The New Republic - 01.03.2007

Graduation Day

Will the U.S. Normalize Trade with Russia?

by Clay Risen

On November 2001, George W. Bush and Russian President Vladimir Putin strode down the long red carpet of the White House East Room to give a joint press conference. They were new best friends--Bush having looked inside Putin's soul--and since September 11 the two had been hashing out a new bilateral relationship: Russia would support the United States on counterterrorism, while the United States would grant Russia more leeway in its domestic affairs (read: Chechnya) and help smooth the way for its accession to the World Trade Organization (WTO). In fact, that same day, the White House released a statement supporting Russia's "graduation" from the Jackson-Vanik Amendment, which bars normal trading relations between the United States and countries lacking free markets and open emigration laws. As the two men gabbed about visiting Bush's ranch in Crawford, Texas and St. Petersburg's White Nights festival, Bush declared that "a new day in the long history of Russian-American relations" had dawned. 

But that "new day" has turned to night over the past year, as the two countries have clashed over Iranian nukes, Georgian democracy, and Ukrainian reform. American policymakers warn of a new Russian imperialism abroad and a new Russian autocracy at home, while Russians bristle at what they consider American condescension and political chauvinism. "The U.S.-Russian relationship," the Carnegie Endowment's Dmitri Trenin and Mark Medish wrote recently, "has reached its lowest point since the end of the Cold War." And it's not just rhetoric: Russia is clearly backpedaling on democracy and the free market, which in turn is leading to calls across the political spectrum for a much harder line--from the normally pro-free-trade economist Irwin Stelzer, who would bar Russia from the WTO; to John McCain, who appears to favor kicking it out of the G8; to a host of Democratic congressmen, who want to make trade relations contingent on further reforms. 

In November 2006, Bush and Putin finally reached a bilateral trade deal, but its implementation hinges on Congress, which still has to lift the Jackson-Vanik restrictions early this year, something both Democrats and Republicans seem wary of doing. And because the WTO is unlikely to accept a country that has restricted trade with the world's largest economy, a failure to lift Jackson-Vanik would doom Russia's accession dreams, reinforcing anti-western factions within the Kremlin and convincing Russian politicians and the public alike that economic and political liberalization is a mistake. All of which makes the next sixth months a decisive moment in U.S.-Russian relations.

Senators Henry "Scoop" Jackson and Charles Vanik intended their 1974 law to punish the Soviet Union for imposing steep fees on would-be émigrés, especially Jews trying to move to Israel. Most religious and political freedom groups agree that Russia no longer violates the terms of the original amendment, but that hasn't stopped some congressional leaders from creating new, ad hoc reasons for keeping Russia bound by it. In April, Senate Majority Leader Bill Frist said that Jackson-Vanik graduation would hinge on Russian cooperation with the United States on the Iranian nuclear crisis. And while Frist will be out of office next month, he is being replaced by a host of other congressmen, including California Representative Tom Lantos, who would link graduation to a broader assessment of Russian human rights. What's more, accompanying Frist out the door will be Pennsylvania Representative Curt Weldon, one of the most vocal advocates of graduation on the Hill. As Elizabeth Stewart, a foreign policy adviser to Oregon Senator Gordon Smith, predicted at an American Enterprise Institute panel in October, "I think it is unlikely the administration will be given a free pass on Russia the next two years." 

But it's the next few months that really matter. Congress will be under pressure to bring Russia's standing under Jackson-Vanik to a vote early in the next session, because Russia's WTO accession talks will begin early this year and its graduation is an informal requirement for them to succeed. If Congress votes no, or just tables the issue, the trade organization is unlikely to override what is essentially a U.S. veto and allow Russia into its fold.

In purely economic terms, this is small beer. Export-wise, Russia is not a major manufacturing or agricultural nation, so, unlike China, it does not need the WTO to break down trade barriers. In fact, its most important asset, natural resources, will always find relatively open markets by virtue of demand. And while the growing Russian market is a lucrative one for American businesses, it is dwarfed by China and other emerging nations. Rather, the real impact of WTO exclusion will be to turn Russia further away from the West, which could have serious security consequences. 

While Putin's image has lost much of its luster among Americans of late because of his disdain for unfettered democracy, Russia watchers warn that he is in fact the best hope for future reforms. That's because what looks like a monolithic autocracy on the outside is actually a precarious alliance of reformers, technocrats, and the conservative siloviki (mainly security and military officials), held together by the president. As Ian Bremmer and Samuel Charap write in the current Washington Quarterly, "Although other institutions and the private sector are now largely irrelevant, disputes between Kremlin factions, rather than directives from the president, often determine major policy outcomes."

Putin has managed a grand economic bargain between the liberals, led by Economic Development and Trade Minister German Gref, and the siloviki: Russia will take an aggressively statist approach to natural resources but in all other areas pursue market reforms. The liberals are the weakest faction and thus make the concession for pragmatic reasons, while the siloviki, the most powerful, are for now convinced that market reforms--including WTO membership--will make Russia more powerful, even though they will also open it up to foreign investment and international transparency. 

To be sure, Putin is no liberal. Neither, despite his provenance, is he a siloviki. Rather, he is marginally a technocrat, evinced by his apparent selection of that faction's leader, Gazprom chair and First Deputy Prime Minister Dmitry Medvedev, as his successor. The fear among Russia watchers, then, is that a WTO failure would delegitimize the liberals and hurt Putin while elevating the anti-Western siloviki. If they gain power, then Russian intransigence could turn into Russian antipathy, or even aggression: As Bremmer and Charap note, the siloviki see NATO and the United States as active threats, talk of revanchist plans for the former Soviet republics, harbor anti-Semitic and xenophobic views, and are openly derogatory of democracy and free markets. Nor is that the worst-case scenario--a disorderly realignment could empower the extremists, who, unlike the siloviki, have no pretense of abiding by the rule of law or international agreements. In an ironic twist, then, a failure to lift the Jackson-Vanik restrictions could end up reviving the very specters it was enacted to combat.

President Bush has placed himself firmly behind Jackson-Vanik graduation and WTO accession for Russia. But he is much less enthusiastic about Putin than he was in 2001--according to The Washington Post's Jim Hoagland, he recently told his advisers that "we have lost Putin" and that his erstwhile ally "fears democracy more than anything else." This bodes ill for any hope of him expending political capital on the congressional fight, especially in an area--trade--where he has so little to begin with. It is therefore up to the new Democratic Congress to recognize the stakes in the upcoming debate. Punishing Russia may feel good in the short term. But failure to promote Russian reform will end up hurting everyone. 

Clay Risen , a former assistant editor at The New Republic, is managing editor of Democracy: A Journal of Ideas.