Monday, May 24, 2010

Russian Foreign Policy, Economics and Local Elections

United Russia’s electoral loss to the Communist Party in Bratsk, Siberia for mayor has garnered slight media attention, even in the Russian press, but it is a reflection on the impact of the extent of the financial crises within Russia. United Russia also lost the mayor’s race in Irkutsk, a major city, last March – also to the Communist Party.

Although the latest defeat was likely caused by the ineptitude of local United Russia political leadership – they managed to field two candidates who split the vote for which heads will role – it is a concern for the Kremlin as it tries to recover from the international financial collapse which severely impacted Russia’s economy.

Local political concerns for the ruling party will likely not translate into a threat to United Russia’s control of the Duma, but it cannot absorb too many of these local election losses without eventual damage to its internal network. There is a connection with the economic turmoil resulting in these losses and Russian foreign policy.

The principal concern of the Kremlin now is attracting international investors. Should the control exercised by United Russia weaken internally, particularly in the industrial centers, those same investors will begin to either look elsewhere, or demand a better deal on their investments. The strength and stability of the political structure might become questionable if further internal problems begin to deteriorate.
Russia’s economic problems have resulted in the weak start on the custom’s union among Russia, Kazakhstan and Belarus. The union, which came into existence on January 1 and was to begin official operations on July 1, is one part of Russia’s attempt to restore economic confidence within the investment community, both internally and internationally. It is not off to a positive start. The union’s commencement has been put off for a year.
It does not help that Ukraine – a member of the WTO while Russia’s membership has been languishing for 17 years – has declined to become part of the custom’s union. Despite the largely pro-Russian leanings of the President Yanukovych, Ukraine’s economic interests are grounded in more cooperation with Western Europe and Yanukovych has shown little inclination to increase the trade relationship with Russia beyond its current bi-lateral format.
Further complicating matters is Belarus, which has recently poked its finger in the Kremlin’s eye by sheltering the fugitive former president of the Kyrgyz Republic, refused to recognize the independence of Abkhazia and South Ossetia and which will be hosting Prime Minister Berlusconi in Minsk as part of the growing warming of relations with western Europe.
As a result of adverse economic and political events during the past year, Russian foreign policy may be undergoing a change from its recent bellicose nature toward the west. Although largely successful in reasserting Russian control in the near abroad ranging from the annexation of Georgian territory to the recent revolution in the Kyrgyz Republic, the success has come at a diplomatic and economic cost. Eastern Europe and the Baltics were particularly alarmed about the invasion of Georgia which had followed the economic arm-twisting of gas supply cut-offs. The Georgia adventure did not help Russia’s relationship with Western Europe, the United States or Turkey. Using gas supplies as a weapon is probably viewed in hindsight by Moscow as a mistake.
Now Russia desperately needs investment. Russia’s political pendulum has historically swung periodically between an eastern and western world view for sometimes very vague motives, if not outright caprice. There are signs that it is repositioning toward the middle on its current swing to the west for very practical political and economic reasons.
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