The role of Economics in Russian International Relations

Russia’s relationship with the international community is not only topical given Russia’s recent military involvement in the Ukraine, but it is also one which students of international relations continuously find difficult to pin down. Winston Churchill once famously said of Russia: “I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma,” (Lo, 2002) reflecting its often difficult relationship with the outside world. In the period since Churchill’s quote, it could be said that Russia’s international relations are no easier to define.

Russia’s relations can be testy with the outside world at the best of times. When the Obama administration came to power in 2009, the administration sought to have a “reset” of the relationship between the two nations. This coincided with several PR-stunts involving leaders from both sides with the media in tow. It didn’t last long, however, and as of 2014, it seems that Russian-American relations are as low as they have been in several years. Since Russia’s intervention in the Ukraine, relations seem to have deteriorated further still. A number of sanctions have been put in place by the Obama administration against Russia (Feaver and Lorber, 2014). However, the relationships between Russia and United States, and that between Russia and Europe are clearly different. It seems clear that something more than mere geography or history might be the reason for this.

The notorious reset button, now available on Ebay.com

Perhaps we can read something into Russia’s relationships with the outside world by looking at economics in particular. Given the interconnectedness of the world economy now and the importance that trade plays in the welfare of many states, it seems a fair assumption to make that international relations might be shaped by economics. Russia would not be alone in using economics as a tool to shape its international relations. The United States, the world’s largest economy, seems to turn to economics on an increasing basis as either an incentive or a sanction to shape its own relationship with other countries. For example, in the past five years alone, it has issued sanctions against Libya, Sudan, Syria, Myanmar, North Korea and indeed, Russia.

Therefore, there would seem to be precedence for suggesting that economics tell us a lot about international relations and Russia is no different. We can probably tell more now than at any other stage before in history. As communism fell and the doors to trade opened, there is more transparency into where Russia’s capital flows to. What might these capital flows tell us something about its relationship with various players in the international community? Given the broad scope of what constitutes the international community, I would like to particularly focus on the United States, the United Kingdom and the European Union. I believe the economic ties of all three parties with Russia can tell us something about the increasingly important role that economics play in international relations.

What does the reaction of the international community to Russia tell us about the role of economics in international relations?

Before this, it had been a centrally-planned socialist economy, more or less excluded from trade with economic actors in the world. Naturally, this economic exclusion tied in with a political exclusion. In 1992, when Russia made the change to a market economy, the language used in the west often reflected the fact that the Russians were looked down upon. Examples of titles in the academic literature include, “Coming of Age in Post-Soviet Russia” (Markowitz, 2000), “Without a Map: Political Tactics and Economic Reform in Russia,” (Schliefer and Treisman, 2000) and “The Piratization of Russia: Reform goes Awry.” (Goldman, 2003).

A lot of the negativity in the academic literature refers to the period after it entered the world economy and underwent privatization. In fact, it is difficult – if not impossible – to find any examples in the literature about this period which portrays Russia in a positive light. A cursory Google search of “Boris Yeltsin” alone yields a series of results which can only be described as mocking. On the first page of results alone, these include “4 international incidents caused by drunk (sic) Boris Yeltsin,” “Highlights of Boris Yeltsin (funny moments)” and “1994: Sleepy Boris Yeltsin snubs Irish leader.” It isn’t hard to imagine given this seemingly sneering attitude in the west towards Russia that Russians themselves might want to re-assert themselves.

Yeltsin was commonly derided but he faced an uphill task with Russia in the early 1990s.

There are several ways in which nations assert themselves in the world. Prime among these is through economics. The World Trade Organization (henceforth, “WTO”) is a group of nations, which might well be called “the international economic community.” Gaining access to this group is a way for a developing economy to show progress on more than just an economic level – it’s a signalling mechanism for the country, almost part of a large rebranding. When it became a market economy again in 1992, one of the state goals of Russia was to enter the WTO (Chowdhury, 2003).

The entry process to the WTO tells us a lot about economics and international relations in general. Prospective members of the WTO must first apply to the WTO secretariat, which organizes a working party composed of all states with “an interest” in the accession (political, economic or otherwise) (Fean, 2012). This took a longer amount of time than usual with Russia given its complicated international relations with several of the parties that composed its working party. Fean (2012) notes, “the length of time this took was a source of immense irritation to Moscow. Frustration is not unusual in accession processes, the onus being on the candidate to reply to member state concerns. In Russia’s case, the working party comprised over fifty interested states, including some with whom Russia has difficult relations, Georgia foremost among these.” On the other side, the biggest support that Russia had in favour of this came from the EU bloc, where most of Russia’s imports and exports are concentrated (Chowdhury, 2003).

Kuchins and Zevelev (2012) provide analysis of Russia’s relations with the outside world in a paper, which makes an interesting comparison between Chinese foreign policy and Russian foreign policy: “unlike current Chinese policy, Russian policy based primarily on great power balancers´[1] views seems to approach the global economy with its guard up.” (p. 150). Later in the paper, the authors suggest, “the defeat of the liberal reformers, caused principally by the economic crisis in the early 1990s, shifted Russian foreign policy to more traditionalist realist concepts asserting national interests and expanding power and influence.” (p. 153).

Seeming to confirm these conclusions, Russia introduced a policy paper for foreign affairs in early 2013 (Monaghan, 2013), which effectively laid out Russia’s future strategy with regard to foreign policy. According to Monaghan (2013, p. 3), “the concept is a natural update of Russia’s views given domestic and international developments since 2008, and it fits into strategic planning guidelines that envisage medium-term updates approximately every five years.” What changed in 2008? The world economy changed quite considerably around that time, at least from a western perspective.

Another example of this is the G8 group of nations (the largest 8 economies in the world), which meet for a summit each year to discuss matters of broad international interest. In the early part of this year, for example, Russia was excluded from this group by the other members because of its incursion into the Ukraine (Borger, 2014). This exclusion from the group in the short term was less of a sanction against Russia (the G8 hasn’t got the capacity to sanction Russia, despite its supposed power), and more of a slap on the wrist.

Energy – itself comprising the vast majority of Russia’s economy – shows how economic matters dictate Russia’s relationships with other nations. In the past 10 years, it has used its control of vast energy resources as a tool in disputes against Belarus, the Baltic States, the European Union, Georgia and the Ukraine (Walker, 2007). There may also be others. What seems to be clear from Russia’s dealings with these nations is that there is a symbiotic relationship that exists between them and Russia: they benefit from it, as does Russia. The same could be said of all trade relations but it is particularly true of Russia’s international relations given that the economic ties are mainly based on energy contracts.

The year 2014 has provided some good insight into the international relations of Russia and how they might be based more on economic ties than is typically true of relations between nations. Russia invaded the Ukraine in February of 2014 and attracted widespread criticism from the international community in doing so. However, the reaction of various countries to Russia’s invasion was quite telling. The United States immediately began issuing sanctions against several highly-placed ministers and economic agents in Russia. The EU, on the other hand, demanded that Russia enter dialogue with the Ukraine. The UK did similarly. Notably, neither the EU nor the UK issued any sanctions against Russia during this time. Clearly, the what differentiates the relationship between Russia and the United States to that of the EU and the UK is economics.

I would assert that there are cooler relations between the United States and Russia not because of military actions – as is often stated – but rather because of economics. That is, the economics between the two nations are largely irrelevant, so each treats the other in a denigrating fashion. Wingfield (2012) notes that in 2011, just 0.6% of all US Exports by value went to Russia. Similarly, Russia doesn’t energy to the United States, so quite the opposite of being a symbiotic relationship, theirs is a relationship of irrelevance to Russia.

Russia’s relationship with the EU and the UK, however, is markedly different. At the same time that large EU nations such as the UK and France spoke tough against Russia’s actions in the Ukraine, both were exporting arms and helicopters to Russia. The UK has granted over 400 visas to Russians in the past 10 years, each costing visa costing in the region of £10 million each. The arms licenses between the UK and Russia which existed even after Russia invaded the Ukraine were thought to be worth around £132 million. Given these figures, it’s not difficult to see how Russia can have differing relations with various countries in the international community.

Russia has acknowledged that the European Union has a dependence on its energy resources. Given that it is aware of the dependence, it no doubt casts its net accordingly and weaves its international relationships quite closely to the economics of the given situation. It may even be that Russia sees economics as the best way of maximizing its relationship with everyone as opposed to what seems to be the case with most other countries: that they use close diplomatic ties to maximize economics. Quotes from the beginning of 2014 would seem to back this theory up. Romero (2014) quotes Putin as saying, “Can Europe stop buying Russian gas? I think it’s impossible. Will they make themselves bleed? That’s hard to imagine.” With regard to the United States, Putin said, “If prices decrease in the global market, the emerging shale industry will die.”

Russia’s international relations are so attached to economics because, conversely, Russia itself is not part of any trading bloc. In a sense, this means that Russia is more defined than most by its economic ties. As Emerson (2014) notes: “Russia is the only major economy in the world that has no preferential agreements with the EU (either already or in the course of negotiation) or in fact with any other major trading bloc.” In this regard, Russia could be seen to be less of a player trading in a community and more of an independent entity whose relationships are based on transactions when and where these transactions need to be made. Whether or not it loses out because of this antagonistic approach is difficult to say; the nature of trading blocs is that goods become cheaper (providing less to the seller and a benefit to the buyer) but Russia’s monopoly on energy to Europe and its play-hard stance means that it can push up prices more or less as it suits. My contention is that the relationship between Russia and all other nations will change as economics dictates. We can tell a lot about Russia and its international relations from its economic ties.

Bibliography

Borger, J., (March 24, 2014). “G7 countries snub Putin and refuse to attend planned G8 summit in Russia.” The Guardian. Available online at: http://www.theguardian.com/world/2014/mar/24/g7-countries-snub-putin-refuse-attend-g8-summit-russia (retrieved 25/07/14)

Chowdhury, A. (2003). “WTO Accession: What’s in it for Russia?” William Davidson Institute Working Paper 595.

Emerson, M. (2014). “Trade policy issues in the wider Europe – that led to war and not yet to peace.” CEPS Working Document, Number 398, July 2014. Centre for European Policy Studies.

Fean, D. (2012). “Decoding Russia’s WTO Accession.” Russie.Nei.Visions Number 64. Russia NIS Center.

Feaver, P., Lorber, E., (June 6, 2014). “Penalty Box: How Sanctions Trap Policymakers.” Foreign Affairs.

Kuchins, A., Zevelev, I., (2012). “Russian Foreign Policy: Continuity in Change,” The Washington Quarterly, Centre for Strategic and International Studies, 35:1, pp. 147-161

Lo, B., (2002). “Russian Foreign Policy in the Post-Soviet Era: Reality, Illusion and Mythmaking.” Palgrave MacMillan. ISBN 0-333-77593-7.

Monaghan, A., (2013). “The New Russian Foreign Policy Concept: Evolving Continuity.” Russia and Eurasia REP 2013/3. Available online at: http://www.chathamhouse.org/sites/files/chathamhouse/public/Research/Russia%20and%20Eurasia/0413pp_monaghan.pdf (retrieved 30/07/14).

Romero, H. (April 17, 2014). “Putin says oil wars with Russia will make west bleed.” RT.com. Available online at: http://rt.com/business/russia-west-oil-prices-136/ (retrieved 24/07/2014).

Walker, M.,(2007). “Russia v Europe: The Energy Wars.” World Policy Journal, Spring 2007. World Policy Institute.

Wingfield, B. (July 12, 2012). “Why US-Russian trade is stuck in the cold war.” Bloomberg Businessweek. Available online at: http://www.businessweek.com/articles/2012-07-12/why-u-dot-s-dot-russia-trade-is-stuck-in-the-cold-war (retrieved 22/07/14).

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[1] The authors use the term “great power balancers” to denote the political elite in Russia.

Foreign Policy Impasses: Notes from Northern Ireland

Be a student of history, not its prisoner. That is the major lesson to be taken away from Northern Ireland’s peace process. Its history is littered with sectarianism, human rights abuses and terrorist atrocities. And yet, in 1998, the two sides of its bloody conflict signed an agreement (the “Good Friday Agreement”) which has led to decommissioning of terrorist weapons, a swathe of reformed institutions and most importantly, a shared democracy.[i]

The conflict which dogged Northern Ireland for over 30 years illustrates how even the most entrenched foreign policy impasses can be overcome if the desire for some form of resolution is present. To understand the extent to which the positions were entrenched in Northern Ireland, one has to look at its history and gain an overview of the opposing cultural and political standpoints that have existed there, side by side, for centuries.

Northern Ireland

A Brief History of Northern Ireland

In the 1600s, the island of Ireland was a troublesome colony of the British Empire. Rebellions among the Irish against British rule were commonplace and a constant drain on Britain’s resources. Ireland’s location on the windward side of Britain meant that a naval attack could be launched there at any time, making it of extreme strategic military importance to Britain. From a British perspective, the situation needed to be contained. The solution the government of the day decided on was the plantation the north east of Ireland[ii].

The plantation (sometimes called “a settlement”) involved tens of thousands of British people being given land in the area now occupied by Northern Ireland. The idea being that, to quote Machiavelli in the Prince, “a prince does not spend much on colonies, for with little or no expense he can send them out and keep them there, and he offends a minority only of the citizens from whom he takes lands and houses to give them to the new inhabitants.”[iii] In the case of Northern Ireland, Machiavelli was plainly wrong.

Over 300 years later at the beginning of the 20^th century, a minority of the Northern Ireland citizens (being Catholic) were still offended. To complicate matters further, the southern part of Ireland had gained its independence in 1921. Relations between the British leaning Protestants and Irish leaning Catholics deteriorated quite significantly in the years thereafter. By the 1960s, discrimination against Catholics culminated in gerrymandering, which in turn led to riots and the Northern Ireland civil rights movement. Sadly and ironically, the quest for civil rights for Catholics marked the beginning of an extended period of violence.

Between 1966 and 1998, two broad ethno-political groups (Protestant Unionists who wished to remain part of the UK and Catholic Republicans who wished to join the Republic of Ireland) embarked on a bloody tit-for-tat battle that would leave 3,600[iv] people dead and divide the two communities more than they had ever been before. As in all such conflicts, innocent people on both sides lost their lives and reasonable people were whittled down in number as the unreasonable became a majority. Treaties, agreements and ceasefires all came and went over the years but the violence dragged on.

Landslide Elections in Great Britain and Ireland

In 1997, landslide victories in the general elections of Great Britain[v] and Ireland[vi] brought Tony Blair and Bertie Ahern to power. Both leaders had made the ongoing crisis in Northern Ireland a priority of their election campaigns and the large majority that each had gave them a mandate to focus more attention on Northern Ireland than otherwise might have been the case. This was particularly true in the case of Blair, whose Labour Party had no presence in Northern Ireland[vii], meaning he had potentially more to lose than to gain in political terms.

In his autobiography, Blair devotes a chapter to the peace process that ensued in Northern Ireland. It is a fascinating insight into what was involved in overcoming the impasse there and the seeming impossibility of the task that confronted them: “A culture had grown up around the dispute. The Unionists didn’t simply have a disagreement with the Nationalists, nor simply a religious difference; they had different music a different way of speaking, a different attitude, a different nature…any theological dispute had long since been subsumed in the tribal one”[viii]

The tribal nature of the dispute also meant that the Unionists couldn’t be seen to be shaking hands with the Nationalists, lest it be seen as some form of pandering to terrorists. In a similar vein, when all-party talks began, negotiations between each side were usually held with them located in separate rooms. Meanwhile, outside negotiations, terrorist factions with links to political parties on both sides were being kept in the loop. The Secretary of State, Mo Mowlam, even made a point of visiting them in prison[ix] to include them in the process - another landmark.

In early April 1998, all parties involved in the process signed what became known as the Good Friday Agreement. It was ratified by elections in May of that year. This meant that the two sides of Northern Ireland, engulfed in tribalism, were beginning a shared government together; no more sitting in separate rooms in different wings of government buildings. It is irresponsible in cases such as this to suggest it was the triumph of hope over adversity; lessons can and should be learned from the Northern Ireland peace process. Broadly speaking, those lessons are the following:

1.      Core principles need to be established between all sides. In the case of Northern Ireland, both sides had irreconcilable differences in their views on whether it should remain in the UK or join the Republic of Ireland. The core principle established in Northern Ireland was the principle of consent – that only fair elections could decide its fate.

2.      Parties to the conflict needs outside assistance from a third party. If you keep doing things as you have always done them, you can expect the same results. A third-party with no agenda can bring a new perspective, new arguments and a new energy to an impasse.

3.      Negotiations need to be relentless. The Northern Ireland peace process was characterized by politicians effectively living in government buildings for days at a time, as details were thrashed out. A lack of urgency in many cases is to risk the lives of more innocent people.

4.      Consideration to details is crucial. This is not as soft an argument as it might appear. Small details in the Northern Ireland process such as the Irish language, army checkpoints and marching parades became bargaining chips[x]. Although at times they may have led to tangents, ultimately, all of them became part of a more holistic final agreement.

5.      There will be dissenters who don’t want to overcome the impasse. Generally, they will do what they can to disrupt negotiations. In the example of Northern Ireland, the largest atrocity came after the Easter Friday Agreement was signed in August 2008. Thankfully, it didn’t derail what had already been set in motion.

6.      The character of political leaders is important. For a political leader, it is not just about finding agreement with the other side, but convincing their own people to buy-in to the agreement. In the case of Northern Ireland, getting traditional hard-liners like Ian Paisley on the Unionist side and Gerry Adams on the Nationalist side to compromise was an extraordinary step, demanding real leadership from both. Likewise, Mo Mowlam taking the unprecedented step of negotiating with terrorist prisoners was a huge moment of leadership.

Conclusion

The most important element in any conflict resolution is a genuine desire on all sides to finish the conflict. No impasse in foreign policy has ever been overcome through peaceful means without this. Unfortunately, getting to a stage where this is desired often comes long after bloodshed and destruction have made people rethink their intransigence in favour of compromise. Northern Ireland’s history is an unfortunate reminder of this.

Lev Tolstoy’s quote that “all happy families are alike; each unhappy family is unhappy in its own way,”[xi] applies very well to foreign policy impasses. The ultimate resolution of Northern Ireland’s conflict is not an exact template for every other of its kind. However, it does provide some useful general lessons that can and should be taken on elsewhere in the world. Most of all, it should send the message that no conflict is so intractable that a resolution can’t be found.

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[i] http://www.bbc.co.uk/history/events/good_friday_agreement

[ii] See: http://www.irishclub.org/Timeline%20for%20the%20Plantation%20of%20Ulster.pdf

[iii] Machiavelli, N., (1513), “The Prince.” Chapter 3: Concerning Mixed Principalities.

[iv] http://www.bbc.co.uk/history/troubles

[v] http://news.bbc.co.uk/onthisday/hi/dates/stories/may/2/newsid_2480000/2480505.stm

[vi] http://electionresources.org/ie/house.php?election=1997

[vii] http://www.labour.org.uk/history_of_the_labour_party

[viii] Blair, T (2010). “The Journey: My Political Life.” ISBN-10: 0307390632. P. 148.

[ix] http://www.theguardian.com/politics/1998/jan/10/devolution.uk

[x] See Blair (2010) Chapter 6.

[xi] Tolstoy, L (1877). “Anna Karenina.” ISBN 9780191500374. Page unknown.