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Evolving Russian-Western Relations

01.01.11

Evolving Russian-Western Relations

01.01.11
Pete SouzaPete Souza

Russia has recently emerged as an important ally of the United States. Not only does the United States need Russian assistance in dealing with uncooperative states and in a supporting role in Afghanistan, but Europe is also finding Russian cooperation to be extremely useful. As the United States and NATO seek Russian assistance in several global regions, these states and institutions are recognizing that Moscow is no longer as dependent on their support as it once was.

However, these states and institutions are learning that relying on Russian assistance around the globe does have a price. For example, due to Russian objections, the United States canceled its land-based missile defense system in Poland and the Czech Republic, in favor of a sea-based system. Europe is paying more for natural gas from Russia, and in some cases access to natural gas is limited in the wake of payment disputes between Russia’s Gazprom and Ukraine.

Since 1945, Russia has been an important global player, due to its immense size, nuclear arsenal and permanent membership on the U.N. Security Council. While Russia endured severe growing pains following the collapse of the Soviet Union, it has since rebounded; and, in some situations, directly challenges the supremacy of the United States and NATO. Failed economic transition, along with the weight of IMF and World Bank loans, created the stage for a structural economic policy implemented in the 1990s by Boris Yeltsin, which involved the state selling off managing shares or whole industries, in order to add liquidity to the Russian economy. This policy had far-reaching ramifications. The oligarchs gobbled up nearly all state industries.

The rise in prominence of the Russian Oligarchs was not only due to state industry liquidation: rising global oil prices over the past decade, and the resulting wealth to the Russian state, was also a contributing factor. This wealth, and Vladimir Putin’s aggressive handling of Chechnya, explains why the Russian voters returned him to office in 2004. The infusion of cash contributed to a growing internal, and external, dependence.

Under Medvedev Russia has implemented economic policies to make it less dependent on the value of U.S. dollars and the Euro. In early 2010, the Russian Central Bank began purchasing Canadian dollars, in an attempt to move away from the Euro and U.S. dollar. Russia is also purchasing significant amounts of gold bullion. Since July of last year, according to the World Gold Council (WGC), Russia has purchased 65 tonnes of gold; it now holds 775 tonnes of gold in total in its reserves.

This wealth, derived in large part from reserves of oil and natural gas, has made Russia economically-competitive. 62 Russians are now billionaires, out of a total population of 139,390,205. By 2003, as oil prices steadily increased, the Kremlin decided to nationalize a part of its oil sector. At the time there were four companies that controlled a significant portion of the oil sector: Yukos, Surgutneftegaz, Lukoil and TNK-BP. During the 1990s, Russia had kept ownership of Rosneft, and had shares in a smattering of other oil companies; currently, the Russian state owns 75.16% of the company.

The state gained substantial control over Russia’s largest oil producer, Yukos, by charging Mikhail B. Khodorkovsky and his business partner Platon A. Lebedev with tax evasion; each was sentenced to a lengthy prison term. The Russian government claimed that Yukos owed the government $27 billion in back taxes. Because Yukos was unable to pay these claims, the company faced bankruptcy and the Russian government was able to cheaply purchase shares in the company. At a public auction in 2007, Rosneft purchased the Yukos-Transservice and Yukos-East Asia Transit transport units for $729 million. Mikhail B. Khodorkovsky recently had his case retried in Russian courts and was again found guilty of embezzlement while at Yukos. Yuri Schmidt, one of Mikhail Khodorkovsky’s lawyers criticized the verdict in an Op-Ed for the International Herald Tribune by suggesting that the guilty verdict was political motivated.

Oil profits have also allowed Russia to upgrade its military capabilities. It was announced recently that an agreement was reached between Russian President Dmitri Medvedev and French President Nicolas Sarkozy for Russia to purchase two Mistral class amphibious French warships. From 2002 to 2009, Russia’s share of the global arms market constituted 18%, followed by France with 8%. The United States leads with 40%.

Growing internal economic strength has pushed Russia to exert external economic influence. As the global recession abates, new economic alliances are playing a more central role in world affairs. In 2009, Russia hosted the Shanghai Cooperation Organization (SCO) in Yekaterinburg, Russia. SCO’s member and associate states include Russia, China, much of Central Asia, India, Pakistan, and Iran. (When the United States applied for Observer state status, it was rejected.) Soon after the 2009 summit, a declaration was submitted, stating “Serious changes are taking place in the contemporary international environment…The tendency towards true multipolarity is irreversible.” Russia followed the SCO meeting in Yekaterinburg by hosting the BRIC summit of Brazil, Russia, India and China, which was also in Yekaterinburg.

Moscow’s increased lack of cooperation may also stem from a fear of encroachment in its traditional sphere of influence. Russia’s Defense Minister Anatoly Serdyukov warned of the increased likelihood of global or regional conflicts involving Russia. Serdyukov asserted that NATO and U.S. encroachment on Russia’s border is a threat to the sovereignty of Russia, as a result of NATO expansion involving the former satellite state of the Soviet Union.

Another source of contention involves Russia’s objections to NATO membership for Georgia and Ukraine. While membership for these two countries was advocated by the Bush administration, the Obama administration has not aggressively campaigned for either state to join NATO. Due to more pressing matters where the Obama administration needs Russian assistance, it is highly unlikely that the U.S. will advocate for their membership over Russian objections.

Russia has not only challenged the United States over NATO expansionism. Russia remains vehemently opposed to the continuing plans by the United States to complete European missile defense, to protect Western Europe from a ballistic missile attack. The United States has argued that the system is meant as deterrent for Iran. Russia suspects that the real aim of European missile defense is to act as a buffer against Russian ballistic missiles. The Kremlin was able to influence the Obama administration to discontinue the land-based portion of the program and search for an alternative design. As part of that concession, the Obama administration was able to get Medvedev to agree to a New Strategic Arms Reduction Treaty (START).

The Russian Duma has yet to ratify New START although the Obama administration was able to achieve its passage during the recent U.S. Senate “lame duck” session. In order to get New START through the U.S. Senate, despite heavy bipartisan support, President Obama and his supporters had to agree to add further language to the treaty that reaffirmed U.S. commitments to complete the missile defense program.

New START is now being slow walked in the Kremlin dominated Duma due to the language recommitting the United States to the missile defense program.

Russia has also displayed an effective use of soft power in its management of a relatively small number of states in its sphere of influence. It has provided Belarus with supplies of cheap oil and natural gas. This policy has allowed Belarusian President Alexander Lukashenko to stay in power, over protests by American and European diplomats. Russia has also pressured the government of Kyrgyzstan to end America’s military presence at the Manas air base, an episode that sheds light on Moscow’s efforts to limit any U.S. presence in Russia’s perceived sphere of influence.

Moscow’s antagonisms may increasingly erupt in flashpoint issues, as illustrated by the 2008 war with Georgia, over U.S. and European objections. The brief conflict over a contentious province illustrates that Russia is not necessarily concerned about confronting an ally of the United States. The war also accomplished a goal for Russia, which was to have Georgian and Ukrainian NATO bids terminated.

The war with Georgia also highlights Russian attempts to control a narrative for Eastern Europe and the Balkans. The U.S. and British led NATO military actions against Serbia in the 1990s relegated Russia to the sidelines where it had to watch an ally eventually surrender to the wishes of the international community. In 2008, a much more assertive and influential Russia could do little to dissuade the United States from acknowledging an independent Kosovo. 22 EU member states now recognize an independent Kosovo along with 69 UN member states.

Yet there are also areas for agreement that Russia is more than cognizant of. A staggering heroin problem resulting from the drug trade, along with internal Islamic extremist issues, means that Moscow does not want Afghanistan to revert back to pre-September 11 conditions. Therefore, Russia has pledged assistance to the U.S.-led mission, by promising to assist the U.S. in transporting supplies into the country.

Recently, in meetings with NATO Secretary General Anders Fogh Rasmussen, the Russian Foreign Minister Sergei Lavrov suggested, “We will expand our cooperation in Afghanistan, it’s in our common vital interests.” Washington understands this as well, and has even purchased a number of Russian Mi-17 Navair’s for use by the Afghan government over protests by the American company Sikorsky. Many challenges remain for U.S., European and Russian relations in the years ahead.

The United States is finding that it must develop a relationship based on trust and mutual interests that function across several issues. The United States must demonstrate that it does not pose a threat to Russia, and that Cold War suspicions need not reemerge. Western Europe, as well, needs to find a range of issues on which it can cooperate with Russia. One of the most pressing current issues is energy. Over the past decade, natural gas disputes between Ukraine and Russia’s Gazprom have resulted in supply disruptions to Western Europe – the dispute calls into question Russia’s ability to be a main energy supplier, and its reliability in the future.

The European Union has already begun to take steps to ensure disputes between the Kremlin and Eastern European states will have less of an effect in the coming years. One major development will be the construction of the Nabucco gas pipeline, which will circumvent Eastern Europe as a transport hub for natural gas from the Middle East and Central Asia to Western Europe.

Russia has undergone tremendous changes, from centralized economic planning until the beginning of the 1990s to a chaotic free market system that played havoc with the Russian economy. During this time Russia witnessed its military and political influence around the globe evaporate, as the United States was able to step into the void and create new alliances with the former Warsaw Pact countries. Poland, the former Czechoslovakia, Romania, Slovakia and other Eastern European states jumped at the chance to join NATO, in spite of incurring Russian ire.

With a resurgent Russia, states like Georgia and Ukraine are now confronted with the risks of upsetting their former Soviet protector.

one comment
2 comments
Nichol S

Just heard Russians are demonstrating for Putin to resign. Think that will happen?

Nichol S

Just heard Russians are demonstrating for Putin to resign. Think that will happen?

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