Lately there’s been a lot of news covering what the media calls ‘The New Cold War.’ Frankly, it’s not so. Russia is becoming increasingly integrated into Western markets, no matter how much the Kremlin tries to keep Russia’s assets under government control. With increasing economic interdependence, the risk of war, even if it might just be a ‘Cold War’, is drastically reduced. Furthermore, today Russia isn’t leading a worldwide communist revolution. Russia is focused on Russia’s own national interests, it’s not challenging anyone’s way of life anymore.
A lot of the negative news focuses on Kosovo, with Russia and Serbia staunchly refusing to go along with Western recognition of the new state. This position by Russia clearly shows that it has rediscovered its confidence when it comes to international diplomacy. Another issue that illustrates the so called ‘New Cold War’ is Russia’s insistence that US not deploy its proposed missile shield in Central and Eastern Europe. This shows that Russia once again (or maybe it never stopped) views the West with suspicion and distrust. The third major news item that comes to mind when describing Russia’s new confrontations with the West is its energy dominance in the European energy market. There are fears that Russia has no qualms about using its energy supplies as a political weapon, and that the Nord Stream and South Stream pipelines (from Russia to Germany, and from Russia to Bulgaria, Serbia, Hungary, Italy, and Austria, respectively) will increase Russia’s dominant grip on the European energy market.
The third reason for expecting a ‘New Cold War’, however, seems to be misinterpreted. Does a businessman declare war on his client? Usually no! Outside of reasserting its independence from the West, Russia doesn’t want to horribly ruin its relations with the West. The European (and American) market is a huge client for Russia’s energy. And, of course, money makes the world go round. It’s not just energy that’s keeping Russia and the West interlinked. It’s also foreign direct investment (FDI) into Russia. Just today’s edition of the Wall Street Journal reported that the French auto maker Renault had purchased a minority stake of 25% worth $1 billion in the Russian auto maker Avtovaz. That was a headline story. Another story buried within the paper was that Pepsico. and its chief bottler purchased a majority stake (75% or something similar) in a Russian soft drink company worth $1.4 billion. That’s a lot of money for a country where the GDP (PPP) is around $14,600.
Even under the USSR, the GDP (PPP) per capita in 1990 was $9,211. This means that Russians today are roughly %150 wealthier than they were 18 years ago. Now, I realize that this is on average, and the the large amount of billionaires (second only to the US in this regard) and thousands of millionaires are a huge offset, but Russia’s economy is still growing at dizzying speeds. For the past six years Russia’s GDP has been growing by over 6.5% each year (sometimes reaching as high as 7.3% as in 2003). Combined with a trillion dollar economy, it is a huge growth rate. This can be seen by the construction of the new Moscow International Business Center, a $12 billion complex in the heart of Moscow. The Russians of tomorrow will be considerably richer than the Russians of yesterday.
Wealth, though, doesn’t necessarily mean that Russia is a stable country. One of Medvedev’s (Russia’s president-elect) chief policy goals will be to “increase the role of civil society.” There’s a lot of things wrong with Russia. The life expectancy for men is alarmingly short: 59 years. Russia is also facing a population implosion; it has lost about 7 million people over the past 15 years because the population is not regenerating itself. Russia’s central government is powerless in many areas of the vast country, with mafia groups or others wielding the real power.
Roughly speaking, now that Russia has restored its international image as a serious player in world politics (Putin’s accomplishment), what Medvedev hopes to do is to improve civil order, health institutions, and education institutions.
Medvedev will have nothing to gain by starting a prolonged conflict with the West. That, however, does not mean that the West can ignore Russia on issues that concern it, as the West did for a decade and a half after the dissolution of the Soviet Union.
All of which makes me cautiously optimistic. I don’t want a new Cold War and I want Russia to become a modern civil society, with a responsible government.