On Monday in Mexico, Vladimir Putin and Barrack Obama appeared together before the press. The Russian President leaned diagonally away from the American President, as if Mr. Obama had a contagious disease.
At a press conference the next day, Mr. Putin belittled American Treasury bonds as untrustworthy, derided US-Russian trade as “peanuts,” and then threatened to limit visas issued to Americans if the US Congress passes legislation to deny entry to Russians suspected of human rights violations.
On Thursday in St. Petersburg, Mr. Putin leaned the other way. Speaking at the annual St. Petersburg International Economic Forum, he extended a warm welcome to American and European company executives, saying Russia wants to dramatically increase foreign investment.
Mr. Putin has declared a goal of doubling Russia’s economy in this decade. And he says he wants foreign smarts and foreign dollars to play key roles.
This is not a new approach. In June 2007, when I was Bloomberg bureau chief for Russia, the Kremlin gave special badge access to Bloomberg reporters on the assumption they would flash economic news bulletins to investors — not political criticism. Indeed, dollar signs prevailed in the reports.
But this time, the Putin Pendulum neatly fits within the brackets of a single work week. It sounds like a sanitized and far milder outgrowth of Bolshevik think: “The capitalists will sell us the rope with which we will hang them.”
Will it work in 2012?
Will American investors march into Russia, resigned to a wide disconnect between the Kremlin’s foreign policy and its foreign investment policy?
In today’s arid economic landscape, Russia is a juicy and tempting fruit.
It now enjoys “The Four Fives” – five percent unemployment, five percent inflation, a five percent current account surplus, and a five percent economic growth forecast for 2012,
In addition, it enjoys foreign currency reserves of $500 billion. (These may have shrink a bit in value after Russia’s President trash-talked a key component: US Treasuries.)
Compared to last year, real incomes for Russians are up 11 percent and retail sales are up 7 percent.
Viewed from the financial flatlands of the European Union, Moscow looks like a shining city on a hill. No longer “the sick BRIC” – Russia will probably grow more this year than Brazil and India. Russia’s growth could approach that of China.
And that may be Russia’s Achilles heel. Russia fortunes are increasingly tied to the fortunes of China, now its largest trading partner. If China catches a cold, Russia could catch pneumonia.
A Chinese slowdown could keep pulling oil prices down into Russia’s red zone. Setting aside Mr. Putin’s lavish pre-election spending promises, Russia’s budget balances at an oil sales price of $120 a barrel. After one year over $100 a barrel, oil prices dipped this month into the low $90s.
And then, American investors should consider the political risk.
It ratchets up the discomfort level to know that you are investing in a country ruled by a former KGB officer proud of his service in East Germany, who, like a Moscow mirror of Mitt Romney, seems to consider the United States his “number one geopolitical foe.”
President Putin’s May 7 inauguration to a third term has released his real foreign policy from the closet.
The tone was set from the start when the Russian President said he was too busy to attend the G-8, held outside of Washington at Camp David.
This decision was interesting for two reasons.
First, it was a clear whack at the US President.
Originally, the G-8 was to be in Chicago, Obama’s home town. Mr. Obama faces reelection in November. Hosting a G-8 in your home town puts a feather in your cap.
Vladimir Putin knows this well. He invested millions of dollars in sprucing up his hometown, St. Petersburg, prior to hosting the G-8 there in 2006.
Three months ago, the White House decided to get relations off on the right foot with Vladimir Putin, who had not had a substantive meeting with President Obama in three years. As a gesture to the President-elect of Russia, the White House separated the G-8 from a NATO meeting in Chicago, and then moved the G-8 to Camp David. There, in a controlled setting, Mr. Putin would not have to face two forces he dislikes: NATO and street protesters.
So, the G-8 was moved to Camp David in March. Mr. Putin’s aides said he would attend.
Then, 10 days before the G-8, the Russian leader pulled out. The timing made it too late to move the G-8 back to Chicago.
Aside for giving the Obama Administration a gratuitous poke with a sharp stick, Mr. Putin apparently had another reason for his pullout.
Russia’s new President firmly believes that in this decade the Kremlin will reemerge as a key pole in a new, multi-polar world.
It would send the world the wrong message if the images of first foreign policy foray of the Russian President showed him, flying to Washington, then sitting in a Western family photo, lost among the likes of the Prime Ministers of Canada and Italy.
Instead, Mr. Putin made his first trip to Minsk, capital of Belarus, Russia’s most economically and politically dependent ally. Then following Moscow’s longstanding divide and conquer approach to Europe, he flew to Berlin, and then to Paris, skipping Brussels, headquarters of the loathed European Union and NATO.
Then, he flew to China and back, with stopovers in Central Asia’s two most important nations: Uzbekistan and Kazakhstan. In Beijing, he enjoyed warm public meetings with leaders who privately are said to see Russia as a junior partner.
Although Russia accounts for only 2 percent of China’s foreign trade, Chinese leaders are far too diplomatic to describe their trade with Russia as ‘peanuts.’ Similarly, Chinese leaders largely leave blunt critiques of US Treasury policy to the opinion columns of The Financial Times.
This week, the quickie meeting with the American President came on the sidelines of Mr. Putin’s participation in the G-20 in Mexico. Next up: a trip to Israel, undoubtedly to discuss Syria and Iran.
Parallel to the Russian president’s six weeks of globetrotting, there have been threats to send warships to Syria, threats to bomb future NATO missile defense installations in Europe, and appeals to teach tolerance of Tehran’s leaders.
At the end of the day, the Western investors gathered in St. Petersburg this weekend will make their own risk assessments of the Putin pendulum.
Does a hot economic relationship outweigh a cold political relationship?
(Photo: White House)
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