Biden’s Moscow visit: On the money

RIA Novosti political commentator Dmitry Kosyrev

As with any summit, it wasn’t entirely clear what U.S. Vice President Joe Biden had to offer when he arrived in Moscow. But he sent a clear signal on the first day, which was devoted to the topics of economic modernization and innovation.

“We fully support Medvedev’s vision of a nation powered by innovation and modernization,” Biden said, and expressed his administration’s desire to take part in the process.

“We are ready to develop fully-fledged strategic relations with the United States,” President Dmitry Medvedev replied.

Biden’s words were backed up by a visit to Skolkovo, the symbol of the Russian economy’s new horizons, and meetings with Russian businessmen, one of whom even complained to Biden that U.S. partners demand more from Russia than from China or India. The overall picture seems clear enough, especially considering that Washington has promised to repeal the obstructive Jackson-Vanik amendment soon and to back Russia’s admission to the WTO.

Big long-term investments

This is the latest in a series of efforts to develop strategic relations between the countries, a process started by the new Russian and U.S. administrations two years ago. Russia and the U.S. ratified the New START Treaty late last year, but military issues are not high on the bilateral list of priorities. The Cold War and the attendant focus on nuclear parity are in the past.

Now the focus has shifted to economic power. This is indeed a strategic issue for the United States, which is looking for ways to maintain its position in the world after China surpasses it as the world’s largest economy. Russia’s strategy for the future is also rooted in economic development.

While strategic investments are on the table, neither side is talking specific dollar figures yet. It would be difficult to at this point, as no one knows how much money the Skolkovo high-tech hub will generate. Even though it may not generate any business in five years, but what about in ten years?

The Financial Times reports that “the Russian government is setting up a $10bn fund to co-invest with leading international private equity firms in an effort to attract foreign capital to the country, and has asked Goldman Sachs informally to guide the project.” However, Russia wouldn’t mind others co-investing in its high-tech project.

One deal that was ready in time for Biden’s visit was Aeroflot’s purchase of eight Boeings. While this may pale in comparison to deals with China and India, eight planes are not insignificant. Boeing has been doing very well in Russia since the 1990s, drawing on the experience of Russia’s best engineers.

But the goal remains large, long-term investments – strategic investments. It’s clear that the serious steps taken by the United States and Russia to forge a closer economic relationship are not just a ploy to help Obama and Medvedev at the polls in 2012 for the simple reason that the investment plans in the works extend far beyond the next presidential term in both Russia and the United States.

All the two sides have to do now is open the door to investment and see what happens next.

The moderating influence of trade

The United States is far from being a major trade partner of Russia. Bilateral trade stands at a measly $23 billion. The United States is far behind Germany, China and the Netherlands in this respect. This has created a peculiar situation in which our two countries are not linked by anything. If they were to completely sever economic ties, this would cause some damage but nothing on a national scale.

Is this good or bad, and who’s affected? Let’s look at the special relationship between the United States and China as a point of contrast. U.S.-Chinese trade is about 15 times larger than U.S.-Russian trade. There is not a single major American corporation that does not have vital interests in China, and the reverse has recently become true as well. Given the circumstances, the talk about the strategic competition between the two countries sounds quite odd. They are competing, and yet both economies would perish if they were cut off from one another. Economic cooperation has an important moderating influence in politics. The sides can compete, but they must do so carefully. They must think twice before taking any step that could affect the bilateral relationship.

The relationship between Europe and Russia is no less special. Europe is known for centuries-old grudges between nations and a host of other skeletons in its historical closet. Russia has been the target of European fear and animosity for centuries, regardless of what it does or does not do. But with bilateral trade standing at $306.2 billion we have learned to keep trade separate from other areas of disagreement. This is not the case with America.

Ideally, Biden’s visit will be the first step on the road to a special U.S.-Russian economic relationship. Clearly, America wants this, otherwise why would Washington support Russia’s WTO bid and promise to repeal the obsolete Jackson-Vanik amendment?

Russia clearly wants the same. Medvedev’s “modernization alliance” between Russia and the West, including the United States, is essentially an appeal to keep our political differences separate from our commercial interests. Help Russia develop a high-tech economy, and let’s see if Russian society makes huge leaps forward as a result, shedding its prejudices and fears of the West in the process.

All that remains to be seen is how strictly this separation between business and politics is enforced in the copious package of proposals Biden brought to Moscow. Are we really supposed to believe that improved trade relations will not be in any way linked with missile defense in Europe, Libya and a host of other issues? Only time will tell.

The views expressed in this article are the author’s and may not necessarily represent those of RIA Novosti.

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