Sleeping With The Enemy

It wasn't exactly your ordinary business trip. The first thing the Russian executive saw as he walked off the plane in Baghdad last month was a slogan emblazoned on the floor of the jetway: DOWN WITH THE U.S.! Later, when Yevgeny and his colleagues reached their work site, they heard the distant thump of bombs from a U.S. airstrike. That was in An Nasiriyah, in southern Iraq, where Yevgeny's company has been building an 800-megawatt power station. Working in Iraq has its quirks, Yevgeny says, refusing to give his last name, but he insists that's no reason to ignore a potentially lucrative market. "We participate in tenders in Iraq all the time. It's all in strict conformity with United Nations rules."

Business as usual? Lately, Russia isn't just continuing its tradition of schmoozing with rogue states around the world. It's actually stepping up relations with several of them. As if in conscious response to George W. Bush's diatribes against an "Axis of Evil," Russia has forged its own axis of friendship, recently announcing a series of deals that extend and deepen its cooperation with Iraq, Iran and North Korea. Late last week, Vladimir Putin traveled to the Far East city of Vladivostok for talks with North Korean dictator Kim Jong Il, who recently arrived on his private train to examine opportunities for business cooperation with Moscow. A new trade agreement with Baghdad, set for signing in the coming weeks, is said to be worth from $40 billion to $60 billion and encompasses 70 different projects from food production to oilfield equipment. And just in case Washington didn't get the message, Moscow has also declared its intention to expand a project to help the Iranians build a nuclear reactor--an undertaking that has been bedeviling Russia-U.S. relations for years.

One could argue that there's nothing new about Moscow's cultivating ties with international pariahs. Ties with Iraq and North Korea date back to Soviet days, and the reactor-building project in the Iranian city of Bushehr started under Boris Yeltsin in 1995. But that was before 9-11 and the astounding turnaround in Russian-American relations that followed. Earlier this year Vladimir Putin and George W. Bush met in Moscow to seal a new alliance against the common enemy of terrorism. Officials from the White House and Pentagon fell over each other to express thanks for Russia's contribution to the war in Afghanistan. Commentators have been taking it as given that the United States can count on Russian oil to buoy the Western economy if Washington launches an attack on Iraq.

To anyone paying close attention, though, it was clear from the start that Russia's coziness with the terrible trio would complicate things. Even during the sweetness-and-light Moscow summit, senior U.S. officials could be heard behind the scenes, warning about Russian courting of Iran in particular. Those fears proved justified earlier this month, when Moscow announced not only that it was planning to finish the $800 million nuclear reactor in Bushehr, but was also giving the go-ahead to an additional 10-year program for five more reactors--a contract worth up to $10 billion. That left American officials speechless--among them, Energy Secretary Spencer Abraham, who just happened to be visiting Moscow and pointedly avoided any public comment about the problem during his visit.

Russia's latest initiatives with Iraq, though, seem to be provoking a more strenuous response. A congressional delegation led by Rep. Henry Hyde came to Moscow last week asking for clarification of Russia's policy toward rogue states and admonishing the Kremlin that the new Russian-American alliance could suffer as a result. But that was nothing compared with the broadside delivered by Defense Secretary Donald Rumsfeld late in the week. Friendliness toward rogues, he said, "sends a signal across the globe that that is what Russia thinks is a good thing to do, to deal with the terrorist states, to have them as their relationship developers." He warned the Russians that cozying up to the rogues could scare off investors from the West, a not-too-thinly veiled warning that U.S. promises of intensified commercial engagement with Russia were already under threat.

So why has Moscow persisted in its dealings with these less-than-savory customers? Essentially, the Russians say, the payoff they were hoping for from the U.S.-Russia alliance hasn't come. While they had hoped for more Russian imports to U.S. markets, they instead got Bush steel tariffs, a hard knock to their own industry. They seek more American investment in the Russian oil industry, but so far such plans have remained just that--plans, not backed up by dollars. They wanted U.S. support for WTO membership; instead, Russia must wait another two years. "After September 11, there were great expectations, and they have ended in nothing," says Dmitry Yevstafiev of the PIR Center, a leading Moscow think tank. "In fact, Russia got less in this cycle of cooperation with the West than it did in the early '90s. There has been zero economic benefit to this warming with the West. Both the military and the political elite are unhappy about it."

Well, maybe not that unhappy. Many members of that elite are now connected with private economic empires, in industries ranging from oil to arms, that stand to benefit from Russian trade with rogues. President Putin has said repeatedly that Russian foreign policy should unsentimentally follow the money, obeying the dictates of Russian commercial interests rather than the ideological or geopolitical principles that once applied.

Russia's relations with the West are still of immense importance, to be sure, and will clearly remain so. But trade with the rogues is catching up fast. Last year, despite U.N. sanctions, Russia's trade with Iraq amounted to $4 billion. That's only half of its total $10 billion with the United States, but the dealings with Iraq in some ways offer more potential. While Russia's customers in the West are interested almost exclusively in buying raw materials--oil and natural gas to Europe, for example--the rogue states, which can't shop where they'd like, are more than happy to buy Russian manufactured goods, ranging from weapons to whole factories and power plants. "If we had good economic relations with the West, and earned some good revenue from them, we'd be very happy," says ultranationalist parliamentary deputy Vladimir Zhirinovsky. "But they don't want to buy from us, so we're dependent on the East, where they're ready for any deal and able to pay."

Often derided as a buffoon, Zhirinovsky is actually in the Russian mainstream as far as his fondness for the rogues is concerned. Earlier this year he visited Pyongyang to discuss plans for connecting the Korean Peninsula rail network with Russia's Trans-Siberian railroad, a project that pleases Putin. That's in addition to Zhirinovsky's regular trips to Iraq, where he claims to have told leading politicians that they should sign "the biggest possible deal" with Russia as a hedge against military action. Surely, he and others in Moscow argue, Washington will be less inclined to attack Saddam if there are large numbers of Russian technicians on the ground in Iraq--which, in turn, will mean a huge payoff for Russian oil companies once U.N. sanctions are lifted. As for Iran, says Zhirinovsky, "I haven't been there since last year. But I hope to be getting back soon." No doubt the likes of Yevgeny will be hard on his heels.