Call: The recession won’t moderate Russia’s foreign policy

In recent years, explanations of Moscow’s increasingly assertive foreign policy have tended, in one way or another, to take the following form: Russia has more clout because Russia has more cash.

As soaring oil prices boosted the leverage of Russia’s state-controlled energy companies and filled the Kremlin’s coffers, Moscow consolidated power at home and was emboldened to stake its claims abroad in a hard-nosed, and sometimes bare-knuckled, way. There is a good deal of truth to this line of reasoning — paying off its sovereign debts to the world and amassing lots of dollars to throw around certainly gave Russia the independence, the confidence, and the means to cut a dramatically more imposing figure on the world stage.

Yet as the country sinks deeper into an economic crisis initially brought on by the world’s financial woes, but exacerbated by glaring structural flaws in Russia’s economy, this line of reasoning suggests an important question: If Russia’s current foreign policy was formed largely on the basis of rapid economic growth, will the collapse of that growth deform, chasten, or reverse Russia’s recent foreign policy?

Probably nyet.

Russia’s leaders certainly have a bit less cause for “petro-arrogant” swagger these days. But the Kremlin’s core foreign-policy objectives — finding diplomatic pressure points that make Russia a more indispensable global player, and consolidating political and economic influence over its neighbors — don’t, in fact, require all that much cash.

On the first point, casting a veto at the United Nations or trying to play a crafty mediating role with Iran doesn’t require a fat wallet. Those things merely require a veto at the UN Security Council and a relationship with Iran, neither of which is in peril because of the economic crisis. Dealing with Syria, Iran, Venezuela or Cuba in ways that tweak Washington’s nose and give Russia some bargaining leverage with the United States on other strategic issues — such as missile defense or NATO expansion — also does not hinge on the dynamics of the financial crisis. These policies will continue.

Concerning the former Soviet sphere, there is consensus among Russia’s elite that further NATO expansion into the region is a red-line issue on which the Kremlin simply will not budge, no matter what Russia’s finances look like. And in some ways, the financial crisis is actually expanding opportunities for Russia among the debt-ridden states in Russia’s “near abroad.” While Russia has been financially weakened by the crisis, it is still a powerhouse compared to neighboring countries. With international donors otherwise preoccupied, Russia has loosened the purse-strings to bail out governments and purchase distressed assets in what President Medvedev has called Russia’s “traditional sphere of interest.”

The Kremlin has already announced $2 billion loans to Kyrgyzstan and Belarus, a $3 billion contribution to Kazakhstan’s sovereign wealth fund, and plans to establish a $10 billion regional bailout fund for post-Soviet states. And as Ukraine’s internal political volatility continues to hamstring international lending there, Russia is poised to extend a similar amount to Kiev. While this is serious money at a time when Russia is facing financial constraints at home, the relative cost to Russia of gaining political and economic concessions from its neighbors — whether by gaining preferential access for Russian companies and troops, or weakening regional ties with NATO and the United States — is still a bargain for the Kremlin.

The global expansion of Russian state-owned and state-friendly companies, an important part of Russia’s foreign policy, will suffer because of lack of financing. But on the more important goal of maximizing control over regional energy transport routes to Europe, the crisis will have little net effect. The global credit drought will probably delay plans for new Russian-controlled pipelines to Northern and Southern Europe, but by the same token, competing non-Russian pipeline projects are financially frozen as well. The status quo, in which Russia dominates the lucrative European market and can use gas supplies for political leverage in transit countries, suits Moscow well enough for the time being.

There are, of course, two caveats to all this.

First, the continuation of Russia’s current foreign policy — much like its domestic policy — depends on maintaining the prevailing balance between hardliners and relative liberals within Russia’s elite. There is a danger that a prolonged economic crisis in Russia could lead to an ouster of more liberal figures in Moscow, and the more marked ascent of the so-called “siloviki” hardliners. If that happens, Russia’s foreign policy — which, despite rhetorical cantankerousness, has been largely pragmatic, if frustrating, to U.S. and Western interests — might lurch in a markedly more aggressive and unpredictable direction.

Second, if the economic crisis pushes Russia to the point of complete reserves depletion or catastrophic economic collapse (still very unlikely but possible if the crisis extends deep into 2010 and beyond), Russia’s freedom of maneuver on foreign policy would be more significantly constrained. It would be difficult to seek international political clout while also seeking international financial support.

But barring that scenario, Moscow will continue to prioritize its core political and economic goals over relationships with foreign investors and governments. Time and again — whether with Yukos, Shell, and Mechel, or Ukraine, Georgia, and Kyrgyzstan — Russia’s leaders have shown this inclination. The financial crisis won’t change it.

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