WASHINGTON: Flush with petro-dollars, Russia is again a star on the world stage. Russians have more geopolitical clout than they’ve had for 30 years. Moscow’s new confidence — perhaps overconfidence — is based on high commodity prices and seven years of strong economic growth. Now the Kremlin is flexing its muscles toward the Middle East, China and Europe.
But the West doesn’t yet get that Russia is back. Many US and European leaders continue to see Russia as a diminished power that can protest, but not obstruct, while the West binds Moscow’s neighbours to Nato.
At the G8 summit that begins on Saturday, hosted by Russian President Vladimir V. Putin in a newly renovated St. Petersburg, Washington should spend more time studying the trade statistics and less time focusing on Putin’s shortcomings. It needs to recognise that this Kremlin will vigorously pursue Russia’s national interests and will try to compete with the West for political and economic advantage.
Like it or not, there’s a new nonaligned power at the table.
The cornerstone of Putin’s strategy is resource nationalism, an expansion of state control over extractive industries that underlies Russia’s economic power and rising role in world affairs. State-owned oil firms control more than 30 per cent of Russian production; rumoured buyouts of now private oil firms could raise that percentage to 60 per cent by 2008. Early this year, the Kremlin took direct control of Gazprom, which produces 20 per cent of the world’s gas and possesses 16 per cent of total reserves. And the Kremlin has effectively used taxation and licensing policy to increase its sway over oil policy.
Russia’s economy is surging, averaging 6.1 per cent GDP growth since 2001. The retail sector has averaged 12 per cent growth, construction is up 10 per cent and services seven per cent. Although income disparities remain great, urban Russians in particular are enjoying higher living standards — and not just because of oil wealth.
Russia’s exemplary macroeconomic policy has kept a lid on inflation while the relative stability of Putin’s presidency has facilitated growth.
But is Russian economic power — and growth — sustainable? Probably. Energy and metals prices are likely to remain robust for the foreseeable future because of tight market conditions and instability in producer countries such as Iran and Nigeria. Despite recent corrections, metals prices are expected to remain high because of strong demand. And Russia’s political system shows few signs of instability.
Moscow’s reemergence in international affairs is manifest on many fronts. It is playing a pivotal and independent role in the Iran nuclear crisis. The Kremlin broke ranks with the West and held talks with Hamas. Russia is drawing increasingly close to China, to whom it will become a significant supplier of oil and gas within the next decade. And, last year, the two nations held large joint military exercises.
The days of Russia as a ‘junior partner’ are gone. Washington should recognise that all great powers have special influence in their neighbourhoods, yet quietly and frankly discuss differences over Eurasia and democracy.—Dawn/The Los Angeles Times News Service
