Moscow Dismisses Economic Threats

Attempts to isolate and punish Russia for its military actions in Georgia will backfire, given Russia’s economic muscle and key role in mediating international disputes, senior Russian officials said Friday.

Top officials in President George W. Bush’s administration have said Russia’s continued military presence in Georgia could jeopardize its membership in the Group of Eight and its bid to join the World Trade Organization, among other things.

“We are a big economy today,” said Vladislav Reznik, chairman of the State Duma Financial Markets Committee. “Whether they like it or not, we have to be reckoned with.”

Yevgeny Fyodorov, chairman of the Duma’s Economic Policy and Entrepreneurship Committee, was even more blunt.

“It’s a political bluff,” he said. “It’s an absolute certainty that the Americans won’t [impose any sanctions] because they themselves would suffer.”

In the latest U.S. warning, Commerce Secretary Carlos Gutierrez said all of the United States’ efforts to help Russia “integrate … into the world community” were “at risk,” according to an interview published Saturday in Germany’s Der Spiegel.

Of the two presumptive U.S. presidential nominees, Republican Senator John McCain has been by far the most strident in his anti-Russian rhetoric during the Georgia crisis, reiterating his call for Russia to be thrown out of the G8 and for Moscow’s WTO bid to be blocked.

Senator Joe Biden, who was named Democratic candidate Barack Obama’s vice presidential running mate on Saturday, has been more tempered in his criticism of Russia, restricting himself to saying there would be “consequences” for U.S.-Russian ties from the conflict. During a trip last week to Tbilisi, Biden proposed a $1 billion aid package for Georgia, but he also stressed that he had long sought to “forge a more constructive relationship with the Kremlin.”

Another leading Democrat, former Secretary of State Richard Holbrooke, said Aug. 11 that kicking Russia out of the G8 as McCain advocated was “an impossibility,” Bloomberg reported.

But Washington has only limited options for exerting economic pressure on Moscow, and threats to suspend G8 membership would largely be about denting Russian prestige.

“I haven’t noticed that they’ve actively welcomed us into the WTO anyway,” Fyodorov said.

Yury Afanasyev, the top trade official in charge of WTO accession talks at the Russian mission in Geneva, said he had not received any signs that the United States planned to withdraw its support of Russia’s bid to join the global trade body.

“I am hoping U.S. officials will have enough common sense not to link WTO issues with politics,” he said by telephone from Geneva.

Russia has finalized bilateral agreements with all of the WTO’s 153 member countries except for Georgia, which rescinded its 2006 backing when Russia severed trade and transport links following a spying dispute between the two countries.

Russia is the biggest economy still outside the WTO, whose members account for more than 95 percent of global trade.

The next meeting to consider Russia’s WTO bid has been scheduled for Sept. 18, Afanasyev said.

If the United States moves to reconsider its support for Russia’s WTO bid, Moscow will retaliate, Afanasyev said.

Russia has “a rich arsenal” of countermeasures at its disposal, he said, referring to a deal that allows the United States larger import meat quotas, among others.

Sean Spicer, a spokesman for U.S. Trade Representative Susan Schwab, declined to say whether the U.S. administration intended to revoke support for Russia’s WTO bid, referring only to comments by Bush on Aug. 13. “This [is] as much as we have stated,” Spicer said in e-mailed comments.

In that statement, Bush indicated that Russia might find itself isolated if it lost U.S. support. “In recent years, Russia has sought to integrate into the diplomatic, political, economic, and security structures of the 21st century. The United States has supported those efforts,” Bush said. “Now Russia is putting its aspirations at risk by taking actions in Georgia that are inconsistent with the principles of those institutions.”

The economic costs of possible sanctions, such as delayed WTO entry, may not be significant, said a senior Western economist who has studied Russia for 15 years.

“Russia would not suffer much — if any — immediate economic pain as a result of such a delay, since the direct trade effects of accession (the impact of tariff changes and improved access to foreign markets) will be limited,” the economist said on condition of anonymity, because he was not authorized to comment on Russian politics.

Both Russia and the West would only gain from changes such as the “reduction in formal and informal barriers to foreign investment in key service sectors [and] the overhaul of technical regulations,” he said.

U.S.-Russian economic interdependence was underlined by Commerce Secretary Gutierrez in June, when he wrote in a commentary in Izvestia that Washington was eager to “expand our economic relationship.”

In 2007, there was a 57 percent growth in U.S. imports to Russia and bilateral trade of $27 billion, Gutierrez noted, including “significant growth not only in the extractive industries but in products as diverse as innovative pharmaceuticals, farm machinery, information technology and an increasing array of services.”

Among the U.S. companies that rely heavily on a thriving Russian economy are struggling U.S. auto giants General Motors and Ford, whose Russia sales make up some of the gap being felt back home. Also, for U.S. aircraft maker Boeing, whose Moscow engineering center is the company’s biggest outside of Seattle, business has been lucrative here.

“Perhaps no other country is able to offer the United States as broad a range of partnership opportunities or capabilities for cooperation in every scientific or technical sphere,” the U.S. Embassy in Moscow said on its web site.

Analysts agree that while uncertainty or even animosity in the U.S.-Russia relationship will likely continue at least until the U.S. presidential election in November, another Cold War is out of the question.

“Russia and the West need each other,” Troika Dialog wrote in a research note to investors last week. “Russia won’t be able to sustain its growth without foreign capital and international experience, while the West needs a strong ally in its fight with global terrorism and Iran. Besides, Russia is the only large energy supplier outside Middle East.”

Reznik, the Duma finance committee chairman, pointed to current economic realities and the country’s history as to why the West needed Russia.

“We can ask consumers of our gas … whether they want to be friends with Russia,” he said.

“There was a time in world history when Russia was the only superpower on the European continent,” said Reznik, referring to the period between the end of the Napoleonic wars in 1815 and the Crimean War in the 1850s.

“We’ll find our place in the world,” he said.

25 August 2008
By Anna Smolchenko / Staff Writer

Source: The Moscow Times

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