Reversal of Fortune

Peter the Great built St. Petersburg in hopes that its sweeping neoclassical boulevards would prove to a skeptical Europe that Russia was no longer a barbarous Asian principality but part of mainstream Western civilization. As Vladimir Putin prepares to host this summer's G8 summit in the old imperial capital, he faces a similar challenge. Buoyed by a windfall of petrodollars, Russia's president has transformed his country from a dysfunctional, debt-ridden post-Soviet wasteland into a major world economic and political player. All that's missing is recognition from his peers that Russia is a full member in the club of the world's leading industrialized, democratic nations.

He's likely to be kept waiting. Instead of a triumph, the St Petersburg summit is fast shaping up as the biggest rethink of Russia's relationship with the West since the collapse of the Soviet Union. Rather than the recognition that Putin craves, there's talk of diluting Russia's G8 membership with a revival of the old G7. Just last week, his old friend George W. Bush responded to calls to boycott the summit, after it was alleged that Russia had passed military secrets to Saddam, with a less-than-ringing endorsement: "I haven't given up on Russia." Give up on Russia? It was only eight years ago that Russia was ceremoniously welcomed into the G8. Yet now, critics in Brussels and Washington seem to talk of it as a borderline outlaw nation.

Russia's reversal of fortune--in the eyes of the West--has been swift and remarkable. Europeans' confidence was shaken this winter, when the Kremlin cut off gas supplies to Ukraine just as much of Europe was finalizing long-term energy strategies tied to Russia. Then came a new Kremlin law restricting foreign NGOs working to build civil society in Russia--receiving, for their pains, a barrage of hostility and accusations of espionage. In recent weeks Europe's last dictator, Aleksandr Lukashenka of Belarus, was re-elected amid police brutality and heavy support from Moscow. Now, NEWSWEEK has learned, the European Court of Human Rights (already reviewing hundreds of other human-rights complaints concerning Russia) has fast-tracked a complaint by the former Yukos Oil oligarch Mikhail Khodorkovsky, jailed on charges of tax evasion and fraud after he challenged Putin politically. Soon European judges will have their say on the fairness of a case that, to many, has come to symbolize the Kremlin's abuse of power.

Nowhere has the shift been sharper than in America. A tipping point came late last month, when the Pentagon claimed that Russia's ambassador to Iraq had passed U.S. war plans to Saddam Hussein on the eve of the invasion. That sparked a chorus of denunciations from Congress. "They've endangered American lives," thundered Sen. Edward Kennedy. "I think you'd have to rethink whether we're going to the G8 conference." More, the news set off a mini-avalanche of criticism of Russia's sins, from Putin's steady repression of civil society at home to his support of obnoxious dictators in Russia's near abroad.

The new thinking is clearly set out in the White House's latest national-security strategy, issued last month. Washington's principal foreign policy objective, the paper said, was now the "support of democratic movements and institutions around the world." And U.S. Under-Secretary of State Nicholas Burns didn't mince words, either, when he spoke of exactly which regions of the world Washington has in mind. The United States would make a point of "encouraging democracy and withstanding oppression in Central Asia and the Caucasus," said Burns, as well as urging "Ukraine and Georgia to work toward ties with NATO and the EU." In the U.S. view, it seems, Russia has become a major obstacle to America's geostrategic interests.

What a change from 2000, when Bush famously looked into Putin's "soul" at a meeting in Slovenia and found a reliable partner. Putin subsequently wasted little time engineering his vision of "democracy"--dismantling any sources of opposition, closing down independent TV stations and scrapping elections for regional governors, as well as waging a bloody war in Chechnya. But here's the rub. Much of Putin's anti-democratic crackdown took place in his first term, when he was still in good odor in Washington. So what's changed? The answer, says Alexei Arbatov, former chairman of the national Parliament's Defense Committee, is that "Russia is becoming more independent in its foreign policy; it's becoming more actively assertive in the former Soviet Union."

From the Kremlin's point of view, the "rethink" of Russian relations is sheer hypocrisy, sparked by perceptions that Russia is crossing U.S. interests. It began, perhaps, with the Kremlin's opposition to a U.S. war in Iraq. It grew with the ongoing nuclear confrontation with Iran. More recently, when Moscow invited Hamas representatives to Russia in the wake of their election victory, Washington complained that the Kremlin was abetting terrorism. "From now on the main criteria in the relationship between the United States and other countries will be their conformity to American notions of democracy," a spokesman for Russia's Foreign ministry said in an indignant rebuttal. And indeed, why shouldn't Russia pursue independent policies, its elites ask. After the mess the United States has made in Iraq, is Moscow supposed to stand idly by as, for example, Washington puts pressure on Tehran and the Palestinians?

For all the hoopla surrounding the G8, and whether Russia should be considered a member in good standing, Moscow has ready and often reasonable answers to most of the charges against it. Clearly, democracy is in retreat under Putin, much as he tries to deny it. Yet it is also true that the Russian president has not been alone. His predecessor, Boris Yeltsin, long Washington's darling, was no slouch in browbeating practically all of Russia's media into supporting him when he was up for re-election in 1996. Yet when Putin did the same in 2004, the U.S. NGO Freedom House downgraded Russia's status from "partially free" to "unfree." (U.S. allies Jordan, Kuwait and Yemen, however, remained "partially free.") By the same token, Russia has been condemned in Europe and the United States for intriguing in its near abroad, from meddling in Ukraine's 2004 elections to backing repressive regimes from Belarus to Uzbekistan. Yet here, too, not only did Yeltsin support Lukashenka, but he also sponsored separatist wars in Abkhazia, Transdnistr, South Ossetia and Nagorno-Karabakh-- specifically to punish breakaway republics for disloyalty to Moscow. Putin has rightly been tarred with Chechnya, but he inherited that war from none other than Boris Yeltsin.

Perhaps nothing symbolizes Russia's new anti-democratic era more than the Khodorkovsky affair. Seen from the West, it's the case of a modern, reform-minded businessman cum dissident taken down by jealous bureaucrats threatened by his power. The charges against him--from tax evasion to fraud and money-laundering--have been dismissed as exaggerated if not trumped up. But while there's little doubt that the decision to prosecute Khodorkovsky was indeed politically motivated, the lesser-known truth is that the case against him was also deserved. As the European Court of Human Rights in Strasbourg prepares to hear a complaint by the oligarch's lawyers that the state "persecuted" their client, they would do well to heed such attorneys as Peter Clateman, a lawyer for Renaissance Capital in Moscow who has been following the case closely. As he tells it, the prosecutors' case was not only well put together but proved its claims beyond any reasonable doubt. "Khodorkovsky is guilty as charged," he says. The Yukos magnate went to extraordinary lengths to evade Russian laws and bilk the country of hundreds of millions (if not billions) of dollars. "You can't prevent a country from enforcing its own laws," says Clateman. Indeed, even the CIA listed Khodorkovsky's Menatep Bank as one of Russia's most criminal in the late 1990s.

Now come other flaps. In late March Putin accused Washington of "artificially pushing back" Russian accession to the World Trade Organization. "We have received a list of questions from our American colleagues requiring additional agreement which we considered settled long ago," complained Putin. And he has a point. Russia's the only major economy outside the 149-member WTO, and it has been trying to gain admission for 13 years. Washington says Russia needs to open up its banking sector and cut down on DVD piracy. Yet WTO member China has stricter controls on foreign banks and, admits Dan Glickman, president of the Motion Picture Association of America, pirates more DVDs. As if to add insult to injury, Ukraine, a major intellectual property infringer, is on the verge of WTO membership, thanks to U.S. support.

It remains to be seen how reports that Russia's ambassador to Baghdad, Vladimir Titorenko, passed sensitive war intelligence to Iraqi officials will play out. Russian officials say they have nothing to hide. "It was no secret that we maintained diplomatic relations right up to the end," says one Russian diplomat in Moscow, speaking on background. "In the framework of those relations, there were extensive briefings and exchanges of analysis." Both the Kremlin and the Bush administration seem determined to keep such tensions from escalating. But there's no mistaking the chill in the air. A recent report by the influential Council on Foreign Relations in New York urges "the democratic members of the G8, including the United States," to "protect the credibility of the organization" by "effectively reviving the G7 within the G8." The purpose: to "convince Russia's leaders that ground that has been won can also be lost."

Is Russia's membership in the Western club really so precarious? Of course not. President Bush, for one, hasn't even flirted with the idea of not going to St Petersburg. But Russia-baiting is a dangerous game, even so, for it risks alienating the West's main ally in Russia--Putin himself. For all his faults, he is a modernizer and far more benignly disposed toward Europe and the United States than most in the Kremlin--or the Russian population. "Being valued by the West is very important to Putin," says Arbatov. "He considers Russia a great Western power--that's the basis of his world view. Excluding him would be a personal insult, like spitting in his face." As if sensing that danger, Bush tried to tone down the rhetoric: "I still think Russia understands that it's in her interest to be West, to work with the West, and to act in concert with the West." Fair enough. But having to say so only testifies to how wide the divide has grown.