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The Year Ahead: The U.S. and Russia
By Martin Sieff
UPI Senior News Analyst

WASHINGTON, Dec. 30 (UPI) -- At the start of 2002, Russia is the inscrutable sphinx of the great powers, facing both east and west, confronting the prospects of both prosperity and poverty, offering America the possibilities of cooperation and confrontation, supposed to be helpless, but in fact far from it.

In the months following Sept. 11, Russia proved America's most valuable partner in the struggle against the Taliban regime and the al Qaida terrorist organization in Afghanistan. Without Russia's wholehearted support, the United States could not have projected its power so effectively so fast into the heart of Central Asia.

Now, however, Russian President Vladimir Putin looks more likely to tacitly support Iraqi President Saddam Hussein against possible U.S. military attack, in part because he has been disappointed in the response from President George W. Bush to his support in the war on terror.

Bush cleared the way for Russia to become virtually the 20th member of NATO. But he also dashed Putin's hopes of forging a closer strategic partnership when the Russian leader visited him in Washington and Crawford, Texas. And the Russians are angry at his decision to pull the Untied States out of the 1972 Anti-Ballistic Missile treaty to clear the way for development of an eventual multi-tiered ABM shield against missiles fired from so-called "rogue nations."

Putin is still looking west. He continues to woo the leaders of Western Europe and stays on good personal terms with Bush. But he retains the option of looking east, too. On June 15, he signed a far-reaching security treaty with Chinese President Jiang Zemin and four Central Asian leaders to set up a Shanghai Pact security organization covering more than half of Eurasia. Its barely concealed purpose was to counter U.S. influence in the Eurasian heartland.

In energy policy, too, Putin appears to be swinging from a policy of cooperation with the United States to one of confrontation. He has authorized cuts in oil production to cooperate with the Organization of Petroleum Exporting Countries to raise global oil prices. Some analysts believe his decision to play ball with OPEC could boost global oil prices by as much as $5 to $7 a barrel.

Russia's economy stabilized and began to recover for the first time in a decade thanks to the revival in world oil prices over the past three years, but in the past three months, those same prices have dropped by almost a third. So far, that drop has not dented Russia's economic revival, but it has already created a shadow of uncertainty over whether that recovery will continue, and what will happen if it seriously falters.

In the last two weeks, however, economic indicators coming out of Russia have been good, and barring a catastrophic global economic downturn, they augur well for the coming year.

On Dec. 14, the State Duma, the main house of the Russian parliament, passed the 2002 budget, and Finance Minister Alexei Kudrin announced that gross domestic product in 2001 was expected to grow by 5.5 percent. This would prove to be a slowdown from the 8.3 percent GDP growth recorded in 2000 but would still be a healthy figure. Current Russian government economic projections for 2002 put expected GDP growth at a still robust 4.3 percent with a healthy budget surplus estimated at 1.63 percent of GDP, Kudrin said.

Responsible international analysts respect the Russian figures. The international rating agency Standard & Poor's announced Dec. 13 that it expected to boost Russia's ratings from its current B- as the investment climate there has markedly improved. S&P analysts gave credit to Putin for pushing through crucial and long overdue structural reforms. These were already cushioning the estimated $1 billion loss in revenues since September as global oil prices have fallen.

The International Monetary Fund too is more bullish on the Bear these days. The IMF announced Dec. 12 in a statement that "the large external current account and fiscal surpluses, together with the relatively comfortable level of foreign reserves, have placed Russia in a strong position to deal with the less favorable environment" caused by the falling oil prices.

Putin rides high politically, too. No Russian or Soviet leader since Leonid Brezhnev nearly 40 years ago has built such a firm foundation for retaining power. In only two years as president, Putin has reversed the apparently inexorable drift towards regional rule and the disintegration of the vast Russian Federation, and reestablished effectively the Kremlin's control over its far-flung regions.

He has also slowly but remorselessly cracked down on freedom of expression in the broadcast media from which nearly all Russians outside Moscow get their news and perceptions of the world. And he has put the once mighty billionaire oligarchs in their place, driving several to exile and forcing the rest to toe his political line.

Still, even if Russia's macroeconomic performance remains robust, Putin still faces the challenge of funneling the proceeds of that recovery down to the impoverished lowest third of Russian society. And he still has to turn around what he has repeatedly called Russia's most pressing and dangerous problem: its literal population implosion. Death rates continue to far exceed birth rates, and an estimated 8 million abortions are performed every year.

In the moral rubble and material squalor that remain a decade after the collapse of communism, the world's second best-armed thermonuclear power still confronts dire problems and an uncertain future as Putin swings between east and west, seeking the best strategy to deal with them.

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