RusEnergy

The development of a new global economic system is under way. The challenge facing Russia is to ensure that it will not find itself in isolation and it will build up an economic weight so as to integrate in this system on acceptable terms and conditions 

25 January 2005 -  Pavel Bykov

The main challenge facing Russia on the international arena for the next few years can probably be formulated thus: not to find itself in the backyard of the new world. On the face of it, there are no reasons for putting a question in such a blunt way, since Russia has established quite good relations with most of economically and politically significant states and it is not in their interest to ignore Russia. However, events of the last year demonstrated that Russia is still exposed both to the risk of economic and political isolation and to the threat of marginalization.

A real new economy
The global economic map is undergoing rapid changes. The collapse of the Soviet system, the end of ideological confrontation and the disappearance of dividing lines in the world had created conditions for the development of a fundamentally new global economic system. However, in the early 1990s no one of the leading players was ready for that. From the mid-1990s till the beginning of the new century, the whole world had been enthusiastic about mirages of the financial globalization and of the US unprecedented economic expansion and about the stock bubble of the new economy. The real overhaul progressed slowly.
In 2002-2004, the global economy developed in the context of new geopolitical realities. The last year brought a record number of news about launches of new large-scale infrastructure and industrial projects worldwide. The US ceased to be a world magnet for investments. Capitals, earlier run to financial speculations, began to flow into the real sector, which resulted in rapidly growing demand for raw materials and in high prices for energy resources and metals. And as a consequence, there has begun a new stage of resource-saving technologies development. For example, companies are increasingly active in introducing vehicles with hybrid and hydrogen engines. Painful restraints in the growth of demand for raw materials caused by highly attractive financial speculations have given way to the natural process of technological evolution under which industrial upturn and growing prices for raw materials encourage innovations and lead to ousting of less efficient producers.

Risks facing Russia
No special arguments are needed to prove that Russia has substantially benefited from this change in the quality of global economic growth. However, it is here where the main risks lie.
First, a new wave of engineering re-equipment in developed countries can result in Russian producers’ continuous development gap and their irreversible ousting from foreign and domestic markets and in assigning a status of the raw materials-producing appendage to Russia. Secondly, as a result of the rapid industrial growth of developing countries, the Russian economy’s relative weight in the global economy is declining. Today, Russia with its GDP of $ 1.3 trillion in terms of purchasing-power parity, according to CIA estimates, is simply lost against background of EC economic giants (GDP of $ 11 trillion), the US ($ 11 trillion), China ($ 6.5 trillion) and Japan ($ 3.6 trillion).
The combination of these two trends produces a rather gloomy picture. On the one hand, the quality of Russia’s integration in global technological chains leaves much to be desired. Unlike, say, France that doesn’t leave Russia behind too far in terms of absolute figures, Russian auto makers don’t help the Japanese establish order in their economy as French Renault does owning a nearly 50-percent stake in Japanese Nissan. On the other hand, the Russian economy is not able to have an impact on the global economy as the same China with its huge production capacity and consumer marker is able to do.
Finally, even in the newly developing global transport system Russia may find itself playing a subordinate role – the restoration of traditional transport routes and linked business complexes, which were destroyed in the period of the bipolar world, is now actively under way. In other words, the new global economic system is taking shape with Russia’s minimum participation in it.

Don’t panic
Yet, one shouldn’t paint the devil blacker than he is. Today, Russia’s position is relatively stable, and it is developing. GDP of $ 1.3 trillion arouses at least respect, if not pride. However, it is clear that it’s not enough, after all: objectively, Russia needs to develop its economy rapidly and increase its economic weight. And it is here where problems arise. Today, Russia is gradually pressed to make a “choice” – either economic marginalization at its own will or forced political marginalization. If Russia agrees to surrender its economic sovereignty, it will certainly secure the most-favored-nation treatment. And if it pursues a minimum realized policy designed to avert this, hysterics will begin.
Over the last few months, the western press has been literally stuffed with crazy articles about Russia filled with absurd accusations, in which everything is lumped together (there was no such a situation, perhaps, even at the height of the campaign against the “Russian mafia” in 1999). When reading them, one is at a loss: whether he/she should cry or laugh. The most remarkable thing in such publications is that their authors evidently give themselves away wishing Moscow to do anything of malevolent and hostile sort as soon as possible – they wish Moscow to present as soon as possible its insidious imperial plans in all its glory. But the trouble is that Moscow doesn’t present such plans. It has never assaulted Georgia (and according to western media, it did want to attack it!). Moscow is ready to work with pro-western Yushchenko. And in general, Moscow is carrying on a constructive dialogue with everybody, be it Beijing, Turkey, Chancellor Schroeder or the incumbent US administration. Apparently, this is exactly what makes them angry.
It makes them angry because the attempts to isolate Russia turn out to be a failure. It cannot be achieved by means of purely economic mechanisms – raw materials and weapons are specific goods, while economic and cultural ties with the post-Soviet countries are too close. As for provocations, the Kremlin doesn’t respond to them.
Here is what Emmanuel Todd, a brilliant French expert in social sciences cum publicist, wrote in his book After The Empire. Pax Americana – The Beginning of the End published in 2002, “They [the Russians] are intellectually trained quite well to make no mistake the adversary expects them to do: in this case, it’s silly to respond to provocations in Georgia or in Uzbekistan without real strategic grounds.
The conflict around the elections in Ukraine the western mass media fanned up to universal scales is of the same sort. Its objective is to convince Russia that it is losing Ukraine and to provoke a hyper-reaction. It also aims to convince Europe of Moscow’s imperial manners. Such tactics work one way or another at the level of public sentiments and they don’t work at the level of the real policy.

In search of a niche
Today, Russia is facing a task of crucial importance – to find a new geopolitical and geo-economic niche. Over three hundred years (in 18-20 centuries), Russia had specialized in military-and-political arbitrage in Europe. Russia’s decisive military superiority and disposition to mobilization development scenarios had been its trumps in the fight with European rivals. But once Europe had ceased to be at war, these advantages devalued. Fifty years of peace in Europe were enough for Russia to become disappointed with this model.
Not so much escalation of the cold war with the US as peace in Europe convinced Russia to dismantle its empire that had been turned into the Soviet Union. Since the break-up of the USSR is not at all the withdrawal from it made by Baltic states, Ukraine or Central Asian countries. It should be reminded that the break-up of the USSR is Russia’s withdrawal from under the power of the “Union center”. In the early 1990s, when all USSR’s outskirts expected with fear that Moscow was just about to make a decision “to establish order”, Russia gave up what it had ceased to consider its own. That was why there were no wars within the CIS similar to those in Yugoslavia, where the matter really concerned breakaway Slovenia and Croatia recognized in haste by recently united Germany.
The Russian expansion – the Russian policies in the Caucasus, Central Asia and Far East – was not a thing in itself. They were an element of the game the Russian empire was playing to keep a status of the European power. It was a Russian way not to turn into a province of the European capitalism as was the case with Poland and other countries eastwards. If you wish, that was a Russia’s know-how thanks to which it remained a competitive country as compared with innovation capitalism of the Western Europe. At the moment when it became obvious that the empire’s contents had ceased to bring dividends to Russia in Europe, the Russians abandoned it. Probably, there were more elegant withdrawals but whether or not we want it, Europe centricity in thinking is an element of the Russian national character. Therefore, the choice made in the early 1990s was by no means accidental, and we will have to live with its consequences.
What could be Russia’s new geopolitical niche and what could be its position in the world? It’s not totally clear. However, one can point out principles formation of the niche should be based on.
First, Russia remains one of the leading powers in military terms and it is naturally able to contain hegemonic claims no matter who they come from. At that, it is important to emphasize that Russia is the only industrially developed country that exports raw materials, which makes it, perhaps, most unbiased of geopolitical players. Secondly, Russia needs to work out a new model of relations with the post-Soviet countries. It is indispensable to rule out a possibility of Russia’s political marginalization as a result of conflicts within the post-Soviet territory and also to increase its economic weight up to the level sufficient for efficient internal development. Thirdly, it is necessary to carry on a multiple-vector policy in the framework of which Russia is establishing as constructive as possible relations with all the major centers of the power.

# posted by Deval : 2:15 AM