Wall Street Journal - 01.26.2005

Wall Street Journal

Bush Reviews Ties to Russia Amid Rising Tensions

Putin's Curbs on Democracy Challenge White House Aim Of Backing Liberty Overseas

By NEIL KING JR. in Washington and GREGORY L. WHITE in Moscow, Staff Reporters of THE WALL STREET JOURNAL

The Bush administration has launched a high-level review of relations with Russia in the wake of Kremlin curbs on democracy and businesses. But top aides say a major policy shift is unlikely, despite rising concerns that growing authoritarianism is hampering political reform and free markets in Russia.

For President Bush, the reluctance to significantly alter relations is an early sign of the challenge he faces reconciling his bold inaugural pledge to promote democracy and free markets abroad with the realities of U.S. foreign policy.

The administration has argued that maintaining close ties to Russian President Vladimir Putin allows the U.S. to raise tough issues but gain Moscow's cooperation in important areas like the war on terror and preventing weapons proliferation.

But critics and even some insiders argue the vaunted relationship has produced little of substance -- particularly as Mr. Putin has rolled back democratic rules. Inside the administration, Vice President Dick Cheney and aides are seen as increasingly skeptical about the Putin relationship, as are officials within the departments of State and Defense. Even Mr. Bush has privately told some aides that Mr. Putin's actions have made the alliance more difficult.

"We're not getting anything out of the bargain, as far as I can see," said Richard Perle, a prominent neoconservative and Pentagon adviser, in a recent interview.

U.S. officials involved in Russia policy described their review as a "midcourse assessment," in part motivated by some of Mr. Putin's recent actions, including restricting independent media, pressuring opposition parties, reining in regional governors and cracking down on business tycoons like the former chief executive officer of oil giant OAO Yukos, Mikhail Khodorkovsky. Yukos was driven to the edge of bankruptcy after it was slapped with billions in back taxes, and eventually broken up.

Just yesterday, Mr. Putin agreed to write off $9.8 billion of debt to Syria, which the U.S. views as a hostile nation that some believe is aiding the Iraqi insurgency. Meeting in Moscow with Mr. Putin, Syrian President Bashar Assad called on Russia to take a greater role in the Middle East to counter U.S. influence.

The review is being led by Tom Graham, a special assistant to the president and senior director overseeing Russia at the National Security Council. It involves input from other departments, including the State and Energy departments. It began late last year and is expected to wrap up before President Bush meets with Mr. Putin in Slovakia late next month.

Such reviews are not uncommon, especially at the start of a new term in office. "There will be no radical reassessment," said a top Russia aide to Mr. Bush.

But even without big changes, the Bush-Putin relationship is viewed as especially fragile, and there are big areas of concern over Russia's direction during Mr. Bush's second term. Besides his restrictions on democracy at home, Mr. Putin has clashed with the administration over foreign-policy issues as much as he has agreed, particularly over the U.S.-led war in Iraq and most recently over the disputed presidential election in Ukraine. In December, he said he "doesn't listen" to criticism from Mr. Bush if he doesn't think it is "constructive."

Last week, several senators pressed incoming Secretary of State Condoleezza Rice on the gap between U.S. policy and rhetoric at Senate confirmation hearings. "How can we be so concerned about the advancement of democracy in the Middle East and so unconcerned about the regression in Russia?" asked Delaware Sen. Joseph Biden, ranking Democrat on the Foreign Relations Committee. Her answer: "Recent history suggests we can work closely with Russia on common problems." She assured critics that she "will continue to press the case for democracy" in Russia.

While continuing to argue for engagement, administration officials say they aren't giving Mr. Putin a free pass. "If he moves further away from freedom and democracy, it will have a consequence on our relationship," a senior administration official said last week.

Aides said Mr. Bush is braced for more domestic pressure to take a hard line against Moscow, particularly from many of the same conservative voices that backed his foray into Iraq.

Indeed, leading Republicans on Capitol Hill -- including two mavericks who may aspire to succeed Mr. Bush in 2008, Arizona Sen. John McCain and Nebraska Sen. Chuck Hagel -- have been speaking against Mr. Putin of late. "Mr. Putin is pursuing autocracy at home and exporting autocracy abroad," Mr. McCain said in a recent speech. "And yet in the face of these outrages, both Europe and the United States have remained too acquiescent, preferring to deal with Mr. Putin as an equal."

In an interview, Senate Foreign Relations Chairman Richard Lugar, of Indiana, said he is trying to arrange hearings in coming months on domestic developments in Russia, particularly on Russia's handling of Yukos. Some legislators would like to eject Russia from the Group of Eight top industrialized nations, and there is increasing talk of possibly voting against Moscow's efforts to join the World Trade Organization. Though the U.S. can't prevent that from happening, a vote could come to Congress as early as this fall and could provide a forum for criticisms of Russia.

Part of the administration's motives are economic, given that high hopes for closer economic ties with Russia haven't been borne out. The Kremlin's campaign against Yukos was widely viewed as Kremlin retribution for Mr. Khodorkovsky's political activity. Separately, Moscow has put off plans for a pipeline that would help open the U.S. market to Russian crude.

Late last year, Lee R. Raymond, chairman and CEO of Texas-based Exxon Mobil Corp., said recent events had convinced him that he was wrong when he said in 2003 that Russia was ready for major investment. Bankers in Russia have said several large U.S. investment funds whose Yukos stakes were rendered all but worthless are considering asking the U.S. government to demand compensation for them from Russian authorities.

Eugene Lawson, head of the U.S.-Russia Business Council, said that U.S. investors remain baffled by events in Russia and are trying to figure out whether the crackdown on Yukos and a few other companies was a brief about-face or the start of a new trend. "We don't know the new rules of the game yet," he said.

During his first term, Mr. Bush built a strong personal relationship with Mr. Putin, starting at their first meeting in June 2001 and deepening after the terrorist attacks of Sept. 11, 2001. Mr. Putin was the first foreign leader that day to call President Bush; he later offered to help in the fight against the Taliban and put up no resistance to the U.S. use of former Soviet bases in Central Asia.

But Moscow was a fierce opponent of the Iraq war, straining the ties. Mr. Putin's rollback of democracy and the Ukraine election provided further stresses, with the Bush administration trying to strike a balance between working with the Kremlin on issues like postwar Iraq debt and taking a tougher stand on Mr. Putin's record at home.

The complicated nature of the relationship played out during a lunch between Mr. Bush and Mr. Putin at an economic summit in Chile in November. Mr. Bush questioned recent Kremlin actions in the wake of the Beslan school massacre, focusing in particular on Mr. Putin's decision to eliminate direct elections for regional governors. Mr. Putin responded by launching into a 20-minute discourse on the history of Russian federalism from the tsars to Josef Stalin, and Mr. Bush didn't pursue the issue, according to both U.S. and Russian officials.

Several times during the meeting, Mr. Bush came back to his plan to write off most of Iraq's debts, officials said. Mr. Putin eventually signed on. But the next day, he made waves by calling to congratulate the Kremlin-backed presidential candidate in Ukraine's fraud-ridden election even before the results had been tallied.

The crisis that followed, pitting the Kremlin and its candidate against his pro-Western opponent and tens of thousands of demonstrators who camped out for weeks in downtown Kiev, marked a low point in recent relations between Washington and Moscow. The Kremlin has toned down its rhetoric recently, as onetime opposition candidate Viktor Yushchenko won a revote and took office. But officials in Moscow have said the Ukraine conflict is a harbinger of future difficulties, given Russia's stated intent to increase its influence with its former Soviet neighbors. Since the elections in Kiev, Mr. Putin has met with several Central Asian leaders to discuss deeper economic and political ties.

"Russia is now trying to restore itself as a world power...not as a rival to the U.S.A. ...but as a power with global interests," said Konstantin Kosachev, who as chairman of the Foreign Affairs Committee in the Russian parliament is a senior player in the Kremlin foreign-policy elite. "Of course that raises concerns in the U.S.A."

He and other supporters describe Mr. Putin as a relative moderate and credit his personal relationship with Mr. Bush with helping him fight off hardliners at home. "Putin is under pressure from his own hawks, who want to drive Russia toward isolation and see the U.S. as Russia's main rival," said Mr. Kosachev.

U.S. officials have said that the more aggressively Russia seeks to get its way in other former Soviet republics, the more those countries will seek protection through membership in alliances like the North Atlantic Treaty Organization and the European Union, further alienating Moscow.

Another possible area of tension is the next Russian election. U.S. officials are concerned that when Mr. Putin's term ends in 2008, he will anoint a successor even less friendly to Western interests. Under the Russian constitution, he is forbidden from running for another term.