Sunday, February 20, 2005

MOSCOW — President Bush’s summit with Vladimir Putin in Bratislava Thursday Feb. 24 will be the most difficult meeting two men ever had. A year after Mr. Putin handily won a second presidential term, his domestic and foreign challenges are snowballing, and his aura of an almost-superhuman invincibility is quickly dissipating. This is not to say Mr. Putin should be looked down upon or counted out: He is still in control.

Meetings with key Russian officials in Moscow reveal that the Putin administration faces a crisis of confidence. Russian Prime Minister Mikhail Fradkov’s Cabinet survived a Duma no-confidence vote Feb. 9. But the real target of the abuse heaped on the prime minister by the nationalist and leftist opposition parties, which are artifacts of power elites, was never in doubt: Mr. Putin himself.

Moscow politicians are uneasy with the country’s perceived lack of domestic and foreign policy direction. Consequently, a 2008 transition to a successor hand-picked by Mr. Putin is no longer a given. Neither is passage of constitutional-legislative changes to guarantee Mr. Putin’s continued rule as prime minister after two presidential terms — with enhanced powers, such as control of defense, the security service and the legal system.

Russia’s political malaise has set in despite high oil prices and a robust growth of around 7 percent in the gross domestic product. Still, a 20 percent drop in Mr. Putin’s popular support leaves one to speculate how quickly the situation could deteriorate if oil prices tumbled.

The stagnation and uncertainty manifest themselves in many areas, including failure to attain economic growth to realize Mr. Putin’s goal of doubling the GDP by 2010. Elites perceive this as failure to achieve an important national target. Deteriorating investor confidence quadrupled capital flight last year.

The state power is monopolized by a small group of Putin loyalists, primarily from the St. Petersburg security services and mayor’s office. This group has overtaken state-owned companies, the justice system and courts, and even private businesses. If Mr. Putin’s group perceives him as too weak, it may try to remove him. However, this total control raises stakes for an anti-Putin coalition in the future, and increases the incentive to dilute or terminate St. Petersburg group’s power — by the ballot box, or other means if necessary.

There is a widespread perception in Moscow that the current Prime Minister Fradkov and his Cabinet failed. Most recently, the Cabinet bungled social welfare reform that was supposed to replace in-kind benefits for the elderly with monetary payments.

Inadequate planning and poor execution led to the largest street demonstrations since Mr. Putin came to power in 1999.

The forthcoming reform of subsidized housing and utilities could further damage the regime’s prestige. Mr. Putin’s attempts to appease the protesters by paying off officers, military retirees and students, while boosting FSB and military budgets, have created an image of weakness and indecision.

Protectionism and economic nationalism are rampant. Recently, the minister of natural resources announced that “non-Russian resident companies” will be denied access to Russian natural resources, such as oil, gold and other minerals. This approach will allow Russian companies with dubious connections to the Ministry or the Kremlin to successfully bid for lucrative licenses while foreigners are excluded.

Already, the YUKOS affair has cost Russia tens of billions of dollars in lost investment. Mr. Putin’s chief economic adviser, Andrey Illarionov, openly termed the sale of the YUKOS main production unit, Yuganskneftegaz, the “swindle of the year,” while Mr. Putin’s Minister of Economic Development German Gref has publicly called for return of Yugansk to YUKOS.

Russia’s policy fiascos are multidimensional. Private, corporate or bureaucratic interests trump raison d’etat as in the regime of the early 20th century’s Czar Nicholas II. Policymakers fall back on Soviet cliches, or even on their czarist-era great-power precursors. Thus, Russia opposes U.S. policy on Iranian nuclear disarmament, “not because of Iran, but because it pushes us into a corner,” as a senior Russian lawmaker put it. He said U.S. unilateral policies based on military superiority are unacceptable not only to Russia, but to China, France and Germany.

The era of quick U.S. fixes in Russia is over, and Washington’s advice is no longer welcome — if it ever was. Give-and-take, however, may still be the best diplomatic tool, as senior Russian officials say many issues on the bilateral agenda are negotiable.

U.S. interests in Russia include cooperation on terminating Iran’s nuclear arms program; nonproliferation; the global war on terrorism; Russian World Trade Organization membership; and bilateral energy and economic cooperation.

President Bush should maintain a solid working relationship with Mr. Putin, while supporting the forces of democracy, tolerance, open markets and civil society in the long term. This is not an easy balance to achieve.

The U.S. should request Moscow’s cooperation in neutralizing the Iranian nuclear weapons program, since it will threaten Russia. Washington should foster Russian cooperation in the former Soviet areas, including troop withdrawals and closure of “frozen conflicts” in Moldova, Georgia, including Abkhazia, and Nagorno-Karabakh. The U.S. should condition progress of Russia’s WTO accession talks on dismantling state monopolies and reversing opaque and protectionist economic practices.

Finally, Washington should express support for democratization of mass media and encourage Russia to promote private and public nonstate TV channels. Finally, Mr. Bush should clarify the United States is not seeking Russia’s dismemberment and fully recognizes its territorial integrity from Kaliningrad in the west to Dagestan in the south.

In Bratislava, President Bush needs to emphasize security, such as nonproliferation and disarming Iran. Lectures on democracy may not be effective; carrots-and-sticks may work better.

Russia faces political instability as the power elites jockey for positions in the 2007-2008 electoral cycle. The U.S. should not pick favorites, but rather champion transparency, democracy and business cooperation, while protecting its own security and economic interests in Russia and Eurasia.

Ariel Cohen is a senior research fellow in Russian and Eurasian Studies at Heritage Foundation and author of the forthcoming “Eurasia in Balance” (Ashgate).

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