- The Washington Times - Tuesday, July 11, 2006

4:54 p.m.

ST. PETERSBURG, Russia — This northern city’s white nights are one of its main attractions this time of year, but the official spotlight this week is on preparing the former Russian capital for its highest-profile international event ever.

Buildings are undergoing facelifts. The grass in city parks is being mowed — a rare occurrence, residents say. And Soviet-era asphalt is giving way to sparkling-new brick sidewalks in a matter of days, defying stereotypes of Russian bureaucratic ineffectiveness.

The locals do not expect to fully enjoy the improvements, however, until after this weekend’s annual summit of the Group of Eight leading industrialized countries, which will be held in Russia for the first time since it became a G-8 member in 1997.

As soon as all preparations are completed, residents are being urged by the city authorities to leave town. Those who have nowhere to go are discouraged from spending too much time outside their homes.

“During the summit, the city’s airspace and waterways will be closed,” the local government said in an announcement posted on its Web site and printed in newspapers.

The police and security services have been checking the buildings along the roads to be used by the visiting leaders for possible threats.

Late last month, workers erecting a billboard found a machine gun and a grenade launcher in the attic of a house overlooking the highway that official motorcades will use as the route into town.

It is not that St. Petersburg has not staged important events before. Only three years ago, it celebrated its 300th anniversary with heads of state and government from around the world, including President Bush.

But hosting the G-8 summit has particular significance for President Vladimir Putin, who chose to hold it in his hometown, because it gives him a chance to prove to his colleagues that their decision to let Russia chair the exclusive club was the right one.

“Russia, as the presiding country, regards it as its duty to give a fresh impetus to efforts to find solutions to key international problems in energy, education and health care,” Mr. Putin said as he outlined his G-8 agenda at the beginning of Moscow’s chairmanship.

Mr. Putin will host the summit at the opulent Constantine Palace just outside St. Petersburg, which was built by Peter the Great with the intention to make it Russia’s Versailles and showcase its power and glamour. But it was almost reduced to ruins over the last 300 years, until Mr. Putin restored it for the 2003 celebration.

The Big Eight

Until the Denver summit nine years ago, the G-8 was the G-7. The group’s history began in 1975, when the leaders of the United States, Britain, France, Germany, Italy and Japan met in Rambouillet, outside Paris, at the initiative of French President Valerie Giscard d’Estaing. Canada joined the following year.

After the end of the Cold War and the Soviet Union’s collapse, its successor, Russia, was invited to attend the gatherings, and the group became known as G-7+1.

The G-8 is an informal group. Its annual summit of the G-8 heads of state is the group’s highest-profile event whose agenda usually covers global issues such as security, poverty, health and education.

The G-8 members rotate in chairing the group and hosting the summit, but even after it became a member, Russia was not trusted with the chairmanship until this year. Still, the debate about its fitness to chair the club of the world’s most powerful countries is far from over.

Russia at the helm

U.S. officials say that Russia has conducted itself “very professionally” as a G-8 chair so far, and they expect the St. Petersburg summit to be a success.

Others, however, say that it will expose some fundamental differences between Russia and the West, despite the leaders’ desire to showcase unity and common concerns. Many are still questioning the wisdom of letting a Cold War superpower that is hardly a democracy or a leading industrialized country into an elite circle of industrial democracies.

Michael McFaul, a Russia specialist at Stanford University, said that if the White House were deciding today whether Moscow should chair the G-8, the verdict should be “absolutely not.”

“Expectations were quite high in 2002, when the decision was made, about Russia’s ability to become a contributing member of the club,” he said. “Since then Russia has gone south. It’s become more autocratic and less cooperative than it appeared to be back then.”

Mr. McFaul, a former student and later colleague of Secretary of State Condoleezza Rice, said that, in retrospect, the White House probably regrets trusting Moscow with the chairmanship, a sense shared by some administration officials.

During the annual meeting of G-8 foreign ministers in Moscow on June 29, Miss Rice repeated Washington’s “concerns about how the transition is going in Russia,” citing the treatment of non-governmental organizations, freedom of the press and other democracy issues.

“As to those who have called for the United States to boycott the G-8 process, we are clearly not boycotting it. I’m here, and President Bush, of course, looks forward to coming to the St. Petersburg summit,” Miss Rice said.

Respect but criticize

Miss Rice also said that her criticism was meant “in a spirit of respect for the Russian Federation, for how far this society and this country have indeed come.”

Washington’s ties with Moscow have been frayed by international issues as well — from the war in Iraq to dealing with Iran and North Korea. Russia and China are consistently opposed to the United States, Britain and France in the U.N. Security Council.

Last week, Mr. Putin revived a theme championed by French President Jacques Chirac during his dispute with Mr. Bush over Iraq that the world should be “multipolar” rather than “unipolar” with the United States as its only superpower.

“We will be campaigning for a multilateral world, multipolar world if you will, that would take into account the interests of a vast majority of parties to the global dialogue, including such forums as the G-8,” he told the British Broadcasting Corp. on Thursday.

In the latest sign of U.S.-Russian tensions, the State Department said last week that two of its senior officials, Daniel Fried, assistant secretary for European affairs, and Barry Lowenkron, assistant secretary for democracy and human rights, are attending a major opposition conference in Moscow that began yesterday.

Igor Shuvalov, an adviser to Mr. Putin, called the move an “unfriendly act.”

A State Department official said that, while “our relationship starts with the government,” it is “perfectly normal for U.S. officials to reach out to civil-society groups” and support “democratic development.”

State of the federation

Specialists agree than Russia is an emerging market economy, rather than a developed country, although it certainly has good news to offer. The economy grew for the seventh straight year in 2005, even though it slowed compared to the previous year. Foreign direct investment reached a record high and foreign debt declined by about 60 percent.

But economists say that, despite those statistics, the overall situation in the country remains bleak.

“Russia’s manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth,” according to a CIA analysis. “Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption and widespread lack of trust in institutions.”

In an effort to show more openness, the government is expected to offer foreign investors an equity stake in its main national oil company, Rosneft, in the next few weeks. In addition, Gazprom, the state-controlled gas monopoly, is to invite a couple of foreign companies to take part in a $20 billion project to produce liquefied natural gas destined for the United States.

John W. Davies, Moscow managing director of Diamond Age Capital Advisors, an investment advisory firm, said that Rosneft’s privatization has more to do with “obtaining the highest realistic price for their share offering” than a concern about its reputation in the West.

Vladimir Kvint, professor of international business at American University in Washington, said that Russia “doesn’t have an economic strategy formally approved by the government or the parliament.”

Both Mr. Kvint and Mr. Davies noted the aggressive flow of Chinese capital in Russia, and Mr. Kvint added that China’s ambitions in Russia have been largely “underestimated.”

Mr. Kvint said that Russia’s main concern is its demographic crisis. Due to its negative growth rate, the population has decreased to about 142 million — less than half that of the United States, whose territory is less than half that of Russia’s.

Neglecting science and development is also a cause for concern, Mr. Kvint said. The Russian Academy of Sciences, of which he is a new member, “has hundreds of institutions around the country and a budget smaller than that of an average American university,” he said.

The city on the Neva

St. Petersburg has long charmed the most sophisticated of visitors. Peter the Great founded it in 1703 on swampy islands at the mouth of the Baltic Sea to be Russia’s “window to the West,” and it reached its apogee under Catherine the Great.

The Soviet rulers, who changed its name to Leningrad in honor of the man they called father of the 1917 Red Revolution, promoted it as a “hero city” that survived a three-year Nazi siege during World War II, as well as their cultural capital.

Tourism is flourishing here, mainly in the summer, given the cold winter. And the line at the Hermitage’s entrance, with visitors from all over the world waiting to tour the museum’s more than 1,000 rooms, rarely disappears.

The city’s economy, however, is not performing as well as it could, Mr. Kvint said. It has attracted some foreign investment, but has not capitalized enough on what it has to offer, he said.

Jeffrey Letino, managing partner of the Eurasian Private Equity Group, an investment advisory firm in St. Petersburg, said that, while the city is a “decent-sized pond,” less competition than in Moscow makes it appealing to foreign businesses.

In addition, he said, political connections are not as important here as they are in Moscow, although “having good connections makes a difference anywhere.”

“St. Petersburg has always been a very tolerant city,” Gov. Valentina Matviyenko told foreign reporters here last month.

But residents and visitors who have lost family and friends to hate crimes beg to differ. A string of recent killings have prompted the press to pronounce the city a hotbed of the country’s rising xenophobia and racism.

An 8-year-old Tajik girl was killed in 2004. A Senegalese student was shot in April, and a Syrian student was pushed in front of a subway train. Press reports quoted witnesses as saying that youths shouted “Russia!” as they attacked the Syrian. Many other foreigners and dark-skinned immigrants have been beaten.

“Putin is trying to stop ethnic crimes, but the Duma has a different agenda,” Mr. Kvint said in reference to Russia’s parliament. “Many of its members are racists, and they are not hiding it.”

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