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#17 - JRL 7218
Wall Street Journal
April 2, 2003
How Russia Is Playing Its Strategic Interests

In response to your March 25 editorial "From Russia With Contempt": You should not ascribe Russia's threatened U.N. veto to a strategy to support covert arms sales to Iraq. Russia has moved a long way from when its interests lay in selling surplus arms to rogue states. The issue should instead be viewed through Russia's legitimate strategic interests.

Politically, fully 87% of Russians believe containment or inaction are the preferable responses to Iraq, with less than 5% supporting military intervention. Russia is a more or less functioning democracy where the vast majority of the population is against war in the Middle East. With parliamentary and presidential elections in the next 12 months, remaining neutral would have cost President Putin considerable political capital, which can be better spent on pushing Russia's ongoing reform agenda.

More pragmatically, Russia's economic future lies with Europe and China. Of the $126.4 billion in gross non-CIS foreign trade in 2002, the U.S. accounted for $7 billion, roughly equivalent to that of Holland and Belgium ($6.5 billion), and way behind Germany ($14.6 billion) and China ($9.2 billion). The EU accounted for 44% of Russian trade outside of the CIS. Of the $19 billion of foreign direct investment in Russia since 1996, U.S. companies contributed $4 billion against the EU's $7 billion.

It is symptomatic of the continued misconception of Russia as a reactionary basket case to argue that a one-off arms deal could persuade President Putin to undermine the legitimacy of the U.N. Security Council. In years past, policy would have stemmed from the outdated notion of Russia's position in the world order and its historic duty to support dubious governments such as Iraq simply because the U.S. didn't like them. Today, Mr. Putin willingly confronts the U.S. because he believes Russia's economic and political interests lie elsewhere.

Roland Nash Head of Research Renaissance Capital Moscow (Renaissance Capital is the largest investment bank in Russia .)

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