With all his pretense vanished, Vladimir Putin has embraced Russia’s past,
seeking to restore its glory days of autocratic imperialism. His role model for
restoring Russia to superpower status is none other than Joseph Stalin, a
native of Georgia which just experienced the type of Soviet-style invasion that
would have made Stalin proud.
Using an old Stalinist tactic, Russia is exploiting local ethnic feuds in
neighboring lands on the pretext of protecting minority Russian speaking
populations. Putin intends to reverse what he characterized several years
ago as “the greatest geopolitical catastrophe” of the 20th century –
the dismemberment of the Soviet Union. However, while Stalin expanded
Russia’s power by brute military force and ideology, Putin is using the
stranglehold Russia has on key energy resources needed to fuel the economies of
Europe and Asia.
Russia owns approximately 27.5 per cent of the world's proven gas reserves
and is responsible for 21.6 per cent of global gas production. It owns
approximately 6.2 per cent of the world's proven oil reserves and is
responsible for about double that amount in global crude oil production.
Russia’s economy has largely recovered to place within the top ten economies in
the world because of the revenues flowing in from its petro and gas revenues.
Putin believes that Russia has now reached the point that he can use its
energy–derived leverage as a strategic weapon to rebuild its empire.
Thus, Russia’s invasion of Georgia was not only about defending the break-away
Georgian provinces of South Ossetia and Abkhazia. It was also a shot
across the bow to signal that Russia has the military power to disrupt oil and
gas pipelines transiting any of its former Soviet republics whenever it wishes.
This includes the 1,100 mile Baku-Tbilisi-Ceyhan pipeline in Georgia,
which does not pass through either Russia or Iran but is clearly vulnerable to
a military attack or sabotage.
James L. Williams, publisher of the Energy
Economist newsletter, summed up Russia’s objectives this way in an
interview with the Los Angeles Times:
"For Russia, control of Georgia and the
pipeline would restore much of its influence over many of the former satellites
of the U.S.S.R. It would have the clear benefit of increasing Russia's
energy chokehold on Europe."
In the short run, through such intimidation, Russia is seeking to throw cold
water on any Western plans to expand NATO membership to former Soviet republics
near Russia’s borders. The missile defense deal just signed between the
United States and Poland was a good push back, but Putin is unlikely to get the
message. At minimum, he can be expected to replay his action of cutting
oil supplies to the Czech Republic when it decided to enter into a missile
treaty with the United States. More ominously, Putin’s puppet
President Dmitry Medvedev was quoted just recently by
the RIA-Novosti news agency as threatening ”to react, of course, in a military way."
Russian officials have warned the United States to choose "a real
partnership" with Moscow over an "illusory" relationship with
countries within Russia’s sphere of influence such as Georgia.
However, Russia is offering an illusory choice of its own which we must
forcefully reject. We must stand instead with duly elected democratic
governments over Russia’s territorial ambitions. Russia evidenced its
real intentions by officially recognizing the independence of the secessionist
South Osssetia and Abkhazia Georgian provinces in defiance of past unanimous UN
Security Council resolutions and then announcing that South Ossetia has agreed
to ultimately join “one united Russian state.”
Russia’s “real partnership” is with the rogue, terrorist-sponsoring states
of Iran and Syria. Despite paying lip service to the goal of preventing Iran
from developing a nuclear weapon, Russia has run interference for Iran in the
UN Security Council to block any meaningful economic punishments for Iran’s
refusal to suspend its nuclear enrichment program. And it has continued
to supply nuclear fuel for Iran’s Bushehr power plant that Russia helped Iran build,
accepting Iran’s ‘assurances’ that it will only be used for ‘peaceful’
Against this political backdrop, Iran and Russia - each an energy giant in
its own right - are working behind the scenes to turn the Gas Exporting
Countries Forum into a cartel along the lines of the Organization of the
Petroleum Exporting Countries. Russia’s own oil and gas reserves, its
captive customers in Europe and Asia, and its control of key export routes
already provide it with significant leverage over the world’s energy markets,
but it wants to lead the economic equivalent of the old Warsaw Pact.
Russia has also forged a military relationship with Iran and its partner in
sponsorship of terrorism, Syria. Some of the arms that Russia has sold to
Iran and Syria for their own use have ended up in the hands of Hamas and
Hezbollah. Indeed, Russia has taken the side of the radical Islamists who
have argued that these terrorist groups are legitimate liberation
movements. Not surprisingly, however, Russia regards the Chechens, who
are fighting for their own freedom from Moscow’s grip, as out-and-out
As long as Russia continues on this path, we should work with our allies to
isolate it from the international community in areas where it matters.
This could include denial of membership in the World Trade Organization
and expulsion from the annual ‘Group of Eight’ summit meetings.
Investors are already voting with their feet, pulling an estimated $25
billion or more from Russia since Russia’s invasion of Georgia. If
coupled with actions to sharply reduce reliance on oil and gas exports from
Russia and other autocratic energy producing countries, Russia and its allies
will lose their economic clout and hence the source of revenue for their
military adventures. China is an essential partner to help us make this
China is sometimes lumped together with Russia as an implacable adversary of
the United States. However, this perception focuses too much on the
obvious similarities between Russia and China, while ignoring the fundamental
difference in worldview and strategic objectives of the two countries. It
is this difference that makes isolation of Russia and cooperative engagement
with China the right strategies for the United States.
It is certainly true that China, like Russia, has little regard for
individuals’ political freedoms or human rights, which they each see as threats
to a stable society under government control. That was made dramatically
clear by China’s use of excessive force in dealing with Tibetan protests
earlier this year and by China’s suppression of dissent during the Olympics.
It is also true that China, like Russia, has significant economic ties with
Iran, which has motivated China to help Russia shield Iran from any meaningful
UN sanctions. Like Russia, China has sold arms to the
terrorist-sponsoring regimes of Iran and Syria, some of which have ended up in
the hands of Hamas and Hezbollah. China has also indicated its
willingness to recognize and work with these two terrorist organizations.
This is all about China’s growing need for energy, as it aggressively
competes with the United States to secure the most advantageous terms and
assured sources of supply in the Middle East and elsewhere. China will
support some of the world’s worst offenders of human rights, including Sudan
and Iran, and will side with the Israel-bashing Organization of Islamic Conference
in the United Nations in order to ensure that its energy needs are met from the
Muslim states that also happen to be among the world’s largest oil suppliers.
Russia has also positioned itself as a major supplier to China. For
this reason, and the fact that China shares with Russia the desire to recreate
a multi-polar world where the United States would lose its unchallenged
dominance, China and Russia have entered into security and economic alliances
and have conducted joint military exercises.
However, there are major differences between China and Russia that the
United States would be well-advised to consider in differentiating how it deals
with each of them.
China, one of the world’s biggest consumers of energy, has embraced a future
of economic vibrancy that depends on its integration into the global market and
Russia, the second largest energy producer in the world, has reverted to its
czarist and Stalinist practices of the past. But Putin can only go as far
as his energy revenue-supported economy will permit.
Russia and Iran have an identity of interests as energy producers, using
their control over significant natural resources to enhance their economic and
political power against the West. As an energy consuming nation, China’s
long-term interest in reducing its dependence on fossil fuels is the same as
the United States and other energy consuming nations, whose domestic production
of oil and gas will not come close to meeting their total needs.
In short, the United States and China are facing the same energy challenges:
increasing dependency on foreign sources of energy and high-energy prices.
Russia and Iran, on the other hand, have strong economic and political
incentives to exploit these vulnerabilities.
According to the Department of Energy, China has become the world's second
largest energy consumer after the United States. China's need for energy
is projected to increase 89 percent by 2020. The Energy Information
Administration projects that by 2025 (assuming current trends) China's demand
for energy will surpass that of the United States, accounting for some 20
percent of total world demand.
Whatever short-term strategies in line with Russian and Islamic interests
that China is now pursuing to meet its current energy requirements, China’s
voracious appetite for energy will continue to grow to the point that it is
only a matter of time until China is forced to confront the intractable
divergence of interests it has with the world’s leading energy producing
states. Russia and Iran have far more in
common with each other than either of those countries has with China.
The fact is that Russia and Iran would be economic basket cases without
their oil and gas reserves and the current high levels of energy prices.
They are not integrated into the global economy to any significant
extent. While limiting their growth potential if energy prices decline
substantially, their relative distance from global economic institutions frees
them from the constraints of the rules that come with being a part of such
China’s relationship with the global economy is at fundamental variance with
the Russian-Iranian paradigm. China’s rise as an emerging superpower is
largely a result of its breathtaking economic success. Particularly since
China’s accession to membership in the World Trade Organization in 2001,
China’s economy has become highly sophisticated and diversified. Its
exports are moving up the value chain. It is attracting major direct
foreign investments. China was the third largest recipient of
foreign direct investment in the world, behind only the United States and the
United Kingdom, in terms of the average value of inflows between 2000 and
2006. Russia was 18th on this list during this same
period. By way of comparison, China had 140% more foreign direct
investment than Russia in 2006. China is the world’s largest holder of
All of this in turn has been helped along considerably by China’s willingness
to play by the rules of the global economic market. For example, China
has reduced tariff rates, eliminated non-tariff barriers, provided improved
market access to goods and services imported from the U.S. and other World
Trade Organization members, and improved transparency. While it is
certainly true that China still has protectionist policies, an opaque
regulatory regime and loose enforcement of intellectual property laws, it is
definitely moving in the right direction toward a more open, entrepreneurial,
The political desire to counterbalance U.S. power and its short-term energy
needs may push China in centrifugal fashion toward Russia and Iran, but the
centripetal force of China’s interdependency with the world’s free market
economies will be more likely to prevail if we engage China on the basis of
mutually shared objectives. Economic globalization and energy cooperation
among the world’s leading economies that rely on energy consumption for
economic growth are inextricably linked.
With this in mind, the China-U.S. Energy Policy Dialogue was launched
several years ago to facilitate policy level discussions on a range of energy
issues, including energy policy making, supply security, energy efficiency,
renewable energy, and energy technology options. At an even higher level, the
China-U.S. Strategic Economic Dialogue was initiated a couple of years ago, in
which Secretary of the Treasury Henry Paulson has had regular and broad-ranging
discussions on economic policy with the Chinese leadership.
Such dialogues are great, but now it is time to move aggressively beyond the
policy talk and undertake concrete actions with achievable results.
To this end, the United States should press for China’s inclusion in the
International Energy Agency, which acts as energy policy advisor to its member
countries and focuses on climate change policies, market reform, and energy technology
collaboration. The United States should
also offer to coordinate with China the use of the two countries’ national
strategic petroleum reserves to counter spikes in oil and gas prices and to
deal with unexpected disruptions in supply.
Moreover, the United States should work with China to build joint
laboratories and research and development centers for conducting alternative
energy R&D projects. Product pilots in both countries can then be
conducted and observed by representatives from both countries. Such
cooperation, which can be expanded to include other major energy consuming
nations as well, should include committed funding, private-public partnerships
with coordinated tax incentives and open sharing of technical
Solar power, for example, would provide excellent opportunities for
cooperation. China is a leader in this area already but realizes it needs
more capital, more markets for its products and technological assistance from
the West to succeed. Thus, China has strong incentives to share its
know-how as part of projects that could include cooperation on equipment design
and manufacturing technology, the construction of international testing
centers, more direct foreign investment in production facilities and purchase
commitments from Western governments and the private sector.
It is true that China’s economic reforms and embrace of capitalism have not
led to political reforms and embrace of democracy. This may turn out to
be only a time lag phenomenon, however. If China’s economic prosperity
continues to grow at a vigorous rate, a larger middle class will develop who
will in turn create the kind of civil organizations from the bottom-up that are
usually the precursor to political change. This is not likely to happen
in Russia, where a sudden leap into capitalism during the 1990’s ended in
disaster. The country instead is reverting to its authoritarian roots.
Appearances are deceiving. Despite some similarities, Russia and China
are two very different countries on two divergent paths. We would
do well to recognize and exploit these differences.