The Medvedev Doctrine

On foreign policy, with oil prices down two thirds from their high, Medvedev is now in a peculiar position: the ambitions with which he began his presidency no longer match the reality of Russia's increasingly precarious position. Over the last six months, the Moscow Stock Exchange has dropped more than 65 percent, and the ruble has plunged 25 percent in two months. The World Bank estimates the ruble will fall another 15 percent in 2009. Yet as late as October, at an EU finance conference in Évian, Medvedev talked of "turning Moscow into a powerful financial center and the ruble into one of the world's leading regional reserve currencies"—ideas that may have made sense with oil at $150 but now seem almost laughable. Few foreigners really need rubles because Russia's biggest exports—oil, gas and arms—are all traded in dollars. And not even Belarus, with its 10 million-strong population and political isolation from Europe, wants to adopt the Russian ruble as its currency. As for being a financial hub, the best Medvedev can realistically hope for is for more Russian stocks to be traded in Moscow, rather than London and New York, and for Russian capital to return to Russian banks rather than flee offshore, as it has been, at the alarming rate of $3 billion to $7 billion per week since September. But even that's a remote possibility. The Moscow Stock Exchange's habit of closing down when the indexes start to tumble, sometimes for days at a time, hardly reassures investors.

Medvedev's plan to push forward with a Putin idea of forming a "gas OPEC" with Iran and Qatar to fix prices and coordinate supply could, in theory, scotch European attempts to break their dependence on Russian gas by diversifying its supplies. But that too now seems increasingly farfetched. Even the regular OPEC has been unable to keep oil prices from collapsing, and the nature of gas contracts, often signed for decades in advance, makes it far harder to manipulate prices. Moreover, the West is less dependent on Russian gas than ever. According to an analysis by Pierre Noël at the European Council on Foreign Relations, Russia's share of the EU's gas imports have roughly halved since 1980, to 40 percent, as Europe diversifies its gas supplies to liquefied natural gas from Algeria and Nigeria. Russian gas now represents just 6.5 percent of the EU's primary energy supply—and that share is declining as well.

There is evidence that the West is starting to understand just how empty some of Medvedev's bluster is. The Shanghai Cooperation Organization, lovingly fostered by Putin as a potential Asian power bloc to rival NATO, ended up refusing to back Moscow's recognition of Ossetia and Abkhazia in September (to Moscow's intense embarrassment, only Hamas and Nicaragua did so). NATO secretary-general Jaap de Hoop Scheffer also called for Europe to stand by "a country's right to freely choose its security alignments" and not give in to Russian pressure, as Ukraine pressed for a membership action plan to speed accession. As for Medvedev's brazen missile threats, Europeans seemed more confused than scared. In his state-of-the-nation address he said he would station Iskander missiles in the Russian Baltic enclave of Kaliningrad to counter proposed U.S. missile shields and radar bases in Poland and the Czech Republic. These missiles could theoretically deliver 450-kilo warheads deep into central Europe. But the Iskander was used in the Georgian war and found to be inaccurate, notes independent military analyst Pavel Felgenhauer—and, in any event, wouldn't be effective against the missiles that would be used in the Bush administration's proposed missile-defense system (itself to protect against Iran, not Russia). Kremlin-connected analyst Stanislav Belkovsky says such details are almost irrelevant—Medvedev's plan was to "drive a wedge between the Europeans and the Americans" by exploiting European concerns that missile defense will only provoke Russia. In that sense, he says, the threat was a classic Soviet negotiation ploy: "you create a problem, then offer to remove it in exchange for something you need."

But Medvedev fumbled by delivering his missile threat just hours after Barack Obama won the U.S. election, making the threat appear strangely aggressive and out of step with the occasion, particularly because Obama's views on the missile-defense shield are unclear. Indeed, Medvedev's tough rhetoric could even give Obama a useful opportunity to demonstrate some backbone of his own, to show the Irans and North Koreas of the world that a soft-spoken Democrat is not to be taken lightly. Some politicians simply dismissed the hawkish language: "We are used to the fact that Russia growls every now and then," concluded Polish Prime Minister Donald Tusk. "[Europe] should not give too much meaning to this declaration."

Of course there is no upside to dismissing Russia altogether, humiliating it and treating it as a paper bear. In an era of falling oil prices and economic distress, Russia is now suddenly up against the wall, and Medvedev will soon face the temptation to control and repress Russia's economy—fixing prices, threatening businessmen and directing the flow of capital. He might also be tempted to repeat his military adventure in Georgia to distract public opinion from a worsening domestic situation—perhaps with a scuffle with Ukraine over Crimea. Both would be disastrous.

Medvedev has little chance of reforming the world in the Kremlin's image—and few pieces of his doctrine are likely to survive Russia's economic downturn. But at least he appears to genuinely believe that "freedom is better than nonfreedom," and he is trying harder than perhaps any previous Russian leader to integrate the nation into the world economy and bring an end to what he has called the "legal nihilism" that has infected his country. If he succeeds in these kinds of nuts-and-bolts reforms, like curbing Russia's voracious and corrupt bureaucracy and introducing the rule of law, he may make his country more functional and richer. A thriving real economy, and a constructive new relationship with the West, would make Russia more truly powerful than any amount of macho missile threats.

© 2008