Obama & Lavrov: It's Business Time

Despite international events suggesting otherwise, Russia and America yesterday stressed the positive working relationship between their governments on a broad range of issues. President Obama and Secretary Lavrov expressed their professional respect of each other and their counterparts, ushering in an era of pragmatic co-operation. Check out the video of the resulting press conference here - http://news.bbc.co.uk/1/hi/world/americas/8039346.stm

Chiming with this sentiment, Secretary Clinton recently remarked; "It is, I think, old thinking to say that we have a disagreement in one area, therefore we shouldn't work on something else that is of overwhelming importance."

Putin to Obama: 'Let's See What You Got, Player'

The Financial Times' international affairs editor Quentin Peel pulls together the pieces of Putin and Medvedev's recent foreign policy surge.

'First, they leaked details of naval and air bases to be established on the shores of the Black Sea in the breakaway Georgian province of Abkhazia, whose independence is recognised by Moscow alone. Then they signed an air defence treaty with the former Soviet republic of Belarus, apparently paving the way for an anti-missile defence system to counter one planned by the previous US administration across the border in Poland. Moscow appears to have persuaded the Central Asian republic of Kyrgyzstan to oust the US from its air base at Manas, outside Bishkek, in exchange for $2bn (€1.6bn, £1.4bn) in loans, and $150m in financial aid.'

That all amounts to quite a few moves on the great chess board. However this is a common trend amongst post-Soviet and pseudo-democratic states; the external projection of strength is designed to distract the gaze from internal weakness.

Places that don't Exist: The Caucuses

While at university several years ago a little-known BBC4 documentary series became popular amoung my (Politics and International Relations) course mates. First broadcast in early 2003, journalist Ben Anderson posing as aninquisitive 'tourist' presented a strangely knowledgable travel programme from the six countries President Bush had recently described as an 'Axis of Evil'. This excellent series applied a long-standing television-format to some of the least known countries of the world and provided a highly entertaining, much-needed backdrop to our daily studies. The cult success of the series allowed it's producers to take the idea and run with it.

As a result, in May 2005, following on from Holidays in the Axis of Evil, journalist, potential boy-band member, and thoroughly nice-bloke Simon Reeve picked up where Ben Anderson left off. Titled 'Places that don't Exist', Reeve travelled to the world's breakaway states and unrecognised nations. One of best shows in this series covered the Caucuses and the regions several states that were trapped in international limbo. You can check out an interview with Reeve here, download the video here, or watch a full version of the Caucuses episode below.

The reason this show has so much value is the snap-shot it provides of life in Georgia, South Ossetia, and Abkhazia before the Russia-Georgia conflict. Throughout the episode, Reeve warns of the real possibility of the stalemate in the region flaring into a full-scale military conflict. When watching, I remember being sceptical of Reeve's claims, but why wouldn't I be? Russia entering into post-Cold War military conflicts? Really?

How rapidly the game has changed.

Buried under the rouble [updated]

I posted recently on the financial cost Russia has paid for it's war with Georgia. Although this conflict has certainly had a significant affect on the current state of the RTS Index, it appears the downturn is part of a wider trend which began in May.

The New York Times presents the figures. Here are the headlines:

'The benchmark RTS index has lost 46 percent of its value since its peak in May, representing a paper loss of about $700 billion for Russian companies.'

'On Friday the RTS, which peaked in May at 2,487, rebounded slightly, rising 3.36 percent to close at 1,342. The country’s other main stock exchange, the MICEX, was rose 6 percent on Friday, after weeks of heavy losses.'

'...one indication that Russian politics lubricated the market slide here, however, investors have pulled nearly $5 billion this year from emerging market funds with a heavy Russia weighting, according to EPFR Global.'

'For next year, Russian officials are projecting federal revenue growth of 1.8 percent, compared with an estimated 13.8 percent this year. Just in the last week, the value of Russia’s hard currency reserves has dropped $8.9 billion. The ruble is down 6 percent since the war in Georgia.'

Why is this happening? Too much state ownership, too much manipulation, too much politics, too much violence and too much risk in the market.

11.09.01 / 08.08.08

On the anniversary of the World Trade Center attacks, President Dmitry Medvedev drew a direct comparison between 9/11 and the recent war in Georgia/South Ossetia.

"The world has changed and it occurred to me that 8 August 2008 has become for Russia as 11 September 2001 for the United States. This is an accurate comparison corresponding to Russian realities. Humankind has drawn lessons from 11 September tragedy and other tragic events. I would like the world to draw lessons also from these events [in South Ossetia]."

This is one of many Western-Russian comparisons the Kremlin tag-team has been drawing recently. Commenting on the poor diplomatic relationship between the UK and Russia, Vladimir Putin indicated why he thought they were unlikely to improve.

"Why do you allow UK territory to be used [as] a launching pad to fight Russia? Imagine if we gave sanctuary to armed members of the IRA - that's why its not possible to build normal relations with Britain."

Relationships between countries are very much like relationships between people. Each country has it's own specific culture, like each person their own unique personality. Some people's personalities are immediately compatible, due to similarities in taste or attitude, and as a result people become friends. Some people have shared similar experiences or have shared a particular experience, and are drawn together as a result. It is in this way that relationships between people take shape and in a similar manner, so to do relationships between cultures, peoples, and states.

These comparative statements provoke a gut reaction that is difficult to ignore; a rejection of the comparison, the very suggestion showing an unsympathetic attitude and a strong feeling that it is based on a gross misunderstanding of fact. But taking action based on this feeling is deeply wrong.

For decades Russia and the West have understood each other as opposites. 'Democratic capitalist USA' and 'authoritarian communist Russia' - content in themselves, at ease with their polar opposite, and so settled in their relationship. The West and Russia were best understood, as was their relationship, by comparisons. This framework is now obsolete.

Russia is attempting to build a relationship built on similarities and should be implored for doing so. As I have indicated before, I am of the firm belief that a strong Russia can also be a benign Russia. But in their zealous drive for equal friendship, they find a largely sceptical Western audience.

For the West, it is difficult to ignore the rife political violence, the sham democracy, the transparently cynical foreign policy and capitalist gangsterism which has come to define Putin's eight years in office. With no real break from the Putin-era, Medvedev rests on a cursed thrown. And so recent history looms large and relatively recent historical precedent, as irritating as Russia may find it, is quite hard for the West to ignore.

Let us remember, Russia is not the only state to be defined by terrible acts and riddled with hypocrisy. Their old adversary the United States lectures on human rights and liberal democracy while propping up oil-rich Gulf states and running a shameful PoW camp in Cuba. And who, they say, is Britain to tell us of Empire.

How then will these individuals replenish their relationship? Unfortunately, I have no answer only that time will tell.

A developing theme

A theme is developing in my posts, that of Russia and international security. This is partly intentional as I find the security situation that Russia (and the world as a result) currently finds itself in as utterly fascinating.

As the ultimate practitioners of realpolitik the Russian state, steered by the siloviki who control it's upper echelons, has awoken from the slow-times endured during the 1990's and appears to be 'back in the game'. Although countless UK/US commentators would have you think otherwise, a strong Russia is not necessarily a malign Russia. The country's slide towards authoritarianism over the past 8 years is well documented and doubtlessly a cause for concern. But we should remember, this is Russia! Previously a world super power, with the largest land mass on earth, 25% of fossil fuel reserves, the second largest nuclear arsenal on the planet and widely accepted as having produced the finest, although at times unscrupulous, intelligence service of the modern age. With all this power apparatus under it's control, you better believe that after sitting on the bench for over a decade Russia wants back in the game.

So in this blog I will be charting Russia's continuing rise, and possible stagnation, on a daily basis. This not to say I will be writing solely on this topic, far from it. I will be addressing topics like cyber-security, online and digital culture, Middle Eastern security, and the global private security industry. But if you are expecting 15 posts per day on Sarah 'Whiskey Tango' Palin's family, you may find yourself disappointed.

Burried under the rouble

The FT brings forward evidence of the financial cost Russia has paid for it's war with Georgia.

"The rouble has dropped by 4 per cent against its euro/dollar basket since before the Georgia conflict [7th August 2008]. More broadly, the conflict has ensured that, probably for years, investors will continue to demand a higher risk premium for Russia. It has thrown into doubt President Dmitry Medvedev’s liberal credentials and commitment to his investor-friendly reform agenda. That could lead to suboptimal growth, and delay or derail Russia’s sorely needed economic modernisation."

(Hat-tip to Charles Crawford A.K.A Blogoir)

Taking the plunge...

BBC News reports that "...the Russian stock market has plunged more than 30% since the country's invasion of Georgia last month."

My first thought on this development was, 'good, that'll give them pause for thought'. My hope was that such a sharp reversal in investment would show the Kremlin that while an adventurous wars can manipulate oil prices to their benefit, it will also significantly affect the level of financial risk investors are exposed to. This uncertain climate will inevitably cause investment to flood out of the country, which it did, with the foreign capital draining from Russian markets at $670 million dollars on average per day since the war in Georgia began. Feeling the pinch, this newting of the hawkish but pragmatic leaders in the Kremlin would force a draw-down and encourage Russia to cease it's action.

On reflection however, it must be remembered that Russia successfully managed to avert market-capitalism for over 80 years while amassing a colossal military machine to challenge the richest nation in the world - a very costly exercise. It should also be noted that the ex-CIS countries, Russia's closest trading partners after the EU, has a population of 278 million which are at the least obliged to purchase first from Russia. And then there is the oil which for every $1 per barrel increase provides Russia with an additional $1 billion per year. The Russian economy appears better equipped at weathering economic storms than was first thought.

"...striking a bleak and rather cautious note about the future..."

James Shear, head of the Russia and Eurasia Programme at Chatham House, offers his sobering thoughts (not that strategic analysis is ever anything but sobering) on EU-Russia relations and what shape the relationship may take in the near future.

Download the interview here.

It's good to hear a rational analysis of recent Russian movements, ignoring the forced framework of the 'nu-Cold War' which I reject for it's simplicity and analytical constraints.