RUSSIA

1. RUSSIA Where does it belong? How does it relate to the USA?

2. Some Basic Facts First And half in Asia • The Russian Federation, which came out of the much larger USSR that had collapsed in 1991, is immense. It is half in Europe It is roughly twice the size of the USA The border is the Ural Mountains

3. Relative Population Size: • USA: 295,797,168 • China: 1,200,000,000Russia: 143,782,338 • Birth rate 9.63 births/1,000 population (2004 est.) • Death rate:15.17 deaths/1,000 population (2004 est.) • Growth Rate of Population: -0.45% (2004 est.)

4. How is it Doing? • Russia ended 2003 with its fifth straight year of growth, averaging 6.5% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are important drivers of this economic rebound, since 2000 investment and consumer-driven demand have played a noticeably increasing role. Real fixed capital investments have averaged gains greater than 10% over the last four years and real personal incomes have averaged increases over 12%. Russia has also improved its international financial position since the 1998 financial crisis, with its foreign debt declining from 90% of GDP to around 28%

5. But…on the other hand • Nevertheless, serious problems persist. Oil, natural gas, metals, and timber account for more than 80% of exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing base is dilapidated and must be replaced or modernized if the country is to achieve broad-based economic growth. Other problems include a weak banking system, a poor business climate that discourages both domestic and foreign investors, corruption, local and regional government intervention in the courts, and widespread lack of trust in institutions.

6. Russia is a Patchwork of Nations

7. Early History • Russia spent much of its time expanding into Siberia, Central Asia, the Caucasus etc., to build a huge land empire. • It was engaged in competition with the Mongols, Tatars and other Eastern people, and did not look to the West • Though it did have its own form of Christianity, it used a different alphabet.

8. One Russian Leader tried to Change That • Peter the Great: 1672-1725 • Single-handedly tried to turn Russia into a modern state: • Built a totally new capital at Saint Petersburg; his “window on the West.” • Built a Russian Navy • Created a science museum and created a new breed of Tsar.

9. However… • Russia missed out on most of the formative developments of the next two hundred years. • It remained an autocracy with total power residing in the Tsar right up to the last Tsar, Nicholas II.

10. It missed… You could say, what’s so different between this picture and pioneers of the Old West. The difference is that the pioneers expected things to change and get better—these folks did not. • The Enlightenment—where science and rationalism replaced antiquated social orders that restricted change. • The Reformation of Western Christianity • The Rise of Democracy and Social Justice. • It was semi-Feudal into the 1860s

11. It couldn’t last • The First World War was a total disaster for Russia against the modern might of Germany. • This brought down the Tsar, but instead of democracy—given there was almost no middle class to support it—the reins of power were seized by the equally autocratic Communists (Bolsheviks).

12. Clash with America • Communism requires that the State owns and controls all property, the means of production, and of distribution. • This is the polar opposite of American free-wheeling capitalism, and so these ideologies were totally opposed. • Under Communism, there is no place for opposition, therefore no democracy.

13. America’s Concern • Communism had an “International Mission” which was to fight Capitalism and create “Workers’ States” all over the world. • So, the US saw Communist (Russian) influence behind much of the unrest during the Depression

14. The Cold War • After the defeat of Nazi Germany in the Second World War, the Soviet Union (of which Russia was now a part), expanded dramatically, making the threat of world revolution look real.

15. The Great Standoff • The approach of the US was to stop this expansion dead in its tracks, which became known as the Policy of Containment. • Once China became Communist in 1949, they too had to be contained, hence the Korean War, and later, the Viet Nam War.

16. The Collapse of the USSR • Russia went through a “liberalizing” phase after 1985, partly because the economy was in such a mess. • Party Secretary Gorbachev gave the Soviets freedom of speech, but not much else, and the economy continued to slide into collapse.

17. The Collapse • President Reagan managed to convince the Soviets that he was going to develop a space-based missile defense system, called “Star Wars,” that would make the USA invulnerable to Soviet missiles. This was a catastrophe for the Soviets. • They did not have the money to retool their military, which was taking 60% of the budget. • Interesting sideline—”Star Wars” never existed, but President Reagan was an excellent actor.

18. The End of the USSR • In 1991, the USSR—the world’s biggest country (area), simply disappeared. • Fifteen new countries appeared around its edge, that had been part of Russia and then the USSR for generations. • This left Russia as a separate country. • It accepted democracy and the open market, though we are not entirely there yet.

19. PART II: US AND NEW RUSSIA

20. What should we do now? • TRADE: It is true that we do very little trade with Russia now Please note: Russia does not even show up!

21. The Pattern of Trade, 2004in 000 dollars This is the sort of Trade pattern the US has with Third World Countries • $2,958.600 Exports to Russia • $11,847.200 Imports from Russia • -8,888.6 Negative US Balance • Our exports are what they were in 1992 • Our imports have gone up nearly seven times what they were then. • What do we import? Oil and raw materials

22. Here is one Possibility.

23. Some Geography • This is how we are used to seeing the world. Russia USA

24. But, it can also look like this Russian Oil

25. Our main supply area is unstable; largely anti-American. Unwise for such a vital commodity Which would replace this But, notice we import next to nothing from Russia Note where most of the US imports originate

26. Possible Scenario • US pays to have the pipelines reoriented to run east, instead of west, which makes Russian oil too expensive for us now. • Brings new life to the Russian Far East, which is falling more and more under the influence of China and Korea—and could decide to break away. Russian Far East Seven days to Moscow by train Russia's main Pacific Port China

27. Why a link with Russia? • We would invest the much-needed capital into the Russian oil industry • We could sign long-term supply agreement to assure a portion of our needs • Gets us out of heavy dependence on unstable or hostile places: Iraq, Saudi Arabia, Iran, Nigeria and Venezuela. • Builds up Russia’s Far East countering Chinese influence.

28. U S Navy visits Russian Far East Port Why not a link with Russia? • How secure is the Russian Far East? What if it breaks away? • Puts strategic export port too close to China? • How stable is Russia? China N. Korea