Questions Posed by a Russian President

Background to Putin’s Visit

At a critical moment in global power relationships, President Vladimir Putin will become the first Russian Head of State to visit Australia, in September 2007. He will command attention as Australia’s major allies, the United States and the United Kingdom, suffer increasing military and economic strains and show signs of reviving Cold War hostilities towards Russia.

20 other national leaders will accompany Putin, participating in the APEC Heads of Government Meeting in Sydney. Putin’s qualities, however, make him stand alone. He is engaged in a public, but mock friendly, battle of wits with the President of the United States that frequently leaves the latter wrong footed. This is taking place against the background of Moscow seizing the upper hand in Central Asia, where the United States clearly had other intentions. Putin has won a major strategic victory by foiling American and European attempts to build alternative routes for oil and gas to Europe from central Asia.

Mike Whitney summed up the situation in an Information Clearing House report on 18 July 2007, after an apparently unrewarding visit to Moscow by Henry Kissinger, George Shultz, Robert Rubin and other American powerbrokers.

America’s pre-eminence in the world depends to a great extend on its ability to control the global economic system. That system requires that the dollar continue to be linked to oil reserves. But everywhere the petrodollar is under attack. The only solution is to control two-thirds of the world’s remaining petroleum –which is in the Caspian Basin—and demand payment in dollars. But that plan has failed. The war in Iraq is lost and the longer America stays, the harder the fall will be. Oil will not continue to be traded in petrodollars, the USD will lose its place as the world’s “reserve currency”, and America will slide into a long and agonizing economic downturn.

The problems of the United States are complex, and the Russian bear is a reassuring, if wily, scapegoat. Putin has recently withdrawn Russia from the post-Cold War treaty restricting the deployment of forces in Europe, in a robust response to a proposed American missile defence system in Poland and the Czech Republic. Even more boldly, he has struck at a major pillar of post-1945 global order by questioning the continued viability of global institutional and power structures that are perceived to serve American interests.

This environment will pose unfamiliar challenges for the host nation, Australia. With the end of the Soviet Union, it has been inclined to approach Russia as a distant nation, with limited relevance to Australia. Its diplomatic staffing in Moscow has not reflected Russia’s enhanced standing and leverage.

Moscow has established itself as a, if not soon the, key supplier in meeting European and Asian energy needs and has consolidated its decisive role in determining power structures and energy access throughout Central Asia. Surprisingly, it has also emerged as an apparently formidable producer of advanced military technology. These successes have enabled it to build up the world’s third largest foreign exchange surplus, putting it in a position to pressure the weakening American dollar.

As if this were not enough, in July 2007 after several years helping put together a Russian aluminium giant, the first Chief Executive of Australia’s mining giant BHP Billiton, Brian Gilbertson, remarked on Moscow’s vast potential for expanding commodity production. Given its vast territory, its high quality technical expertise and its inexpensive labour it seems inevitable that it will emerge in the future as a serious competitor for Australia in global commodity markets.

Australian media has reported little of the above. Nor has it covered adequately the nascent influence of the Shanghai Cooperation Organisation, which has brought together in a strategic manner the political and commercial interests of Russia, China and four Central Asian states. Four observer states, India, Pakistan, Iran and Mongolia offer the potential to create a strategic grouping that could overshadow APEC.

Putin has steadily recaptured initiative from the United States that was lost due to the weak and ineffectual leadership of Boris Yelstin. Russia has regained its economic footing, its regional influence and its international prestige, posing a real challenge to America. This has become ever more evident since the July 2006 Group of Eight (G8) meeting in St Petersburg, which was preceded by clumsy American threats aimed at Russia.

Mike Whitney reported for Information Clearing House a year later on 12 July 2007, that:

When Putin was rebuffed by Bush at the G-8 meetings a month ago, he promptly retaliated at the International Economic Forum in St. Petersburg less than 24 hours later. In his address to the conference, he called for “a new architecture of economic relations requiring a completely new approach (with an) alternative global financial centre that will make the rouble the reserve currency for central banks.” He said that the World Trade Organization, the World Bank and the IMF are ``archaic, undemocratic and inflexible'' and do not `` reflect the new balance of power.''

Putin’s speech is seen as a direct challenge to Washington’s global leadership and the institutions which preserve its position as the world’s only “superpower”. He rejects US hegemony” and the prevailing doctrine of a “unipolar” world order.

The APEC Setting

Putin is a polished diplomatic operator and is likely to respect the measured proceedings of an APEC Summit. Equally, he will probably use the occasion to advance Russian interests. There will be opportunities to use Russia’s standing with China and Japan to remind the United States and its allies that the oil wealth, strategic Eurasian position, advanced military technology and mature strategic leadership of Putin’s Russia make it not just a force in European energy politics but also a significant Asian power.

The Sydney meeting will highlight the fact that APEC has been transformed since its establishment in 1989 with twelve members by the Hawke Labour Government. This took place at a time when the American and Japanese economies dominated the new organisation. Due largely to the addition of China and Russia, APEC’s membership is beginning to dwarf the significance of both G8 and European groupings.

The combined landmass, population, resources and economic dynamism of China, Japan, India and Russia is beginning to make traditional Western groupings look puny in contrast. Should Indian lobbying for membership in APEC be successful, the significance of existing developed world groupings would decline. It is probable that the positions adopted towards Indian membership by the United States, China and Russia respectively will highlight the growing fluidity of important global alignments. All major players— America, Russia and China — are eagerly wooing India as an ally.

In this context, Putin is likely to stand out. No other leader is as skilled in making the dramatic move or statement nor has a comparable record of playing a weak hand with such dexterity. He has resurrected a nation and its people from imminent decline, marginalisation and subordination. With a domestic approval rating around 85 percent, Putin casts a troubling shadow over the leader of the democratic West, who is struggling to retain support above 25 percent. The timing of September 15 for a crucial report from General Petraeus and Ambassador Crocker on the situation in Iraq will further distract the American leadership and accentuate its problems.

Something of what may be in store was suggested by The Hindu of 11 June 2007, when it featured accounts of Putin from St. Petersburg. It featured him saying that "Countries that only yesterday appeared to be hopelessly backward, today have emerged as the world's fastest growing economies. While 50 years ago 60 per cent of the global GDP was produced in the Group of Seven nations, today 60 per cent of the world GDP is generated outside the G7." The Hindu also reported Putin’s call for creating "regional Eurasian free trade institutions" to encourage trade and growth and “several reserve world currencies and several financial centres” to help diversify assets in the world financial system. Putin further spoke of Russia increasing energy exports to Asian markets "in view of the growing energy needs in the Asia-Pacific region," and launching projects in transportation, telecommunications and logistics to promote closer ties between Europe and Asia. He said "I am talking about the modernisation of existing transport corridors and the construction of new routes linking Europe with Central Asia and the Far East." These declarations came at a moment when Europe and the U.S. had been dragging their feet over Russia's bid to join the WTO. They have also been threatening to link broader access for Russian business to Western markets and technologies to faster democratic reforms in Russia. It is difficult to avoid the impression that Western leaders are out of touch with present realities. Putin’s words seem conceived to use to lay down the gauntlet for these Western leaders. Moreover, they appear likely to foreshadow some interesting diplomacy at APEC. The Hindu has maintained its focus on this issue. It reported on 14 July 2007 that Russia and China are calling for a ‘multi-polar world’, providing further evidence of Putin’s capacity to mobilise diverse diplomatic pressures to serve Russian interests. It highlights an already established tacit alliance in seeking an alternative to an American unipolar world. Even more interesting is the way in which it displays Putin again punching above his weight in the company of the globe’s behemoths. While the Russian Federation covers a land area larger than that of any other nation and is home to 160 different ethnic groups and indigenous people, its population is just over 140 million people and is in decline. Under less adept leadership this might have been expected to make it a minion amongst the major powers. Russia’s surprising resilience may also be explained by its free, widespread and in-depth educational system, which is almost unchanged from the Soviet Union. This produces 100% literacy with selective and highly competitive entry to higher education and five year undergraduate courses. These in turn lead to medical, mathematical, scientific, and space and aviation research of the highest quality. A Challenge to the Host Nation Australia, as the APEC host nation, will seek both to maintain in good repair its traditional alliance with the United States and avoid any words or actions that might compromise its future standing in the dynamic region covered by the organisation. Even without Indian membership, Australia is dwarfed in APEC by large dynamic communities with long, but unfamiliar, traditions of civilization. It will be at pains to manage the reality that the United States is already being shuffled to the sidelines by developments increasingly beyond its control.

Russia’s position as a strategic energy supplier to both Europe and Asia is giving President Putin a form of leverage that used to be identified with Anglo-American interests and that is hard for today’s troubled America to match. When this is partnered with the economic dynamism and the deft diplomacy of China, Japan and India it is clear that the United States pays a high price for any errors of political judgement.

American preoccupation with the ‘War on Terror’ has depleted its military and economic resources and eaten away at its political and moral influence. It has also contributed to a substantial financial windfall to the Russian and other potentially rival economies, like Iran and Venezuela, through sky-rocketing energy prices.

Perhaps the shifts in global economic power have been most seriously reflected by recent developments in the European Union. These have seen both France and Germany moving away from long established free market principles fundamental to the Union’s cohesion and character. An article by Ambrose Evans Pritchard in the British Telegraph of 6 July 2007 had the colourful headline Berlin defends its 'crown jewels' and the sub-heading Sarkozy turns on ‘predator’ hedge funds. It reported that “Germany is drawing up detailed plans to stop strategic assets falling into the hands of "giant locust funds" controlled by Russia, China and Middle East governments.” Shielding "telecoms, banks, post, logistics and energy" was identified. The report noted that Germany's “shift follows the success of French president Nicolas Sarkozy in striking the words "free and undistorted competition" from the list of the EU's treaty objectives last month, a move that emasculated the chief enforcement arm of the EU's single market.”

The report maps out the volatile international financial and political situation in which Putin is operating. It highlights the vulnerability of fundamental principles in Western institutional structures and tensions between long established legal and emerging political imperatives.

Moreover, European concerns highlight the fact that strategic Australian assets could attract Russian interest and finance, posing a dilemma for a government that has actively sought foreign investment. Although critics have noted that the Singapore Government owns more local assets than the Australian Government, to date the unique challenges presented by the so-called Sovereign Funds and by strategically calculated investments have not troubled Australian governments.

Recent History of Russia and Asia

Primakov Redux? Putin's Pursuit of "Multipolarism" in Asia by Mark N Katz in the Winter 2006 edition of Demokratizatsiya outlined Russia’s recent history in the Asian region. Unwittingly, it highlighted Putin’s achievements in recasting established assumptions and certainties to his advantage by focusing on the challenges confronting Russia.

Russian expectations of Western economic assistance, the disbandment of NATO and a working partnership with Washington in a bipolar world during the period of close relations in Gorbachev’s latter and Yeltsin’s early years were soon disappointed. In response, Yevgeny Primakov, foreign minister and later prime minister under Boris Yeltsin, attempted to build a "multipolar" international order in response to Washington’s "unipolar" world order. He reflected popular feeling that Washington was taking advantage and expanding its power and that Russia must make no further concessions.

Primakov hoped that Russia could emerge as the leader of an alliance of countries that opposed American hegemony. These might include China, India, Iran, Iraq (under Saddam), Syria, Serbia (under Milosevic), most of the CIS countries, and even France and Germany.

Yeltsin ousted Primakov as prime minister in May 1999, and resigned himself at the end of December 1999. Vladimir Putin, as acting president, did not change Primakov's foreign policy. He did meet with President Bush and appeared open to Russian-American cooperation but continued to seek alliances with other governments to counter hostile American policy. Post-September 11 Russian expectations, which saw Putin make gestures seeking closer alliance with America, were again disappointed. America withdrew from the 1972 Soviet-American Anti-Ballistic Missile Treaty, revived a ballistic missile defense program and, despite Moscow's objections, intervened in Iraq. Moscow was particularly troubled by Washington's perceived role in democratic revolutions in Georgia in 2003, Ukraine in 2004, and Kyrgyzstan in 2005 and the 2004 Islamic terrorist attack in Beslan.

Before the American intervention in Iraq in 2002-03, Putin entertained hopes of a Russian-French-German alliance. But European democracies would not ally with Russia against the United States. Moreover, the European Union was unyielding on critical issues, such as NATO expansion and democratic revolutions in the former Soviet Union.

Putin, unlike some Russian Eurasianists, has not sought to completely alienate the United States from Asia but has looked to identify powerful and wealthy allies in Asia that have differences with the United States. Among the most important potential partners for a multipolar order are China and India, followed by South Korea, Vietnam, Malaysia, Iran, the United Arab Emirates, Syria, Turkey, and even the more problematic Saudi Arabia and Pakistan. While reasons differ, they generally share opposition to American "unilateralism", especially regarding the use of force.

They also share a demonstrated or potential ability to make sizable purchases of Russian arms, nuclear technology, or other items that the United States wants to deny them. Although Russia earns far more from petroleum sales, weapons and nuclear reactor exports have been crucial for the survival of these industries because Russia’s own market is weak.

Obstacles to its creating a multipolar world in Asia include Russian uneasiness about Chinese power, persistent enmities between the Asian states Moscow may seek to recruit, and wariness towards Russia, stemming from hard-headed practices of arming both sides in a conflict and of refusing concessions when issues are in dispute. While most of these concerns also apply to the United States, as long as Asia exports far more to the United States than to Russia, Moscow has to move astutely in finding allies. Even states like Iran and Syria that have bad relations with America do not want hostilities with it, especially after Russia failed to prevent American attacking Iraq. With the exception of the former Soviet states of Central Asia and Armenia, Asian states are not particularly reliable allies for Russia, just as Russia is not a particularly reliable ally for them.

Putin as a Strategist

Against this background, Putin has displayed unique diplomatic finesse. He clearly does his homework thoroughly and is mindful of all the above considerations. He is also mindful in a manner uncommon in the Anglo-American world of the cultural qualities that have provided the foundation for successive economic miracles in East Asia.

Putin has made a practice of maintaining relations with one of the homes of Chinese traditional spiritual discipline, physical therapy and martial and strategic art, Shaolin Temple. He is the author of a book, Judo: History, Theory, Practice. Moreover, Russian academic authorities attending conferences on traditional Chinese culture have debated for several decades whether Russia is better served following an Asian or a European model of economic development. Today more Russians regard themselves as Eurasian than European.

Putin’s 218 page Ph.D. thesis from the St. Petersburg State Mining Institute, titled Mineral Raw Materials in the Strategy for Development of the Russian Economy, and his subsequent thinking reflect such influences. While these matters are almost taboo issues in Western political commentary, they may well enable Putin to manoeuvre to advantage in surprising ways in the context of an APEC Summit.

This Russian preparedness to look at Asia in greater depth than is practiced by Western leaders has found one of its most interesting expressions in the Shanghai Cooperation Organisation (SCO). This brings together Kazakhstan, China, Kyrgyzstan, Russia, Tajikistan and Uzbekistan as members and India, Iran, Pakistan and Mongolia as observers. It is a potentially formidable grouping, which has already obstructed American aspirations in Central Asia.

Moreover, the SCO has contributed to the vibrant growth of a Central Asian economic zone that increasingly reflects shared Russian and Chinese commercial interests and marginalizes American ambitions. There is increasing talk of a new Silk Road. Some reports suggest that Russian is spoken as much as Chinese in the Xinjiang capital Urumuqi and others indicate a flood of Chinese goods across the Central Asian region. In 2006, China became Russia's fourth-largest trading partner, while Russia moved up to become China's eighth-largest partner.

Putin will find opportunities as long as Russia does not insist on primacy. Putin gives much evidence of having used Russia’s period of humiliation to equip himself with the sensitivities and skills needed to manage rival priorities. American and other Anglo counterparts, which have long been accustomed to having their own way, will need to be on their guard. Putin will enjoy the opportunity in Sydney to parade both his camaraderie with the American President George Bush and his extensive working partnerships with many other APEC participants. He will tacitly question whether further Asian economic dynamism will be driven by Pacific or Central Asian partnerships.

Asian political leaders have a disposition to work with styles of discretion and understatement that can be misunderstood from other cultural perspectives. It will not necessarily be easy to follow developments at the forthcoming APEC Summit. All this makes the first visit by a Russian Head of State to Australia an occasion that should be followed closely. Signs of the changing character of the international political and economic environment may well emerge in Sydney in ways that will demand careful evaluation for some time after the event.

The presence of President Putin at the 2007 APEC Summit is likely to focus attention on some difficult choices that Australian leaders will have to make in the near future. If economic, political and military misjudgements continue to compromise American power, how must Australia position itself? Can Australia ensure that the major players of its region organise internationally within a potentially benign organization, like APEC? Or will Australia be confronted with alien organizations, like the SCO, redefining the world around it?

These issues will grow in importance after September 2007. There is a serious prospect that the APEC 2007 Summit may mark a critical moment when Australia’s future is at the mercy of interaction between an astute Russian President and a distracted American President. Asian and Latin American leaders seem to have less at stake and may remain seemingly impassive, if carefully observing, on the margins. In contrast, Australia may need to be more active and work to ensure that leaders like Vladimir Putin recognise its role in a vibrant Asian Pacific region rather than become preoccupied with the political and economic dynamics of Central Asia.