On November 19th, Presidents of U.S. and Russia will discuss the dominant global security issues: Middle East, including Iran and Iraq, North Korea and Georgia, at their forthcoming summit in Hanoi, Vietnam. The meeting is taking place at the sidelines of the Asia Pacific Economic Cooperation Organization (APEC). The presidents are expected to preside over the signing ceremony of a bilateral protocol on Russia's accession to the World Trade Organization (WTO) in addition to US Trade Representative Susan Schwab and the Russian Economics Minister German Gref.
Despite a troubled relationship in the last three years, the U.S. has an interest in Russian membership in rules-based organizations, such as WTO. Furthermore, expansion of U.S. and Western trade and investment ties with Russia integrates it with the outside world and hopefully will prevent it from going isolationist and aggressive. Provided President Bush receives assurances from Putin that on two key issues -- Iran and foreign access to Russian oil and gas reserves, this is the best deal that can be achieved and the U.S. should sign the bilateral protocol.
Iran, the Key Issue. Russia has been insufficiently cooperating with the U.S. on the key international security issue, Iran, stalling and backtracking on the earlier, agreed-upon UN Security Council draft resolution sponsored by Great Britain, France, and Germany. The document is calling for sanctions against the Islamic Republic's nuclear, missile and military programs.
The Russian Foreign Minister Sergey Lavrov recently downplayed International Atomic Energy Agency's (IAEA) discovery that Iran has concealed highly enriched uranium and plutonium. This happened as President Mahmud Ahmadinejad promised make Iran a nuclear power by March 2007 and announced the launch of a 3,000-strong centrifuge cascade capable of enriching weapons grade fissile material. He threatened to expand the cascade to 60,000 centrifuges, which will eventually give Iran a powerful nuclear weapons producing capability.
Moscow is concerned that its support of tough UNSC sanctions may diminish its leverage in Teheran, in the Middle East, and vis-a-vis Washington and European capitals. The Kremlin may be concerned that the sanctions may jeopardize its Bushehr nuclear reactor deal, and the sale of TOR M-1 mobile anti-aircraft system worth of $700 million. Proposed sanctions may affect many other weapons and technology transaction, including Russian support of and technology transfer to the Iranian space program, a precursor to the intercontinental ballistic missile (ICBM) production capacity. Earlier this week US UN Ambassador John Bolton rejected Russia's alternative (and toothless) sanctions resolution draft.
Promises, promises. President Bush promised Putin repeatedly to abolish the Jackson-Vanick Amendment (passed in 1974), which historically denied the USSR the Most Favored Nation (MFN) status in trade. He also promised Putin to facilitate the passage of Permanent Normal Trade Relations (PNTR) through Congress. So far, nothing has been accomplished, and the newly elected Democratic Party-dominated Congress is likely to stall on these issues, citing concerns about trade, insufficient protection of intellectual property rights, democracy shortcomings, and harsh treatment of Russia's neighbors, such as Georgia.
The U.S. business community, conversely, lobbied for Russian accession to WTO: Boeing, Shell, Ford, Microsoft, and a number of agribusinesses have market access issues to address and businesses to expand in what is one of the most dynamic economies on the planet. Russia has been growing at about 6.5 percent of GDP a year since 2000.
Some accomplishments in the WTO agreement are clear, such as Russia's recognition of 100 percent foreign owned banks, broker-dealers and investment companies. Some liberalization of the insurance sector is also welcome.
Russia also softened the stance on major agricultural dispute resolution issues regarding U.S. exports of meat and poultry. This took a direct override of the intransigent and allegedly corrupt Russian Agricultural Ministry and the meat-and-poultry lobby by President Putin.
Energy Access. A major concern, however, remains unanswered: foreign company access to the Russian mineral resources fields and deposits, including hydrocarbons, and private ownership of oil and gas pipelines. Russia promised and then denied Western companies partnership in development of the giant Shtokman gas field in the Barents Sea, and is piling up difficulties for Sakhalin Island oil projects. The Russian pipeline monopoly Transneft is increasing tariffs for transit through the Caspian Pipeline Consortium (CPS) pipeline from Kazakhstan to the Black Sea. This is a major bottleneck in development of exportable Russian energy resources, and U.S. should achieve progress before granting Russia PNTR.
Georgia, on Moscow's Mind. Russia rejects any official mediation of the Georgian conflict, which it deems in its "sphere of influence". Moscow is threatening to recognize independence of Abkhazia and South Ossetia, following the model of Kosovo. The U.S. rejection of the South Ossetia's (part of Georgia) independence referendum, held on November 12th, is making the issue thorny. However, Moscow must conclude a bilateral WTO accession agreement with Tbilisi. This will not be easy, as Russia severed trade, financial, and transportation ties with Georgia and banned the two Georgian key exports to Russia: wine and mineral water.
Danger and Opportunity. Moscow and Washington are facing the lowest point in the bilateral relations since the end of the Cold War, with Russia providing arms and diplomatic cover to Iran -- the main anti-status quo power in the Middle East and the world. Moscow, at the same time, strives to join the developed nations as a respected power and a key supplier of energy, raw materials, and, increasingly, machine tools, industrial goods, and services. It cannot achieve such status while challenging the U.S. on vital security issues. Signing the WTO protocol is a step away from confrontation and hopefully towards cooperation on the two issues of great importance to the U.S. ¨C Iran and access to oil and gas.
At the Hanoi Summit President Bush should strive to receive guarantees from President Putin that Russia will end the fence-sitting on the Iranian nuclear program and will recognize the threat to world peace, including to itself, from the missile-wielding, nuclear-armed Iran. Russia should support and be part of the US-European policy on bringing sanctions against Iran and not rule out the use of force if the sanctions fail.
In exchange, President Bush should re-commit to passing PNTR for Russian and abolishing the Jackson-Vanick Amendment in the lame duck session of the Congress. However, this can only be accomplished if Russia agrees to allow access to Western companies to its natural resources and energy transportation infrastructure. Russia also needs to demonstrate that it is serious in protecting intellectual property rights.
Finally, U.S. may consider offering it good services in resolving the Russia-Georgia dispute, which should include lifting of Russian economic and transportation sanctions in exchange for lifting Georgia's objections to Russia's WTO membership.
Presidents Bush and Putin, as their countries, have experienced ups and downs, and a lack of trust, in attempting -- and often failing -- to reconcile conflicting national interests for the greater part of the decade. Addressing US concerns about Iran and energy, and signing Russia's WTO accession is a good place to start in opening a new page in this complicated relationship.
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