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Dr. Kuchins provided introductory remarks on the topic of Russia's current geo-strategic issues. Specifically, he reflected on Russia's position in the international arena characterized by the military uni-polarity of the United States and increasing economic multi-polarity (with the US economy largest but not dominant). The bilateral relationship has not benefited from the Iraq crisis, and, as a result, despite some common interests like terrorism and proliferation, the US-Russian partnership is likely to remain shallow in the future. Dr. Kuchins noted that both administrations have indicated their desire to move beyond the issue of Iraq. However, the failure of President Putin to support the United States in the moment of need would make it less likely for President Bush to spend a lot of his political capital on Russia. In this light, Dr. Kuchins suggested that the salient issue at the wake of the St. Petersburg summit would be how much Russians are willing to bring to the table to strengthen the partnership and how much political capital is Moscow ready to invest.
Anatol Lieven discussed the current state of US-Russian partnership in the area of security issues. The damaging impact of the Iraq crisis on the bilateral relations, the Russian interests and pride, has been less than many observers feared at the time. There are a number of reasons for this. First, Putin did not seek out this crisis nor tried to exacerbate but rather followed the course of events. Secondly, Russia and the United States, unlike in 1990s, do share at least one very visible vital interest in common- the struggle against al-Qaida. Thirdly, apart from this cooperation against terrorism, the relationship is rather shallow. Therefore, the capacity of both sides to help or to hurt each other is somewhat limited even if they want to do so due to relatively limited economic ties between the two countries.
On the issue of the US capacity to retaliate against Russia, Mr. Lieven suggested that its ability to isolate Russia on the international stage has diminished greatly. This impossibility of effective retaliation arises from the decline or possibly even a collapse of the concept of "the West" as a meaningful geopolitical unity. In 1990s, if Russia tried to stand up to or resist the US in really important issues the US and Western Europe would form a unity against Russia. And, Russia would be left in front of a prospect of isolating itself, which led to a whole series of humiliations. However, things have changed since the Iraq crisis. It is still unlikely for a steady long-term alignment to persist between Russia, on one hand, and Germany and France, on the other, because there are too many dividing issues. Nonetheless, in its unhappiness with many aspects of the US hegemony, Russia can now rely on considerable sympathy from Europe. And the stance taken by Russia towards the Iraq crisis reflected of the overwhelming majority of public in Europe, as well as European governments.
Mr. Lieven emphasized another point about the US-Russian relationship. Precisely because it is embedded in a much wider series of relationships, and because, at this moment, these relationships are more fluid than at any time for many previous decades, it will be American policy to drive the character of this relationship as well as the Russian responses.
Subsequently, Mr. Lieven speculated on possible strategy for Russia in the light of the above. Of course, Russia would not be balancing the United States in the classic realist sense. Not only is Russia not nearly strong enough to do so but also no combination of countries can do that either. In Russia, the economic elites as well as bureaucratic and political elites now have deep personal economic stakes in the stability of the world economic environment, which they would be very reluctant to compromise by a crisis in international relations. Instead, Mr. Lieven suggested another view of the relationship. Russia would be a part of, what Steven Miller called, "ad hoc anti-hegemonic alliance", calibrated in response to US policies and designed not to confront or defeat American hegemony but rather nibble at its edges in order to challenge legitimacy of particular US actions.
On US-Russian security issues, which have largely defined the past decade as well as the first eight months of Bush administration's policy towards Russia, Mr. Lieven commented that now these have been relegated to the backburner. Of these, the most traumatic has been the question of Caucasus but the tension has diminished greatly. On the one hand, Russia has accustomed itself to construction of the Baku-Ceyhan pipeline for the export of Caspian oil. But ironically, it did so at the moment when the issue seems to have become of less importance for the United States.
There is also a changed mood on the subject of Chechnya. Mr. Lieven noted that the United States finds itself in the same position as towards Kashmir-- however much it disapproves and criticizes of many aspects of Russian military behavior there, the US cannot lend its direct support given the international links and alliances of the Chechen separatists with the radical Islamic forces.
Regarding US-Russian security relations elsewhere in the former Soviet Union, Russia initially was suspicious of the new US presence in Central Asia. But increasingly, both sides are coming to see not just common interests but also common dilemmas, such as combating international terrorism. In the case of security relations that concern Ukraine, Belarus and Moldova, one potential disruptive factor could be re-deployment of the US military bases from Germany further East, as it is being widely suggested in the current US administration recently. Russia would view these actions as breach of promises by the US given at the time of NATO enlargement. Yet, Mr. Lieven said that it would be unlikely to happen given the current development in the international scene.
Mr. Lieven named one area of potential crisis in US-Russian security relations. Iran remains another contentious point between the US and Russian administrations, specifically, Russia's nuclear trade with Iran. Mr. Lieven emphasized two relevant points in this respect. Firstly, it is, above all, US policy that will drive the relationship and shape the Russian behavior. Secondly, the Russian behavior in response will be heavily guided by the behavior of other states, e.g. Europe and Muslim world. Currently, there is considerable verbal readiness from Russia to meet the US demands on Iran. However, the stated intention has been to put pressure on Iran through engagement. This gives the US a capacity to bring Russia on board to pressure Iran. Above all, if the US could design economic incentives to compensate the losses to Russia if nuclear links were broken. If Russia is not responsive, the approach of EU gives the US the chance to isolate Russia, which Russia would be extremely reluctant to encounter. However, this is the path of "qualified engagement". If the US chooses the path of a deliberate regime change and destabilization of Iranian regime, then a major crisis will emerge in US-Russian relations. But then, this crisis would have much broader international implications than only in US-Russian relations.
Dr. Anders Åslund addressed the economic aspect of US-Russian relations. He noted that this summit could signify a turning point in the relationship. The US demands on Russia are higher than the Russian demands on the United States. Even if Russia remains weaker, Russia does not demand much from the US today. The big challenge for President Bush this time would be to show that the US remains an indispensable power for Russia. Dr. Åslund highlighted three issues in this respect. The first concerns Russia's recovering economic strength, the second- trade policy, and the third - US-Russian economic relations.
In regards to the Russian economic resurgence, Dr. Åslund noted that in the last four years Russia has enjoyed an average economic growth of 6.4%. The growth is steady, and further discussion centers on the question of whether the growth remains at the same level or continues to rise. With all due caution, it is hard to deny that Russia is now on the track of long-term economic growth. The same happened in Germany in 1950s, Japan in the 1960s and Korea in the 1970s. Particularly, since President Putin came to power, he has ticked off one important economic reform after another. He references reform continuously in his speeches. In the last three years, according to business surveys by the EBRD and World Bank, corruption has fallen by about twenty percent in Russia. It is now insignificantly more than levels in Poland. Full market economic legislation has now been adopted, for example, a new civil code. Judicial reform has been undertaken-- essentially all the pieces are now in place, and, at least, formally render the judges independent. Tax reform- jewel in crown, with a flat income tax of 13%. Previously the businessmen complained most of all about taxes. Now that is not the major issue. Dr. Åslund argued that the point here is that this is not only oil or devaluation that is driving economic growth.
Furthermore, Dr. Åslund posited that the same trend is present throughout the region. Kazakhstan is doing even better than Russia, while Ukraine is on the same level as Russia. Generally, the whole region has had an economic growth of 6% in the last four years. This is one of the main growth areas in the world, and it is likely to remain so over the next decade. In contrast, the much cherished New Europe, the ten EU accession countries in Eastern and Central Europe have had only the economic growth rate of 3.5 % for the last four years.
Dr. Åslund addressed next Russia's trade policy, which poses many problems. Recently Russia has turned inwards in its trade policy. Instead of focusing on an early WTO accession, Russia has started negotiations on a free trade zone with Kazakhstan, Belarus and Ukraine at the end of February 2003. But in order to form a free trade area as such, Russia should already have a large body of trade connections, including an arbitration court, etc. The WTO already has all those mechanisms; why should these four countries try to invent a wheel and waste a lot of time and effort. Whoever wants to undertake any trade sanctions against any of these countries in the region can do so unpunished. In that respect, Dr. Åslund noted that Russia is wasting its time. It should focus instead on the WTO issue that unfortunately has been on the backburner for quite a while now.
On the issue of the US-Russian relations, Dr. Åslund pointed out to several moments. The first one concerns the 1974 Jackson-Vanik amendment. In April 1993 Clinton promised to Eltsin that it would be abolished, Bush promised the same to Putin at least twice. Even though the amendment itself has virtually no economic impact, it is detrimental for US-Russian relations. Visa issues have also been an ever-greater problem in bilateral relations. Many meetings and events are cancelled because many Russians, often at high levels, fail to get visas to visit the United States.
Edward Chow addressed the question of energy issues in the US-Russian relationship. He noted that these issues would receive little attention during the St. Petersburg summit. Perhaps, the official explanation would be that a lot of substantive work is being done and outcomes would be deferred until the next high-level meeting. However, the real reason behind this, in Mr. Chow's opinion, is that the energy dialogue is still finding its way. In the meanwhile the attention in the oil &gas world is diverted elsewhere currently. Nonetheless, Mr. Chow characterized such development of events as healthy and realistic. Rather grandiose and inflated expectations at the political level by both sides are often doomed for disappointment. In the US, the stated reasons were the diversification of the increasingly heavy dependence on imported oil away from Persian Gulf. Out-of-proportion discussion of the potential Caspian or Russian oil often did not consider that proven Russian oil reserves were making up only 4-8% of total global oil reserves.
For Russia, on the other hand, the pay-off must have been to have some economic, political and strategic relationship after 9/11. The conception of attracting US investors in Russia oil and gas sector as well as providing American markets with Russian oil failed to consider that American government does not make any decisions on American purchases of oil except for strategic petroleum reserves. It also neglects that what attracts American and Western investment is the actual Russian policy in gas and oil sector.
Mr. Chow pointed out that there is a certain disconnect between the policy environment and rhetoric of the Russia's stated policy. Structural distortions will continue to be an impediment on foreign investment. For instance, the continued maltreatment of the Caspian Pipeline Consortium - single largest operating Western oil & gas investment in the former Soviet Union- by the Federal Energy Commission in Russia is very telling. Thus, not too much is likely to happen in short and medium term. Market forces are in place, and business continues.
In addition, Mr. Chow pointed out towards another trend, that is the international industry's focus shifting to Persian Gulf. Both geologically and economically, the area is more interesting. Therefore, at this point there will likely be a reassessment of Russian energy resources in a different long-term oil & gas climate.
