Editor’s Note: The following is the first of a series of articles from the Center for the National Interest’s new report: Costs of a New Cold War: The U.S.-Russia Confrontation over Ukraine. You can read the full report here.
Forecasting global developments is the first and foremost task of professional policy analysts, whether they work for the government or for corporations, and for researchers, who attempt to study events from an academic perspective. But experience shows that such forecasting is not always precise, in part because those who conduct it are often influenced by prevailing stereotypes. Thus, a combination of rational evaluation and literary fantasy sometimes proves to be much more accurate than traditional, matter-of-fact analytical work.
The specter of the future
Let us imagine a not-so-distant future—the fall of 2017. A major international conference entitled “One-hundred Years after the October Revolution: Lessons for the 21st Century” is taking place in Moscow. The conference’s attendees include Chinese President Xi Jinping, Brazilian President Dilma Rousseff, Indian Prime Minister Narendra Modi, South African President Jacob Zuma, Iranian President Hassan Rouhani, and the leaders of many other Latin American, Asian, and African countries. Additional guests include prominent European politicians—not only those professing leftist and social-democratic views but also Eurosceptics—and representatives of non-governmental organizations, anti-globalization movements, etc.
Russian President Vladimir Putin delivers a keynote address. Its focus is not on communist ideology or attempts to revive the Soviet economic and political model. Instead, its underlying message is that the Russian Revolution of October 1917 ushered in a new era in the history of mankind. It was a pivotal point that began a drive for equality and justice, and that rejected the power of a small group of countries, monarchs, and financial and industrial conglomerates over most of the world’s citizens. Although actual practice exposed the faults and blunders made when building “real socialism,” these mistakes did not undermine the international, historical importance of the event. In today’s new chapter, mankind should remember the energy for renewal and the aspirations to build a fairer and more democratic world that the 1917 Revolution unleashed. Now, at the beginning of the 21st century, the world is again undertaking this quest, having become tired of an international system dominated ideologically, politically, and economically by one power center that seeks to impose its development model on others, often by force. Everyone immediately recognizes the identity of this single power center.
Today, this sounds like fantasy. Modern Russia was born in 1991, through the rejection of communism. Vladimir Putin is the direct heir to Mikhail Gorbachev, the politician who drove to dissolution the Soviet system created by the October Revolution. Russian life and economic practices are characterized by many of the typical features of early capitalism, and are much harsher than living and economic conditions in the United States or in Western Europe. Doing business in Russia – and living there – are sometimes extremely unfair, partly due to the country’s feudal form of government and partly due to this government’s inefficiency. Beyond this, Kremlin ideology is based on conservative, traditional values, at least as they are understood by the present Russian leadership. Although Russia’s foreign policy is based in part on opposition to the West, Russia is not engaged in an ideological confrontation like the one that secured the Soviet Union support from and robust diplomatic ties with many developing countries.
However bizarre this vision may seem to Western readers, the logic of politics may push Russia to seek ways to expand its support in the world should confrontation with the West, and especially with the United States, deepen. If America and Europe respond to a possible political settlement in Ukraine by further increasing the pressure on Russia—to add to Ukraine’s negotiating leverage, or to try to go beyond stabilizing eastern Ukraine to return Crimea to Kiev’s control—that could still happen. And Moscow has many options for responding to American pressure, which is likely to grow in the years ahead almost regardless of immediate outcomes in Ukraine. But the situation is not symmetrical, and the United States objectively has more ways to influence Russia than vice versa.
The “war of sanctions lists” that erupts from time to time between Russia and the United States is a vivid, albeit comical, example that shows the uselessness of the “eye for an eye” approach. In 2012, after the U.S. Congress passed the Magnitsky Act, Moscow responded by adopting a similar law and creating a list of American officials to whom it intended to deny entry to Russia. But it was hardly a match for Washington’s move. In fact, it’s difficult to imagine why American Senators or judges would consider it necessary to go to Russia; their Russian colleagues are far more likely to travel to the United States. Furthermore, the mutual freeze of assets looks like a joke. There is no proof that the officials from the so-called “Magnitsky list” or other such lists have assets in the U.S., but America’s “violators of the rights of Russian people” surely do not have any holdings in Russia.
Clearly, however, Moscow will not sit idly and simply register new restrictions imposed by Washington—Russia’s retaliatory agricultural sanctions make this clear, as do Prime Minister Dmitry Medvedev’s threats to shut off access to Russian airspace for Western commercial airlines. Moscow understands that if relations continue to deteriorate further, the United States and its allies (many reluctantly and under pressure) may move over to informal but systemic measures intended to deter Russia and cut it off from Western financing and technology. In fact, widespread elite opinion in Russia holds that our relations with the United States have already assumed a state essentially reminiscent of the Cold War. Most believe this situation will most likely continue for several more years, and that it is not simply connected narrowly to the Ukrainian crisis.
Washington regards Moscow as a force that inhibits what the United States considers to be the proper functioning of the international system. Therefore, this force must be curbed and prevented from questioning the order of things. Yet for Russia, the incorporation of Crimea became a red line beyond which there is no going back without risking political collapse. If the United States and the West also view Crimea as a red line, and continue heavy pressure on Russia even after a possible settlement in eastern Ukraine, it may be difficult to avoid a worsening long-term confrontation.
Given these asymmetrical realities, Kremlin leaders understand that Russia should avoid getting involved in reciprocal responses modeled on the methods employed by the Soviet Union, which closely watched the balance of actions and reactions between both sides.
Symbolically, Russia has always acted quite reciprocally. Suffice it to recall its response to incidents involving Russian citizens in other countries, such as when three Russian school kids, the children of Russian diplomats, were beaten up under unclear circumstances in Poland in 2007. Subsequently, three Poles were attacked in Moscow. Or recall that when Dutch police used force against a Russian deputy ambassador during a row over Russia’s detention of a Greenpeace ship in 2013, his counterpart was roughed up in Moscow. This list can be continued.
However, Russia does no more than merely demonstrate its commitment to national prestige. Most understand that Russia lacks sufficient power to deliver an equivalent, reciprocal response to hostile U.S. moves. This means not only that its responses should be asymmetrical and “creative,” but also that they should be systemic and strategic. Above all, Russia should use objective global development trends that can benefit it, especially the rise of China and other emerging economies and the diffusion of economic power, while also exploiting U.S. weaknesses unrelated to Russian interests and activities but tied to America’s position as a global leader.
When experts study Vladimir Putin’s political style, they often recall one of his sport hobbies: Oriental martial arts, specifically judo. While musing over Moscow’s responses to U.S. pressure, one is compelled to draw an analogy from Putin’s pastime; namely, that one of the key skills in many martial arts (in judo and even more so in aikido) is the ability to first avoid a heavier opponent’s overpowering attacks and to then turn the opponent’s weight advantage against him by using momentum and inertia. These principles are likely to prevail in a potential Russian-American confrontation.
Will Russia Seek an eye for an eye?
But before one begins to study this confrontation from a martial arts perspective, one should consider several more likely and expectable Russian measures. They may not necessarily be taken, but the possibility that they will be cannot be dismissed. They are described quite well in an article written by Russian international relations expert Alexei Fenenko and published by the online edition of Russia Direct, and we may as well rely in our analysis on his conclusions.
One way to take revenge upon America, Fenenko argues, would be to create problems for the Northern Distribution Network, which is critical for providing logistical support to U.S. troops in Afghanistan. Since the United States is in the crucial stage of its withdrawal from that country amid a disastrous situation in Iraq, intentional complication of this process could create serious problems for Washington.
Denunciation of the agreements signed in 2008 and 2009 with NATO and a ban on land and air transit through Russia could also be a possibility. This would make the United States and its allies hurriedly look for alternative routes in the Caucasus and Kazakhstan, which would be costlier and longer, while transit through Pakistan would be fraught with serious security risks.
Experts also mention Russia’s pressure on its Collective Security Treaty Organization (CSTO) allies to curtail their cooperation with the United States and NATO on Afghanistan. This is possible in principle, but some of Moscow’s partners may sabotage this effort to avoid putting all their eggs in Russia’s basket. Uzbekistan, which has officially quit the CSTO and is not Russia’s ally, would be least reliable.
Another traditional area where Russia could make a U-turn and thus influence the United States is arms control and international nuclear security treaties, especially since practically all of them contain a clause allowing Russia to withdraw if its national security is endangered. In fact, when New START was under negotiation, some skeptical voices in Moscow questioned the need for new agreements with the United States. The treaty’s preamble, which links defensive and offensive strategic armaments, is interpreted in Russia as providing an indisputable right to repudiate all agreements if the United States proceeds with its missile defense plan. Since U.S. missile defense deployment is underway, it won’t be hard to find such justification in Russia.
In March of this year, rumors emerged that Russia would renege on the agreement giving American inspectors access to its nuclear arsenals. This hasn’t happened yet, but limiting transparency measures is a natural possibility as bilateral relations are increasingly characterized by militaristic rhetoric.
Some international treaties, particularly those signed by Presidents Mikhail Gorbachev and Boris Yeltsin, were never popular in the Russian strategic community. The wisdom of continuing to honor the 1987 INF Treaty and the Comprehensive Test Ban Treaty (CTBT), to which Russia acceded in 1996, are most often questioned. In a confrontation with the United States, Moscow could abandon them, especially since the CTBT has not been ratified by the United States or China and the INF Treaty is already producing fierce disagreements between Russia and America.
Following through on Vladimir Putin’s recent indication that Russia could terminate the INF Treaty would quickly affect the course of events, most likely reviving Europe’s worries of the 1980s, when the Old World feared becoming a battlefield between the United States and the Soviet Union. At the time, Europe’s fears were two-fold: On one hand, Europeans urged America to strengthen Europe’s nuclear forces to deter the Soviets; On the other hand, there were strong anti-war protest movements in Europe directed against America, which left-wing activists and sympathetic leftist politicians said was ready to sacrifice Europe to further its own superpower ambitions. Now, of course, the situation is different: Russia is not the Soviet Union, nor can it mobilize the broad European public for its benefit. At the same time, however, America’s popularity in Europe has plunged, especially after a series of U.S. scandals and failures in the world, ranging from mistreatment of prisoners in Iraq to electronic surveillance and spying.
Another possibility that would annoy America would be Russia’s return to Cuba and restoration of the Russian radar station at Lourdes, which was closed by Vladimir Putin in 2001. This option was discussed in 2007, when Russia and the United States were at loggerheads over missile defense, but things did not go any further then. Today, this looks more probable, as Russia is generally bent on restoring relations with former Soviet allies. The closure of the radar station angered Cuba’s then-leader, Fidel Castro, and its present leadership will most likely welcome its reopening, especially since it will give the country an additional source of much needed revenue. After Putin’s visit to Cuba in July 2014, the Russian president publicly denounced rumors of a deal to reactivate the station and said that no agreement has been reached. Of course, this doesn’t exclude the possibility of reaching one later.
Russia can also make things harder for the United States in the Middle East. Moscow’s firm and unyielding position on Syria in 2011-2014 has partly restored the Kremlin’s authority in the region, which was lost after the disintegration of the Soviet Union and Russia’s disinterest in the region during the 1990s. Many countries, including those historically relying on the United States but deeply disappointed by its ill-considered and inconsistent policies in the region, expect Russia to assume a more active position.
With Iraq falling apart and the Syrian-Iraqi region turning into a battlefield for religious war, Russia can step up its support for traditional partners such as Bashar al-Assad, Iran, and pro-Iranian Shiites in Iraq. Lifting sanctions on Tehran if its nuclear talks end successfully would allow Moscow to resume full-scale arms sales, energy trade, and peaceful nuclear cooperation with Iran.
However, frankly speaking, it’s hard to imagine what exciting and provocative steps Moscow could take now to create more problems for the United States in the Middle East, as the situation there is already highly chaotic – even by Middle Eastern standards.
Fenenko comes to the conclusion in his article that unlike the Soviet Union, Russia can, as a last resort, take drastic measures to destabilize the global situation. He thinks that, in the Soviet Union, the prevailing view was that global stability in itself is valuable, even at the cost of serious concessions. Now the situation has changed. Russia’s changed circumstances since the Soviet era is impelling Moscow to look at tougher retaliatory measures. The Soviet leadership felt more secure in its superpower status and could afford not to respond to provocation. The Russian leadership has no such safety margin.
However, it’s hard to agree with this conclusion. In fact, the Soviet Union did feel quite secure and never doubted its ability to control processes, since dramatic and dangerous confrontation always occurred within certain limits, written or unwritten. This enabled the Kremlin (and the White House) to do many things. For example, Moscow could afford to support and even foment regional conflicts, finance the “right” kind of extremist and terrorist organizations, test its strength in different parts of the world, and raise the degree of confrontation while firmly believing that de-escalation was quite possible, if necessary.
Today, the Russian leadership thinks differently. Vladimir Putin has spoken often about the dangers of a chaotic, unpredictable, and uncontrollable world, a world of unforeseen consequences. Uncertainty about the results is the main deterrent to geopolitical troublemaking. The Russian leadership believes that the United States pursues an adventurist and irresponsible policy by getting engaged in different foreign campaigns and endeavors with unfathomable results. The growing uncontrollability of the international environment is seriously worrying the Kremlin, which is well aware of Russia’s vulnerabilities to instability.
Thus the desire to improve Russia’s position by fishing in “murky waters” is not currently the underlying motive of the Russian leadership. Still, Russia views what is required for achieving stability differently than does the United States in some respects—as is obvious in Syria—and steps by Moscow to promote stability could instead look—in American eyes—like attempts to promote the opposite. Setting this aside, however, Russia’s actions are as a rule reactive and defensive in nature, even if they look offensive and aggressive. The incorporation of Crimea is not an exception to this, as it was driven primarily by the fear of having on its border either a completely uncontrolled and explosive state or an officially-avowed anti-Russian one. (Actually, both of these outcomes are still possible and an anti-Russian Ukraine seems increasingly likely.) Russia’s involvement, albeit quite reluctant, in the civil war in eastern Ukraine only bears out Moscow’s concerns that nothing can be predicted.
Besides, we should remember one of Putin’s personal features: Being generally quite suspicious of the West in general and having no positive feelings about the United States in particular, he is very fastidious about the promises he makes. This explains why Russia has so far not even considered terminating its cooperation with Washington and NATO on Afghanistan, even though this would be a logical step now that relations have chilled. It is notable that even the most consistent opponents of the United States in the State Duma mentioned this possibility for the first time only on July 17 of this year, after the Obama administration imposed fairly tough sanctions on selected Russian banks and energy companies.
Taking all of this into account, it would be hard to imagine Russia deliberately destabilizing the world order and becoming a global spoiler preoccupied with damaging the United States. However, Moscow can pursue a different strategy, one not destructive (destroying the existing world order) but instead constructive (building a new world order). The world may already be ripe for this, and Russia has some tools for doing this that it has not used yet. This brings us back to “martial arts” and Russia’s search for asymmetrical policy responses.
Many believe that the new Russian-American and Russian-Western antagonisms differ from Cold War-era tensions because of the absence of an ideological basis for the conflict. According to this view, the new confrontation is a classical geopolitical rivalry: America seeks to sideline Russia, while Russia naturally resists, biting back wherever possible. Hence the expectation is that Moscow will start “taking revenge” on the U.S. in the Middle East, East Asia, and elsewhere.
However, as was mentioned above, Russia would pay a significant price in a struggle like this. Yet there are two other options that are complementary, rather than mutually exclusive. One involves avoidance of any further, and termination of all existing, assistance to the United States without direct conflict. The other option is ideologizing the confrontation under the banner of building a new and more just world order in place of the U.S.-centric one that is now under increasing strain.
Let’s first discuss avoidance of assistance. It is widely believed in Russia that the United States, which has voluntarily assumed the role of world leader, is overstrained and unable to cope with this task. In practical diplomatic terms, this means that without assistance from its partners, Washington is unable to control many difficult processes in the world simultaneously, especially as their number is growing. In the most important conflict areas—Iran, Syria, North Korea, Afghanistan, and now Ukraine—the U.S. needs the participation of other countries. Even Russia is an integral part of solutions to some of these issues and others, as Americans themselves admit. Or rather, without Russia, there may be no solutions that do not require excessive expenditure.
At the same time, against the background of unending public political discussions, Russian and American diplomats cooperate in a businesslike manner on a wide range of issues, including Iran’s nuclear program, Syria’s chemical disarmament, coordination of an international response to North Korea’s behavior, the settlement of endless contradictions within the WTO framework, and responses to local conflicts in Africa. In many cases—such as the Iran, Syria and North Korea ones—Russia’s connections and capabilities significantly facilitate communication and enable progress or, at least, prevent regression. Numerous conflicts in Asia, which are bound to escalate, are an obvious area where Russian-American interaction might be useful. In some cases, Russia is viewed as a more neutral participant, considered acceptable to all sides, than is the U.S. or Europe (the post-Soviet space is an obvious exception to this, but here one can only note the ever-continuing “agreement to disagree”).
According to many Russian diplomats, if Russia simply ceases to participate in all these processes and ends its cooperation, the U.S. will soon be faced with growing problems. In this case, America’s military-political and economic weight will play against it, since expectations are high, but most complex conflicts require political solutions based on a multilevel and subtle approach. Russia’s disengagement would make this more difficult.
Last fall’s chemical weapons agreement on Syria is an elegant example of this. Without the Russian President’s contribution, the U.S. might have been involved in yet another military campaign in the Middle East, with unpredictable results. The alternative to either reaching a deal or going to war was that America would have backed away from its own “red line.” Judging by what is occurring in Iraq today, it is easy to guess who would have benefited from U.S. strikes against Bashar al-Assad’s troops: the Islamic State, which is now occupying much of Iraq, and which was also a significant component of the Syrian opposition. Obviously, Vladimir Putin pursued his own and Russia’s interests, and in doing so helped America to avoid taking unnecessary and dangerous political-military actions.
Generally, the scale of U.S. involvement in world affairs and the expectations associated with it are so great that U.S. leadership has turned into a heavy yoke that cannot be cast off, but is also increasingly hard to carry. Several years ago, when Barack Obama was preparing to become president, the idea of global burden-sharing—that is, delegating to key regional states the powers of supporting U.S. partners—became extremely popular. This was seen as a substitute for the unilateral leadership of the preceding Bush administration. Now we can say that the result is the opposite: the United States once again has to rely mainly on itself, while potential regional supporters behave more and more independently. But while unilateral leadership was previously a conscious choice, now it is the only possible option.
Passive behavior—meaning not only that Russia will not use its capabilities against the United States, but also that it will not use them at all—would be quite in line with the philosophy of many martial arts, including dodging blows and benefiting from the rival’s mistakes. Russia would not apply this tactic in the post-Soviet space, where it plays sports like Thai boxing or even ultimate fighting, but in the rest of the world, where Russia has few if any vital interests.
The second option is to take advantage of America’s setbacks in global governance and of the shortcomings in the global economic architecture. The Ukraine crisis has an important aspect that not everyone has been able to perceive: in a bid to punish Russia, the United States has used its power as a regulator of the world economic system as a weapon. By threatening to withhold the “keys” to globalization, it prompted its opponents to reclassify anti-Americanism into a conceptually much broader phenomenon: anti-globalism or, rather, alter-globalism; that is, moving beyond the current design of the global economy in favor of some other system.
The White House’s decision to impose sanctions against the Russian officials it sees as being closest to Vladimir Putin led to sanctions being imposed against four Russian commercial banks. The payment systems Visa and MasterCard complied with the sanctions and blocked credit card services to these banks, which caused problems for the banks and fueled long-discussed plans to establish a national payment system in Russia. Also, Russia’s Ministry of Finance tightened rules for the two credit card companies, demanding that they make a huge security deposit as protection against force majeure. The possible outcome of the conflict is unclear; the credit card companies are threatening to leave the Russian market, but in the context of this discussion, this is not the most important consideration.
Denying banks access to international transactions is a powerful lever, but demonstrating who the master in our shared global home is has a downside. U.S. world leadership is based on the conceptual premise that it not only ensures prosperity for all but that it is also just—it is not someone’s subjective will that decides everything; instead, the laws of the free market are supposedly decisive. Excluding Russian banks from payment systems, limiting the use of software produced by major IT companies, or shutting Russia out of the SWIFT system of international banking payments, a measure that was earlier taken against Iran, demonstrate an indisputable fact: one power has dominant influence and uses it for political purposes.
As long as such measures were used against countries like Iran, not to mention odious governments like Gadhafi’s in Libya, they did not have such a strong effect. But when such pressure is put on one of the most important and influential countries in the world, it means that no one can feel safe. It also means that, in a heated conflict with the United States, global rules can be changed and directed to work against any target Washington desires.
This stimulates new trends—the fragmentation of the global economy and society, the creation of zones of preferential trade rules and national or regional payment systems, and hedging against non-economic methods of global competition. American efforts to establish the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) trade zones actually undermine the WTO’s principle of universal rules for world trade. The rapidly strengthening partnership between Russia and China suggests that in response to U.S.-centric economic zones, they may try to compete with their own major projects—Russia’s Eurasian Economic Union and China’s Silk Road Economic Belt. Coordinating Russia’s and China’s interests in order to facilitate cooperation between these two entities will be difficult, yet hardly more so than is reaching an agreement between the U.S. and the EU on new trade rules.
Russian Prime Minister Dmitry Medvedev and Minister of Economic Development Alexei Ulyukayev have both already promised to challenge U.S. sanctions in the WTO as unfair competition. If filed, this suit could take several years to be investigated, but it will support the key goal of demonstrating how the U.S. undermines its own principles for political purposes.
After the end of the Cold War, the world saw little real institutional redesign. Some global governance institutions survived from the previous era, and some others, which formerly provided economic and financial services to the West, extended their operation to the rest of the world. At the rhetorical level, they came to reflect universal interests, but in practice there were continuous charges that these institutions remained instruments of Western control and dominance. The campaign of sanctions against Russia provides additional support for this view: for example, the European Bank for Reconstruction and Development, which in theory is an institution operating outside of politics, is being used by major shareholders to apply pressure on Russia.
I repeat, such methods of pressure were used in the past as well. But they never were used against such a powerful state. The key issues are not military power nor energy levers, but are instead ideology and the ability to produce a universal narrative. Vladimir Putin has already begun to focus on this, as was clear in his recent remarks at the 2014 BRICS Summit in Brazil.
The world as a whole is growing increasingly tired of the lack of alternatives to the U.S.-centric order. Not everyone likes the Western model of social order and political behavior, yet no one offers any viable alternative. Meanwhile, the complete domination by the United States in world affairs causes growing resentment and rejection of America, even among U.S. allies.
Previous attempts to offer alternatives failed either because the countries that made them did not have enough international clout, or because of their scandalous leaders, like the late Hugo Chavez. Unlike these countries, Russia still has much of the strategic mindset of the USSR, which aspired to be a systemic alternative to the West. This factor manifested itself last year in the Middle East, where many expected that Russia would convert its successful Syria policy into the role that the Soviet Union had played in the region—namely, as a second patron to whom one could defect from the United States. There were, and could be, no such plans last year. Now the situation is changing—and Russia may be at least ready to assume this role.
Acting as a serious troublemaker (Moscow did cross a red line in Crimea), Russia cannot continue to operate within the same global paradigm, wherein the West has an indisputable advantage. To strengthen its position, Moscow will have to oppose America ideologically and must formulate a different vision of the world order. Emphasizing conservatism will not be enough—this is good only for discussions within Western culture. A united “right-left” opposition is needed, in which the conservative defense of national identity would be combined with the Third World’s anti-globalist rhetoric about the injustice of the current system.
No other country but Russia can bring about such an opposition. China values the opportunities provided by globalization, although it is not happy about everything. In addition, it is not good at advancing global-scale ideas—this has long been America’s forte. By virtue of its cultural identity, China’s ideological influence can only spread within the Chinese cultural area. On the other hand, Beijing can tacitly support such an initiative; after all, it hardly misses any opportunity to remind the West that the time of its hegemony has passed. Also, China understands that Russia’s conflict with the West has only postponed a global rivalry between China and the United States, which may unfold and intensify in a few years, probably by 2020. The dispute between Russia and the West has hardly erased Sino-U.S. tensions. That is why Russian-Chinese cooperation may become one of Russia’s most consistent responses to increasing pressure from the United States.
At the global level, new Russian-Chinese cooperation is likely to spur systemic efforts by the two countries—albeit very cautious at first—to erode the global domination of institutions and practices of the Washington Consensus. A gradual weakening of the U.S. dollar in trade settlements among members of the SCO and the BRICS and the development and mutual recognition of national payment systems by them, the establishment by the BRICS of their own development bank, and the creation by Russia and China of an international rating agency to compete with the Big Three—Moody’s, Fitch, and Standard & Poor’s—could be the first signs of a restructuring of the global economy.
In early June, Russian Minister of Finance Anton Siluanov said at the fifth Financial Dialogue between Russia and China in Beijing that the two countries had agreed to establish a joint international rating agency. Earlier, the Chinese Dagong rating agency had announced plans to create a joint venture with American and Russian partners to organize an independent global rating group. The structure is to be called Universal Credit Rating Group. The partners will be Egan Jones Ratings of the United States and RusRating of Russia. The Russian parliament adopted a law on the establishment of a national payment system almost immediately after the banks Rossiya, SMP, and others were hit with U.S. sanctions. Potential international partners include China’s UnionPay, Japan’s JCB, as well as VISA and MasterCard. Brazil and Argentina may also participate in the project.
Russia’s post-Crimea turn towards China may have another unexpected effect with serious consequences: the “nationalization” of the Internet. In addition to the two countries’ close positions on the role of the Internet Corporation for Assigned Names and Numbers (ICANN) and on Internet governance (the need to delegate the governance functions from a private U.S. company to international institutions), the Russian government’s determination to establish a Russian analog of the Great Firewall of China can be a kind of revenge of the Westphalian order on the World Wide Web. As noted by Russian researcher Dmitry Yefremenko, “the famous principle cuius regio eius religio (‘Whose realm, his religion’) in the middle of the 2010s can be reformulated as ‘Whose server, his Internet’.”
The most likely outcome of this conflict will be the acceleration of a process that has long been spoken of in Russia: a departure from the U.S. dollar as the dominant currency in international trade transactions. Russian presidential advisor Sergei Glazyev has long insisted on such measures and has even proposed not using the dollar at all. Now this probability is discussed by Russian businesspeople. As a model, they look to Indian-Iranian transactions, whereby India pays for Iranian oil in rupees. Iran maintains a rupee account with UCO Bank in Kolkata, from where Indian exporters are paid against their shipments of various goods. Russia also had experience with such interaction in Soviet times. The Council for Mutual Economic Assistance, the economic wing of the Warsaw Pact, practiced trade in non-convertible currencies on a mutual offset basis. Another model, clearing, was used between the Soviet Union and Finland, for example. The May 2014 Russia-China gas deal, which contemplates $400 billion in gas supplies over the next 30 years, allows for some renminbi–ruble payments.
Russian-Chinese rapprochement may also have a purely political regional effect—a marked strengthening of the Shanghai Cooperation Organization (SCO). The SCO is already the most representative and influential organization in Central Eurasia. Against a backdrop of ongoing geopolitical changes, it can increase its symbolic capital even further. Until recently, China had continuously delayed admitting India and Pakistan to the SCO. But now, according to Russian diplomats, Beijing is ready to take a more flexible approach because of its growing rivalry with the United States in East Asia. An enlarged SCO (including India, Pakistan, and also possibly Mongolia) could become a serious and highly diversified organization with unique capabilities in a critically important region. If the current negotiations on the Iranian nuclear program succeed and the UN Security Council lifts its sanctions against Tehran, Iran could become a full member as well (it now has observer status). The SCO Charter prohibits countries under international sanctions from enjoying full membership.
Moscow will not be able to retain a monopoly on rule-setting in such a large organization involving such powerful countries. Actually, Russia does not have a monopoly now—China outweighs Russia economically, and if the SCO’s present composition does not change, there will be little room for balancing. But if the SCO admits India, Pakistan, and Iran, the diplomatic process within the organization will become more complicated but will also allow for more potential “coalitions.” In addition, the overall clout of the organization in the world will multiply. Back in 2005, the SCO called on the U.S. to clearly define a timeline for its presence in Central Asia. Now, the organization’s aversion to the U.S. presence in the region has only increased.
Of course, Moscow will also take into account the growing tension between Washington and the latter’s European allies. Many of these allies have resisted strengthening of sanctions against Russia, because those measures will badly affect EU economies. Sanctions have already generated visible rift inside the EU, where businesspeople and even some in the political establishment complain that Washington has totally disregarded European interests while struggling to punish Russia, rather than attempting to resolve the crisis in Ukraine. This comes on top of fury in Germany about comprehensive spying by the U.S. that might have a long-term impact on transatlantic relations. Russia will not be afraid to use these sentiments to advance its interests.
Over the 15 years of Vladimir Putin’s rule, we have learned his political style well enough. Firstly, he never responds immediately and usually takes a break to consider matters; he has strategic patience. Secondly, he does not like to break promises, even if they were given to his opponents. Thirdly, he has a comprehensive view of the world, and he understands the world system and its various interrelationships. Combined with a tactical flair and fast adaptation to changes, this helps him to do without an action strategy, which hardly exists in practice.
“As long as Russia is not subject to systemic sanctions, which could bring an artificial limit to our economy’s access to dollars…then I don’t think Russia will take any steps in order to bring about artificial de-dollarization,» the Financial Times quoted Andrei Belousov, economic adviser to Mr. Putin, as saying. Yet one cannot rule out the possibility for exacerbation of the crisis in relations with the United States. If a real confrontation begins, Russia will seek to use objective weaknesses of the world leader. If Moscow sides with advocates of a revision of the current international system, which it has never supported before, this may significantly change the global balance of power. Russia may pool its capabilities with those of China—not in the military sphere, as only fringe Russian politicians propose, but in their approaches to global governance. As masters of judo teach, it is better to not rely on one’s own strength but to instead use your opponent’s strength against him. Formulating an alternative approach to global governance when disappointment over the present leader’s approaches is increasing is consistent with this teaching. Russia can become a catalyst of this process, which has already begun. This does not guarantee an immediate effect, but it could be quite successful over time.
Fyodor Lukyanov is editor in chief of the journal Russia in Global Affairs and Chairman of Presidium of the Council on Foreign and Defense Policy.
 «Don’t Tease the Bear: Russia’s Retaliatory Sanctions Have Teeth,» Alexey Fenenko, Russia Direct, April 3, 2014, available at http://www.russia-direct.org/content/dont-te…
 See, for example, Charles Kupchan and Adam Mount, “The Autonomy Rule,” Democracy Journal No. 12 (Spring 2009), available at http://www.democracyjournal.org/12/6680.php.
 See Ivan Safranchuk, “Traveling in Different Boats,” Russia in Global Affairs No. 4 (October – December 2008), available at http://eng.globalaffairs.ru/number/n_11888.
 Leonid Grigoriev and Alexandra Morozkina, «Different Economies, Similar Problems,» Russia in Global Affairs, June 30, 2013, available at http://eng.globalaffairs.ru/number/Different-Economies-Similar-Problems-16051
 «Siluanov: Russia and China Will Establish a Joint Rating Agency,» Vedomosti, June 3, 2014, available at http://www.vedomosti.ru/finance/news/2730127… (In Russian).
 «Russian Companies Prepare to Pay for Trade in Renminbi,» Jack Farchy and Kathrin Hille, Financial Times, June 8, 2014, available at http://www.ft.com/intl/cms/s/0/9f686816-ed51-11e3-abf3-00144feabdc0.html#axzz3A79iXllB
 «Russian Companies Prepare to Pay for Trade in Renminbi,» Farchy and Hille, Financial Times, Op. Cit.