Russia's economic reward

Russia's support for the US was what both presidents needed

By Alexander Koliandre BBC News Online Russian Service

Strike the iron while it is hot. Russia's president Vladimir Putin has proved that he knew how to do it.

The events of 11 September have given him a unique chance to portray Russia as reliable partner of the West - and gain economic support as a result.

In a striking contrast to his predecessor, the old spymaster Evgeniy Primakov, who had cancelled his trip to Washington at midair on hearing the news that NATO was bombing Yugoslavia, Mr. Putin decided to join the joining the US-led war against terror.

Thinking the unthinkable

The president then over-ruled his old school generals and diplomats and allowed the US to establish military bases in the Central Asian republics, normally regarded by Moscow as its rear garden.

He even promised to give the Americans all Russian intelligence information related to Afghanistan.

The energy dialogue resulted in the first ever direct shipment of Russian oil to the US

As part of his honeymoon with Washington, Mr. Putin also signed the first arms-control treaty in a decade and abandoned his opposition to the US renunciation of the Anti-Ballistic Missile treaty.

In the past year, Russia's opposition to NATO and EU enlargement has also all but vanished.

Although opposed by the foreign policy establishment, the new business elite with strong global ambitions has vocally supported these moves.

Hefty rewards

They say that Mr. Putin simply accepted the inevitable, and in return Russia will get much needed economic benefits.

During the past year Russia was formally admitted to the G7 club of the wealthiest nations, with the prospect of a world summit in Moscow.

The country has been given (by both the US and EU) the status of a market economy, enabling Russia's companies to export to West without being subject of painful anti-dumping tariffs.

And the strategic goal to gaining full membership of the World Trade Organisation is now much closer.

Oil companies are also expecting huge benefits from the recently signed energy cooperation protocol with the US.

Much needed support

Russia hopes to join WTO and not to limit its export to energy only

Washington has even promised to encourage Americans to invest in Russia's stock market, still soaring but threatened as the influx of reinvestments from offshore banks on Cyprus and Channel Islands slows down.

Although Russia's economy, boosted by high oil prices and political stability, has been booming for the past three years, a huge debt repayment problem is looming. In 2003 the country has to pay some $17bn to its Western creditors.

In the new spirit of political cooperation and amity with the West, new credits or even debt restructuring is no longer unthinkable.

Top priority

They were friends once

Russia still suffers from enormous and ineffective bureaucracy.

Its energy and banking sectors need to be reformed, and social and pension programmes will need radical changes as population shrinks.

Crumbling infrastructure, increasing health problems and striking inequality make the picture more sombre.

But there are dangers in the Western approach. By giving Russia politically motivated economic benefits, like granting a market economy status before all the necessary reforms were even started, or hinting that the WTO rules might be bent to make Russia's admittance faster, the US might weaken its leverage to enforce change should Moscow's zeal for modernisation evaporate.

For now the President and the majority of his voters are happy to get any kind of politically motivated economic credit they can muster.

Mr. Putin has said that the prosperity of the Russians as his top priority , and few regret his giving away some musty Imperial ambitions if it makes them better off.

Although opinion polls suggest almost three quarters of the Russians distrust America, those who can afford it buy imported goods, spend holidays in Europe and desire the country to be more "civilised", freer and prosperous.

Mr. Mr Putin's alliance with the US after 11 September looks both profitable and stable.

But one should not forget that in the past 15 years anti-Western sentiments in Russia have increased each time the economy faltered.

This happened in the early 1990s when Mikhail Gorbachev and then Boris Yeltsin's reforms failed to deliver instant prosperity, and again in 1998 when a devastating financial crisis wiped out the first fruits of the painful market transition.

Neither a powerful President nor the rich West can guarantee that Russia will continue to prosper.