Why Russia needs America

September 21, 2009

In the wake of President Obama’s decision to scrap the U.S. missile defence shield in eastern Europe, many are pondering Russia’s response. The relationship will remain in the spotlight this week, when President Medvedev heads to the U.S. for the G20 summit. Although the precise nature of Russia’s reaction remains to be seen, it has a big incentive to improve relations. It badly needs American investment and co-operation to help solve serious economic problems at home.

Critics of Obama’s decision worry that it will “embolden” Russia, causing more aggressive behaviour abroad. Yet they forget that the Bush administration’s antagonistic policies failed to provide security to Russia’s neighbours. These policies didn’t prevent Russia’s war with Georgia, the repeated gas disputes with Ukraine, and a serious cooling of relations with countries such as Poland. Far from being restrained, Russia’s confrontational attitude had a lot to do with its perception that the U.S. was busy encircling the country with missile bases and alliances.

The critics also imply that Russia is preoccupied with external expansion, but that hardly seems appropriate today. Russia’s GDP is set to plummet by 8 percent this year. Russian analysts estimate that the country needs up to $2 trillion to renovate its dangerously clapped-out infrastructure. In major industrial cities, Russia’s dilapidated factories are mulling huge job losses. For the foreseeable future, Russia’s leaders are likely to be preoccupied with thorny domestic problems.

Faced with such daunting challenges, it’s entirely logical that both Medvedev and Putin say they are keen to kick-start American trade and investment. Responding to Obama’s decision — which he described as “brave and correct” — Putin immediately linked it to economic issues. He called for the U.S. to back Russia’s entry into the World Trade Organisation (WTO), and scrap Soviet-era trade restrictions against Russian companies, especially those that regulate technology transfer to Russia.

On the same day, at an investment summit in Sochi, Putin held well-publicized meetings with the CEOs of General Electric, Morgan Stanley and Texas Pacific Group — all major U.S. companies. When it comes to the economic sectors that Russia says it is most eager to develop, American investment will be especially crucial. The crisis has underscored the need for Russia to wean itself off dependence on natural resources, and develop new high-technology sectors, such as IT and nanotechnology, where U.S. companies are at the cutting edge.

This means that the U.S. still has plenty of bargaining chips left as it seeks to gain Russia’s cooperation on global issues. The bigger problem could be persuading U.S. investors to come. No matter how much Russia’s leaders appear to welcome foreign investment, there remain huge obstacles, including corruption and bureaucracy, which they seem largely powerless to deal with.

Nor does the tentative thaw mean an end to diplomatic tensions. Russia’s relations with its immediate neighbours may well remain stormy, potentially causing renewed strains with Washington. Still, it’s hard to argue that by extending his olive branch to Russia, Obama increases the likelihood of such upsets. The evidence of the last few years implies just the opposite. The frostier Russia’s relations have been with the U.S., the more determined Russia has been to resist U.S. encroachment in nearby countries, increasing regional tensions.

Now, Obama’s gesture has opened up the possibility of a fresh start, creating prospects for mutually beneficial economic cooperation. The Russians would be foolish not to jump at that opportunity.


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