The Kremlin at the G8’s Helm: Choosing the Right Steps

13 july 2006

Vlad Ivanenko

Resume: Chairing the G8 meeting in St. Petersburg is an important test of the Kremlin administration’s ability to advance its national interests abroad.
If Russia engages other members in a substantive discussion of its proposals,
it will make a significant accomplishment. Comments by Hiski Haukkala and Peter Rutland.

The time is rapidly approaching for Russia to chair the G8 Summit in St. Petersburg. This event marks the first time – at least since 1991 – when the Russian government has an opportunity to openly promote its national priorities within a very powerful international forum. The success or failure of the meeting will have profound implications for Russia’s search to find the right place for itself inside the global architecture.

 

A failure to advance its priorities is not the outcome that Russia would welcome. The Kremlin is irritated that the collective West responds coldly to its global initiatives. To understand the reasons for the West’s negative attitude, one needs to consider the image that Russia projects in the West. But first, let us discuss why Western recognition is important for Russia.

 

To participate in global policy-making, a country should satisfy two criteria: first, it must have means to support its position internationally and, second, it must be able to forge alliances with other strong participants. While Russia has obtained certain «means», as reflected in its relative financial wealth, it is not viewed as a reliable partner by what is called the «West». The latter, which is a loose grouping of countries centered on Euro-Atlantic institutions, dominates world policy-making. Increasingly, its power takes the form of «soft» authority, expressed through the appeal of Western economic might and its ability to define global agendas through key international organizations (IOs) that it controls. Because Western nations have closely aligned international interests, they tend to cooperate with one another – but not with Russia.

 

Western countries, or «partners», that share common interests form the nucleus of modern IOs. They may choose a close interdependence of economic systems with the consequence being a favorable global trade environment. This rationale underlies the establishment of the IMF, the World Bank, and the WTO. Still, trade pragmatism is an insufficient force to build partnerships in international relations. For example, China and the United States are large trading partners that share many trade-related concerns and, yet, they often fail to cooperate in bilateral deals. And then there is current account deficit that the U.S.A. runs vis-a-vis China and which affects both countries. While they recognize that the situation is unsustainable, each country fiercely opposes one another’s initiatives. The U.S. government insists that China should conduct a steep appreciation of its national currency, the renminbi, but the Chinese authorities have agreed only to a cosmetic appreciation, made last July. For its part, China advocates have been pushing for the U.S. to open its asset markets for Chinese acquisitions, but the U.S. government blocks virtually every Chinese attempt of a corporate buyout arguably on security grounds. This tug-of-war situation indicates that commercial interests alone do not build trust. Something else is missing. What is it?

 

Trade is insufficient for generating long-term trust because, as the example of the 1930s shows, it may reverse if the domestic situation deteriorates. The bond is much stronger if countries share common social values that preclude sudden reversals. The concept of shared values forms the very foundation of Western dominance of IOs. Take NATO as an example. This organization was built according to the Atlantic Charter that was signed by the U.S.A. and Great Britain in 1941. It emphasized the joint defense of democratic institutions against Nazi Germany and, later, the Soviet Union. With few exceptions, NATO was open only to countries that practiced forms of public governance compatible with the trans-Atlantic vision of democracy. Even its exceptions (Portugal or Turkey) came under increased pressure to democratize in due course. Another IO, the OECD, complemented NATO from a political perspective. Its initial mandate included management of the Marshall plan for reconstruction and development aimed at supporting free market principles. Today, the OECD continues to be an important forum that designs norms for market operations. The Council of Europe, which was originally envisaged as a prototype of liberal and democratic European Union, plays an important role in defining and monitoring human rights.

 

C

Certainly, cosmetic improvements alone are insufficient for developing long-lasting trust
ountries that adhere to these three sets of values – democracy, free market and human rights – comprise the collective «West». They have developed a complex network of interdependence based on common values, many of which Russia does not share. Unsurprisingly, because Russia and the West have little common interests, they tend to ignore each other’s problems, yet it is Russia that gets internationally marginalized. Facing strong resistance to its initiatives, this country is compelled to take one of two policy courses. First, Russia may consider building an alternative union with other large countries now excluded from the West, such as China, India, and Brazil. However, the value of such a policy is not very high. Unlike the West, the members of such a «union» share a single and very unstable feature: their lack of membership in the West. And once a member of the «pariah» club develops sufficient affiliation with the West, the group falls apart. The second policy is more painful but holds potential to be fruitful. Russia may set the goal of gradually absorbing Western values, thereby joining the West spiritually if not formally in the process. As Russia becomes governed by similar principles, the West will cease to be a separate entity from Russia, whose voice will be heeded because the key test that the collective West uses to distinguish between strategic «friends» and «foes» is a sharing in values.

 

The second policy is pragmatic and practical. Currently, Western policy-makers maintain two incompatible views on the potential for Russo-Western integration. Those who take a formal approach observe that Russia fails to measure up on many parameters of democracy, free markets, and human rights and conclude that Russia is a strategic «foe». Moreover, when formalists place Russia in a comparative perspective, they find that other major non-Western powers, for example Brazil and India (which together with Russia and China are commonly called the BRIC countries), are more closely aligned with the West in terms of shared values. Even China, an openly undemocratic country, fares better by the criteria of economic efficiency and the quality of its state apparatus. This conclusion is disadvantageous to Russia. It suggests that the West defines Russia and China to be strategic enemies on the democratic count, but the Russian situation is worse, since it is also recommended that Russia be blocked from economic integration in the world.

 

Other Western observers recognize that Russia has the longest history of coexistence with major Western powers (G7) among the BRIC countries. Russia and the West share many cultural traits brought about mainly by Christianity and the Enlightenment. Close cultural affiliations, therefore, serve to qualify the Western policy toward Russia. Today, Russia fails many parameters to be admitted to the West, but its historical legacy indicates that it is not an enemy either.

 

The ambiguity of opinions shapes Western debates about its appropriate Russian policy. Taking a formal approach is the first option. Since Russia is not a part of the West, it is not a partner and, therefore, it is a «foe» that needs to be «contained». To substantiate this position, its proponents emphasize Russia’s actual or imaginary failings in the area of democracy, human rights and its actions against those countries that the West recognizes as its «partners». The first accusation argues that Russia is hostile to the concept of the West. The second charge highlights potential threats that Russia presents to the collective West. Unsurprisingly, this line of reasoning implies that the West should restrict Russian access to strategic resources and know-how, as well as thwart its international initiatives in forums like the G8.

 

The second approach recognizes the value gap, but it takes into account cultural commonalities, which are conducive to Russia’s gradual integration with the West. Its followers observe that greater prosperity, associated with macroeconomic and political stability in this country, encourage greater acceptance of Western values. For example, a growing private sector allows citizens to earn income independently of the state and available indicators show that this independence is real. Real estate is booming and consumer credit is expanding. But because personal well-being improves against the background of a decaying public infrastructure, demand for democratization will grow. Therefore, current political apathy is misleading. Public agencies are outside of civic oversight but this situation is likely to be temporary.

 

Consider another commonly emphasized Russian «non-Western» feature: the dominance of public agencies over private businesses. It may be transitory as well. The Putin administration appears to agree that public micromanagement of the economy is an inefficient if not outright impractical idea. They want private entrepreneurs to take responsibility for economic affairs, an idea that is tender to the heart of the average bureaucrat. Russia’s public servants are no exception: unsurprisingly, they embrace enthusiastically the prospect of a public private partnership advocated by the World Bank. However, the Russian state and businesses are deeply mistrustful of one another, which is understandable given the unresolved consequences of privatization distribution. On the one hand, owners cannot claim full legitimacy of assets that were privatized in murky deals of the turbulent 1990s. They are afraid to lose their property, and take extra precautions not to irritate the Kremlin with “excessive” initiative. But the state itself is a hostage to this situation because it does not want to take responsibility for business operations. The separation of business and political spheres requires that the state credibly guarantee the protection of private property rights and private businesses – to firmly commit to be socially responsible. There are favorable signs that the problem will be settled as the political situation stabilizes and public pressure to review the privatization deals of the past diminishes. Once there is greater trust between public agencies and entrepreneurs there will be less need for state interference in economic affairs. This development will not go smoothly, however, since so many bureaucrats, for example, resist losing control over the private sector because it will deny them opportunities to interfere in business affairs for private gain (i.e. corruption).

 

The clash of the two Western policy strands will intensify in the run up to the G8 meeting. Considering the recent attempts by proponents of the confrontational approach (see, for example, Russia's Wrong Direction: What the United States Can and Should Do, published by the Council on Foreign Relations), this type of policy is being promoted more aggressively. Clearly, Russia should be concerned. Promoting Russia’s image as a reliable Western partner is an important task for President Putin at the upcoming G8 meeting. Fortunately, Russia has avoided making serious mistakes since its disastrous, and completely unwarranted, interference in the Ukrainian election of 2004.

 

In this situation, what should Russia do? The recommendations can be divided into quick and easy answers to advice that requires longer-term commitments.

 

The West will obviously raise the question of Russian policy toward its democracy-building programs, particularly within the CIS. Currently, Russia appears to be taking a militant stance on democratic issues, expressed in Putin’s words «dogs are barking (about Russia’s democratic failings) but the caravan (of inter-state contacts) goes on». This approach, however, is unwarranted because it assumes that the Russian democratic position is so weak that it cannot be defended. This assumption is false, however, as the discussion above has shown. In particular, the Kremlin can clarify the logic of its public oversight policy.

 

First, it must be acknowledged that Western public opinion is split on the issue of Russian democracy. On the one hand, the pessimists have given up on the possibility of Russia becoming a democracy under the current leadership. Meanwhile, the optimists understand that developing democracy is a complex process, but they need solid evidence and logical argumentation to see the «master plan». It helps when the Russian authorities frankly discuss domestic democracy-related events.

 

The recent NGO bill controversy is a good example. Last December, Russian Minister of Justice Chaika claimed erroneously that the Council of Europe, which conducted a preliminary expert assessment at Russia’s request, found the bill to be in compliance with Russian human rights obligations. This misleading statement raised outrage at the Council of Europe; it believed that its integrity had been compromised. However, the generally transparent process of public discussions that followed the controversy, and which involved active non-governmental participation, has partially restored some good faith. It is also telling that President Bush mentioned the public discussion around the NGO bill in his effort to explain why he did not give up on democracy in Russia (see President’s Speech reported by the White House Office of the Press Secretary, March 29, 2006).

 

Another way that Russia can successfully defend its record is to request formalization of the claim that Russia is really undemocratic. The Western (especially American) policy of promoting democracy worldwide is built on flimsy methodological foundations. Consider, for example, how the Freedom House democratic ranking, which is often cited as an authoritative indicator of democratization, conducts its assessment. It simply employs a relatively small group of experts (about a dozen) who provide evaluations on about two hundred countries by sifting through predominantly English-language publications. So let’s consider this organization’s Russian ranking as an example. The Freedom House downgraded Russia from being "partially free" to «not free» in January 2005, citing the Russian government’s intervention in the Ukrainian presidential election of November 2004 as a key parameter. While the interference was obviously unfortunate, the logic of linking national democratic developments with foreign policy is highly unorthodox to say the least. The formalization of democratic criteria is likely to improve Russia’s ranking. For example, data from the Polity IV project, organized by the University of Maryland at College Park, which relies on formal criteria, show that by the responses of top executive recruiting and democratic oversight Russia stands in the same league with Brazil and India – countries that the Freedom House assesses to be free.

 

To promote trust building, the Kremlin may agree on a confidential peer review in those areas where Russia underperforms relative to the other G8 members. Such a request would show that the Russian government is serious about establishing its credibility in the West. One document, Russia in the Spotlight: G8 Scorecard, prepared by the Foreign Policy Center, a British think tank with significant political clout, provides a potential framework to evaluate the performance of the G8 members. While more work is required – and trust-building measures introduced to ensure that such an assessment is not used for petty politicking – a frank discussion of Russia’s relative failings will help to improve Russia’s image in the West, as well as provide useful feedback. Peer reviews are conducted regularly at Western forums such as the OECD on both a confidential and open basis. Russia is familiar with the procedure; for example, the OECD completed an appraisal of Russia’s regulatory reform by Russia’s request in 2005. A review of democratic issues would be a step forward in the same direction.

 

In preparing for its G8 meeting, the Kremlin may want to reconsider the logic of its outreach programs, such as the Russia Today TV channel. This program appears to take on topics not so much of interest to the West as reflecting Kremlin priorities. For example, last November the Russian immigration service banned William Browder, the Founder and CEO of Hermitage Capital Management, from entering the country on «security grounds». This fact raised significant interest within the international community because Browder is a leading shareholder rights activist and outspoken advocate for better corporate governance in Russia. Many have interpreted the ban as evidence of growing state interference in private business affairs, while Browder has hinted that corruption among bureaucrats was the main cause for his entry ban. Because the Russia Today TV channel is designed specifically to address Western concerns, it was expected to conduct and report a detailed investigation of the event. The channel, however, chose to ignore this news story, thereby missing an opportunity to establish its credibility.

 

Certainly, cosmetic improvements alone are insufficient for developing long-lasting trust. Structural differences between Russian and Western values create a natural obstacle for the successful integration of the Russian and Western energy sectors. Here, the main problem is not to negotiate rights and obligations between contractual parties because legal wrinkles can be ironed out in due course. Similarly, the West will not press Russia to sign the Energy Charter, although some G8 members may claim that it should for it to succeed.

 

Overcoming differences in business practices seems to be the most important objective. A simple rumor that Gazprom had plans to acquire Centrica Plc, a British gas distributing company, sent shivers across the UK. Such a reaction did not arise because the Britons subscribe to economic nationalism, like some other members of the collective West. For example, news of Gas de France expressing a same interest would not disturb the British layman. But a firm from Russia, Gazprom or otherwise, is treated differently because it is often associated with irresponsibility, unethical behavior, and shadowy dealings. This attitude is further aggravated because the Russian approach to business negotiations seems to be to dominate and run over an opponent rather than to negotiate in a businesslike manner. When a company is state-controlled, it tends to worsen the attitude. In this case, British consumers fear that the Russian government may advance its political objectives by using Gazprom’s control of the gas distribution chain in the UK. Incidentally, returning to the previous example of the Chinese-American trade deficit problem, it is important to mention that if acquisitions were initiated on the part of Chinese private companies, Washington would be less intrusive. In fact, such deals largely fall outside of the U.S. government jurisdiction altogether.

 

The Russian government faces the difficult task of convincing its fellow G8 members that its global energy integration plan is not a strategic threat to the collective West. Lack of such assurances provides fertile ground for critics of the Russo-Western integration process. At the same time, the Kremlin has to proceed carefully since formal assurances – such as granting unrestricted access of Russian oil and gas pipelines to the Western oil majors – are fraught with other dangers. Russia’s recent history of rampant corruption, tax evasion, capital flight, and sell-off of strategic assets to foreign entities indicates that local private interests may subvert national priorities if left unsupervised.

 

Chairing the G8 meeting in St. Petersburg is an important test of the Kremlin administration’s ability to advance its national interests abroad. Because Russia is struggling to establish itself as a full member (many observers continue to call the group «G7»), the very fact that the meeting is taking place at all and without preconditions should be considered a success. If Russia engages other members in a substantive discussion of its proposals, it will make a significant accomplishment. However, to progress further, a partnership pact should be offered to the West. This requires adjusting Russian norms of good corporate practices, democratic oversight and the observance of human rights to Western standards. The G8 Summit in St. Petersburg offers an opportunity to take a significant step along this long road.

 

COMMENTS

 

Democracy and Energy Security: Finding the Right Balance


Hiski Haukkala is a Researcher at the Finnish Institute of International Affairs in Helsinki.

 

In an article by Vlad Ivanenko, Russia at the G8’s Helm: Choosing the Right Steps [featured in this issue], he raises two important questions: the fortunes of democracy in Russia and the country’s current and future role as a pivotal player in the ongoing game of global energy security. As with Ivanenko, I also see a link between the issues, but I see their interrelationship in a slightly different manner. In my view, democracy is not only the admission fee to the Western club of powers, but also the most reliable method of organizing societies in such a way as to ensure their stable development and prosperity – something that is in the interest of both Russia and the West.

 

Concerning democracy, Ivanenko draws our attention to what he sees as a mismatch between Western perceptions and Russian realities on the ground. According to him, both the West and the Russian leadership have got it wrong: Russia is much more democratic than it is given credit for in the West and the Russian leadership is needlessly on the defensive about this topic.

Ivanenko raises an important issue, but I think his analysis needs to be qualified with a further observation. We should ask: What is the current overall trend in the country? Is it toward more democracy, or have we been witnessing a rollback of democratic rights in Russia? I think in all fairness we must admit that the latter has taken place during Vladimir Putin’s presidency. However, a certain strengthening of the power vertical was certainly in order after the chaotic free-for-all of the Yeltsin era. But here one should tread carefully since there is always the danger that Russia is getting too much of a good thing: healthy re-centralization can easily turn into a jealous obsession with power.

The issue boils down to the question of finding the right balance: democracy is not a static end-state but a constant balancing act between those who govern and those who are governed. And it is natural for those at the helm to try to expand their powers. That is why institutions and democratic practices are required to restore the balance. In my view, the justified worry in the West concerning Russian democracy is that although Putin has been adept at bringing stability and amassing powers he has been less successful in building stable political institutions that would, on the one hand, constrain his powers and, on the other hand, guarantee a smooth – and democratic – succession to the presidency in the future.

Democracy is also linked to Russia’s future “global prominence,” as Ivanenko puts it. In my view, Russia’s prominence will flow from its ability to succeed both economically and politically. This means extracting the maximum harvest from its energy resources, as well as moving beyond them to a more post-industrial economic development. On this point, Russia is faced with a task of almost Herculean proportions. To take just one example, the investments needed to sustain the current levels of oil production are astronomical. Russia’s infrastructure is aging rapidly and in the coming years the situation will come to a head. For example, LUKOIL’s Vagit Alekperov made a grim prophecy about Russia, which, if correct, sees the country as becoming a net-importer of processed petroleum products by 2009. This prediction speaks volumes about the shaky foundations on which Russia’s current energy superpowerdom rests.

Democracy encourages accountability and transparency, the two best known antibodies against corruption that are in danger of engulfing a lion’s share of the vast financial resources currently generated by Russia. In order to succeed, Russia cannot waste these resources by their inefficient, negligent or outright criminal application. Russia desperately needs to get a big bang for its petroleum bucks in the years ahead in order to make that qualitative leap in her economic development. By strictly sticking to the principles of democracy, rule of law and transparency, Russia’s prospects of succeeding would be greatly enhanced. Thus, Ivanenko’s belief that Russia should think seriously about raising the issue of democracy and energy security in tandem on the G8 agenda are to be applauded, for it is my view as well that a link between these two concepts is indeed intimate.

 

Great Expectations

 

Peter Rutland works for Wesleyan University, Middletown, Connecticut.

 

Hopes are being raised in Moscow that President Vladimir Putin’s chairing of the G8 summit will finally cement Russia’s acceptance by the West. At the same time, the occasion is providing an opportunity for Western critics to roll out their usual alarms about Russian deficiencies – from its alleged back-tracking on democracy, to interference in neighboring states, to unreliability as an energy supplier. A case in point is the new version of the White House’s National Security Strategy, released on March 16, made some blunt criticism of the quality of democracy in Russia.


Russia’s quest to find a comfortable place in the international order since the end of the Cold War has not been an easy one. Excluded from long-standing institutions such as the European Union, NATO and OECD, President Boris Yeltsin clutched at the straw of observer status at the G7 in 1997 as a way to shore up his plunging prestige. With one foot in the door, it would have been difficult for Russia to retreat, so President Putin persisted in pursuing full membership, which he secured in 2002.


It can be argued that Russia has more to lose than to gain from the G8 gatherings. As the latecomer to the club, and the sole “outsider,” it sets itself up as the target for criticism by the pre-existing members. At the very least, it would make sense for Russia to downplay expectations for the summit.


How can Russia best respond to criticism of its democratic record? The most appropriate reaction is to adopt a low-key attitude and avoid ratcheting up the rhetoric. This is, in effect, the current Russian policy, and is seems to work well. The purpose of the G8 is to reach agreement about things upon which agreement can be reached. It is not a place to fan controversy for the sake of political audiences back home.


Putin can legitimately argue that Russia has come a long way – with the implicit reminder that things in Russia could be a lot worse. In the mid-1990s, as the Yeltsin system was tottering, State Department officials used to ask: “What happens if Russia ‘goes bad?’” It seems that such conversations have ceased. Partly, this is because some people think Russia has already ‘gone bad.’ But mostly, it is because the majority no longer think that a scare scenario of a fascist Russia, or a Russia locked in civil war and military coups, is worthy of debate.


Not satisfied with this “least worst” argument, some observers are encouraging Putin to more aggressively defend the current level of democracy in Russia – and to criticize the democratic achievements of the West. This is China’s chosen policy, with for example their annual report criticizing the U.S. human rights record. That is definitely not a path that Moscow should follow. They will not change any minds in the West, and by doing so they will only give fuel to those who wish Russia ill. The G8, and the accompanying press debate, is not an academic seminar where one can debate the nuances of how democratic institutions work in different cultures.


It is also worth asking whether G8 membership was really a prize worth pursuing. Organizations such as the G8 were created as a club for the advanced nations, and they have arguably outlived their usefulness by the accelerating pace of global change since 1991. The explosive growth of India and China means that two of the world’s largest economies are not sitting at the G8 table. Whether the issue be trade barriers, insurance against financial crises, or tackling global warming, the absence of India and China from the G8 is striking. This severely limits the utility of the G8 for Russia – and the other members – as a forum for tackling global economic problems.

Last updated 13 july 2006, 12:16

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