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After a decade of humiliation, Russia is more powerful than ever before.

In August, while the world’s attention was fixed on the Beijing Olympics, Russian troops swept into South Ossetia, a semi-independent province of Georgia into which the Georgian army had been sent to attack separatists. Quickly taking control of it and another breakaway province, Abkhazia, the Russian military soon began bombing targets in the heart of the country before agreeing to a ceasefire. A week later, Russia threatened Poland with nuclear retaliation for that country’s decision to host a U.S. missile installation—echoing similar tough talk directed at the Czech Republic the month before. Not since the Cold War had the Kremlin asserted its power so brazenly over its European neighbors.

In his new book Petrostate: Putin, Power, and the New Russia (Oxford University Press, 2008), Marshall Goldman W’52 explores Russia’s dramatic reemergence as a geopolitical force. Goldman is professor emeritus of economics at Wellesley College and a senior scholar at the Davis Center for Russian Studies at Harvard. The Gazette caught up with him in early September, as he was on his way to Russia to meet President Putin and his replacement as prime minister, Dmitri Medvedev.  

When George W. Bush took office in 2001, Russia didn’t rank very high on anyone’s list of concerns. Clearly a lot has changed since then. What kinds of challenges can the next U.S. president expect to face?

When Bush took over in 2001, the U.S. was strong economically and militarily, and Russia was weak in both areas. In August 1998, after its financial crash, Russia was effectively bankrupt. Fortunately for Putin—who was appointed prime minister in August 1999—the price of oil began to recover in the spring of 1998, rising from $12 a barrel to as much as $145. And since Russia alternates with Saudi Arabia as the world’s largest producer of oil, this turned out to be an enormous windfall. Russia was able to pay off its debts and rebuild its military. At the same time, after a few years Putin was able to suppress the rebellion in Chechnya, while the U.S. launched a war in Iraq as well as Afghanistan, bogging itself down just as Russia was freeing itself.

The new U.S. president will have to deal with a resurgent Russia which is now not only flush with foreign currency reserves, but is also seeking to rebuild its military prestige and is eager to reassert itself after more than a decade of what it regards as political and economic humiliation. On top of this, it is not only the money it has: its oil and gas have become very important economic and political instruments. In many ways, as I argue in Petrostate, because of its oil and gas, Russia is now more powerful relative to other countries in Europe than it has ever been in its history. 

To complicate matters, the new U.S. president (whoever he might be) and Medvedev, the new Russian president, don’t have the personal relationship that made things a little easier for Bush and Putin.
You’ve observed that 30 years ago, the big private oil companies known as the “Seven Sisters” controlled about 75 percent of the world’s reserves, but today government-run energy companies control upwards of 80 percent. Russia has been particularly aggressive in nationalizing oil and gas operations. How much geopolitical leverage does this give them?

Russia has enormous political leverage now because of its oil and gas. Germany, for example, gets 42 percent of its gas imports from Russia—and the percentage is likely to increase in future years as supplies diminish from Germany’s other suppliers. This meekness toward Russia is also reflected in the almost total lack of response from Western oil company executives when their projects have been reclaimed by Putin at nowhere near the fair market price. For instance, Shell Oil was forced to yield control of its operations off Sakhalin Island in exchange for a payment of $7.4 billion from state-dominated Gazprom—but most outside analysts estimate that Shell’s share was worth $15 billion to $17 billion. This gives Russia enormous political leverage, and may already explain why Germany now seems to be taking a less confrontational stance toward Russia.

Are there disadvantages that come with Russia’s dependence on fossil fuel wealth?

There is a disadvantage to all of this. All these export sales have brought in a flush of foreign currencies, which in turn has lead to a sharp increase in the demand for, and relative value of, the ruble. The high value of the ruble makes it difficult for manufacturers in Russia to compete with imports—not to mention the enormous difficulty in expanding exports for Russian-made products.

Do current Russian policies represent a threat to the United States or Europe?

Russian policies represent a threat in that Russia will once again seek to reclaim control over its immediate neighbors, most of whom were part of the former USSR. Russia refers to these countries as “the near abroad.” The odds are that Russia will also try to strong-arm neighbors that were not part of the USSR, because of their increased dependency on Russian gas and oil. This will cause most of the European countries to pull their punches when it comes to challenging Russian behavior.

What lessons can we take away from the Russia-Georgia conflict in August? Was it in any way a harbinger of things to come?

The conflict with Georgia is a case study of all these dangers. We are likely to see many more instances in which Russia will seek to influence not only powerful countries like Germany, but weaker countries as well. I would not exactly call it a cold war—it will more likely be a “patron’s war” where the U.S and Russia will bump into each other as they try to advance their interests by protecting or advancing the interests of their proteges.
Also in August, a senior Russian general said that Poland’s agreement to host a U.S. anti-missile installation exposes that nation to an attack—possibly a nuclear attack. What do you make of that?

Russia’s threats to Poland—and for that matter, to the Czech Republic, where the U.S. also wants to install radar for that missile system—is an example where the proteges of the U.S. will be threatened. This is also a strong signal to the U.S. to stay out of Russia’s backyard—a sort of ‘Putin Doctrine’ that’s comparable to the Monroe Doctrine in an earlier period of U.S. history.

How can U.S. policy best be calibrated to minimize Russia’s potential menace, and maximize its stake in being a productive and lawful member of the international community?

The U.S. will have to be more considerate of Russian interests, much as we were before 1998. This will not be easy to do. One approach would be to find enemies common to both the U.S. and Russia, so that we can work together against those enemies—for instance, Islamic terrorism. This is one area where the U.S. and Russia have a long record of sharing intelligence information. 

It might be possible to share work on climate change and developing new and existing sources of energy. The U.S. will also have to be more thoughtful in deciding how it will pursue its foreign policy interests—for example the invasion of Iraq, which was a perfect example of misguided U.S. unilateralism. Installing an anti-missile system in Poland and the Czech Republic was another. The U.S. should seek to tame the savage beast by seeking to include Russia in international organizations, but it must also have the fortitude to expel Russia from those groups when it misbehaves—something that is not easy to do, and also requires the U.S. to see itself as others see it.

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