by Anders Aslund, Peterson Institute for International Economics
Op-ed in the Moscow Times
October 28, 2009
© Moscow Times
Russia's relations with its neighbors are worse than ever, and this is particularly true among the former Soviet republics. On October 9, the Commonwealth of Independent States (CIS) held its annual summit in Chisinau. The Nezavisimaya Gazeta headline said it all: "Summit in 30 Minutes. CIS Leaders Had Nothing to Tell One Another."
Georgia left the alliance on August 18. Among the remaining 11 members, only six presidents arrived—from Russia, Belarus, Ukraine, Armenia, Azerbaijan, and Kyrgyzstan, while the host country, Moldova, temporarily has no president. Even the strongest proponent of multilateral cooperation in the post-Soviet region, Kazakh President Nursultan Nazarbayev, chose to stay at home. Needless to say, nothing was accomplished.
To aggravate things further, President Dmitry Medvedev refused to meet Ukrainian President Viktor Yushchenko and Belarusian President Alexander Lukashenko. Will Lukashenko attend another CIS meeting after that insult? Everybody left quickly after their half-hour meeting and even skipped the planned gala dinner. The CIS is Russia's baby, and its failure is also Russia's.
Each CIS country has its own complaints, but the four dominant concerns are: Russia's lacking respect for its neighbors' territorial integrity, gas policy, trade conflicts, and financial issues. The Kremlin needs to fix each of these areas to restore Russia's standing in the region.
On August 26, 2008, the Kremlin dealt the most devastating blow to its reputation in the post-Soviet region by recognizing the sovereignty of Abkhazia and South Ossetia. Russia violated its long-standing principles of respecting a nation's sovereignty and territorial integrity inscribed in the Organization for Security and Cooperation in Europe convention, the CIS convention, and multiple bilateral friendship treaties with CIS countries.
President Boris Yeltsin signed as many treaties as he could to reassure the former Soviet republics that Russia would respect their sovereignty. But when Vladimir Putin became president, he revised Yeltsin's policy. He articulated this new policy quite clearly in his 2005 annual address when he said, "The collapse of the Soviet Union was the biggest geopolitical disaster of the century."
Russia's recognition of Abkhazia and South Ossetia after the Russia-Georgia war confirmed that Russia had become a revisionist power in the region. Not one other CIS state has recognized Abkhazia or South Ossetia. The reason is that it could set a dangerous precedent and could ultimately threaten the sovereignty of CIS states as well. Several republics have large ethnic Russian populations and possess former Russian territories. The Kremlin needs to restore its respect for its neighbors' territorial integrity to be able to improve its relations with them.
Russia's gas policy toward its neighbors is just as damaging. It has been right in moving toward market-related prices, but prices offered to different CIS countries vary according to political conditions. After its unjustified cutoff of gas deliveries in January, Gazprom now finds itself in a severe crisis because its current and former customers consider it an unreliable supplier. Because of falling demand, its total output is likely to plummet by some 20 percent this year
For years, Gazprom has tried to monopolize gas supplies from Central Asia, but when European gas demand and prices dropped, Turkmenistan's gas pipeline to Russia blew up just like two gas pipelines to Georgia a few years ago. Now, after the pipeline has been repaired, Gazprom refuses to accept the contracted volumes or pay the agreed-upon price. Therefore Turkmen President Gurbanguly Berdymukhamedov did not go to the CIS summit. Instead, the Chinese are filling the gap by building a large gas pipeline to Turkmenistan. China will buy most of Turkmenistan's gas exports, as it already does from Kazakhstan.
Gazprom needs to recognize that it faces a serious crisis in its relations with both customers and suppliers. Otherwise it will be treated as a rogue company. The most sensible thing to do would be to ratify the Energy Charter Treaty, but last summer Russia took the opposite step: It suspended its signature for this important pact.
The greatest failure of the CIS is not to have established a free trade area. All the CIS countries, except Turkmenistan, signed a multilateral free trade agreement in 1994, but Russia has never ratified it. Instead, most CIS countries have concluded bilateral free trade agreements. Although they have been ratified, they lack legal teeth. Whenever one country wants to undertake protectionist measures against another, it does so with impunity because detailed rules, arbitration, and penalty mechanisms are missing. As a consequence, trade within the CIS is often interrupted. Whenever a successful exporter captures another market, it is blocked through quotas, tariffs or outright prohibition.
There is a clear resolution to this problem: World Trade Organization (WTO) accession for all. The WTO has the requisite rules, arbitration, and penalties. Five CIS countries have become members of the WTO, but Russia has failed to do so. In June, Russia was very close to accession, but Putin surprised everybody, including his own cabinet, by stating that Russia, Belarus and Kazakhstan would enter the WTO as a customs union. WTO Secretary General Pascal Lamy said this was impossible. Only when Russia and the other CIS countries join the WTO can free trade arrangements within the commonwealth become meaningful.
The global financial crisis offered the Kremlin a new chance to rebuild relations with its CIS neighbors. With its large reserves, Russia could offer substantial financial assistance to Belarus, Armenia, Kyrgyzstan, and Moldova. But Belarus, Kyrgyzstan, and Moldova are complaining that Russia has failed to deliver what it promised. Once again Lukashenko and Putin have ended up in public mudslinging. Instead, China is quietly providing larger financial support to Belarus and Moldova.
Thus, the Kremlin is spoiling its relations with its neighbors in a seemingly mindless fashion. In the East, Central Asia is turning to China to expand trade and receive financing. In the West, the European Union's Eastern Partnership has pulled Ukraine, Georgia, Belarus, and Moldova closer to Europe. For the time being, Russia seems to have decent relations with only Armenia and Azerbaijan.
Russia has solidified its reputation as an unreliable and unpredictable partner. It is finding itself increasingly lonely, and in global affairs the lonely are weak. Russia should have an interest in improving its tarnished international reputation. It urgently needs to form a new, constructive and respectful policy toward its post-Soviet neighbors. Perhaps Medvedev and Putin should take a page from Yeltsin's CIS playbook.
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