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Subject: The U.S.-Russian Summit Turns Routine - Outside the Box Special Edition






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Volume 5 - Special Edition
July 9, 2009



The U.S.-Russian Summit Turns Routine
By George Friedman

This week saw a 2-day summit between the United States and Russia that looks to be the first in a trend of subtle push and pull that will shape economic agendas for both states. Just as at the height of the Cold War, these two superpowers are jockeying for global attention and prospective untapped markets. But while the communication between the two is at the same volume and frequency as it was back in the days of Kennedy and Khrushchev, the tone has taken on a different level - as Obama flexes his newly appointed muscle and plants a possible seed of discontent between Medvedev and Putin concerning the future of the former USSR.

Hands-down the most important thing in Russia is energy. It's not the headline on CNN these days, but come less than 6 months from now the cold European winters will make natural gas supply lines and shipping an unavoidable talking point. Today's U.S./Russia relationship lays the groundwork for the future of global energy markets.

I'm sending you an article by my friend George Friedman at STRATFOR, a global intelligence firm, discussing what's really going on between the U.S. and Russia - at the summit and in the coming months. If energy markets matter to you - and they do, regardless of how you're invested - then you need to understand this pivotal global relationship. Also, STRATFOR is offering special rates to Outside the Box readers. Click here to read more and be sure to take advantage of these low rates for priceless intelligence to help you in your future financial planning.

John Mauldin
Editor, Outside the Box


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The U.S.-Russian Summit Turns Routine

July 7, 2009

By George Friedman

Related Special Topic Page

Special Summit Coverage

The Moscow summit between U.S. President Barack Obama, Russian President Dmitri Medvedev and Russian Prime Minister Vladimir Putin has ended. As is almost always the case, the atmospherics were good, with the proper things said on all sides and statements and gestures of deep sincerity made. And as with all summits, those atmospherics are like the air: insubstantial and ultimately invisible. While there were indications of substantial movement, you would have needed a microscope to see them.

An agreement was reached on what an agreement on nuclear arms reduction might look like, but we do not regard this as a strategic matter. The number of strategic warheads and delivery vehicles is a Cold War issue that concerned the security of each side's nuclear deterrent. We do not mean to argue that removing a thousand or so nuclear weapons is unimportant, but instead that no one is deterring anyone these days, and the risk of accidental launch is as large or as small whether there are 500 or 5,000 launchers or warheads. Either way, nuclear arms' strategic significance remains unchanged. The summit perhaps has created a process that could lead to some degree of confidence. It is not lack of confidence dividing the two countries, however, but rather divisions on fundamental geopolitical issues that don't intersect with the missile question.

The Fundamental Issues

There are dozens of contentious issues between the United States and Russia, but in our mind three issues are fundamental.

First, there is the question of whether Poland will become a base from which the United States can contain Russian power, or from the Russian point of view, threaten the former Soviet Union. The ballistic missile defense (BMD) system that the United States has slated for Poland does not directly affect that issue, though it symbolizes it. It represents the U.S. use of Polish territory for strategic purposes, and it is something the Russians oppose not so much for the system's direct or specific threat — which is minimal — but for what it symbolizes about the Americans' status in Poland. The Russians hoped to get Obama to follow the policy at the summit that he alluded to during his campaign for the U.S. presidency: namely, removing the BMD program from Poland to reduce tensions with Russia.

Second, there is the question of Iran. This is a strategic matter for the United States, perhaps even more pressing since the recent Iranian election. The United States badly needs to isolate Iran effectively, something impossible without Russian cooperation. Moscow has refused to join Washington on this issue, in part because it is so important to the United States. Given its importance to the Americans, the Russians see Iran as a lever with which they can try to control U.S. actions elsewhere. The Americans do not want to see Russian support, and particularly arms sales, to Iran. Given that, the Russians don't want to close off the possibility of supporting Iran. The United States wanted to see some Russian commitments on Iran at the summit.

And third, there is the question of U.S. relations with former Soviet countries other than Russia, and the expressed U.S. desire to see NATO expand to include Ukraine and Georgia. The Russians insist that any such expansion threatens Russian national security and understandings with previous U.S. administrations. The United States insists that no such understandings exist, that NATO expansion doesn't threaten Russia, and that the expansion will continue. The Russians were hoping the Americans would back off on this issue at the summit.

Of some importance, but not as fundamental as the previous issues, was the question of whether Russia will allow U.S. arms shipments to Afghanistan through Russian territory. This issue became important last winter when Taliban attacks on U.S. supply routes through Pakistan intensified, putting the viability of those routes in question. In recent months the Russians have accepted the transit of nonlethal materiel through Russia, but not arms.

Even before the summit, the Russians made a concession on this point, giving the United States the right to transit military equipment via Russian airspace. This was a significant policy change designed to demonstrate Russia's flexibility. At the same time, the step is not as significant as it appeared. The move cost the Russians little under the circumstances, and is easily revoked. And while the United States might use the route, the route is always subject to Russian pressure, meaning the United States is not going to allow a strategic dependence to develop. Moreover, the U.S. need is not as apparent now as it was a few months ago. And finally, a Talibanized Afghanistan is not in the Russian interest. That Russia did not grant the U.S. request last February merely reveals how bad U.S.-Russian relations were at the time. Conversely, the Russian concession on the issue signals that U.S.-Russian relations have improved. The concession was all the more significant in that it came after Obama praised Medvedev for his openness and criticized Putin as having one foot in the Cold War, clearly an attempt to play the two Russian leaders off each other.

What the Summit Produced

Much more significantly, the United States did not agree to withdraw the BMD system from Poland at the summit. Washington did not say that removal is impossible, but instead delayed that discussion until at least September, when U.S. Secretary of State Hillary Clinton will visit Moscow. A joint review of all of the world's missile capabilities was established at the summit, and this joint review will consider Iranian — and North Korean — missiles. The Polish BMD system will be addressed in that context. In other words, Washington did not concede on the point, but it did not close off discussions. The Russians accordingly did not get what they wanted on the missiles at the summit; they got even less of what they wanted in the broader strategic sense of a neutralized Poland.

The Russians in turn made no visible concessions on Iran. Apart from studying the Iranians' missile systems, the Russians made no pledge to join in sanctions on Iran, nor did they join in any criticism of the current crackdown in Iran. The United States had once offered to trade Polish BMDs for Russian cooperation on Iran, an idea rejected by the Russians since the BMD system in Poland wasn't worth the leverage Moscow has with Iran. Certainly without the Polish BMD withdrawal, there was going to be no movement on Iran.

NATO expansion is where some U.S. concession might have emerged. In his speech on Tuesday, Obama said, "State sovereignty must be a cornerstone of international order. Just as all states should have the right to choose their leaders, states must have the right to borders that are secure, and to their own foreign policies. That is why this principle must apply to all nations – including Georgia and Ukraine. America will never impose a security arrangement on another country. For either country to become a member of NATO, a majority of its people must choose to; they must undertake reforms; and they must be able to contribute to the alliance's mission. And let me be clear: NATO seeks collaboration with Russia, not confrontation."

On the surface, this reiterated the old U.S. position, which was that NATO expansion was between NATO and individual nations of the former Soviet Union, and did not — and should not — concern Moscow. The terms of expanding, reforming and contributing to NATO remained the same. But immediately after the Obama-Putin meeting, Russian sources began claiming that an understanding on NATO expansion was reached, and that the Americans conceded the point. We see some evidence for this in the speech — the U.S. public position almost never has included mention of public support or reforms.

In many ways, however, this is splitting hairs. The French and Germans have long insisted that any NATO expansion should be limited to countries with strong public support for expansion, and which meet certain military thresholds that Georgia and Ukraine clearly do not meet (and could not meet even with a decade of hard work). Since NATO expansion requires unanimous support from all members, Russia was more interested in having the United States freeze its relations with other former Soviet states at their current level. Russian sources indicate that they did indeed get reassurances of such a freeze, but it takes an eager imagination to glean that from Obama's public statement.

Therefore, we come away with the sense that the summit changed little, but that it certainly didn't cause any deterioration, which could have happened. Having a summit that causes no damage is an achievement in itself.

The Kennedy Trap

Perhaps the most important part of the summit was that Obama does not seem to have fallen into the Kennedy trap. Part of the lack of serious resolutions at the summit undoubtedly resulted from Obama's unwillingness to be excessively accommodating to the Russians. With all of the comparisons to the 1961 Kennedy-Khrushchev summit being bruited about, Obama clearly had at least one overriding goal in Moscow: to not be weak. Obama tried to show his skills even before the summit, playing Medvedev and Putin against each other. No matter how obvious and clumsy that might have been, it served a public purpose by making it clear that Obama was not in awe of either of them. Creating processes rather than solutions also was part of that strategy.

It appears, however, that the Russians did fall into the Kennedy trap a bit. The eagerness of Putin's advisers to tout U.S. concession on Ukraine and Georgia after their meeting in spite of scant public evidence of such concessions gives us the sense that Putin wanted to show that he achieved something Medvedev couldn't. There may well be a growing rivalry between Medvedev and Putin, and Obama might well have played off it.

But that is for the gossip columns. The important news from the summit was as follows: First, no one screwed up, and second, U.S.-Russian relations did not get worse — and might actually have improved.

No far-reaching strategic agreements were attained, but strategic improvements in the future were not excluded. Obama played his role without faltering, and there may be some smidgen of tension between the two personalities running Russia. As far as summits go, we have seen far worse and much better. But given the vitriol of past U.S.-Soviet/Russian relations, routine is hardly a negative outcome.

In the meantime, BMD remains under development in Poland, there is no U.S.-Russian agreement on Iran and, as far as we can confirm at present, no major shift in U.S. policy on Ukraine and Georgia has occurred. This summit will not be long remembered, but then Obama did not want the word "disastrous" attached to this summit as it had been to Kennedy's first Soviet summit.

We wish there were more exciting things to report about the summit, but sometimes there simply aren't. And sometimes the routine might turn out significant, but we doubt that in this case. The geopolitical divide between the United States and Russia is as deep as ever, even if some of the sharper edges have been rounded. Ultimately, little progress was made in finding ways to bridge the two countries' divergent interests. And the burning issues — particularly Poland and Iran — continue to burn.



John F. Mauldin
johnmauldin@investorsinsight.com

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