No Comment — July 6, 2009, 9:39 am

To Russia With Love

Today, Barack Obama attempts to make good on his effort to “restart” relations with Russia with a visit to the Kremlin. He will find there a regime under intense domestic pressure–pressure that has soured its relations with its immediate neighbors. Last August, Russians celebrated an ego-boosting military adventure across the north Caucasus and into Georgia. The moment seemed a significant triumph for Vladimir Putin, allowing him to consolidate his popularity shortly following his cession of the presidency to Dmitri Medvedev, with whom he continues to govern in a curious alignment. But the euphoria proved brief. One month later, the world financial crisis took root, and the vulnerabilities of a natural resource-based economy quickly became apparent. As the American president arrives in Moscow, public support for the Putin-Medvedev team is waning, and more ominously, other predators on the Russian political stage sense emerging vulnerabilities.

In a meeting last week in London with some prominent Eurasia experts, I repeatedly heard the phrase “rezhim Putina”—Putin’s regime. It was technical, precise, and not very polite. And it reflected the overall assessment of a politician whose failings are increasingly apparent. In a penetrating review of recent Russian critical literature published in Foreign Policy, Leon Aron sums up the situation:

A classic case of what the late Harvard University political theorist Samuel Huntington called “performance legitimacy,” Putin’s regime enjoyed widespread acceptance so long as income was growing by leaps and bounds. Putin’s “authoritarian modernization” was in large measure inspired and justified by China’s spectacular growth. But the Russian version of the “Chinese miracle” has been revealed to be yet another Potemkin village. For many Russian writers, thinkers, and activists struggling to understand the legacy of Putinism, there has been too much “authoritarianism” and precious little “modernization.” As one of the most perceptive—and brilliantly sarcastic—Russian commentators, Yulia Latynina, has explained, in China the state tells entrepreneurs: Go ahead, get rich, and if there is a bureaucrat who bothers you, we will wring his neck. In Russia, the state tells bureaucrats: Go ahead, get rich, and if there is an entrepreneur who balks at the arrangement, we will bash his head in.

Looking around Russia now, Putin’s new critics see only the ruins of unfulfilled promises and wasted wealth. Like Nemtsov and Milov, they rue the missed opportunity for a modern and transparent state and for a diversified, entrepreneur-driven economy, the foundation for which could have been laid under the more favorable market conditions of the early 2000s. “In all the years of the fantastic, unearned money, which gushed from the oil pipe as if from a broken bathroom spigot, we did not move a finger to diversify our economy,” Nikolai Svanidze, professor of the Moscow University for the Humanities and a member of the Public Chamber, the Kremlin’s top advisory body, wrote in March in the key opposition Web journal, Ezhednevnyi zhurnal. Simply put, Svanidze added, Russia has not learned how to make anything that would enjoy demand in the global market: “As in the 10th century, we still cannot offer the world anything that is not gifted to us by Mother Nature: no electronics, no clothes, no food, or cars, or medications, not even children’s toys.” Instead of emerging as a world economic power, Svanidze concluded, Russia appears to be headed in the direction of becoming “a cheap Chinese gas station.”

The comparison to China is appropriate. Russian elites are prepared to give Putin their support, provided that he delivers on economic opportunity. But China is the model they constantly keep in view, and Putin pales under this comparison. Moreover, the relationship with China is one of Russia’s key miscues. Putin has systematically failed to judge China’s appetites for energy. He disrupted its efforts to complete pipelines and secure long-term supply arrangements with Russian producers.

Does this help explain last summer’s excitement? The invasion of Georgia was a sugar high for Russians long starved for news of geopolitical success. But soon the high wore off, and the Kremlin had to cope with its consequences: poisoned relations with its neighbors, the “near abroad.” Leader after leader looked at the plight of the hapless Mikheil Saakashvili. Criticism was offered for his improvident bear-baiting. But each leader was quick to see his nation as the target of some Russian military escapade of the future. Belarus’s Lukashenko became disabused of the benefits of the Russia-Belarus Union and began to renege on his commitments. Uzbekistan’s Karimov, who only a few years ago had cast the Americans out of their two bases, suddenly found a clever way to welcome the return of American military matériel for Afghanistan—this time through a South Korean surrogate. Turkmenistan’s Berdymuhammedov charged ahead with plans for multiple American supply stations and continued to tease major multinational oil and gas players about investment possibilities. Kyrgyzstan’s Bakiyev ostentatiously kicked the United States out, and then, just weeks later, welcomed them back. It was all just a question of money, his advisors explained–though they just as quickly said that it was all about Russia, too.

Putin’s other hallmark was a new foreign policy that aimed to leverage Russia’s position as a supplier of hydrocarbons to Europe. For the last several years, Putin took personal leadership of this peculiar oil-and-gas diplomacy, carefully promoting his cronies in the industry. It was noteworthy that during a recent visit to the Netherlands, President Medvedev paid no visit to Shell, nor did he discuss their efforts to resolve their substantial Russian investments, which are entangled in a melodrama of Russian natural-resources nationalism—that was, of course, Putin’s affair. Over six years, Putin has aggressively pursued a new model of state capitalism in which the Kremlin asserted its control over the hydrocarbon sector, using an impressive array of tools to suppress the oligarchs who had wormed their way into it and to usurp foreign investment. Even as Russian prestige benefits from its position as an energy power, the politicization of oil and gas has its costs. Capital for the development and exploitation of hydrocarbon resources has been scarce, and the collapse of global markets is now exacerbating the shortfall.

That’s not the only evidence of the Kremlin’s mismanagement of the natural resource sector. Russia’s curious dealings with Turkmenistan on natural gas are also worth some study. We don’t know all the details of the Russian-Turkmen deal, but it is clear enough that Russia engaged in an embarrassing miscalculation concerning the value of natural gas on the global market. It promised to buy Turkmen gas at rates close to the peak, not anticipating the precipitous fall of gas with the onset of the financial crisis. To cover its exposure, Russia has summoned a contractual “act of god”–problems with its aging pipeline system that leave it “unable” to receive (and thus have to pay for) more Turkmen gas. And this experience has taught the Turkmen government an important lesson about the need to find access to markets that avoids the choking embrace of Russia.

All of this is good news for Barack Obama. It sets the stage for a Russia with diminished interest in acts of provocation against its neighbors, and with a need to avoid a restart of the arms race that helped bring down the old regime. The Russian elite have long accepted the wisdom of Zbigniew Brzezinski, who once told a Moscow audience that the real test of Russia’s greatness as a power is not the number of nuclear warheads it has stockpiled, but whether there will be flush toilets a hundred kilometers away from Moscow. Will there be a Russo-American rapprochement? It’s not likely that we’ll soon again see the sort of amicable dealings of the Yeltsin era. But Obama is seeking a “restart,” and it seems that’s what he’ll get.

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