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THE EURASIAN IDEA : WHERE THE EAGLE LOOKS

This paper was initially published on www.shapingtomorrow.com, reprinted on the David Johnson List and an abridged and update version in French published in Le Temps of November 10, 2006

Introduction

We do not have the riduculous pretense of writing future history but have simply imagined a wild card scenario.

We have proceeded by identifying major variables which we believe affect Russian policy thinking and we have tried to forecast a scenario for their development and impact on the international scene.

Our central argument is that a viable alternative to a monopolar world is the creation of a Eurasian political entity that would act as a counterweight to the United States of America. In developing the scenario we have taken the entirely hypothetical premise, that Russia would lead such a movement.

A Eurasian axis would hurt the US in its efforts to complete a globalization process with a neo-conservative vision of a world without any state control of the economic levers.

The Russian viewpoint

While it is true that a globalized world needs strong leadership, the advantages of having this role carried out by the United States, at least with its present ideology, is being put into question by very diverse states, including Russia.

The end of the cold war seemed to have signaled the end of the competition between the Soviet Union and the United States. Russia has seemed to be searching for its place on the international scene in a context in whihc the US is practicing quasi-imperialism by asking countries to open their borders to trade and accept American democratic principles, whatever the local context, without hesitating to resort to force if there is resistance. Further, NATO has been expanding eastwards, in the post-Soviet space, and this is also perceived as a threat. There is also a percieption, in Russia, that Slavic and Western ideas are diametrically opposed. In short, the idea of a monopolar world led by the United States has proven difficult to accept for the Russian political elite.

Russians are somewhat confused about the values the US puts forward claiming to be a defender of freedom. Indeed, the invasion of Iraq, the tortures at Abu Ghraib and the defiance of law at Guantanamo have cast a heavy shadow on the image of the US in the minds of Russians. Concepts such as 'humanitarian intervention', which lead to the Kosovo action, are not easily apprehended in Moscow.

Russia is one of the world's, if not the world's, most important supplier of weapons, and it sees this role threatened by the expansion of NATO and by US moves to thwart sales to what it considers to be rogue countries, such as Iran.

Russia knows how to use arms sales as an annoying factor for the US, such as the sales of weapons to Venezuela in spite of the US' request to reconsider the matter. Mr Chavez has let it be known that his prime objective is to defend his oil reserves against a possible US invasion.

This has led the US, in August 2006, to impose sanctions on Russia although the official reason for the US to take this decision was arms sales to Iran by Rosoboronexport and Sukhoi.

Just as the COMECON was NATO's counterpart, Russia could use the Shanghai Cooperation Organization to create a new military counterweight. It would regroup certain military heavyweights such as Russia, of course, but also China, Iran and perhaps even India.

Even the recent rapprochement between India and the US could be reversed as India increasingly seeks energy partnerships and the new demographic redistribution in the country, in favor of Muslim minorities, could lead it to ally itself with both China and Russia to form a common block against Islamic terrorism.

Last, but certainly not least is the belief of the Russian government that the country can once again achieve a superpower status. What it is apparently not certain of is how to achieve this and therefore it is attempting to keep as many options open as possible.

Like many people, Russians believe they are rather unique in the mission that they have been given in world history. However, this belief, with its nationalistic edge, is to a large extent similar to the belief Americans have of their own role in the world, and is also incompatible with the creation of a supra-national Eurasian ensemble.

Russia is still the world's second largest nuclear power and it has recently reinforced this position by the development and deployment of the sub-marine based Bulava missile and the surface-launched Topol-M. Nevertheless, it is lagging far behind the US in its ability to wage non-contact wars and more generally in 'smart' weapons. The consequence might well be the loss of major export markets for weapons. This would translate not only in lost revenue, but also in declining influence in countries that are attempting to raise themselves to the status of regional powers.

Its geography, not only as the world's largest country, but also its position, profiles it as an unavoidable actor. It borders the EU, China, Turkey and is only a stone-throw away from Iran. Its northern sea shelf lines the Arctic with its tremendous potential in hydrocarbons. Russia's potential as a player in exploiting its own Pacific coast and the related expansion possibilities has until now been mostly ignored but could offer another area of challenge to the US. One quarter of the world's population live in countries bordering Russia. A good many of these countries can no doubt be turned into useful allies if not on a grand project, at least for short term tactical purposes and then be abandoned.

It can play, at will, on several levels : as a nation sharing many of the characteristics of European history and culture, but also as a nation sharing the Asian continent with China and Japan. After all 14 of the 17 million hectares of Russia's surface are in Asia and it is precisely in those lands that the country's riches are located. The country increasingly trades with Asia and the economic growth forecasted for the continent mean that it is from trade with that area that economic growth will result.

It is therefore normal that Russia's double headed eagle looks both left and right, and this ability to have a dual vision is an element that requires careful consideration. Let us not forget that the eagle has a single body, but two heads and therefore can process the information its eyes collect in a totally different manner.

Russia's energy weapon

Russia is an energy giant resting on clay feet. Its strength is dependent on the availability of Western technology, the resistance of a decaying infrastructure and the willingness of its Central Asian neighbors to provide it with cheap energy.

Western technology is required not only for techniques allowing a better recovery rate from existing wells but also to develop fields in the Arctic which, the Russian government considers to be the future wealth of the country. Considerable funds - of the order of $ 250 billion - will be required in the next 15 years to sustain and expand energy production. The preferred origin of the funds until now has been Initial Public Offereings on foreign stock exchanges, particularly London.

The fact that Kazakhstan and Turkmenistan supply massive quantities of gas at low prices to Russia enable the latter to supply its domestic market at below-market prices and export, at world prices, its own production.

Should all Central Asian countries renegotiate their pricing agreements with Russia, the entire Russian economy would risk collapse. This explains why the Unitd States is becoming very interested in the arwa and is encouraging the building of pipelines that would export through alternative routes.

Putin's proposal, in August 2006, to create a customs alliance with the former Soviet states is a step in the direction of creating a counterweight to the economic integration of the West with an economic integration between Russia and Central Asia that, if successful, could be expanded further East.

Russia wants the west to open itself to investments, by Russian corporations, in the energy infrastructure. Should the ruble become a reserve currency, the costs of these investments would be perceived differently by Moscow as they would be made with money printed by none else than the Russian Central Bank.

The West is divided on the issue of Russian investments, except perhaps on the fundamental condition of reciprocity - i.e. that Russia should allow foreign corporations to invest in energy and mining projects. Recent restrictions placed by the Russian government make this unlikely.

The fact that Russia will not have access to the most recent oil extraction technology is not necessarily a major handicap for Russia as it may assist the country in maintaining high oil prices by limiting supply. Russia may actually be able to acquire this technology through oil service companies rather than through the oil majors.

It is of importance to the government to avoid low prices, not only because it would be a hindrance to its geopolitical plans, but also because it would reduce government spending and thus thwart economic growth. This in turn would mean facing strong domestic political and perhaps even social pressure.

The government may also finally encourage investments in other sectors to reduce the dependence on energy.

Russia is not rich only in hydrocarbons, but also in much needed metals, in particular nickel, palladium, platinum and titanium.

Russia's educational infrastructure and past technological achievements should allow it to develop into a major player through the development of non-military technology. For a variety of reasons, this route is not the one presently encouraged by the government in spite of the fact that it would allow Russia to diversify its sources of revenue and not be almost solely dependent on oil and gas revenues.

Russia and the EU

The EU is, by far, Russia's most important trading partner, representing one third of imports and exports, with a very large surplus in favor of Russia. It has, nevertheless, been dragging its feet, to say the least, in developing a closer relationship with Russia. The very size, in terms of the number of member-countries, and the complexity of decision-making in the community structure, is unlikely to allow the EU  a change of policy any time soon.

Europe is highly dependent on Russia for gas, is uneasy about this dependence, even though it is a shared dependence as the supplies flow through a pipeline and these infrastructures are not easily diverted. In turn, the EU is Russia's biggest trading partner, both with regards to exports and imports. Also, Russia neds western technology, whether to update its present production or to undertake major projects in the Arctic. There is therefore, undoubtedly, a situation of cross-dependence that has not been sufficiently exploited.

If the EU does not see Russia integrating Europe, it nevertheless shares a number of common points of view. Perhaps the most important one concerns the US and its propensity to engage rapidly in military action. Iran and North Korea are the latest worry points.

However, just as it is dependent on Russia for gas, the EU is dependent on the US nuclear umbrella for its security.

The EU maintains a fear of Russia that verges on the irrational as Europe's politicians have grown in the paradigm of an aggressive communist Soviet Union which they equate with today's nationalistic politices in Russia.

More importantly, the EU does not have an international policy and disagreement among the member countries was all too obvious in their stance towards the war in Iraq going from condemnation to sending troops.

Russia, in turn, is uncertain about how it should view the EU - it is not a homogeneous block by any means, and there has been particular disagreement on the attitude of the member countries towards key events such as the Iraqi war.

One can therefore conclude that, at least as the situation stands today, the possibility of Russia and the EU eventually integrating as a counterbalance of US power seems, to say the least, remote.

Turkey

Turkey plays a key geopolitical role essentially because of its central position in the middle of major energy producers and at the edge of the world's most turbulent area.

The country is becoming a hub for energy pipelines. In July 2006, BP inaugurated a new peipeline bringing, to the Mediterranean, oil from the Caucasus. While it reduces dependence on Iran and Russia, it crosses Azerbaijan and Georgia, the latter being itself caught up in a local war. This pipeline will carry 5% of the world's oil.

Yet, Turkey itself is highly dependent on Russian gas, while trying to diversify its supplies through a link with Azerbaijan and Iran. Further, Russia itself would like to build a pipeline crossing Turkey and carrying gas to Greece, Italy and Israel. It is precisely against this last project that the US, through the voice of Condoleezza Rice, raised objections.

The US' overt backing of the entry of Turkey in the EU is largely based on the hope that Turkey will then attract in its pro-western wake the Central Asian Republics, with which it has a common history and culture.

Nevertheless, relations between Turkey and the US may well prove complicated. Although a NATO member, Turkey has behaved, and continues to behave, in a less-than-friendly manner. It first refused to allow safe passage to US troops to attack Iraq from the North and is now massing its army along the Iraqi border, and according to some sources is even allowing its troops to occasionally cross it, in the fear that an influential Kurdistan (the US' strongest ally in Iraq) may well arm, or at least encourage, their brothers on the Turkish side of the border to demand more freedom from the central government.

The Arab countries of the Middle East

It must be remembered that although the world's largest corporations are oil companies such as Exxon and Shell, their hydrocarbon reserves owned by them pale in front of those owned by partly - or wholly-owned state corporations such as Gazprom. Indeed, the NOCs - National Oil Companies - own 90% of the world's reserves, even if they only account for 50% of total production. Further, it is in countries in which the hydrocarbons are owned by NOCs that new discoveries are likely to be made.

This has meant, in practice, fewer investments in infrastructure, and a reduced productivity.

Russia and Saudi Arabia are, to a certain extent, rivals.

Contrary to the Saudis, the Russians can ship both gas and oil, while the Middle Eastern kingdom is limited to oil. In fact, while the Saudis are vaunted by media as owning the world's largest oil reserves, Russia has the world's largest hydrocarbon reserves.

Another important difference is that Russia does not need the US' protection, while the Saudi rulers are increasingly reliant on American protection from Iran and the Wahabists. Iran, as we have seen, has increasingly strong ties to Russia.

It is US warships that protect safety of passage of the oil tankers in the Hormuz waterway, while no such protection is necessary for the pipeline system Russia has and is extending.

While OPEC members are paid in US dollars, Russia is expected to move towards a payment model of a basket of currencies that will include the now convertible ruble and with an increasingly large role for the Euro.

Any rapprochement between Russia and Saudi Arabia is therefore unlikely.

Iran

The country wants to induce a momentous shift - to displace thinking away from the concept of an Arab world to that of a Moslem world which Iran would lead.

Its oil reserves are the world's second largest. Its production, however, has been steadily declining due to a lack of investments in its mostly old oilfields. This will create a major problem as the economy is largely oil-driven, state-owned and subsidized, in particular the domestic price of energy. In the same manner, the economy, and therefore political stability, is highly dependent on export oil prices.

It has been specualted that the present nuclear crisis is partly fuelled by concerns to keep oil prices high. Several leading Iranian politicians have threatened to disrupt the Hormuz Straits passage, which is the world's main oil route not only for Iranian oil but also from the other Gulf countries.

India

India, Japan and the US see their relationship as essential in limiting China's influence in Asia and a possible radicalization of Paksitan, should the Musharraf government be removed, possibly forcibly. This very concern creates a distance between Delhi and Moscow in view of Russia's export of weapons to China.

India's need for energy is expected to be multiplied by four by 2030 and the bulk of this increased demand is expected to come from transportation, and therefore oil cannont, in that sector, be replaced by nuclear energy or more coal-fired plants.

The recent closeness between India and the US could be reversed as India increasingly seeks energy partnerships. The new demographic redistribution in the country, in favor of Muslim minorities, could lead it to ally itself with both China and Russia to form a common block against Islamic terrorism.

Central Asia

 Countries of that area are ruled by highly authoritarian and corrupt regimes and this may lead to considerable instability. They may also be beset by religious and ethnic fighting and are fearful of Islamic fundamentalism. They rely on their protection from such movements on the Shanghai agreement, which essentially means on China and Russia as both these countries are fearful of an extension of radical Islam inside their own borders.

Russia has a series of bilateral agreements with the member states that makes them, to a large extent, dependent on the Kremlin's policy.

China

The interdependence between China and the US is obvious when one considers that Chinese exports to the US enable the Chinese government to have an extremely positive trade balance, the product of which is essentially used to purchase US government paper. The proceeds of these sales are then used by the US government to, at least partly, fund wars abroad.

The US budgetary deficit is not likely to be reduced considering expected rise in health care spending, if only due to the aging of the population.

Should the huge disparities between the poorest classes and the new rich in China widen further, the Chinese government might have no other recourse than to prime the economy through massive spending. To do so, it will need to repatriate a substantial part of the dollars it has invested in US government paper.

Alernatively, part of the substantial monetary reserves of the country can be used to invest in the acquisition of foreign corporations thus increasing the international presence and clout of the country. It is not impossible that Chinese firms may, in turn, outsource some of their own activities to other countries, particularly in South East Asia where the economy is, at least to some extent, in the hands of overseas Chinese.

China's relations with Russia are ambiguous.

China is a major arms client for Russia, both are competing for foreign direct investment, Russia is weary of possible expansion plans into Siberia, all this thinged, on the Russian side with a layer of paranoia and civilizational hatred rooted in history. Indeed, the Mongols ivnaded and occupied Russia in the 13th century.

No doubt the greatest common factor between the two countries is their rivalry with the United States for a major international political role.

Is the Eurasia concept realistic ?

The answer, strangely enough, depends on the US.

The US economy is driven by a weak currency, low real interest rates and an abnormally high budget deficit. Indeed, the country is the world's biggest debtor nation with the largest trade and fiscal deficitis. The US debt absorbs 80% of world savings.

The ability to sustain this system is key to the US domination of world trade and, consequently, of the globalization process.

Under the present US administration, the point of view in Washington is that it is right for the US to dominate the world and to dictate who should, or should not, have access to nuclear fuel - yes for India, no for Pakistan or Iran. This apparent irrationality appars to breed fear in the state that are not 'authorized' by the US to develop nuclear enrichment and this fear, in turn, pushes tehm precisely down the road the US administration want to bar.

As the need for energy increases, with the economic rise of China and India (and a few other developing countries), and the reserves of fossil fuel either dwindle or are controlled in profit-maximization schemes, nuclear energy increasingly appears as the energy of choice. Thus, it will become increasingly difficult, if not impossible, to prevent countries to start enrichment programs.

The countries in the Eurasian area are very heterogeneous in a variety of ways and any move to create some form of common area would require a major effort both financially and politically.

Moves along the line of solidifying the CIS might prove difficult but may be a step in that direction.

The creation, in 2001, of the Eurasian Economic Community, including Belarus, Kyrgyzstan, Kazakhstan, Russia, Tajikistan and Uzbekistan is a step in that direction.

From this beginning to a Eurasian integration, however, the road is long, windy and difficult.

A major change in the policy of the US administration, driven by the forthcoming election results, may even make it redundant.