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Russia stands firm ahead of G8 summit

Vladimir Radyuhin

Moscow's message to the West is that resurgent Russia will no longer tolerate being treated as the Cold War loser.

WHEN THREE years ago the Group of Eight awarded the rotating presidency for 2006 to Russia, it was for much the same reason that President Boris Yeltsin was first invited to a G8 summit in 1992: to sweeten the bitter pill of the NATO push into the former Soviet Union and to strap Moscow to the U.S. foreign policy bandwagon. The tactics worked with Mr. Yeltsin, but did not with President Vladimir Putin.

President Putin has skilfully played Russia's resurgent economy and soaring demand for its energy resources to regain geopolitical clout and assert his own agenda for relations with the West that he will put on the table at the G8 summit in St. Petersburg this weekend.

The West realised its mistake too late. When it did, it responded with a high-pitch campaign of Russia-bashing to question its right to G8 membership, discredit its presidency in the group, and downgrade the importance of the St. Petersburg meeting. President Putin has been accused of "rolling back democracy" at home, pursuing "neo-imperialist" policies in the former Soviet Union, and supporting terrorist regimes beyond it.

Washington has indicated that President George W. Bush will register Western concerns when he meets President Putin in St. Petersburg for a bilateral summit ahead of the G8 meeting. Some other G8 leaders may restate similar concerns at the meeting itself. But there is little more they can do. It is the Russian leader who holds all the cards.

With its coffers bursting at the seams from the oil export windfall, Russia is no longer dependent on the foreign credits that made Mr. Yeltsin so vulnerable to Western pressure. Moscow has paid off the entire Soviet-era debt to the West ahead of schedule and has built some of the world's biggest financial reserves. Demonstrating strong confidence in its currency, Russia made the rouble fully convertible as of July 1 in a move expected to attract foreign investment and boost the stock market. President Putin has also ordered the government to set up an oil exchange in Russia to sell its oil for roubles.

The West needs Russia's oil and gas, as well as its cooperation in resolving the standoff over the nuclear programmes of Iran and North Korea and defusing the growing confrontation between the Christian and the Muslim worlds.

Drawing on its new economic strength and stronger role in world affairs, Moscow in the past few weeks has formulated principles on which it wants to base relations with the West.

To begin with, the Kremlin has declared that while its foreign policy is multi-vectored Russia historically belongs to Europe and its strategic goal is to build close ties with the West. Russia badly needs Western technology to renovate its Soviet-era industrial infrastructure and diversify its commodity-dominated economy.

"A substantial part of Russia's territory lies in Asia, but its population by culture and mentality is European," Mr. Putin said in an interview. "By this yardstick, the whole of our country, right up to the Pacific Ocean, belongs to Europe ... Europe and Russia can and will complement each other."

At the same time Russia demonstrates that it has a strong option in the East, with the Shanghai Cooperation Organisation rapidly evolving into an effective counter-balance to U.S. and NATO influence in Central Asia and beyond. Moscow has made it clear that its Western vector can take priority over the Eastern vector, only if Europe and the U.S. accept Russia as an equal partner.

In a key foreign policy speech at a gathering of Russian diplomats two weeks ago, President Putin pointedly put relations with China and India ahead of the U.S. "Partnership between countries such as Russia and the USA can be built only on equal rights and mutual respect," he said adding this was an "axiom" of international relations.

"I repeat that we will cooperate and we will compete, but on the basis of fair and honest rules that apply equally to one and all," Mr. Putin said. "The principle of `I'm allowed to do it, but don't you try' is completely unacceptable to Russia."

Moscow has also totally rejected attempts to make its relations with the West a hostage to the Western judgment of its democratic record. Asserting Russia's right to build a "sovereign democracy," one that is not manipulated from outside, the Kremlin's chief ideologist Vladislav Surkov dismissed the West's democratic agenda for Russia as a cynical ploy to grab its energy resources.

"One gets a feeling that if cannibals came to power in Moscow, they would still be declared a democratic government [in the West] provided they give away [Russia's resources and pipelines]," Mr. Surkov said.

Moscow's message to the West is that resurgent Russia will no longer tolerate being treated as the Cold War loser. "To be honest, not everyone was ready to see Russia begin to restore its economic health and its position on the international stage so rapidly," Mr. Putin told the Russian Ambassadors' meeting last month. "Some still see us through the prism of past prejudices and, as I said before, see a strong and reinvigorated Russia as a threat."

Mr. Putin placed energy security at the forefront of the G8 summit in St. Petersburg in a well calculated move to play the West's growing dependence on Russian oil and gas as a trump card to achieve a breakthrough in their relations.

The West, in turn, has made Russia's energy policy the focus of its attacks on the Kremlin, with U.S. Vice-President Dick Cheney accusing it of using Russian oil and gas as "tools of intimidation or blackmail." The U.S. and other Western nations have demanded that in the name of global energy security Russia break up its natural gas monopoly Gazprom, dismantle government control of the energy sector, and open unlimited access for Western companies to its energy resources and pipelines.

Russia has firmly turned down Europe's demands. A week before the G8 summit the Russian Parliament approved a bill consolidating the monopoly of the state-controlled company Gazprom over Russian natural gas exports. President Putin said Russia would only let Western investors into its energy market if Europe and the U.S. stop raising "new curtains and barriers" and let Gazprom and other Russian companies buy into their lucrative downstream energy industry. This way, he argues, the West will get the security of Russian energy supplies, while Russia will have the security of energy demand in the West.

The situation appears absurd if one sees it in terms of long-term goals of Russia and the West: while President Putin is trying hard to integrate Russia and the Western world through the swapping of energy assets and mutual penetration of the economies, as well as visa-free travel between Russia and the European Union, the West baulks at developing full-fledged ties with Russia, accusing the Kremlin of building an overcentralised, anti-West autocracy.

The ultimate argument

Energy is Mr. Putin's ultimate argument in this tug of war. He is confident that in a world where demand for energy resources races far ahead of supply it is Russia as the biggest producer of hydrocarbons, rather than its Western partners in G8, who will be calling the shots.

If this argument is rejected, Moscow will divert its gas and oil exports to Asia, Mr. Putin said.

"What are we to do when we hear the same thing every day [that Russian companies should have limited access to the Western energy market]? We start to look for other markets," Mr. Putin bluntly remarked in an interview.

During a visit to Beijing earlier this year, Mr. Putin said Russia would begin gas shipments to China by 2011, and could eventually supply the country with up to 80 billion cubic metres of gas a year. With the share of Russian gas expected to rise from the current 25 per cent to 50 per cent of Western Europe's needs by 2020, there is a risk that Russia many not have enough gas to meet the demand both in the West and in the East.

As the final countdown for the G8 summit began, the first signs appeared that the West was finally yielding ground. Russian officials indicated that a deal with the U.S. paving the way for Russia to join the World Trade Organisation might be signed in the next few days. Moscow has accused the U.S., the last hurdle to Russia's accession to WTO, of deliberately stalling on its bid.

White House officials were also quoted by American newspapers as saying that Washington may be prepared to expand nuclear fuel cooperation with Moscow and give Russian companies freer access to U.S. markets. "The moves represent an acknowledgment by the administration that on a variety of hot-button issues, the U.S. needs Russia more than Russia needs the U.S.," The Wall Street Journal concluded citing such issues as Iran, North Korea, and energy.

According to the paper, the G8 summit is likely be shaped by "the shifting power balance between a U.S. facing challenges on several fronts and a Russia moving to reassert itself on the world stage."

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