The roots of Russia's hostility
Commentator Marshall Goldman
TEXT OF COMMENTARY
Kai Ryssdal: The Russian ruble enjoyed its best performance in seven years today. To be expected, perhaps, after Russian President Dmitry Medvedev ordered an end to the war in Georgia. Commentator and economist Marshall Goldman says the international response to the Russian assault on its neighbor says a lot about the region's economic realities.
Marshall Goldman: Playing chess against a Russian takes skill. The mess in Georgia is a good example. The Russians outplayed us.
Initially it looked like an easy win. When the USSR disintegrated Georgia sought to keep as wide a space as possible between it and Russia. The Georgians worked hard and generated growth rates as high as 12 percent a year. While not perfect, their democracy was a vast improvement over what had existed previously.
Russia was so weak, it couldn't rein in the various republics. And after its August 1998 stock market and economic crash, Russia was effectively bankrupt.
But a year later, Vladimir Putin led Russia to a recovery. Lucky for him, his appointment coincided with increases in world oil prices. These higher prices led Russian oil companies to increase production, and Russia became the world's largest producer of oil and natural gas.
Russia quickly paid off its debt and with its natural gas exports, it found itself with an important strategic weapon. Today, the Germans are dependant on Russia for 43 percent of their gas imports. If the Russians cut off that flow, there is no ready substitute. No wonder European leaders are unwilling to challenge Russia -- they can't afford to.
Russia's hostility has other roots, too. Their efforts to encourage South Ossetia and Abkhazia to secede from Georgia was a way of punishing Georgia for seeking NATO membership. The Russians were also angry because Georgia allowed Western companies to build pipelines connecting producers in central Asia with consumers in Europe. This undercuts Russia's monopoly and its ability to buy gas cheaply in central Asia and sell it at high prices in Europe.
Russia doesn't seem to care if the rest of world treats it as a bully. Now that its economy has recovered and it has powerful oil and gas weapons to use against those who oppose it, Russia knows that it has a strong hand -- and now it knows we know.
Ryssdal: Marshall Goldman is the author most recently of "Petrostate: Putin, Power, and the New Russia." He's a professor emeritus of economics at Wellesley College.