The Empire Strikes Back

No need to call in the Kremlinologists. Russia's latest messages to the West and its close neighbors are clear. First came the New Year's Day gas war, when Moscow cut gas supplies to Ukraine over a pricing dispute--and demonstrated to the world that it was ready and willing to use energy as a weapon. Then came an essay from Defense Minister Sergei Ivanov entitled "Russia Must Be Strong," full of nuclear swagger and warnings that foreign interference would not be tolerated in Russia's backyard. And now, as neighboring Belarus and Ukraine prepare for elections in March, Moscow is doing everything in its power to ensure that wayward former satellites return to its orbit.

Delusions of empire? Clearly, after years of weakness, a resurgent Russia is striking back. "Russia is a very different place from the way we saw it just three or four years ago," says Katinka Barysch of London's Centre for European Reform. Its rulers believe they don't need to defer to anyone anymore, and the reason is obvious. Buoyed by high oil prices, a booming economy and a hefty 7 percent budget surplus, Moscow can afford to throw its weight around in a way it's been unable to do in a generation. The gas war was a slap not only to anti-Russian Ukrainian President Viktor Yushchenko, but also a signal to Europe and the world at large: don't trifle with us.

Sensing this new confidence, Europe has begun to reappraise its powerful eastern neighbor. Last week all eyes were on the new German chancellor, Angela Merkel, and her first Moscow meeting with President Vladimir Putin. Eager to draw a line under her predecessor Gerhard Schroder's cozy relationship with Putin, she played up human rights and spoke of German disagreement with Russia's bloody war in Chechnya. Pointedly, she went out of her way to meet with Russian NGOs threatened by a repressive new law they fear will put many out of business. What's more, Merkel has said many times that she wants to bolster ties with Germany's traditionally close neighbors in Eastern Europe, who've been openly critical of Schroder's friendliness with Putin.

Yet Merkel wasn't exactly tough, either. She "made very gentle and friendly comments on the situation in Russia," said Putin. The reason for the softly-softly diplomacy? Like Schroder, Merkel must ensure continued supplies of roughly 30 percent of Germany's oil and gas--not to mention safeguard trade with Russia's booming petro-economy, an increasingly important market for German companies from equipment-maker Siemens to construction giant Hochtief. Thus Merkel has put the word out to her advisers: use all channels to prevent any crisis in relations with Moscow, including activating Schroder's close personal ties to Putin, sources close to the chancellor tell NEWSWEEK.

The same goes for the world's Iran diplomacy. Like Moscow or hate it, Europe and the United States have little choice but to deal with Russia if there's to be any progress in the growing conflict over Tehran's suspected nuclear-armament plans. But while Russia's willing enough to play the partner, it won't trim its strategic sails for anyone. Late last year Moscow unsuccessfully offered Tehran a deal to enrich uranium at a facility on Russian --soil. Rebuffed, Russia is reluctantly coming round to referring the matter to the United Nations Security Council. But at the same time Moscow has ignored calls from Washington to suspend a program of building civilian power stations in Iran and has been actively marketing missile defense systems to Tehran.

Russia's newfound assertiveness is sharply evident in Ukraine, where the Kremlin seeks to undermine the 2004 "Orange Revolution" that turned out a Moscow-friendly regime and ushered in a band of West-leaning political and economic reformers. So far, its major triumph has been to encourage Yulia Timoshenko, the celebrated "Orange Goddess," to turn against her former ally Yushchenko. Denouncing her as "anti-Russian," Moscow all but refused to recognize her appointment as Ukraine's prime minister initially, pointedly citing criminal charges pending against her (for alleged bribery of Russian Defense Ministry officials in 1996) and effectively barring her from visiting Russia even on official business. But when Yushchenko fired Timoshenko last September, she was transformed overnight from an outlaw to honored guest. Charges against her were mysteriously dropped. A visit to Moscow soon followed, where, according to former Economy minister Sergei Terekhin, she met with Putin privately. Suddenly, Timoshenko became Yushchenko's most vocal critic, accusing him of corruptly benefiting in the deal that ended the New Year's gas crisis--so far without proof. (Amid the hubbub, Kiev and Moscow last Saturday postponed signing the agreement for another week.) "We regard Yulia as our ally," says Sergei Markov, a Kremlin political consultant. "There is nothing anti-Russian about her."

Timoshenko has proved a deadly opponent for Yushchenko. The reformist president's parliamentary bloc, led by his Our Ukraine Party, is suffering badly under the assault, polling only 13 percent compared with Timoshenko's 16 percent--and, worse, trailing far behind his nemesis in the Orange Revolution, the former prime minister under the old regime, Viktor Yanukovych, with 31 percent. If Yanukovych's Party of the Regions wins in the coming parliamentary ballot, he could again become prime minister or nominate his own pro-Moscow candidate, effectively sounding the death knell for Orange hopes of political independence from Moscow. And last week, just to remind Yushchenko once again who's boss, Russia suspended imports of Ukrainian meat--another small turn of the screw.

Meanwhile, what of the EU? During the recent gas war, Brussels showed itself powerless to help Kiev. "Ukraine hoped that Europe would threaten Russia with sanctions," says Markov. "That didn't happen." While Europe willingly embraced the first round of Eastern European nations to break out of the Soviet sphere, it's clearly not going further. Preoccupied with its own problems--high unemployment, low growth, immigration troubles--the Union is in no mood to contemplate membership for impoverished Ukraine. And when push comes to shove, Ukrainians know that few major European nations will jeopardize relations with Russia. "How can we ever beat the Russian-German economic alliance? It's worth $36 billion a year," says Dmitry Vydrin, a political analyst in Kiev. As for private business, the doors to investors may be open, but it's not Westerners who have come in but Russians. "They are by far the largest group of non-Ukrainian businessmen," says Vladimir Zubanov, a pro-Yanukovych deputy. And with those Russian businessmen, of course, comes political influence.

In the long run, the Kremlin's use of its energy weapon could backfire. Russia employed the same tactics in the 1990s with the Baltics. "Cutting off supplies and forcing us to pay market prices was the best thing that could have happened to us," recalls Toomas Ilves, a former Estonian foreign minister. "It forced reforms and made us more competitive," not to mention more independent. But those were the days when Europe was strong and expanding, and Russia was weak. Today those roles aren't quite reversed, but they are clearly very different. And Moscow is ready to take advantage.