The Obama-Medvedev Summit
Presidents Barack Obama and Dmitri Medvedev enjoyed tasty (if not particularly healthy) hamburgers and fries and had a productive meeting in the Oval Office. And while traditional security issues were on the bilateral agenda—arms control, the aftermath of the 2008 Russo-Georgian war, the situation in Kyrgyzstan—economic matters took pride of place in the discussion.
Both presidents understand that the lack of substantial economic ties between the two countries has meant that the U.S.-Russia relationship has lacked the ballast to ride through turbulent patches. Both sides are working to clear through the debris that has prevented the construction of a new commercial edifice. Some of the results might appear minor but may have significant payoffs in the future. Settling the ongoing spat over U.S. chicken exports to Russia removes a vocal domestic constituency in several key states that had lobbied Congress to review deals with Russia. After all, when he was in the Senate, Vice President Joe Biden opposed lifting the Jackson-Vanik sanctions on Russia because Moscow had imposed a cap on chicken imports from the United States—and chicken is a major export from Delaware. In turn, the United States is likely to remove any remaining laws on its books (including graduating Russia from Jackson-Vanik) that affect normal trading relations with Moscow, in order to clear Russia’s entry into the World Trade Organization.
Those are some of the things that governments can do. But if the economic relationship begins to take off, both governments will have to be prepared to trust the other side—and to let go of some of their remaining tools of leverage.
From the U.S. side, a new wave of American financial and technological investment into the Russian economy means accepting that Russian firms will continue to sell in their traditional markets in the developing world, including to countries the United States may not have the best relations with. If the 123 civil nuclear agreement goes through, American firms stand to benefit from closer cooperation and joint ventures with their Russian counterparts, as Russia continues to grow its markets for nuclear energy. In some cases—notably with India—this would coincide with American policy preferences. In other cases—particularly in parts of Latin America, Africa and the Middle East—the spread of nuclear technology might conflict with U.S. desires. America will not be able to dictate to Russian companies how, when and where to sell high-technology goods and services.
A closer economic relationship will also inevitably lead to a growth in Russian influence in the U.S. policy process. Already, the Russian market has become vitally important for the survival and good economic health of the U.S. car industry. If and when business ties expand, both Wall Street and Main Street may acquire much bigger stakes in keeping good relations with the Kremlin—and just as we have seen in the U.S.-China relationship, this may have an impact on the types of policies Washington is free to pursue when it comes to Russia.
On the Russian side, however, there are also constraints to consider. In his remarks at the U.S. Chamber of Commerce, Medvedev promised that the Russian government will create “the most favorable, most protective conditions” for U.S. investors. This commits the Kremlin to moving ahead with further reforms to strengthen the rule of law and root out corruption. There will be no massive U.S. investment in Russia in the high-technology sector if oligarchs and state companies can use their connections with government to seize assets and pressure corporations to make drastic concessions, or to risk losing their investments altogether. High-technology firms and companies producing innovative products do not have the same geographic requirements as raw material producers, which have no choice but to locate in Russia if they wish to access the country’s bounty of minerals. They can pass Russia by, keeping her in the periphery of technological advancement. They can also continue to benefit from a Russian “brain drain.” “Crony capitalism” is not an inviting environment for American businesses, at least not in the sectors that matter most to Medvedev and to Russia’s modernization.
In the past, U.S. and Russian leaders have settled on agendas that were directly under the control and purview of the two governments. The economic relationship both presidents say they want would begin to change the tenor of the ties between the two countries—tapping a great deal of potential, but also resulting in a loss of control for bureaucrats in both capitals. Their predecessors dipped their toes in the swimming pool, but never committed to diving in. Whether Obama and Medvedev have reached the “plunge point,” therefore, remains to be seen.
Nikolas K. Gvosdev, a senior editor at The National Interest, is a professor of national-security studies at the U.S. Naval War College. The views expressed are entirely his own.