Russia: The “Cold Friend”

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Russia: The “Cold Friend”

by Michael Liebig


On March 4, 2012, presidential elections will be held in Russia. It seems certain that Putin will win, becoming President for a third term, after the previous two terms 2000-2008 and having been Prime Minister 1999-2000 and 2008-2012. The time span in which Putin has been the most powerful man in Russia is approximating that of Leonid Brezhnev who ruled the Soviet Union from 1964 to 1982. The Brezhnev period was a time of “stability and stagnation” which was followed by the erratic Gorbachev years and the collapse of the Soviet Union in 1991. Putin has effectively stabilized Russia after the chaotic 1990s, but in the past years stagnation has increasingly gripped Russia.

Stagnation Bears Frustration

The vote for Putin will likely be significantly lower then in the 2004 presidential elections, when he received 71%. Putin is the chairman of United Russia party. At the December 2011 Duma elections, United Russia lost roughly 10 million votes compared to the 2007 election. The party still holds a comfortable absolute majority in the Duma, but the heavy losses are indicative of the mood of discontent in Russia.

Frustration is growing on both ends of Russian society: among the well-educated and rather prosperous middle class and the socio-economic “losers”: low skilled workers, pensioners and the people of the vast Russian countryside. The latter are the voting base of ultra-nationalist and xenophobic LDPR of Vladimir Zhirinovsky and the Communist Party led by Gennady Zyuganov, which together gained 32% of the vote in the Duma elections.

Since the Duma elections, there has been a series of large-scale demonstrations in Moscow and other big Russian cities. The demonstrators claim that widespread vote fraud occurred at the December elections and denounce the “Putin System” as autocratic and corrupt. The base of these protests is Russia’s urban middle class – frustrated by the Kremlin’s habitual “ownage” of political life – known as the “sovereign democracy” system. The Russian middle class is equally frustrated over the arbitrariness of the state bureaucracy, endemic corruption, and the inept justice system.

However, while the protests do reflect popular frustration, they don’t represent a political movement: there is neither a charismatic leader nor a coherent programmatic agenda. Any comparison with the “colored revolutions” in other post-soviet countries seems way off. No serious political actor in Russia wants the country to get destabilized. The reason is obvious: During the 20th century, Russia has simply experienced too many violent ruptures. Moreover, the average Russian is very patriotic and doesn’t want to see Russia weakened in geopolitical terms. Talking to friends in Russia, I get the impression that Putin’s economic and political stabilization of Russia following the chaotic 1990s is still very much appreciated. But now the middle class is fed up with the status quo and wants more: the modernization of the state, a transparent and accountable state bureaucracy and the strengthening civil society. The middle class wants genuine political reforms.

Has Putin understood the message? There are some indications that he will go for more than cosmetic political reforms. On his website, Putin criticizes Russian state’s “tendency for excessive repression“ as “morally undermining society” and calls for “accountability” of the state organs towards the people. More than words is the removal of Vladislav Surkov, the intellectual architect of “sovereign democracy” system and eminence grise of the Presidential Administration from 1999 to 2011. Surkov was “kicked upstairs” to become a deputy prime minister. Another indication is the candidacy of Mikhail Prokhorov for the presidential elections. Prokhorov – aged 44 and a billionaire businessman – is running as an “independent”. He will likely receive a significant protest vote. The question is whether that vote will make him an political actor who might loosen up Russia’s stiff and sterile political life?

Russia in the Multipolar World Economy

Putin seems to have understood that there is no way to lead Russia out of its current stagnation if “traditional” state-dirigist and bureaucratic methods prevail. Russia needs the technological innovation of its industrial base and technologically competitive small and medium-sized enterprises. Russia needs to to make the fullest use of its good science and education system. Russia needs a full-spectrum modernization which is impossible without political reform and liberalization.

Political reform and liberalization are not only vital for Russia’s domestic political stability, but for its foreign policy stance. Russia’s must find a new place in the multipolar world system in which Asia is on the rise both in economic and strategic terms. In order to remain an independent and substantial actor in the multipolar world system, Russia is forced to take new foreign policy initiatives, which necessarily have to be economically focused. Russia’s traditional imperial-vectored, “hard power” foreign policy has simply become unrealistic in the present world situation.

Both China and India each have around 1.3 billion people. Within a decade or two, China will have the biggest economy in the world. India will not be far behind. Europe is currently stuck in serious problems, but the technological strength of the EU with its roughly 500 million inhabitants is there to stay. The United States – 310 million citizens – will likely recover economically over the next decade. Russia is the country with biggest territory in the world, but relative to its size, the population is rather small: 142 million.

The Russian leadership has made the decision to create an “single economic space” in Eurasia comprising Russia and neighboring countries which formerly belonged to the Soviet Union. The new regional economic community is to have sufficient own weight as to be one “pole” in the world economy along with the Asian heavyweights China, India, Japan and the regional economic association ASEAN, as well as the EU, the USA and Brazil.

The “Eurasian Economic Union” Project

On October 4, 2011, Putin published an opinion piece in Izvestia with the programmatic title „A new integration project for Eurasia: The future in the making“. He wrote: “We propose a model of a strong supranational entity [in Eurasia] which is capable to constitute one of the poles in the present world”.

Barely noticed by the international media, on October 18, 2011, eight former Soviet republics signed a treaty on a free trade zone in St. Petersburg. The list of signatories includes Russia, Belarus, Kazakhstan, Kyrgyzstan, Tadjikistan, Armenia, Moldavia and Ukraine. Some key commodities like oil, natural gas, metals, and some agricultural products are still exempted from the free trade agreement, but it is an important first step towards a transnational economic space in Eurasia.

The next step came a month later: on November 18, 2011, the declaration on the formation of the Eurasian Economic Union (EAEU) was signed in Moscow between Russia, Belarus and Kazakhstan. Kyrgyzstan and Tadjikistan will likely join in the near future. The EAEU is not merely a free trade zone, but a customs union, meaning common tariff policies vis-a-vis third-party countries plus an abolition of investment, labor, and currency restrictions between the participating countries. The EAEU is a regional economic community whose depth of integration would roughly correspond to that of the European Economic Community (EEC) in the 1960s and 1970s. This is also suggested by the fact that – similar to the Brussels Commission – a supranational EAEU Commission will be established in Moscow to coordinate the economic integration process between the member states.

Some observers have viewed the EAEU project either as a neo-imperial attempt by Russia to reestablish a “soft version” of the former Soviet Union or – alternatively – as a futile attempt to revitalize the defunct “Community of Independent States” (CIS) which had been created in 1991, but never gained any real life significance.

It should be rather obvious that the EAEU is none of the above. It’s primarily an economic project. Belarus, Kyrgyzstan, Tadjikistan, Armenia, Moldavia or Ukraine for that matter have an overriding self-interest in a single economic space in Eurasia. They depend on the Russian market for their export products. They depend on Russian investments and on Russian energy supplies.

Russia’s prime motive is geoeconomic in terms of the global economy. Russia needs a single economic space that can counterbalance the other big economic powers, notably in Asia and the EU. The world economic thrust of the EAEU project is underlined by the fact that – just a month after founding the EAEU – Russia joined the World Trade Organization (WTO). Joining the WTO means that Russia feels confident enough that it can stand up to the global economic competition.

Russia’s WTO accession came exactly 10 years after China had done so. During this decade, China’s economic and political rise has further accelerated and its global position – economically and strategically – has consolidated. The “Centre for Economics and Business Reserach” in London published an prognosis in late December 2011 on the occasion of Brazil replacing Britain as the sixth-biggest economy in global ranking. The London institute forecasts that the Russian economy will move ahead of both the British and French economies by 2020.

The EAEU “counterbalancing” the Asian economic heavyweights and the EU? Isn’t that a rather far-fetched proposition? Not necessarily so: Russia owns the biggest reserves in energy and mineral resources worldwide. Kazakhstan too is big country with vast energy and mineral resources. Both Asia and Europe need these resources. In the coming decades, the EAEU will not only be an irreplaceable source of energy and minerals for the world economy, but the central logistical corridor for the economies of Asia and Europe. Pipelines, rail lines and highways will complement the sea-lanes between Asia and Europe. The EAEU will constitute the transcontinental “land-bridge” between Asia and Europe. Thus, the EAEU is a viable project in geoeconomic terms.

The European Union, Russia & EAEU

After meeting with Putin last December, Eckhard Cordes, the head of the very influential “Eastern Committee” of the German business community and former CEO of Metro said: “We hope that Eurasian Union will be the connecting link between the EU and the Asian markets.” He said that the EAEU project plus Russia’s WTO accession should be an additional reason to intensify trade and economic cooperation between the EU and Russia plus its EAEU partners. Cordes demanded that negotiations between the EU and Russia on a free trade agreement should be started without further delay.

Alexander Rahr is the Russia expert of the German Association for Foreign Policy in Berlin.
After a three-hour meeting with Putin, Rahr urged the German government and the EU as a whole not to underestimate the future importance of EAEU. Putin wanted the EAEU project to be oriented towards both the EU and China, said Rahr. But if the EU were to confront Russia with unacceptable conditions for mutual economic cooperation and integration, Russia would turn to Asia, the new center of gravity of the world economy. Rahr warned the Europeans to not dismiss this geoeconomic option as a Russian bluff. For Germany to remain a world leader in technology, it needed secure access to Russia’s energy resources and raw materials on the basis of a long-term, strategic partnership with Russia. While globally operating European companies had already grasped this reality, several EU governments, some due to understandable historical resentments, were still dragging their feet. Time is running short for Europe to make a genuine commitment on its relationship with Russia.

Rahr is both political scientist and a man of realpolitik. The title of his latest book is programmatic: „The Cold Friend – Why we need Russia”. He sees clearly the imperative that Russia must modernize and liberalize itself. But he argues that the EU’s pertinent insistence that Russia strictly adopt the Western European model of liberal-democratic „good governance“, is precisely not the way to advance the modernization and liberalization of Russia.

Russia drifting towards Asia at the expense of its cooperation with Europe would certainly be detrimental to the core strategic interests of the EU. Thus, it would be mistake of historical dimensions if Europe would miss the economic and political-strategic opportunities which derive from a genuine partnership with Russia and the EAEU.

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