A Tough Act to Follow

An upsurge in energy revenue has helped precipitate an assertive Russian foreign policy. But China provides an alternative model for transforming economic growth into international influence, a model Moscow might want to take a close look at.

The Kremlin's ongoing efforts to establish dominance over Russia's energy sector, and to use it as an instrument to develop both the economy and Moscow's international standing has often been viewed as part of an effort to follow the successful "Chinese model" of state-led development. But if the Russian government wants to enjoy the same economic results, not to mention China's considerable and growing international influence, it would do well to study Beijing's foreign policy, too.

Russia's international behavior has become increasingly assertive as the country's natural resource wealth has morphed into $268 billion in Central Bank reserves and a $71 billion stabilization fund. This has been evident most recently in Moscow's tough handling of its dispute with Ukraine over natural gas prices, its even tougher treatment of Georgia after Tbilisi's very public arrest of Russian military officers on espionage charges, and the irritated tone of senior Russian officials when dealing with the United States.

The contrast with China is striking in more ways than one. Looking strictly at economic statistics, Beijing has $988 billion in central bank reserves -- almost four times the Russian total -- and added some $169 billion, or two-thirds of Russia's reserves, in the first nine months of 2006 alone. And unlike the expansion of Russia's foreign currency holdings, these impressive gains were made in spite of high oil prices, not because of them.

More broadly, in purchasing power parity (PPP) terms, the size of China's economy is over five times that of Russia -- $8.9 trillion to $1.6 trillion -- and the dollar volume of its exports is three times higher than Russia's energy-inflated figure. Of course, China has a considerably larger population than Russia -- a source of anxiety to many in Moscow, not to mention the Far East -- but its PPP gross domestic product per capita is still about two-thirds of Russia's.

No less interesting are the differences between China's and Russia's approaches to converting economic might into political weight. China's economy reached the size of the present-day Russian economy about 16 or 17 years ago, roughly at the time of the Tiananmen Square tragedy. China did not, however, suddenly begin to express its frustration at hundreds of years of perceived abuses by Western imperial powers or to push around its neighbors. On the contrary, over the last 15 years, Beijing has generally been quite moderate in its own behavior, with a view to promoting the regional and global stability necessary to encourage further economic growth. Today China sometimes appears to bend over backwards to reassure its neighbors and others of its benign intentions. And it seems to have worked.

In Moscow, by contrast, a few short years of energy wealth have led to a growing sense of foreign policy entitlement not unlike the sense of economic entitlement that followed the collapse of the Soviet Union. The interesting question is whether it is based on similarly flawed assumptions that will lead to a new and different kind of disappointment and disillusionment.

One assumption is that energy prices will remain high. That seems like a reasonably safe assumption to make today, especially with OPEC trying to cut oil production to prop up prices, but how long will today's numbers last? Two years? Five? Ten? If they do last that long, when will someone invent a new energy technology to displace oil or gas?

The next question is whether Russia will successfully take advantage of the current period of high energy prices to diversify its economy. Senior officials routinely cite this as a goal and call for a high-tech economy, but seem to be doing little to get there. And Russian foreign policy, not to mention continuing problems with the investment climate, hardly contributes to this process. Some in Russia might respond by saying that with the country's new wealth, Moscow can go it alone. They tend to forget that another of Russia's Asian neighbors -- North Korea -- has tried that approach and failed. Russia was unfairly disparaged in the 1990s as "Upper Volta with missiles," but few would view "North Korea with oil" as progress.

None of this is to argue that Moscow can not succeed without returning to what Russians view as the overly compliant foreign policy of the Yeltsin era. After all, there has been one major exception to China's relatively restrained foreign policy, namely Taiwan. Beijing has been very clear with the United States about the potential consequences of a Taiwanese declaration of independence. And China has not been shy in using economic inducements -- as distinct from economic pressure -- to influence other governments' policies toward the island, especially in Africa. At the same time, however, Beijing has managed to craft a sophisticated foreign policy to protect its vital interest in avoiding a split while maintaining cooperative ties with Washington, other key powers and its neighbors. This in turn has helped China's leaders to manage one of the greatest economic miracles in history. Will today's Russian foreign policy strategy lead to the same result?

Paul J. Saunders is executive director of The Nixon Center and associate publisher of The National Interest.

Reprinted with permission from The Moscow Times. To view the original article, click here.