EXCESSIVE AMBITIONS ARE COMPLICATING CRISIS MANAGEMENT EFFORTS

Nezavisimaya Gazeta
Feb 5 2009
Russia

Despite the dwindling reserves and economic recession, the country
is still littering the world with dollars.

The latest reports of Moscow’s extraordinarily generosity towards
its permanent and temporary allies suggest the country is unaware
of the onset of hard times from the economic standpoint and of the
need to reconsider excessive geopolitical ambitions rather than
cultivating them.

The creation of a collective fund of $10 billion within the framework
of the Eurasian Economic Community (EAEC) was announced yesterday. Most
of the money will be contributed by Russia and Kazakhstan during
the first phase. The money will be used to alleviate the effects of
the crisis in five countries belonging to this organization. There
were reports a day earlier that Russia was ready to extend a loan
of tens of billions of roubles to Belarus in exchange for the move
to settlements in Russian roubles. This was in addition to the loan
of $2 billion which had already been approved, with half of the
money already released to Minsk, and in addition to an estimated
$5 billion a year in hidden subsidies. The allocation of an amount
ranging from half a billion dollars to 1 billion to Armenia is also
being negotiated. Raul Castro, the new Cuban leader, left Moscow
a few days ago with a line of credit for $175 million. Meanwhile,
Havana has no plans to pay the debts that have been accumulating
since the Soviet era and now exceed $20 billion.

The apotheosis of this extravagance could be the decision, announced
on Tuesday, to give Kyrgyzstan a loan of $2 billion and $150 million
in nonrefundable aid. For the sake of comparison, the entire budget
of this small mountain country is just over $1.1 billion. In
exchange, President Kurmanbek Bakiyev of Kyrgyzstan promised to
close the American military base in Manas, through which the United
States delivers supplies to its contingent fighting the Taleban and
Al-Qa’idah in Afghanistan. This expensive exchange is dubious from
the economic and geopolitical standpoints. If the Americans and their
allies suddenly leave Afghanistan, Moscow might have to restrain the
radical Islamists in that region again.

Even expenditures of that size on allies might be justified in some way
if it were not for the financial crisis, which has drastically reduced
Russia’s own economic potential. Now this money is needed within
the country. The Ministry of Economic Development and Trade expects
a decrease of 0.2 per cent in the GNP. The country is in danger of
dropping out of the top 10 economies in terms of dollars. The exchange
rate of the rouble to the dollar was more than 1.5 times the present
figure in July, and gold-backed currency reserves have decreased by
more than one-third. The federal budget for this year will be adjusted
in line with an income projection of only 6.5 trillion roubles instead
of the 10,927 trillion in the current budget. The plans for spending
cuts are still unknown, but the projected expenditures in the current
budget amount to 9.024 trillion roubles. The number of unemployed
might also double and exceed 10 million.

Even the United States, with the largest economy in the world,
is tempering its geopolitical ambitions in the atmosphere of
crisis. Barack Obama has announced the reduction of the contingent
in Iraq and is urging Russia to reduce the nuclear potential of our
country by 80 per cent. Moscow, on the other hand, is eager to take
advantage of the crisis to strengthen our position in the world and to
restore and maintain our status as a great power instead of thinking
of ways to solve its own socioeconomic problems. Furthermore, price
is no object. In this sense, Russia is similar in some respects to
the almost penniless Countess de Beauvilliers in Emile Zola’s novel
"Money," who was willing to limit her daily diet to nothing but bread
as long as she did not have to reduce her lavish banquet menu by a
single dish, all for the sake of maintaining her image as a prosperous
aristocrat. The sooner Russia gives up the great-power ambitions that
are so inconsistent with the present state of its economy, the less the
country, its population, and the physical production sector will have
lost when the crisis is over. It would be regrettable if Russia were
to make the same mistake as the USSR, wasting all of its resources on
global confrontation with the West and trying to maintain its status
as the world’s second superpower at any cost, to the point of the
complete collapse of the economy and the disintegration of the country.