TCS Daily

Bush-Putin: The Toughest Summit Ever

By Ariel Cohen - February 23, 2005 12:00 AM

MOSCOW -- Meetings with key Russian officials in this town last week reveal that the Putin Administration is facing a crisis of confidence. Russian Prime Minister Mikhail Fradkov's Cabinet survived a Duma vote of no confidence on February 9th, but the real target of the abuse heaped on the Prime Minister by the nationalist and leftist opposition parties, which are artifacts of power elites, was never in doubt: Mr. Putin himself.

President Bush's summit with Mr. Putin in Bratislava Thursday February 24th will be the most difficult meeting two men ever had. One year after Putin handily won a second presidential term, his domestic and foreign challenges are snowballing, and his aura of an almost-superhuman invincibility is quickly dissipating. This is not to say, however, that Putin should be looked down upon or counted out: he is still in control.

Moscow politicians are uneasy with the country's perceived lack of domestic and foreign policy direction. Consequently, a 2008 transition to a successor hand-picked by Putin is no longer a sure thing. Neither is passage of constitutional-legislative changes that would guarantee Putin's continued rule as Prime Minister after two presidential terms -- with enhanced powers, such as control of defense, the security services, and the legal system.

Russia's political malaise has set in despite high oil prices and a robust GDP growth rate of around 7 percent. Still, a 20 percent drop in Putin's popular support leaves one to speculate how quickly the situation could deteriorate if oil prices tumbled. The climate of stagnation and uncertainty manifests itself in numerous areas, including failure to attain economic growth to realize Putin's proclaimed goal of doubling the GDP by 2010. The elites perceive this as a failure to achieve an important national target. Deteriorating investor confidence quadrupled capital flight in 2004.

The state power is monopolized by a small group of Putin loyalists, primarily from the St. Petersburg security services and mayor's office. This group has overtaken state-owned companies, the justice system and courts, and even private businesses. If Putin is perceived by his group as too weak, it may attempt to remove him. However, this total control raises stakes for an anti-Putin coalition in the future, and increases the incentive to dilute or terminate the power of the St. Petersburg group -- through the ballot box or by other means if necessary.

There is a widespread perception in Moscow that the current Prime Minister Fradkov and his cabinet failed. Most recently, the Cabinet bungled social welfare reform that was supposed to replace in-kind benefits for the elderly with monetary payments. Inadequate planning and poor execution led to the largest campaign of street demonstrations since Putin's coming to power in 1999. The forthcoming reform of subsidized housing and utilities could further damage the regime's prestige. Putin's attempts to appease the protesters by paying off officers, military retirees, and students, while simultaneously boosting the FSB and military budgets, have created an impression of weakness and indecision.

Protectionism and economic nationalism are rampant. Recently, the Minister of Natural Resources announced that "non-Russian resident companies" will be denied access to Russian natural resources, such as oil, gold and other minerals. This approach will allow Russian companies with dubious connections to the Ministry or the Kremlin to successfully bid for lucrative licenses while excluding foreigners. Already, the YUKOS affair has cost Russia tens of billions of dollars of opportunity cost in lost investment. Putin's chief economic advisor, Andrey Illarionov, openly termed the sale of the YUKOS main production unit, Yuganskneftegaz, the "swindle of the year", while Putin's Minister of Economic Development German Gref has publicly called for its return Yugansk to YUKOS.

Russia's policy fiascos are multi-dimensional. Private, corporate, or bureaucratic interests trump raison d'etat in a manner the regime of Nicholas II did in the early 20th century. Policy makers allow themselves to fall back on Soviet clich├ęs, or even on their czarist era great power precursors. Thus, Russia opposes the US policy on Iranian nuclear disarmament, "not because of Iran, but because it pushes us into a corner," as one senior Russian lawmaker put it. He added that US unilateral policies based on military superiority are unacceptable not only to Russia, but also to China, France and Germany.

The era of quick US fixes in Russia is over, and Washington's advice is no longer welcome -- if it ever was. Give-and-take, however, may still be the best diplomatic tool, as senior Russian officials say that many issues on the bilateral agenda are negotiable.

US interests in Russia include cooperation on terminating Iran's nuclear arms program; non-proliferation; the global war on terrorism; Russian membership in WTO; and bilateral energy and economic cooperation. President Bush should maintain a solid working relationship with Putin, while supporting the forces of democracy, tolerance, open markets and civil society in the long term. This balancing act is not an easy task.

The US should request Moscow's cooperation in neutralizing the Iranian nuclear weapons program as it will threaten Russia. Washington should foster Russian cooperation in the former Soviet areas, including troop withdrawals and bringing to closure "frozen conflicts" in Moldova, Georgia, including Abkhazia, and Nagorno-Karabakh. The US should condition progress of Russia' WTO accession talks upon dismantling state monopolies and reversing opaque and protectionist economic practices. Finally, Washington should express support for democratization of mass media and encourage Russia to promote private and public non-state TV channels. Finally, Bush should clarify that the US is not seeking its dismemberment and fully recognizes its territorial integrity from Kaliningrad in the West to Dagestan in the South.

In Bratislava, President Bush needs to emphasize security, such as disarming of Iran and non-proliferation. Lecturing about democracy may not be effective; carrots-and-sticks may work better. Russia is facing a period of political instability as the power elites jockey for positions in the 2007-2008 electoral cycle. The US should not pick favorites, but rather champion transparency, democracy and business cooperation, while protecting its own security and economic interests in Russia and Eurasia.

Ariel Cohen, Ph.D., is a Senior Research Fellow in Russian and Eurasian Studies at Heritage Foundation and author of Eurasia in Balance (Ashgate, forthcoming)


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