ESSAY

Myth of thenew cold warBY STEPHEN KOTKIN

Russia was not a liberal democracy underTeltsin, and neither has it reverted tototalitarianism under Putin. ButAmerica's long-established religiouslyinspired concern about "losing" Russia isonce more at the centre of debate

What is it about Russia that drives the Anglo-American world mad? Soviet communism col-

lapses, the empire is relinquished. Then come thewild hopes and failures of the 1990s—including tlie1993 half-coup and the tank assault on Russia's legis-lature, the results-adjusted referendum on a new con-stitution (still in force), the dubious privatisations, thewar in Chechnya and the financial default in 1998.But after all that, in December 1999 Boris Yeltsinapologise.s, steps down early—and names his primeminister and former secret police chief VladimirPutin as acting president. To widespread consterna-tion, Yeltsin predicts that the obscure spy is the manto "unite around himself those who will revive GreatRussia.'" Incredibly, this is exactly what transpires.

And this is a grand disappointment, even a fright-ening prospect? The elevation of Putin—a secret dealpromoted by Yeltsin's personal and political familymotivated less by patriotism than self-preservation—will go down as one of the most enduring aspects ofYeltsin's shaky legacy. Now, Putin, just like his bene-factor, has selected his successor, Russia's new presi-dent Dmitri Medvedev Sure, Putin has no plans toretire to a hospital-dacha, where Yeltsin had spentmuch of his presidency. Still, in his crafty way Putinhas abided by the constitutional limit of two presiden-tial terms. In May, Medvedev will acquire theimmense powers of the Russian presidency {a gift ofYeltsin) in circumstances whereby the Russian state isno longer incoherent (a gift of Putin). And this isgrounds fbr near universal dismissal in the west?

Two clashing myths have opened a gulf of misun-derstanding towards Russia. First is the myth in thewest that the chaos and impoverishment underYeltsin amounted to a rough democracy, whichPutin went on to destroy. When something comesundone that easily, it was probably never what it wascracked up to be. Still, the myth of Russia's over-turned democracy unites cold war nostalgists, whomiss the enemy, with a new generation of Russia-watchers, many of whom participated earnestly inthe illusory 1990s democracy-building project inRussia and are now disillusioned (and tenured).

Second is the myth, on the Russian side, that theKGB was the one Soviet-era institution that wasuncorrupted, patriotic and able to restore order. Thiscredits Putin's stooge entourage for the economicliberalisation that was actually pushed through bythe non-KGB personnel around him.

Each of these myths deeply rankles the other side.When a big majority of Russians accept or evenapplaud Putin's concentration of power, Anglo-American observers suspect not just ignorance but alove of authoritarianism. (Unfortunately, Russianshave never been offered genuine democracy and therule of law alongside soaring living standards.)When foreign-based commentators and academicscelebrate Yeltsin's Russia, which was worth a paltry$200bn and suffered international humiliation, whiledenouncing Putin's Russia, which has a GDP of $ 1.3trillion and has regained global stature, most Rus-sians detect not just incomprehension but ill-will.

Let's take a deep breath. To recognise that Putininherited a dysfunctional situation derived fromrampant in.sider theft and regional misrule is not tocondone his KGB-style rule, which has of en beennasty and sometimes self-defeating. Even thoughmany Russian officials are conscientious and compe-

Stephen Kotkin is director ol the programme on Russianand Eurasian studies at Princeton University

38 Prospect APRIL 2008

STEPHEN KOTKIN ESSAY

tent, tbe state remains too corrupt, as in most placesaround tbe world. At the top, privileged functionar-ies bave grabbed (and are still grabbing) prime busi-ness holdings. At all levels, officialdom now seeks itsrewards by mimicking the Kremlin's repression andmanipulation. But Russia is also increasingly pros-perous, with a new consumer-driven market econ-omy and a burgeoning middle-class society full ofpride. This combination of a relatively closed, unsta-ble political system and a relatively open, stable soci-ety may seem Incompatible—but there it is.

What happens wben a large, important countryturns out to have a dynamic, open market economyintegrated into the global system, yet a political sys-tem that is undemocratic and not democratising? Alot of head-scratcbing by experts. It may be comfort-ing in the corridors of punditry and social science towrite about how economic growth without the ruleof law is doomed to fail (China?) or bow economicgrow th eventually brings political liberalisation. Butmany countries, not just Russia, have more or lessmanipulated elections while lacking the rule of law,and yet still have dynamic market economies. InRussia private property is not guaranteed—andproperty ownership is widespread.

A conceptual adjustment to Russia's seeminglyimpossible reality is now under way, but the processis painful and slow. "When I worked in Moscow in1994 and 1995 for the National Democratic Insti-tute, an American NGO, I could not have imaginedthe present situation," confessed Sarah Mendelson, asenior fellow in Russian affairs at the Centre forStrategic and International Studies, in ÚK AmericanScholar recently. "We thought we were on the fron-tier of a democratic revolution. We weren't. We werewitnessing a market revolution." This basic under-standing, so long in coming, is not yet widespread.For the most part, pathetic cries about how "thewest," whate\'er that is, has (again) "lost" Russia, andbow the west must somehow "resist" Putin, persist.

Edward Lucas, by his telling, was once deportedby the KGB. This happened in 1990, when

Lucas, a British passport-holder, entered Lithuaniaon a Lithuanian visa after it declared its independ-ence but before the Soviet Union bad been formallydissolved. As far as tbis reviewer is aware, Lucas hasnever been imprisoned for bis convictions. Still,though not technically a dissident, be argues likeone. That is bow a very perspicacious journalist likeLucas, the central and eastern Europe correspon-dent of the Economist, could end up writing a notvery persuasive polemic called The New Cold IVar:How the Kremlin Menaces Both Russia and the H'est.Russia, he argues, is aggressively waging a globalwar for influence witb it.s vast natural resources and

piles of cash, and although the US and Britain aretrying to stand up to the mighty bear, Germany iscolluding, and China is, possibly, "co-operating."

Refutation of the idea that the cold war hasreturned is in fact provided by Lucas himself Henotes that eastern Europe is now free. Russians cango abroad. Russia's consumerist economy booms.Russia is not a military menace (its defence budget isat least la times smaller than that of the US). InLucas's words, "tbe old cold war is indeed over." Asfor what Lucas calls "tbe new ideology" in Russia,which has led him to claim a newcoXá war, he writesthat its "main ingredients are unexceptional: anedgy sense of national destiny, a preference for sta-bility over freedom and a strong dislike of westernhypocrisy and shallowness." He adds that "similarviews are held in many countries outside Russia."And yet, he insists, "it is tbe combination and inten-sity [of these views in Russia]] that are unusual."Not in the least. It Is the circumstance that Russiacan do something about such globally shared viewstbat appears to be the rub. Unlike Germany andJapan, which were defeated in tbe second world w ar,Lucas writes, Russia is "unrepentant" and "petulant."

Imagine that. And Imagine this: "Tbe Kremlin'srepresentatives throw habitual tantrums in interna-tional organisations. They block programmes incountries they don't like." And tbis: Russia is bully-ing small states. And this: Russia is cosying up todespotisms. Russia is using its leverage to acquireprime assets abroad. Russia is hiring lobbyists andagents of influence in western countries. Power poli-tics is not pretty, but is Russia's muscle-flexing thatunusual, or at all effective? "Slice by slice," Lucaswarns, "the Kremlin is adding to its sphere of influ-ence." Is tbat true? Here's his new domino theory: ifRussia is allowed to get its bullying way in the Cau-casus and the Balkans, then comes the turn of cen-tral Europe, even w^estern Europe, and the Arctic.Once again, however, tbe reader can turn to Lucas forrelief The Kremlin, he writes, "has systematically

BOOKS & ARTICLES DISCUSSED

The New Cotd PFar: How the Kremlin Menaces liolh Russia andthe {{'est by Edward Lucas (Bloom.sbiii'y)

The American Mission and ike 'Evil Empire": the Crusade for aFree Russia since ¡881 by David S Foglesong (Cambridge)

Rusnan Foreign Policy in the Twe?ity-ßrst Century and theShadow of the Past edited by Robert Lt'gvold (Columbia)

"The Myth of the Authoritarian Model: How Putin'sCrackdown Holds Russia Back" hy Michael McFaiil andKathryn Stoner-Weiss [Foreign Affairs, Jan/Feb ¿008)

"Russia's Wrong Direction: What the United States Canand Should Do," Project Director Stephen Sestanovich(Council for Foreign Relations)

Prospect APRIL 2008 3 9

ESSAY STEPHEN KOTKIN

Lucas cries wolf about some new coldwar while the very countries he insistslie in grave danger are inside the EUand Nato. Has he read the Nato charter?

overplayed its hand." Huffing and puffing over theKremlin's various pipeline projects, Lucas has toconclude that "the biggest question for Europe in thecoming decade is likely to be how to deal with a Rus-sia that is short of gas," So much for the energyweapon. Russia is "stuck," Lucas writes. "It settlesfor being noticed." Further: "it compensates for realweakness by showing pretend .strengths."

Lucas bores right through Russia's posturing, andstill insists on a call to arms. "Eastern Europe," hewarns several times, "sits on the front line of the newcold war." Incredibly, he invokes Chamberlain andMunich in 1938. The same countries, tbe same les-sons, he claims. Lucas is, in fact, uncommonly lucidon today's eastern European states. "The paradox,"he writes, "is that these ill-governed, tetchy andintolerant countries are tbe front line that the west istrying to defend." In other words, Lucas is cryingwolf about some new cold war while the very coun-tries he insists lie in grave danger are inside the EUand Nato. Has he read the Nato charter? He goes sofar as to demand "a confrontation now" because "ifwe don't win the new cold war on terms of ourchoosing, we will fight at a time and place chosen byour adversary." Lucas works himself into a latherover how the Kremlin conceals its "lawless, brutaland greedy reality" behind the trappings of elec-tions. Is this really "clever manoeuvring"? Ed—weare not fooled! Russia is an authoritarian regime. Itselites' actions are frequently reprehensible, andsometimes criminal even by Russian standards.

This could be the smartest incoherent book thisreviewer has ever read. Lucas writes divinely

and offers a sharp-eyed foray through the thicket ofpost-Soviet misinterpretations—up to a point. Takehis sober attitude toward the Yeltsin years. "Somesort of clean-up was certainly overdue," he writes.He calls the 1990s muddle "perfect... for a quietputsch by the heirs of the KGB." He further notesthat "the oligarchs were certainly a deserving tar-get," even if the selectivity of those attacks bothershim. Even more pointedly, Lucas writes that post-Yeltsin Russia "is a country in which it is possible fora private citizen to dream about personal fulfilmentthrough brains and hard work." And this: "Never inRussian history ha\e so many Russians lived so well

and so freely." All the same, Lucas asserts that com-pared with Putinism, "the Yeltsin years now lookless bad" and that Putin "betrayed" Yeltsin's commit-ment to "friendship" with the west. Back and forthLucas goes, alternately incisive and imconvincing.

Unlike his employer, the Economist, Lucas does notundersell Russia's economic achievements in order todiminish Putin. Rather, be likens the new Russia totoday's Brazil, or to India. He also notes Russia's hugepositive significance for Europe. "Russia is one of themost lucrative markets in the world, bigger than allthe other central and east European countries com-bined," Lucas says. At the same time, confoundingly,he suggests both that "western businessmen show noshame in following their wallets" and that "it is hardto fault German companies for acting in the interestsof their shareholders." Which is itP His purple pas-sages read like the inverse of the Kremlin's election-year propaganda: "We are facing people who want toharm us, frustrate us and weaken us," he asserts. Butif, as he writes, Russia's authoritarian version of capi-talism "is not a new civilisation but a dead end," whatexactly is the problem?

The problem seems to be twofold. First, whenLucas urges European countries to overcome theirdifferences with each other and with the US, he inad-vertently shows that "the west" may no longer exist inthe unified sense usually invoked. Second, Russia'sauthoritarian capitalism might not be a dead end atall. The rest of the world might have to live with anauthoritarian, increasingly rich Russia (and again—not just Russia), Lucas has reconfirmed that the long,torturt)us era of civilising missions has passed. Whitemen's burdens, new world orders, grandiose develop-ment schemes, huge foreign aid boondoggles, ci\ilsociety building—goodbye to all that. Like it or not,effective geopolitics in the 21 st century can no longerbe about forcing others to be like you, but mustinvohe accommodating new rising countries. Lucasknows this, but he doesn't seem to know what to doabout it. His advice for handling the supposed newcold war involves a mere two steps. The first is tothrow off "our" illusions and acknowledge Russianreality The next is to give up the naive idea that thewest can influence Russia's domestic politics.

"We are," Lucas himself concludes, "back in theera of great-power politics." Welcome to the lSthcentury. Still, there's one very important exceptionhere. The political friars in London, Berlin and evenBrussels will nianage a modus vivendi with Russia aswell as China, while holding at home to their liberaland democratic values. But can Washington, tlie cap-ital of a country that has only been around since theera of the civilising mission and ultimately owes itsexistence to Puritans, survive a world without self-assigned crusades? In the US, Russia's very make-

4 0 Prosped APRIL 2OO8

STEPHEN KOTKIN ESSAY

Lip, let alone its conduct, is treated as nothing lessthan an issue of American identity.

Just how many times can America "lose" Russia? Alimitless number, it seems. But there may be hope:

someone has finally traced in compelling detail thelong-standing, religiously inspired American move-ment to remake Russia. In The American Mission andthe "Evil Empire ": The CrusadeJbr a "Free Russia " sinceI88I, David S Foglesong, a professor at RutgersUniversity, shows that the missionaries, economicadvisers and activists promoting God, capitalismand freedom in Russia stretch back in time to Amer-ica's former slave abolitionists. American fascinationwith Russia took oif with the terrorists' assassina-tion of Czar Alexander II in St Petersburg in 1881,after which, James William Buel. a Missouri journal-ist and author of a popular account of the outlawsJesse and Frank James, dashed across the tsaristempire to gather material for a book. "Civilisation isspreading rapidly eastward; it cannot stop or goaround Russia," Buel w rote, "and whether with bayo-net or psalm-book the march will be made tliroughevery part of the czar's dominions."

Foglesong demonstrates that powerful Americanshave again and again seen the possibility, even neces-sity, of spreading the word to Russia, and then, whenRussia fails to transform itself into something resem-

bling the US, have recoiled and condemned Russia'sperfidious national cliaracter or its leaders—mostrecently Putin. The author's singular achievement isto show that well before the cold war, Russia servedas America's dark double, an object of wishful think-ing, condescension and self-righteousness in a truestfor American purpose—without much to show forsuch efforts inside Russia. Tlie author thereby placesin context the cold war, when pamphleteers likeWilliam F Buckley Jr and politicians like Ronald Rea-gan pushed a crusade to revitalise the Americanspirit. Russia then was a threat but also a means toAmerica's end (some fixed on a rollback of the allegedSoviet "spawn" inside the US—the welfare state—while others, after the Vietnam debacle, wanted torestore "faith in the United States as a virtuousnation with a unicjue liistorical mission"). Foglesong'sexpose of Americans' "heady sense of their country'sunique blessings" helps make sense of the giddiness,followed by rank disillusioîiment, vis-à-vis the post-Soviet Russia of the 1990s and OOOs.

In today's downer phase of the recurrent cyclethat Foglesong identifies, however, the missionendures. Consider that, in 2006, Stephen Ses-tanovich of the US Council on Foreign Relationsspearheaded a high-profile report sensationally enti-tled "Russia's Wrong Direction: Wliat the UnitedStates Can and Should Do" (put out under the names

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APRIL 2OO8 41

ESSAY STEPHEN KOTKiN

Russia has long served as America's darkdouble, an object of wishful thinking,condescension and self-righteousness ina quest for American purpose

of the politicians John Edwards and Jack Kemp). Tliedocument acknowledges that Wa.shington's efforts tomake Mo.scow into a (junior) partner for America'sglobal agenda have failed. So the report recommends"selective co-operation" on issues for which Moscowcould supposedly still be coaxed into doing the USbidding. At the same time, the report admits that theUS faces a difficult task in the ancient mission of try-ing to rescue Russia from authoritarianism. And yet,despite how vital Russia seems to the US—in thereport's illogic, precisely becau.se ofthat very need—the démocratisation of Russia must remain a US for-eign policy goal. "To go beyond mere expressionsabout the rollback of Russian democracy," the reportadvises, "the US should increase—^not cut—FreedomSupport Act funds, focusing in particular on organi-sations committed to free and fair parliamentary andpresidential elections in 2007-08."

Still more influential has been an essay publishedearlier this year in Foreign Affairs, "The Myth of theAuthoritarian Model: How Putin's Crackdown HoldsRussia Back" by Michael McFaul and KathrynStoner-Weiss. It is a rallying cry for America'sbesieged democracy-promoter.s, wlio are eager toregain the ground they lost after Iraq. The twoauthors are at pains to show that Putin's Russia isautocratic compared with Boris Yeltsin's "electoral"democracy (a telling modifier), and that Putin's autoc-racy has had nothing to do with Russia's economicsuccess. This argument is a red herring. The point isnot autocracy but the many vital economic liberalisa-tion measures that were passed during Putin's firstterm (radical tax revision, red tape reduction, privateproperty in land) as well as the maintenance of toughfiscal discipline and macroeconomic stability. Theautliors downplay these breakthroughs (while alsofailing to note that second-term presidencies theworld over are rarely know n for continued bold policyachievements). McFaul, the lead author, seemsunaware that his unsolicited concern for Russia con-tinues more than a century of failed evangelism, asoutlined by Foglesong. Indeed, McFaul and his co-author, both at Stanford, cannot be accused of exces-sive self-reflection: they condemn as "paranoidnationalism" Putin's straightforward observationsregarding tlie "growing influx of cash used directly tomeddle in our domestic afïairs"—a policy that McFaul

has taken part in and continues to advocate.Tiiat McFaul and Stoner-Weiss must fight their

democracy-promotion battle on economic groundsdoes not help their cause. When they assert thatincreased state ownership in the last few years hasslowed Russia's economic performance, they under-estimate the degree to which until very recently,Russian growth was helped by squeezing tlie lastdrops of blood from Soviet-era investments, a tacticthat has stopped working. Moreover, excluding thetwo energy giants Rosneft and Gazprom, theincrease in state ownership of companies in Russia isnot dramatic. And many Russian state-owned firms,including the energy giants, are either at or set toreduce the state share in themselves to 5 1 per cent.(In 2007, Russian companies sold $33bn in stockflotations, mostly on international markets.) Russia'sstate-owned companies, too, whatever their dubiousmethods, have not been resting on their bureaucraticlaurels but rather acquiring assets for the money(and ego). Of course, high debt accumulation tounderwrite M&A may not be a smart growth strat-egy (it sure looks stupid in the US). But as DavidWoodruff'of the LSE has pointed out, Russia's state-owned companies can redeem international capitalmarket obligations only by increased market shareand profits. They may turn out not to be up to thechallenge. But hey, that's capitalism.

As their supposedly clinching argument, McFauland Stoner-Weiss cite the circumstance that growtlirates in Russia's neighbours have often been slightlybetter than Russia's—to wit, they write that from1999 to 2006 Russia occupied nintli place among the15 former Soviet republics in ranking of growthrates. The differences in growth and hence rankingsare not that large, but let's accept them. The largerpoint, which the authors miss, is that theseeconomies are all linked, so the authors need to takeinto account the impact of the large Russian econ-omy's grow th on these far smaller ones. In 2007, ahalf dozen or more of the former Soviet republicswere utterly dependent on Russia as a source ofremittances. More than 30 per cent of Tajikistan'sGDP in 2007 consisted of remittances from Tajikslabouring in Russia. The estimate for remittancesfrom Russia to Moldova was close to 30 per cent ofGDP, for Kyrgysstan more than 20 per cent, and forGeorgia and Armenia probably between 10 and 20per cent. And so on. Consider the possible effects ifthe millions of Ukrainians who have found work inRussia suddenly had to go home, unemployed. Com-parable numbers for economic dependency are per-haps found only in the many countries receivingremittances from tiieir nationals working in the US.There are many reasons to be critical of Russian eco-nomic performance and policies, but the super-high

4 2 Prospect APRIL 2OO8

STEPHEN KOTKiN ESSAY

growth rate of Kazakhstan is not one of them.In reality, though, McFaul and Stoner-Weiss are

driven not by any interest in economics, but by thealleged urgency of démocratisation for US foreignpolicy In this regard, Robert Legvold, editor of thecollection Russian Foreign Policy in the Twenty-firstCentury and the Shadow of the Past, published last year,provides an echo. His introduction is a defence of along overdue recourse to some history in analysingcontemporary Russia. But even as he urges analyststo study Russia's past, he urges Russia "to escape itspast," by which Leg\'üld means its authoritarianism.Above all, he insists that the US and the EU have"legitimate" interests in Russia's domestic politicalarrangements because of their impact on Russia'sneighbours. (He might also have mentioned theimpact on Russia's inhabitants, through internationalhuman rights policy.) In other words, Russian foreignpolicy, in Legvold's mind, flows not from the maw ofRussian national interests but from the nature of itspolitical system. Voilà. Here, projected outwards, wehave hit upon one of those quintessentially Americanbeliefs about itself: namely, that the US conducts itselfin the world not on the basis of its national interestsbut on the basis of its democracy.

Not all the authors in the volume agree withLegvold that Russia's absolutism is unsuited to anera of globalisation. David McDonald portrays abso-

lutism in Russia as a capacious toolbox, and one thattoday too, can advance the country economically andculturally, even if such an approach carries the dan-ger of overreach. Still, the general tenor of the vol-ume falls in line witii what Foglesong has shown tobe an American-identity crusade projected on toRussia since 1881. Foglesong quotes DavidLawrence, founder of US News and IVorld Report,expressing the American establishment's underlyingcredo back in 1958: "There can be no safety in theworld as long as we have autocratic regimes." Thisbelief opens the widest possible field fbr a missionaryforeign policy (and for the inevitable hypocrisy). Itsucceeded in uniting liberal internationalists, likeMcFaul and Stoner-Weiss, with neocons over Iraq,and like all fundamentalist beliefs, it survived thatdebacle. What it may not survi\ e is the conversion ofthe American dollar into the Mexican peso.

The unsolved murders of Russian journalists andthe arrests of political activists make manyobservers want at a minimum to chalk up Putin'sboom to dumb luck—floating on highly priced reser-voirs of oil and gas left by nature hundreds of mil-lions of years ago—and to predict a come-uppance.Maybe Russia is set for a fall. In terms of quotidianstate functions, Russia is badly governed, whichmakes it vulnerable in a crisis. In a global worldwhere everything is connected, if China's boom loses

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Prospect APRIL 2008 4 3

ESSAY STEPHEN KOTKIN

air, Russia too will feel the enormous downdrauglit.And Wall Street's financial engineering may yetannihilate everyone, good and bad alike. Whateverthe future holds, it is clear that the world has notseen sucli large authoritarian market economies likeRussia'.s or China's since, well, Nazi Germany and itsally Japan. But today's authoritarian Russia andChina are not militarily aggressive. And EdwardLucas notwithstanding, these countries are also notlikely to be defeated in war and occupied so that thelikes of Michael McFaul and Kathryn Stoner-Weisscan have another go at the democracy crusade sowell chronicled by David Foglesong.

The power of the Kremlin can seem all-encom-passing. Across the 20th century, the average

time in office for leaders in the democratic US hasbeen about six years. In autocratic Russia, it has beenaround ten. Remove Stalin's long despotism, and thefigure falls to eight. Still, authoritarian successionsare always difficult from a regime s point of view.(Perhaps the most remarkable fact about China is notits market transformation but its two .smooth, albeitopaque, political transitions after Deng Xiaopingstepped down, first to Jiang Zemin and then to HuJintao.) One of the many weak points of authoritari-anism is that it makes bad options appear attrac-tive—like hoping, as many do, that Putin remainsRussia's real ruler. But whatever the fate of the latestsuccession, the Kremlin's China-like strategy willlikely continue: suppressing many of the politicallyliberalising aspects of globalisation while pursuingits economic aspects to the ends of the earth.

Just like the Chinese and the Arab autocracies, theRussians are coming—and for real this time. WhenRussian capital, already highly \ isible in Europe andBritain, comes with ever greater force to Wall Streetand to Main Street America, will Americans under-

"I'm going to talk about myself in a veryloud voice. What would you recommend?"

stand the value of Russia having a substantial stakein US success? Will Americans appreciate that hav-ing Russian-owned assets on American soil thatcould be seized provides a huge source of leverageover the Kremlin that is today lacking? As for theEU, it may be crucial tor north Africa and the Lev-ant, but it is far less so for Russia (or China). The EUseems likely to be bede\ illed for some time o\ er thestatus of Turkey, while Russia, just like China, con-tinues to pursue bilateral relations with individualEuropean countries. Russia's trade with EU coun-tries is huge—three times its trade with the formerSoviet republics—and Germany is easily Russia'sbiggest single partner (in '2007 tlieir bilateral tradehit $5í2.8bn). Still, right now no place matters moreto Russia than London as a commercial hub of glob-alisation. London's importance is one reason Russiahas tried—with episodes like the British Councilharassment—to send forceful diplomatic messagesover anything related to its sovereignty, just asChina does, without undermining real interests.

We should not, however, exaggerate Russia'sglobal power. In future the US, the EU and Chinawill each account for no less than one fifth of globalGDP. E\ en if Russia does become the world's fifthlargest economy, it would still constitute no morethan 3 or so per cent of global GOP. The Kremlinwill use its seat on the UN security council and pres-ence at the G8 to defend its interests globally, whilealso seeking good relations with China in variousforums. But Russia is not an EU country, not a USally and not a China ally. It is percei\ed as a possiblepartner, but also as a potential enemy, by all three.Above all, if Russian companies, whether state-owned or private, are not able to go toe-to-toe w iththe best companies in the world, you can forget thewhole game. "Even with the economic situation inour favour at the moment, we are still only makingfragmentary attempts to modernise our economy,"Putin said in a speech this year on Russia's long-term de% elopment strategy to 2020. "This ine\ itablyincreases our dependence on imported goods andtechnology, and reinforces our role as a commoditiesbase for the world economy." He added that "theRussian economy's biggest problem today is that it isextremely ineffective. Labour productivity in Russiaremains very low. We have the same labour costs asin tlie most developed countries, but the return isseseral times lower. This situation is all the moredangerous when global competition is increasing."

In short. President Medvedex and, if so named.Prime Minister Putin have their work cut out. •

FROM THE PROSPECT ARCHIVE

Robert Skidelsky on Russia's oil cursewww.prospect-magazine.co.uk

4 4 Prospect APRIL 2OO8

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