Rethink Before You Reset

The Obama administration thinks it can work more productively with Russia on the countries' mutual interests. Unfortunately, these interests don't exist.

ALEXEY NIKOLSKY/AFP/Getty Images Confidence man: Vladimir Putin's legitimacy is based on the myth that he has delivered stability and economic growth.

For almost a century, American conventional wisdom on Russia has been consistently, and sometimes catastrophically, wrong.

You can look back to as far as 1920, when Walter Lippmann and Charles Merz of The New Republic picked through the New York Times' coverage of the Russian Revolution and found articles riddled with ludicrous predictions of the Bolshevik regime's imminent collapse. The news about Russia is a case of seeing not what was, but what men wished to see, they concluded.

As the century wore on, the wishful thinking got worse. For a time, even mass murderer Joseph Stalin improbably morphed into the jovial, pipe-smoking Uncle Joe. When the American establishment finally reversed course and accepted that the Bolsheviks were there to stay, it clung to that belief so adamantly that the collapse of the Soviet Union took the CIA by surprise. In the 1990s, foreign-policy hands were celebrating Russia's transition to free market democracy under the buffoonish but supposedly well-meaning Boris Yeltsin and his merry band of reformers.

The latest Washington consensus holds that Vladimir Putin has presided over a period of Russian restoration amid flowing oil and ebbing civil liberties. In a July 8, 2008 op-ed in the Washington Post, Henry Kissinger hailed one of the most promising periods in Russian history and described Russia's foreign policy under Vladimir Putin as driven by a quest for a reliable strategic partner, with America being the preferred choice. A March 2009 report by the blue-ribbon Commission on U.S. Policy toward Russia developed this thinking further, concluding that both countries' strategic interests require making a genuine effort at putting the U.S.-Russia relationship on a new high ground of cooperation, based on today's geopolitical, economic, and security realities and our many common goals. In other words, Russia is back, a force to be reckoned with, and intent on reclaiming its lost share of import and influence among nations. We might not like everything we see in Moscow, but the United States should try to engage the Kremlin, build trust, and work together.

This new conventional wisdom is as muddled as its predecessors, and the policies it inspires are just as flawed. To see why, we need a Russian reality check. We need to critically examine our notions about Russia's recent history so that we understand exactly who we are dealing with in Moscow.

A transition did take place in Russia in the 1990s, but it was not toward liberal democracy, a free-market economy, and the rule of law. Instead, the doddering bureaucratic authoritarianism of the late-Soviet period evolved into a flashier, more sophisticated authoritarianism whose defining characteristic I call selectively capitalist kleptocracy. Russia today has a market economy subject to the whims of an elite that would be ripe for criminal prosecution in a free-market society with a functioning legal system and genuinely independent judiciary. Embezzlement of budgetary funds, graft and kickbacks, tax-evasion schemes, and grossly unfair business practices are not aberrations. They are the essence of the system.

This system began to take shape under Boris Yeltsin in the 1990s, matured under Vladimir Putin in the 2000s, and went on steroids as oil prices soared. But despite its muscle-bound exterior, the system lacks a coherent model of governance and is loath to acknowledge that it stands on feet of clay.

Kleptocracy evokes the loony larceny of states like Mobutu's Zaire. It's an imperfect term for Russia. Outright theft marred the early post-Soviet years, most grotesquely during privatization, but it's no longer a systemic hallmark. In its petro-state incarnation, Russia has even boasted a swelling stabilization fund and substantial hard-currency and gold reserves. But the essence of kleptocracy is that the machinery of the state serves private gain before the public good, and this is as true in Russia today as it was in Mobutu's Zaire.

Russia's kleptocratic capitalism is selective, meaning it mixes the free market with non-market-driven mechanisms and pervasive government corruption, particularly where state-controlled companies intersect with the global economy. State-run energy behemoths like Gazprom bring in hard currency from the global economy, use their profits to subsidize domestic consumers, and otherwise redistribute revenue without a hint of transparency or market logic.

Selectively capitalist kleptocracy blurs the distinction between high-level businessmen and officials. The distinction evaporates completely when government officials run sizable companies. The boards of Russia's fattest cash cows, from gas giant Gazprom to oil major Rosneft, are studded with deputy prime ministers and ministers on double duty. Meanwhile, Transparency International's annual corruption surveys show a downward spiral in recent years, with Russia ranked a dismal 147 out of 180 countries in 2008. A May 2009 Ernst Young survey of employees at companies with over 1,000 staff found that more than half of Russian respondents fingered top management as the most likely to commit fraud, with 64 percent expecting corporate fraud to get worse.

As in Soviet days, the real powers of formal institutions in Russia rarely correspond to their nominal functions. And when the beast went belly up in 1991, the Soviet Union's formal institutions imploded, but its informal components mutated, survived, and thrived. What emerged were influence groups. These are the real sources of power in Russia.

Influence groups can come together around an institutional affiliation, like KGB veterans, or shared business interests, like Oleg Deripaska's now ailing financial empire, or experiential bonds, like the group of friends in St. Petersburg who summered together in the 1990s, formed the Ozero cooperative to unite their out-of-town residences, and went on to immense wealth and power when one of their number, Vladimir Putin, became president in 2000. Most are held together by more than one type of glue. They form an invisible power structure parallel to the imposing marble ministries. They control assets, vie with other groups for assets, and tug the mechanisms of state power to further their interests. The influence they wield secures their hold on assets in the absence of real property rights.

The leader -- a function performed in Russia by Prime Minister Vladimir Putin -- is a fine example of a post with limited formal powers vastly enhanced by the informal powers of the man who holds it. He acts as arbiter and conspirator, resolving disputes and playing interests groups off each other to prevent threats to his power. When Putin performs this task successfully, he keeps conflict under the radar and enhances his influence. When he stumbles, visible spats tarnish the veneer, as they did during a public polemic in 2007 between elite clans over KGB officers turned business moguls.

The same kleptocratic impulses that drive the Kremlin's management of its own economy inform the way it interacts with other states. In its foreign policy, Russia's guiding principle is not some abstract notion of national interest, but rather the narrower interests of the elite -- energy exports and cozy ties with likeminded regimes. The style has been thuggish, fed by the elite's three great formative influences: the gangland 1990s, the KGB inheritance, and a territorial, zero-sum understanding of relations between states taken directly from the Cold War playbook.

But make no mistake - the Cold War is over, and the Kremlin's playbook today looks more like a checkbook. The bottom line is that for Russia's mercenary-minded elite, it's all about the bottom line.

So how should the U.S. administration approach this corrupt, dysfunctional, undemocratic, and illiberal Russia? Unfortunately, there are few good options.

President Obama has opted for a realist reset, hoping to use mutual interests to rebuild trust for subsequent engagement on thornier topics. But realpolitik lives and dies on the accuracy of its assumptions. The key assumptions here are that mutual interests exist, and that Obama can parlay them into fruitful cooperation on the sticking points.

The harsh truth is that on crucial issues, real interests diverge. On Iran, Moscow has every reason to maintain the uneasy status quo, not aid the normalization of U.S.-Iranian relations, and certainly not foment a breakthrough that could end Russia's lucrative status as the sole export conduit for Central Asian gas. On Afghanistan, the Kremlin's interest is not stabilization, but rather tying the United States to supply routes contingent on Russian beneficence. U.S. policymakers who seek to make common cause on Iran and Afghanistan should take heed that Russian talking heads and state-controlled media spend lots of time ranting about the dangerous Americans and very little about the mullahs or the Taliban.

The United States and Russia do have common interests today, particularly when it comes to arms control. Unfortunately, arms control agreements no longer pack the punch they once did. The greatest danger of the Cold War was that it might turn hot, and the jaw-jawing over arms control kept that threat at bay. The risk we run with Russia today is not nuclear annihilation, but a death-by-a-thousand-cuts erosion of the realm of common rules and values that we have fought so hard to wrest into being from the ruins of Soviet empire and Cold War confrontation. New arms control agreements, however welcome, won't mitigate that risk.

Building trust on scraps of common ground presumes a complete about-face in Moscow. The Kremlin's actions over the last eight years -- from its lavish sponsorship of anti-American propaganda at home to its energy blackmail and warmongering with neighbors -- suggest that it will view friendly overtures as signs of weakness and move aggressively to exploit them for concessions while pushing to safeguard its cash-cow energy exports through a privileged zone of Russian influence in neighboring countries.

Yes, Obama should present Russia with a good-faith offer of a constructive role in ensuring nuclear non-proliferation, energy security, and common solutions to the global economic crisis. But he needs a Plan B if Russia responds with rhetorical sops while continuing to undermine a rules-based system of international relations.

Plan B will involve measures aimed at dispelling the Kremlin's impression of Western weakness. If Russia sends the message that the road to Kabul runs through Moscow -- as it did when it enticed Kyrgyzstan to shutter a U.S. military base while kindly offering to facilitate a new U.S. supply line through Russia -- send a stronger message by exploring a new base in Georgia. Or Azerbaijan. Or even Turkmenistan. If Russian energy skullduggery leaves European customers out in the cold, go after the ill-gotten assets of the Russian elite, targeting the sleazy offshore networks of individuals in leadership positions.

These are hard-nosed moves that don't need to happen in the full glare of public back and forth. Merely telegraphing a willingness to get tough -- through messages sent behind closed doors -- can create a new, more realistic, context for achievable cooperation on clear terms.

Moscow won't like any of this, but it will understand it perfectly. Hardball is a familiar game to folks who cut their teeth far from the polite confines of Washington's elite foreign policy conclaves.

Back in those hallowed halls, much of the Washington expert community will respond with predictable howls of outrage: We need Russia! they will say. Really? What, exactly, has Russia done for the United States on Iran? Afghanistan? Counterterrorism? Energy security?

Aggrieved, authoritarian Russia presents the world's democracies with challenges aplenty. Some will be easier met than others. But the challenge they must surmount immediately is to see not what they wish to see, but what is, and to use that as the basis for action.



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