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Analysis & Opinion
17.10.08 Russia Profile Weekly Experts Panel: Time For A New Global Leader?
Introduced by Vladimir Frolov

Contributors: Ethan Burger, Sergei Shishkarev

With an unprecedented financial hurricane devastating the world's leading economies (and even bankrupting an entire NATO member state—Iceland), there is now a palpable vacuum of global leadership which could stop this contagion from undoing humanity's remarkable progress of the last decade.

The United States and the EU, the world's largest economies, are shirking their responsibility for taking collective action to deal with the crisis. The G8 has gone AWOL on the issue, with the group's finance ministers only now gathering to issue a toothless declaration.

Russia's President Dmitry Medvedev criticized the reluctance of the G8 to deal with the crisis at their last summit in July, and has been lamenting the lack of a legitimate international platform to develop emergency response measures to stop the financial blowout that is destroying the global markets.

Russia has taken decisive steps to contain the crisis on the local markets, including injecting up to $200 billion of liquidity and providing sweeping government guarantees to Russian companies facing margin calls on their foreign debts.

Having seen the entire NATO alliance refusing to bail out its bankrupt member, Iceland, Moscow intervened to lend Iceland up to ?4.5 billion in emergency loans – an act of global statesmanship, as the collapse of Iceland threatened major British banks and companies.

Russia has honored its commitment to withdraw its troops from Georgia.

Last week, president Medvedev went to Evian, France, to deliver a major policy speech at a global governance conference. Medvedev renewed calls for a new security architecture in Europe, and outlined an action plan to deal with the global financial crisis, including measures to improve the transparency of the derivatives market and risk management for all market players.

Medvedev is pushing for a multi-polar economic system that would be less dependent on the United States. He has rallied unexpected support for his ideas from French President Nicolas Sarkozy and World Bank's President Robert Zellick. Both called for expanding the G8 to include emerging market economies, and to share the responsibility for dealing with the crisis with them.

Is Medvedev showing global statesmanship? Is Russia trying to position itself as a responsible global player that has the ideas and the will to lead? Has Moscow come to grips with the jarring reality of its dependence on the global financial system? Does this represent a significant learning experience for the Kremlin, and if so, what are the policy implications likely to be? How will the world's leading players respond to Russia's claim to global leadership? Will Medvedev's ideas on reforming the global financial and security architecture gain any traction at the tables of global politics?

Sergei Shishkarev, Chairman, Committee on Transport, the Russian State Duma (United Russia):

There is no question that Russia is demonstrating the resolve and the will to act and to lead in the unfolding crisis. It is as if the Russian leadership had been preparing in advance for this contingency and is now keen to use this opportunity to project Russia's financial and economic power to reshape the world.

It all started last year, when Russia raised objections to the U.S.-EU appointment of Dominique Strauss-Kahn to head the International Monetary Fund. At that time, Russia rightly claimed that the candidate was ill-prepared to handle a major global crisis. Russia then proposed its own candidate, a reformist Czech central banker, to underscore the need for a major reform of the international financial institutions.

At the last G8 summit in Japan last July, Russia's President Dmitry Medvedev tried as hard as he could to compel the rest of the group to focus on the unfolding crisis. Instead, the G8 was more concerned with the botched presidential election in Zimbabwe.

Before that, at the Economic Forum in St. Petersburg, Medvedev first raised the issue of a new economic architecture and new international mechanisms to handle the complex developments in modern financial markets.
In Evian, France, Medvedev went much further and proposed specific measures to improve the transparency of the international financial markets to prevent new financial meltdowns from happening again. He is offering the West an opportunity to engage Russia and other BRIC countries in a constructive way to handle global problems. This is not anti-American posturing, but rather an earnest effort to be a helpful, constructive and responsible world power, prepared to lead.

The financial crisis has destroyed American global leadership. The world will never be the same again. Russia is showing the ability and readiness to lead. It is now time for Russian leadership.

Ethan S. Burger, Adjunct Professor, Georgetown University Law Center, & Scholar-in-Residence, School of International Service, American University, Washington, D.C. :

I wouldn't describe taking some responsible actions on the economic front that are to the benefit of Russia as well as others to qualify as "statesmanship." Even altruism can be equated to self-interest or ego.

If president Medvedev had real power, it would be nice to see it used with respect to Belarus, Hamas, Iran, North Korea, and Venezuela—all potential crisis areas that are not central to Russian national security.

It has become the conventional wisdom among most experts on Russia that the Prime Minister Vladimir Putin has never surrendered power (see the works of Edward Lucas, Steve LaVine, Marshall Goldman, Lilia Shevtsova and others). Just before leaving the presidency, Putin transferred many powers formerly belonging to the president to the prime minister. This was done without amending the Russian Constitution.

These actions emasculated the Russian presidency, unless its occupant is willing to fire the prime minister. At present, president Medvedev goes to international meetings and expresses his beliefs to his colleagues (which are more informed and nuanced than those of the national security type). But he is not the decision maker.
The current financial crisis has taught many Russian officials that their country's economy depends on the performance of the world market. The price of oil has plummeted to around $75 a barrel. This has major ramifications – the Russian government (like the winner of the contest between Sen. Barack Obama and Sen. John McCain) will have to prioritize.

The Russian government cannot afford major infrastructure projects, including those that have an immediate impact on the people (education, health, housing) while bailing out Russian banks and other enterprises. In addition, the Russian actions in Georgia have unleashed forces both within the country and abroad that pose real threats to Russia's interests.

While Russia can try to buy friends abroad with lucrative contracts (e.g. former German Chancellor Gerhard Schroeder), make some concessions so at least one major oil company (other than ENI) does not give up on Russia in the neat-term, and cultivate a friendship with the Italian Prime Minister Silvio Berlusconi; this can have a positive impact in isolated instances (Iceland, excepted). As electric cars, alternative fuels, and conservation increase among Russia's customers, its failure to diversify its economy can have grave consequences for its future, having the effect of reducing Russia's power.

I note that last week, by coincidence or design, not a single Russian analyst wanted to offer their opinion on the likelihood of president Medvedev's anti-corruption policies. While they all might have felt that they had nothing to add to the discussion, it might also be the case that corruption is so central to the way things are done in Russia, that they either thought the effort was doomed to fail (and they did not want to say so), or they believed that if it were to succeed, it would have a tool on some of Russia's most powerful officials and wealthiest individuals (sometimes the latter appear to be acting on behalf of the former).

I don't want to seem na?ve, but just as "change" has become the mantra of the U.S. presidential campaign (which includes dealing with corruption and white-collar crime in the private sector), president Medvedev could be the vehicle of change in Russia in both foreign and domestic policy. He may not have consciously recognized this potential, but Boris Yeltsin's break with the communist system was a revolutionary process. It appears that Medvedev's world view is quite different from those of past and present members of the security apparatus. If he were to act on it, others might follow in numbers that would surprise many.

Now, the question is negotiating the process in an orderly fashion. The Russian president is empowered to grant amnesties – this could be part of the arrangement. Perhaps it is time to transfer power to a new generation in Russia.
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