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Will Strained US - Russia Relations Dominate G8?

By Ian Bremmer

In July, it will be Russia's turn to host the annual G8 summit. Russian President Vladimir Putin is hoping the event in St. Petersburg will highlight Russia's new international prominence and the respect it now enjoys among the world's leading industrialized nations. Instead, it may well showcase the erosion of Russia's ties with the United States, just as President George W. Bush is hoping to win reliable Kremlin backing in the nuclear dispute with Iran and to create new opportunities for energy cooperation.

U.S.-Russian relations are in trouble. Russian opposition to the war in Iraq, Putin's increasingly authoritarian rule and U.S. criticism of it, confrontations over elections in former Soviet republics and less-than-robust U.S. support for Russia's admission to the World Trade Organization punctuate the steady deterioration of the relationship -- now at its lowest point of the Bush-Putin era.

When U.S. Vice President Dick Cheney offered the most pointed American criticism to date of Russian policy during a speech in Vilnius, Lithuania, in May, the two governments had a new bone of contention. The risk is great that all this bilateral baggage will be on display as Bush arrives in St. Petersburg next month.

Kremlin backtracking on democratic reform and its use of energy wealth to gain political leverage over Russia's neighbors have featured prominently in U.S. public expressions of concern. Speaking before a receptive gathering of leaders from Baltic and Black Sea states, Cheney warned: "Opponents of reform (in Russia) are seeking to reverse the gains of the last decade. . . . From religion and the news media to advocacy groups and political parties, the government has unfairly and improperly restricted the rights of the people." On Russia's increasingly assertive energy policy, Cheney said, "No legitimate interest is served when oil and gas become tools of intimidation or blackmail."

Certainly, many Bush administration officials are genuinely troubled by Kremlin moves to strangle Russian democracy and to purchase downstream energy assets that further extend the country's influence in areas it still regards as Russia's traditional "sphere of influence." But the administration is holding its public fire on the issues of greatest U.S. concern. They are Kremlin obstruction of U.S. and European efforts to pressure Iran to renounce its nuclear ambitions and Russia's growing energy relationship with China.

Moscow has been even more reluctant than Beijing to support Western efforts to resolve the nuclear standoff. There are several reasons.

First, the diplomatic conflict has added significant upward pressure on oil prices. Russia, the world's no. 2 oil exporter and its leading gas supplier, earns windfall profits from the higher prices. China, a net importer of oil, does not.

Second, if Iran is able to develop a nuclear program, Russian companies will win contracts to build its new reactors -- just as they are now working to complete construction of the $1.2 billion reactor in the Iranian province of Bushehr. In addition, many influential Kremlin officials have ties to Russia's arms industry. Russia is Iran's leading weapons supplier. In fact, Putin's government has rebuffed U.S. criticism of its sale to Tehran of advanced anti-aircraft technology, weaponry Iran would find useful if the United States or Israel were to launch air strikes on the country's nuclear sites.

Third, just as China resists U.S. pressure to press North Korea into a dangerous corner, Russia hopes to limit pressure on an Iranian regime that could produce substantial instability near Russia's southwestern border.

Ideally, Russia would prefer to live without a nuclear Iran on its doorstep. But because the Kremlin does not believe international pressure can ultimately thwart Iran's ambitions, it intends to profit from them and to maintain friendly relations with Tehran.

The other point of contention not featured in public U.S. criticism is the Kremlin's improved ties (particularly in the energy sector) with a fast-expanding China. Kremlin officials have hinted in recent weeks that unless Washington fully supports Russian membership in the WTO, it may block the participation of U.S. firms in the development of Russia's vast Shtokman Bering Sea gas field, which could supply enormous quantities of liquefied natural gas to U.S. markets. If an understanding between the two countries cannot be reached, Russian officials warn, other countries (read China) will be eager to step in at America's expense.

The U.S.-Russian "energy dialogue" is one of the few remaining vestiges of the cooperative relations Moscow and Washington established in the wake of the Sept. 11 terrorist attacks. Certainly, there are many Russian officials who deeply mistrust China. But the growing acrimony between Russia and the United States and European Union suggests many of them may trust the West even less.

The Bush administration's more explicit admonishment of Putin's government suggests that U.S. officials hope to earn Kremlin concessions on both the Iranian and energy supply issues by applying pressure on the eve of the St. Petersburg summit -- a strategy that often pays dividends with China. In advance of the Bush-Hu Jintao meeting in Washington in April, tough criticism of Chinese trade practices earned U.S. negotiators a gift bag of pre-summit concessions, including new measures to protect intellectual property rights in China, a number of purchase agreements and a lowering of barriers for U.S. telecom companies operating in the country.

Will this strategy work with the Kremlin? Probably not. Putin's approval rating (now hovering above 70 percent) and the enormous revenues Russia is earning from $70-per-barrel oil ensure that Putin's need for good relations with the West is limited. Further, as many governments outside the traditional group of U.S. allies have discovered, "standing up to the United States" is an effective way to bolster domestic popularity.

Will Putin choose to protect his summit by appeasing his Western guests? That appears unlikely. A newly self-confident Russian government may already have calculated that appeasement of the West has become an anachronism. When U.S. and European leaders arrive in St. Petersburg in July, they may well receive an unseasonably chilly reception.

Ian Bremmer is president of Eurasia Group, a political-risk consultancy and the author of "The J Curve: A New Way to Understand Why Nations Rise and Fall,". He can be reached via e-mail at research@eurasiagroup.net.

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