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Russia A Would-Be Great Power Or More

Russia may indeed by an "energy superpower" and China may indeed be the low cost manufacturer that has held down global inflation and made life cheaper for western consumers. But both countries still have an awfully long way to go. Most striking of all, however, is the growing energy, communications and security nexus in Eurasia - a shift in power that is very different from that in Pacific Asia - and one which receives hardly any comment in the West.
by Ian Pryde for RIA Novosti
Moscow (RIA Novosti) Apr 10, 2007
Anyone strolling around a half-decent bookshop these days will find that most of the books on current affairs seem to deal with Islam and the war in Iraq - and China.

The storyline is, of course, that China is changing the world as the rising giant and superpower of the twenty-first century. India also warrants the odd volume, but more by virtue of its size and software industry rather than its overall economy, even though it averaged GDP growth of 5.7% per annum between 1979 and 2006 and since implementing liberal reforms in the early 1990s has achieved an average of 6.8% since 1994 - a solid performance, of course, but way below that of China's.

But go back to the early 1990s and the time after the collapse of the Soviet Union, and the bookshelves were full of books on Russia, on its politics and its opportunities for western business.

And even earlier, in the 1970s and 1980s, it was Japan that was set to conquer the world after wiping out one industry after another in the United States and Europe. With the biggest banks in the world, Japan was also buying up property everywhere it could.

Nowadays popular books on Russia are not only rarer than before, but also tend to be rather negative. Racy biographies of Putin and his KGB background, or of multi-billionaire and Chelsea football club owner Roman Abramovich, seem to sell well everywhere.

In Germany, recent books on Russia carry titles such as "Russia Between the Pliers: Putin's Empire between NATO, China and Islam" and "Putins Demokratur."

This is odd. Russia is more confident about itself now than it has been for decades, including the early 1990s, when western observers, many of whom had no expertise on the country whatsoever, assumed that Russia would become a flourishing market economy and democracy.

Many academics, along with the U.S. Congress, were asking themselves for years "What went wrong with Russia?" and "Who lost Russia?" rather than ditching their nonsensical scholastic theories.

Joseph Stiglitz, for instance, a Nobel prize winner in economics, is so bent on discrediting the IMF policies and the Washington Consensus of the early 1990s that in his 2002 book "Globalization and its Discontents," he utterly fails to mention that the Soviet economy was in dire straits in the 1980s and that production there was already falling long before the IMF and an army of western consultants showed up in Moscow.

The rupturing of the economic ties between the republics of the Soviet Union and between the USSR and Eastern Europe were virtually pre-programmed to make an already bad situation much worse.

Few observers in the early 1990s realised that construction is far, far harder, than destruction, and that the collapse of the Soviet Union did not ipso facto mean that the successor states would develop into market democracies. Other options - including muddling through - were never considered.

In other words, the Zeitgeist doesn't always get it right. The pundits also got it wrong on Japan, which was greatly feared - and often despised - in the United States and Europe until its bubble burst in the early 1990s and the economy went into a recession - largely as a result of the 1985 Plaza Agreement by the then G5 group of leading industrialized countries and subsequently aided and abetted by disastrous policy decisions in the late 1990s.

Japan is now emerging from its recession, but the West's current focus on China - understandable given China's sheer scale - means it has hardly considered what impact a revitalised Japan could have on the global economy.

Much the same caveat applies to Russia. One of the best biographies of Putin and Russia's future direction was written by a German academic Wolfgang Seiffert as long ago as 2000. His biography of Putin carries the telling subtitle: "Wiedergeburt einer Weltmacht?" ("Rebirth of a World Power?")

But commentators, academics and policy makers are still behind the curve in understanding that Russia will play in increasingly active role on the world stage.

Hence the general surprise when President Putin was at pains to point out during the G8 summit in St. Petersburg in July 2006 that Russia was now an energy superpower - something Moscow underlined in its energy wars both before and after the summit.

True, as the new millennium began, a growing awareness of the changes in Russia began to emerge. The much-vaunted BRIC acronym to signify the large, populous countries of Brazil, Russia, India and China and their future importance for the global economy was coined by a Goldman Sachs economist in 2003. The "Global Economics Paper No. 99: Dreaming with BRICs: The Path to 2050," prepared by The Goldman Sachs Group, is hedged with caveats: "These countries "could become a much larger force in the world economy... if things go right." But things could just as easily go wrong.

Being conferred a title such as "energy superpower" is of course much better than being self-appointed - the very term itself highlights Russia's general weakness. Both China and Russia take the paradoxical line of wanting to be recognized as major powers and part of the Western club, but both are still a long way off on a number of important criteria.

Leaving aside politics and the democracy deficit to look at the economy, it is striking that of the few countries that have posed serious economic challenges to the West, only Japan has so far managed to create instantly recognizable world-class brands and globally respected companies.

Like China, Russia has few brands which are internationally famous, and most of its best known companies are in the energy sector. Admittedly, many of its own domestic brands are flourishing, but these seem to be of little interest to the average foreign reader and receive little press coverage.

Russian chocolate, for instance, went through a very sticky patch in the 1990s as the big companies such as Nestle, Cadburys and so on moved in, but Russian brands such as Red Oktokber, Babayevsky and A. Korkunov hold their own on the supermarket shelves although in January 2007, Wrigleys signed a purchase agreement for an 80% stake in Korkunov.

The failure of Russia and China to develop these kinds of new companies and take them into the international marketplace in sufficient numbers shows just how difficult it is to get into the premier league of major economies with high per capita incomes. As Lester Thurow pointed out in the early 1990s in "Head-to-Head," Japan is the only (large) non-western economy to have managed this feat since the nineteenth century.

Russia may indeed by an "energy superpower" and China may indeed be the low cost manufacturer that has held down global inflation and made life cheaper for western consumers. But both countries still have an awfully long way to go.

Most striking of all, however, is the growing energy, communications and security nexus in Eurasia - a shift in power that is very different from that in Pacific Asia - and one which receives hardly any comment in the West.

Ian Pryde is CEO of Eurasia Strategy and Communications, Moscow.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Source: RIA Novosti

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