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GETTING RUSSIA INTO PROPORTION
Paul Taylor
Reuters
Dec 8 2008
General, 2008 campaign, Barack Obama, credit crunch, dmitry medvedev,
gas monopoly, global financial crisis, missile shield, putin, Russia,
russian investors, russian tanks, russian union, soviet satellite -
Paul Taylor is a Reuters columnist. The opinions expressed are his
own -
It's time to get Russia back into proportion.
Moscow's resurgence as a major power, determined to be treated with
respect and to stamp its influence on its neighborhood, has been one
of the big stories of 2008.
The sight of Russian tanks rolling into Georgia in August, coupled
with a Kremlin drive to extend its control over energy supply routes
to Europe, sent shivers through former Soviet satellite countries
and drew loud condemnation from Washington.
President Dmitry Medvedev's threat to site short-range missiles
in Kaliningrad aimed at Poland if Warsaw deploys part of a planned
U.S. missile shield raised the rhetorical stakes.
Yet the global financial crisis, the collapse of oil prices, the
aftermath of the Georgia war and U.S. President-elect Barack Obama's
victory have all cast doubt on Russia's real weight.
The credit crunch has hit Russia harder than other emerging economies,
hammering confidence in its stocks, bonds and the rouble and forcing
the central bank to spend some of its huge foreign currency reserves
to stabilize the financial system.
Foreign portfolio investors have fled and many Russian investors have
parked more of their money in foreign currency abroad, at least partly
due to heightened political risk since the military action in Georgia.
State gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research,
Stock Buzz), feared in many parts of Europe as a predator seeking
a stranglehold on the continent's gas supply, has lost more than
two-thirds of its market capitalization since May.
SHRINKING POPULATION
With oil prices down from a peak of $147 a barrel in July to below $50
now, the heavily oil-and-gas-dependent economy looks more vulnerable,
especially since Russia needs Western technology to boost its energy
extraction.
Alexander Shokhin, president of the Russian Union of Industrialists
and Entrepreneurs, says that after a 10-year boom, growth will fall
to between 0 and 3 percent next year.
Russia remains a lucrative market for Western consumer goods, but
concerns about state meddling in business, widespread corruption and
shortcomings in the rule of law have contributed to its failure to
diversify away from hydrocarbons and minerals.
Compounding the weakness of its non-energy economy, Russia's
demographics are among the worst in the world, with a life expectancy
of just 67 (60 for men) and the combination of a low birth-rate,
an aging population and a public health crisis.
The Organization for Economic Cooperation and Development (OECD)
projects the population could shrink by nearly one-third by 2050 to
100 million from 143 million.
Diplomatically, Russia overreached itself after its lightning military
victory in Georgia by recognizing the breakaway regions of South
Ossetia and Abkhazia as independent.
Only Nicaragua followed suit. Major allies such as China and India,
fearing the precedent, pointedly declined.
The European Union, the main customer for Russian gas, has responded by
accelerating efforts to reduce its dependency, planning an alternative
supply corridor through Turkey and seeking new suppliers in Africa,
the Middle East and Central Asia.
Other former Soviet republics, including Azerbaijan, Belarus and
Turkmenistan, have sought closer ties with the West.
True, the U.S.-led NATO alliance has gone no further toward giving
Georgia and Ukraine a roadmap to membership -- the issue is off the
agenda for now -- and it has now resumed some frozen contacts with
Russia, as has the EU.
But Moscow's efforts to reshape the security architecture of Europe,
sidelining the role of the United States and of the Organization for
Security and Cooperation in Europe, loathed by Moscow for its election
monitoring, have gained little traction.
STATUS QUO POWER?
Russian analysts insist the Georgia war was a defensive action
responding to pro-Western Georgian President Mikheil Saakashvili's
bid to retake control of South Ossetia by force.
"Russia is a status quo power, not a recidivist aggressor on the
prowl," says Dmitry Trenin, head of the Moscow office of Carnegie
Endowment for International Peace.
Moscow has taken a number of steps recently to suggest it wants
peaceful solutions to other "frozen conflicts" in its neighborhood,
brokering the first summit talks between Armenia and Azerbaijan over
Nagorno-Karabakh, and seeking a deal between Moldova and its breakaway
region of Transdniestria.
In Ukraine, the biggest former Soviet republic where a democratic
"Orange Revolution" in 2004 infuriated the Kremlin, Russia has other
political and economic levers it can pull to maintain influence
without having to use force.
Getting Russia into proportion does not mean ignoring Moscow or its
security interests. Its location and the fact it supplies 40 percent
of Europe's gas imports mean it cannot be neglected.
The United States and the EU have an interest in binding Moscow
rapidly into rule-based international bodies such as the World Trade
Organization and the OECD, although they put both processes on hold
in reprisal for the Georgia war.
Some Western analysts believe a weak Russia could be more dangerous,
if mishandled, than a strong one.
In NATO circles, some see a risk of the "Weimarisation" of Russia,
comparing it to Germany's economically enfeebled Weimar Republic that
was swept away by the rise of Hitler's Nazi party.
Political humiliation and economic instability could lead to a surge
of aggressive nationalism.
After the collapse of the Soviet Union in 1991, wags branded Boris
Yeltsin's rump Russian Federation "Upper Volta with nukes," capturing
the paradox of a failed state with a ruined economy sitting on a huge
arsenal of atomic weapons.
When Vladimir Putin succeeded Yeltsin in 2000, he was determined
to restore Russia's power and pride after a decade in which many
Russians felt the West ignored their interests by expanding NATO in
ex-communist eastern Europe.
Today, it sometimes seems that Russophiles and Russophobes in Europe
and the United States have become objective allies in exaggerating
the importance of or the threat from Moscow.
A more self-confident Europe and a less unilateralist America need
to find a way of engaging with Russia according to its true weight,
without treating it as a giant.
Paul Taylor
Reuters
Dec 8 2008
General, 2008 campaign, Barack Obama, credit crunch, dmitry medvedev,
gas monopoly, global financial crisis, missile shield, putin, Russia,
russian investors, russian tanks, russian union, soviet satellite -
Paul Taylor is a Reuters columnist. The opinions expressed are his
own -
It's time to get Russia back into proportion.
Moscow's resurgence as a major power, determined to be treated with
respect and to stamp its influence on its neighborhood, has been one
of the big stories of 2008.
The sight of Russian tanks rolling into Georgia in August, coupled
with a Kremlin drive to extend its control over energy supply routes
to Europe, sent shivers through former Soviet satellite countries
and drew loud condemnation from Washington.
President Dmitry Medvedev's threat to site short-range missiles
in Kaliningrad aimed at Poland if Warsaw deploys part of a planned
U.S. missile shield raised the rhetorical stakes.
Yet the global financial crisis, the collapse of oil prices, the
aftermath of the Georgia war and U.S. President-elect Barack Obama's
victory have all cast doubt on Russia's real weight.
The credit crunch has hit Russia harder than other emerging economies,
hammering confidence in its stocks, bonds and the rouble and forcing
the central bank to spend some of its huge foreign currency reserves
to stabilize the financial system.
Foreign portfolio investors have fled and many Russian investors have
parked more of their money in foreign currency abroad, at least partly
due to heightened political risk since the military action in Georgia.
State gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research,
Stock Buzz), feared in many parts of Europe as a predator seeking
a stranglehold on the continent's gas supply, has lost more than
two-thirds of its market capitalization since May.
SHRINKING POPULATION
With oil prices down from a peak of $147 a barrel in July to below $50
now, the heavily oil-and-gas-dependent economy looks more vulnerable,
especially since Russia needs Western technology to boost its energy
extraction.
Alexander Shokhin, president of the Russian Union of Industrialists
and Entrepreneurs, says that after a 10-year boom, growth will fall
to between 0 and 3 percent next year.
Russia remains a lucrative market for Western consumer goods, but
concerns about state meddling in business, widespread corruption and
shortcomings in the rule of law have contributed to its failure to
diversify away from hydrocarbons and minerals.
Compounding the weakness of its non-energy economy, Russia's
demographics are among the worst in the world, with a life expectancy
of just 67 (60 for men) and the combination of a low birth-rate,
an aging population and a public health crisis.
The Organization for Economic Cooperation and Development (OECD)
projects the population could shrink by nearly one-third by 2050 to
100 million from 143 million.
Diplomatically, Russia overreached itself after its lightning military
victory in Georgia by recognizing the breakaway regions of South
Ossetia and Abkhazia as independent.
Only Nicaragua followed suit. Major allies such as China and India,
fearing the precedent, pointedly declined.
The European Union, the main customer for Russian gas, has responded by
accelerating efforts to reduce its dependency, planning an alternative
supply corridor through Turkey and seeking new suppliers in Africa,
the Middle East and Central Asia.
Other former Soviet republics, including Azerbaijan, Belarus and
Turkmenistan, have sought closer ties with the West.
True, the U.S.-led NATO alliance has gone no further toward giving
Georgia and Ukraine a roadmap to membership -- the issue is off the
agenda for now -- and it has now resumed some frozen contacts with
Russia, as has the EU.
But Moscow's efforts to reshape the security architecture of Europe,
sidelining the role of the United States and of the Organization for
Security and Cooperation in Europe, loathed by Moscow for its election
monitoring, have gained little traction.
STATUS QUO POWER?
Russian analysts insist the Georgia war was a defensive action
responding to pro-Western Georgian President Mikheil Saakashvili's
bid to retake control of South Ossetia by force.
"Russia is a status quo power, not a recidivist aggressor on the
prowl," says Dmitry Trenin, head of the Moscow office of Carnegie
Endowment for International Peace.
Moscow has taken a number of steps recently to suggest it wants
peaceful solutions to other "frozen conflicts" in its neighborhood,
brokering the first summit talks between Armenia and Azerbaijan over
Nagorno-Karabakh, and seeking a deal between Moldova and its breakaway
region of Transdniestria.
In Ukraine, the biggest former Soviet republic where a democratic
"Orange Revolution" in 2004 infuriated the Kremlin, Russia has other
political and economic levers it can pull to maintain influence
without having to use force.
Getting Russia into proportion does not mean ignoring Moscow or its
security interests. Its location and the fact it supplies 40 percent
of Europe's gas imports mean it cannot be neglected.
The United States and the EU have an interest in binding Moscow
rapidly into rule-based international bodies such as the World Trade
Organization and the OECD, although they put both processes on hold
in reprisal for the Georgia war.
Some Western analysts believe a weak Russia could be more dangerous,
if mishandled, than a strong one.
In NATO circles, some see a risk of the "Weimarisation" of Russia,
comparing it to Germany's economically enfeebled Weimar Republic that
was swept away by the rise of Hitler's Nazi party.
Political humiliation and economic instability could lead to a surge
of aggressive nationalism.
After the collapse of the Soviet Union in 1991, wags branded Boris
Yeltsin's rump Russian Federation "Upper Volta with nukes," capturing
the paradox of a failed state with a ruined economy sitting on a huge
arsenal of atomic weapons.
When Vladimir Putin succeeded Yeltsin in 2000, he was determined
to restore Russia's power and pride after a decade in which many
Russians felt the West ignored their interests by expanding NATO in
ex-communist eastern Europe.
Today, it sometimes seems that Russophiles and Russophobes in Europe
and the United States have become objective allies in exaggerating
the importance of or the threat from Moscow.
A more self-confident Europe and a less unilateralist America need
to find a way of engaging with Russia according to its true weight,
without treating it as a giant.