http://stats.oecd.org/Index.aspx. Accessed 14 August 2010. Oliker, Olga, Keith Crane, Lowell Schwartz, and Catherine Yusupov. 2009. Russian Foreign Policy: Sources and Implications. Santa Monica, Calif: The RAND Corporation. Reddaway, Peter and Dmitri Glinkski. 2001. The Tragedy of Russia’s Reforms: Market Bolshevism Against Democracy. Washington, DC: U.S. Institute of Peace. Roland, Gerard. 2002. The Political Economy of Transition. Journal of Economic Perspectives 16 (1): 29–50. Savic, Iva. 2010. The Russian Soldier Today. Journal of International Affairs 63 (2): 219–229. Sergounin, Alexander and Sergey Subbotin. 1999. Russian Arms Transfers to East Asia in the 1990s. Oxford: Oxford University Press. Shleifer, Andrei and Daniel Treisman. 2000. Without a Map: Political Tactics and Economic Reform in Russia. Cambridge: MIT Press. Simes, Dimitri. 1991–1992. Russia Reborn. Foreign Policy 85: 41–62. Stent, Angela. 2008. Restoration and Revolution in Putin’s Foreign Policy. Europe-Asia Studies 60 (6): 1089–1106. Stoner-Weiss, Kathryn. 2006. Russia: Authoritarianism Without Authority. Journal of Democracy. 17 (1): 104–118. Solnick, Steven L. 1996. The Breakdown of Hierarchies in the Soviet Union and China: A Neoinstitutional Perspective. World Politics 48 (2): 209–238. Sutela, Pekka. 2010. Russia’s Response to the Global Financial Crisis. Carnegie Endowment for International Peace, Policy Outlook, July 29. Tabata, Shinichiro. 2006. Observations on the Influence of High Oil Prices on Russia’s GDP Growth. Eurasian Geography and Economics 47 (1): 95–111. Tompson, William. 2005. Putting Yukos in Perspective. Post-Soviet Affairs 21 (2): 159–181. Trenin, Dmitri. 2006. Russia Leaves the West. Foreign Affairs 85 (4): 87–96. Ziegler, Charles. 2010. Neomercantilism and Energy Interdependence: Russian Strategies in East Asia. Asian Security 6 (1): 74–93. Zweynert, Joachim. 2007. Conflicting Patterns of Thought in the Russian Debate on Transition: 1992–2002. Europe-Asia Studies 59 (1): 47–69.

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Chapter 2

How Russia Sees the World Mikhail Rykhtik

We think with the heads of the others, And our hearts’ convictions are fragile, We speak European, but act Asiatic (Akulshina 2002:31)

2.1

Introduction

This quote was written in the mid-nineteenth century. More than a century has passed since then but the substance of Russia’s foreign policy has not changed. Russia’s foreign policy has traditionally given priority to Europe, and Russia has traditionally admired Western culture and its way of life. The elite, which determines foreign policy, has long chosen Paris, Berlin, and London over other centers of power. Yet, many in Russia feel chagrined that this orientation has not attracted more interest and appreciation from Western elite. Russians are a fairly emotional people, and seeing their enthusiasm unreciprocated like this has led many Russians to take offense. Under the leadership of President Vladimir Putin from 2000 to 2008, Russia reestablished much of its lost Soviet-era strength. This “new” status has made Russia a valuable partner. Medvedev’s Russia has started the very complicated process of redefining its role in international affairs. The process of redefinition is based on the achievements of Putin’s years, which makes the whole process very vulnerable. Russia in 2010 is different from Russia in 2008. The five principles of Medvedev’s foreign policy have been officially announced, which means that Russia has received an updated foreign policy doctrine. There are some factors which are important in order to understand how Medvedev’s Russia views the world. In order to understand this,

M. Rykhtik (*) Nizhny Novgorod State University, Nizhny Novgorod, Russia e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_2, © Springer Science+Business Media, LLC 2012

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one should understand Russia on its own terms, in its own context, in its own language, and in terms of its own political institutions and culture. This chapter is an attempt to interpret Russia’s changing foreign policy outlook. Even despite losing some of its financial security as a result of the global financial crisis, Russia should still be considered a resurgent power. I begin by examining the four pillars of Russia’s power: geography, the socio-political system, natural resources, and nuclear weapons. The second part of the chapter is devoted to discussion of the meaning of the term “security,” since different understandings of this concept have led to misunderstandings between Russia and the West. At the end of the chapter, I outline some regional priorities of Russian foreign policy.

2.2

Why a Resurgent Russia?

The global recession had many negative consequences for the Russian economy, but interestingly, the financial crisis did very little to affect the nature of Russian power more broadly. Russia has faced a slew of economic problems. Incoming foreign direct investment has reportedly dried up to just a few billion dollars.1 Russia’s two stock markets, the Russian Trading System (RTS) and the Moscow Interbank Currency Exchange (MICEX), have fallen since their highs in May 2008. Russia’s recent prosperity was mostly based on growing world fuel prices, and the economy was too dependent on the oil and gas exports that accounted for one-half to twothirds (depending on world fuel prices) of total Russian exports. As Popov stated, “Russia was unable to properly cope with the growing stream of petrodollars. In recent years it developed a typical ‘Dutch disease’; Russian growth was concentrated in resource industries and non-tradables (services). Increased fuel revenues were mostly used not for investment, but for personal consumption that more than doubled since 1999 (Popov 2007).” From an economic perspective, Russia in 2011 is much different from Russia in 2008. Despite these problems, however, Russia has remained a powerful country. Historically, Russia has not relied on economic stability as a foundation for political might, instead choosing to rely on many other tools in its kit. The following traditional pillars of Russian power are stronger and more relevant than ever: geography, the socio-political system, natural resources, and nuclear weapons. Despite the reality check that the economic crisis provided, Russia is doing its best to continue to pursue a broad, global foreign policy agenda. Russia is a self-sufficient country and one of the richest nations in the world. According to a presentation given by Osipov at the Second Sociological Congress in Moscow, Russia has all the necessary pillars to achieve Great Power status (Second Sociological Congress of Russia 2003:6–7). Due to the favorable economic

1

From . Stratfor 2008.

2 How Russia Sees the World

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environment at the beginning of the 2000s, Russia was able to restore its position in the world. Russia has 2.4% of the world’s population and 10% of the world’s territory. Russia has enough land to provide a sufficient standard of living for 450 million people – three times the number currently living in Russia. Only Russia has such a “margin of safety.” 21% of the planet’s natural resources – including 45% of the world’s natural gas, of its oil, and 23% of its coal – reside in Russia. For each inhabitant of Russia there are 0.9 ha of arable land (80% more than in Finland and 30% more than in the USA) (Second Sociological Congress of Russia 2003:6–7). Since the 1990s, Russia has become increasingly integrated into the world economic system.2 It became an active member of global institutions such as the International Monetary Fund (IMF), the G-8, and G-20. Russia has regarded negotiations on accession to the World Trade Organization (WTO) as a top foreign policy priority. Moscow has built special relations with the European Union and NATO. After September 11, 2001, Russia participated in the antiterrorist coalition, demonstrating its interest in building pragmatic relationships with the leading Western countries to stop the spread of international terrorism and weapons of mass destruction. From 2000 to 2007, Russia used its economic strength to revive its influence. There are many actions that are symbolic of Russia’s “revived influence.” For example, Russia put its national flag under the sea at the North Pole, declaring its right to the Arctic. It also announced plans to create a new command and control system and to construct a new air defense system by 2015. It started long-range aircraft flypatrols in the Atlantic and boosted its fleet to reestablish its presence in the world’s seas. Russia is also developing the Syrian ports of Tartus and Latakia in order to manage an expanded Russian naval presence in the Mediterranean and may possibly revive an anchorage in Libya and Yemen. In addition, new military exercises have taken place, some of them conducted jointly with China, and Russia has built new military bases along its border in an effort to secure it. In 2007, then-President Vladimir Putin proclaimed a moratorium on the Treaty on Conventional Armed Forces in Europe. These are only some examples of how Moscow is implementing its new agenda. While some of these moves may be mostly symbolic, when combined with a $300 billion military modernization program, they signal a much more ambitious Russian global posture. The overall size of Russia’s armed forces will slip modestly from just under 1.2 to 1 million men. More importantly, it will reconfigure the forces to eliminate many Soviet-era “phantom” divisions, which have generals but no troops. In their place, a smaller number of fully staffed units will be formed and equipped with modern weapons.3 Russia has started the very complicated process of redefining its role in international affairs. The process of redefinition is based on the achievements of previous years. It is impressive and based on concrete pillars. Even the economic crisis has not radically changed Russia’s vision.

2

The main consumers of Russian exports are Western nations, which provide Russia with goods, technology, credit, and investment. 3 Medvedev 2008.

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2.3

M. Rykhtik

Understanding Russia’s Foreign Policy Vision

In order to understand Russia’s vision for its foreign policy, one should understand the country on its own terms, in its own context, in its own language, and in terms of its own political institution and culture. There are some basic differences between Western and Russian foreign policy traditions. If one is going to understand Russia’s behavior and intentions, one needs to consider the impact of the following factors: geography, the socio-political system, natural resources, and nuclear weapons.4

2.3.1

Geography

Russia considers its current borders to be a weakness. Due to the lack of natural borders in the northwest, any threats originating from that area are considered very seriously in Moscow. Russia has always pressed westward on the northern European plain, while Europe has always pressed eastward, with EU and NATO expansion being examples of the latter. Russian experts are concerned with the Iranian-Afghan segment of their border, and there is a potential weakness along China’s western border as well. Due to its geographic location and relatively poor transportation system, Russia faces important strategic problems. If Russia were attacked along its entire periphery, it would be very difficult to protect its territory and the country would have difficulty mobilizing and deploying conventional forces. Taking into account the negative Russian official reaction to any base construction initiatives on the territory of Estonia, Latvia, Lithuania, Georgia, or Moldova, we can deduce one main characteristic of Russian strategy: the creation of deep buffers. In order to secure its territory, Russia will use all possible resources to expand as far west as possible. Its proclamation that CIS countries are a zone of “privileged interests” reveals Russia’s deep concern with recovering influence and effective control in the former Soviet Union. This suggests that Kremlin still admires the realist approach toward international relations. Russia’s hostile reaction to new initiatives to include Romania and Bulgaria in the ICBM development program proves that Russia will seek to create buffer zones beyond the boundaries of the former Soviet Union, which might be an obstacle during negotiation on strategic arms. Another factor that drives Russian foreign policy and its perception of security is a lack of useful seaports. Kaliningrad on the Baltic Sea is not connected to the main body of Russia. The Gulf of Finland freezes in winter, isolating St. Petersburg. The only true deepwater and warm-water ocean ports are Vladivostok and Murmansk, but these ports are too far from Russia’s core to be useful. Russia has to be very careful about protecting its transportation system, supporting state controlled companies responsible for railroads, channels, and seaports. Russia has had to use every available kopek to link its country together with an expensive road, rail, and canal network. Potentially, Russia could with its current borders become the center of a road junction between East and West, as well as North and South, but this would require a focused strategy and policy. 4

For more information about the importance of some of these factors, see Rykhtik 2009 or Friedman 2009:101–105.


2.3.2

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Socio-Political System

The events of the last decade have demonstrated what little influence society as a whole has on the conduct of policy in Russia. The Kremlin uses an iron fist to maintain domestic control. This control is seen in every aspect of Russian life: from one main political party ruling the country to the lack of a diversified media. This political strength is based on neither financial nor economic foundations. Rather, it is based within the political institutions and parties, and on the lack of a meaningful opposition. This has made Russia politically and socially strong, not in the sense that the people have had a voice, but in that the state has not been challenged. In particular, foreign relations have remained in the hands of the elite closest to the Kremlin. At present, there is a large gap between the opinions of the elite and that of the rest of society (Afanasiev 2009). That means Moscow can count on a stable populace and conduct foreign policy with little regard for public opinion. Russia’s neighbors (primarily members of the Commonwealth of Independent States (CIS)) cannot count on the same political strength. The stability of the Russian government and lack of stability in the former Soviet states and other regions has allowed the Kremlin to reach beyond Russia’s borders to influence its neighbors and proclaim that they are under Russia’s sphere of influence (Kuznetsova 2005). Demography also has a significant impact on the strategic culture of contemporary Russia. Many experts believe that Russia is facing a demographic crisis, as the current population of 144 million people is expected to decline to 112 million by 2050.5 Given Russia’s demographic trajectory, the Far Eastern and Siberian regions will likely struggle with severe depopulation, and the relative number of ethnic Russians will also decline. This might lead to a special migration policy for China and Central Asian states. Moreover, Russia’s ability to field a military may be called into question. A smaller conventional force may lead Moscow to increase its reliance on the Russian nuclear arsenal in order to rebalance the military equation and ensure territorial integrity.

2.3.3

Natural Resources

As mentioned previously, Russia houses 2.4% of the world’s population on 10% of the world’s territory, and it currently has enough land to provide a sufficient standard of living for three times the number of people currently residing on Russian territory. Natural resource abundance and the structure of the Russian economy also increase the relevance of geopolitics. Since 2000, the Russian government has chosen to deemphasize industrial development, opting instead to reinvent Russia as an exporter of natural resources, minerals, lumber, and precious metals (for more details, see

5

Data available from .

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M. Rykhtik

Russia Council on Foreign and Defense Policy 2007:52–68). These resources serve a dual purpose: increasing Russia’s independence from the outside world and giving it the ability to project power. Russia possesses 26.6% of global natural gas reserves and between 6.2 and 13% (according to different estimates) of global proven oil reserves. The country is the world’s leading pipeline gas supplier. About 90% of Russian energy exports go to European countries, creating a dependency that the latter finds troubling. While Europe is showing a marked interest in alternative energy sources, there is no real alternative to hydrocarbons in the foreseeable future. This means that Russia’s pipeline strategy is a crucial element of constructing the European security system. The fact that the majority of resource-rich countries (Iran, Iraq, Saudi Arabia, Latin America, and African countries) are politically unstable sets the stage for future upheavals on the world energy market, while opening some opportunities for Russian expansion. There are two main dimensions of the new expansionist pipeline policy of Russia: Northern and Southern. The Nord Stream pipeline is a fundamentally new route. There are no transit countries on this route, which enables Russia to reduce transmission costs and exclude any possible political risks (concerning Russian–Ukrainian and Russian–Belarusian relations). The target markets for gas supply via the Nord Stream are Germany, the UK, the Netherlands, France, and Denmark. All kinds of barriers (political, ecological, economical, etc.) have been successfully overcome, and the Nord Stream should be functional in 2011. However, the Southern route is more complicated. The Caucasian region and Central Asia are crucial for Russian security. There are geopolitical and geoeconomic dimensions to its importance. In the Caspian region, oil production will continue to steadily rise. Azerbaijan is becoming a regional leader; oil will be produced at the Azeri-Chirag-Gyuneshli fields, while natural gas will be produced at the ShakhDeniz field. Kazakhstan is going to play a more important role due to its oil and gas resources. Kashagan will be the main oil deposit in Kazakhstan. Turkmenistan and Kazakhstan will be main suppliers of natural gas. Russia is interested in preserving its influence in the region, with pipelines as one possible instrument. There are alternative instruments, however, which diminish Russian dominance in the region. The Baku-Tbilisi-Ceyhan (BTC) oil pipeline and the Baku-Tbilisi-Erzurum (BTE) natural gas pipeline bypass Russia. There are plans to build a gas pipeline from Turkey (subsequently transporting Iranian, Kazakh and Turkmen gas) to Europe (the Nabucco project). In this context, the United States and the EU will intensify their pressure on Turkmenistan to reroute gas flow to this pipeline project. At the same time, Kazakhstan and Turkmenistan will implement pipeline projects to carry oil and natural gas to China. Russia will use all of its influence in the Caspian region and Central Asia in order to protect its interests; it remains the only transit country for Caspian oil and gas along the Caspian Pipeline Project (CPC). There is a risk that oil shipments along the Baku-Novorossiisk pipeline will stop flowing once the BTC oil pipeline reaches full capacity. Russia has a chance to compensate for losses with the Burgas-Alexandropoulos oil pipeline bypassing the Turkish straits. But given that the costs involved in Russian oil production and exports exceed analogous


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costs on the Caspian, some experts suggest that it is quite likely that Russian oil will be partially crowded out of the European market (Russia Council on Foreign and Defense Policy 2007:67). Natural gas and oil might be considered a political weapon of sorts, but the utility of this so-called weapon is limited. Since resource production is not labor-intensive, it gives Russia an economic base that can be sustained despite a declining population. However, it also makes Russia highly vulnerable to the whims of partners and consumers. Mutual economic dependence between a producer and a consumer does not help to develop a long-standing partnership, as both parties are inclined to attempt to minimize that dependency. Russia needs more reliable means of sustaining its economic development and maintaining a good standard of living.

2.3.4

Nuclear Weapons

The Russian military is in the midst of a broad modernization and restructuring. While many critics and challengers remain, Moscow is reconstituting its basic war fighting capabilities. However, due to geographic, demographic, and geopolitical factors, Russia has come to rely increasingly heavily on its nuclear arsenal to rebalance the military equation and ensure its territorial integrity. Russia’s new military doctrine (2010) has emphasized the importance of its arsenal of nuclear weapons to compensate for its limited conventional capabilities to deal with hostilities along its borders.6 This new military doctrine allows for the use of nuclear weapons to repel aggression if an enemy applies conventional weapons in a large-scale war. If its national security faces serious threat, Russia does not rule out the possibility of a nuclear attack against an aggressor in either large-scale or regional war (Chapter II, Articles 16, 18; Chapter III, Article 22).7 Some experts say that Russia’s nuclear strategy is beginning to resemble that of the United States (Rubtzov 2009). However, the new Russian military doctrine says nothing about preemptive attack. Thus, while Russia’s financial sector has been negatively affected by the global crisis, the state does not really count on that sector for domestic cohesion or stability, or for its ability to project power abroad. Moscow has many tools more potent than finance with which to continue reasserting itself as a world power. In order to deal with all these contributing factors (borders, resources, demography and economic structure), Russia must address such issues as buffer zones, pipelines, new consumers, and strategic nuclear weapons. Moscow should be interested too in supporting the status quo in neighboring countries, which serves as a barrier against uncontrollable developments.

6

RIA Novosti. Russia’s New Military Doctrine Will Change the Foundation of Nuclear Weapons. Available from http://ria.ru/defense_safety/20091008/187964000.html. Date written: 8 October 2009. 7 Nezavisimaya Gazeta, 8 February 2010.

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2.4

M. Rykhtik

Differing Understandings of National Security

Because national security outlooks are determined by objective factors such as geography and resources as well as historical and cultural trends, different understandings and definitions of the term “security” exist among states. This has an impact on security cooperation in Eurasia. While contemporary Russia is ready for the “economization” of security, Western partners and some states in the CIS are reluctant to move in the same direction. Why is it always so difficult to talk about national security? Security may be a hot topic for public discussion, but few pay attention to its theoretical aspects. There are two philosophical categories that make up the term “security”: the first includes safekeeping and stability, while the second encompasses development and change (Kosolapov 2002:201). These two categories are related: to provide security, one should provide both stability and development. For example, in the later period of the USSR and during the first years of democratic Russia, there was too much development and not enough stability, which undermined national security. The concept of national security has gone through several phases in Russia (and the USSR). Before the 1917 Revolution, security was understood to mean the safeguarding of the interests of individuals, society, and state in a variety of realms, including foreign policy, public safety, and the safety of property. Between 1917 and 1985, “national security” meant state security (Sergounin 2003:8). Security had two dimensions: domestic security (including political and military security) and external or international security. The main priorities for Soviet authorities were to provide safety and security for state institutions and borders. Preservation of national values and way of life, and protection of individuals were not considered priorities. Around 1986, a “romantic period” began which ended abruptly at the start of the 1990s. This was a time when leading Soviet scholars and academic institutions published several books and materials articulating a new “softer” approach to security and began to talk about the economic, humanitarian, ecological, and informational dimensions of security (for more details, see Sergounin 2003:8–11). After 1992, a new meaning of security developed. In March 1992, the new law “On Security” was signed by then-president Boris Yeltsin. This was the first time Russia officially adopted the term “national security.” In December 1997, the first Russian national security concept was released, and in January 2000, a new edition of the national security concept was issued: “The national security of the Russian Federation is understood to mean the security of its multinational people, in whom reside sovereignty and the sole source of authority in the Russian Federation.”8 The new main tasks for guaranteeing Russia’s national security included removing internal and external threats, ensuring citizens’ personal security and constitutional rights and freedoms and ensuring full compliance with Russian Federation legislation.

8

Russian National Security Concept 2000.


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Distinguishing between internal and external dimensions is a new element in Russian security view. The new concept broadens the possible scenarios in which Russia would use nuclear weapons. A 1997 national security document used a vague formulation that called for the use of nuclear weapons “in case of a threat to the existence of the Russian Federation as a sovereign state.” The new document says nuclear weapons can be used “in the case of the need to repulse an armed aggression, if all other methods of resolving the crisis situation are exhausted or have been ineffective.”9 The term “national security” has lost the narrow meaning of hard security and now comprises all different types: military, political, economic, cultural, health, and human. The concept of national security plays different roles in the United States and in Russia. In the United States, it is an important instrument for creating bipartisan support and the mobilization of a population traditionally hostile to foreign policy issues. The US administration needs public support for an expanded foreign policy agenda. As political scientist Barry Buzan has noted, securitization legitimates the use of force (Buzan 1991:23–24). While this may be the case for other Western democracies as well, the situation is different for Russia and most of its CIS neighbors. Russia (like the USSR) does not need such justifications to take exceptional measures or utilize force. It has another kind of foreign policy decision-making process, based on its own strategic culture. Strategic culture refers to “a nation’s traditions, values, attitudes, patterns of behavior, habits, symbols, achievements and particular ways of adapting to the environment and solving problems with respect to the threat or use of force” (Booth 1979:121). It is known that traditionally Russia is a collectivistic society and that Russians consider their obligations to the state a priority (Afanasiev 2009). The first priority is to serve one’s homeland – to protect the interests of the state and society. Unlimited discipline and self-sacrifice are important characteristics of Russian (as well as other Slavic and Caucasian) political cultures. It is easier in Russia to mobilize public support to promote state interests and well-being than in the United States. “Security” for Russia means stability and predictability. The era of the “post-Soviet space” is coming to a close and a new era is dawning in Eurasia. However, the players have different weights, interests, and resources. For states like Ukraine, Georgia, Armenia, and Azerbaijan, security means survival (with regard to territory), whereas for Russia, security means stability. So far, the United States has played a “hard security game” in Eurasia by helping those states and not Russia. The United States has long worked for the westward export of the Caspian region’s energy resources, and this gradually became an even more important issue as energy markets tightened and oil prices soared. Even promoting democratization in the region is understood as a way of tackling the perceived root causes of terrorism, namely socioeconomic backwardness and political repression (Cornell 2006). This is why Russia views the European Union as a more reliable and preferable partner. America’s priority is preserving strategic access to Central Asia and the Caucasus. The EU and Russia have

9

Center for Arms Control, Energy and Environmental Studies at MIPT 2000.

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M. Rykhtik

“economized” their bilateral security agenda while the United States and Russia have not (for more details, see Wallander 1997). From the formal point of view, Russia’s national security structure looks like that of the United States with one exception: the National Security Council (NSC) plays a limited role in Russia. It has become a comfortable institution for “retired” politicians who have lost their influence and importance. In Russia, the president and members of the presidential administration are responsible for developing foreign policy and the security agenda. That is why it is important to understand how these leaders think and feel. The humiliation they experienced in the 1980s has likely had an impact on the evolution of national security policy. By his own confession, “the destruction of the USSR broke [Vladimir Putin’s] heart” (Putin et al. 2000:146). In addition, outside Russia, new national elites share an anti-Russian mood. Russia is still making its way through its leadership transition. Some experts say that various power clans are still waiting for the “final battle.” Skirmishes among these clans for the control of defense and energy industries are ongoing. This means that in the short term, Russia might have new elites who are responsible for developing its security agenda, and the influence of the former KGB officers is likely to decrease. As a result, Russia will be looking at security through a more liberal lens than will some of the other CIS states. Meanwhile, leaders of most CIS states, including Russia, are using nationalism to fill the gap left by the disappearance of Marxist–Leninist ideology. Nationalism in Eurasia has been a reliable tool for mobilizing the population. As a result, the role of religion has been increasing in Eurasia, and immigration has become a new security issue.10 A new group of political elites led by President Dmitry Medvedev believes that Russia should rely on international cooperation for security and for securing its place in the international community. They believe that Russia has the potential to regain its status as a regional power. A notable phenomenon in Russian society and among the Russian elite in particular is a rise in pro-European attitudes, rather than pro-American ones (for more details, see Rykhtik 2002). This does not mean they are against liberal and democratic values, however. Rhetoric plays an important role in the contemporary Russian political process. Exaggerated expectations among some American scholars, experts, and politicians concerning democratic development in Russia and some other CIS states have had an impact on analyses and assessments published in the United States. Existing anti-Americanism in Russia and an anti-Russian mood in the United States, Western Europe, and some CIS states (including Georgia and, to some extent, Ukraine) are worrisome. There is a difference, however, between these two trends. Anti-American rhetoric in Russia may be susceptible to rapid change because it lacks significant historical, cultural, or institutional roots. Even during the Cold War, public opinion fluctuated following instructions from the Kremlin. The situation in the United States is different. Unfortunately, many scholars, experts, and journalists

10

Security Council of the Russian Federation 2009.


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are promoting an anti-Russian agenda. As Thomas Graham says, “Russia has an exceedingly negative image in the United States. It has few friends in the Congress or more broadly in the political establishment or key media” (Graham 2009). For the next several years, it seems likely that we will observe more anti-Russian initiatives in the United States. In July 2008, the new Russian Foreign Policy Concept was approved, and early in 2009, the Kremlin released the new Russian National Security Strategy. Both documents, which replace earlier concepts adopted during Putin’s presidency, outline new priorities for Russian foreign and security policy. They state that a just and democratic international order should be based on collective decision-making, equal relations between states, and the rule of international law, with the United Nations playing a central role. A strong international influence is not considered one of Russia’s direct goals; it is subordinate to other priorities, such as the need for domestic economic development. The economization of foreign policy, rather than power politics, is the main priority for Russia today. There are five principles of Russian foreign policy, which were articulated by President Medvedev in 2009.11 First, Russia recognizes the primacy of the fundamental principles of international law, which define the relations between civilized peoples. Russia will build relations with other countries within the framework of these principles and this concept of international law. Second, the world should be multipolar. A unipolar world is unacceptable. Domination is something Russia cannot allow. Russia cannot accept a world order in which one country makes all the decisions, even as serious and influential a country as the United States. Russia sees such a world as unstable and threatened by conflict. Third, Russia does not want confrontation with any other country. Russia has no intention of isolating itself and will develop friendly relations with Europe, the United States, and other countries, as much as possible. Fourth, protecting the lives and dignity of its citizens, wherever they may be, is an unquestionable priority for Russia. Russian foreign policy decisions will be based on this need and strive to protect the interests of its business community abroad. Consequently, Russia will respond to any aggressive acts committed against its people. Finally, as is the case with other countries, there are regions in which Russia has privileged interests. These regions are home to countries with which Russia shares special historical relations and are bound together as friends and good neighbors. Russia will pay particular attention to its work in these regions and build friendly ties with these countries. There is an understanding among those close to Medvedev that Russia is not able to achieve its interests alone; it needs cooperation and partnership. However, the question remains: who will those partners be? Russia’s foreign policy doctrine does not specify that partnerships should be based on common values. Russia, unlike many Western states, does not seek to partner with like-minded countries but to create broad coalitions with varying states and institutions. Such a multidirectional Russian foreign policy is a natural consequence of the country’s position at the crossroads of Europe and Asia.

11

Rossiyskaya Gazeta, 1 September 2008.

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M. Rykhtik

President Medvedev’s foreign policy appears to consist of preserving traditional ties with the countries of the CIS and making Russia a full-fledged member of the developed world. Russia has a potentially key role to play in Eurasia as it seeks to create parallel security structures and institutions to prevent unfriendly interference in what Moscow views as its sphere of “privileged interests.” At the same time, Russia sees the European Union as one of its key political and economic partners and thus seeks to promote intensive, sustained, and long-term cooperation with it. Unfortunately, as evidenced in recent years by a variety of asymmetric dialogues, the EU as an institution has little interest in the economization of EU–Russian relations. As a result, Russia pursues bilateral relations with individual states, particularly Germany and Italy, as a substitute for broader EU–Russian relations (for more information, see Barysch et al. 2008). Russia’s main strategic goal today is to preserve its national, economic, and cultural identity, while maintaining its strategic partnerships with neighboring states and institutions. Medvedev has demonstrated his interest in building trustworthy relationships with any partner who prioritizes pragmatism and economic interest. Germany and France might be considered as examples. Russia’s integration into reformed international and regional security structures must also be resolved in a positive way. Russia is an important partner in the pursuit of many of the West’s foreign policy goals, including efforts to deal with problems such as international terrorism, organized crime, illegal drug trafficking, illegal immigration, nuclear nonproliferation, and conventional arms reductions. Moscow also believes that the time is right to start a new round of consultations and negotiations on a new European security agreement. As a partner in trade and security, as well as a direct neighbor, Russia has a vested interest in promoting stability in Central Asia. Russia pursues two main goals in the region: keeping its allies close and continuing military cooperation within the CIS. These goals necessitate the expansion of Russia’s military presence and influence in the region. Although Russia has sought to preserve its military position in Central Asia since the collapse of the USSR, the last decade has seen the EU and the United States undertake more active policies toward the region as well. Russia turned its attention to the region at the start of Putin’s presidency in 2000, while the area gained significance for the United States and the EU with the beginning of military operations in Afghanistan in 2001. The policies of all key actors in the region, however, are defined by shared concerns about radical Islamic organizations, drug trafficking, and, to varying degrees, natural resources such as gas and oil. Russia is less concerned than NATO members with ideology and democratization, preferring to pay more attention to political stability and predictability. Moscow and the Central Asian capitals see any interference in the domestic affairs of the region as promoting or catalyzing the destabilization and disintegration of its states. For that reason, Central Asian regimes find Moscow a more comfortable partner than the EU or the United States, which are seen as overly focused on democratic transformation and liberalization. Russia, then, has declared a special sphere of interest in the former Soviet Union built upon friendly relations with CIS countries and strengthening military cooperation within both the CIS and the Collective Security Treaty Organization (CSTO).


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Established in 2002, the CSTO has the stated focus of preserving territorial integrity and seeking closer cooperation with other multilateral institutions, such as the United Nations, Organization for Security and Cooperation in Europe, Shanghai Cooperation Organization (SCO), and NATO. Its current members are Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The organization aims to create a unified special rapid-reaction force “capable of repelling any threat from outside” which is to be composed of ten battalions with the added protection of a unified air defense system (Zhussip 2008). It will be financed equally by all CSTO members. In Russia’s 2002 National Security Strategy, internal threats to security were considered more significant than external threats. Traditional international threats were noted, but these were secondary to internal threats. These internal threats included: growing uncertainty and unpredictability; violations of human rights and freedoms; armed conflict; weakening of Russia’s economic independence; degradation of its technological and industrial potential; and environmental issues. There was an understanding that Russia’s problems must be addressed through economic reform. The National Security Strategy states that, “Russian national interests are combined and balanced interests of the individual, society and the state in economic, domestic political, social, international, informational, military, border, ecological security.”12 This is quite a liberal approach. Interestingly, Russia could be a predictable partner due to the specifics of its foreign policy decision-making process. According to its constitution, Russian foreign policy is presidential foreign policy; the State Duma and prime minister have limited influence on these issues. Moreover, unlike in the West, public opinion does not play an important role in foreign policy-making because the Russian foreign minister is relatively isolated from the public. When discussing foreign policy expertise in contemporary Russia, we have to admit that it is highly personalized and not institutionalized. Many bright, well-educated, and well-trained experts and specialists comment on foreign policy issues, but there are very few institutions and organizations that go beyond representing the position of Russia’s leadership to articulate and defend policy based upon a set of ideological principles and ideas. It is not easy to find a think tank that has been able to have significant and long-lasting influence on the foreign policy decision-making process. In addition, civic and religious organizations are not yet strong enough to shape the views of either authorities or the general public. In a country with a very strong executive and a public that generally agrees with official policy, it is very difficult to develop foreign policy expertise. As a consequence, the Russian public follows rather than leads official foreign policy. This means that the elite has a responsibility to articulate the country’s foreign policy priorities. Most of the discussions on foreign policy have their origins in debates among elites, and public opinion largely reacts to these debates. The existing foreign policy consensus has lowered the public’s interest in international affairs, and as a consequence, has led to more predictable foreign policy.

12

Russian National Security Concept 2000.

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2.5

M. Rykhtik

Regional Priorities

Europe has become more popular among Russians, not only because the forces of globalization have made the geographic distance between the two countries less significant, but also because various groups of the Russian population identify themselves with the European community and consider themselves to be part of European civilization. The Euro has become an important instrument for saving, payment, and credit, which is bound to have a marked influence on Russia’s companies, citizens, and Central Bank (Butorina 2009). Russian elites have also long been involved in global exchange of information, primarily with Europe, which has produced common rules and common standards. Russia sees the European Union as one of its key political and economic partners and will seek to promote intensive, sustained and long-term cooperation with it. So far, dialogue between the EU and Russia has been asymmetric on most issues, including the identification of priority areas for cooperation. The European Union has long been Russia’s main foreign trading partner. EU countries are the major creditors of and investors in the Russian Federation. EU countries account for 40% of all international air passenger traffic into and out of Russia. The same holds true for communications: 61% of Russia’s international telephone traffic is with the EU (Ryzhov 2002:14–15). These and many other facts show that throughout the past decade the whole of Europe has witnessed a process of cultural, economic, and political integration and that this process has included Russia as well. And most significantly, there are signs that the EU is ready to economize its relations with Russia. There is an understanding among Russian experts and current leaders that Russia’s integration into the main European institutions will benefit everyone (Barysch et al. 2008). Without an active Russian role, it would be difficult to achieve stability and security on the European landscape. Russia plays a crucial role in equipping Europe with energy, and Russia–EU scientific cooperation also has immense potential. In addition, subregional cooperation between the EU and Russia may strengthen Russia’s position, since Russia is interested in more favorable visa regimes. Russia is a key player in the Eurasian community and is eager to cooperate as long as there is no danger of interference in Russian domestic affairs. Russia’s main strategic goal today is to preserve its national, economic, and cultural identity, while maintaining a strategic partnership with Europe. Medvedev has shown that he is interested in building relationships between Russia and the EU. The EU is obviously uncomfortable with its dependence on Russian resources and would like to switch to oil and gas supplies from other regions, including Central Asia and North Africa, or develop alternative sources of energy. But it is in the medium-term interests of both Russia and the EU to preserve the current status quo in their relationship. The overriding question of Russian integration into the reformed security structures of Europe also needs to be resolved in a positive way. Russia is a more interesting partner for the West today, taking into account their shared security agenda of dealing


29

with international terrorism, organized crime, illegal drug trafficking, nonproliferation, conventional arms reductions, illegal migration, and other matters. Current conditions are ripe for a new round of consultations and negotiations on a new European Security Agreement (Helsinki 2).13 It is obvious that we are dealing with a new type of relations between Brussels and Moscow. The idea of a Helsinki 2 or Helsinki-Plus treaty has found some support in the West (Lo 2009). Some experts have agreed that the 1975 Helsinki Final Act should be changed to reflect post-Cold War realities.14 What is not welcomed by the West is Medvedev’s emphasis on hard security, which is a reflection of the realist approach which is still popular in Russia. But the new elements of Medvedev’s initiatives prompt some optimism. The EU is a modern institutional creation that acts in accordance with different laws and rules than a traditional state; consequently, relations with it must take a different form from traditional relations between states. Russia is a traditional subject of international relations. It has national goals and priorities that, once declared by the government, have to be strictly complied with. The European Union is different. Even if Russia is on good terms with some countries in the European Union, it will not help if the EU’s supranational bodies decide to block an initiative. The EU has a different way of resolving discrepancies in financial and trade spheres. So, there is an inherent contradiction in relations between the EU and Russia. Russia needs to maintain good bilateral relations with all 27 countries in order to reach any agreements with the EU, which is particularly difficult when dealing with the “new” members of the EU who are former members of the Eastern bloc. The West has managed to convince Russia that EU expansion is different from the traditional expansion of one state at the expense of another. But this is not the same when we talk about NATO. NATO expansion is one of Moscow’s greatest fears. Admission of any new countries into NATO would contradict Russian national interests, which would definitely lead toward deterioration of NATO–Russia relations. An examination of Russian official documents helps us understand the origin of the Russian reaction to NATO’s enlargement. In contrast, US–Russian relations remain characterized by a more traditional type of relations between two states; both parties remain primarily focused on security concerns, though Russia is also ready for economization of US–Russian relations, which may be an important element of future dealings between the two countries. Washington is currently more interested in intelligence information from Russian officials, though it has been very slow in sharing American intelligence with Russia. US officials are also interested in the possibility of installing military bases on the territory of the former Soviet Union. Important changes started to happen after September 11, when Russia emerged as an important and valuable partner in the US-led informal coalition tackling

13 14

Nezavisimaya Gazeta, 8 October 2008. Mezhyev 2009.

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international terrorism. Moscow took a very practical and rational approach, which reflects an increasing shift toward pragmatism in relations between the two countries. The United States, as a global leader, has had much experience working with different kinds of regimes and governments. Similarly, there is no real nostalgia for empire and great power status in today’s Russia, though a few experts and politicians continue to harbor such feelings. But the world has changed, and Russia has none of the resources necessary to get this status. Russia faces the same problems as the United States and the EU as well as all other developed countries. This has the potential to provide a common basis for cooperation, which is what the antiterrorist coalition represented. Though things changed somewhat with the greater optimism of Presidents Medvedev and Obama about the ability of international organizations to deal with these issues, terrorism remains an important area of cooperation for both countries. International terrorism particularly concerns the Russian Federation for several reasons.15 First, Russian citizens and property are targeted by international terrorism. Hundreds of Russian citizens were killed in terrorist attacks during the last ten years.16 Second, terrorism represents an obstacle to the peace process in North Caucasus that has been nurtured by Moscow for several years. Third, terrorism threatens the internal stability of Russia. Russia therefore takes an active role opposing international terrorism. There are several basic principles of Russian antiterrorism policy, which include the protection of basic human and civil rights and prioritization of the protection of the targeted citizens’ interests and rights. Political concessions to terrorists are inadmissible, and terrorists are subject to inevitable punishment. Russia is interested in strengthening the rule of law through international cooperative agreements and refuses to reward terrorism through concessions or bargaining with terrorists. The Russian government is committed to systemic and complex political, social-economic, propagandistic, and legal and special preventive actions. It will partner with political and religious organizations, international organizations, and volunteers to implement antiterrorist policy, but the government retains undivided authority in conducting antiterrorist operations. Proportionality of antiterrorist actions to the level of the terrorist danger is also an important component of Russian policy. Russia has limited resources (compared with the United States, for example) to pressure states that sponsor or harbor terrorists to

15

From a societal perspective, it is interesting to note that terrorism endangers the spread of democratic norms and traditions in the country because the Russian government may use antiterrorist rhetoric to justify its more strict and drastic laws regulating and limiting civil liberties. Some analysts consider NGOs to be the first victim of antiterrorist rhetoric in Russia. A new set of laws regulating the activity of Russian NGOs came into effect in April 2006 and was widely criticized by Western experts and some politicians. 16 In 2005, there were more than 250 terrorism-related incidents in Chechnya, killing about 100 servicemen and policemen, and more than 110 civilians. Examples of other terrorist attacks include: Budyonnovsk in 1996, Nord-Ost in Moscow in 2003, Beslan in 2004, and Nal’chik in 2005.


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cease their support for such groups. But the Russian government (like the US government) has proclaimed its willingness to use force “with or without” allies or institutional approval when national security interests are at stake. Another aspect of Russia’s counterterrorism policy is to work with other governments and international organizations to identify, apprehend, and prosecute terrorists. Russia supported UN Resolution 1535 (March 2004) aimed at reform of the Counterterrorist Committee of UN Security Council. The Russian government has welcomed the enactment of Anti-terrorist Resolution 1526 (January 2005), and it initiated Resolution 1540 (April 2004) prohibiting non-state actors from obtaining WMDs. Russia is a signatory to the 11 Global Anti-terrorist Conventions, which includes international agreements concerning the unlawfulness of aircraft hijacking and hostage taking. Counterterrorist activity is also a priority in Russia–NATO relations. The utility of these important international agreements for the Russian Federation is measured largely by the degree to which they are complied with and enforced by other governments. The growth of international cooperation among CIS countries is another important aspect of Russia’s counter-terrorist strategy. The Anti-Terrorist Center of CIS was founded in June 2000. Countries have agreed to share information, jointly train for antiterrorism operations, and generally improve security arrangements.

2.6

Conclusion

An examination of relations between the West and Russia prompts the question: what can the two sides offer each other? How can both parties contribute to the formation of a new system of international relations? The emergence of new centers of influence and changes to the structure of the international system have altered attitudes to traditional problems. Globalization, in particular, diminishes the possibility of countries and regions developing in their own way. As borders become more penetrable, movement of capital, information, technology, and human resources have intensified and become harder to control. This diminishes the capacity of each society to consciously choose its own path of development. Much of this is bitterly resented, especially in Russia. Globalization is associated with the destruction of national identity. In a country still searching for its identity, globalization tends to elicit a fiercely negative reaction. It is unquestionable that the old geopolitical paradigm is no longer relevant. Thinking in terms of “the center and the periphery” does not reflect the realities of modern society, whose central value, increasingly, is that of “all inclusiveness” (as opposed to interdependence). Nowadays, the inhabitants of large Russian cities increasingly think of themselves as citizens of a globalized world. Joint economic, cultural and educational projects are helping to create a generation that seeks a way of life fundamentally different from that of Soviet times. The new generation is developing its own approach to the West. It no longer thinks in terms of “us and them.” It has rejected confrontation.

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Unfortunately, perceived differences in values continually prevent Russia from integrating more closely with the West. This is partly the fault of Russia for failing to capitalize on opportunities, but Brussels and Washington also need to provide a clearer justification for the expansion of Western security institutions. A new generation of politicians needs to come along with a very different set of priorities. Fortunately, such a generation is emerging in Russia and in the United States. It seems that Russian society is capable of learning, and now that potential must be put to good use. Russia’s integration into various international institutions will benefit everyone. In particular, without an active Russian role, it would be very difficult and expensive to achieve stability and security in Eurasia. Russia’s so-called resurgence on the international stage is a natural phase as the country emerges from one of the most significant recessions in its history. Russia’s new foreign policy is not accompanied by remilitarization and aggressive policies; in fact, defense spending remains low despite an urgent need to address the decay of Russia’s military and defense industry. The country’s military activity beyond the post-Soviet space is far less than that of NATO, the EU, and the United States. There is a broad spectrum of parallel and overlapping Russian–Western interests in Eurasia, which gives both sides the opportunity for a new beginning.

References Afanasiev, Mikhail. 2009. Is There a Demand for Modernization in Russia? Russia in Global Affairs 3 (July–September). Available from . Accessed 3 October 2011. Akulshina, Alla. 2002. Building Europe: Lessons for Russia. Russia on Russia 7. Barysch, Katinka, Hans-Henning Schroder, and Andy Klimov. 2008. Partnership with Russia in Europe A Strategy for a Win-Win-Situation? Paper presented at the 6th Roundtable Discussion, February, Morozovka, Available from . Accessed 4 October 2011. Booth, Ken. 1979. Strategy and Ethnocentrism. New York: Holmes & Meier Publishers, Inc. Butorina, Olga. 2009. Dances with the Dragon. Russia in Global Affairs 1 (January–March). Available from . Accessed 4 October 2011. Buzan, Barry. 1991. States and Fear: An Agenda for International Security Studies in the Post Cold War Era. Boulder, Colorado: Lynne Reinner. Center for Arms Control, Energy and Environmental Studies At MIPT. 2000. Russian National Security Concept and Nuclear Policy (21 July). Available from . Accessed 7 October 2011. Cornell, Svante. 2006. E. Eurasia: Crisis and Opportunity. The Journal of International Security Affairs 11. Available from . Accessed 4 October 2011. Friedman, George. 2009. The Next 100 Years: A Forecast for the 21st Century. New York: Doubleday. Graham, Thomas. 2009. Resurgent Russia and U.S. Purposes. New York, N.Y.: The Century Foundation. Available from . Accessed 4 October 2011. Kosolapov, Nikolay. 2002. Sila, Nasilie, Bezopasnost: Sovremennaya Dialektika Vzaimosvyzei. In Essays on Theory and Political Analysis of International Relations, edited by A. Bogaturov, N. Kosolapov, and M. Khrustalev. Moscow: Academic Educational Forum on International Relations.


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Kuznetsova, Yekaterina. 2005. The Near Abroad: Increasingly Far Away from Russia. Russia in Global Affairs 1. Available from . Accessed 4 October 2011. Lo, Bobo. 2009. Medvedev and the New European Security Architecture. Policy Brief for the Center for European Reform. London: Center for European Reform. Medvedev, Dmitri. 2008. Statement on Key Issues (26 August). Available from . Accessed 7 October 2011. Mezhyev, Boris. 2009. Initziativa Medvedeva. Vozniknovernie I Razzvitie Politicheskogo Processa (8 April 2009). Available from . Accessed 7 October 2011. Popov, Vladimir. 2007. A Putin Policy without Putin after 2008? Caijing (December). Putin, Vladimir, Nataliya Gevorkyan, Natalya Timakova, and Andrei Kolesnikov. 2000. First Person: An Astonishingly Frank Self-Portrait by Russia’s President. New York, N.Y.: Public Affairs. Rubtzov, Yuriy. 2009. Russia’s Military Doctrine: Nukes as Most Weighty Argument in Strategic Deterrence (26 November). Available from . Accessed 4 October 2011. Russia Council on Foreign and Defense Policy. 2007. The World Around Russia: 2017 An Outlook for the Midterm Future. Moscow: The Council on Foreign and Defense Policy State University Higher School of Economics. Russian National Security Concept. 2000. Available from . Accessed 7 October 2011. Rykhtik, Mikhail. 2002. Russia-EU: New Opportunities or Old Wine in New Bottles. Russia on Russia 7: 24–31. Rykhtik, Mikhail. 2009. The Geopolitics of Resurgent Russia: How Medvedev’s Russia Sees the World. PONARS Eurasia Policy Memo 60. Available from . Accessed 4 October 2011. Ryzhov, Vladimir. 2002. Why Europe. Russia on Russia 7. Second Sociological Congress of Russia. 2003. Russian Society and Sociology in XXI Century: Social Challenges and Alternatives. Security Council of the Russian Federation. 2009. National Security of Russia until 2020. Available from . Accessed 7 October 2011. Sergounin, Alexander. 2003. Russian Foreign Policy Thought: Problems of National and International Security. Nizhny Novgorod: Nizhny Novgorod Linguistic University Press. Stratfor. 2008. Geopolitical Diary: Russia’s Stock Market Woes (17 September). Available from . Accessed 7 October 2011. Wallander, Celeste A. 1997. The Economization, Rationalization, and Normalization of Russian Foreign Policy. PONARS Policy Memo 001. Available from . Accessed 4 October 2011. Zhussip, Sultan-Khan. 2008. Russia Expands Its Military Presence in Central Asia (12 November). Available from . Accessed 4 October 2011.

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Chapter 3

US–Russia Relations in the Post-Western World Andrei P. Tsygankov

3.1

Introduction

This chapter describes US–Russia relations since the end of the Cold War, with special attention to the period after September 11, 2001. Although the two nations have learned to cooperate on some issues, their relationship can be described as limited engagement with elements of rivalry, rather than cooperation. The United States’ support for expansion of NATO, competition for energy resources in Central Asia and the Caspian Sea, and methods of fighting terrorism in the region – among other issues – continue to put the two nations at odds with each other. Pressing the “reset button” in relations with Moscow, as suggested by US President Barack Obama, will therefore not be easy. However, reengaging Russia in reciprocal relations is especially important today given the increasingly post-Western nature of the world. Although the exact direction and endpoint of global development remains unclear, there is hardly any doubt that the international system is moving away from its post-Cold War Westcenteredness. Military involvement in the Middle East and Afghanistan, as well as the ongoing global financial crisis, has made it difficult for the West to function as the world’s economic and political authority. Economically, China and the rest of the Asia–Pacific region are emerging as new centers of global gravity. In security relations, the Western monopoly on the use of force has been undermined by Russia’s military intervention in Georgia in August 2008. In this increasingly postWestern world, the United States may require additional allies and may have to learn to respect Russia’s interests and act in consultation with the Kremlin and other key actors in the region. This chapter analyzes the respective strategic visions of the United States and Russia, focusing on their perceptions of political changes in the former Soviet A.P. Tsygankov (*) San Francisco State University, San Francisco, CA, USA e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_3, © Springer Science+Business Media, LLC 2012

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region, security issues, and energy relations. The concluding section reflects on causes underlying the lack of cooperation between the United States and Russia, and suggests some possible ways of moving forward.

3.2

The US Perception of Russia

Immediately following the 9/11 terrorist attacks on the United States, the American leadership attempted to develop a partnership with Russia. However, many within the American political class viewed Russia’s international strategy as threatening to the US position in the world, which greatly contributed to the failure of the US–Russia coalition.

3.2.1

America’s Attempted Partnership with Russia

The 9/11 tragedy took place on American soil, but it was seen as an equally tragic and dangerous development by Russia as well. By that time, Russia had already experienced multiple domestic terrorist attacks, and many Russians sympathized with the United States and extended their support to the American people and their government. President Vladimir Putin was among the first to call then-President George Bush to express his support and pledge resources to help America in its fight against terror. Despite the reservations of the political class and a number of social strata, Putin offered America broad support for operations in Afghanistan that included intelligence sharing, opening Russian airspace to relief missions, taking part in search-and-rescue operations, rallying Central Asian countries to the American cause, and arming anti-Taliban forces inside Afghanistan. As the horrific attacks began to create a new social and political atmosphere in international relations, an important opportunity for establishing a partnership between the United States and Russia emerged. Initial developments following the terrorist attacks were encouraging. Bush responded to Putin’s offer of support by indicating a change in the American perception of Russia. Previously, the Bush administration did not foresee any breakthroughs in relations with Russia. It had made public the arrest of FBI agent Robert Hanssen, who had spied for the Russians, and it subsequently expelled 50 Russian diplomats. The Bush Administration also threatened to end any economic aid except for nonproliferation projects, and Secretary of Defense Donald Rumsfeld accused Russia of proliferating nuclear materials and weapons technologies. As late as February 2001, Bush’s National Security Advisor Condoleezza Rice insisted that Russia was a threat to America and its European allies. Following the attacks, however, America was increasingly prepared to see Russia as an equal and potentially strategic partner in the global war on terror, rather than a threat. The cordial relations between Bush and Putin that were established at their

3 US–Russia Relations in the Post-Western World

37

first meeting in Ljublana, Slovenia in 2001 were now strengthened in the name of redefined national interests. Convinced that “old suspicions are giving way to new understanding and respect,” President Bush now saw the two countries as “allies in the war on terror” moving “to a new level of partnership.”1 This changing perception had also begun to shape Washington’s attitudes toward several issues of prime significance to Russia: Chechnya, the nature of the Russia’s domestic political system, the military, and energy security. The White House showed greater sensitivity to Russian arguments that Chechnya was a part of a global war on terror. Although many in Washington’s policy circles continued to refer to Chechen terrorists as “rebels,” demanding that Russia “negotiate” peace with them, Bush differed in his assessment. For instance, he expressed strong support for Putin’s decision to storm a Moscow theatre after Chechen guerrillas took 700 hostages and threatened to blow up a theater in October 2002. While the American media was overwhelmingly focused on Russia’s negative role in the hostage crisis, Bush insisted that “the people who caused this tragedy to take place are terrorists who took hostages and endangered the lives of others.”2 He reiterated his conviction in further statements that “terrorists must be opposed wherever they spread chaos and destruction, including Chechnya” (The White House 2003). Overall, Washington toned down its rhetoric about Russia’s role in escalating tensions and violating human rights in the region, and was more willing to accept the Kremlin’s attempts to stabilize the area. It was also around this time that Bush expressed his confidence in Russia’s commitment to principles of democratic governance. Despite the chorus of critiques from Western human rights agencies and experts,3 Bush called for patience and expressed his respect for Russia’s political path. US–Russia relations also improved in the area of military security. Putin’s efforts to focus the security agenda on issues of counterterrorism resonated with the White House. As the Russian leader expressed an interest in joining NATO, some NATO leaders indicated their support of Russia’s membership in the alliance. In late 2001, NATO secretary general Lord Robertson, supported by President Bush and Prime Minister Tony Blair, advocated the idea of giving Russia a status equal to the alliance’s 19 permanent members, including veto power over certain decisions. In an assessment by The New York Times, the plan promised a “fundamental shift in behavior for the 52-year-old organization, which was founded after World War II, specifically to contain the military power of the Soviet Union” and Russia’s “full partnership with Western democracies.”4 An important step in that direction was the establishment at

1

The White House 2003. The New York Times, 29 October 2002; Washington Post, 26 October 2002; The New York Times, October 26, 2002; The New York Times, 26 October 2002; The New York Times, October 27, 2002; Nation, 18 November 2002. 3 Neistat 2003; The New York Times, 28 May 2003; The New York Times, 28 May 2003; The Weekly Standard, 17 November 2003. 4 The New York Times, 23 November 2001. 2

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the May 28, 2002 summit in Rome of a new NATO–Russia Council for consultation on security principles and action against common threats. The US–Russian Joint Declaration at the summit was the highest point in their fast-developing relations. It stated that the two nations’ “belief that new global challenges and threats require a qualitatively new foundation for our relationship” and that “we are achieving a new strategic relationship. The era in which the United States and Russia saw each other as an enemy or strategic threat has ended. We are partners and we will cooperate to advance stability, security, and economic integration, and to jointly counter global challenges and to help resolve regional conflicts.”5 Finally, the US government also demonstrated an interest in developing a major energy partnership with Russia to reinforce the strengthening of bilateral ties. Secretary of Energy Spencer Abraham was supportive of rebuilding relations with Russia, viewing it in terms of greater diversification of supplies away from the Middle East: “Greater energy security through a more diverse supply of oil for global markets – these are key elements of President Bush’s National Energy Policy.”6 Abraham’s visit to Moscow in November 2001 reportedly ended the years of US–Russian rivalry over Caspian Sea oil. Rather than trying to isolate Russia, Russian companies were invited to participate in the Baku-Tbilisi-Ceyhan pipeline. At about the same time, the Caspian Pipeline Consortium (CPC) was established to carry oil from Kazakhstan’s Tenghiz oil field (the world’s sixth largest) to the Russian Black Sea port of Novorossisk.7 Its membership included Chevron-Texaco, Arco, Mobil, Shell, and the governments of Russia and Kazakhstan. In May 2002, the US and Russian presidents signed a joint declaration on energy cooperation with the intention, in President Bush’s words, to build a “major new energy partnership” that would unite Russia and America as close partners.8 However, in early 2003, US–Russia energy relations took a different direction. The US investment flow to Russia’s energy sector stopped, which some attributed to the absence of “a good legal and business climate,” particularly in the area of taxation related to the production-sharing agreement (PSA).9 More importantly, as the next section shows, Washington begun to lose the political capital necessary to prevent deterioration of relations with Russia, and the PSA story was only one aspect of the emerging political vacuum.

5

The White House 2002. Village Voice, 16–22 January 2002. 7 Ibid. 8 The New York Times, 25 May 2002. 9 Russia passed PSA framework legislation in the mid-1990s but failed to introduce amendments to other existing laws, particularly the tax code, which are needed to underpin the PSA regime (see Bahgat 2002). 6


3.2.2

39

Partnership Unraveled

The US–Russia partnership was not to last and soon the initially encouraging developments turned into renewed competition over a whole series of issues. The United States did not resort to policies of containment, nor did it push for severing Russia’s relations with the G-8, NATO, or foreign investors. Some elements of cooperation survived, including counterterrorist intelligence information sharing, policy coordination against nuclear proliferation, and development of some economic ties. Nevertheless, Washington backed away from its initial commitment to take its relationship with Moscow to a new level of cooperation. As the immediate sense of the post-9/11 threat had subsided, the US returned to expecting Russia to follow America’s foreign policy agenda. In the Caucasus, Washington’s unwillingness to oppose Russia’s Chechnya policy – partly due to the Kremlin’s cooperation with the war in Afghanistan and partly because of established Al-Qaeda ties in the region – soon yielded to renewed suspiciousness of the Kremlin’s intentions. Instead of being seen as a state determined to secure its borders and territorial integrity, Russia was being increasingly perceived as revisionist and expansionist. By late 2002, some clear signs had appeared that the White House was not prepared to tolerate Russia taking any initiative in the Caucasus and would only work with Moscow if it followed Washington’s agenda. It was one thing for the White House to announce its determination to hunt terrorists wherever they are,10 yet it was an entirely different matter to allow the Kremlin to do the same. When Russia accused neighboring Georgia of providing safe haven for terrorists on its territory and warned that it might take action, the United States sided with Georgia. And when an unknown airplane attacked a remote Georgian region that bordered Chechnya, White House spokesman Ari Fleischer publicly accused Russia of lying when it claimed that it did not bomb Georgia, thereby violating Georgian sovereignty and escalating tensions in the region.11 The relationship visibly deteriorated after 2003. The United States insisted that Russia find a “political solution” to the Chechnya problem, by which Washington meant holding talks with those whom the Kremlin considered to be terrorists. The United States also downplayed links between Chechen terrorists and Al-Qaeda,

10

This is the heart of George W. Bush’s strategy: “The war on terror will not be won on the defensive. We must take the battle to the enemy, disrupt his plans, and confront the worst threats before they emerge. In the world we have entered, the only path to safety is the path of action … our security will require all Americans to be forward-looking and resolute, to be ready for preemptive action when necessary to defend our liberty and to defend our lives.” Bush 2002. 11 BBC News World Edition, 25 August 2002.

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which made it possible to grant political asylum and media exposure to those closely affiliated with Chechen terrorists.12 And inadvertently, through its intervention in Iraq and global strategy of regime change, the United States contributed to Russia’s already strained relations with Muslims. Intervention in Iraq made efforts to engage moderate Muslims across the world even more difficult, which translated into a greater support for Islamic radicals inside Russia (Hahn 2007:221–224). There was also a change in the American attitude toward Russia’s domestic political system. Rather than viewing the country as in need of greater stabilization in the face of a long economic depression and many security vulnerabilities, the White House focused on seeing Russia as insufficiently democratic. Following Putin’s proposals to increase state centralization after the devastating terrorist attack in Beslan, the United States became alarmed over Russia’s anti-democratic trends, warning that a divergence from democratic values could harm US–Russian relations. The United States itself took a number of state-consolidating steps in response to the terrorist threat, such as passing the Patriot Act, and the White House was widely accused of violating democracy and human rights in fighting the war on terror. Yet then-Secretary of State Colin Powell urged the Kremlin not to allow the fight against terrorism to “harm the democratic process,” and President Bush raised concerns about “decisions … in Russia that could undermine democracy.”13 In line with its new regime change strategy, the United States pushed the entire former Soviet region toward transforming its political institutions. It provided funds for the opposition and supported revolutions in Georgia, Ukraine, and Kyrgyzstan (MacKinnon 2007). The revolutions added to the Kremlin’s perception that Washington’s chief objective might have been to change the regime in Russia as well. That influential elites in the United States maintained contacts with some radical organizations in Russia, such as the National Bolshevik Party, while increasing pressures on the Kremlin to “democratize” and respect political freedoms, only served to strengthen this perception. For instance, in April 2007, the US State Department issued a report highly critical of Russia’s political system, pledging various assistance to “democratic organizations” inside the country, which the Russian government viewed as terrorists. The relationship also suffered considerably in the area of military security. In addition to withdrawing from the Anti-Ballistic Missile treaty, the United States took steps to advance its military infrastructure closer to Russia’s borders, arousing further suspicions in Moscow. Despite the established Russia–NATO Council, the two sides again treated each other as potential enemies rather than partners, and Washington did little to integrate Russia into Western security institutions or address its concerns. Not only did the US not stop at two waves of NATO expansion that had already taken place despite opposition from Russia, but it also worked on extending NATO membership to

12 In May 2004, political asylum was granted to Ilyas Akhmadov, the foreign minister of the separatist Chechen government who was viewed by the Russian government as responsible for terrorist violence. 13 Associated Press, 14 September 2004; The White House 2004.


41

former Soviet states such as Azerbaijan, Georgia, and Ukraine. Although Russian officials such as Foreign Minister Sergei Lavrov warned that the possible entry of Ukraine and Georgia to NATO would bring about a tremendous “geopolitical shift” requiring Moscow to “revise its policy,”14 Washington took these warnings lightly. In this context, Russia saw Washington’s plans to deploy elements of a missile defense system in Poland and the Czech Republic as a deviation from, rather than a contribution to, the war on terror. In response, President Putin went as far as to announce his decision to declare a moratorium on implementing the Conventional Forces in Europe (CFE) Treaty, which would allow Russia to freely move its conventional forces within its territory in response to steps by NATO that the Kremlin might see as potentially harmful. Finally, little came of the two nations’ efforts to establish an energy partnership. Russia’s energy strategy – increasing state share in energy companies, building pipelines in all geographic directions, raising energy prices for its oil and gas-dependent neighbors, moving to control transportation networks in the former USSR, and coordinating its activities with other energy-producers – generated anxiety in the American political class. Individuals such as Senator John McCain and Vice-President Dick Cheney issued multiple statements indicating their concerns with Russia’s new “imperialism” and energy “blackmail.” Washington no longer looked for ways to work with Russia as an energy partner, and instead routinely denounced its leaders for “using energy as political leverage to influence its neighbors’ policies.”15 The United States had earlier built the alternative Baku-Ceyhan pipeline and now began to work hard on persuading potential investors and Central Asian nations to build the Trans-Caspian route under the Caspian Sea, circumventing Russia. In May 2007, Putin secured a commitment from Kazakhstan, Turkmenistan, and Uzbekistan to increase exports of Central Asian oil via Russia’s pipelines, which only served to heighten US concerns.

3.3

Russia’s Vision and Strategy

Russia’s perception differed from that of the United States. This difference in perception is evident in the Kremlin’s vision of state-building challenges, political institutions, security threats, and energy opportunities.

3.3.1

State-Building

The post-Soviet Russia operates under new international conditions that no longer reflect traditional patterns of Western domination. However, Russia’s long history as an

14

Interfax, 12 December 2006. See, for example, the remarks by Assistant Secretary of State for European and Eurasian Affairs Daniel Fried before the US Senate Foreign Relations Committee Russia and US-Russia Relations, 21 June 2007. 15

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empire and its complex relations with non-Russian nationalities make it challenging to create a new power-sharing mechanism with the region. A case in point is Chechnya. Russia’s Chechnya problem was an issue of rebuilding a state under growing ethno-nationalist pressures – and by a regime that was itself of separatist origin and came to power by toppling the central authority. By the time Boris Yeltsin decided to intervene in Chechnya in early 1994, it was already too late. Chechen President Dzhokhar Dudaev was no longer in full control of the republic and had to share power with organized crime. Political instability followed. The society was fragmented and could no longer function as a whole (Tishkov 2004). And Russia’s army – an institution that was highly demoralized and humiliated during the protracted campaign to discredit the Soviet system – was unable to restore order and instead exacerbated the situation by engaging in criminal activities, brutalities, and the destruction of civilian infrastructure. All of this made it extremely difficult to restore order and threatened the state’s ability to govern the republic. The peace agreement did not last, and violence returned with renewed force. Even after the end of the second Chechnya war in 2004, Russia continued to suffer from multiple terrorist attacks, and some analysts projected a further growth of violence in the region (Hahn 2007). The Beslan hostage crisis further exposed weaknesses of the Russian state and the rule of law. These weaknesses were all too evident in the corruption of local officials who made it possible for terrorists to safely pass several security check points and inadequate special services, and delayed proper investigation of the terrorist act itself. The solution therefore was not to negotiate with Chechen separatist leader Shamil Basaev, but rather to strengthen state governance and increase the Chechen people’s involvement in ruling their republic. The Kremlin proposed a series of steps which included far-reaching reform of the political system. At the heart of the proposed reform was the idea of further centralization of decision-making. Local governors were no longer to be elected; instead, they were to be nominated by the president and confirmed by local legislative bodies. Russia also stepped up its counterterrorist activities and promised to continue with its Chechenization policy by holding new parliamentary elections in Chechnya and gradually expanding political rights in the republic. New parliamentary elections in Chechnya took place in November 2005, with the overall voter turnout estimated at 60%, far exceeding the minimum 25% mark mandated by law.16 After eliminating the most notorious terrorists, the Kremlin also offered Chechen fighters amnesty and incentives to lay down their arms, and thousands of them did so. In addition, Moscow allocated more than two billion dollars in extra federal assistance to the region. Gradually, Chechnya changed into a different place, with refugees returning, terrorists leaving the republic, and the rest of the Northern Caucasus taking an interest in Chechnya reconstruction.

16

RFE/RL Newsline, 28 November 2005.


3.3.2

43

A State-Controlled Democracy

Although Russia’s experience of combining democratization with other state-building challenges has been a mixed one, its overall trajectory is rather positive. Russia has come a long way from communism while preserving some important attributes of state governance. Lacking a strong middle class and political order – conditions that are critical for a functioning democracy – the country has created a functioning macroeconomic environment and abstained from attempts to restore its empire. Partly because of the adoption of radical economic reforms, Russia had almost become a failed state (Meierhenrich 2004; Willerton et al. 2005), but it subsequently revived its economy and a good measure of political viability. The fragility of Russia’s political system helps us to understand the Kremlin’s nervous reaction to Western democratization pressures and the color revolutions occurring in the former USSR and Balkan States. The color revolutions were strongly supported by Western nations, but from Russia’s standpoint the revolutions had a destabilizing effect on the region. Georgia under President Mikheil Saakashvili has had problems solving vital social and political issues. In dealing with separatist regions, Tbilisi increasingly relied on force, while pressuring Russia out of the region. The Orange coalition in Ukraine, for its part, failed to address the root causes of the revolution – poor living conditions and unpopular leadership – and the country remained unstable.17 Georgia and Ukraine have also expressed a desire to join NATO, which has added to Russia’s sense of strategic insecurity.18 In Kyrgyzstan, yet another case of a color revolution, the situation was arguably the worst, partly because of the country’s location. Sandwiched between the Ferhana Valley and China’s Xinjiang province, Kyrgyz territory was commonly used as a transit route by drug traffickers, Islamic militants, and Uighur separatists. Kyrgyzstan’s change of power in March 2005 was accompanied by violence and looting, and the new regime had difficulty preventing criminal groups from shaping the political system. Vulnerable and insecure, Russia has sought to do everything in its power to stabilize its political environment and minimize outside interference. President Putin insisted on Russia’s right to “decide for itself the pace, terms and conditions of moving towards democracy,” and he warned against attempts to destabilize the political system by “any unlawful methods of struggle.”19 The Kremlin’s supporters

17 Even proponents of the Orange Revolution soon became disillusioned with its outcomes. See, for example, Anders Aslund, Betraying a Revolution. Washington Post, 18 May 2005. Previously Aslund strongly supported the revolution, viewing it as a “classical liberal revolution, like 1848, or the Velvet Revolution in Prague in 1989” and thought that it would end the excessive corruption of Ukraine’s oligarchs. See Anders Aslund, Ukraine Whole and Free: What I saw at the orange revolution. Weekly Standard, 27 December 2004. 18 Interfax, 12 December 2006. Similar statements were made by president Putin during the NATO summit in Budapest in April 2008. 19 Putin 2005.

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and theorists sympathetic to the official agenda have developed concepts of “sovereign democracy” and “sovereign economy,”20 insisting on the need for Russia to protect its path of development and natural resources. The Kremlin’s leading ideologist, Vladislav Surkov, justified the concept of sovereign democracy by citing the need to defend an internally determined path to political development and to protect the values of economic prosperity, individual freedom and social justice from potential threats. He defined these threats as “international terrorism, military conflict, lack of economic competitiveness, and soft takeovers by ‘orange technologies’ in a time of decreased national immunity to foreign influence.”21 The Kremlin has trained its own youth organizations and restricted activities of Western NGOs and radical opposition inside the country. Russia’s elections have also demonstrated the ample fear of outside interference, and the willingness of politicians to resort to an anti-Western rhetoric.

3.3.3

The Threat of NATO Expansion and the US Missile Defense System

After 9/11, Putin moved to cooperate with the United States by supporting the antiTaliban operation in Afghanistan and deemphasizing his opposition to the White House’s decision to withdraw from the ABM treaty. Putin at one point also showed interest in joining NATO and demonstrated his commitment to working with the alliance members to address the newly emerged threats of terrorism. However, the notion of cooperation that the United States had in mind left little room for Russia and its security interests. NATO was to be expanded to the East and the United States was to move its security infrastructure closer to the former Soviet borders, and Russia was expected to accept these moves. Given this disjuncture in interests, Russia had cause to be skeptical of America’s declared intentions to develop a security partnership. Many in Moscow interpreted the West’s decision to expand its military alliance without planning to include Russia as a threat.22 In response, President Putin delivered a tough speech in Munich in the early 2007, in which he warned that Russia intended to pursue a more assertive course in relations with the United States. Then, while continuing to withdraw its troops from Georgia, Russia announced a moratorium on the CFE Treaty that the

20

Rossiyskaya gazeta, 28 April 2005; Moscow News, 3 March 2006. See also Aleksandr Tsipko, Obratno puti net, Literaturnaya Gazeta (19), May 2006. Not all in the Kremlin share the notion of sovereign democracy. For an alternative perspective from the current President Dmitri Medvedev, see Medvedev 2006. 21 Surkov 2006. 22 The National Interest, May–June 2007; RIA Novosti, 7 May 2008. See also Vitaly Shlykov and Alexei Pankin. Why We Are Right to Fear NATO. Russia Beyond the Headlines, 30 April 2008.


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Western nations had refused to ratify for 8 years. Having left the door open for a return to the treaty, Russia nevertheless indicated that its level of frustration was running high. The Kremlin also appointed Dmity Rogozin, a hard-line nationalist and critic of attempts to develop relations with the West, as Russia’s new ambassador to NATO. In addition, Russia was determined to show that it was dissatisfied with negotiations with the West over NATO expansion and was prepared to prevent incorporation of states like Georgia and Ukraine into the alliance by all means available. After the recognition of Kosovo and the NATO summit in Bucharest, Russia strengthened its ties with Georgia’s separatist territories. It also sent signals that it was prepared to work to develop separatist attitudes in Ukraine.23 In August 2008, in response to Georgia’s use of force against South Ossetia, Russia sent its troops to defeat Georgia’s army. In addition to cementing its military presence in the Caucasus, the Kremlin also recognized the independence of two of Georgia’s autonomous regions, Abkhazia and South Ossetia. As for the US nuclear primacy drive under Bush’s administration, Russia’s initial posture was muted and nonthreatening. In 2000, Putin finally convinced the Russian Duma to ratify the START 2, which had been signed in January 1993 and promised to reduce the amount of nuclear missiles to a new 3,000–3,500 threshold. And despite Bush’s decision to withdraw from the ABM treaty in 2002, Putin was hopeful that the two nations’ ability to focus on issues of counterterrorism would develop their mutual trust and perhaps render the nuclear primacy drive unnecessary. Opposition to this view in the military and political establishment was formidable, partly as a result of NATO’s war in Yugoslavia, which led to the new draft military doctrine. The situation began to change in 2002–2003 when the Russian security perception shifted to viewing the United States’ nuclear policy as directed against Russia. Increasingly, the Kremlin saw Washington’s plans to deploy Missile Defense System (MDS) elements closer to Russia’s borders as a direct security threat and a deviation from the war on terror. Although the Kremlin considered drastic cuts in the Russian nuclear arsenal throughout 2001–2002, by late 2003 it had returned to its traditional emphasis on preserving nuclear parity with the United States (Gottemoeller 2004). In October 2007, Putin went as far to draw a parallel between the deployment of Soviet missiles in Cuba that led to the US–Soviet crisis in 1962 and American MDS plans in Eastern Europe.24 Acting on this threat assessment, Russia pursued a policy response that included the preservation of existing nuclear treaties, the development of systems capable of breaching the US MDS, and plans to retarget missiles to new American installations

23

For example, Moscow Mayor and pro-Kremlin Unified Russia party leader Yury Luzhkov claimed that Sevastopol was legally a part of Russia, and he urged Moscow not to extend its treaty of friendship, cooperation, and partnership with Ukraine. See Yasmann 2008. 24 RFE/RL Newsline, 29 October 2007. The United States dismissed the comparison as irrelevant arguing that the US MDS was introduced to defend Russia, not to challenge it. See US sees no parallel between Cuban Missile Crisis and NMD in Europe, Itar-Tass, 27 October 2007.

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in Europe. First, the Kremlin emphasized the need to preserve existing nuclear agreements, such as START 2 and SORT. Although some within the military establishment threatened to withdraw from the Intermediate-Range Nuclear Forces (INF) Treaty, which bans the deployment of medium-range missiles, the Kremlin did not endorse these threats. Well aware of Russia’s inability to match the American strategic arsenal, Russia instead developed new weapons capable of an asymmetric response. In 2006, Putin said that Russia had tested new missiles that were “hypersonic and capable of changing their flight path” and therefore capable of penetrating any MDS.25 The Kremlin also announced plans to reequip its new single-warhead intercontinental ballistic missile (ISBM) Topol-M (SS-27) with multiple warheads.26 Finally, the Kremlin said it would have to retarget its missiles at Poland and the Czech Republic as places for the new MDS infrastructure.27 While making these preparations, Russia did not give up on its efforts to engage the United States. In June 2007, Putin surprised the United States by proposing to share the early warning radar system in Gabala, Azerbaijan. He said the radar system Russia was using would cover not only part, but the whole of Europe and would therefore “make it unnecessary for us to place our offensive complexes along the border with Europe.”28 The White House later dismissed the proposal as insufficient for addressing its security concerns in Iran and elsewhere. It took the arrival of President Barack Obama for the US to abandon the old MDS approach and to partly resolve its differences with Russia.

3.3.4

Global Energy Clout

Russia views energy as a tool for achieving its larger modernization objectives. As explained by Putin, the role of the energy sector is to work with the state to promote these objectives. Relying on market forces is essential, but insufficient: “Even in developed countries, market mechanisms do not provide solutions to strategic tasks of resource use, protecting nature, and sustainable economic security.”29 The state therefore has to shape policy outcomes by actively seeking to control social resources, coordinating the activities of key social players, and assisting the country in finding its niche in the global economy. In order to achieve these tasks the state has to be sufficiently concentrated and relatively autonomous of interest group pressures.

25

Associated Press, 31 January 2006. See also Norris and Kristensen 2007. RIA Novosti, 15 December 2007. 27 Los Angeles Times, 8 June 2007. 28 Associated Press, 8 June 2007. 29 The passage is from Putin’s Ph.D. thesis, “Mineral Raw Materials in the Strategy for Development of the Russian Economy,” as cited in Larsson 2006, 58. 26


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The Kremlin was therefore ruthless to those oligarchs whom it perceived as violating its “new deal” by refusing to stay out of politics and being uncooperative with the state in the implementation of its economic vision. Boris Berezovski and Vladimir Gusinski, who launched an anti-Putin propaganda campaign using their media empires and their own TV-channels, were charged with not paying their financial debts to the state and fled the country to avoid prosecution. Mikhail Khodorkovski too was given time to leave the country, but chose not to, and on October 25, 2003, he was arrested on charges of multiple fraud and tax evasion. Despite their selective nature and questionable legality, the Kremlin’s actions against oligarchs were strongly supported by the general public, which overwhelmingly felt robbed by Yeltsin’s reforms. In a country where notions of law and justice were severely undermined, a legal solution to the problem of excessive wealth concentration and the restoration of a balance between state authority and big business was arguably hard to come by (Desai 2006). With respect to the overall objectives of economic recovery and political independence, Russia has developed a coherent strategy of exploiting the country’s abundance in natural resources. In an environment of rising energy prices, the emphasis shifted away from providing macroeconomic discipline and tough fiscal policies and toward the desire to capitalize on Russia’s reserves of natural gas and oil. Russia’s strategy has included several important elements. Among them are increasing the state’s share in energy companies, such as Gazprom and Rosneft, often at the expense of Western capital; building pipelines in all geographic directions; seeking to negotiate long-term contracts with energy consumers and obtain access to their markets and distribution networks; raising energy prices for Russia’s oil and gas-dependent neighbors; moving to control transportation networks in the former USSR; and coordinating its activities with other energy-producers. Acting on these policy guidelines, the state renegotiated production-sharing agreements with Western companies in the most lucrative oil fields in Siberia and the Far East. Foreign energy giants, such as Royal Dutch Shell and British Petroleum, now had to play by different rules as set by a more assertive Russian state. In the Caspian Sea, Russia sought to remain an important oil producer and preserve its status as a major transit country through which to carry energy from the Caucasus and Central Asia to Europe. Although it has generated anxiety in a number of energy-consuming countries in Europe as well as in the United States, the strategy reflects more than anything else Moscow’s legitimate desire to capitalize on its energy reserves and improve its chances to serve as a reliable oil and gas supplier to primarily Western countries. Against the advice of some energy analysts and geopolitical thinkers, the Kremlin did not think it would be better off sharply redirecting its oil and gas supplies toward Eurasian countries such as China and India. Judging by statements of its key officials, Russia continues to welcome energy cooperation with the United States and other Western nations. As the Russian ambassador to the US Yuri Ushakov wrote, although American investments in Russia grow every year and Russian oil supplies to America reach unprecedented levels every year, “in real terms, our energy cooperation is way below potential.”30

30

Wall Street Journal, 13 February 2006.

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3.4

A.P. Tsygankov

Conclusion: Prospects for US–Russia Relations

Overall, cooperation between the two countries has been less than impressive. Although the nature of the current post-Western world prescribes multilateral solutions, the United States has continued to make unilateral decisions, such as bringing Georgia to NATO without addressing Russia’s concerns or encouraging Ukraine toward NATO membership. It has armed narrowly based militaristic regimes in Azerbaijan and Georgia. And it has sought to control the Caspian Sea reserves and isolate Russia from the energy infrastructure in the region. President Barack Obama has indicated his willingness to abandon his election rhetoric about a “resurgent Russia” and has proposed – via Vice-President Joe Biden’s speech in Munich on February 10, 2009 – to press the “reset button” on relations with Moscow. The new administration has prioritized the stabilization of Afghanistan and expects the Kremlin’s cooperation since terrorist camps and intense drug trafficking from the area create problems for Russia as well. In addition to continuous counterterrorist cooperation, the United States hopes to strengthen Russia’s support for nuclear nonproliferation and to coordinate reactions to the global economic crisis. However, Russia remains suspicious about US intentions and policies undermining Russian security interests. This suspicion has its roots in the American support for the color revolutions, which many in the Kremlin view as directed at Russia. Russia feels humiliated by what it sees as lack of appreciation of its foreign policy interests, and it argues that it was Russia, not America, that had to swallow the war in the Balkans, two rounds of NATO expansion, the US withdrawal from the ABM treaty, military presence in Central Asia, the invasion of Iraq, and now, plans to deploy elements of nuclear missile defense in Eastern Europe. This has all served to complicate efforts at bilateral cooperation. In the meantime, Washington continues to operate with an attitude of superiority that is evident in a broad range of its policies and attitudes, from a persistent attitude that “we won the Cold War” to expanding NATO, blocking development of Russia’s energy infrastructure, and pushing the Kremlin to adopt Western-style democratization. These policies betray a fundamental misunderstanding of international and former Soviet realities. Russia is not a defeated power and has greatly contributed to the end of the Cold War. It has security and economic interests that are principally undermined by the process of NATO expansion and unilateral energy policies. Finally, Russia’s current imperatives are those of a state-building nature, which are broadly supported by the public. Further democratization may come, but not before a strong middle class emerges and a sense of security from external threats is realized. If the two sides are to build foundations for a future partnership, they ought to begin by developing cooperation on both the strategic and operational levels of dealing with the threat of terrorism. In the absence of proper vigilance and cooperation among states, terrorism may even obtain a nuclear dimension. The Caucasus and


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Central Asia, with their mixture of ethnic and clan loyalties, remain some of the world’s most difficult regions to understand. Western leaders should support a locally acceptable solution to the conflict, one that is grounded in general principles of territorial integrity and the accommodation of minorities. On the other hand, the US and Russia have an interest in being firm with radical Islamists – whether in Chechnya, Afghanistan, the Balkans or the Middle East – who are preying on the world’s political divisions and military confrontations, and who rely on violence as the dominant method of achieving their objectives. The two nations must also cooperate on equal terms in security affairs, including reduction of their nuclear arsenals and negotiation of new treaties. Instead of expanding NATO, the United States should also work with Russia to address issues of instability in Afghanistan and Central Asia, the rise of China, and the proliferation of conventional weapons in Eurasia and the Middle East. It would thus behoove Washington to act in consultation with Moscow and other key actors in the region. After three failed attempts to engage the United States and other Western nations in a mutually advantageous partnership under Mikhail Gorbachev, Boris Yeltsin, and Vladimir Putin respectively, Russia now wants to be sure Washington does not overstep its bounds in the region, and the Kremlin views Western intentions largely through a geopolitical lens. Finally, the United States does not have a good alternative to developing energy cooperation with Russia. Russia represents a critically important market for the United States, which consumes over 20% of the world’s energy and has a shortage of domestic energy supplies. As US Ambassador William Burns put it, “in the case of Russia, the United States and energy, the power of the argument for partnership between us is obvious. Russia is the world’s largest producer of hydrocarbons; the United States is the world’s largest consumer.”31 A recovering great power with the world’s largest energy supplies, Russia can be either a valuable partner or a major spoiler of Western policies in Eurasia and beyond. Denying Russia the right to pursue its energy interests and to establish an independent energy policy at home and in Eurasia is sure to come with large political and economic costs. Treating Russia as a potential threat may bring to power in Moscow those who are not interested in strengthening relations with the United States. Politically, it may generate a prolonged cycle of hostilities shaped by clashing American and Russian perceptions of each other’s energy intentions, resulting in a situation that some experts describe as the energy security dilemma and others as the militarization of the global struggle over energy supplies.32 Economically, it may lead to the isolation of prominent American companies from developing important energy fields and energy relations abroad.

31

Moscow Times, 27 June 2006. Asia Times Online, 17 January 2007. See also Jeronim Perovic and Robert Orttung. Spero News, 10 April 2007. Available from http://www.speroforum.com.

32

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References Bahgat, Gawdat. 2002. The New Geopolitics of Oil: The US, Saudi Arabia, and Russia. Middle Eastern Economic Survey 45(36). Available from . Accessed 28 September 2011. Bush, George W. 2002. Graduation Speech at West Point. United States Military Academy West Point, New York (1 June). Desai, Padma. 2006. Conversations on Russia: Reform from Yeltsin to Putin. New York: Oxford University Press. Gottemoeller, Rose. 2004. Nuclear Necessity in Putin’s Russia. Arms Control Today 34 (3). Hahn, Gordon M. 2007. Russia’s Islamic Threat. New Haven, Conn.: Yale University Press. Larsson, Robert L. 2006. Russia’s Energy Policy: Security Dimensions and Russia’s Reliability as an Energy Supplier. Stockholm: FOI – Swedish Defence Research Agency. Available from . Accessed 15 February 2011. MacKinnon, Mark. 2007. The New Cold War: Revolutions, Rigged Elections and Pipeline Politics in the Former Soviet Union. New York: Random House. Medvedev, Dmitri. 2006. Dlya protsvetaniya vsekh nadouchityvat’ interesy kazhdogo. Expert, 28 (522) (24 July). Meierhenrich, Jens. 2004. Forming States after Failure. In When States Fail: Causes and Consequences, edited by Robert L. Rotberg, 153–169. Princeton: Princeton University Press. Neistat, Anna. 2003. Who’s Afraid of Vladimir Putin? Human Rights Watch (26 September). Available from . Accessed 28 September 2011. Norris, Robert S., and Hans M. Kristensen. 2007. Russian Nuclear Forces 2007. Bulletin of Atomic Scientists 63 (2): 61–64. Putin, Vladimir. 2005. Poslaniye Federal’nomu Sobraniyu Rossiyskoy Federatsiyi (March). Surkov, Vladislav. 2006. Suverenitet – eto politicheski sinonim konkurentnosposobnosti. Moskovskiyenovosti (3 March). The White House, Office of the Press Secretary. 2002. Text of Joint Declaration (24 May). The White House, Office of the Press Secretary. 2003. Remarks by the President and Russian President Putin (27 September). The White House, Office of the Press Secretary. 2004. Remarks by the President at the Hispanic Heritage Month Concert and Reception (15 September). Tishkov, Valery. 2004. Chechnya: Life in a War-Torn Society. Berkeley, Calif.: University of California Press. Willerton, John P, Mikhail Beznosov, and Martin Carrier. 2005. Addressing the Challenges of Russia’s ‘Failing State.’ Demokratizatsiya 13 (2): 219–240.

Chapter 4

Russia’s Integration into the Global Economy: The Route to Geopolitical Harmony Christopher Granville

4.1

Introduction: Scope and Judgments

In contrast to other chapters in this volume that focus on perceptions (e.g., Russia’s self-image, European and American perceptions of Russia’s transformation), I concentrate on an aspect of Russia’s integration into the global economy which is less perceptible than the often revisited topics of the “politics of energy” – revolving around the country’s role as an exporter of hydrocarbons and metals – and the problems of major foreign strategic investors in Russia which gain media and political attention. Although I touch on these points, and other aspects of Russia’s role in the global economy, those references follow from my main focus on broader trade flows and, above all, capital flows, comprising strategic and portfolio investment, and cross-border lending. I argue that this less visible aspect of the subject creates powerful underlying realities. International companies, lenders, and financial investors have responded to the opportunity presented by those realities. Perceptions in the foreign policymaking and broader political communities of the EU and US lagged these realities but began to catch up from around 2008 – and this trend will likely intensify. As with China, albeit less rapidly and powerfully, Russia’s economic transformation is deepening its integration into the global economy and the value of that integration, which, as it proceeds, increases the stakes for all concerned, will increasingly temper political relations. The EU and US will pay more heed to Russian interests and concerns in the international arena, while Russia will adjust its view of the trade-off between sovereignty (especially as manifested in “resource nationalism”), economic development, and welfare. This last realization will manifest itself most obviously in the climate for foreign strategic investment in strategic resource sectors and for attracting know-how and innovatory R&D capabilities into Russia, and will ultimately contribute to a relaxation of social controls and more open political competition. C. Granville (*) Trusted Sources, Charlotte Street, London, W1T 2NS, UK e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_4, © Springer Science+Business Media, LLC 2012

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Background: Russia’s Recent Economic History

In introducing the theme of Russia’s integration into the global economy, I have already drawn an analogy with China. But in one important respect, Russia differs from China. The difference has to do with contributions to global imbalances. The commodity boom of 2003–2008, to a considerable extent driven by China’s explosive growth based on investment in export-oriented capacity, allowed Russia to generate substantial fiscal and external surpluses. These surpluses increasingly became the counterpart of rapidly expanding domestic demand – that is, both investment and consumer demand. In particular, the stabilization fund into which, from 2005 onwards, the government diverted most of the fiscal windfall arising from high marginal tax rates on oil producers’ super profits, promoted creditworthiness and reduced cost of capital, which allowed Russia to tap foreign private savings to finance a domestic consumer and investment boom. This has made Russia a material source of marginal demand in the world economy. Before taking this analysis further, and attempting in particular to substantiate the forward-looking contentions stated in my introduction, it is worth looking more closely at the premise of Russia’s economic transformation as a domestically driven affair – contrasting with, for example, the post-World War II Pacific Rim economies, which based their growth on manufactured exports to generate the foreign exchange for domestic development, and resembling more the United States in the late nineteenth century in stemming from the expansion of its domestic market. This understanding of Russia’s economic growth model may seem at once counterintuitive and at odds with the theme of the international significance of Russia’s integration into the world economy. It is counterintuitive, because by far the largest sectoral contribution to value added – around a fifth of the total – is generated by the oil and gas sector, which has also accounted over the past decade for between half and two-thirds of all exports, which, in turn, accounted for nearly 30% of GDP in the last 2 years of the past decade’s oil boom (2007–2008). It is at odds with the global integration perspective, since domestic market expansion is by definition inward looking. The rate of this expansion is determined by the price of the commodities which Russia exports. In other words, average oil price levels matter for the pace but not the existence of growth, a point revisited in the last section of this chapter, which looks at the impact of the global economic crisis that began in 2008. These points are best addressed by means of a brief review of Russia’s economic history in the period between the recovery from the financial debacle of 1998 and the global crash of 2008. In these years, Russia’s real GDP grew at an annual average rate of 7%. In the same period, nominal dollar GDP at market exchange rates expanded almost tenfold, from roughly US$180 billion in 1999 to US$1.7 trillion in 2008. As a result, close to the end of the second decade after the Soviet collapse, the Russian economy is larger than it was on the eve of that collapse in 1990 (i.e., the dramatic ensuing output loss has been reversed) and is now growing on a qualitatively sounder, market-based foundation (see Fig. 4.1).

4 Russia’s Integration into the Global Economy: The Route to Geopolitical Harmony

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Fig. 4.1 Russian Per Capita GDP since 1990. Source: Rosstat (The Federal State Statistical Service)

In this perspective, it is no mystery why the government is popular. Political stabilization under the rule of Vladimir Putin has been an important cause of the country’s economic recovery, which, in turn, has had the effect of sustaining that political stability. Figure 4.2 below captures the story from the perspective of official demand data. The primary driver of growth after the 1998 devaluation was exports, boosted by the recovering oil price. But as early as 2001, and since then right up to the global crisis of 2008, domestic components of demand have been growing faster than net exports (which, in all but 2 years in this period, turned negative as a result of surging imports, a point I will return to below). Private consumption was the primary growth driver in 2001–2003, to be overtaken by investment thereafter. Here, then, are the two main stages in Russia’s economic recovery from the near decade-long recession which followed the collapse of the Soviet system in 1991. The first stage, from 1999 to around 2003, can be characterized as a “bounce-back.” As is by now well established in the literature on post-Soviet economic transition, this growth is based on efficient adaptation of capacities inherited from the centrally planned economy (Granville and Oppenheimer 2001; Kharas et al. 2001). That trend was facilitated by the 60% devaluation of the ruble in 1998, pricing out most imports. Productivity gains consisted in redirecting existing capacity to satisfy real (mainly domestic) demand, something which by definition had not been a feature of the central planning system. Growth of this kind is not capital intensive, with much of the investment required to sustain it limited to maintenance spending. This was on the whole affordable out of retained earnings, which was just as well, as external

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Fig. 4.2 Components of Demand (Year Over Year %) and Investment/GDP (%). Source: Rosstat (The Federal State Statistical Service)

financing sources were largely closed to Russia in the years after the 1998 default. Cheap labor and energy were also helpful in kick-starting the recovery, though these factors were, respectively, short-lived (as unit labor costs were driven up by real wages rising consistently faster than productivity) and distorting (as key prices – gas, electricity, and transport – were held down in real terms by continuing administrative controls). Relatively high rates of real GDP growth were therefore compatible with modest growth in fixed capital investment. The multiplier effect of the job creation and real wage increases generated by this growth phase accounts for domestic consumption being the fastest growing component of demand after the initial – and fleeting – surge in net export demand following the recovery of oil prices in 1999–2000 (see Fig. 4.2). Panel data from the World Bank-financed Russian Economic Barometer suggest that by 2003–2005 capacity utilization rates had risen in most main sectors from lows of below 70% after the 1998 crisis to around 90%. Given the age and obsolescence of installed equipment (with an average age of nearly 20 years by mid-decade), the output gap had clearly closed. So, to sustain the economic recovery, Russia had to enter a new phase of investment-led growth. This second phase of the recovery was underpinned by the country’s new-found stability. Political and macroeconomic stabilization (especially conservative fiscal


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policy) made property rights less precarious (leading to some baby steps toward proper corporate governance) and promoted financial deepening.1 A key effect, as already noted above, was to reduce the cost of capital and hence facilitate the financing of domestic investment – increasingly from abroad. Industrial output growth has lagged overall economic growth in every year since 2003. This reflects a number of factors, notably import penetration on the back of the inexorably appreciating real exchange rate of the ruble, and the deterrent effect of corruption – especially on SMEs, which are particularly vulnerable to the extortions of predatory bureaucrats acting both as principal mafiosi and as the paid agents of private mafiosi. But despite these huge problems for Russia’s development, domestic investment growth accelerated rapidly toward the end of this period (2005–2008) on the back of a strengthening virtuous circle of increasing domestic demand justifying higher investment, which in turn generated more demand. The strongest growth came in two areas. The first was new sectors which under central planning were under- or mis-developed (retail, real estate, and automotive), or simply non-existent (most service industries – financial, media, and logistics – which would be taken for granted in a more normally developed economy with Russia’s income levels). The second major source of stimulus was government consumption, which had not contributed to growth since the collapse of the Soviet system. While maintaining overall budget surpluses, the Putin administration also concentrated on redistribution, especially through intensive real-term hikes in public sector wages and pensions. Redistributive policies became more systematic after 2004, when the windfall tax regime on the oil sector entered into force. Although most of the resulting fiscal windfall was saved (in the oil stabilization fund), a portion of these resources now available to the government were tapped in two important initiatives. The first of these, announced in 2005 and known as the “National Projects,” was directed at improving human resources by targeted funding of initiatives in primary health care, education, agriculture, residential housing, and financial incentives for women to have more children. Then in 2007, the government appropriated around $35 billion out of the total $120 billion then accumulated in its stabilization fund vehicles to capitalize a raft of new “development institutions” designed to fund infrastructure development and to promote the diversification of the economy. Drawing these threads together presents the outline of a long-term growth trajectory centered on the expansion of the domestic market and driven specifically by: • Raising productivity to levels consistent with the potential of the country’s physical and human resource endowments (the potential here compensating for constraints in labor inputs due to demographic weakness – “inspiration” rather than “perspiration,” in the jargon of classical economics). • Features peculiar to the transition from Soviet-style central planning, specifically the catch-up effect of missing sectors coming into being, with associated one-off market share opportunities. • Capital deepening, from industrial re-equipment and construction to infrastructure. 1

Household deposits as a share of GDP tripled from 8% to 25% in the decade between the two crashes of 1998 and 2008.

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There is fuel here for several decades of domestic investment-driven growth, perhaps enough to raise per capita income to the level of today’s EU average, before the scope for further improvement in Russia’s living standards will begin to be decisively determined by the extent to which the country can achieve new comparative advantages in the global division of labor, at which time the specific drivers listed above will fall away.

4.3

The Positive International Impact of Russia’s Domestic Demand-Driven Growth

Having taken stock of Russia’s economic growth drivers in light of recent history, I now return to my main theme of the significance of Russia’s development from a global economic perspective and my hypothesis about the impact of that development on international perceptions of Russia and relations with Russia. In this perspective, Russia’s domestically driven growth is not an isolationist affair, but instead has made the country a land of opportunity for: • International companies exporting goods and services to exploit huge and rare one-off market share grab opportunities, especially given the size of the economy (in 2006, breaking into the global top ten in the world in dollar GDP terms). • Foreign strategic investors seeking exposure not only to export-oriented extractive sectors, but also to domestic demand in sectors like automotive where the potential could not be efficiently exploited simply by exporting finished goods into the Russian market as opposed to building in-country production facilities (this would be true for reasons of logistics and other costs, even before tariff barriers are taken into account). This type of FDI has also been attracted by the above-mentioned market share opportunities – the beer market providing a good early example dating back to the 1990s, and there have been several others since. • International private savings seeking superior returns from debt and equity exposure to a growth environment which, while lagging the headline rates seen in India and China, can often offer superior returns on the back of asset prices discounted more heavily for various country-related risks than is the case with comparable assets in other emerging market countries. Perhaps the most overlooked aspect of the cross-border opportunities created by Russia’s economic growth has been the surge in imports. This important feature of the economic landscape has been obscured by the fact that five consecutive years of strong oil-price increases starting in 2003 nevertheless kept the headline external trade surplus growing (though even here there was an exception in 2007, when the relatively modest year-on-year oil price increase resulted in a reversal of the trend – see Fig. 4.3 below). The important story all along was import growth rates exceeding 30% yearon-year since 2004, peaking at 50% on the eve of the global financial meltdown in 2008 (see Fig. 4.4 below).


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Fig. 4.3 External Trade and Current Account Balances ($ Billion). Source: Central Bank of Russia.

Fig. 4.4 Import and Export Growth, 2007–2009 (% Year over Year 3-Month Moving Average). Source: Central Bank of Russia

As a result, by 2007 (the last full year before the global financial crisis and economic recession), Russia had become the third largest importer from the EU (by far Russia’s main trading partner), not far from being second equal with the US. The share of capital goods in total Russian imports increased from 31% in 2000 to 51% in 2007. This change, reflecting the acceleration in domestic investment

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Fig. 4.5 Direct Investment Inflows and Outflows, $ billion (LHS) and Year over Year % Change (RHS). Source: Central Bank of Russia

demand to replace obsolete plants, has benefited the main European exporters of manufacturing equipment, Germany and Italy. Russia’s imports are an important component of its best relationships with Western Europe – resulting, for example, in the German-led blocking of the Bush administration’s attempt in 2008 to fast track NATO membership for Ukraine and Georgia. Likewise, the fact that Russia’s imports from the UK, though substantial and fast-growing, are concentrated in the invisible sectors of financial and professional services with employment less directly attributable to Russian demand than in manufacturing, may help explain why the UK business lobby has been less effective in countering political tensions with Russia. In any event, when evaluating the effect of economic ties on broader political relations, the importance of a large and fast-growing market for a country’s exports should not be ignored – even though, or rather because, that importance has yet to work itself out fully in the practice and assumptions of US and, especially, EU relations with Russia. The same goes for the other CIS countries, for almost all of which the Russian labor market has become a vital source of export revenues in the form of remittances. The economic importance of the latter was brought home by the Russian economy’s deep 8% real contraction in 2009 (a factor which almost certainly contributed to the overthrow of the Bakiyev regime in Kyrgyzstan in April 2010, and as such, may go down as perhaps the first regime change influenced more by Russia’s economic weight than any conscious political action). Turning from trade to investment flows, Fig. 4.5 (above) shows the surge of direct investment flows both into Russia and from Russia since mid-decade, an obviously important part of the story of Russia’s integration into the world economy.


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Fig. 4.6 Capital Flight, $ billion. Source: Central Bank of Russia

The last important aspect of the international ramifications of Russia’s domestic growth story takes us back to capital flows. Russia has run a current account surplus since the collapse of the Soviet Union. Throughout the 1990s, this surplus – which, by definition, is the excess of savings over investment – funded the accumulation of foreign savings (capital flight). Structural capital flight persists to this day (see Fig. 4.6). But from 2005 until the third quarter of 2008 (when hard on the heels of the war against Georgia came the global financial crisis, the combined effect being a $180 billion outflow), net private capital inflows turned positive. These flows took the form of lending to the domestic banking and corporate sectors in the proportion of roughly two-thirds to one-third. The key point about these inflows is that they offset the accumulation of government savings – the combined official foreign exchange reserves and sovereign funds – in US Treasuries and other OECD government securities. In other words, Russia’s oilrelated surpluses were being recycled in the form of foreign savings inflows financing domestic growth. On the eve of the global financial crash and economic recession, government savings abroad and foreign private lending to Russian residents were roughly in balance (see Fig. 4.7). From this perspective, Russia’s strong domestic demand prevented it from contributing to growing global imbalances. This globally positive effect of Russian growth was enhanced by the strong appreciation of the national currency, a development which many Russian officials were as keen to resist as their Chinese counterparts, though Russian authorities proved much less well equipped in this important area.

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Fig. 4.7 External Debt vs. Sovereign Foreign Investments, September 2008. Source: Central Bank of Russia

Fig. 4.8 Net Private Capital Flows and Ruble/Dollar Exchange Rate, 2001–2007. Source: Central Bank of Russia

In Fig. 4.8, we can see that the nominal exchange rate was held relatively steady despite persistent external surpluses. The goal, of course, was to protect employment and promote continued output growth by maintaining competitiveness – not only of exporters, but also to shelter domestic-oriented firms from import competition. Impeding the natural appreciation of the ruble required the Central Bank to intervene in the foreign exchange market, buying dollars, and other foreign currency for rubles.


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The result was rapid accumulation of international official foreign exchange reserves. By 2008, Russian reserves were the third highest in the world after China and Japan. But unlike China, Russia did not systematically sterilize the local currency emissions carried out to fund this acquisition of reserves. Instead, the reserve accumulation was largely funded by straightforward increases in the monetary base. Such unsterilized funding will always correct external surpluses. For, as a result of the domestic monetary expansion, inflation rates will become higher than those of trading partners, and the country’s real exchange rate will therefore strengthen even if the nominal exchange rate remains pegged. This real exchange rate appreciation will in turn result in loss of competitiveness, causing the external surplus to narrow or disappear. Such automatic rebalancing is clearly visible in the trend of the Russian current account surplus, declining from around 10% of GDP in the first half of the decade to 6% in 2007 (with a small widening in 2008 due to the final pre-crisis oil price surge before plunging as the crisis hit). In this fundamental respect, then, Russia may be seen as more constructive than China and other surplus countries (including the Gulf oil exporters) in not entrenching the global imbalances which were a root cause of the present world economic crisis. In this light, Russia – which is not usually perceived as a constructive and positive force in the world – emerges in economic terms, and however unwittingly, as a good global citizen.

4.4

Russia’s Global Economic Integration in Post-2008 Crisis Conditions

Will this conclusion prove in hindsight to be an ephemeral anomaly of the last years of the global expansion that preceded the crash of 2008? The international significance of Russian domestic demand-driven growth obviously depends on serious growth potential surviving the present crisis. Sharp oil price fluctuations of the kind which have surrounded this crisis drive short-term changes in Russia’s growth rate, but not the existence of growth. And although the longer-term trend rate of annual GDP growth will vary proportionately with the average oil price, that variation may prove less wide than might be suggested by the sharp short-term fluctuations caused by oil price volatility. These relationships are reflected in Fig. 4.9 below. That generalization on the possibility of continued growth regardless of oil price shocks depends on two conditions being met. The first is exchange rate flexibility: the devaluation of the ruble in the face of a negative commodity price shock will ensure the profitability of natural resource sector companies. The second condition is macroeconomic and financial sector stability (especially the public finances and the banks), in relation to which political stability is both a cause and an effect. Assuming those two conditions hold (which seems a reasonable assumption at the time of writing), there is another threat to the continuation of the state of affairs considered so far, in which Russian domestic demand not only drives the country’s own growth but also benefits the world economy (by the recycling of the transfer to

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Fig. 4.9 Real GDP (Year Over Year %) and Oil Price ($/bbl), 1996–2010. Source: Rosstat (The Federal State Statistical Service) and Bloomberg

Russia from net commodity-consuming countries through Russian domestic demand), and in turn points to a longer-term maturing of political relations. This threat stems directly from the discussion above of Russia’s financial policies in the pre-crisis period. While, as argued, this looks responsible from an international perspective by tending to correct external surpluses, it looks rash from a domestic Russian standpoint since it causes relatively high inflation rates. The pre-2008 pattern of the government saving in foreign assets while international private savings flowed into the country should not be disparaged. It allowed Russia to begin strong growth after all the hardships and setbacks following the collapse of central planning. And given the problems of bureaucratic waste and corruption, it made much better sense for the government to build up its own savings as the cornerstone of an environment attractive to foreign financing rather than trying to follow the advice of many domestic politicians and spend the stabilization fund directly. Moreover, as already noted, the inflationary policy response to those foreign capital inflows (a de facto exchange rate peg and reserve accumulation financed by largely unsterilized ruble issuance) resulted in real appreciation of the ruble exchange rate hence a natural correction of external surpluses. Yet while this makes Russia seem a more constructive global integrator than China in not aggravating global imbalances, this approach in an environment of abundant global liquidity and easy credit lured the Russian government into an inflationary dash for growth which was already betraying signs of its unsustainability before it was interrupted from September 2008 by the global crisis. This timing looks ironically fortunate, for by that time (as shown in Fig. 4.7) the pace of nonpublic external debt growth (see Fig. 4.10) was driving total obligations above the level of the government’s reserve cover.


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Fig. 4.10 Non-Public External Debt, 2001–2009 ($ billion). Source: Central Bank of Russia

Fig. 4.11 Interest Rates and Inflation, 2007–2010. Source: Central Bank of Russia

The combination of a managed exchange rate and (from June 2006) the full convertibility of the ruble on the capital account of the balance of payments resulted in the outside world dictating domestic interest rates. But whereas under the 1990s currency peg, markets pushed interest rates up to a level reflecting the risk of a sovereign default which then materialized, the situation in 2006–2008 was the reverse: hot money inflows drove interest rates far too low (deeply negative in real terms – see Fig. 4.11).

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Fig. 4.12 BRICS: M2 as Percent of GDP, 1998–2008. Source: Bloomberg

The result was not only high inflation – especially of producer prices, at the margin discouraging domestic investment by undermining its effectiveness – but also the over-borrowing which precipitated the stock market collapse and corporate debt defaults. Supply constraints were severe across the board. Against this background, new tensions arose between the government and business, with collateral damage to the investment climate. The main exhibit here is Prime Minister Vladimir Putin’s July 2008 attack on the coking coal and specialty steel producer, Mechel, for allegedly predatory pricing. The financial policy mix underpinning the rapid growth seen in the few years leading up to the 2008 crash now seems ill-advised for a longer-term reason than the evident reality that above-potential growth was unsustainable even without the “help” of a global shock. More important still from a strategic point of view is the domestic financial repression that resulted from those policies founded on negative real interest rates. Although household deposits were growing, the actual extent of financial deepening remained far inferior to the BRIC peer group (see Fig. 4.12), and a large portion of domestic savings went unmediated by being directly invested in fixed assets (mainly real estate). The reliance on foreign savings to fund credit can now be seen to have had two negative consequences from the point of view of the Russian authorities. It accentuated the boom-bust effect, as the sudden reversal of these credit inflows (i.e., capital flight) and the credit stop impaired the balance sheets of Russian banks and corporations, deepening the post-crash recession and retarding the recovery. It was noticeable that


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in the fourth quarter of 2009 the Russian economy was still shrinking in year-on-year terms despite the oil price having rallied for three straight quarters. It also highlighted Russia’s dependency on foreign capital. If not quite as humiliating as the reliance on Western official funding in the years between the Soviet collapse and the 1998 financial crisis, this reality still ran counter to Russia’s political agenda as articulated by Vladimir Putin and his advisers of sovereign self-reliance – adding, as it were, insult to the injury of highly undesirable economic volatility. It follows that domestic interest rates must be kept positive in real terms to attract savings into the banking system as a sustainable basis for long-term domestic investment. As suggested by the post-crisis shift to positive real interest rates shown in Fig. 4.11 above, there are already clear signs of the authorities having set themselves this new objective. Russian policymakers still, however, have a long-way to travel from this initial monetary policy shift to a fully-fledged inflation targeting regime. Among the many missing ingredients (starting with a credibly independent central bank), the most fundamental is the abandoning of exchange rate management. But the new-found political tolerance for the constraint on growth caused by keeping interest rates positive in real terms (for the sake of greater sustainability and selfreliance) will not extend to the more serious threat to growth stemming from a freely floating exchange rate. Regardless of the success of this new one-legged inflation targeting (and attempts may be made to mitigate the obvious exchange rate-related flaw by introducing some “soft” capital controls such as taxing interest payments on foreign borrowing), the prospect for the Russian economy coming out of the 2008–2009 crisis and recession is one of a much lower trend rate of growth than that seen in the previous decade. This analysis of the impact of the crisis on Russia’s economic performance and macroeconomic policymaking leads back to the main question of the post-crisis sustainability of the trends analyzed in the previous section of this chapter. My conclusion is that the change from the pre-crisis period will be a difference of degree rather than in kind. That is, economic growth will be slower, but it will continue – and with it, Russian import demand for consumer and capital goods, and an assured place for Russian debt and equity securities in international financial investment portfolios seeking superior returns in emerging markets than in the developed world (with a plausible trend growth rate of 3.5% for Russian GDP most probably comparing favorably with the OECD area average). That said, in the post-crisis period, those two forms of global economic integration (import demand and portfolio investment flows) will have less impact than direct investment. And it is precisely foreign direct investment and outward investment by Russian companies that are the most potent vehicle of integration from the perspective of this chapter – which is the effect of economic relations on international perceptions of Russia and the ebb or flow of the cooperative spirit in foreign policymaking. Apart from anything else, increased foreign investment flows have much to recommend themselves as the best way to finesse the monetary policy dilemmas discussed above. While net FDI flows would of course put upward pressure on the ruble exchange rate, the resulting loss of competitiveness has the potential to be offset by

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cheaper imports of productivity-enhancing technology and business processes. Above all, such flows are not associated with the highly undesirable volatility in the exchange rate and credit cycle associated with the foreign credit inflows that were such a dominant feature of the pre-crisis period. The more important – and strategic – advantage of direct investment lies not only in meeting direct demand efficiently and with direct benefits for domestic employment and output (the automotive sector being the most visible example here). Above all, the world economic crisis which began in 2008 has created an opportunity for Russia to soften the “resource nationalism” of the boom times and increase its openness to foreign energy companies participating in the equity and operational management of projects in Russia.

4.5

Looking Ahead: Responses from the Russian Leadership

At the time of writing, there are signs that the Russian leadership grasps the all-round importance of foreign direct investment, but not yet fully convincing evidence that the Medvedev-Putin administration wills all the necessary means to that end. A fundamental background development in this area is the entry into force in May 2008 of new regulations governing foreign strategic investment in the form of the law “On foreign investments in companies having strategic importance for state security and defense.” This law establishes a commission chaired by the prime minister to approve all such investments after prior screening by an inter-agency group chaired by the competition regulator (Federal Anti-Monopoly Service). To date, this commission has endorsed almost all applications to make such investments. A good many of these are projects of Russian industrial groups with a foreign-domiciled parent company (Russian tycoons’ preferred corporate structure). However, they also include some genuine foreign investments such as the acquisition by Alenia Aeronautica, a Finmeccanica subsidiary, of a 25% +1 share stake in Civil Sukhoi Aircraft (CJSC), maker of the new “Sukhoi Superjet 200” regional aircraft, and the purchase of a controlling interest in Imperial Energy, a London-listed oil exploration firm with assets in West Siberia, by Oil and Natural Gas Corporation Limited (ONGC). The significance of these decisions is not destroyed by the fact that deteriorating return prospects have resulted in some cases in the foreign investors concerned either walking away or seeking to renegotiate terms. Up to a point, this early track record of implementing the new foreign strategic investment law bodes well for the continuation of the positive trends identified in this chapter. The law itself is conceptually sound. Despite the insistence of the Federal Security Service (FSB) on designating no fewer than 42 areas of activity as “strategic,” the law is a positive development for bringing long-awaited clarity. Strategic investors will no longer have to worry about the reliability of their informal pre-deal soundings with Kremlin officials; from now on, they will only be proceeding in sensitive areas with a formal, statutory-based green light.


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Yet in the specific area of subsoil resources, the law marks a step back from Putin’s original political position that foreigners would be limited to minority partnerships with controlling Russian company operators only in a handful of giant new deposits. Instead, this restriction applies to all fields of any size whatsoever. Specifically, oil deposits become “strategic” when they hold 490 million barrels; natural gas deposits at 50 bcm; copper deposits at 500,000 metric tons; gold deposits at 1.6 million troy ounces; and the following at any levels: uranium, diamonds, quartz, cobalt, nickel, platinum group of metals, beryllium, and lithium. This brings us to the heart of the question of Russia’s economic prospects in an international perspective. The diversification agenda proclaimed by President Medvedev will require decades of work in the best case. As for the years immediately following the 2008 global crash, the foundation for continued growth driven by domestic demand (especially investment demand) will remain the extractive, energy, and broader natural resource sectors (e.g., oil and gas, mining, electric power, forest products, and agriculture). The difference now, as new hydrocarbon provinces are opened up in Eastern Siberia and the continental shelf, is greater capital intensity with returns threatened by a combination of high domestic taxes on the oil industry and an uncertain global commodity price outlook. The two obvious policy responses here are a relative reduction in oil taxes and encouraging greater involvement of foreign strategic investors. Once again, there are signs of the necessary action. September 2008 saw the settlement of a bitter monthslong dispute between the Russian and foreign shareholders of TNK-BP. While the Russian shareholders proved able to use parts of the bureaucracy in support of their campaign of harassment against BP, there is no doubt that the government desired such a settlement, and that senior ministers of varying ideological persuasions (Igor Shuvalov and Igor Sechin) had worked behind the scenes to promote that outcome. January 2009 saw the entry into force of tax breaks for the oil sector, and the implementation of increases in regulated domestic energy prices (for gas and electricity), as planned before the outbreak of the crisis – and unchanged despite the crisis. In September 2009, Prime Minister Putin personally made a presentation in Salekhard (the capital of the Yamal-Nenets Autonomous District of Tyumen Oblast in northwest Siberia) to a group of senior executives of major international energy companies encouraging them to participate in the development of Russia’s giant natural gas deposits on the Yamal peninsula. Moving from occasional signals and individual policy decisions to more strategic trends, the most significant by far must be the involvement of Western European energy groups in the new Russia-Europe gas pipeline projects (“North Stream” and “South Stream”). Here we see what might be reckoned the essence of the Putin approach. What he himself has termed Russia’s “crown jewels” – that is, access to equity participation in upstream hydrocarbon reserves much coveted by international energy companies – are traded for what matters most for Russia: access to high margin downstream markets in Europe and financing from the foreign partners for the construction of projects of strategic importance (in the case of these gas pipelines, bypassing the traditional but politically vulnerable transit through Ukraine) but uncertain economic viability (certainly in the case of South Stream).

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This approach will reinforce the tendency for mutual perceptions and political cooperation between Russia and the US and EU to be improved on the back of the close economic integration brought about by direct investment. This trend has now appeared in the nuclear power sector, where Siemens has entered into a strategic partnership with Rosatom, while perhaps the first concrete economic result of the Obama administration’s “reset” of relations came with the revival in April 2010 of the nuclear fuel enrichment deal with Rosatom first struck (after years of negotiation) in 2007 but suspended in the wake of the Five Day War between Russia and Georgia in August 2008. But the decisive factor in entrenching or eroding this trend will be the extent to which Russia becomes more systematically open to larger and more broadly based FDI in oil and other natural resource industries. As suggestively argued in a forthcoming paper by Clifford Gaddy and Barry Ickes, this would produce deep economic and hence political integration in the sense that Russia would share both the risks and upside of capital intensive projects with the major commodity consumers – which of course means not only the US and the member states of the EU, but also China (Gaddy and Ickes 2010). At the time of writing, there have been declarations of intent by senior Russian officials to relax the restrictions on foreign investment in the extractive industries (including a statement to that effect by Vladimir Putin himself during a visit to Finland in May 2010), but not yet any hard indications of regulatory change or other practical action.

References Gaddy, Clifford G. and Barry W. Ickes. 2010. Russia after the Global Financial Crisis. European Geography and Economics 51(3): 281–311. Granville, Brigitte and Peter Oppenheimer, eds. 2001. Russia’s Post-Communist Economy. New York, N.Y.: Oxford University Press. Kharas, Homi, Brian Pinto and Sergei Ulatov. 2001. An Analysis of Russia’s 1998 Meltdown: Fundamentals & Market Signals. Brookings Papers on Economic Activity 2001(1): 1–68.

Chapter 5

Nuclear Power Contracts and International Cooperation: Analyzing Innovation and Social Distribution in Russian Foreign Policy Theocharis N. Grigoriadis

5.1

Introduction

What is the role of nuclear contracts in Russian foreign policy? This chapter analyzes the political economy of nuclear power regulation in Russia and its implications for Russian foreign policy when it comes to international cooperation in the advanced and the developing world. Complementarities between the civil and military uses of nuclear power may explain its extensive adoption by states defined by high electricity demand, market interventionism, and great power status. Now that nuclear technology focuses primarily on civil rather than military applications, sustainable development fueled by sufficient growth rates is part of the core logic of nuclear investment. In that regard, is it possible to argue that international business activity in the nuclear sector may have positive domestic implications for social welfare? The latter includes all those policy instruments that guarantee the provision of a distributive minimum to the median citizen of the middle- and lower-class continuum price subsidies on energy commodities, social peace-preserving employment rates, and the provision of adequate health and education services form a set of energy-induced distributive rents for middle- and low-income citizens (Roemer 1993; World Energy Outlook 2006). Low electricity prices have been more important than nuclear weapons for governmental survival since the end of the Cold War; nuclear innovation reduces the marginal cost of electricity production and thus allows higher consumption rates for the median citizen. This first-order assumption implies that nuclear innovation is expected to exert positive welfare influence at the domestic level; international nuclear power contracts are less likely to occur when, despite their high sunk costs, they are not linked with social peace and public opinion.

T.N. Grigoriadis (*) University of California, Berkeley, CA, USA e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_5, © Springer Science+Business Media, LLC 2012

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Energy policy is crucial in understanding Russia’s resurgence in international politics. The use of domestic monopolies and oligopolies for the promotion of the country’s political agenda in foreign markets has been particularly effective in the energy sector. Gazprom, Rosneft, and Lukoil have been much more significant than the bureaucracy of the Russian Ministry of Foreign Affairs (MFA) in promoting foreign economic diplomacy and the conclusion of profitable trade and investment contracts with foreign governments and multinationals. The German–Russian energy partnership is indicative of the potential but also the limits of the impact that business interests can exert on economic policy decisions. The nuclear sector has not been as central as the oil or the gas sector in Russia’s economic growth in the 2000s; nevertheless, infrastructure contracts for the construction of nuclear reactors in leading economies of the developing world such as Turkey and India or collaborative schemes with key monopolists in the nuclear sectors of advanced economies, such as Siemens or Electricité de France (EDF), accumulate high political rents for the Russian government at the international level and stabilize the influence of nuclear power actors at the domestic level. At the same time, the structural transformation of the Russian nuclear sector and its primary focus on peaceful applications of nuclear power redefine Russia’s position in international security architecture; post-Soviet Russia is no longer considered to be the weak link of global nuclear security. On the contrary, it has been able to make use of its Soviet-era expertise in order to foster new corporate partnerships that may turn into long-term political alliances given the high sunk costs required for the construction of a nuclear reactor and Russia’s reasserted influence in all major international security institutions such as the United Nations (UN) and the Organization for Security and Cooperation in Europe (OSCE). Russia’s vast uranium reserves may explain its long-term commitment to the expansion of nuclear technology and dynamic entry into the global market of nuclear infrastructure contracts. Increased oil and gas revenues have gradually offset Russia’s nuclear energy disadvantage, which was caused by the installation of the majority of Soviet nuclear reactors outside the boundaries of the Russian Soviet Federative Socialist Republic (RSFSR) (CEA 2008b). Because nuclear sustainability requires high levels of state oversight, industrial and administrative networks in the nuclear sector have been under the regulatory control of the government. I treat Russia as a hierarchical regulatory system, when it comes to nuclear power regulation. This chapter intends to show how increasing electricity demand renders nuclear innovation necessary for state providers of nuclear infrastructure, which want to be successful in international contract bids. I argue that the conclusion of an international nuclear contract generates conditions of cooperation between the provider and the recipient; nuclear power contracts constitute the most regulated and therefore most politicized energy market, involving the highest startup costs. Commitment to nuclear innovation matters, because it preserves state competitiveness in international nuclear markets; the ability of a state to transfer its own nuclear technology to another state requires excessive investment costs, the irreversibility of which renders the dissolution of the alliance unlikely. (For more

5 Nuclear Power Contracts and International Cooperation

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information on Russian nuclear energy policy, see Dorian et al. (2006); for the idea of irreversible reform costs, see Roland (2000, 2002).) This expands the revenue base of the technology provider and thus the distributive capacity of the state increases at the domestic level. While innovation is critical for nuclear production efficiency, the hierarchical structure of Russia’s regulatory system allows for innovation only to the extent that it does not undermine centralization in decision making and financial management. Nuclear power contracts are pivotal instruments of Russian foreign policy for the following reasons. First, they provide continuous innovation incentives when it comes to the domestic use of nuclear power and, thus, they facilitate sustainable development. Second, they contribute to the preservation of low electricity prices, and, therefore, to social distribution by minimizing one important source of inequality. Third, they consolidate Russian political influence in critical advanced and developing economies. It is clear that Russia’s international business activity in the nuclear sector has concrete positive implications for its domestic economic policy; at the same time, the centralized nature of nuclear power regulation allows the Russian government to pursue nuclear alliances based exclusively on its material interests, without the interference of domestic or global regulatory norms. I treat social distribution in terms of both social welfare as well as environmental protection. Popular views about nuclear technology and the safety of nuclear plants have been associated with increased risk perceptions; the ability of nuclear regulators to minimize the probability of a nuclear accident tends to be evaluated more through the lens of political ideology rather than administrative capacity (Rothman and Lichter 1987). Moreover, the consolidation of Russian nuclear industry by Kremlin administrators occurred in the model of Gazprom and RAO UESR, but with a much higher degree of state interventionism (Tsvetkov 2006). Nuclear innovation is contingent upon public revenues from the oil and gas sectors, and is inherent to corporate governance practices in the electrical power industry (Tsvetkov 2006). In this chapter, I analyze the Russian nuclear sector as a model of interdependence between domestic and international economic conditions; I argue that the system of innovation incentives for the Russian nuclear industry depends on oil and natural gas demand in international markets. Furthermore, the degree of nuclear innovation has different policy outcomes for the technology recipient when it comes to social distribution. Hence, I present the distributive impact of nuclear power for both the provider and the recipient of nuclear technology. This chapter is organized as follows. In Section 5.2, I analyze regulatory governance and innovation in the Russian nuclear sector. In Section 5.3, I discuss production intensity, sustainability, and the definition of nuclear-intensive economic systems, which may facilitate a transition from hard (raw materials-based) to soft (electrical power-based) economic development. In Section 5.4, I provide an analytical design of the interconnections between innovation, distribution, and international cooperation in advanced, transition, and developing economies with a particular focus on Russian foreign policy. Section 5.5 concludes.

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5.2

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Innovation and Regulatory Governance in the Russian Nuclear Sector

Nuclear innovation is essential for efficiency in power production and reduction of electricity prices; second generation nuclear reactors constitute the majority of nuclear reactors around the world, because the Chernobyl accident in Ukraine discouraged many governments from ordering third generation reactors (OECD/IEA 2007: 1). This is the reason why the design of fourth generation nuclear reactors has already been launched; the new reactors proposed have a higher degree of passive safety, reduce long-life waste production, and are less capital-intensive (OECD/IEA 2007: 2–4). They address all major concerns that have so far prevented the expansion of nuclear-intensive electricity production in many advanced and the majority of developing economies. In parallel, the intensive exploitation of current uranium reserves combined with the discovery of new ones is likely to transform the resource base of many advanced and transition economies by creating a long-term source of public revenue (CEA 2006: 12). Unlike the oil and gas industries, the nuclear sector is under the direct supervision of the state. Nuclear power is not exported directly to world markets, but serves as a resource base for the operation of the electricity industry. Given the key significance of electrical power in consumer welfare, it becomes obvious that nuclear power can conditionally become a useful instrument in the hands of governments intending to maintain their social legitimacy. The primary public goods provided by a nuclearintensive economy are environmental protection through pollution abatement and social welfare through efficient electricity generation. Although nuclear power was symbolically excluded from the Kyoto compliance mechanism in the 2008–2012 period, it is not likely that this will continue to be the case in the post-adjustment period, when the Clean Development Mechanism (CDM) of the Protocol will enter into force (OECD/Nuclear Energy Agency 2002: 29–34). Opponents of nuclear expansion contend that nuclear infrastructure entails extremely high sunk costs, does not prevent the proliferation of nuclear weapons, and provides insufficient guarantees for nuclear waste disposal and decommissioning while undermining innovation in the electricity sector as a whole (Schneider 2000: 3–6). The argument proposed against nuclear innovation is that the ecological and security risks associated with it are so immense that they offset the positive impact of the public goods it provides. (For the Canadian–US nuclear experience and the role of public participation, see Kraft 2000). Hence, it becomes crucial to define a nuclear-intensive economy. I argue that a nuclear-intensive economy has the following four characteristics: 1. It operates at above average levels of electricity demand, due to its population size, climate, industry size, or a combination of some of those factors. 2. It enjoys a sufficient degree of macroeconomic stability and therefore can afford to pay the high sunk costs required for the construction of nuclear infrastructure.


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3. The promotion of renewable energy technologies does not constitute a central energy policy priority of the government, no matter what party or group is in power. 4. The state intends to maintain a suboptimal security advantage in the international community. This nuclear-intensive provision of public goods such as pollution abatement and maintenance of low electricity prices is possible either in advanced economies with a high GDP per capita, a large population and/or idiosyncratic climate conditions or in transition/developing economies with high growth rates, large population and/or idiosyncratic climate conditions. Thus, nuclear-intensive economies may be divided into advanced and emerging ones. I argue that the difference between advanced and emerging nuclear-intensive economies is that advanced economies are likely to prioritize pollution abatement over low electricity prices; the inverse inequality holds for emerging economies. The full nuclear power chain emits the same amount of carbon as solar or wind energy and two magnitude orders less than oil, coal, or gas (Sokolov et al. 2004: 24). Moreover, nuclear technology has to concentrate in industrial applications other than electricity production; clean water supply and transportation are the two areas where the contribution of nuclear power is likely to become increasingly important (Sokolov et al. 2004: 25–26). At this point, it becomes critical to understand the status of nuclear technology infrastructure in the Russian Federation and the institutional design of nuclear power regulation initiated by the Kremlin. Russia maintains three types of organizational entities in its nuclear sector: (1) ten atomic energy stations; (2) four processing companies; and (3) four exploration companies (Rosatom 2008c). In the Russian nuclear sector, there are 31 reactors; out of these, there are 15 pressurized water reactors (nine VVER-1100 and six VVER-440), 15 channel boiling reactors (11 RBMK-1000 high power channel type reactors and four EGP-6 graphite channel power reactors with steam overheat) and one fast neutrons reactor (BN-600) (Rosatom 2008a). What we observe is the operation of mainly second generation reactors since the Cold War period (1965–1995) (see Table A.1 in the Appendix). Rosatom, the federal agency of atomic energy, provides the necessary institutional framework for both domestic and overseas activities of the national nuclear industry (Deliagin 2008; Rosatom 2008b). Its hybrid structure combining elements of multidivisional (M-form) and unitary (U-form) organizational schemes confirms a key trend in Russian political economy under Putin: instead of maintaining deficient U-form organizations of public ownership, the Russian government has launched a mixed organization strategy with a combination of state control and corporate profitability (Rossiiskaia Federatsiia 2007). While the public character of the nuclear sector is maintained, its focus of interest shifts from domestic to external operations; Atomstroyexport and Tenex, the nuclear constructor and uranium trader for overseas operations respectively, become the drivers of Russia’s foreign nuclear strategy (IAEA 2007).

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This reality may lead to the following observations: 1. Nuclear innovation may lead to increased competitiveness of Atomstroyexport and Tenex over nuclear infrastructure bids in the developing world and thus attract more foreign capital inflows to the Russian economy. 2. The complementary nature of civil to military nuclear technology and the absence of strong grassroots environmental movements in Russia may facilitate the prioritization of low electricity prices over pollution abatement and the creation of an international nuclear network dependent on Russian nuclear technology transfers, certainly civil and potentially military. (On the monopoly role of the Russian government in nuclear energy regulation, see Rossiiskaia Federatsiia 1995.) Due to the high sunk costs of nuclear infrastructure projects, the Russian government can trade uranium on a much more selective basis than oil or natural gas (OECD/Nuclear Energy Agency 2000: 10–16). Nevertheless, long-term financial benefits, wealth, and the size of its customer base provide innovation incentives comparable with the oil or natural gas industries. Rosatom is a state corporation, a nonprofit organization owned by the government, with the mandate of performing social and managerial tasks for the benefit of the majority (Deliagin 2008). State corporations enjoy a special status of institutional immunity within the Russian political system, because no administrative agency can oversee their activities, control their financial accounts, or confiscate their property, for any reason (Deliagin 2008). Rosatom is a quasi-ministry of the Russian government that combines the budgetary support of a public institution, the functional independence of a private institution, and some extraordinary functions related to its social policy objectives (Avdasheva and Simachev 2009). Hence, Rosatom can be a stabilizing factor for the Russian economy, to the extent that it secures long-term capital flows that can subsequently be used to improve the quality of delivery of public goods (Semenov et al. 2008). In 2006, Russia initiated a program for the restructuring of its nuclear sector by setting as its central objective the increase of the share of nuclear power to overall energy production from 16 to 25% by 2020 (Faizullaev 2009). Moreover, the construction of 26 new nuclear plants at the domestic level, combined with the construction of five new nuclear plants abroad, will constitute 40% of the world market for uranium enrichment and 17% of the world nuclear fuel market (Faizullaev 2009). At this point, it is important to point out that the uranium market is very important for Russian foreign policy in the post-Soviet space: Kazakhstan is the third-largest uranium producer in the world and its access to Russian nuclear technology was necessary for the enrichment of its uranium reserves (Faizullaev 2009). In October 2007, the Russian Tekhnabexport and the Kazakh Kazatoprom signed a contract for the creation of an International Center for Uranium Enrichment in Angarsk, Irkutsk; enriched uranium has been divided equally between the two partners (Faizullaev 2009). There are other examples of links between Russian energy companies and counterparts that have potential foreign policy consequences. Rosatom and its construction branch, Atomstroyexport, have signed nuclear power contracts with governments in


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Turkey, China, Slovakia, and Iran. Russia has also been able to win the tender competition for nuclear fuel provision to the nuclear plant Temelin in the Czech Republic (Aukutsionek and Mironov 2007). Moreover, Rosatom formed a partnership with Siemens following the dissolution of a Franco–German joint venture by Areva and Siemens in early 2009 (Bloomberg, 4 March 2009; Reuters, 9 December 2009). Areva filed an arbitration request in front of the Paris-based International Chamber of Commerce. The case is still underway, and the arbitration venue issued a provisional order that prevents Siemens from forming any joint venture during the arbitration process (World Nuclear Association 2008). It is obvious that the Russian nuclear sector has been able to increase its competitiveness in global energy markets by rendering innovation and thus higher levels of nuclear intensity as a condition of increasing importance when it comes to electricity generation. The political nature of the aforementioned nuclear alliances in the advanced (e.g., Germany) and the developing world (e.g., Kazakhstan, Turkey, Iran, China) reinforces the primary goal of Russian foreign policy: to become the common denominator of nuclear infrastructure developments and alleviate the security and economic externalities since the end of the Cold War.

5.3

Transforming the Nuclear Core: Production Intensity and Sustainability in the Russian Nuclear Industry

I argue that international nuclear contracts reinforce innovation incentives in the Russian nuclear sector and facilitate the preservation of low electricity prices for the Russian people. How does the choice of nuclear innovation affect people’s welfare, and in particular, the welfare of the lower social strata? To answer this question, it is necessary to link nuclear intensity and the nature of the Russian nuclear sector as a regulatory system with the impact of nuclear distribution on people’s welfare. It is clear that the nuclear-intensive economies are more likely to have a distributive impact the higher the share of nuclear-based electricity in the overall electricity production. The rationale here is that unless nuclear energy constitutes a major resource base for electricity production in any economic system, it is not likely to maintain low electricity prices for citizens (World Nuclear Association 2008). Thus, I argue that there is a distributive threshold E(N*) ³ q*E(T), where E(N*) is the optimal nuclear-based electricity generation, E(T) is the total electricity production in any national economy, and q* is the share of total nuclear-based electrical power generated (World Nuclear Association 2008). In addition, the shift to high temperature nuclear reactors may have a positive impact on nuclear power-induced distribution. High temperature nuclear reactors using gas, molten salt, or liquid metal as their coolant lead to more efficient thermochemical and electrochemical hydrogen production (Yildiz and Kazimi 2006). Moreover, the technology of light-water reactors, which was applied by the US Navy immediately after the end of World War II, has shown that nuclear technology development may benefit the lower classes, when its primary focus are the civil

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rather than military applications of nuclear power (Cowan 1990). Similar lessons can also be drawn from the French nuclear sector; the substitution of fission with fusion, which lies in the core of the ITER project – a joint scientific initiative by China, the EU, India, Japan, Korea, Russia, and the United States – indicates that sustainability is an inherent feature of a redistributive nuclear energy industry (Fiore 2006: 3336–3338). In Russia, the current locus of energy distribution is in the natural gas rather than the nuclear power sector. Unlike Gazprom – whose domestic and international corporate activities are regulated not only by the Russian government, but also by the WTO, the European Commission, foreign governments, and transnational arbitration courts – Rosatom is subject only to the decision-making authority of the Kremlin. Hierarchical regulation by a single state jurisdiction does not provide comparable innovation incentives, which would approximate E(n*) to q*E(T) in the Russian economy (Kryukov 2006). Nevertheless, Russia’s nuclear intensity is due to drastic increase of uranium exports and the flourishing overseas construction activities of Atomstroyexport. Hence, the increase of nuclear power revenues in Russia is the only condition able to generate distributive outcomes for the lower and the middle class. I suggest the following formula: R(n*) ³

R (e) n

R(n*) indicates the optimal volume of state revenues from the nuclear sector, R(e) is the volume of state revenues from all oil and natural gas companies in any economy and n is the number of oil and gas companies. I argue that in Russia, distribution through the nuclear power sector is likely to occur only when the revenues from the nuclear power sector approximate the mean state revenues from the oil and gas sectors. Gradual adjustment to International Atomic Energy Agency (IAEA) standards and technical cooperation with the French Areva on the sustainability of the nuclear fuel cycle and safety measures provide limited innovation incentives to Rosatom (Kamalova 2006; Kryukov 2006). The provision of state credit guarantees by the Bank of Foreign Trade (Vneshtorgbank), Russia’s second largest financial retailer, is a key aspect of Russia’s new nuclear policy (Kamalova 2006). I argue that the consolidation of an export partnership between RAO UESR, Russia’s electricity company, and Atomenergoatom is likely to increase Rosatom’s international competitiveness, and thus diversify the sources of domestic nuclear revenues. This twostage policy outcome may transform nuclear power regulation from a hard to a soft policy area; the atomic priorities of the Russian government are then likely to shift toward new business strategies (Kungurov 2008: 29–30). The distributive capacity of the Russian nuclear sector is a second-order condition, contingent upon the strengthening of its quota in domestic electricity production, an increase in innovation, and a boost in international competitiveness. The design of the fast neutrons nuclear reactor (BN-800), which abides by international standards, is a first signal that Russia is moving toward that direction of nuclear governance (Rineiskii 2006). France is an interesting case to study the distributive role of nuclear power in a nuclear-intensive economy, where E(N*) ³ q*E(T) will always hold. As in Russia,


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nuclear modernization occurred under conditions of state regulation and public budgetary support; EDF is not only the largest nuclear-based electricity company in the world, but it has also been able to meet domestic and international demand with low price volatility and a high degree of supply certainty (OECD/IEA 2000). Furthermore, the zero reduction target set by the French government as a response to the Kyoto Protocol adjustment requirements indicates that nuclear energy saves citizens from additional environmental taxation; the internalization of externalities through governmental funds rather than an emissions trading system does not transpose the social cost equally to all strata, but it confines it within formal political institutions (OECD/IEA 2000: 52). Thus, state responsibility rather than collective contributions solves the pollution abatement problem by requiring a relatively low threshold of carbon emissions cost per ton (US $50) (OECD/IEA 2000: 54). The high nuclear intensity of the French economy illustrates an interesting tradeoff between the cost of decommissioning and nuclear waste disposal on the one hand and carbon emissions taxation on the other. Unlike in France, the nuclear sector in Russia has not transitioned from second and third generation nuclear reactors to fourth generation ones (CEA 2008a). This phenomenon is partly explained by France’s revenue dependence on nuclear energy rents and Russia’s revenue dependence on natural gas rents; this means that nuclear innovation in France is associated with higher expected revenues for the state and therefore fewer negative externalities for the citizens. Cost effectiveness is thus a key parameter of sustainability, which subsequently facilitates the provision of public goods without the prevalence of significant environmental risks. Hence, social distribution is likely, both in terms of environmental protection and cost-effective electricity generation, when it comes to the nuclear sector. The introduction of fusion technology in the design of nuclear reactors is an extremely important step in that direction, but one which has yet to be seen in Russia (CEA/Cadarache 2005; for the opposite opinion see Martinez-Val and Piera 2007). Unlike the gas sector, where innovation does not necessarily lead to redistribution for the benefits of the citizens, nuclear innovation is a win-win situation for both the citizens and the state, because it has a direct effect on the domestic price of electricity and thus, most domestic goods and services.

5.4

Analytical Design: International Cooperation and Nuclear Contracts in Russian Foreign Policy

The peaceful use of nuclear power and the conclusion of international nuclear power contracts with the purpose of producing cheaper electrical power lead to new market opportunities for Rosatom. Russia is already meeting 15% of the Japanese demand for nuclear fuel, and its market share will increase to 25% by 2014 (Ivashentsov 2010). Improvements of state regulation, rationalization of intergovernmental relations, and enhancement of innovation incentives in the structure of Rosatom have constituted the main priorities of the Russian government for its nuclear policy (Fedorovich 2008). The creation of a corporate network composed of

78 Table 5.1 Nuclear Technology and Distributive Justice Nuclear intensity Advanced economies → E(N*) Nuclear technology (high) Reactor type ³ generation Scenario 1: Social distribution III (high) Reactor type = generation Scenario 2: Social inequality II (low)

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Emerging economies → E(N*) (low) Scenario 3: Poverty reduction Scenario 4: Negative externalities

subsidiary and dependent companies under the administrative oversight of Rosatom and conditions of competitive development is crucial for the restructuring of the Russian nuclear sector (Fedorovich 2008). I treat social justice as an infinite form of social distribution. To understand the interaction between nuclear power regulation and social justice, I suggest the following framework of analysis. In this classification system, nuclear technology forms the first axis of analysis and nuclear intensity constitutes the second axis. I classify nuclear technology into two categories according to the types of nuclear reactors predominant in an economy; a high value is assigned to nuclear reactors of generation III or higher, whereas I assign a low value to generation II nuclear reactors. Nuclear intensity is determined by the aforementioned binary typology between advanced and emerging nuclearintensive economies. I assume that in advanced nuclear-intensive economies, the level of optimal nuclear-based electricity generation is higher than in emerging nuclearintensive economies. I am convinced that when nuclear reactors of generation III or higher are observed in an advanced nuclear-intensive economy (Outcome 1), then positive social distribution occurs for the benefit of the lower social strata. Thus, innovation generates distributive effects for the poor in the form of lower prices and a cleaner environment. In the lower-left entry of the matrix (Outcome 2), the government in an advanced nuclear-intensive economy decides not to innovate. In that case, the government may impose an emissions trading system, which will lead to electricity price increases without the existence of any offsetting welfare mechanism. Thus, income inequality under these conditions is likely to increase. In the upper-right entry (Outcome 3), I analyze the prevalence of high nuclear technology in an emerging nuclear-intensive economy; nuclear innovation again has a positive impact on the social welfare of the lower strata, but due to the developing rather than developed character of the economy, distribution is fulfilled indirectly: poverty reduction may capture this phenomenon. The lower-right entry (Outcome 4) suggests the worst of the four cases; lack of nuclear innovation in any developing economy transposes negative externalities and uncertainty costs to citizens’ shoulders. France and Russia have the largest nuclear capacity in Europe both in terms of power generation and number of nuclear reactors (World Energy Council 2007, Figure 2.3). France’s central role in world nuclear innovation and Russia’s transition to higher levels of power generation under conditions of nuclear modernization may explain why the nuclear policies of these two states correspond to Outcomes 1 and 3 of Table 5.1;

5 Nuclear Power Contracts and International Cooperation Table 5.2 French–Russian Nuclear Cooperation Recipient (Russia) Adjustment to international norms → Innovator (France) open nuclear system (high) Construction of nuclear Scenario 1: Global sustainability reactors (high) Nuclear waste disposal Scenario 2: transnational regulation (low)

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Maintenance of status quo → closed nuclear system (low) Scenario 3: Political alliance Scenario 4: Ad hoc contracts

I treat France and Russia as the main nuclear innovators among the advanced and emerging economies respectively. Spain and Ukraine form appropriate country studies for Outcomes 2 and 4 respectively; Spain’s decision to abandon nuclear power through de facto phase-out programs is inclined to aggravate social inequality, because its transition to wind energy will lead to a short-term increase in electricity prices until the infrastructure costs of wind energy match profits (Bloomberg, 4 March 2009; Reuters, 9 December 2009). Ukraine, the main recipient of Chernobyl’s negative externalities when it comes to environmental and human security issues, is deprived of adequate financial resources and technological expertise to modernize its nuclear sector. This is why I consider it to be a key country case for Outcome 4; the dependence of the Ukrainian nuclear power from Russian technological expertise undermines the effectiveness of any independent policy planning (Dubinin 2004). The dynamics of international cooperation and nuclear power contracts are amplified in my analysis of French–Russian nuclear cooperation, summarized in the table above. I regard it as an extremely vital development for global nuclear security, given my baseline distinction between advanced and emerging nuclear-intensive economies (Table 5.2). France as the innovator forms the first axis of analysis and Russia as the technology recipient forms the second axis. I define the nuclear policy choices of France in terms of its cooperation potential with Russia; it spans between nuclear waste disposal (low) and nuclear reactor construction (high). Russia’s nuclear policy choices are determined in terms of its adjustment to international nuclear energy standards as these are defined by the advanced nuclear economies and the IAEA. Thus, Russia is faced with a binary choice between adjustment to international norms (high) and maintenance of the status quo (low). I propose that if Russia adjusts to international nuclear energy standards and France agrees to provide the necessary expertise for the construction of generation III or higher nuclear reactors, then global sustainability occurs (Scenario 1). The regulatory coordination between France and Russia, the two main nuclear powers of Eurasia, is likely to have a positive effect on global governance of the nuclear sector. (For an overview of the politics of international regulatory coordination, see Drezner 2007). In the lower-left entry of the table (Scenario 2), France prefers to limit its nuclear cooperation with Russia at the level of nuclear waste disposal, while Russia adjusts to international nuclear standards. This combination of preferences generates a mode of transnational governance, the indirect internaliza-

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tion of French nuclear standards by Russian policy makers through international channels. In the upper-right quadrant (Scenario 3), I analyze the implications of nuclear technology transfers from France to Russia, when the latter preserves the status quo. If France contributes to the modernization of the Russian nuclear sector without any institutional adjustments from Moscow, this will occur under conditions of political alliance. The lower-right quadrant (Scenario 4) shows that when no player moves from their initial position, ad hoc contracts take place; uranium exports, occasional nuclear waste disposal, and common innovation projects form the basis of this category. Despite the nuclear cooperation agreement between Russia and France in June 2010, which generated conditions for a long-term political alliance between the two countries, it is highly unlikely that the scenario of global sustainability will prevail; Siemens’s nuclear ambitions will continue to create disincentives for Rosatom to participate in intensified French–Russian cooperation. At the same time, Areva’s quasi-monopoly position in Africa and other developing parts of the world does not render Rosatom a first priority partner for the French nuclear industry.

5.5

Conclusion

In this chapter, I have discussed the politics of innovation and social distribution in the Russian nuclear sector and its linkages with Russian foreign policy. I observe a clear divide between advanced and emerging nuclear-intensive economies when it comes to nuclear innovation incentives. High sunk costs associated with nuclear infrastructure projects render transition from nuclear power irreversible. Hierarchical nuclear regulation in Russia creates a mixed organizational space, where corporate organization meets public oversight. The nuclear energy dependence of an economy predicts its level of nuclear innovation; this explains Russia’s lag vis-à-vis other nuclear-intensive economies, with France being a case of extreme nuclear intensity. It becomes obvious that nuclear power is significant for social distribution, when the distributive threshold E(N*) ³ q*E(T) is met. For an oil- and natural gas-intensive economy as Russia, this is likely to occur only when the nuclear power revenues approximate average oil and gas revenues for the public sector. Transition to nuclear reactors of generation III may lead to poverty reduction and generate conditions of modernization for the Russian economy. Global sustainability occurs when an advanced nuclear-intensive economy (France) opts for a high level of nuclear technology transfers to an emerging nuclear-intensive economy, while the latter abides by the norms of interstate and multilateral nuclear cooperation. Nuclear power contracts are a key instrument of Russian foreign policy. They generate long-term innovation incentives when it comes to the domestic use of nuclear power and, thus, they facilitate sustainable development, when the political repercussions from their conclusion do not hinder the perspectives of global or regional sustainability. Moreover, nuclear energy contributes to the preservation of


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low electricity prices, and, therefore, to social distribution by minimizing one important source of inequality. Hence, nuclear power contracts meet both the goals of Russian foreign policy and domestic politics: an increased market presence in the nuclear industries of advanced and emerging economies, and a decrease in the number of citizens that live under the poverty line through more affordable energy. In this chapter, I argue that Russia’s resurgence in the international system will not have any positive lasting effects, both for its domestic growth and global peace, unless it is linked with innovation and social distribution. Nuclear power contracts can bolster innovation incentives for the Russian government, while advancing Russian foreign direct investment in emerging economies and nuclear know-how transfer from the advanced economies of Western Europe, North America, and Japan. The French–Russian nuclear cooperation has the potential of changing the security map of Europe by shifting the locus of French–German relations. At the same time, nuclear innovation in Russia is likely to continue at a slow pace given the public finance constraints and the negative growth rates observed since 2008. This reality will also affect the completion of Russia’s nuclear power contracts in the developing world. If nuclear deterrence was the key feature of Cold War military competition between NATO and the Warsaw Pact, then nuclear cooperation will be the critical element for the active engagement of Russia into Euro-Atlantic structures, global environmental negotiations, and European energy security. The current financial crisis will only provide further nuclear innovation incentives to the Kremlin elites; popular discontent and the subsequent lack of social legitimacy can oftentimes be more dangerous than public debt, both for foreign policy and regime survival.

5.6

Appendix

Table A.1 Generations of Nuclear Technology (Generation IV International Forum 2008) Time period Generation Type 1945–1965 Generation I Early prototypes 1965–1995 Generation II Pressurized water reactors (PWRs) CANDU Boiling water reactors (BWRs) Advanced gas-cooled reactors (AGRs) 1995–2030 Generation III and III Plus Advanced boiling water reactors (ABWRs) AP600 System 80 Plus European pressurized reactors (EPRs) Advanced CANDU reactors (ACRs) AP1000 Economic simplified boiling water reactors (ESBWRs) APR-1400 (continued)

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Table A.1 (continued) Time period Generation 2030–onward

Generation IV

Type Thermal: Very high temperature reactors (VHTRs) Thermal: Supercritical water cooled reactors (SWCRs) Thermal: Molten salt reactors (MSRs) Fast: Gas-cooled fast reactors (GFRs) Fast: Sodium-cooled fast reactors (SFRs) Fast: Lead-cooled fast reactors (LFRs)

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Kryukov, Oleg V. 2006. Nam Doveriyaiut Atomshchiki 14 Stran Mira. Atomnaia Strategia (25): Glavnaia Tema, Sentiabr’. Kungurov, Yu. A. 2008. Organizatsionnye i Finansovye Aspekty Reformirovaniia Atomnogo Energopromyshlennogo Kompleksa Rossii. Aval Mart-Aprel 2’. Martinez-Val, Jose and Mireia Piera. 2007. Nuclear Fission Sustainability with Hybrid Nuclear Cycles. Energy Conversion and Management 48: 1480–1490. OECD/IEA. 2000. Nuclear Power in Competitive Electricity Markets. OECD/IEA Report. OECD/IEA. 2007. Nuclear Power. IEA Energy Technology Essentials, March. OECD/Nuclear Energy Agency. 2000. Nuclear Energy in a Sustainable Development Perspective. OECD/IEA Report. OECD/Nuclear Energy Agency. 2002. Nuclear Energy and the Kyoto Protocol. OECD/IEA Report. Rineiskii, Anatolii A. 2006. Inzhiniring Energobloka s Reaktorom Na Bystrykh Neitronakh BN-800: Sravnenie s Mirovymi Analogami. Atomnaia Strategia (23): Atomnye Tekhnologii. Roemer, John. 1993. A Pragmatic Theory of Responsibility for the Egalitarian Planner. Philosophy and Public Affairs 22(2): 146–166. Roland, Gérard. 2000. Transition and Economics: Politics, Markets and Firms. Cambridge, Mass.: MIT Press. Roland, Gérard. 2002. The Political Economy of Transition. Journal of Economic Perspectives 16(1): 29–50. Rosatom. 2008a. Atomnaia Energetika v Rossii. Rosatom. 2008b. Dokumenty Goskorporatsii Rosatom. Rosatom. 2008c. Geografiia Atomnykh Obektov. Rossiiskaia Federatsiia. 1995. Federalnii Zakon ob Ispolzovanii Atomnoi Energetiki.20 October. Rossiiskaia Federatsiia. 2007. Federalnii Zakon o Gosudarstvennoi Korporatsii po atomnoi energetike Rosatom. 1 December. Rothman, Stanley and Robert Lichter. 1987. Elite Ideology and Risk Perception in Nuclear Energy Policy. American Political Science Review 81(2): 383–404. Schneider, Mycle. 2000. Changement Climatique et Énergie Nucléaire. WWF, Aout. Semenov S. et al. 2008. Lokomotiv Rossiiskoi Ekonomiki. Voprosy Ekonomiki (11), November: 102–109. Sokolov, Yury A. et al. 2004. Nuclear Power in the 21st Century and its Role in Developing Countries. An International Journal of Nuclear Power 18 (2–3): 21–26. Tsvetkov, V. A. 2006. Gosudarstvo i Ekonomika: Blagie Namerenia i Podvodnie Kamni. E’KO Vserossiiskii Ekonomicheskii Zhurnal 10(October): 92–105. Yildiz, Bilge and Mujid Kazimi. 2006. Efficiency of Hydrogen Systems Using Alternative Nuclear Energy Technologies. International Journal of Hydrogen Energy 31(1): 77–92. World Energy Outlook. 2006. Are Conditions Right for a Nuclear Revival? Fact Sheet – Nuclear. Available from . Accessed 1 March 2011. World Energy Council. 2007. The Role of Nuclear Power in Europe. Available from . Accessed 1 March 2011. World Nuclear Association. 2008. The Economics of Nuclear Power. Nuclear Issue Papers 5. Yildiz, Bilge and Mujid S. Kazimi. 2006. Efficiency of Hydrogen Production Systems Using Alternative Nuclear Energy Technologies. International Journal of Hydrogen Energy 31: 77–92.

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Chapter 6

Reformatting the EU–Russia PseudoPartnership: What a Difference a Crisis Makes Pavel K. Baev

6.1

Introduction

“My impression is that the Western elites just hate Russia … We can forget about integration, and it is sad,” argued Vladimir from Smolensk on the BBC forum on Russia–EU relations, where I was invited as a guest expert.1 Opinions of this kind illustrate that claims that Russia is transforming itself into an oversized but otherwise entirely “normal” member of the European family are detached from reality. The disconnect between the discourse of “ever-closer partnership” and the reality of estrangement has its roots in the Kosovo war, which broke the rapprochement momentum in Russian–European relations. Each of the following often overlapping crises – the brutal Second Chechen War, the expropriation of the oil company Yukos and imprisonment of its owner Mikhail Khodorkovsky, and the spectacular victory of the “Orange Revolution” in Ukraine – increased Russian hostility toward the expanding Europe. Between 2005 and 2008, economic ties between Russia and the EU grew spectacularly, but mutual trust simultaneously declined; with the arrival of the still-evolving recession, trade and investment have contracted dramatically, and trust has taken a further nosedive. This trajectory can only be described as sad indeed, but toward the start of a new decade, a hesitant climb toward better cooperation provides a bit of ground for more positive perceptions. The negotiations on a new Partnership and Cooperation Agreement (PCA), which provides a political, economic, and cultural framework for Russia–EU relations, were started in the spring of 2008. However, they appear on track to a perfect dead-end.

1

This discussion devolved to the point where it was asserted that Russia should not even think about joining the EU, which was just a self-serving bureaucracy saddled with the problem of saving East–Central European clients from bankruptcy. British Broadcasting Corporation, 23 April 2009. Available from http://newsforums.bbc.co.uk/ws/ru/thread.jspa?forumID=8663. P.K. Baev (*) Peace Research Institute Oslo (PRIO), Oslo, Norway e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_6, © Springer Science+Business Media, LLC 2012

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The previous PCA, signed in 1994 and still formally in effect despite expiring in 2007, is reminiscent of the period when Russia–EU relations were shaped by an integration paradigm. The much smaller EU believed then that Russia was a slow learner in the “transition” school, and Moscow committed to change its domestic legislation to conform to the EU norms and values. In retrospect, it is ironic that the momentum toward rapprochement in Russia–EU relations was essentially lost after the approval of the “road maps” for advancing through four “Common Spaces” – economics, freedom and justice, external security, and education and culture – at the May 2005 Moscow summit (Gomart 2006; Karaganov 2005; Moshes 2005). The integration paradigm was destroyed by Russia’s assertive drive to establish itself as an equal partner to the EU (despite having an economy 15 times smaller) and by Russia’s confidence in a set of values conceptualized as “sovereign democracy.” However, no other mode of interaction was suggested, so Russian–European discourse became progressively detached from reality. The reconfiguration of the Russian leadership system in early 2008 ushered in a more liberal discourse from President Dmitri Medvedev but did not deviate from Putin’s experimentally revisionist course. This approach reached its peak in August 2008 with the Russian–Georgian war, which delivered a devastating blow to feeble hopes for a new dynamism in Russian–European relations and prompted the EU to call an extraordinary summit to announce that there would be no “business as usual” (Allison 2008; King 2008). That momentum dissipated disappointingly quickly and Medvedev’s proposal to turn the Georgian page prevailed over disjointed demands to “punish” Russia in only a couple of months. However, in a few more months, a new round in the ever-smoldering Russian–Ukrainian “gas war” deeply compromised Russia’s role as a key supplier and turned Moscow into a key challenge to European energy security.2 While the direct impact of this breakdown had dissipated by mid-2009, there was indeed no way to return to the old pattern of doing political business because the familiar agenda was overtaken by the multitude of new problems brought by the arrival of a financial crisis of entirely unforeseen proportions (Conti et al. 2009). Any attempt to measure the impact of this catastrophe on the political positions of Russia and the EU would now be about as informative as were the authoritative economic forecasts issued at the end of 2007, when the term “subprime” had just entered the common vocabulary. Nevertheless, two features are distinguishable. First, Russia’s strong and sustained growth has sharply changed into the most complex and possibly deepest recession in the world, so the idea of “resurgence” has to be reexamined both by its neighbors and the country itself. Second, the EU’s slow but unstoppable advancement toward an “ever-closer” and expanding Union able to formulate and conduct a common policy vis-à-vis Russia has given way to national parochialism and protectionism, so propositions about “de-Unionization” cannot be dismissed offhand.

2

Trenin, Russia in a Gas Chamber. The New Times, 19 January 2009 (in Russian). See also Pirani et al. (2009).

6 Reformatting the EU–Russia Pseudo-Partnership…

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At this writing, it is clear that Russia and Europe have been pushed further apart, despite Putin’s claim that they “are in the same boat” apparently facing a “perfect storm.”3 Russia’s policy has shifted to a peculiar mix of residual self-assertiveness and defensive pragmatism, as its perception of itself as a “rising power” has been deflated by this brutal reality check. The EU is facing not only a sharp contraction of exports to Russia and the need to bail out states poised at the brink of default, like Latvia and Greece, but also a powerful centrifugal momentum that weakens its resolve for joint action. This momentum was contained at the end of 2009 by the resolution of the protracted crisis with ratification of the Lisbon Treaty, but it is expected to return with a vengeance as quarrels about growth-hurting austerity measures intensify.4 Russia remains a strategic priority for the Union, but no coherent course addresses the complexity of this antagonistic partnership: the EU cannot encourage Russia with promises of a hypothetical accession to the EU in some indefinite future, nor can it relate to Russia as a non-European entity that follows its own trajectory, as it does with China for instance. This chapter simplifies the complex Russian–European relationship to just two dimensions – economics and security – in order to assess the balance of “push” and “pull” factors. It starts with a “middle-of-the-crisis” snapshot of Russia–EU political dialogue, then examines the balance of energy trade and economic ties more generally, then takes a measure of the security agenda and looks specifically at the postwar landscape on the Caucasian front. The conclusion offers several propositions about the future of the Russia–EU relationship.

6.2

Dialogue of the Disoriented

The organization of political dialogue between Russia and the EU reflects a shared belief in the pivotal importance of frequent top-level contacts. Consequently, the pattern of two summits each year between the Russian president and the European “troika” is supplemented by special meetings, like the February 2009 visit to Moscow by Jose Manuel Barroso, President of the European Commission, who was accompanied by no less than nine commissioners. The Russian leadership, however, believes that Brussels bureaucrats are just going through the motions when addressing the issues of democratic “imperfections”; during the aforementioned meeting, Putin felt confident enough in this assumption to cut short a poignant exchange on “values” with Barroso, saying curtly, “Shall we go on like that or what?”5 From the Russian

3

Vladimir Putin’s speech, World Economic Forum, Davos, January 2009; Gevorkyan, Congress of Forgotten Illusions. Gazeta.ru, 29 January 2009 (in Russian); and Baev, Faced with a Crippled Economy, Putin Strikes a Conciliatory Tone in Davos. Eurasia Daily Monitor, 2 February 2009. 4 Paul Krugman sharply criticizes the EU austerity policies in his blog The Conscience of a Liberal. See for example, “Hard currencies, soft heads,” 21 December 2010. 5 Kolesnikov, Flying Pucks. Kommersant, 7 February 2009 (in Russian).

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point of view, the main channel of dialogue is bilateral contact with key European states, particularly Germany, France, and Italy, which are seen as the “deciders” in the complicated consensus-building process in Brussels. Since the installment of Dmitri Medvedev in the Kremlin, these bilateral talks have intensified because Vladimir Putin continues to cultivate his personal ties. The main ambition behind this networking is to establish Russia’s status as a leading player in the European “concert.” The greatest moment in this self-aggrandizement process was perhaps the trilateral meeting in Paris on February 10, 2003, when former French President Jacques Chirac, former German Chancellor Gerhard Schröder, and Vladimir Putin announced that there would be no UN Security Council approval for a US intervention in Iraq. That “entente” proved, however, to be short-lived. Even before Chirac and Schröder departed from the political arena, Putin had begun to feel isolated and shunned. Many mainstream Russian commentators were inclined to explain away this attitude by citing European concern and even envy over Russia’s rapidly increasing power.6 However, the unmistakable growth of authoritarian tendencies in Russia is a more plausible explanation. Europeans were increasingly appalled by manifestations of “mature Putinism,” such as the murders of Anna Politkovskaya in Moscow and Aleksandr Litvinenko in London in October and November 2006.7 The “big leap” in EU enlargement in 2004, when eight East European states joined the Union, had a greater impact on shaping its Russian policy than Moscow had expected. These countries (plus Bulgaria and Romania, which joined in 2007), while rarely forming a single bloc, have brought their pronounced post-Soviet idiosyncrasies into the Brussels bureaucracy and are not inclined at all to follow the lead of the EU’s “founding fathers.” Their ability to disrupt was demonstrated in November 2006 when Poland single-handedly blocked the start of talks on a new PCA at the EU–Russia summit in Helsinki because of a Russian ban on Polish meat. This discord has pushed the proverbial “common denominator” in EU policymaking to a new low because the newcomers, while not deeply concerned about human rights, never miss an opportunity to condemn Russia for its transgressions in this arena. The European Commission feels therefore obliged and even compelled to address problems relating to the curtailing of liberties but has slim hopes of influencing Moscow’s increasingly rigid position. Many member states presume that raising issues pertaining so closely to the very nature of Putin’s regime while Russia is undergoing a delicate transformation under Medvedev is counterproductive.8 It remains to be seen whether the Russian–Polish rapprochement fostered by the tragic death

6

Karaganov, Real Treaties and Empty Declarations. Rossiiskaya gazeta, 6 April 2007 (in Russian). 7 Baev, Summit of Technical Disagreements and Diminishing Trust. Eurasia Daily Monitor, 27 November 2006. 8 Thus, Germany preferred in the late 2000s an approach called Annäherung durch Verflechtung (“rapprochement through economic interlocking”), reducing any criticism of Russia to the minimum required by political decency. For details, see Stelzenmüller (2009).


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of President Lech Kaczynski will take root, but the issue of “democratic deficit” in Russia is unlikely to go away.9 This unproductive dialogue was interrupted by the August 2008 war between Russia and Georgia, but in just a couple of months, under French pressure, the EU agreed to resume talks about a new PCA, admitting that isolating or “punishing” Russia was a non-option.10 This reluctant return to “business as usual” was, however, derailed and distorted by the still unfolding economic disaster that is currently affecting Russia and the EU in massive but dissimilar ways. Russia’s perception of itself as a “rising power” has been suddenly undermined, leaving it with an acute feeling of vulnerability in a Hobbesian environment (Ostrovsky 2009; Trenin 2009). The question of regime survival has begun to loom large over the Kremlin, where power-holders cannot avoid reflecting on the fact that the last crisis of such magnitude resulted in the collapse of the USSR. In Europe, the crisis has revealed many structural deficiencies that were created by its “big leap” in enlargement. It has also greatly exacerbated the inadequacy of decision-making mechanisms that have not been significantly improved by the approval of the Lisbon Treaty. Several “success stories” such as Latvia and Hungary have come to the brink of bankruptcy, and even Europe’s “locomotives,” like Germany and France, cannot generate any positive momentum, as their own rescue packages are loaded with protectionism. Against this backdrop of deeply integrated but differently affected economies, inevitable renationalization of politics has led to near paralysis in shaping a common anticrisis strategy.11 Seeking to build positive momentum, the Swedish presidency abandoned its “principled” criticism of Moscow’s behavior and hosted a remarkably friendly summit with President Medvedev in Stockholm in November 2009.12 The summit in Brussels in December 2010 – the first one hosted not by the troika but by the new EU leadership – was also problem-free. It is clear, however, that the president of the European Council and his team cannot – due to the pressure of intra-Union problems as well as personal preferences – give priority to relations with Russia.13 Russia–EU dialogue has perhaps become less co-opted by Central European special agendas, but forging consensus on any meaningful issue, from visa regulations to overflight payments, is trickier than ever, particularly since Russian diplomacy excels at playing on contradictions. It is also hard to expect a coherent negotiation position from Moscow as its European policy emerges as a mix of residual self-assertiveness, defensive reactions against often imaginary threats, and half-hearted attempts to join forces with European partners-in-need.

9

Terehov, Mourning Summit, Nezavisimaya gazeta, 13 April 2010 (in Russian). Grigoriev, Detente in November. Nezavisimaya gazeta, 13 November 2008 (in Russian); and Gomart, Great Strategic Loneliness. Nezavisimaya gazeta, 11 February 2009 (in Russian). 11 Krugman, A Continent Adrift. New York Times, 16 March 2009. 12 Moshes, Is a ‘Reset’ of EU-Russia Relations in the Cards? Ezhednevny zhurnal, 23 November 2009 (in Russian). 13 Behold, Two Mediocre Mice. The Economist, 26 November 2009. 10

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6.3

P.K. Baev

Devaluation of Energy Interdependence

The fundamental geo-economic reality is that Europe is seriously and increasingly deficient in energy and Russia is richly endowed with just about every possible source of energy. This complementary relationship leads quite naturally to Russia being the main energy supplier to Europe, and the political significance of this energy dependence has always generated concerns. The United States has been a consistent opponent of the European “addiction” to Russian energy since the first deal on exporting Soviet gas to Germany gas in the late 1970s, despite the fact that America’s own dependence on oil imports from the Persian Gulf involves demonstratively greater strategic consequences and has proven irreducible. Though the heart of global (and in particular, the US–Chinese) energy security conundrum is oil, Russian–European energy relations are centered on natural gas. A unique feature of this gas flow is its relative inflexibility, due to the fixed structure of pipelines. Gas is also a uniquely politicized substance because Putin has established effective personal control over Gazprom, the company that dominates Russian supply and maintains a legally protected monopoly on exports.14 Average figures on Russia’s share of EU gas imports and consumption are not exorbitantly high. Russia now makes up about 40–45% of the EU’s gas imports (down from 75% in 1990) and consumption is steady at 30%. This is also not very informative since gas accounts for differing proportions of individual national energy balances. It is noteworthy that many European countries (including Spain, Sweden, and the UK) do not purchase Russian gas at all. The countries with high levels of dependency (from Finland to Bulgaria) are usually inclined to perceive Russia as a reliable and relatively inexpensive source. However, the interruption of gas flow due to the Russian–Ukrainian “skirmish” at the start of 2006, which lasted only a couple of days, awakened the EU to the risks inherent to this dependency.15 Making a determined effort at developing a common energy strategy, the European Commission discovered that the seemingly common-sense guidelines on liberalization of gas market and diversification of gas sources were in fact highly divisive.16 The EU leadership was certainly aware that member states had dissimilar interests at stake but it was not quite prepared to fight with European energy “champions” (like ENI, Total, or E.ON), who saw great benefits in dealing with Gazprom (Guillet 2007; Milov 2006). Forging an alliance with environmentalists, the Commission approved the Energy Security and Solidarity Action Plan in fall 2008, envisioning deep reductions in energy consumption. The target range for gas import in 2020 was lowered to 285–340 billion cubic meters (bcm) from the previous estimate of 385–455 bcm. The actual level for 2005–2007 was about 300 bcm. Gazprom

14

Cornell and Nilsson (2008). An insightful Russian source is Panyushkin and Zygar (2008). One precise assessment is Stern (2006); a more alarmist view is Baran (2007). 16 For useful analysis of the energy dimension in Russia–EU relations, see Noël (2008) and Barysch (2008). 15


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Table 6.1 Revisions of the IEA forecasts for the EU and Russia (Scenario 2015) Total energy Natural gas Total energy Natural gas production demand (Mtoe) demand (Mtoe) production (TWh) (TWh) EU (2007) 1,910 509 3,736 891 EU (2009) 1,711 437 3,432 746 Russia (2007) 766 416 1,126 508 Russia (2009) 700 367 1,141 513 Source: International Energy Agency (2007, 2009)

was hugely irritated with this virtual shrinking of its main market (see Table 6.1) and its deputy CEO Alexander Medvedev told an international gas conference in Moscow: “Although the EU’s Energy Security and Solidarity Action Plan doesn’t define any concrete source of danger, it is clear that the primary focus is placed on Russia. But if the European energy security concept is being developed based on the myth of nonexistent danger from Gazprom, this concept will inevitably lead to the approval of actions, to put it mildly, devoid of sense.”17 These objectives and objections were thrown into disarray by the exceptionally fast descent into recession in the second half of 2008, which caused a collapse in oil prices – and thus significantly improved cost-efficiency of gas vis-à-vis alternative sources. As the crisis hit bottom in January 2009, all risk assessments of the energy supply had to be revised due to the profound impact of the 3-week long “gas war” between Russia and Ukraine. The motivations of Gazprom and Naftogaz and responsibilities for the interruption of gas supplies to the EU are examined elsewhere,18 but what is relevant here is a protracted breakdown of the Russia–EU energy dialogue. European consumers demonstrated the ability to punish Gazprom, cutting their intake of gas by 40% in the first quarter of 2009 and by 25% in the second (compared with the same quarters in 2008), but toward the end of the year the volume of imports returned to average, so the company sought to recover the lost profits by insisting on a “take-or-pay” condition and to restore its position in the market by relaxing it.19 While many experts offered sobering lessons from the “no-win” conflict, the Russian leadership insisted on the validity of its decisions, and on several occasions in 2009, sent warnings to the EU Commission and key consumers about possible new supply interruptions due to expected (but never occurring) delays with Ukraine’s monthly payments. President Medvedev also resolutely rejected the Energy Charter

17

Alexander Medvedev’s presentation New Initiatives of the European Union and Export of Russian Gas – Gazprom’s Vision, VI International Forum Russian Gas, 18 November 2008. 18 One balanced evaluation is Gustafson and Blakey (2009). 19 This condition prescribes that the consumer has to pay for the gas even if the agreed volume was not taken. The compromise deal between Gazprom and E.ON involved the payment of only US $140 million for the unpurchased gas. For more details, see Mazneva, Anti-records of Gazprom. Vedomosti, 30 December 2009 (in Russian); and Grib and Egikyan, E. ON Pays Gazprom’s Bills. Kommersant, 25 January 2010 (in Russian).

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as the platform for negotiations and advanced his own proposal, which duly fell flat.20 Ideas about complementing the “security of supply” principle with a symmetric “security of demand” guarantee might have seemed fair in the period of tight supply, but in the emerging buyer’s market where many energy-deficient countries are preparing to drill for shale gas (following the US example), they are plain irrelevant. It was moderately encouraging for Europeans facing an extraordinary cold winter that Putin opted in November 2009 to strike a gas deal with Ukrainian Prime Minister Yulia Tymoshenko, perhaps assuming that she was on track to win the presidential elections in February 2010. As a result, gas was delivered without any interruptions. The government formed by President Viktor Yanukovich in early 2010 managed to negotiate a price cut in exchange for extending the lease on the Sevastopol naval base, but further negotiations have stumbled over the issue of control over the gas infrastructure and Ukraine is still edging toward insolvency. The controversial construction of the Nord Stream pipeline across the Baltic Sea (approved in December 2009) would only partly ease the problem of Ukrainian transit, but the opening of the so-called “Southern corridor,” where neither the Russian South Stream nor the EU Nabucco projects begin to meet the cost-efficiency criteria, remains doubtful (Baev 2009). Most probably, the EU would pragmatically focus on making low-cost arrangements (in particular, interconnectors that link separate supply networks) alleviating the impact of short-term interruptions, acting on the assumption that the development of the gas market would empower the consumer and make Russia far more dependent on European demand, rendering it unable to exert any pressure.

6.4

What Russian Market?

Despite the importance of gas trade, the complexity and richness of Russia–EU economic relations cannot be reduced to this single issue; it is exactly in the second half of the 2000s, when energy security has attracted extraordinary mainstream attention, that nonenergy ties have expanded exponentially. European companies flocked to the seemingly insatiable Russian market, acquiring assets like beer breweries and yogurt factories and trying to outperform IKEA’s success in retail.21 This new character in relations manifested itself in the feebleness of the EU action in the aftermath of the August 2008 Russian–Georgian war. In some quarters of the EU bureaucracy, the idea of sanctions briefly emerged and instantly died when potential consequences for European exporters were taken into account, even when the whole energy dimension was most carefully bracketed out.

20

The text of this proposal is awkwardly entitled Conceptual Approach to the New Legal Framework for Energy Cooperation (Goals and Principles). Also see Aliyev, Charter-less-ness. Expert, 7 August 2009 (in Russian). 21 Kramer, New Russian Wealth Sets Off Mall Development Boom. International Herald Tribune, 16 May 2008.


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During the fall of 2008, utterly disoriented market forecasters still maintained that solid financial reserves would help Russia to sail through the crisis, to apply leverage by granting or withholding loans, and even to entertain extravagant ideas like bailing out Iceland, which had slipped to the brink of bankruptcy.22 By the end of the year, however, it had become clear that quick spending of reserves could not prevent a deep economic decline, and Russia ended up with greater GDP contraction than most emerging economies, even if it was able to cover the vast deficits in its federal budget in 2009 and 2010 without external borrowing. Moscow had to acknowledge the limits of its financial clout, and the promised credit lines to Serbia and Ukraine were never opened. The devaluation of the ruble had little stimulating impact on import-substituting industries (unlike in 1999), but this was hardly good news for European exporters as retail trade declined even deeper than income due to severe tightening of consumer credit. Facing a worse-than-the-worst-case industrial crisis, the government turned back to encourage foreign investment. Prime Minister Putin personally presented to the executives of leading energy companies the potential projects on the Yamal Peninsular that previously had been Gazprom’s exclusive territory.23 Some risk-takers have returned to the decently performing Russian stock exchange, but big investors remain wary due to the history of harassment in the energy sector, the deeply corrupt business culture, and prevalent expectations of slow and uneven recovery. One of the unmistakable signals of Russia’s propensity to resort to protectionism in order to shelter own producers is its failure to clear the last obstacles for accession to the World Trade Organization (WTO) and its ill-conceived inauguration of the Custom Union with Belarus and Kazakhstan. President Medvedev advanced an ambitious idea of modernization in his November 2009 address to the parliament, but nothing resembling an action plan has so far resulted. Consequently, European high-tech companies have not found any useful connections to this promised market of innovation.24 While Russia (as well as its European partners) is reckoning with the reality of prosperity-no-more, Ukraine keeps balancing on the brink of sovereign default and remains at the bottom of a recession of crushing depth. During the second half of 2009, this economic menace was neglected due to the impending presidential campaign, but it is still looming large despite the remarkable success of President Yanukovich in making Ukraine governable.25 Joint efforts from Russia and the EU are needed to get Ukraine on track to recovery, but such cooperation is precluded by the political clash over the “color revolution,” which is seen in Moscow as a security threat and in Brussels as a big disappointment. Russia could ill afford any unilateral

22

The idea was not entirely philanthropic as several Russian billionaires could have been exposed to the Icelandic financial meltdown. For more details, see Butrin, Money into the Geyser. Kommersant, 13 October 2008 (in Russian). It was eventually discarded in autumn 2009; see Kochelyagin, They Will Borrow and Pay Back. Vremya novostei, 20 October 2009 (in Russian). 23 Rubanov, Our Move in the European Gas Game. Expert, 5 October 2009 (in Russian). 24 Inozemtsev, Modernizatsya.ru: Where We Are. Vedomosti, 11 January 2010 (in Russian). 25 Medish, The Difficulty of Being Ukraine. New York Times, 22 December 2009.

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rescue packages, and the EU is in the unfamiliar territory of looming bankruptcies of several member states, including Greece and even Italy. The Eastern Partnership project becomes a burden rather than an asset in this predicament, and economic ties with Russia cannot generate much export-driven growth.

6.5

How Much Does Security Matter?

The integrity of the European security system was damaged, possibly beyond repair, by the Kosovo war, which Moscow saw – and still sees – as a gross violation of the most fundamental code of interstate conduct by NATO. Russia’s withdrawal from peacekeeping operations in both Bosnia–Herzegovina and Kosovo in mid-2003 exemplified the reduction of its common security agenda, and the much-emphasized antiterrorist cooperation has in fact never amounted to much, particularly since the EU had serious reservations about the Russian-style “war-on-terror” centered on Chechnya (Hedenskog and Konnander 2005). Nonproliferation has also remained a narrow point of interface, not least because Moscow has cultivated its Iranian intrigue primarily in the context of trade-offs with Washington, despite the active mediation of the European troika. The EU generally remained unconcerned about this “de-securitization” up until 2007, when Putin followed up on his vitriolic speech at the Munich security conference with orders for Russia’s Long-Range Aviation to resume regular strategic patrols.26 The monthly patrols by these aging and unarmed bombers over the North Atlantic soon stopped attracting attention, but Putin did not waste any time in taking the next step: withdrawal from the Treaty on Conventional Armed Forces in Europe (CFE) (1990/1999).27 The national ceilings on the number of tanks and other weapons had long stopped making practical sense, but the observation procedures providing for transparency of military activities were quite useful. Russia’s firm rejection of the so-called “flank limits” – which set a ceiling for tanks and other types of weapons deployed in the North Caucasus and are linked to the commitment to withdraw all Russian bases from Georgia – was highly destabilizing for the power balance in the Caucasus. The United States and European NATO states have not found any incentives to entice Russia to reenter the CFE Treaty, but at least Moscow decided that abandoning the Intermediate-Range Nuclear Forces Treaty (1988) would not suit its interests.28 Just a month into the job, Medvedev put forward an initiative for signing an all-European accord enshrining the principle of nonuse of military force, which at that moment appeared odd since the principle was hardly in need of buttressing.

26

Trenin, Strategic Simulation. The New Times, 27 August 2007 (in Russian). Karaganov, Requiem for the Treaty. Rossiiskaya gazeta, 5 May 2007 (in Russian). 28 Arbatov, A Dangerous and Unnecessary Step. Nezavisimoe voennoe obozrenie, 2 March 2007 (in Russian). 27


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He has returned to the idea many times since, even telling the military parade on Red Square on May 9, 2009 that international law marks the surest way to a safer world: “That is why our country has suggested a new European Security Treaty.” Each time, however, his idea seemed rather underdeveloped and slightly out of place.29 The European leaders were initially reluctant to explain to Putin’s junior partner that his initiative was a nonstarter but then began to ponder the possibility of inventing content that could make it meaningful. No European security system can function without Russia’s commitment to its basic principles and engagement in implementation mechanisms. Moscow has made it clear that three key elements of the existing system do not fulfill its aspirations: the deployment of “the forward echelon” of the US strategic defense system in East–Central Europe; NATO’s expansion toward Ukraine and Georgia; and the Organization for Security and Co-operation in Europe (OSCE), which according to Medvedev, “has focused on solving partial, sometimes even peripheral security issues.”30 At the start of 2009, these problems appeared deadlocked, but by the end of the year, the first two had been greatly reduced in salience. While the talks on a new strategic arms reduction treaty had not achieved compromises in all areas by the time of expiration of the START I Treaty (1991) in December, President Obama’s decision to cancel the plan to deploy ten anti-missiles in Poland and radar in the Czech Republic discharged a hugely overblown conflict (Arbatov 2009). The resumption of the work of the NATO-Russia Council in December 2009 has helped in advancing matters of practical cooperation, primarily related to Afghanistan, and in clarifying that the Alliance has to confirm its readiness to embrace Georgia and Ukraine only as a matter of principle but is not prepared to take any practical steps in this direction.31 The NATO-Russia summit in Lisbon in December 2010 was remarkably peace-building, but the declared intention to build a joint anti-missile system is hardly practicable. The work on preparing a joint evaluation of common security threats, which generally answers Medvedev’s vision (not mentioned in any signed documents), is also unlikely. The disagreement over the role of the OSCE, nevertheless, has persisted despite the organization’s best efforts to address Russia’s dissatisfaction at a special ministerial meeting in Corfu, Greece in June 2009. President Medvedev finally unveiled his draft of a new treaty in November, with a very particular focus on creating a mechanism of consultation that would make it possible for any member state to express its concerns over a perceived threat to its security from any other state.32

29

Official translation of Medvedev’s Victory Day Speech on 9 May 2009 is available at the presidential website. For an indifferent response in Europe, see Lo (2009). 30 Official translation of Medvedev’s speech at the Helsinki University on 20 April 2009 is available at the presidential website; see also Moshes, Politics of Grand Façade. Gazeta.ru, 22 April 2009 (in Russian). 31 Baev, Russia and NATO Explore the Limits of the “Agreeing-to-Disagree” Posture. Eurasia Daily Monitor, 14 December 2009. 32 Tsypkin, Moscow’s European Security Gambit. RFE/RL Commentary, 10 December 2009.

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This proposal fell far short of the declared ambition to reconfigure the whole architecture of European security (Lukyanov 2009). In addition, it was clearly unacceptable for most (and particularly new) NATO members as it reduced the role of the Alliance to just one of the many overlapping institutions in that already overstructured space; hence the firm point of Secretary General Anders Fogh Rasmussen on the redundancy of a new treaty, which he concedes, could still be discussed by the OSCE.33 There could indeed be some space for such discussions in the “spirit of Corfu” but it is hard to expect that the OSCE (even under Kazakhstan’s chairmanship) would approve an initiative that implicitly aims at weakening the organization’s role as the most inclusive security institution entrusted with upholding norms and rules. Even in the midst of the economic crisis, the EU remains committed to strengthening its security-providing capacity, and Russia raises no objections against such functional expansion. At the same time, there is little place for the EU in the macrosecurity schemes designed by Moscow, and security planning in Brussels remains timid regarding challenges emanating from Russia, which is particularly evident in the region that has the highest concentration of such challenges: the Caucasus.

6.6

The Caucasian Epicenter of Conflict

In the 1990s, the EU was preoccupied with violent conflicts in the Balkans and was basically content to leave conflict management in the Caucasus to Russia; the EU disapproved of the conduct of the First Chechen War but assumed that it would tie Moscow’s hands and cut short its experiments with projecting power beyond its borders. At the start of the 2000s, the Second Chechen War had the same restraining effect on Russia’s policy, but the EU felt obliged to increase its attention to Caucasian matters because enlargement made the Black Sea area into a sector of its new neighborhood (Lynch 2008). One geopolitical clash that was conceptualized but never materialized was centered on the so-called “energy corridor”; against many overexcited predictions, Moscow let the Baku–Tbilisi–Ceyhan pipeline project proceed unimpeded toward its opening in 2005 (Starr and Cornell 2005). The gas pipeline Baku–Tbilisi–Erzerum attracted less attention, even if Russia had greater political stakes in the gas business, but Moscow took every necessary step to make sure that Turkmenistan would not be connected to Azerbaijan, so the real geo-hydrocarbon importance of this corridor remained limited. As Chechnya was subdued by the brutal rule of Ramzan Kadyrov, Moscow gained usable spare military capacity in the North Caucasus and set its sights on Georgia. Tensions around Georgia had been steadily escalating since the “Rose Revolution” of late 2003, which displaced President Eduard Shevardnadze. Moscow saw this

33

Terehov, Moscow Will Help NATO in Afghanistan. Nezavisimaya gazeta, 18 December 2009 (in Russian).


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event as the trigger of a chain reaction of other political calamities that had exhausted its energy by the end of 2005. The EU provided only lukewarm support to Georgian reforms, not least because new Georgian President Saakashvili prioritized ties with the Bush administration, but also because the subsequent “Orange Revolution” in Ukraine in late 2004 generated such a strong pro-European impulse that the EU had to make it clear that it would not be ready for new enlargement anytime soon (Lynch 2006). The war between Russia and Georgia in August 2008 changed that indifferent attitude, particularly because French President Sarkozy’s personal diplomacy made the EU into the key party in the deadlocked peace process. The momentum of unity peaked at the extraordinary meeting of the EU Council, which expressed its “grave concern” over Russia’s “disproportional reaction,” but already at the November EU–Russia summit the negotiations on the new Partnership and Cooperation Agreement were resumed (Emerson 2008). Commitments to deliver massive aid for Georgia’s reconstruction were thwarted by the financial disaster that engulfed most of EU’s eastern newcomers. The Geneva talks between parties to the conflict produced only a series of scandals, and expectations for a more reasonable course from Georgia (perhaps after Saakashvili’s departure) have not come to fruition. Moscow’s attitude cannot be described as “reasonable” either, but its firm stance effectively destroyed the semblance of EU resolution. It is still an open question what lessons Moscow has learned from this experience, and risks of a new explosion are high. What has made the EU role in managing this conflict perhaps more prominent than the newly appointed High Representative for Foreign Affairs and Security Policy would have wished is Russia’s “principled” position, which has resulted in the closure of the UN peacekeeping operation in Abkhazia (UNOMIG) and the OSCE mission in Georgia (monitoring the conflict in South Ossetia). The EU has tried to preserve a balanced position in the conflict, and the report of the international fact-finding mission organized by the Union indeed presents an impeccably impartial analysis.34 This neutrality has not, however, enhanced their ability to influence the developments on the ground, and EU monitors often find themselves helpless and reduced to making appeals to Russia to respect the Medvedev–Sarkozy ceasefire deal.35 It is certainly entirely possible for the EU to bracket out the Georgian issue into an “agree-to-disagree” category in its developing relations with Russia, but the problem is that Moscow’s easy military victory has given it every reason to assume that the political price for its actions is negligible. Such an assumption not only encourages Moscow to maintain its inflexible stance that the recognition of Abkhazia and South Ossetia as independent states cannot be undone, but also creates a temptation for Russia to reproduce its triumph. The year 2009 passed – against many predictions – without any major incident, but the persistent claims from Russian

34

For more information on the report, see http://www.ceiig.ch/Report.html. For more information on the EU Monitoring Mission, see http://www.eumm.eu/; see also Dzyadko, Zone of Death. The New Times, 20 April 2009 (in Russian). 35

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leadership that Georgia has restored its prewar military capabilities could signify readiness to experiment with another “small-and-successful” war.36 The EU cannot have any confidence in Russia’s responsiveness to Western signals about the need to show utmost caution and restraint in the Caucasus; it also finds its diplomacy outflanked and outmaneuvered by the rather unexpected move by Turkey in opening a dialogue with Armenia. Moscow expresses full support for Turkish– Armenian normalization and invests heavily in several energy projects in Turkey, expecting that mature partnership between rising powers Russia and Turkey will reduce to irrelevance the feeble EU design for Black Sea cooperation (Torosyan 2009; Strauss, Ottoman Mission. Financial Times, 24 November 2009). Overall, Russia shows no interest in cooperating with the EU in the profoundly destabilized Caucasus, while the EU has no capacity for delivering on its promises for addressing security challenges in this conflict-prone part of its neighborhood.

6.7

Conclusion

The evolving global crisis may yet deliver many spectacular surprises, but it has already revealed fundamental nonsustainability of two processes that had flourished for most of the 2000s: Russia’s phenomenal economic growth and the EU’s revolutionary enlargement. Both processes created serious structural and institutional distortions in their respective political bodies and between them; these anomalies have not been sufficiently addressed, so neither Russian growth nor EU enlargement can proceed while the recession runs its course. Moreover, the self-perceptions of the two entities – shaped by ambitious political discourses – have been deeply undermined. Russia can no longer fancy itself a rising power with a unique state-society contract of “sovereign democracy”; and the EU is coming to acknowledge that its model of “post-historical” norms-based ever-closer integration is neither universally applicable nor functional in delivering on its central promise of ever-closer union. As a result of these recession-fueled self-reevaluations, the long-existing (but often misunderstood) asymmetry in EU–Russia relations is growing and is felt more acutely by both parties. Despite exaggerated perceptions of the EU’s gas dependency, Russia remains, in real terms, far more dependent upon multidimensional ties with Europe – from education and tourism to money-safekeeping – than vice-versa. As the EU is forced to concentrate on putting its divided and depressed house in order, it cannot prioritize Russia above the EU’s other demanding external “frontiers,” such as Turkey or its floundering Mediterranean and Eastern partnerships. Russia will therefore find itself in need of greater attention and support from Europe than its ambition of “equal partnership” warrants, and the EU will be less able to sustain its focus on Russia at the precrisis level.

36

Hramchihin, The Situation on the Caucasian Fronts is Deadlocked As Yet. Nezavisimoe voennoe obozrenie, 15 January 2010 (in Russian).


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The EU may turn out to be one of the main losers in the global crisis, but Moscow would hardly be able to take advantage of this weakness and cultivate “privileged partnerships” with Germany and Italy (even less with Bulgaria and Slovakia) due primarily to its own diminishing leverage and very possible leadership crisis. Predicting a protracted stagnation in the “euro-zone” is now a conventional wisdom among Russian analysis but the EU has shown much resilience in the past and could come out of the recession on the strength of a new integrative momentum without cutting out weaklings like Greece. Russia would only be able to connect with this resurgence through its own modernization, which has to be different from Medvedev’s current emphasis on technical innovations in a profound “Europeanization” of its institutions, necessarily including the departure of still massively popular and influential Putin from the political arena. Many things could go wrong in Russia, and its record of coping with economic cataclysms is not encouraging (with the possible exception of the August 1998 financial meltdown). Much in its current anticrisis policy is based on the assumption that difficulties are externally driven and will soon pass without necessitating any major reforms. A return of “petro-prosperity,” however, is highly unlikely while the commitment to modernization remains far weaker than the commitment to deliver expanded social benefits. The best option is for Russia and the EU to combine their strength in order to defy the gravity of recession, so that Russian modernization can build on European momentum and the EU can gain access to a vast resource base. This option, unfortunately, comes close to the “too-good-to-be-true” category as many spoilers interfere with the intention to sacrifice some parochial interests for greater good. The worst “disaster zone,” however, is developing in Ukraine, where the crisis of governance is set to continue after the presidential elections, while Russia and the EU are not sufficiently concerned with the potential impact of this implosion and continue to stick to their competitive templates. Finally, Georgia has a full set of conditions for a new war with Russia, while the EU shows little concern about its diminishing capacity to perform the role of solo Western mediator.

References Allison, Roy. 2008. Russia Resurgent? Moscow’s Campaign to Coerce Georgia to Peace. International Affairs 84 (6):1145–71. Arbatov, Alexei. 2009. The Fifth Missile Defense Crisis. Briefing Paper 11(4). Moscow: Carnegie Center. Baev, Pavel. 2009. Competing Designs for Caspian Energy Highways: Russia and the EU Face Reality Checks. PONARS Eurasia Memo 55. Washington: Georgetown University. Baran, Zeyno. 2007. The EU Energy Security: Time to End Russian Leverage. Washington Quarterly 30 (4):131–144. Barysch, Katinka, ed. 2008. Pipelines, Politics and Power: The Future of EU–Russia Energy Relations. London: Centre for European Reform. Conti, Marta, Valeria Kasamara and Maria Ordzhonikidze. 2009. Europe and Russia – Trusting Friends or Fearful Neighbours? The EU–Russia Centre Review 13 (1):3–38.

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Cornell, Svante E. and Niklas Nilsson, eds. 2008. Europe’s Energy Security: Gazprom’s Dominance and Caspian Alternatives. Washington & Stockholm: CACI & SRSP. Emerson, Michael. 2008. Post-Mortem on Europe’s First War of the 21st Century. Policy Brief 167. Brussels: Center for European Policy Studies. Gomart, Thomas. 2006. The EU and Russia: The Needed Balance between Geopolitics and Regionalism. Russie.Nei.Visions 10 (1):5–19. Guillet, Gerome. 2007. Gazprom as Predictable Partner: Another Reading of the Russian-Ukrainian and Russian-Belarusian Energy Crises. Russie.Nei.Visions 18 (1):4–24. Gustafson, Thane and Simon Blakey. 2009. Lessons for Europe of the Russian-Ukrainian Gas Crisis. Decision Brief. Cambridge, Mass.: Cambridge Energy Research Associates. Hedenskog, Jakob and Vilhelm Konnander, eds. 2005. Russia as a Great Power. London: Routledge. International Energy Agency. 2007. World Energy Outlook. International Energy Agency. 2009. World Energy Outlook. Karaganov, Sergei. 2005. Russia’s European Strategy: A New Start. Russia in Global Affairs 3 (3):72–85. King, Charles. 2008. The Five-Day War: Managing Moscow After the Georgia Crisis. Foreign Affairs 87 (6):2–11. Lo, Bobo. 2009. Medvedev and the New European Security Architecture. Policy Brief. London: Centre for European Reform. Lukyanov, Fedor. 2009. Rethinking Security in “Greater Europe.” Russia in Global Affairs 7 (3):94–102. Lynch, Dov. 2006. Why Georgia Matters. Chaillot Paper No. 86. Paris: Institute for Security Studies EU. Lynch, Dov, ed. 2008. The South Caucasus: A Challenge for the EU. Chaillot Paper 65. Paris: Institute for Security Studies EU. Milov, Vladimir. 2006. The EU–Russia Energy Dialogue: Competition Versus Monopolies. Russie. Nei.Visions 13 (1):5–14. Moshes, Arkady. 2005. Reaffirming the Benefits of Russia’s European Choice. Russia in Global Affairs 3 (3):86–97. Noël, Pierre. 2008. Beyond Dependence: How to Deal with Russian Gas. Policy Brief. Council on Foreign Relations. Ostrovsky, Arkady. 2009. Reversal of Fortune. Foreign Policy 171:70–74. Panyushkin, Valeri and Mikhail Zygar. 2008. Gazprom: Novoe Russkoe Oruzhie (Gazprom: New Russian Weapon). Moscow: Zaharov. Pirani, Simon, Jonathan Stern and Katya Efimova. 2009. The Russian-Ukrainian Gas Dispute of 2009: A Comprehensive Assessment. Oxford: Oxford Institute for Energy Studies. Starr, Frederick and Svante E. Cornell, eds. 2005. The Baku-Tbilisi-Ceyhan Pipeline: Oil Window to the West. Washington: Johns Hopkins University. Stelzenmüller, Constanze. 2009. Germany’s Russia Question. Foreign Affairs 88 (2):89–100. Stern, Jonathan. 2006. The New Security Environment for European Gas: Worsening Geopolitics and Increasing Competition for LNG. Oxford: Oxford Institute for Energy Studies. Torosyan, Tigran. 2009. The Return of Turkey. Russia in Global Affairs 7 (3):120–129. Trenin, Dmitri. 2009. Russia Reborn: Reimagining Moscow’s Foreign Policy. Foreign Affairs 88 (6):64–78.

Chapter 7

Meeting the Russian Challenge in the Obama Era Robert Legvold

7.1

The Challenge

Dealing with the challenge posed by contemporary Russia scarcely comes easy, in no small part because defining the challenge is hardly easy either. So it is when a country is neither fish nor fowl, neither clearly an adversary of the United States nor its ally, yet anything but irrelevant or inconsequential. Take a series of key questions: (1) Is Russian foreign policy motivated by a desire to undermine the US influence or, alternatively, to influence what is viewed as objectionable US behavior? To aggrandize Russian power at the expense of US power or, alternatively, to increase Russian leverage over particular uses of US power? (2) Is Russian foreign policy designed to create a “sphere of influence” in the post-Soviet space from which major competitors are excluded or, alternatively, to enhance Russia’s competitive position in what it knows will be a competitive arena? To exploit the security concerns of others as a way of enhancing Russian power or, alternatively, to address Russian security concerns, albeit often by heavy-handed means? And (3) is the assertive and at times confrontational character of contemporary Russian foreign policy (i.e., the use of coercion over compromise in dealing with neighbors, the sometimes strident criticism of US foreign policy, and the exaggerated or distorted notion of threat) due to ambition or to insecurity? To manipulation (in the service of domestic political or other objectives) or to conviction? While some of these pairings are not mutually exclusive, when added together, one set of questions suggests a very different policy challenge from the other. They also lead to very different notions of how the United States should respond to the challenge. If one subscribes to the harsher, more suspicious view of the impulses driving Russian behavior, the United States should be on its guard and focus on thwarting Moscow’s capacity to make trouble. In its purest form the natural recourse would be R. Legvold (*) Columbia University, New York, NY, USA e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_7, © Springer Science+Business Media, LLC 2012

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a neo-containment strategy – drawing lines in the sand, dealing with the country from a position of strength and at arm’s length, and fashioning coalitions aimed at keeping Russia in its box. This is not a hypothetical example, but an approach vigorously urged in a number of quarters.1 The more agnostic and less menacing interpretation of what Russia is up to leads in a rather different direction. Without gainsaying potential problems in US-Russian relations, it favors reaching out and engaging Russia, attempting to identify areas where the United States and Russian interests converge, and facing head on in a frank and open dialogue the core issues dividing the two countries. The Obama administration’s effort to put the US-Russia relationship on a different footing, after a decade of growing rancor, appears to fit within this mold. It is the approach urged in this essay. But it is not the only alternative to the first, tougher policy line. A third approach falls between the previous two approaches, resonating in varying degree with both sets of basic questions. Accordingly, advocates would have the United States pursue the possibility of cooperation with Russia in a limited number of areas where the two countries have clearly overlapping interests, such as preventing nuclear proliferation and fighting terrorism, while at the same time confronting Russia when it makes trouble, say, for its neighbors or by providing too much aid and comfort to what Washington sees as outlaw regimes. In effect, it would be a strategy combining selective engagement with selective containment. It would also consciously frame the potential in US-Russian relations in modest terms, abjuring the notion that the two countries could or should aspire to something as ambitious as a strategic partnership – an aspiration that the second approach does entertain.2 There is also a fourth way of thinking about the challenge posed by Russia that falls outside the framework shaping the first three approaches, one that largely sets aside the questions asked at the outset. It starts from a perspective less concerned with the trouble Russia may cause than the trouble Russia is in. Considering the demographic crisis facing the country, the vulnerability of an economy subject to the vagaries of oil and gas prices, a system suffused with corruption, growing ethnic tensions in the North Caucasus, and a dilapidated infrastructure, the real concern should be with the problems posed by a weak, rather than a boisterous or aggressive, Russia. What precisely this fourth approach suggests as a response is not entirely clear. If it produces a Russia inclined to lash out at the world around it or to distract its public with adventures abroad, then presumably the United States should respond forcefully or, better yet, deter the Russians from even thinking in these terms. On the other hand, if Russia’s weakness generates contagion, spreading instability, health hazards, criminality, arms flows or fugitive fissile material, and other sources of mayhem to the outside world, then presumably the United States is better off trying to insulate itself and key allies from these effects. The policy prescription would

1

See Lucas 2008; McKinnon 2007; and Rep. Ros-Lehtinen 2009, 3–5). This third approach is most effectively articulated in Kemp and Edwards (Kemp and Edwards 2006); it also came to characterize the George W. Bush Administration’s Russia policy in the administration’s last years, although this is not where its Russia policy began in 2001–2002. 2

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essentially be to build a sarcophagus around Russia, however this might look – a kind of political equivalent of Chernobyl. The argument in this essay rests on the assumption that the second, less agitated way of framing the question is, if not assuredly correct, then a safe and potentially constructive basis for acting as long as the United States maintains the upper hand that it currently enjoys. The third approach – selective engagement/selective containment – is too meager, too much without vision. The fourth option is both premature (until there are clear signs that Russia’s decline is secular and deep) and indeterminate in its implications (given the sharply different direction that the threat may take). Such an assumption, however, still leaves a number of additional angles from which to consider the challenge raised by Russia. They include where and to what degree US and Russian interests clash, which factors shaping Russian behavior matter most to the United States, and how the basic nature of Russian power figures in the picture, subjects to which I now turn. One way to think about the problem is by identifying those points where US and Russian national interests conflict or are viewed by one or both leaderships as in conflict, and then to assess the gravity of the discrepancy. Here, however, a distinction should be kept in mind: it matters considerably whether interests are genuinely in conflict or merely differ. The former represents an active source of discord and tension; the latter has the potential of producing discord and tension, but need not if carefully managed. Unquestionably important areas exist where US and Russian leaders define their interests in ways unmistakably at odds. The United States, for example, wants independent, autonomous, democratic, or democratizing states in the post-Soviet region open to unimpeded external economic engagement. Russian leaders want dominant influence and a droit de regard in the post-Soviet space. The United States wants a strong NATO capable of out-of-area action and free to welcome into its membership any state that meets its criteria. Russia accepts a NATO with an out-of-area role in selective cases (provided it is sanctioned by the United Nations), but neither a NATO expanding into the post-Soviet space nor a NATO arming on its immediate borders. The United States, until recently, has viewed its substantial edge in conventional and nuclear forces as natural and necessary and sought to avoid any form of arms control that would reduce it. Russia wishes to constrain US strategic innovation, such as the weaponization of space and the development of a national missile defense system, as well as the scale of the overall US defense effort. The United States wants to see “rogue regimes” change or (during the Bush years) be changed. Russia opposes force as a means of regime change – at least, in the case of US-defined “rogue regimes” – and, for that matter, most forms of armed humanitarian interventionism. The United States stresses values and a commitment to democratic development as a key dimension of relations with Russia and its neighbors. Russia opposes making this an important element in the relationship and, in general, a justification for active intervention anywhere. In other instances, the two countries have differing interests – interests that diverge but that are not squarely in conflict. For example, the United States attaches highest priority to preventing the proliferation of nuclear arms to countries like Iran and North Korea. Russia regards preserving and strengthening the NPT regime as

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important, but balances this objective against other foreign policy objectives. The United States approaches the challenge posed by Iran primarily in terms of nuclear proliferation, global terrorism, and the conflict in Iraq. Russia thinks of it in multiple dimensions (nuclear proliferation, but also energy, Islam in Central Asia and the Northern Caucasus, arms sales, etc.). The United States regards the threat posed by Iran’s ambiguous nuclear program as a legitimate reason to build and deploy a ballistic missile defense system. Russia entertains the idea of missile defense as legitimate, but only if collaborative and on a basis acceptable to Russia (and China). The United States supports multiple energy supply lines out of the post-Soviet area. Russia wants to monopolize energy supply lines out of post-Soviet area. US policymakers at times are willing to consider a neo-containment option when contemplating policy alternatives for dealing with China. When framing China policy, Russian policymakers stop at a hedged alignment strategy. The United States seeks to isolate regimes seen as destabilizing in international politics and overtly hostile to US interests. Russia is willing to “truck, barter, and exchange” with regimes antagonistic to the United States such as Venezuela, Cuba, Iran, and Syria. And the United States has a different conception of the global terrorist threat (specifically who and what constitute it) and assigns global terrorism the highest priority. Russia has a different conception of which groups are terrorist, thinks of terrorism in regional terms, and assigns the larger global threat a lower priority. It is not difficult to see how easily some of these contrasting preferences could turn into open conflicts. From the distinction between conflicting interests and differing interests, therefore, comes the first of the policy guidelines consistent with the second of the four strategic choices outlined above – i.e., the approach that favors engaging Russia as ambitiously as both circumstances and imagination allow. (If this distinction provides less of a guideline for the other three approaches, it is because for them the distinction is either nonexistent or of little consequence.) Once the distinction is accepted, however, a key function of policy is to preserve the gap between the two categories, that is, to ensure that disparate interests do not deteriorate into colliding interests. This can only be done where interests diverge if policymakers put a conscious effort into highlighting those aspects of a problem area on which the two governments agree and into de-emphasizing and, when possible, easing those points on which they disagree. For example, in the energy sphere, stress should be on commercial interests that are aligned (e.g., direct foreign investment strategies and joint pipeline projects), as well as on depoliticizing points of tension (e.g., competing pipeline projects); or, in the case of Iran, Washington would be better to focus on what unites the two governments – viz., a desire to prevent Tehran from acquiring nuclear weapons – and then look for ways to minimize tactical differences over how to go about achieving those shared objectives. Dealing with divergent interests is, from this perspective, basically different from dealing with conflicting interests. Divergent interests, if well managed, can be part of an improving relationship; if not, the arrow points in the opposite direction. Conflicting interests, however, reflect genuinely opposing stakes, so even when the element of misperception or an exaggerated reading of the other side’s intentions is


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factored in, they cannot easily be defused by even the most skillful diplomacy. Instead, the objective becomes preventing these issues from escalating or spilling over and contaminating other parts of the relationship, and the way forward depends not resolving them directly, but counting on overall progress in the broader relationship to drain them of their intensity and gradually allow them to be redefined. Whichever strategic perspective one adopts in defining the Russian challenge, another dimension has to be faced: which factors shaping Russian behavior are to be singled out and assigned what proportionate weight. Most analysts would likely agree on the categories and even the makeup within each. Setting aside the intangibles, such as the psychological factor of a lost empire and diminished status or the imprint of historical legacy, most would start with immediate influences, three in particular: first, the impact of key domestic political features on the country’s external behavior. For some this would simply be the baleful effect of the recent trend toward authoritarianism and the “privatization” of the state produced by the ruling elite’s merger of power with property. For others, among whom I count myself, the emphasis is elsewhere, such as on the impact of centralized but poorly institutionalized power, which contributes not only to state weakness but also to inconstancy and a lack of coherence in policy, together with an obscure policymaking process. Add to this the impact of “clan” politics in the upper echelons of power, in which policy is subordinated to the biases and preferences of powerful but competing factions. Include as well the consequences of highly personalized national leadership, now complicated by the curious – and by Russian historical experience, anomalous – creation of a diarchy, which has enfeebled a normal and reasonably effective bureaucratic airing of policy and left the locus of decision making at times opaque to both the system and the outside world. Second, nearly all analysts struggle with assessing the potential impact on Russia’s foreign policy of the harsh challenges that the country faces from within. These include a demographic crisis of disputed proportions but severe enough to prompt its leadership to treat it as a national security threat, not merely a socioeconomic problem.3 Russia also suffers from an economy that for all the impressive growth from 1998 to early 2008 remains a tenth the size of that of the United States, and that, battered by the economic crisis of 2008–2009, has little chance of managing growth rates of seven percent, the target by which the current leadership planned to reach Portugal’s current per capita GNP by 2020.4 Then comes the seemingly intractable political obstacles to a major reform of the country’s financial and banking sectors and the creation of a judicial and regulatory infrastructure capable of protecting property rights and taming corruption. This in turn parallels the dead weight on Russian progress from decrepit infrastructure, such as aged pipelines, dilapidated airports, a limited highway network, contaminated water, underfunded and spotty healthcare, a partially reformed educational system, and energy efficiency one-third that of the average OECD country.

3 4

See Vladimir Putin’s “State of the Union” addresses in 2003 and 2004. Dmitriev 2008.

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Still, again, what are we to make of this? Much depends on whether one sees this combination of woes as irremediable, at least for the foreseeable future, or whether one entertains the possibility that, with a little luck, the country can begin working itself out of this corner; whether one views Russia as not only in decline, but in a downward spiral that is secular and fixed, or whether one treats Russia’s formidable troubles as malleable and gradually soluble if addressed in a serious and sustained fashion. Neither perspective, however, yields a single policy prescription. Each, in fact, produces more than one recommended course of action – in some cases, paths that are sharply at odds. For example, some who stress Russia’s decline view this as a reason to give no quarter when negotiating with Russia’s leaders or simply to leave them to stew in their own juices.5 Others who see Russia as a country in decline treat the country’s hard road ahead as a reason that its leadership is often difficult to deal with, but not as a reason to ignore Russia on issues of importance to the United States or to assume that the United States can achieve much unless it takes Russia’s own agenda seriously.6 Some in the other camp search the horizon for any sign that positive steps promoting political liberalization, judicial reform, anticorruption measures, or a healthier investment environment are being considered, or simply fall back on the assumption that the country’s great natural and human wealth will eventually prevail. There are those in the business community who believe opportunity in Russia beckons or those working for Pricewaterhouse Coopers who wrote the report predicting that in 2030 Russia would have the world’s sixth largest economy, ahead of Germany, France, and the United Kingdom (but fourth among BRIC).7 Others who also are not ready to consign Russia to long-term failure shift the focus entirely, and fault the United States for taking Russia for granted for too long, disregarding its concerns, and seeking to impose Washington’s agenda on it. They would urge a repentant United States to alter course, recognize how important to US interests a failing Russia would be, try to repair the damage of past policy, and begin earnestly to build a more equitable relationship with it.8 My own view is more agnostic. How deep and comprehensive Russia’s troubles are, and, even more so, how much deeper they may become, are simply unknowable. Some countries do, of course, stagnate for long periods of time, but for over more than a half millennium, Russia has been through several periods of collapse, followed by revival and growth. It seems ahistorical, while the country is still part way through the convolutions of a historic transition, to project the ultimate course of events. It also seems incautious and a little simple-minded to fasten on a single set of trends, when in contemporary Russia so many countervailing winds are blowing. Indeed, demographic trends cast a long, dark shadow, but the innovative prowess of an

5

The view can be found in Bugajski 2009 and Cohen and Ericson 2009, 13. Graham 2009. 7 PriceWaterhouseCoopers Media Center (UK) 2010. 8 Cohen 2009. 6


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emerging entrepreneurial class is also real. True, the hazards of an economy shackled to energy exports weigh heavily, but so too do the potential force of a swelling consumer class, the contribution an improvement in human resources could make to GDP, the effects from enhanced energy efficiency, and a scientific community rivaling any in the world.9 If the many forces at work in Russia run powerfully in different directions, one should not expect their effects on foreign policy to be black and white. More likely the link between Russia’s domestic fortunes and its external behavior will be complex, cross-cutting, and, above all, variable. Some of the leadership’s anxieties may well push them at times toward a testy or heavy-handed treatment of outside powers and nervous neighbors. On the other hand, there is much in the catalogue of challenges facing them that would just as logically encourage them to seek relief beyond their borders – either in the form of cooperation to keep their immediate environment peaceful or in the form of partnerships helping them meet the challenges they face. Which tendency dominates at any one time, in all likelihood, will vary depending on how internal and external pressures interact – whether they are reinforcing or countervailing; whether problems at home are receding or intensifying, while concerns abroad are worrying or reassuring. That creates a four-box matrix, and US policy has some, albeit limited, capacity to influence which box emerges more often. Before exploring how this capacity might be exercised, one last factor shaping the nature of the Russian challenge should be noted: the deformed nature of Russian power. Russia is the other great nuclear power with nearly half of the world’s nuclear weapons, but it is saddled with a large, misshaped, and decrepit conventional military force. It is one of the world’s mightiest energy powers, but because of the backward, commodity-dependent nature of its economy, it is utterly vulnerable to short-term price and demand volatility. And it has more clout in a potentially vital region – the post-Soviet space – than any other major power, but less influence than almost any other major power beyond. So, what is the US policymaker to fasten on – the elements making Russia formidable or those rendering it weak? While the temptation is to emphasize one or the other – something a fair portion of analysis does – common sense suggests that both go into making up Russia’s anything-but-straightforward capacity to act on the international stage. Understanding the two sides to Russian power and how together they both drive and constrain Russian actions in the world outside completes the puzzle. The US policymaker does not have it easy.

7.2

The Stakes

What makes struggling to decode the puzzle worthwhile, however, is also what has been most missing from past US policy toward Russia: an appreciation of the stakes that the United States has in the relationship. No administration, until the current 9

For example, the contribution of human resources to GDP is currently only 14%, but if increased to 60%, this would solve Russia’s demographic problem.

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one, has articulated well the substantial and wide-ranging ways that Russia matters to the United States. This may be because none ever really did the tally or succeeded in persuading itself of Russia’s importance, and was, therefore, neither of a mood nor in a position to persuade others. US-Russia policy, without the ballast of a strong sense of why a solid, constructive relationship with Russia is crucial to the United States, has ebbed and flowed with the to and fro of events. As a result, it has been all too easy for people to drift with circumstances, judging the merit of policy by the prevailing state of relations or, worse, assuming that fine-tuning policy did not much matter, because an infirm Russia, let alone a pugnacious infirm Russia, was of only tertiary importance to the United States. True, most observers, in moments of serious reflection, have recognized that a country with 45% of the world’s nuclear weapons has some claim to US attention, if for no other reason than ensuring that no part of this stockpile or any of the associated fissile material falls into the wrong hands. And Russia is normally seen as an important counterpart to the United States in preserving and strengthening the nuclear nonproliferation regime. But, with the end of the Cold War and the fading fear of a nuclear holocaust, what had once been central to US-Soviet relations and, thus, to international politics more generally lost its urgency. Russia, of course, impinges on the US consciousness because of its vast oil and gas reserves and its critical role as an energy supplier to old and new allies in Europe. But for much of the first decade after the collapse of the Soviet Union, when Russia’s oil and gas industries were in semi-chaos, this dimension of the relationship remained largely confined to the visions animating US oil majors. When Washington again focused on the issue in Boris Yeltsin’s last years and over Putin’s tenure as president, Russia’s and the larger region’s energy resources were not the basis for an energetic, cooperative US-Russia agenda. Instead the confusing tension between competing pipelines and shared development projects simply stoked growing policy lethargy in the Clinton administration’s last years. George W. Bush arrived in office without a Russia policy – indeed, quite purposely so. Clinton and his people, he and his advisors thought, had erred by assuming that they, with skillful engineering, could steer Russia toward democracy and a market economy.10 Although Russia and China were lumped together as among key international actors “important to international peace,” in contrast to China the rising power, the headache Russia posed stemmed from its weakness. Other than a concern with securing Russia’s nuclear material – and even this tended to be more lip-service than action when it came time to fund the Nunn–Lugar initiative – the administration initially chose not to fashion an elaborate Russia-specific agenda. Rather, Russia would figure in US calculations as simply background noise on a number of concrete issues, such as the administration’s plans to advance ballistic missile defense or the decision to complete a second round of NATO enlargement. September 11 changed

10

Rice 2000 is critical of all aspects of the Clinton foreign policy, but particularly of its “happy talk” aspect, including with Russia.


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that and brought Putin’s Russia to the fore, at least for a while, until in the wake of the march to war with Iraq the relationship began to sour. Even during the short interlude from fall 2001 to spring 2003, when the two governments drew closer and talk of “strategic partnership” was in the air, the administration never defined why such a partnership might be important or what its scope should be. In this respect, the Obama administration is different from its predecessors. From the start its spokesmen and the president himself stressed Russia’s importance. Undersecretary of State William Burns began a speech in April 2009 with a point he called “glaringly obvious”: “Russia matters.”11 “Few nations,” he said, “could make more of a difference to our success than Russia.” It “remains the only nuclear power comparable to the US at a time when the proliferation of nuclear weapons is a growing danger.” It is “the world’s largest producer of hydrocarbons, and America the largest consumer.” It “remains the largest country on the face of the earth, sitting astride Europe, Asia and the broader Middle East – three regions whose future will shape American interests for many years to come. And as a permanent member of the UN Security Council, Russia will have an influential voice on the most crucial diplomatic challenges of our times, from Iran to North Korea, to anti-piracy and Afghanistan.” When Obama, in his July 2009 commencement address to the students at Russia’s New Economic School, spoke of wanting Russia to occupy “its rightful place as a great power,” he was not simply flattering his audience; he had in mind the number of areas where Russia’s capacity to act as the United States’ partner was key to United States’ success.12 Some of these are obvious. Russia is the other principal steward of nuclear weapons, and therefore, as in the past, a necessary partner if the United States wishes to create a regime giving stability and shape to their bilateral strategic relationship. Beyond this, however, the world of nuclear possessing states is now indisputably multipolar, without many of the stabilizing features slowly built into the US-Soviet relationship over the course of the Cold War. If, as one would hope, the international community begins to address its dangers, leadership can only come from the United States and Russia. Equally obvious, notwithstanding the tensions in the politics over energy, if any movement toward genuine energy security for key consumers, producers, and transit countries can be generated, again, Russia has a large role to play. And it scarcely needs saying that a sustained and comprehensive effort to contain catastrophic terrorism requires Russian cooperation, whatever the differences in the two countries’ precise categorization of terrorist organizations. Other areas where the United States has a stake in cooperation with Russia are less obvious – or at least were until recently. First, as the Obama administration sets about reasserting US leadership in the effort to impede global climate change,

11 12

Burns 2009. Obama 2009.

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China’s role is doubtlessly paramount, but Russia, as the country that ranks third in the emission of greenhouse gases and whose current level of energy inefficiency could, if addressed, produce the greatest gains among major economies, can hardly be ignored.13 Second, Russia is an important player in competition over the vast hydrocarbon reserves in the Arctic region now in play because global warming is opening the waterways to them. Even if estimates suggesting that the region contains 13% of global undiscovered oil and 30% of global undiscovered conventional natural gas prove unrealistic, or even if the development of shale gas in the United States and Europe drains some of the drama from the quest for these resources, the fact that all five Arctic littoral states are vigorously staking claims to them and backing up these claims with military preparations, makes the issue increasingly salient.14 And, because the primary clash sets Russia against the other four, Russia automatically moves to the center. When the Supreme Allied Commander in Europe, General John Craddock, speaks of the Arctic as “not yet a region of conflict,” but one where “environmental and geopolitical developments” could generate “potential military conflict,” Russia may not be his only source of concern, but it surely is his principal one.15 Third, to the extent that state corruption, criminality, and its primary international manifestation, illicit trade, have become a major menace to global welfare, Russia and its post-Soviet neighbors come close to being the problem’s epicenter.16 If the United States hopes to make a dent in the illegal flow of humans, heroin, endangered species, small arms, counterfeit goods, laundered money, and cybercrime, Russia will have to be a critical part of the solution or else it will be remain a major part of the problem. Then come the large, subtle, often overlooked stakes the United States has in relations with Russia. Because they involve remote, conceptually complex geostrategic goals rather than easier-to-understand, harder-to-avoid practical problems, they do not get the attention they merit – provided, of course, that policy for the policymaker means guarding the future and not merely coping with the present. They come in three forms, each vital to the stability of a world the United States would presumably like to see emerge. First, for all of the unarguably acute frictions between the United States and Russia over the role each mean to play in the post-Soviet space, at a deeper level no two countries have a larger stake in mutual security and stability in and around the Eurasian landmass. For Russia this is its vital neighborhood – the glacis keeping external harms at bay or the tinderbox bringing them closer; the natural extension of Russia’s economic space or a swirling arena of economic rivalries. For the United States it is, as Undersecretary Burns said, the great hinterland of the strategic arenas at the core of US foreign policy: Europe, East Asia, and the turbulent Islamic south. Finding a way to cooperate rather than compete in this vast and critical portion of the

13

Newman 2010 provides an interesting analysis of the potential. Long et al. 2008, iv. 15 de Hoop Scheffer 2009. 16 I have explored the issue in some detail in Rotberg 2009. 14


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globe may be the single most consequential aspect of the US-Russian relationship, not only for the two countries but for the broader international community. Second, the prospect of creating a stable, effective, and inclusive security environment in two of these three settings – Europe and East Asia – depends heavily on a workable convergence of US and Russian visions. In Europe such harmonization is decisive; in Asia, it is secondary to the US-Chinese relationship, but still a critical building block. In Europe, unless Washington and Moscow can find a way to work together to escape the current deadlock over European security architecture, little is likely to happen, and the European core will remain vulnerable to security threats all along its eastern periphery, some of them severe indeed. The third of the geostrategic stakes relates to a primary US interest. Scarcely any strategic challenge looms larger for the United States in the next two decades than managing the rise of new major powers, particularly China. Again, Russia enters the picture in important ways. If Russia and the United States join together in promoting a constructive integration of China into an evolving international order, the chance of US success grows. If Russia chooses to play a China card against the United States or provide China a Russia card against the United States, the chance of success shrinks rapidly. Finally, the United States has a historic stake in the relationship with Russia. For the first time in the post-Westphalian history of international politics, the system is not dominated by great power strategic rivalry. It is not marked predominantly and fatally by one or more great powers defining one or more great powers as the principal threat, arming against it/them, and mobilizing alignments in order to counter it/them. Unless one believes naively and with a poor sense of history that this state of affairs can never return – that globalization, the new international economics, or the “earth-is-flat” dynamics have changed everything for good – preserving this blessing should be of some concern to the United States. If one tries to imagine where it could come undone, Russia figures both directly and indirectly: directly, were strategic rivalry between Russia and the United States in and around the postSoviet space to escalate and assume an enduring character; indirectly, as a wild card in the multiple instances involving China (China vs. the United States, China vs. India, and China vs. Japan).

7.3

Designing US Policy Toward Russia

If the stakes are this substantial, then US policy toward Russia needs to meet a stiffer test than has been set in the past. It needs to be far more comprehensive, far more coherent, and far more attuned to the way issue areas intersect. No easy task is this. Comprehensive means that policy must address all of the key dimensions of the relationship, not merely those that command today’s headlines. It must do justice to the breadth and depth of the stakes that the US has in the relationship. Coherent sets a still higher bar in two respects: first, attention to the issues in the relationship should not be spasmodic, depending on which issue stirs up more dust at any one

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time, or approached with one set of arguments, tradeoffs, and tactics on one day and another on another day. Second, coherence more than before comes by joining resources capable of giving policy a larger effect. Calibrating US policy toward Russia with that of European allies promises to add greater constancy and balance to US goals and actions. Forging links between NATO and the Shanghai Cooperation Organization in fighting the insurgency in Afghanistan and helping to stabilize the larger region offers a way to increase the resonance of US efforts and add staying power. Approaching problems that require tri- rather than bilateral cooperation among China, Russia, and the United States avoids disparate, suboptimal answers when dealing with climate change, regional security, UN reform, illicit trade, aspects of strategic nuclear arms control, and many other spheres. Recognizing the interlocking character of nearly every issue in the relationship, and then devising responses attuned to this complexity is still harder. Ensuring the security of oil and gas supplies out of the Caspian Sea region, for example, depends on managing the “frozen conflicts” and dealing with regional instability in the south and north Caucasus. Increasing cooperation in areas of trade and investment requires progress in mitigating the impact of corruption in Russia and neighboring states, just as dealing with the problem of regional violence in the post-Soviet space requires progress in mitigating illicit trade in and from the region. Enhancing US-Russian cooperation on Iran’s potential nuclear weapons program requires enhancing US-Russian cooperation on ballistic missile defense just as a meeting of the mind on ballistic missile defense will determine the prospects of offensive nuclear arms control.

7.3.1

The Issue of Strategic Design

Ideally US policy on all critical issues and in all crucial relationships would be guided by a thoughtful strategic design, which would then be implemented by a carefully crafted strategy. If, as argued here, the stakes in US relations with Russia are both sufficiently wide-ranging and important to warrant striving for a coherent and comprehensive policy, then strategic design takes on particular significance. One needs to be careful when entering the semiabstract realm of strategic design, strategic concepts, strategic vision, and the like. The danger is that the exercise soon loses the policymaker who sees it as too academic – too abstruse, too removed from the world he or she has to deal with. It would, of course, be nice if the policy world worked with reasonably ambitious conceptual frameworks. Say, something even as simple as where, in realistic terms, would one like the US-Russian relationship to be 5 years from now? And how does one get there?17 To illustrate, maybe the goal would be a relationship in which (1) the two countries were far along in building a regime to manage the next phase in their nuclear relationship (i.e., resolving the relationship between offense

17

I was ingenuous enough to suggest as much in Legvold 2009.


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and defense, establishing limits on the weaponization of space, eliminating tactical nuclear weapons, and constraining conventionally armed ballistic missiles); (2) had begun fashioning workable forms of cooperation in the energy area (i.e., emphasizing commercial over political considerations in the development of pipelines, developing an overarching framework protecting the interests of suppliers, consumers, and transit countries, and moving forward on a series of projects to increase energy efficiency in both countries); (3) were at peace with each country’s respective role in relations with Russia’s neighbors; and (4) were in the process of finding a workaround enhancing the security for all Euroatlantic states, whether in or outside NATO. In fact, however, this is not where the Obama administration began, nor is it a way of thinking whose prospects have improved as the pressures of immediate events and the ardors of harmonizing bureaucratic activity shrink policymakers’ horizons. Instead the Obama administration set about putting the deteriorated US-Russian relationship on a different footing, not by envisaging where it wanted to end up 4–6 years from now, but by establishing a series of ambitious tasks, some of them immediate (such as salvaging a START I follow-on agreement, securing Russian logistical support for the war in Afghanistan, and persuading Moscow to back US policy opposing Iran’s nuclear program); others were broader and more enduring (such as engaging Russian civil society, developing new patterns of cooperation in areas of energy, health, and environment, and addressing the issue of post-Soviet corruption). By the July 2009 Moscow summit, the Administration’s approach assumed organizational expression in the US-Russia Binational Presidential Commission, led by the two countries’ foreign ministers and comprising sixteen wide-ranging working groups – from counterterrorism to the handling of emergency situations, from nuclear nonproliferation to civil society. Senior administration officials dispute the notion that they lack a strategic vision.18 They argue that not only do they have a clear sense of direction for guiding US policy toward Russia, but, better yet, that it forms part of a wider vision of US foreign policy articulated in five key foreign policy speeches delivered by President Obama in his first year in office: the Prague speech laying out his concept of nuclear disarmament, the Cairo speech inviting a new relationship with Islam, the Accra speech addressing economic development, the Oslo speech reflecting on the use of force in international politics, and the Moscow speech promising a new more constructive and respectful but also candid relationship with Russia. Indeed, the five speeches do represent an impressive and logically intact set of basic positions on four critical issues as well as on a key relationship, something none of Obama’s three predecessors had accomplished. In his July 2009 Moscow speech, Obama, after assuring his young Russian audience that the United States “wants a strong, peaceful, and prosperous Russia” and does not assume, as some do, that the two countries are fated to compete rather than cooperate, described a set of US national interests that, in his view, largely overlapped with those of Russia. They were five: guarding against the proliferation

18

Private communication with a senior figure in the Administration July 19 and 20, 2009.

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of nuclear weapons; “isolating and defeating violent extremists”; promoting “global prosperity,” in the first instance by addressing the contemporary economic crisis; encouraging “democratic governments that protect the rights of their people”; and working to ensure “an international system that advances cooperation while respecting the sovereignty of all nations.”19 The list tied directly to the Prague and Cairo speeches and the future Accra speech. In doing so, the president situated US Russia policy in the larger sweep of US foreign policy more directly than any prior administration had managed to do. But it fell short of a strategic vision, in that it failed to articulate a destination, a sense of what might be accomplished, not merely of problems that need to be attacked.

7.3.2

The Role of a Strategic Dialogue

In the absence of an ambitiously conceived strategic vision, it was perhaps predictable that another potentially important facet of a successful effort to reorient the US-Russian relationship would go missing. Given, on the one hand, how badly the relationship had deteriorated over the 6 or 7 years before the Obama administration came into office and, on the other, the large stakes the United States has in the relationship, the practical steps the two sides pursue need a deeper underpinning. Unless the two leaderships find a way to get at the core issues separating them, progress on concrete issues (e.g., START, Iran, NPT, and Afghanistan) may be real, but it will also be slower, less complete, and more easily disrupted by unexpected events. Getting at what separates them can only be done by engaging in a frank, far-reaching strategic dialogue. A strategic dialogue is most needed precisely when it is least easy to effect. It is most needed when a relationship is plagued by divisive issues that cannot be easily resolved or transcended without getting at the deep roots of each side’s position. It, however, is most difficult because the frustrations and suspicions on each side weaken the will to engage in a serious give and take on fundamentals, while strengthening elements within the bureaucracies on each side that stress the recalcitrance of and the threat posed by the other side. To be productive a strategic dialogue must be a relatively closed affair, not an elaborate, broadly vetted enterprise enlisting all relevant bureaucracies. Rather, if successful, the insights generated should inform the way senior policymakers frame specific policy responses, guide those in the bureaucracy tasked with working out details, and provide the analytical context by which policy is justified throughout government, with Congress, and to the broader public. A strategic dialogue, however, is to facilitate and strengthen, not replace, the normal policymaking process, to enhance not substitute for the special role direct presidential meetings play.

19

Obama 2009.


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In the US-Russian relationship four subjects form a natural, albeit difficult, focus for a strategic dialogue. Not only do they cut to the core of the relationship, they constitute four of the early twenty-first century’s most important security challenges. The first is nuclear security. How Russia and the United States conceive and then approach its five interconnected dimensions (the “renaissance” in developing civil nuclear power options, nonproliferation, the goal of global zero, strategic arms control, and managing a multipolar nuclear world) is both key to their relationship and still more critical to the wider international setting. The second challenge is energy security. Unless the two countries manage a frank discussion of the calculations, including the apprehensions, driving their positions on pipeline, investment protocols, and price and supply stability, areas of practical cooperation will be hit or miss. Third, Moscow and Washington need to confront the core source of tension in the relationship – the topic rarely discussed but the one shadowing every other dimension of their interaction – namely, the way each judges the aims and actions of the other in the post-Soviet space. Until the two achieve something approaching a modus vivendi in Central Asia, the Caucasus, and the new “lands in between” (Belarus, Moldova, and Ukraine), nothing else they do or wish to do will be optimal, easy, or secure. In a phrase, this part of a strategic dialogue should be about how to promote mutual security and stable change in and around the Eurasian land mass. Squarely facing the tension over US-Russian interaction in the post-Soviet space ties directly to the fourth subject: European security. Progress in relaxing tensions surrounding US, NATO, and Russian policies in the post-Soviet area depends directly on the success the United States and its NATO allies have in rallying Russia to an altered European security architecture that creates a genuine common security space from the “Atlantic to the Urals” – that is, a set of arrangements that deals with the security challenges facing states left out of a NATO-dominant security order and does so in a fashion seen by Moscow as enhancing its security as well. None of this has a chance, however, without a deep, probing US-Russian exploration of what stands in the way and how these obstacles might be circumvented. Alas, a strategic dialogue of this magnitude neither comes naturally nor is it easily accommodated in the normal policymaking process. Unless conducted by senior officials at the behest of national leaders and with their full authority, given systematic focus, and conducted on a sustained basis, it will falter or fall far short of the aims inspiring it. For this reason, when tried in the past, the effort has either started as or soon become an operational exercise focused on immediate concerns, not a deep, far-reaching dialogue about essentials. There have been three attempts at what former officials regard as a strategic dialogue with a post-Soviet Russia. The first occurred fleetingly in 1992 in the last months of the George H. W. Bush administration, when the two governments created a working group to explore potential common ground on national missile defense.20 Although the specific impulse behind the initiative centered on the concrete risk that US plans to go forward with a limited national missile defense program would upend the momentum generated by the new START

20

Goldgeier and McFaul 2003, 288–290.

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II agreement, the two sides recognized the need to embed the discussion in a broader dialogue over the nature of the threat as each saw it. The group divided into three subgroups – one to explore the possibility of developing a common threat assessment, another to consider areas of potential cooperation in technology, and a third to look at regional threats for which theater missile defense might be appropriate. Although this agenda held the possibility of a genuine strategic dialogue – at least, in one subject area – it never came to fruition, because the administration was soon absorbed in a reelection campaign and the effort died in the process. The second attempt had a much longer life – indeed, it lasted through nearly all of Bill Clinton’s two terms in office. The initiative for what came to be the Strategic Stability Group originated with Georgi Mamedov, the foreign ministry official who had co-led the earlier effort, and who now asked Strobe Talbott, the senior Russia specialist in the new Clinton administration, to put together an interagency group including officials from the Department of Defense and the CIA, because he would use this to do the same on his side. Over the years, the innumerable meetings, particularly one-on-one between Talbott and Mamedov, became a critical channel for testing possibilities and working out preliminary compromises on the many difficult issues that the two presidents would grapple with at their 18 meetings.21 Strategically useful as this was, it was operational rather than a mechanism for exploring in depth core issues in the relationship. Similarly, a commission set up under Vice President Albert Gore and Prime Minister Victor Chernomyrdin to oversee different aspects of the agenda, including problems unresolved in regular negotiating channels, tilted even more in this direction. Indeed, as the US-Russian relationship slid into rougher water in the administration’s last three years, any thought of pursuing an ambitious strategic dialogue had little chance, particularly as national leaderships on both sides hunkered down to deal with difficulties at home. The third attempt came in George W. Bush’s first term and in its format and purpose most closely approximated a real strategic dialogue. In the spring of 2003, in the wake of the initial phases of the Iraq war and the damage the war had done to US-Russian relations, the two governments agreed to a small, high-level group that would (1) attempt to spell out in more detail the notion of the strategic partnership that the two presidents had discussed two years earlier, identify areas of cooperation, and develop a framework for policy making; (2) monitor implementation of agreed policies and identify log-jams that should be raised to the presidential level for resolution; (3) provide a setting in which sensitive issues (e.g., domestic political dynamics, intelligence issues) could be discussed candidly and in confidence; and (4) identify areas of competition and ways to minimize the consequences of that competition for the broader cooperative agenda.22 The dialogue was not intended to replace other channels of communication or to take over negotiations being handled

21

A detailed accounting figures throughout Talbott 2002. This and subsequent detail comes from interviews with senior officials directly involved in the effort in December 2009 and January 2010. 22


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elsewhere in the government. But, as is the essential purpose of a strategic dialogue, it clearly was hoped that it could help create better conditions for the conduct of concrete negotiations. Under the nominal leadership of the US national security adviser and the director of Russia’s Presidential Administration and with a small number of senior officials, the dialogue met formally once a month, alternating between Washington and Moscow. In initial meetings it was agreed that the group would take on the entire range of regional and functional issues in US-Russian relations (including what was perhaps the most sensitive issue, interaction in the former Soviet space). Each side was expressly encouraged to be frank in laying out the essence of the problem in each issue area as their side saw it, indicate where national interests lay, and then tax themselves to imagine steps that might ease matters. Finally, they also agreed to a one-page set of principles to guide the exchange and put in place a presidential “checklist” process, a set of concrete tasks assigned to specific agencies, with report back dates at predetermined intervals, approved by the presidents and renewed at each major meeting between them. Well-conceived as this effort was, it too came up short for three reasons. First, neither side created a follow-up system with enough teeth to ensure that the bureaucracies on both sides were compelled to perform as expected and on time. Second, there was too little recognition of just how fast and broadly negative trends were converging, creating ever larger barriers to an untrammeled exchange of views. And third, most directly, although perhaps a reflection of the general deterioration in the relationship, the Russian side scarcely a year into the process placed leadership in the hands of a third-level foreign ministry official with no direct access to President Putin or other top leaders, undermining the basic utility of the exercise in the eyes of the Bush administration.

7.4

Obama’s Russia Policy

The Obama administration from the start moved quickly to develop an ambitious Russia agenda, culminating in a wide-ranging set of undertakings that the president and his Russian counterpart announced in a joint statement at their first summit in London in April 2009. They ranged from revitalizing strategic arms control efforts to launching a “comprehensive dialogue” on European security; from looking for new approaches to energy security to accelerating progress on a host of concrete issues, such as Russia’s WTO membership, a fissile material cutoff agreement, and ratification of the Comprehensive Nuclear Test Ban Treaty.23 Quite consciously the administration intended to back up its initial effort to set a different tone for the

23

Obama and Medvedev 2009.

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relationship (i.e., Vice-President Biden’s famous metaphor on “reset” at the February Munich Security Conference) with a serious effort to engage a skeptical and jaundiced Russian leadership, and then test the progress that could be made by scheduling an early presidential summit, hoping by then to have agreed on a framework for rescuing the START I treaty, begun reconciling the two countries’ position on Iran’s nuclear program, and planted the seeds of new collaborations in a number of previously neglected areas, such as promoting energy efficiency, highway safety, and civil society contacts. As they went about their task, administration officials were mindful of the lessons from the past, including the need to keep the process focused and the bureaucracies disciplined. Hence, even by the April London meeting they had developed an internal action plan by which to monitor the process and measure the progress being achieved.24 More than this, they recognized that the relationship required both a sense of strategic direction and a structure to propel it forward. Their answer took the form, not of the high-level, far-reaching strategic dialogue over the four core issues advocated in this essay (nuclear security, energy security, mutual security in and around the Eurasian landmass, and European security), but rather the elaborate architecture of the US-Russian Binational Presidential Commission as well an intense web of high-level working contacts between the national security advisors on both sides, the chairs of the US Joint Chief of Staff and the Russian General Staff, and the US Undersecretary of State for Economic and Agriculture Affairs and his Russian counterpart. Two things followed. First, as the two sides set about their ambitious agenda the critical immediate issues, such as negotiating a START I follow-on agreement, supply routes for the Afghan war, and Iranian sanctions, crowded out the larger, more elusive subjects anticipated in the London Joint Statement, such as a “comprehensive dialogue on European security” and a broad discussion of ways to achieve the “stabilization, reconstruction, and development in Afghanistan, including in the regional context.” Second, because moving on each of the immediate issues proved more difficult and time-consuming than anticipated (START was not signed before the December 5 expiration, but only in April 2010; the transit route for lethal supplies to Afghanistan was not up and running in September but only in January 2010; and nursing the two sides toward a common position on Iranian sanctions occupied time and patience well into the spring of 2010), by the end of the administration’s first year in office, it found itself defending its Russia policy not only from critics who found the policy naïve from the start, but also from sympathetic observers who began questioning how much the “reset” had achieved and even how much it could be expected to achieve. In April 2010, a year and week from Obama’s first meeting with Medvedev in London, the two arrived in Prague to sign a new START accord. It was their eighth

24

The “action plan” was never publicized, but is mentioned in the briefing that followed the London meeting. The White House 2009.


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face-to-face encounter, on top of fifteen direct telephone conferences – more meetings than Obama had with any other world leader. More important, for publics in both countries for whom US-Russian relations had dropped from sight, the fanfare surrounding the signing gave both leaders a chance to celebrate a conspicuous foreign policy success. Perhaps still more significant, with the arduous START negotiations behind them, the administration regained some of the momentum that had been siphoned into the labored last stages of these negotiations and again began thinking of ways to give its Russia policy a new wind. For the next phase, thoughts appeared to favor finding concrete issues where progress would give a major positive impulse to recasting US-Russian relations and then to encase the effort in a broader field of cooperation. Missile defense began to emerge as the principal plausible “game-changing” issue. Not only had the two sides regularly, albeit vaguely, spoken of the need to reconcile their positions on missile defense, but the issue stood in the way of any attempt at more ambitious forms of strategic arms control, including any further substantial reduction in warheads. What is more, important additional voices had come to see the European dimension of missile defense as both needed to deal with a potential Iranian threat and, if done in cooperation with Russia, as a means of transforming the Euroatlantic region into a genuine security community.25 Essentially, the administration’s choice was between trying to finesse the issue with a modest outstretched hand to the Russians – virtually guaranteeing that as the US program moved forward the drag on US-Russian relations would grow – and investing serious effort in the search for a genuinely integrated system, with all the technical, practical, and political difficulties this would entail. Thinking about what concrete issue might best serve to propel the relationship forward, however, was only one piece in their reinvigorated calculations. In accord with both their own instincts and the increasing insistence of their Russian interlocutors, they also now put the accent on deepening the economic dimension of the relationship. The two countries, of course, were starting from very low levels of trade (less than one percent of US trade and scarcely four percent of Russian), but for administration officials this was itself a reason to do much more. Not only were these totals incommensurate with the potential for two-way trade and investment between the two countries, but their niggardly level deprived the relationship of the ballast heartier economic links could provide. From the start, the administration had viewed enhanced business ties as an important element in producing a longer-term transformation of the relationship. Hence, the decision to hold a parallel summit between business representatives during Obama’s July 2009 summit with Medvedev; the prominence given to the Business Development Working Group under the Binational Presidential Commission; the important role assumed by Undersecretary

25

Rasmussen 2010.

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Robert Hormats and First Deputy Foreign Minister Andrei Denisov in the bilateral relationship, each country’s senior foreign ministry official for economics; and, in particular, the stress placed on the steady exchange of industrial, particularly high tech, delegations. After the April Prague START breakthrough, they made achieving progress in this area a still higher priority. The Medvedev-Obama Washington summit on June 24, 2010 both allowed the two sides to highlight the progress in US-Russian relations and to announce new steps forward. Indeed, the progress reported was impressive. In the year since the 2009 Moscow summit, Moscow and Washington had achieved a follow-on START agreement, extended their cooperation on Afghanistan, including a more ambitious joint counter narcotics effort, created greater common ground on the Iranian and North Korean nuclear threats, enlarged the range of counterterrorism initiatives, and considerably increased military-to-military contacts. They had also developed a strikingly large array of concrete projects across a wide range of areas – from enhanced energy efficiency in the two countries to joint biomedical research; from collaborative responses to emergency situations to multiple measures for protecting the environment; from progress toward a joint data exchange mechanism on ballistic missile launches to a rich mix of society-to-society contacts in education, health, science, sports, community action, and the arts. Under the Presidential Commission’s sixteen working groups, from July 2009 to June 2010, more than 100 meetings had taken place, involving more than 60 US government agencies and many US and Russian NGOs.26 The focus of the Washington summit and of Medvedev’s simultaneous visit to Silicon Valley, however, was on strengthening economic cooperation and had as its centerpiece a new “strategic partnership on innovation.” The latter envisaged a major effort by both governments and the private sectors of the two countries to launch a series of initiatives promoting the development of “innovative ideas” across a broad spectrum of areas from advanced transportation technologies to alternative energy sources to nanotechnology, while also sharing experience in disseminating and commercializing their application. As a preliminary step to this and all other aspects of an enhanced US-Russian economic relationship, the two presidents set September 30, 2010 as a hard and fast deadline for completing the steps necessary to finalize Russia’s long-delayed accession to the World Trade Organization. All of this fits a larger concept that the president and his senior Russia advisors have embraced as an overarching guideline for policy: the US-Russian relationship should be both understood and approached as multidimensional and multilevel. The multidimensional emphasis reflects the administration’s recognition of the broad stakes the United States has in the relationship. The multilevel aspect rests on the notion that the engagement between the two countries should not simply be

26

The White House 2010.


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between the two governments but on multiple planes, involving the business communities of both as well as civil society more broadly. As Undersecretary William Burns underscored in an April 2010 speech assessing the results of the first year of the administration’s Russia policy, “We need a relationship that is about more than New START and nuclear security, important as those issues are. We need a relationship that connects us more actively and intimately on the other great challenges before us in the twenty-first century, from economic modernization to climate change and energy security. And we need a relationship that connects our societies, and especially our young people, in ways that can help shape a more hopeful future for both of us.”27

7.5

Conclusion

One year and a half into the new administration, the president and his team had every right to stress, as they often now did, how much the tone of US-Russian relations had changed over the intervening months. They also could claim significant progress on the issues of priority to them (rescuing START, securing greater Russian cooperation in prosecuting the Afghan war, bringing closer the two countries’ position on Iran, and solidifying their joint leadership of the effort to strengthen the nuclear nonproliferation regime). Perhaps this pragmatic, step-by-step effort to develop and then broaden areas of cooperation would gradually produce the transformation of the relationship the administration hoped for. The initial results seemed promising. Yet, there lurked the danger that, until the underlying sources of discord – from the divide over European security to the gulf in attitudes on democratic development, from the not so subtle competition in marketing oil and gas to tension over the two countries’ policies in the post-Soviet space – were confronted and eased, whatever progress was achieved on concrete items would remain constrained by the hard, elemental questions left unanswered. Worse, it would also remain fragile, the likely victim of the untoward event as well as the deformations of politics in each country. Indeed, six months later Congressional elections delivered, as Obama acknowledged, an electoral “shellacking” to him and his party, and, in the process sent ripples of doubt through supporters of Obama’s Russia policy in both countries. A nervous Russian side, particularly its president who by now had made the improvement of US-Russian relations a signature issue, watched as the Administration struggled to secure Senate ratification of the START agreement. When, after an immense lobbying effort, it succeeded in the waning moments of the “lame duck” session, the relief in

27

Burns 2010; The White House 2010a.

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Moscow was palpable. And then, when in short order three weeks later, the 1-2-3 agreement on cooperation on civil nuclear energy, unblocked in the Congress, went into effect, some of the uncertainty surrounding the prospects for US-Russian relations resurgent in the last part of 2010 momentarily eased. But it did not disappear entirely. The shadow cast by the clear opposition that Obama would face should he pursue further strategic arms control agreements or ratification of the CTBT not only dampened expectations for ambitious next steps in policy toward Russia, but evoked the prospect that after the 2012 presidential election he would not be around to preserve what he had started these first two years. The shaky underpinning for a redrawn US-Russia relationship underscored by the imponderables in the politics of both countries brought one back to the fundamental strategic question. Conceivably the administration’s approach is simply preliminary, even if only half consciously so, to a deeper exploration of what divides the two countries. Or even if not, conceivably the cumulative effect of progress on a widening agenda will gradually come to insulate the relationship from the buffeting of unanticipated tensions and the unwanted pressures of domestic politics. It is even conceivable that what divides the two countries may be altered by changes in the context – were, say, Russian politics to take a democratic turn or the question of further NATO expansion to be permanently removed or a set of agreements creating security and predictability of oil and gas arrangements to be achieved. On the other hand, if none of these three possibilities is in the cards, then the complex challenge posed by Russia will continue to haunt US policy, and real change in the relationship will await an effort to get at more fundamental impulses.

References Bugajski, Janusz. 2009. Dismantling the West: Russia’s Atlantic Agenda. Dulles, Virg.: Potomac Books. Burns, William. 2009. Remarks at the Russia World Forum, 27 April 2009. Available from . Accessed 6 October 2011. Burns, William. 2010. U.S.-Russia Relations in a New Era: One Year After the “Reset.” Speech at the Center for American Progress, 14 April 2010. Cohen, Ariel and Richard E. Ericson. 2009. Russia’s Economic Crisis and U.S.-Russia Relations: Troubled Times Ahead. Washington, DC: Heritage Foundation. Cohen, Stephen. 2009. Soviet Fates and Lost Alternatives: From Stalinism to the New Cold War. New York, N.Y.: Columbia University Press. de Hoop Scheffer, Jaap. 2009. Security Prospects in the High North. Speech on 29 January 2009, Reykjavik, Iceland. Dmitriev, Mikhail. 2008. Russian Economic Goals 2020: Dreams or Reality? Available from . Accessed 15 March 2010. Goldgeier, James M. and Michael McFaul. 2003. Power and Purpose: U.S. Policy toward Russia after the Cold War. Washington, DC: The Brookings Institution. Graham, Thomas. 2009. Resurgent Russia and U.S. Purposes. Available from . Accessed 12 April 2010.


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Kemp, Jack and John Edwards. 2006. Russia’s Wrong Direction: What the United States Can and Should Do. New York, N.Y.: Council on Foreign Relations. Legvold, Robert. 2009. The Russia File: How to Move toward a Strategic Partnership. Foreign Affairs 88 (4):78–93. Long, Philip, et. al. 2008. Preliminary Geospatial Analysis of Arctic Ocean Hydrocarbon Resources. PNNL-17922, Prepared for the U.S. Department of Energy Under Contract DE-AC0576RL01830. Lucas, Edward. 2008. The New Cold War: Putin’s Russia and the Threat to the West. New York, N.Y.: Palgrave-Macmillan. McKinnon, Mark. 2007. The New Cold War: Revolutions, Rigged Elections, and Pipeline Politics in the Former Soviet Union. New York, N.Y.: Carroll & Graf. Newman, Adam. 2010. Energy Efficiency: Russia’s Hidden Reserve. Available from . Accessed 26 March 2010. Obama, Barack. 2009. Remarks of the President at the New Economic School Graduation, 7 July 2009. Available from . Accessed 6 October 2011. Obama, Barack and Dmitriy Medvedev. 2009. Joint Statement by President Dimitriy Medvedev of the Russian Federation and President Barack Obama of the United States of America, 1 April 2009. Available from . Accessed 6 October 2011. PriceWaterhouseCoopers Media Center (UK). 2010. Shift in World Economic Power Means a Decade of Seismic Change. Available from . Accessed 6 October 2011. Rasmussen, Anders Fogh. 2010. Building a Euro-Atlantic Security Architecture. Speech to the Brussels Forum, 27 March 2010. Available from . Accessed 6 October 2011. Rice, Condoleezza. 2000. “Promoting the National Interest.” Foreign Affairs 79 (1):45–62. Ros-Lehtinen, Ileana. 2009. U.S. House of Representatives, Committee on Foreign Affairs. Opening Statement. From Competition to Collaboration: Strengthening the U.S.-Russian Relationship. Hearing before the Committee on Foreign Affairs. 11th Cong., 1st sess., 25 February. Rotberg, Robert. 2009. Corruption, the Criminalized State, and the Post-Soviet Transition. In Corruption, Global Security, and World Order, edited by Robert I. Rotberg, 194–238. Washington, DC: The Brookings Institution. Talbott, Strobe. 2002. The Russia Hand: A Memoir of Presidential Diplomacy. New York, N.Y.: Random House. The White House. 2009. Background Readout by Senior Administration Officials on President Obama’s Meeting with Russian President Medvedev, 1 April 2009. Available from . Accessed 6 October 2011. The White House Office of the Press Secretary. 2010. Joint Statement by the Coordinators of the U.S.-Russian Presidential Commission. Available from . Accessed 6 October 2011. The White House Office of the Press Secretary. 2010a. Conference Call Briefing with Administration Officials on President Medvedev’s Visit to the White House, 22 June 2010. Available from . Accessed 6 October 2011.

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Chapter 8

Russian Foreign Policy: Challenging the Western Liberal International Order? Kristi Govella and Vinod K. Aggarwal

8.1

Introduction

As Russia reasserts itself in an international system still governed by a “Western” conception of order drawn from liberal models of capitalism and democracy, how are the European Union and the United States responding to this re-emerging power? This is the question that we attempt to tackle in the conclusion to this volume; its answer has important implications for the viability of the current international economic and political order.1 The fall of the Soviet Union, followed by the political and economic liberalization of Russia, prompted many observers to believe that Russia would gradually incorporate itself into Western economic and political systems. Unfortunately, the promise of a diplomatic realignment between Russia and the West now seems far more uncertain. The West’s current relationship with Russia is marked by a sense of disappointment. Despite some promising initial steps, efforts to engage Russia through multilateral efforts have fallen flat. On a bilateral level, relations between Russia and the EU and between Russia and the US have deteriorated during the last decade, with all three actors bearing some measure of responsibility for the current state of affairs. Moreover, the EU and the US have not always been aligned in their approach to Russia, and even EU members have often been at odds with each other. Much of the problem stems from divergent interests, as well as the differing levels of importance that these actors ascribe to their relationships with one another. Although Russia has become less of a priority for the West – in light of the rise of China, India, and problems in Iraq and Afghanistan – the US and the EU still loom largest for Russian

1

More generally, how the US responds to rising powers such as India, China, and Brazil poses a central challenge for analysts and policymakers. K. Govella (*) • V.K. Aggarwal University of California, Berkeley, CA, USA e-mail: [email protected] V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4_8, © Springer Science+Business Media, LLC 2012

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foreign policy; this disjuncture grates on the Russia’s desire to reclaim its great power status in the world. Yet, it is obvious that Russia will continue to be a crucial partner for both the EU and US, if important economic and security goals are to be accomplished. We proceed by discussing the tensions between Russia and the current system of international institutions before turning to an examination of Russian relations with the European Union and with the United States, respectively. We then turn to Russian options for international partnerships, including a discussion of its relations with other emerging market economies. In concluding, we identify major themes in Russian relations with the Western-led international order, focusing on the degree to which the EU and the US have pursued a coherent transatlantic policy toward Russia.

8.2

Russia and International Institutions

Russian foreign policy since the end of the Cold War has been motivated by a consistent desire to restore its great power status, and to be recognized as a major center of power by leading global actors.2 This aspiration plays out in its approach to international and regional institutions, as well as in its bilateral relations. After the fall of the Soviet Union, Russia was not invited to join the leading Western institutions, having no real prospect of membership in either NATO or the European Union. Given this reality, Russia’s approach has been to promote and protect its position in those institutions where it can be seen to play a leading role, such as the UN Security Council. By contrast, Russia has often been ambivalent about its accession to the WTO, which would require it to deepen its integration with the global economy. Finally, when faced with the growth of potentially anti-Russian institutions, Russia has engaged in reactive and competitive multilateralism, as seen in its promotion of the Collective Security Treaty Organization (CSTO) and Shanghai Cooperation Organization (SCO). The US decision in 1994 to enlarge NATO to include former members of the Warsaw Pact was a critical factor in the evolution of Russian foreign policy, helping to steer Russia’s turn away from the West in the mid-1990s. As Dmitri Trenin puts it, Moscow “was only willing to consider joining the West if it was given something like co-chairmainship of the Western club – or at the very least membership in its Politburo.”3 With such an offer not forthcoming, hopes of Russian integration into Western institutions were problematic from the beginning. Though Russia was incorporated into groupings such as the G7, the NATO-Russia Council, and the Council of Europe, for example, none of these arrangements emerged as transformative or even as particularly effective means of socializing Russia into the a system still clearly dominated by the US and Europe.

2 3

Larson and Shevchenko (2010); Oliker et al. (2009). Trenin (2006).

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This is not to say that Russia has not embraced some international institutions. It has particularly favored those institutions wherein it and a small group of other leading states define international politics, acknowledging or ignoring smaller states as they might – a phenomenon Elana Rowe and Stina Torjesen term “great power multilateralism.”4 This can be seen, for example, in Russia’s commitment to the UN Security Council, despite the fact that the UNSC does not advance Russian arms sales or expand its regional influence.5 Russia has generally sought to maintain the Security Council as the most respected and central international multilateral body, although it has sometimes done this by trying to keep issues that might reveal the UNSC to be weak or inconsequential completely off the agenda.6 The G8 holds a similar appeal for Russia as a “concert of great powers.”7 With respect to other types of institutions, Russia has been more ambivalent. For example, Russia’s desire to join the WTO has often been unclear over the 17 years that it has spent negotiating its entry into this grouping. Russia’s accession to the WTO would constitute a major step in the integration of that state into the global economy. The World Bank estimates that WTO membership could give the Russian economy a 3% boost in the short term; it also could help the diversification and modernization of Russia’s economy.8 Yet while Putin seemed enthusiastic about the prospect of WTO accession during his first term as president, his attitude toward the grouping cooled noticeably during his second term. As power began to shift away from liberal reformers within Russia, concerns about the ways that accession might disadvantage Russian industry came to the forefront. Russia’s WTO prospects were further called into question by the Georgian Crisis in August 2008; in 2009, Russia complicated its negotiation process by proclaiming that it, Belarus, and Kazakhstan would join the WTO together as a single negotiating bloc and customs union, though it later backed down from this demand. As of early December 2010, Russia and the US had reached agreements in principle on intellectual property rights, government procurement, and transparency in trade-related decision-making processes, all of which should pave the way for Russia’s WTO accession. The process of bilateral negotiations between Russia and WTO members is now largely complete. Still, various countries continue to raise objections to its membership bid, with several criticizing Russia’s recent moves toward protectionism in forms such as government agricultural subsidies. Georgia, in particular, has threatened to veto Russia’s WTO membership. There is also a lack of consensus among the Russian business elite on membership, and the global economic crisis has generally dampened Russia’s enthusiasm for becoming a WTO member.9

4

Rowe and Torjesen (2009). Ikenberry and Wright (2008); Rowe and Torjesen (2009). 6 Pikayev (2009); Zagorski (2009). 7 Baev (2009). 8 Ikenberry and Wright (2008). 9 Economist Intelligence Unit (2010). 5

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An interesting aspect of Russia’s approach has been the reactive and competitive nature of its multilateralism.10 NATO expansion in particular has presented a continual thorn in Russia’s side; when combined with the missile attacks of 1998 and the war over Kosovo, Russia saw plenty of reasons for concern about activities in what it sees as its “sphere of influence.” NATO expansion served as a catalyst for the development of the CSTO, an alliance between Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Russia. Russia has consistently attempted to elevate the prestige of the CSTO, in which it is unquestionably the lead country. After the US deployed troops to Central Asia and the “color revolutions,” Russia stepped up its efforts to strengthen both the CSTO and the SCO, which brings together China, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Russia. The SCO has enabled its member states to craft collaborative policies for issues on which they agree, such as political stability, terrorism, and extremism. It has also allowed them to express joint concern about US involvement in the region. At the June 2009 SCO summit, for example, Dmitri Medvedev, President of Russia, claimed that the SCO was an opportunity to “build an increasingly multipolar world” and to undermine “an artificially unipolar system.”11 In this way, Russia’s approach to multilateralism can be seen as a reaction to policies and events pushed forward by the US and EU, and indeed, of the broader failure of the West to engage Russia in genuine multilateral institutions. This suggests that any changes in the NATO/EU configurations of Western multilateralism will probably prompt adjustments in Russian multilateral activities. Russia appears to embrace a more flexible, regional, and pragmatic (i.e., non-normative) form of multilateralism of the type seen in the SCO. It also prefers to underpin this type of flexible regional multilateralism with bilateral arrangements. In the next two sections, we turn to the analysis of its bilateral relations with the European Union and the United States, respectively.

8.3

Russia and Europe

As touched upon in the introduction, the EU-Russia relationship is undergirded by debates about Russia’s identity and its perceived relationship to Europe. For its part, Russia has been engaged in what Thomas Gomart calls “a battle of memories,” as it has struggled to redefine its identity in light of communism, the Cold War, the disastrous transition years of the 1990s, and its resurgence in the 2000s.12 With respect to Europe, Mikhail Rykhtik points out in his chapter that Russia has a tradition of admiring Europe and prioritizing the region in its foreign policy; however, this

10

Gomart (2008); Larin (2007); Rowe and Torjesen (2009); Rykhtik (2011); Tsygankov (2009). Hudson (2009). 12 Gomart (2008). 11


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inclination has not been equally reciprocated by Europe, and Russian discontent over this disjuncture provides the subtext for all of their formal interactions. At the elite level, little consensus exists about whether Russia should pursue greater integration with Europe. EU-Russia relations have tended to be dominated by two broad issues: the integration of Eastern European nations into Western European institutions and the politics of energy resources. The first topic has been discussed above and throughout the chapters in this volume. From the Russian perspective, Western Europe has courted Eastern European countries, encouraging them to adopt democratic reforms and welcoming them into organizations such as NATO. For the EU, these moves have been part of a mission to ensure its security, by cultivating closer relationships with its neighbors to the east and to the south. Even if the EU’s intentions have been benign, however, this expansion of influence has been interpreted as threatening and alarming by Russia.13 In Chapter 2 of this volume, Rykhtik discusses how Russian security concerns stem from its geographical location and border issues. The European neighborhood policy, for example, has been seen as interfering with Russia’s regional relations and its sovereign interests.14 The encroachment of the EU into Russia’s periphery, and potentially into its domestic affairs, has ideological, economic, and security elements. Time has shown that the normative convergence of the EU and Russia seems unlikely: Russia reacts poorly to what it perceives as the EU trying to dictate norms and values to it. Moreover, the use of EU norms in regional and international organizations can be seen as a way to discriminate against non-European countries and keep them marginalized. Economically, EU demands for liberalization have the potential of disadvantaging Russian companies. In terms of security, the common agenda of the EU and Russia has been significantly weakened, damaged by things such as the conflict in Kosovo, Russia’s withdrawal from peacekeeping operations, and the Treaty on Conventional Armed Forces in Europe.15 Second, conflicting perspectives regarding energy supplies have strained relations. Europe’s need for fuel and Russia’s need for a stable export market would seem to make them natural trading partners for one another. 60% of Russian crude oil and 90% of Russian gas go to the European Union.16 However, this dependence has always generated concerns within Europe and in the US. Particularly in the 2000s, energy issues were politicized and securitized, used as pawns in political negotiations and viewed as critical components of national well-being. Russia’s willingness to use its energy supplies as a political tool has further raised concerns about its reliability. Recently, Europe has sought to reduce its reliance on Russian energy sources, partially spurred by the interruption of natural gas during the RussianUkrainian conflict in early 2006. For its part, Russia has resisted being integrated into relevant European legal frameworks, refusing to ratify the Energy Charter

13

Averre (2005) discusses this disjuncture. Haukkala (2008). 15 See Chapter 6 of this volume by Pavel Baev. 16 Paillard (2010). 14

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Treaty.17 Given the stakes that these two parties have in future energy supplies, this issue is sure to be a continual challenge. Moreover, beyond the challenges that Russia faces with the EU, it must also cope with undertaking much needed reforms in its energy sector to ensure that it can continue to be a leading supplier. A feature that has permeated both of the issues above, and indeed, most aspects of Russian relations with the EU, is the former’s preference for bilateralism. As Rykhtik and Baev point out in this volume, Russia often chooses to eschew dealing with the EU in favor of bilateral contacts with Germany, France, and Italy. Russia sees these bilateral relationships as the main channel through which to promote its interests, viewing these countries as the “deciders” in the complicated consensus building process in Brussels. Thus, while EU attention is consumed by the complicated task of formulating a unified position, Russia is able to take advantage of the divergent views of its member states.18 These internal divisions became even more chaotic with the addition of eight Eastern European states to the EU in 2004 and Bulgaria and Romania in 2007, making it extremely difficult for the EU to make important policy decisions and exacerbating problems in EU-Russia relations. The newcomers have taken many opportunities to criticize Russia for its human rights transgressions, for example, and have blocked various initiatives from going forward. As the biggest and most antiRussian of the new member states, Poland in particular has been a hindrance to EU-Russia cooperation, especially after the victory of its far-right Law and Justice Party in 2005. There is also an organizational level to this complexity, with the EU bureaucracy being poorly matched on the Russian side, adding another element to what Baev aptly calls the “dialogue of the disoriented.”19 The global economic crisis has taken an uncertain toll on EU-Russian relations. As with other countries around the world, both parties have been forced to deal with domestic challenges. Baev argues that the crisis has exposed the weakness and nonsustainability of Russian economic growth and EU enlargement and exacerbated the asymmetry in their bilateral relationship. Despite the EU’s reliance on Russian energy supplies, Russia is in fact far more dependent on its broader ties with Europe. And as the EU is forced to focus on its internal problems, its partnerships in the Mediterranean and the East, and the rise of China, it will have less attention to devote to Russia. By contrast, Christopher Granville presents a more positive view in his chapter, arguing that Russian economic integration with the EU has made the relationship more important. Although energy plays a central role in the EU-Russian economic relationship, their commercial ties go beyond that; Russia is now the EU’s third largest trade partner and the third largest importer of EU products. It is possible that these and other cross-border economic opportunities increase the stakes for both parties and serve to temper the impact of negative political events.

17

Finon and Locatelli (2008). Averre (2005); Forsberg and Seppo (2009); Haukkala (2009); Kulhanek (2010); Leonard and Popescu (2007). 19 See Chapter 6 of this volume. For a discussion of structural incompatibilities in the EU-Russia relationship, see Light (2009). 18


8.4

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Russia and the United States

Russia’s relationship with the US has been similarly disappointing, despite a few periods of apparent promise. As discussed in the introduction and in several chapters in this volume, hopes for improved US-Russian relations were high in the immediate aftermath of the Cold War. But the difficult period of economic and political reform in the 1990s pulled both Russian elites and citizens away from the US, prompting them to try to regain a sense of national identity under Putin’s strong leadership. The terrorist attacks of September 11, 2001 seemed to bring an improvement in US-Russian relations, with Putin aligning with the US. Though the two countries were motivated by fundamentally concerns with regard to terrorism – with Russia focused domestically on Chechnya and the US far more concerned about global terrorist organizations – they managed to take steps toward forming a partnership. Yet this arrangement proved to be short-lived, as described in detail in Chapter 3 by Andrei Tsygankov. As the US began to take more unilateral action in response to terrorism and particularly after the advent of the war in Iraq, Russia became more critical of American policies.20 By the end of Putin’s second term in 2008, it was interesting to note the dominance of Cold War-era factors in the US-Russian relationship. As Thomas Graham notes, “The focus was on the balance of forces in Europe: NATO expansion, US bases in Bulgaria and Romania, planned US missile defense systems in Eastern Europe; the Conventional Forces in Europe Treaty; the Balkans (particularly Kosovo); and European energy dependence on Russia.”21 Rising energy prices in the 2000s and Russia’s economic recovery increased its ability and desire to push back against US dominance, emboldened by its new wealth. Moreover, Russia’s disappointment with US behavior in the post-Cold War period contributed greatly to the deterioration in relations. As Robert Legvold points out in Chapter 7, American policy has lacked a strong sense of why a solid, constructive relationship with Russia is crucial to the US; consequently, American policy has tended to fluctuate with the latest events instead of moving consistently toward a predefined goal. Many Russians look at NATO expansion, US withdrawal from the ABM treaty, plans for missile defense systems in Eastern Europe, and efforts to promote pipelines to bypass Russia as a strong signal that the US has failed to uphold its post-Cold War settlement with post-Soviet Russia.22 As discussed by Andrei Tsygankov in Chapter 3, despite Russian expectations of being treated as an equal partner, the US took these and other actions that ignored Moscow’s status concerns, believing that Russia had little choice but to accommodate to American policies. In addition to these American actions, the US invaded Iraq without UNSC or Russian approval, supported the color revolutions, and has continually criticized Russia’s domestic policies.23 From 20

Lieven (2002). Graham (2008). 22 Deudney and Ikenberry (2009). 23 See also Brovkin (2003); Hanson (2004); Lo (2008); Spechler (2010). 21

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an American perspective, however, the issue of Russia’s democratic deficit has also helped to justify its actions toward Russia. As in its relationship with Europe, Russia exhibits a persistent desire to be treated as an equal by the United States. The US-Russian relationship also had an additional dimension because of the status of the US as the world’s sole superpower. Russia finds that cooperating with the US in some areas helps to build Russia’s prestige; when Moscow and Washington cooperate as equals, it signals Russia’s importance to the rest of the world. But criticizing and countering US policy can also bolster its reputation on the international stage.24 For example, Russia’s cooperation with the other “BRICS” countries and entities such as the SCO often serve as platforms for this dissent. With the election of President Barack Obama in 2008, both sides seemed to embrace a “reset” of US-Russian relations. They chose to focus on nuclear nonproliferation as their first act of bilateral cooperation. The US established a set of ambitious tasks, including negotiating a new START agreement, securing Russia’s logistical support for the war in Afghanistan, enhancing cooperation in energy, health, and the environment, and pursuing joint opposition to the Iranian nuclear program. The two sides made progress on many of these issues. By the time of the Medvedev-Obama summit in June 2010, the two countries had achieved a followon START agreement, extended cooperation on Afghanistan, created common ground on Iran and North Korea, taken on more counter-terrorism initiatives and military-to-military contacts, and launched joint projects in a wide range of areas. President Obama’s September 2009 decision to abandon plans for missile defense systems in Eastern Europe also helped to pave the way for these steps.25 These developments suggest a marked improvement in US-Russian relations; however, it remains to be seen whether this and future US administrations will be able to maintain a consistent vision of potential cooperation with Russia.

8.5

Alternatives to the West: BRICS, China, and Beyond

The preceding discussion of Russia’s disappointing relations with both the EU and the US begs the question: Is Russia seriously trying to promote an alternative to the Western order? If the international scene is indeed increasingly “post-Western,” as Tsygankov argues in his contribution to this volume, what form might the new order take? One likely vehicle for such an effort would seem to be the “BRIC” grouping of Brazil, Russia, India, and China. In 2001, Goldman Sachs coined this acronym to describe these major emerging markets, and the term has now become synonymous with discussions of the migration of power away from the developed G7 economies and toward the developing world. The foreign ministers of the four countries began meeting in 2006, established regular meetings in 2008, and held their first official summit in 2009. They also played a role in the G20’s decision to reform the 24 25

Oliker et al. (2009). Economist Intelligence Unit (2010).


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International Monetary Fund, which had long been criticized for giving the traditional Western powers too much clout. In October 2009, the G20 agreed to a landmark reform of the International Monetary Fund that would transfer 6% of IMF voting shares from industrial economies to developing countries. The change made China the third most influential voice in the organization, behind the US and Japan, and vaulted Russia, India, and Brazil into the top ten. All of the BRICS countries now have seats on the organization’s governing board, which has been expanded from five to ten members. Russia has played a key role in developing BRICS into a coalition of states that present a critique of the current Western-dominated order, using the grouping as a kind of “power multiplier” to increase its own influence and international profile.26 In December 2010, South Africa was formally admitted to the grouping, which is now known as “BRICS.” Although the BRICS have not formally attempted to counterbalance or overthrown the latter, they have complemented the diplomatic initiatives discussed above with more subtle withholding or moderation of their cooperation, as in providing assistance to American counter-insurgency and anti-drug-trafficking efforts, for example.27 In pursuing a BRICS strategy, however, Russia faces some major drawbacks. First, the BRICS are an incredibly diverse grouping, both economically and politically. It still remains for these countries to articulate a vision or a set of norms that would replace the existing order – beyond the mere advocacy of a multipolar world over a unipolar one. At the moment, the main point of agreement between Russia and China seems to be an embrace of traditional notions of sovereignty and noninterference in the domestic matters of states. Although it is true that many countries around the world find this approach appealing for various reasons, it remains to be seen what kind of international system can be built on top of this principle. A second issue stems from Russia’s relationship with China, an undeniably important actor within BRICS and in any viable alternative to the current status quo. If BRICS were to arise as an influential grouping, Russia would have to deal with China as a rival or run the risk of ending up in a subordinate position in a China-run international system.28 Although Sino-Russian relations have grown much closer over the past two decades, much of this improvement can be attributed to Russia’s troubled relations with the West, rather than to any specific desire to cultivate an alliance with China. China also conditions its relationship with Russia in the context of its dealings with the West.29 Still, it is undeniable that Russia and China have increasingly worked as partners. Bilaterally, this has taken the form of not only diplomatic efforts but also joint military exercises and Russian sales of military equipment (primarily aircraft and naval vessels), arms, technology, energy, and raw materials to China.30 In addition to BRICS, they have also partnered within forums such as the UN Security Council and the SCO. Because China represents the most likely candidate for balancing against the West, either via stronger Sino-Russian 26

Roberts (2010b). Roberts (2010a). 28 Hancock (2007); Roberts (2010b). 29 Kuchins (2007). 30 Ferdinand (2007); Pirchner (2008). 27

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bilateral ties or through groupings such as BRICS or the SCO, Russia will eventually have to grapple with the issue of whether it genuinely wants to promote an anti- or post-Western order if it means having China at the helm.

8.6

Prospects

Bilateral interactions with the US and key European countries continue to play a key role in contemporary Russian foreign policy; however, they are not the only elements. Russian foreign policy is multifaceted and sometimes multilateral, with the country exploring possible avenues of cooperation with non-Western countries such as China and pursuing alternatives through groupings such as BRICS and the SCO. As seen throughout this volume, a consistent theme in Russia’s post-Cold War foreign policy has been a persistent desire to restore its great power status. Indeed, much of Russia’s pursuit of alternate partnerships and forums has been a result of its disappointment with the West and the feeling that it has not been accorded due respect as a result of US unilateralism and European neglect. Given Russia’s goals, it seems that any significant improvement or progress in relations between Russia and the West will have to involve both the EU and the US recognizing Russia as an equal and giving it the recognition it desires. For the US, it would mean setting aside unilateral policymaking and embracing a more consultative approach that incorporates Russia and other rising powers. Not only Russia but also countries such as China will be more likely to contribute to global governance when they believe that doing so will enhance their prestige. However, this may be difficult, especially in light of the recent financial crisis, which has prompted most countries to concentrate more on their domestic issues. As Baev points out in this volume, the global crisis has the potential to exacerbate the asymmetry in EU-Russian relations, and the same could be said for the US, which is increasingly mired in domestic political issues. Although Russia continues to expect attention from the West, it may find its American and European interlocutors even more distracted than usual. So, how can Russia and the West move forward? In many ways, this will require both sides to take a more holistic look at their relationships with one another and to work on better internal policy consistency and external coordination with one another. Russia and the West still have many interests that converge and many goals that require collaboration with one another. As for the areas where they disagree, Robert Legvold draws a useful distinction between divergent and conflicting interests in his chapter, arguing that while the US and Russia are undoubtedly at odds with one another in some policy areas, they often simply have different (but not necessarily mutually exclusive) interests. Conceptualized from this angle, one way forward would be for the West to reach out and engage Russia, pushing ahead in areas where they have common interests and trying to make sure that “disparate interests do not deteriorate into colliding interests.”31 31

See pg. 104 of this volume.


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Yet this proposition presents challenges for both the European Union and the United States. For the EU, this would mean being able to identify common goals among its disparate members and not letting individual countries’ bilateral relationships with Russia cause further discord in EU-Russia relations as a whole, as alluded to in Baev’s chapter. And as Legvold argues, in the case of the US, this would mean formulating a strategic vision such that American policy toward Russia remains more consistent and less vulnerable to current events. Both the EU and the US also need to make a greater effort to conceptualize their relationships with Russia as a whole, and not let deterioration in one issue area disable the entire relationship. To what extent are the US and EU likely to be able to develop a common transtlantic response to Russia’s resurgence? Since the end of the Cold War, the areas in which these two parties have achieved a common consensus have grown narrower, with their divergent interests becoming particularly evident during the presidency of George W. Bush.32 Turning first to successes in achieving a common position, the EU and US have been able to forge a relatively coherent approach toward Iran on the question of sanctions to address its nuclear program. In June 2010, for example, they went beyond UN Security Council measures to unilaterally adopt stiffer sanctions to prevent companies from doing business with Iran’s energy sector. Russia immediately criticized the EU and US, arguing that they were “putting themselves above the United Nations Security Council.” The Russian Foreign Ministry went on to note that this action showed their “disregard to partnership with Russia.”33 Yet the Russians were hardly alone, with China, India, and Turkey moving forward with cooperation on energy with Iran. At the same time, the Russians have agreed to comply with the UNSC, and decided not to deliver S-300 air defense missiles to Iran, which it had agreed to under a 2007 contract. Another area in which the US and EU have cooperated is their policy on Kosovo. Both supported an independent Kosovo in 2007, against Russian (and Serbian wishes). However, there was internal dissent within the EU over its policy, with several states such Spain, Romania, and Greece worrying that this would embolden political demands from their own national and religious minorities. Russia responded to this action by justifying its own military actions in Georgia and recognition of its break-away provinces. As President Medvedev noted in August 2008, Russia “felt obliged to recognize South Ossetia and Abkhazia as other countries had done with Kosovo.”34 Other areas of cooperation include the EU and US position on the treatment of Hamas and the PLA’s lack of recognition of Israel, and dealing with Cuba, although some differences continue to exist on this score. By contrast, Russia was willing to host Hamas leaders.35

32

Kanet (2008). Many also point out that rifts in the relationship existed long before the Iraq War – see Peterson (2006), for example. 33 Associated Press, 17 June 2010, available at . Accessed 29 September 2011. 34 Leff (2008-9), 12. 35 Trenin (2006), 92.

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In terms of differences between the US and EU vis-à-vis Russia, several issues have proved to be leverage points for Russia. These include the Iraq war, where Russia sided with some EU members opposed to US action, and the Russian invasion of Georgia. In the latter case, the U.S. was quick to dispatch humanitarian aid to Georgia and blame the Russians for their invasion, but the EU was more circumspect. Eventually, a 2009 report commissioned by the EU did find that Georgia was at fault in starting the war, but it also faulted Russia for its aggressive response. More recently, in October 2010, the French and German leadership met with Russian leaders at the Deauville Summit and called for cooperation on foreign and security policy. Some saw this action as being a challenge to NATO and one Obama official noted: “Since when, I wonder, is European security no longer an issue of American concern, but something for Europe and Russia to resolve.”36 Such actions suggest that EU dependence on Russian energy and US concerns about Russia’s view of its immediate neighbors as being part of its sphere of influence (“its near abroad”) have created rifts, both within the EU and between the US and EU. Yet the EU has also tried with this recent summit to create a “reset” of its relations with Russia, just as the US has done under the Obama Administration. An important positive step took place at the NATO-Russia Council meeting in Lisbon in October 2010. In this forum, Russia, the US, the EU pledged to make a fresh start and seemed to assuage some of the tensions still lingering in the wake of the Russia-Georgia conflict. Whether the US and EU will see eye-to-eye on a growing number of issues as they focus on a reset of their policies remains to be seen; however, US-EU cooperation is essential if they are to deal with the difficult challenges facing the international community today. In the context of a global financial crisis that has impacted all three entities and the challenges presented by their respective domestic political situations, the future remains uncertain for Russia’s partnership with the West. Still, the West has important reasons to cultivate strong relations with Russia. The EU needs Russian cooperation to ensure its security and its energy supplies. And the US needs Russia as a partner in many of its global projects, such as curbing the proliferation of weapons of mass destruction, controlling terrorism, maintaining stable energy supplies and prices, stabilizing Eurasia, and dealing with problem countries such as Iran. In some areas, it needs Russia’s cooperation because Russia is part of the problem, as in the case of greenhouse gas emissions, human trafficking, and drug trafficking. Although Russia cannot dominate the international arena as it once did, it is more than capable of playing the role of spoiler in venues such as the UN Security Council and through its relationships with other countries also ambivalent toward the West. Russia, the EU, and the US each have much to gain from strong partnerships with one another and much to lose from deterioration of relations. Acknowledgments The authors would like to thank Sarah Garding and Theocharis Grigoriadis for their helpful comments.

36

Quoted in The New York Times, 26 October 2010.


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Index

A Abkhazia, 45, 97, 135 Afghanistan, 5, 11, 26, 35, 36, 39, 44, 48, 49, 95, 109, 112–114, 118, 120, 125, 132 Al Qaeda, 39 Anti-Ballistic Missile Treaty, 5, 40 Arctic, 17, 110 Areva, 75, 76, 80 Armenia, 23, 27, 98, 128 Atomstroyexport, 73, 74, 76 Azerbaijan, 20, 23, 41, 46, 48, 96

B Biden, Joseph, 48, 118 Bilateral Talks, 88 Bi-national Presidential Commission, 113, 118, 119 BRICs, 64, 106, 126, 132–134 Bulgaria, 18, 88, 90, 99, 130, 131 Burns, William, 49, 109, 121 Bush, George H.W., 115 Bush, George W., 36–40, 45, 58, 97, 102, 108, 116, 117, 135 Business Lobby, 58

C Caspian Sea, 4, 35, 38, 41, 47, 48, 112 Caucasus, 23, 30, 39, 42, 45, 47, 48, 94, 96, 98, 102, 104, 112, 115 Central Bank, 28, 57, 60, 63–65 Chechnya, 1, 30, 37, 39, 42, 49, 94, 96, 131 Cheney, Dick, 41 Chernobyl, 72, 78, 103

China economy, 35, 51, 52, 56, 61, 68 energy, 47 military, 17, 35 Climate change, 109, 112, 121 Clinton, William, 108 Cold War, 1, 2, 5, 8–10, 24, 29, 35, 48, 69, 73, 75, 81, 108, 109, 126, 128, 131, 134, 135 Collective Security Treaty Organization (CSTO), 26, 27, 126, 128 Commonwealth of Independent States (CIS), 4, 5, 18, 19, 22–24, 26, 31, 58 Communism, 43, 128 Comprehensive Nuclear Test Ban Treaty, 117 Corruption, 1, 7, 42, 43, 55, 62, 102, 105, 110, 112, 113 2008 Crash, 64 1998 Crisis, 54

D Democracy, 2–5, 40, 43–45, 86, 98, 108, 125 Developing countries, 11, 133

E Economic growth, 6, 52, 55, 56, 65, 70, 98, 130 Economic integration, 38, 61–66, 68, 130 Elections, 5, 42, 44, 92, 99, 121 Electricity, 10, 54, 67, 69–78, 81 Energy Charter, 91 Environment, 3, 10, 11, 23, 43, 47, 56, 62, 78, 89, 106, 107, 111, 113, 120, 132 Eurasia, 4, 22–24, 26, 32, 49, 79, 87, 88, 95, 136 European security Conventional Forces in Europe (CFE), 94

V.K. Aggarwal and K. Govella (eds.), Responding to a Resurgent Russia: Russian Policy and Responses from the European Union and the United States, DOI 10.1007/978-1-4419-6667-4, © Springer Science+Business Media, LLC 2012

139

140 European Troika, 87, 94 European Union (EU) EU Enlargement, 88, 98, 130 Euro, 28, 99

Index Kyoto Protocol, 77 Kyrgyzstan, 27, 40, 43, 58, 128

L Lisbon Treaty, 87, 89 F Federal Security Service (FSB), 66 Foreign direct investment (FDI), 16, 56, 65, 66, 68, 81, 104 France, 20, 26, 70, 76–80, 88, 89, 106, 130 Freedom of Press, 40 G G–8, 17, 39 G–20, 17 Gas Gazprom, 76, 90, 91 Generation III Nuclear Reactors, 78–80 Geography, 10, 16, 18, 22 Georgia Russia-Georgia Conflict of 2008, 8, 35, 45, 68, 86, 89, 92, 97, 127 Germany, 20, 26, 58, 75, 88–90, 99, 106, 130 H Helsinki Helsinki 2, 29 Helsinki Final Act, 29 Helsinki Plus, 29 I India, 7, 47, 56, 70, 76, 111, 125, 132, 133, 135 Industry, 6, 32, 67, 71–73, 75–77, 80, 127 Integration, 2, 4, 10, 26, 28, 32, 38, 51–68, 85, 86, 98, 111, 126, 127, 129, 130 Intermediate Range Nuclear Forces Treaty (INF), 46, 94 International Cooperation, 24, 31, 69–81 Iran, 11, 20, 46, 75, 103, 104, 109, 112–114, 118, 121, 132, 135, 136 Iraq, 5, 20, 48, 88, 104, 109, 116, 125, 131, 135, 136 Islam, 104, 113 J Japan, 61, 76, 81, 111, 133 K Khodorkovsky, Mikhail, 85 Kosovo, 4, 45, 85, 94, 128, 129, 131, 135

M McCain, John, 41 Media, 19, 25, 37, 40, 47, 55 Medvedev, Dimitri, 7, 24, 29, 44, 86, 88, 117, 128 Missile Defense, 41, 44–46, 48, 103, 104, 108, 112, 115, 116, 119, 131, 132 Moldova, 18, 115 Moscow Interbank Currency Exchange, 16 Moscow Summit, 86, 113, 120 Multipolar, 5, 7, 25, 109, 115, 128, 133 Munich Security Conference, 94, 118 Muslim, 40

N Narcotics/drugs, 120 National Projects, 55 National Security Council (NSC), 5, 8, 21–27, 31, 36, 70, 105, 117, 118, 121 Networking, 88 9/11. See September 11 (9/11) Non-Governmental Organization (NGO), 30, 44, 120 North Atlantic Treaty Organization (NATO) NATO Expansion, 5, 7, 8, 18, 29, 40, 44–46, 48, 122, 128, 131 NATO–Russia Council, 95, 126, 136 North Korea, 103, 109, 120, 132 North Stream, 67 Nuclear contracts, 69, 75, 77–80 Nuclear deterrent, 81 Nuclear disarmament, 113 Nuclear economy, 78 Nuclear energy, 70–72, 74–77, 79–81, 122 Nuclear infrastructure, 70, 72, 74, 75, 80 Nuclear innovation, 69–72, 74, 75, 77, 78, 80, 81 Nuclear proliferation, 39, 102, 104 Nuclear sector, 10, 69–80 Nuclear weapons, 8, 10, 16, 18, 21, 23, 69, 72, 104, 107–109, 112–114

O Obama, Barack, 11, 30, 35, 46, 48, 68, 95, 101–122, 132, 136 OECD, 6, 59, 65, 72, 74, 77, 105

Index Oil BP, 67 Orange Revolution, 43, 85, 97

P Partnership and Cooperation Agreement (PCA), 85, 86, 88, 89 Patriot Act, 40 Pipeline Baku-Tiblisi-Ceyhan (BTC), 20 Baku-Tiblisi-Ezarum (BTE), 20 Caspian Pipeline Consortium (CPC), 20 North Stream, 67 South Stream, 67 Poland, 41, 46, 88, 95, 130 Ports, 17, 18, 38 Post-Soviet Space, 23, 32, 74, 101, 103, 107, 110–112, 115, 121 Powell, Colin, 40 Production Sharing Agreement (PSA), 38, 47 Putin,Vladimir, 1, 2, 5–9, 11, 15, 17, 24–26, 36, 37, 40, 41, 43–47, 49, 53, 55, 64–68, 73, 86–88, 90, 92–95, 99, 108, 109, 117, 127, 131

R Recession, 1, 10, 16, 32, 53, 57, 59, 64, 65, 85, 86, 91, 93, 98, 99 Revolution, 5, 22, 40, 43, 48, 85, 93, 96–98, 128, 131 Romania, 18, 88, 130, 131, 135 Rosatom, 68, 73–78, 80 Rose Revolution, 96 Russian Economic Barometer, 54 Russian Foreign Policy Concept, 25 Russia Trading System (RTS), 16 Russia–US Partnership, 36

S Second Chechen War, 42, 85, 96 September 11 (9/11), 10, 17, 29, 35, 36, 39, 44, 108, 131 Shanghai Cooperation Organization (SCO), 7, 27, 112, 126, 128, 132–134

141 Siemens, 68, 70, 75, 80 South Ossetia, 8, 45, 97, 135 South Stream, 67, 92 Soviet Union, 1–11, 18, 29, 37, 59, 108, 125, 126 START START II, 45, 46 Strategic Offensive Reductions Treaty (SORT), 46

T Taliban, 36, 44 Terrorism, 17, 23, 26, 28, 30, 35, 40, 44, 48, 102, 104, 109, 128, 131, 132, 138 Troika, 87, 89, 94 Turkmenistan, 20, 41, 96

U Ukraine, 5, 9, 23, 24, 40, 41, 43, 45, 48, 58, 67, 72, 85, 91–93, 95, 97, 99, 115 Russian Gas Embargo, 90 Unified Energy System of Russia (RAO UESR), 71, 76 Unipolar, 5, 25, 128, 133 United Kingdom (UK), 20, 58, 90, 106 United Nations (UN) International Atomic Energy Agency (IAEA), 76 Security Council, 7, 31, 109, 126, 133, 135, 136 Uranium Uranium enrichment, 74 Uzbekistan, 27, 41, 128

W War on Terror, 36, 37, 39–41, 45, 94 World Trade Organization (WTO), 17, 76, 93, 117, 126, 127

Y Yeltsin, Boris, 2, 4, 22, 42, 47, 49, 108 Yugoslavia, 45 Yukos, 5, 85

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