Owen Matthews and Anna Nemtsova
December 1, 2008
Just what exactly does Dmitry Medvedev want? Six months into his tenure at the Kremlin, the Russian president’s signals are so mixed, he has Western policymakers and diplomats baffled. In speech after speech, to audiences at home and abroad, he has talked forcefully of putting an end to Russia’s culture of corruption; diversifying Russia’s economy beyond the oil and gas industry; integrating Russia into the world economy; instituting the rule of law; and guaranteeing freedom of speech. He has said Russia should be a country where ordinary people take a “more active role in the country’s political life.” Yet at the same time, he has blasted Washington for destabilizing the world’s finances; blamed the United States for provoking the August war with Georgia; laid claim to Russia’s “privileged interests” in its neighborhood; and proposed a massive shift in the global “architecture,” which would give Russia a more pronounced say in world affairs.
Earlier this month, in his first state-of-the-nation address, he delivered a more passionate commitment to liberal values than his predecessor, Vladimir Putin, had ever voiced. Putin adviser Sergei Karaganov called the address “the most liberal presidential speech in Russian history.” Yet he also managed to be even more hawkish than Putin by directly threatening the West with missile deployments. The upshot is that over the last several months, Medvedev has developed his own rather radical agenda: surprisingly liberal at home, and increasingly hawkish abroad.
The Medvedev doctrine amounts to an ambitious plan for fixing Russia’s broken society at home and restoring Russia’s place in the world. At its broadest, it is a plan to redraw the world’s security and financial infrastructure, on Russia’s terms. One way to do that, Medvedev believes, is to replace at least some of America’s influence in Europe with Russia’s through a mixture of military threats and the use of Russia’s enormous gas reserves as leverage. For starters, he wants to keep America and Europe from meddling in Russia’s near abroad, and he envisions rebalancing global diplomacy by building up the Shanghai Cooperation Organization, a loose body of Asian states that includes Russia and China, into a NATO-like bloc. Other goals include transforming Moscow into a world financial center, and creating a new OPEC-style gas producers’ cartel, with Russia, the world’s largest gas producer, as a leading member. “The old unipolar world is dying,” says Mikhail Margelov, chairman of the Foreign Affairs Committee of Russia’s Upper House. “New power formations are appearing; besides the U.S. we see the rising power of Brazil, China, India, the EU and, obviously, Russia.”
Medvedev’s overwhelmingly ambitious goals have clearly evolved from Putin’s longstanding plan to restore Russian greatness, at home and abroad. That’s hardly surprising, since Putin remains Russia’s back-seat driver from his post as prime minister, and is widely expected to return to the presidency after a decent interval. But there are clear differences between the two men. Putin used the language of democracy and liberalism when it suited—drawing, for instance, moral equivalencies between U.S. actions in Kosovo and Iraq and Russian policy in Georgia. Medvedev, a lawyer reared in glasnost-era liberal St. Petersburg, has adopted a more open and modern style. He surfs LiveJournal, Russia’s biggest social-networking site, and said last week that he reads opposition Web sites daily, and that they make him “want to get up and start working, working and working.” He arranges to “spontaneously” drop in at cafés and restaurants to chat with customers about things like rising prices and petty corruption. More substantively, Medvedev is also sending a resoundingly liberal message on the economy, local democracy and free speech—not because it’s popular, but because he believes that to keep Russia functioning, it needs firm political control at the very top and something approaching an open society on a lower level, with accountability for bureaucrats and greater freedom for businesses. So even as he pushed a bill through Parliament that would extend the presidential term from four to six years—potentially allowing Putin to come back as president for 12 more years—he has also promised to revive Russia’s moribund parliamentary democracy by mandating a regular, elected rotation of party leaders. Moreover, he has actually promoted and defended economic liberals like First Deputy Prime Minister Igor Shuvalov, a defender of shareholder rights, economics adviser Arkady Dvorkovich, a staunch opponent of nationalization, and Finance Minister Alexei Kudrin, who created Russia’s $150 billion stabilization fund and defended it against attempts to raid it for populist spending plans.
Perhaps most significantly of all, Medvedev has a clear grasp of the problems facing Russia—and isn’t afraid to talk about them. Under Putin, economic growth hummed along at a 7 percent annual clip, thanks to rising oil prices, the lifeblood of the Russian economy. Yet Putin appeared to have little real interest in diversifying the economy or reining in the kind of corruption that makes entrepreneurship impossible and even dangerous. One of the hallmarks of Medvedev’s speeches, by contrast, has been his brazen criticisms of Russia’s corrupt judiciary and bureaucracy—though he’s always been extremely careful never to suggest that Putin was at fault for not tackling these problems earlier. In his speeches, Medvedev has blamed bureaucrats for being “as suspicious of free enterprise as they were under the Soviet regime,” and for controlling the media and interfering in elections—which may sound odd coming from someone who has benefited so much from the state’s control of both the press and the ballot box, but it’s a sharp critique of what’s wrong with Russia nonetheless. In a speech last week to top ministers, he emphasized it was a “national priority” to encourage innovation and reduce administrative and other barriers to creating and developing small and medium-size business.
On foreign relations, Medvedev has been mindful to avoid appearing weaker than Putin. Putin talked of a “multipolar world.” But it was on Medvedev’s watch that Russia took international law into its own hands as Russian tanks went rolling into South Ossetia and Abkhazia. The Kremlin then implicitly reasserted Russia’s imperial right to make—and swallow—nations by recognizing the breakaway Georgian Republics. In the aftermath of the war, Medvedev went a step further, suggesting that the ground rules of international diplomacy should be shifted to recognize Russia’s “privileged interests” in countries where NATO’s interference was definitely not welcome. Russia’s “historical and cultural ties” to various countries along its borders “and beyond” should be recognized, he suggested—a clear assertion of the old Soviet principle of Moscow’s sphere of influence. “We are not trying to rebuild the Soviet Union,” explains pro-Kremlin Duma deputy Sergei Markov. “But Russia, as a great empire, should be surrounded with friends.”
Still, for all the big talk, it’s far from clear if any of Medvedev’s grand strategic goals can be achieved. With enormous resentment and mistrust of the West, Medvedev has few models to look to in his attempt to fulfill his economic goals. So he has reverted to an almost Soviet-style strategy of policymaking: announcing ambitious plans to reform and then seeming to believe they will be accomplished by fiat, rather than through the difficult and often cumbersome task of building coalitions, negotiating and managing the entrenched interests that seek to thwart reform. Medvedev, in short, has talked a good game, but there has been little concrete follow-up.
On foreign policy, with oil prices down two thirds from their high, Medvedev is now in a peculiar position: the ambitions with which he began his presidency no longer match the reality of Russia’s increasingly precarious position. Over the last six months, the Moscow Stock Exchange has dropped more than 65 percent, and the ruble has plunged 25 percent in two months. The World Bank estimates the ruble will fall another 15 percent in 2009. Yet as late as October, at an EU finance conference in Évian, Medvedev talked of “turning Moscow into a powerful financial center and the ruble into one of the world’s leading regional reserve currencies”—ideas that may have made sense with oil at $150 but now seem almost laughable. Few foreigners really need rubles because Russia’s biggest exports—oil, gas and arms—are all traded in dollars. And not even Belarus, with its 10 million-strong population and political isolation from Europe, wants to adopt the Russian ruble as its currency. As for being a financial hub, the best Medvedev can realistically hope for is for more Russian stocks to be traded in Moscow, rather than London and New York, and for Russian capital to return to Russian banks rather than flee offshore, as it has been, at the alarming rate of $3 billion to $7 billion per week since September. But even that’s a remote possibility. The Moscow Stock Exchange’s habit of closing down when the indexes start to tumble, sometimes for days at a time, hardly reassures investors.
Medvedev’s plan to push forward with a Putin idea of forming a “gas OPEC” with Iran and Qatar to fix prices and coordinate supply could, in theory, scotch European attempts to break their dependence on Russian gas by diversifying its supplies. But that too now seems increasingly farfetched. Even the regular OPEC has been unable to keep oil prices from collapsing, and the nature of gas contracts, often signed for decades in advance, makes it far harder to manipulate prices. Moreover, the West is less dependent on Russian gas than ever. According to an analysis by Pierre Noël at the European Council on Foreign Relations, Russia’s share of the EU’s gas imports have roughly halved since 1980, to 40 percent, as Europe diversifies its gas supplies to liquefied natural gas from Algeria and Nigeria. Russian gas now represents just 6.5 percent of the EU’s primary energy supply—and that share is declining as well.
There is evidence that the West is starting to understand just how empty some of Medvedev’s bluster is. The Shanghai Cooperation Organization, lovingly fostered by Putin as a potential Asian power bloc to rival NATO, ended up refusing to back Moscow’s recognition of Ossetia and Abkhazia in September (to Moscow’s intense embarrassment, only Hamas and Nicaragua did so). NATO secretary-general Jaap de Hoop Scheffer also called for Europe to stand by “a country’s right to freely choose its security alignments” and not give in to Russian pressure, as Ukraine pressed for a membership action plan to speed accession. As for Medvedev’s brazen missile threats, Europeans seemed more confused than scared. In his state-of-the-nation address he said he would station Iskander missiles in the Russian Baltic enclave of Kaliningrad to counter proposed U.S. missile shields and radar bases in Poland and the Czech Republic. These missiles could theoretically deliver 450-kilo warheads deep into central Europe. But the Iskander was used in the Georgian war and found to be inaccurate, notes independent military analyst Pavel Felgenhauer—and, in any event, wouldn’t be effective against the missiles that would be used in the Bush administration’s proposed missile-defense system (itself to protect against Iran, not Russia). Kremlin-connected analyst Stanislav Belkovsky says such details are almost irrelevant—Medvedev’s plan was to “drive a wedge between the Europeans and the Americans” by exploiting European concerns that missile defense will only provoke Russia. In that sense, he says, the threat was a classic Soviet negotiation ploy: “you create a problem, then offer to remove it in exchange for something you need.”
But Medvedev fumbled by delivering his missile threat just hours after Barack Obama won the U.S. election, making the threat appear strangely aggressive and out of step with the occasion, particularly because Obama’s views on the missile-defense shield are unclear. Indeed, Medvedev’s tough rhetoric could even give Obama a useful opportunity to demonstrate some backbone of his own, to show the Irans and North Koreas of the world that a soft-spoken Democrat is not to be taken lightly. Some politicians simply dismissed the hawkish language: “We are used to the fact that Russia growls every now and then,” concluded Polish Prime Minister Donald Tusk. “[Europe] should not give too much meaning to this declaration.”
Of course there is no upside to dismissing Russia altogether, humiliating it and treating it as a paper bear. In an era of falling oil prices and economic distress, Russia is now suddenly up against the wall, and Medvedev will soon face the temptation to control and repress Russia’s economy—fixing prices, threatening businessmen and directing the flow of capital. He might also be tempted to repeat his military adventure in Georgia to distract public opinion from a worsening domestic situation—perhaps with a scuffle with Ukraine over Crimea. Both would be disastrous.
Medvedev has little chance of reforming the world in the Kremlin’s image—and few pieces of his doctrine are likely to survive Russia’s economic downturn. But at least he appears to genuinely believe that “freedom is better than nonfreedom,” and he is trying harder than perhaps any previous Russian leader to integrate the nation into the world economy and bring an end to what he has called the “legal nihilism” that has infected his country. If he succeeds in these kinds of nuts-and-bolts reforms, like curbing Russia’s voracious and corrupt bureaucracy and introducing the rule of law, he may make his country more functional and richer. A thriving real economy, and a constructive new relationship with the West, would make Russia more truly powerful than any amount of macho missile threats.