At Large

Russia, Inc.

With Putin it's not personal, just business.

By 8.30.07

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No one ever said that Vladimir Putin wasn't smart. No one ever said he wasn't a quick study. No one ever said he lacked management skills. It's just that no one envisaged him as a business mogul. But that is exactly the latest operative psychology behind his and Russia's swaggering.

For Putin, the little boy from Leningrad who has always striven for respect, the time has arrived for him to demonstrate what a really big man he is. And it's all possible because of the oil and gas revenue of Russia.

In spite of Putin's macho pretense, he knows he cannot challenge the United States militarily. But he does know that through Russia's newly created wealth he has the political economic leverage to stand up to the West.

Russia's energy lifeline to Europe is a powerful instrument of coercion, even if only by the potential of its being cut off. In the same way the rather Hollywood bravura -- like placing the Russian national flag on the seabed of the oil and gas rich Arctic -- is the same as the announcement of a hostile takeover bid challenging existing claims of the other stockholders: Canada, the USA, Denmark, and Norway.

Putin has found that being flamboyant in his actions -- such as insisting Russia had to alter its existing missile targeting -- was a preferred method of negotiation on American plans for an anti-Iran missile defense proposed for placement in Poland and the Czech Republic. This is not a strategic challenge; it's a businessman's ploy to scare off a perceived rival from setting up shop in "his" territory.

In hard terms of military planning, threatening the Baltic States with missile targeting hardly adds anything new to the strategic equation. It does make good home office copy, though. Similarly, the announcement of the resumption of long-range reconnaissance by 14 Soviet era strategic bombers hardly brings a tremble to the U.S. Strategic Air Command. Nor the does the announcement that Russian Navy vessels may once again show their flag in the Mediterranean really bother the vastly superior NATO Southern Command.

All this followed Putin's personally announced intention to place a moratorium on the Cold War period's arms control accord, the Conventional Forces in Europe Treaty. An experienced observer of international affairs would have to yawn a loud ho-hum at these tough guy poses.

The big stick that Putin has to back up his relatively empty military strutting is the increasingly muscular Russian financial and business weaponry. Russia had an oil income of $170 billion in 2006 and substantially more is projected for '07, while having already built up an oil stabilization fund of $160 billion.

Meanwhile, Russian muscle flexing has resulted in cuts to oil supplies to Germany of about one third in July and August -- without explanation. The Germans can replace the oil, but the unilateral breaking of the Russian contracts certainly raises concerns over Russian energy reliability. This whipsawing of their customers is a tactic that usually precedes a demand to alter existing agreements to the supplier's (Russia's) advantage.

On the financial front Moscow shocked the International Monetary Fund (IMF) by attacking the former French finance minister who had been signaled as the next head of the fund. As a play to the smaller and emerging economies, the Russians put forward the ex-prime minister of the Czech Republic to take the job. By throwing a wrench into the nearly already settled matter of the next IMF managing director, Moscow has announced that it intends to use all of its newly gained status in the international economic community to exercise its political will.

At the same time it is emphasizing its role as a nation of "free enterprise," the Russian government is tightening control over the country's extractive industry sector (oil, gas, minerals) by playing off the private interests so as to place the resulting structure under greater government influence. Damned clever! They'll get back their central control one way or another, and Putin's "inside traders" will have the advantage.

Putin has become very full of himself and the rest of his government reflects this self-infatuation. It is what is known in less technical terms as "big shot-itis." It's a malady that affects sports stars, labor leaders, business tycoons and certain politicians, among others.

All in all, the Russians' latest chest thumping is a clever way to exert influence beyond their actual national strength. The important thing to remember is that these are just the first stages of the Kremlin's attempt to use economic wheeling and dealing as a political lever. Rebuilding its military is not far behind.

So keep your eye on little old "Putkin" for the next several years -- whether in or out of office. That middle-aged guy of diminutive stature stripped to the waist in his flexed photo op isn't just fishing for trout. He's chairman of the board and CEO for life, and he'll be around running Russia, Inc. for a very long while.

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About the Author
George H. Wittman writes a weekly column on international affairs for The American Spectator online. He was the founding chairman of the National Institute for Public Policy.