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RUSSIA INDIA REPORT 05
The new resource for investment professionals covering Russia and CIS
www.kremlin.ru/eng/
IN ASSOCIATION WITH ROSSIYSKAYA GAZETA Russia & the World
President of Russia official website
THE ECONOMIC TIMES SATURDAY, JULY 5, 2008
http://en.rian.ru
News from Russia and the world
Foreign relations Russian expert assesses the role of the U.S. in the
complicated inter-state relations in the Asian-Pacific Region
India-China-USA:
A new conundrum
of global politics
The transfer of centres of pressure on Beijing, as ac- tween Delhi and Moscow. dian Navy to both achieve the
economic growth from the cording to certain forecasts, However, Indian military ex- “undoubted regional suprema-
North-Atlantic space to the latter would obediently perts are still in doubt as to cy” and to have “an efficient
the Asian and Pacific accept both the new geopolit- the capabilities of F-16 Falcon projection of the military
region (APR) resulted in a ical role of India and the role and F-18 Super Hornet planes, might” in the region spreading
raised attention of of the United States as a regarding them as “the de- from the Persian Gulf to Sin-
political analysts towards supreme arbiter in China-In- parting nature” in the condi- gapore.
the positioning of political dia relations. On the other, tions of the present-day air However, the U.S.-Indian
forces underway in the Washington is merciful combat. Nevertheless, Ameri- relations are developing along
APR, first and foremost, in enough to allow China, one of cans push purposefully on a rather complex trajectory
the virtual “triangle” of the chief creditors of the other directions of the mili- depending on both the dy-
India, China and the United American economy, to play a tary and technical coopera- namics of interaction of In-
States. marginal part in global affairs, tion with India. The media dia’s socio-political forces, and
undoubtedly, an auxiliary part continues to make references its complicated relations with
to the U.S. role. to Washington’s intention to “the great Northern neigh- AFP
ANDREI VOLODIN Continuing its foreign polit- bour”, China.
A pair of Indian SU-30 fighter aircraft lead a pair of USA F-15C fighter aircraft as they fly over India
MOSCOW ical advancement in the most Indian critics continue to
important region of the world,
the U.S. military and political
The complex
attack the idea of “a nuclear
agreement” with the United
In their assessment of these establishment is apparently
inter-state relations
States. Interestingly, these nuclear energy field. refer to “India’s perennial am- tier frictions” between Delhi sensed in the region. Russia’s
processes western authors inspired by the successful de- critiques are voiced from left The government headed by biguous stance”: on the one and Beijing were the direct approach to solving “the
strive to prove three basic the- velopment of the military and
in the APR have
Communists and a number of the Indian National Congress hand Indians regard Tibet as consequence of Britain’s Indi- Asian puzzle” is vitally impor-
ses: the U.S. “strategic part- technical cooperation with In-
already been
other parties and right has a limited capability of ac- an inseparable part of China, an imperial policies. tant, given the prospects of
nership” is vitally important to dia, having signed an agree- “Bharatia Janata Party. The tion due to the complicated while on the other, allegedly Aside from Tibet, China development of Siberia and
India’s political elite; the Chi- ment on the supply to India
referred to as “an
gist of these criticisms can be domestic socio-economic situ- since the times of India’s first faces problems in Xiangyang, the Far East, in other word
nese leadership is making military cargo aircraft Lock-
Asian conundrum”.
expressed in one phrase: “the ation. No political force is will- prime-minister Jawaharlal but India would on no account Russia’s territorial integrity.
every effort to demonstrate to heed C130 Hercules ($1 bln) nuclear deal” would restrict ing to hold early general elec- Nehru (1947-1964), they take advantage of those at Alas, the euphoria of military
the United States its strategic and a potentially promising
The meaning of this
India’s sovereignty. At the tions next autumn. viewed it as a “buffer zone” least because the two coun- parades is fading away as
and financial independence; signing of a contract on the
definition is in the same time, Indian opponents
The “geopolitical figure” of between India and the PRC. tries have of late show signs morning fog, and again we re-
and the USA skillfully contin- sales of sea patrol planes P8i of an agreement with the China is constantly looming It must be stated that over of “strategic mutual under- turn to the sad prose of the un-
ues furthering its no-loss ($2 bln) to replace Russian-
progressing
United States are guided by over India’s domestic political the last several years a more standing” over the issue of modernised life in Russia. And
strategy regarding Russia, as made TU-142M. The geopolit-
complication of the other, not so overt motives. life. China is spoken and writ- balanced view of Tibet was stabilisation of Pakistan’s do- I would like to ask the reader a
Moscow is wary of both the ical goal of supplying U.S. mil- First, on the eve of parliamen- ten about more and more of- gaining strength. For example, mestic political situation. rhetorical question: how many
prospects of the strengthening itary equipment is evident,
“equation” of the
tary elections slated in India ten in the last several years. in 2003 Beijing published in- Beijing is sure to appreciate Indians remember the recent
of U.S.– India military and aiming to tie India’s armed geopolitical forces for the spring of 2009 its ba- To a significant degree this is formation presumably sanc- Delhi’s restraint, and who virtual demonstration air com-
technical ties and the growing forces with the U.S. defense sic socio-political forces are due to the latest develop- tioned by high authorities that knows – that could help to cut bats waged by Indian and U.S.
prospects of “secret mutual industrial complex fast and unwilling to take chances ments in Tibet. stated that an agreement “il- the angles on the road to a fi- pilots? The Russian aircrafts
understanding” between for as long as possible. An offer to India the recently de- where there influence is con- “The frontier problem” legal” from the vantage point nal settlement of bilateral re- then overwhelmingly out-
Washington and Beijing. even more exciting is the commissioned aircraft-carrier cerned given the distrust of must be “the bone of con- of international law was con- lations. gamed the U.S. aircrafts.
And how is the United strategic intention to sell to Kitty Hawk almost for nothing the USA and its policies ex- tention” of Delhi and Beijing cluded in 1914 by British India The complicated inter-state
States promoting its geopolit- India 126 multi-target U.S. as an alternative to the Russ- pressed by the significant relations. If Indians keep on and China that placed a relations in the APR have al- Prof. Andrei Volodin, Ph.D,
ical strategy in relation of the fighter planes worth $10 bln ian Admiral Gorshkov. Be- number of electorate. Second, recalling the tragic events of 90,000 square kilometres of ready been referred to as “an Chief Research Associate,
two largest states in the to $16 bln. The conclusion of sides, Americans are insistent a part of Indian political elites 1962, which are known as the original Chinese territory Asian conundrum.” The mean- the Institute of World Econ-
world? On the one hand, the such a deal would, in the opin- in offering its Kitty Hawk in a is under the impression of the “the frontier war” between under control of Delhi that ing of this definition is in the omy and International Rela-
U.S. – India nuclear agreement ion of a number of U.S. ex- package with F-18 aircraft, limited capacity of the United the two states, the Chinese, was then gradually annexed progressing complication of tions at the Russian Acade-
is viewed by some western ex- perts, destroy long-term mili- which according to their as- States as regards the entire too, have their claims to India. by Britain from Tibet. So, Chi- the “equation” of the geopolit- my of Scienses.
perts as an ideal means of tary and technical ties be- surances would allow the In- world, and in particular, in the Unofficially, Chinese analysts nese experts argue, “the fron- ical forces. Russia is hardly www.en.fondsk.ru
President’s way A global player Legislation The government is setting up commis-
presents his vision sion to monitor overseas control
A new course:
Law change on
conservative
foreign investment
approach to
A new law on investment then let it operate. We will see the American Chamber of Com-
will protect the interests of how it works and, possibly, merce in Russia, said the compa-
liberal values
Russian companies abroad. amend it.” nies would have to learn how to
At a June meeting of the Konstantin Simonov, director live by the new rules, adding that
government’s presidium, general of Russia’s National En- they were not overly severe com-
Prime Minister Vladimir ergy Security Fund, said: “The pared with similar rules in Mexi-
CONTINUED FROM PAGE 1
Putin praised the law which problem of foreigners’ access to co and Saudi Arabia.
restricts foreign investment strategic sectors has become But… “it would be good if the
SS
A in strategic sectors. acute. We know that the value of aerospace sector were eliminat-
-
T
Medvedev’s ambitious plan has President unveiled a new
AR
reserves has increased hugely in ed from this law because there is
not come from nowhere. Amer- course in domestic policy. At
“We welcome foreign invest-
the past few years. The hunger some ambiguity about its appli-
ica’s geopolitical singleminded- least that was how many per-
AN, IT
ment and will support this
for resources has grown, spread- cation.” Chris Weafer, chief equi-
ness worries not only Russia ceived it. Strictly speaking,
AR
process in the future in every
ing to energy and other spheres. ty strategist at UralSib, said that
but also Europe, and the failure though, unveiling is a misnomer.
possible way,” Putin said. “Essen-
Just look at the growth in prices so far the law looked like it would
of attempts to rush Ukraine and Medvedev has long been clear
tially, that’s what the law is all
of basic raw materials, including generate more positives than
Georgia into Nato has changed about his plans for domestic
ANDR T
X
about.” He added that every de-
foods. The situation must be reg- negatives.
the fabric of Atlantic solidarity. policy. He first outlined the
ALE
veloped country had similar leg-
ulated, and the government’s so- “There has been so much un-
The idea of a European security course during his presidential
islation.
lution to the problem is quite rea- certainty about the ‘investment
treaty will enable Russia to campaign, when he explained
The law on foreign investment
sonable. Foreigners have been rules’ in recent years that foreign
broaden the agenda of the first an economic policy based on
did not start off well. The list of
given one authority in the form investment has been less than it
round of talks with the EU on four ‘I’s (institutions, infrastruc- from the private sector. cept the Russia that has tive approaches are judged pri-
strategic sectors has been ex-
of a commission headed by the should have been. Now, there is
the new partnership and coop- ture, innovation, investments) This course is combined with emerged under Putin. marily in terms of solving con-
panded and reduced several
Prime Minister. The foreign com- clarity, it will help raise invest-
eration agreement, due to be and set seven main tasks: en- a new interest in the private There are grounds for cau- crete tasks. New liberal ap-
times, and attracted criticism,
panies have been shown that the ment in the strategic industries,”
held in Khanty-Mansiysk at the suring respect for the law, cut- sector and a readiness to ad- tious optimism. First, proaches in economic policy are
from Brussels and Washington.
door is open, provided they com- he remarked in an email.
end of June. ting red tape, reducing the tax dress its concerns: a law on Medvedev has got his priorities combined with a commitment
Putin said in the State Duma, the
ply with clearly defined condi-
–
Medvedev’s speech at the St burden, turning the rouble into self-regulating organisations right: it is impossible for Russia to conservatism in social policy.
lower house of Russia’s parlia-
tions.” Based on publications from
Petersburg Economic Forum a regional reserve currency, will abolish licensing in many to move forward without solv- The setting of long-term
ment, on May 8 that the law was
Andrew Somers, president of The Moscow Timesand Gazeta
contained even more surprises. modernising the transport and sectors, small businesses will ing the tasks he has identified. goals is moderated by realistic
aimed at fighting the restrictions
He lashed out against the glob- energy infrastructure, laying no longer be badgered by end- Second, continuity lends thinking. Russia’s main prob-
imposed on Russian companies
al economic and financial order, the groundwork for a national less inspections, and the public strength to this political course. lems were summed up at the St
abroad. The hot 42 strategic businesses
called the US claim to world innovation system, and imple- prosecutor’s office will address It is also important that the Petersburg Economic Forum in
At the same meeting, he called
leadership “untenable”, while the needs of private business- new President continues and a candid and exhaustive way: a
on the Industry and Trade Min-
staking out a new global role men by setting up consultative builds on his predecessor’s national mentality obsessed
istry to propose the composition
Russia has approved transparent ing stake (more than 25pc) in a
for Russia (turning Moscow councils representing small and work (and the latter, in turn, with catching up (not a way to
of the governmental commission
rules for foreign operation in the strategic company, they will need
into a world financial centre
‘There are grounds
medium-sized enterprises. An- supports his successor’s initia- become a leader), the energy
key sectors of its economy, which a permit from the government
charged with reviewing prospec-
and the rouble into a regional
imply considerable limitations to commission on foreign investment,
tive investments. Putin, who will
reserve currency).
for cautious
other core element of the new tives). But perhaps most signif- trap (abundance of resources
domestic policy is a systematic icant is the fact that creates one of the most energy-
safeguard national interests. chaired by the Prime Minister. The
head the commission, will have a
Until recently, conventional
optimism. First of
campaign against corruption, Medvedev’s theses were elabo- intensive economies), a lag-
The federal law on the proce- decision on each deal is to be tak-
final say on access of foreign in-
wisdom in the West had it that,
dure for foreign investment in en within six months.
vestors.
for the Russian leaders at least,
all, Medvedev has
which today threatens not only rated at the St Petersburg Eco- gard’s habits (shortage of
economic growth but the via- nomic Forum by First Vice-Pre- skilled labour), an unhealthy
businesses of strategic importance Deals giving foreign investors
The government will also use
liberal domestic policies should got his priorities bility of the state. Another sign mier Igor Shuvalov. That means way of life, and the instinct of
for national defence and security control of more than 50pc of the
this instrument to promote Russ- has been approved in parliament, voting shares in strategic compa-
go hand-in-hand with a more
ian companies abroad. Restrict- signed by the President and be- nies must also be coordinated
pro-Western foreign policy.
right’
of change is the new attention that there is political consensus the state to dominate (an in-
being paid to the hitherto neg- in the leadership, and that the stinct which has many support-
ing foreign investors’ access to come effective. with the federal authorities.
Medvedev indicated that al- lected areas of the environ- plans will be implemented by ers). The fact that political
strategic sectors in Russia is a It identifies 42 types of “strate- Foreign investors also need
though he has an inclination for ment, public health and quality an effective and united team. planners can be realistic about
symmetrical response to the
gic” business in the nuclear and permits to buy 5pc of voting
liberal values at home, he would menting a robust social devel- of life. Also, the new course is the situation is a good sign.
problems Russian businesses
aerospace sectors, in the produc- shares in companies prospecting
be a staunch defender of Russ- opment programme. In Russia, Medvedev’s for- marked by consistency and a The course will be seriously
face abroad. Foreign investors
tion and marketing of weapons, for and exploiting mineral re-
ian interests in the world. The il- The St Petersburg forum fo- eign policy debut is thought to comprehensive approach. The tested not only by Russian real-
who lobby for the interests of
military and special equipment, in serves in areas of federal impor-
lusion of a tough Putin, who cused on the role of private have been a success. In Berlin projects and practical steps in ities, but also by the realities of
Russian colleagues in their coun-
geological prospecting and explo- tance.
does not like the West, being re- business in the new economic and St Petersburg, he showed foreign and domestic policy world politics. Not all Russia’s
tries will be granted privileges.
ration and mineral production in Within six months of the law
placed by a soft Medvedev, policy, a key element of which that he is acquiring political dovetail neatly. Ideas are being problems are strictly internal.
After the meeting, deputy PM
areas of federal importance. coming into force, foreign in-
thought to have a sneaking says that the state will not identity without breaking with fleshed out and slogans turned We have yet to see how Europe
and Finance Minister Alexei Ku-
Foreign investment in radio and vestors or groups of investors
sympathy for the West, has seek a greater role in the econ- his predecessor’s course. into decisions. This shows that responds to the new Russian
TV broadcasting is limited on the must submit to the authorised
drin described the law as the re-
been shattered. Medvedev’s omy. Government interference Medvedev is beginning to carry the Russian leadership takes proposals and the outcome of
territories populated by half, or agency information about own-
sult of a “political consensus”, but
speeches in Berlin and St Pe- in the economy is to be ratio- his weight as President of Rus- the proposed goals seriously. the US presidential elections.
more than half, of the population ing 5pc or larger stakes in strate-
said he had hoped the list of sec-
tersburg set a new framework nalised, its writ being nar- sia. Arguably, his further The healthy pragmatism of the But what is beyond dispute is
of any given federal region. For- gic companies, acquired before
tors described as strategic would
for relations between Russia rowed by slashing the number progress in this direction would new course is also to be wel- that the new Russia is emerg-
eign investment is also limited in the law was enforced.
contain fewer industries.
and the West. Whoever be- of enterprises listed as strate- depend on how he handles an- comed: neither the state nor ing as a global player.
printed media with a circulation of The new law is not retrospec-
Kudrin, one of a few economic
comes the next US President gic. State-owned companies other key, though less obvious, the market are perceived as
– one million or more copies. tive. It will not apply to deals
liberals within the government, The law is especially strict re- made prior to its approval or to
can hardly expect Russia to ac- will be made more market-ori- task: “to build bridges” with ends in themselves, but as in- Alexei Zudin is the head of
long opposed the law, but said it garding transactions made by for- relations regulated by other
cept American desire for world ented by replacing govern- business, the middle class, the struments geared to the task of political studies programmes
should be given a chance. “If so- eign countries, international organ- federal laws, or ratified interna-
hegemony. ment-appointed bureaucrats structures of civil society and, development. The same for val- at the Political Technologies
ciety, the State Duma and the isations and the companies they tional treaties to which Russia is
At St Petersburg the new with independent directors perhaps, help the West to ac- ues. The liberal and conserva- Centre.
Federation Council agreed on it,
control. To be able to buy a block- a signatory.
–
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