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#9 - 7138
Washington Times
April 9, 2003
Understanding Moscow
By David McCormack
David McCormack is a member of the Chicago Council on Foreign Relations.

Much has been made in recent days of apparent Russian government complicity in sales to Iraq of hardware and technology capable of hindering the coalition war effort. The situation is not surprising to most observers, and indeed has been on the Bush administration's radar for months. But how are we to understand the incident? Is this simply an indication of lingering hostility by the Russian military-industrial complex toward the United States, as some have suggested? Perhaps this plays a part, but a more thorough analysis requires a look at Russian domestic and foreign policy over the last dozen years.

Following the collapse of the Soviet Union, Russian reformers intent on moving their country toward political liberalism and market capitalism set out on their own campaign of "shock and awe." This involved a radically swift effort of privatization and property distribution, assuming that once a critical mass of private owners had been created, this constituency would demand political institutions courts, regulatory agencies, etc. that would advance democratic principles as well as lead to economic growth.

That this did not occur is now well-known. Instead, the small number of enterprise insiders who benefited most from privatization sought rules of the game meant to build only on their newly obtained interests, effectively preventing the establishment of mechanisms capable of encouraging growth. At the same time, the process of "permanent redistribution" that set in had a terrible, corrupting effect on both business and the government, whereby economic actors traded their capacity to influence the state for political subservience. These unintended consequences combined to ensure the economic crises that befell Russia throughout most of the 1990s, posing a direct threat to a democratic Russia.

The Russian economy, and hence government, has been rescued over the last four years almost solely by high oil prices, as demonstrated by a strong statistical correlation linking these increases to the economic growth experienced in Russia over that period. Indeed, estimates suggest that every dollar increase in the price of a barrel of oil results in $1.5 billion-$2 billion in additional yearly export revenue for that country. In absence of a system capable of generating economic expansion, Russia will continue to depend on commodities namely oil to sustain what growth it has realized.

Under these conditions, it is not surprising that Russian foreign policy has been oil-driven. In recent years, Russia has made an aggressive bid to secure oil interests from the Caspian Basin to the Persian Gulf, despite the fact that this often ran in direct contrast to the interests of its newfound "friends" in the United States and Europe (recall Russian arms sales to Iran).

Which brings us to the case of Iraq. It was Russia, after all, that began advocating in the late 1990s the lifting of sanctions, while the Iraqi regime negotiated oil contracts with Russian companies that could only be fulfilled once sanctions had been lifted. Although September 11 made this all but an impossibility, oil continues to drive Russian policy. Sales of night-vision goggles and GPS jamming devices to Iraq by Russian companies in an attempt to curry favor with that government are entirely consistent with Russian government strategy. It is now estimated, in fact, that roughly one half of all Iraqi weapons are Russian-made.

Russia's fear that the removal of the Iraqi regime would nullify Russo-Iraqi contracts has been exponentially augmented by the possibility that increased oil production by Iraq, outside of its control, might lead to a drastic lowering of oil prices that could devastate the Russian economy. Hence, we saw Russia's determined opposition to the war, and can expect to see Russia continue to advance its own interests in Iraq at the expense of the United States and the Iraqi people.

For its part, the administration has thus far refrained from publicly reprimanding Russia, recognizing the precariousness of the Russian position. As it totters on the brink between democracy and authoritarianism, a collapse of its economy could push Russia down the latter path. How long the United States chooses to ignore and indulge Russian foreign policy, however, is anyone's guess.

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