Political Economy of Russo-Georgian war

by Dr. Abdul Colachal


(September 05, New Delhi, Sri Lanka Guardian) On August 8 Moscow sent troops and tanks into Georgia’s two breakaway pro-Moscow provinces, South Ossetia and Abkhazia, citing the need to avert "Georgian genocide" against Russian civilians. Russia launched a counter-attack leading to a brief war between Russia and Georgia last month after a Georgian military offensive to retake South Ossetia, a pro-Russian province that has long back declared independence from Georgia. Russia is keen to unite South Ossetia with Russianpart of North Ossetia oppsed by Georgia. Both South Ossetia (About 70,000 people before recent conflict) and Abkhazia (About 250,000 as of 2003) threw off Georgian rule in the early 1990s. Georgian President Mikheil Saakashvili called the U.S. president to discuss the situation in his country and Bush reiterated US support for the government and people of Georgia.

Exacerbating international tensions, Russia withdrew some forces but left others deep inside Georgian territory, serving in what Moscow describes as a peacekeeping mission. Russia has defied U.S. demands for a complete and immediate pullout of all its troops from Georgia. West wants Russia to totally withdraw its troops from Georgian territory. Russia claims it had to protect the Russian Diaspora in the area after Georgia launched an offensive to retake South Ossetia, an attack that South Ossetia’s prosecutor general said had killed 1,692 people. Tbilisi has labeled the Russian forces in Ossetia as occupying force.

On the ground, most of Russia's forces pulled out of Georgia last week. But some troops continue to operate near the Black Sea port of Poti, south of Abkhazia, where Russia says it will carry out regular inspections of cargo, fuelling speculation that Moscow is imposing an economic stranglehold on Georgia. Troops also continue to operate in buffer zones that Russia controversially set up within undisputed Georgian territory. France's President Nicolas Sarkozy who brokered a truce said at the weekend that, under the terms of the ceasefire he had helped broker, troops from the Organization for Security and Co-operation in Europe (OSCE) would move into these buffer zones. But senior Russian officials now say they never agreed to allow international peacekeepers to patrol in the zones, and also say they will not allow aerial reconnaissance over the zones.

President George Bush has made a series of public statements criticizing Russia’s actions and sent the U.S. military to deliver humanitarian aid into Georgia. Bush said a major issue was Russia’s contention that the regions of South Ossetia and Abkhazia might not be part of Georgia’s future. Russia and Georgia signing a French-brokered peace plan was "a hopeful step," Bush said at his Texas ranch, where he was joined by Secretary of State Condoleezza Rice after her trip to France and Tbilisi. Bush, after meeting with his national security team, said Russia needs to honor the agreement mediated by France, the current EU chair, withdraw its troops. Bush said a major issue was Russia’s contention that the regions of South Ossetia and Abkhazia might not be part of Georgia’s future. Rice said the additional security measures referred to a "very limited mandate" for Russian peacekeepers to have "limited patrols" within the zone of conflict until international monitors arrived.

Russia Recognizes Independence

Both South Ossetia and Abkhazia have effectively been independent since breaking away in the early 1990s. While they have enjoyed Russian economic and diplomatic support, and military protection, no foreign state has yet recognized them as independent states. Abkhazia and South Ossetia have been pushing for formal independence since the break-up of the Soviet Union in the 1990s. Hours after announcing Russia's recognition on 26 August of the two rebel Georgian republics, Medvedev gave interviews to CNN, BBC, the French network TF-1 and Al-Jazeera. Medvedev and Putin also dodged the international media in order to avoid questions about Russia's possible recognition of the independence of South Ossetia and Abkhazia -- hence their wave of interviews following the recognition. Russia claims that South Ossetia and Abkhazia had more rights to become recognized nations than Kosovo, which declared independence from Serbia earlier this year with support from the US and much of the European Union. Back in March the State Duma passed a resolution supporting independence should Georgia invade or rush to join NATO.

On 26 August Russian Parliament, Duma passed resolution supporting and recognizing, along with Abkhazia, South Ossetia's independence. The upper house, Federation Council, voted 130-0 to call on President Medvedev to support the independence of Abkhazia and South Ossetia. The lower house, the State Duma, approved the same resolution in a 447-0 vote shortly afterwards. The Federation Council speaker, Sergei Mironov, said both Abkhazia and South Ossetia had all the necessary attributes of independent states. During the debate in the two chambers, several speakers compared Georgia's military action in South Ossetia with Hitler's World War II invasion of the Soviet Union. Both houses of the Russian parliament are dominated by allies of Medvedev and Putin. The lawmakers interrupted their summer holidays for extraordinary sittings, formally called at the request of separatist leaders in the two Georgian provinces. Abkhaz leader Sergei Bagapsh and his South Ossetian counterpart, Eduard Kokoity, were invited to Moscow and they addressed the Russian lawmakers before the votes, urging them to recognize the independence of the two regions. "It's a historic day for Abkhazia and South Ossetia," Bagapsh said, adding that Abkhazia would never again be part of Georgia. Kokoity thanked Russia for supporting South Ossetia during the conflict with Georgia, describing President Medvedev's move to deploy troops as "a courageous, timely and correct" decision. The Kremlin recognised them as independent states, prompting Georgia to withdraw all but two of its diplomats from Moscow.

South Ossetia's parliamentary speaker Znaur Gassiyev said Russia would absorb the region within "several years", He said the move had been agreed at high-level talks in Moscow earlier this week. Moscow will sign an agreement next week allowing it to set up military bases in the region. Abkhazia's foreign minister, Sergei Shamba, said his province Abkhazia may become part of the Union State of Russia and Belarus ". The claims come a day after Russian Prime Minister Vladimir Putin stoked up the war of words with the US. There was a "suspicion" that the Georgian conflict was created by someone in the US in the hope of benefiting one of the candidates in the presidential elections.

Anti-Moscow sentiments

In a televised address in Georgia, President Saakashvili dismissed the vote, saying: "Nobody can legalize the annexation of the Georgian territories." The Georgian parliament debated the future of ties with its giant northern neighbour on 28 August.Georgia has intensified its move to enter the NATO. Former Soviet Foreign Minister under Michael Gorbachev and first Georgian president Eduard Shevardnadze warned meanwhile that Russia’s recognition of the regions would boomerang on Moscow. After the 26 August votes, the bill was sent to the Kremlin for final approval. Georgia's President Mikheil Saakashvili on 28 August accused Russia of planning to "redraw the map of Europe by force". He blamed Moscow of ousting him: “How can Moscow oust Georgia’s democratically elected government?”

Georgia on 29 August said it was cutting diplomatic ties with Russia over the Kremlin's recognition of two Georgian rebel regions as independent states. The Georgian parliament adopted a resolution on August 28 urging the government to cut ties completely, and to declare Russian troops on Georgian soil as "occupying forces." Tbilisi had said it would recall all but two diplomats from its embassy in Moscow. The Georgian ambassador was recalled in July after Russia admitted to sending fighter jets into Georgian airspace. Meanwhile Georgia’s interests in Russia will be represented by the embassy of a third party and consultations in this regard are underway with several countries.

On August 27, the Group of Seven industrialized powers strongly condemned Russia’s recognition of the two rebel regions. Although Russia is not part of the G7, it has close ties with the bloc and is a member of its sister grouping, the G8. "We deplore Russia’s excessive use of military force in Georgia and its continued occupation of parts of Georgia," said the statement from Britain, Canada, France, Germany, Italy, Japan and the USA. On a visit to Ukraine on August 27, British Foreign Secretary David Miliband warned Russia not to start a new Cold War. But he also conceded that isolating Russia would be counterproductive because the West relied on cooperation with Moscow to tackle global problems like climate change and nuclear non-proliferation.

The Russian president has clearly said he is not afraid of a new Cold War. Russia's Foreign Ministry accused the G7 of making "baseless assertions about Russia undermining Georgia’s territorial integrity". The G7 was trying to justify Georgian aggression towards the breakaway regions of Abkhazia and South Ossetia. Considering the long history of US-Russia relations passing through turbulent years, it looks like the Kremlin might delay its decision while it carries out wider negotiations with the West on the crisis. But it is unlikely to make the US-led NATO to roll-back its policy decisions.

Leaders from Germany, the UK and Italy also expressed concern that the vote would raise tensions further in the Caucasus. Meanwhile Alexander Stubb, the head of the European security organization, the OSCE, has accused Russia of trying to empty South Ossetia of Georgians. "They are clearly trying to empty southern Ossetia from Georgians, which I don't think goes by any of the books that we deal with in international relations," he said.

The West has strongly condemned Russia’s military offensive in Georgia and Medvedev's decision to recognize Georgia’s breakaway regions of Abkhazia and South Ossetia as independent states. The West is considering what steps to take against Russia, which has great leverage over the European Union (EU) as the supplier of much of its oil and gas. As well as energy supplies, Western policy-makers must weigh the fact that Russia's support is vital to maintaining pressure on Iran over its nuclear program. Ratcheting up pressure on Russia, French Foreign Minister Bernard Kouchner, whose country holds the presidency of the European Union, said the 27-nation bloc was preparing sanctions on Moscow. The meeting by NATO foreign ministers and European Union officials in Brussels on the Georgia crisis did not yield any fruitful results.

As mutual accusations mounted, Vladimir Putin launched a fresh attack on the USA, saying U.S. advisers were involved in the Georgian conflict and accusing the White House of provoking the crisis to help Republicans win the U.S. election. "If the leadership of the United States had sanctioned that, then I have the suspicion that it was done specially to organise a small, victorious war. And if it didn't work, then to create from Russia the appearance of an enemy and on that ground unite the electorate around one presidential candidate, of course the ruling party."

Both Russia and Georgia have cut diplomatic relations. On Sept 02, EU leaders decided to freeze strategic partnership talks with Moscow until Russian troops withdrew from Georgia.

SCO Endorses Russia on Georgia

The ex-Soviet Central Asian states have built their foreign policy strategies on trying to maintain a balance between loyalty to Moscow and building ties with the West. The Shanghai Cooperation Organisation (SCO) claims the role of a security guarantor in Central Asia. SCO is a regional group comprising China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan set up in 2001 to counter NATO influence in the strategic Central Asia region. The group voiced support for Russia’s "active role" in resolving the conflict in Georgia, according to the draft of a joint statement released by the Kremlin. Russia’s President Medvedev said he hoped the "united position" of a summit of Central Asian nations would "serve as a serious signal to those who try to turn black into white".

Moscow's allies in the former Soviet Union, Asia and elsewhere usually side with the Kremlin against the West on contentious issues, but have so far been notable for their silence since Russia fought a brief war with Georgia over Ossetia. The biggest prize for Russia, however, was to win the support of China as Medvedev met President Hu Jintao at the summit of the SCO in the Tajik capital Dushanbe with China and four Central Asian states.

China, which has own “separatists”, was considered the biggest problem. The SCO members expressed their deep worries over the tense situation triggered by the South Ossetia conflict, and called on relevant parties to solve existing problems peacefully through dialogue, strive for reconciliation and push for negotiations. The SCO leaders on 28 August welcomed the six-point proposal on solving the conflict which was reached in Moscow on Aug. 12, expressing their support for Russia's positive role in promoting peace and cooperation in the region.

And Russia won support on August 28 from China and Central Asian states in its standoff with the West over the Georgia conflict as the European Union said it was weighing sanctions against Moscow. China and four Central Asian nations signed a statement last week supporting Russia's role in the Caucasus but also expressing their "deep concern" over the Georgia conflict and calling for a negotiated settlement. Beijing has consistently refused to fully endorse Russia or the Western nations that have condemned Moscow.

Of course, China faces a dilemma over the Georgian issue. While it has close ties with Russia, it has its own problems with independence-minded regions. In particular, China claims Taiwan as part of its territory that must eventually be reunified, by force if necessary. The two sides split at the end of a civil war in 1949. China is also facing independence movements in its Muslim-populated region of Xinjiang that borders Central Asia, as well as Buddhist Tibet. China urged Russia and Georgia on September 2 to resolve their conflict through dialogue, while again refusing to openly choose sides in the dispute.

The Kremlin diplomacy has succeeded in persuading every member of the SCO to play a pro-Moscow line in the standoff. Already Moscow and china have been collaborating on various international issues like North Korea and Iran.

Moscow-West Collision

USA expressed the government's "regret" over a vote in Russia's lower house of parliament for Moscow to recognize Georgia's breakaway regions of South Ossetia and Abkhazia as independent states. "We regret that this vote will only add tension in the region," the spokeswoman said. "We call on Russia to live up to its commitments and refrain from acts which may further raise already very high levels of tension. This move can only raise suspicions about Russia's motives and aims coming after news of continued Russian military activity in Senaki and Poti,.

Moscow said it did not fear being isolated over recognising Georgia’s rebel provinces, saying drumming up support for its position was not its primary goal. Formal recognition by Russia of the independence of South Ossetia and the Black Sea province of Abkhazia has put it on a collision course with the United States and other Western nations, which insist on Georgia's territorial integrity. US President George W Bush had urged Russia not to recognize Georgia's two breakaway regions of Abkhazia and South Ossetia as independent states. USA says it is annoyed. The US and a number of Western governments have backed Georgia, sending aid and issuing strongly-worded statements. The US has said such recognition would be contrary to international law and has pledged to stand by Georgia", a violation of Georgian territorial integrity". Bush reiterated that the USA will continue to stand with the people of Georgia and their democracy and to support its sovereignty and territorial integrity," he said. Bush's comments came after Russia's parliament passed a non-binding motion calling on President Dmitry Medvedev to support the enclaves' independence bid.

As mutual accusations mounted, Vladimir Putin launched a fresh attack on the USA, saying U.S. advisers were involved in the Georgian conflict and accusing the White House of provoking the crisis to help Republicans win the U.S. election. "If the leadership of the United States had sanctioned that, then I have the suspicion that it was done specially to organise a small, victorious war. And if it didn't work, then to create from Russia the appearance of an enemy and on that ground unite the electorate around one presidential candidate, of course the ruling party."

Of the two presumptive U.S. presidential nominees, Republican Senator John McCain has been by far the most strident in his anti-Russian rhetoric during the Georgia crisis, reiterating his call for Russia to be thrown out of the G8 and for Moscow's WTO bid to be blocked. Senator Joe Biden, who was named Democratic candidate Barack Obama's vice presidential running mate has been more tempered in his criticism of Russia, restricting himself to saying there would be "consequences" for U.S.-Russian ties from the conflict. During a trip last week to Tbilisi, Biden proposed a $1 billion aid package for Georgia, but he also stressed that he had long sought to "forge a more constructive relationship with the Kremlin." Another leading Democrat, former Secretary of State Richard Holbrooke, said Aug. 11 that kicking Russia out of the G8 as McCain advocated was impossibility."

Moscow Strikes: Reduces Commitments

There was a time in world history when Russia was the only superpower on the European continent: the period between the end of the Napoleonic wars in 1815 and the Crimean War in the 1850s. But now Russia is one of economic giant of the continent. But Russians point to current economic realities and the country's history as to why the West needed Russia. "Russia and the West need each other. Russia won't be able to sustain its growth without foreign capital and international experience, while the West needs a strong ally in its fight with global terrorism and Iran. Besides, Russia is the only large energy supplier outside Middle East."

UK Prime Minister Gordon Brown has said NATO and the EU must reassess their relations with the Kremlin to prevent further "Russian aggression". His comments came amid fears Russia could cut oil and gas flows in the row over Georgia. Brown said: "When Russia has a grievance over an issue such as South Ossetia, it should act multilaterally by consent rather than unilaterally by force." He went on: "My message to Russia is simple. If you want to be welcome at the top table of organizations such as the G8, OECD and WTO, you must accept that with rights come responsibilities.

Russia has been negotiating to enter the trade body since 1995 and had been ready to wrap up all talks by year's end. It has finalized bilateral agreements with all of the WTO's 153 members, except for Georgia, which rescinded its backing in 2006. Russia's readiness to renege on agreements reached over more than 15 years of WTO talks appeared aimed at pre-empting a Washington threat to deny Russia entry into the WTO as punishment for its military action in Georgia. Senior U.S. officials have suggested that Russia's war with Georgia put its integration into the world economy at risk.

President Dmitry Medvedev warned that Russia might cut ties with NATO. Putin said 26 August that Russia should abandon some of the commitments it made during World Trade Organization accession talks. Putin's announcement is a first sign that an unraveling war of words between Russia and the West is likely to go beyond empty threats. Putin said at a regular meeting of his Presidium that it was "sensible" to abandon some of the commitments Russia made during WTO accession talks. "We don't see or feel advantages from membership, if they exist at all. But we are carrying the burden," Putin said Russia would continue WTO accession talks but at its own pace and not at the expense of its economic interests. "Certain sectors of our economy, primarily agriculture, are carrying a fairly heavy load," Putin said.

Moscow decision to reduce its economic engagemnt with Western institutions would create prblems in the West.

Economics of the Standoff

President George W. Bush's administration said Russia's “recognition” of independence and continued military presence in Georgia could jeopardize its membership in the Group of Eight and its bid to join the World Trade Organization, among other things. Russia says has done its best to meet WTO requirements but that the West has unfairly politicized its support of the bid. Putin said membership of the WTO is not a high priority for Russia. It is more a 'box to be ticked' rather than a critical piece of the immediate economic program. Russia would continue WTO accession talks but at its own pace and not at the expense of its economic interests. Russia has been negotiating to enter the trade body since 1995 and had been ready to wrap up all talks by year's end. It has finalized bilateral agreements with all of the WTO's 153 members, except for Georgia, which rescinded its backing in 2006. Russia's readiness to renege on agreements reached over more than 15 years of WTO talks appeared aimed at pre-empting a Washington threat to deny Russia entry into the WTO as punishment for its military action in Georgia. Senior U.S. officials have suggested that Russia's war with Georgia put its integration into the world economy at risk.

NATO does not want Russia to get South Ossetia from Georgia for economico-strategic reasons. Russia’s continued military presence in Georgia has angered the West. Moscow says the troops are still needed to protect civilians from Georgian aggression and that their presence is provided for under a French-brokered ceasefire, a view disputed by Paris. The region under conflict is considered by NATO for polico-economic factors as well. Georgia is a key non-Russian route for oil from the Caspian Sea. Azerbaijan's state oil company SOCAR said it expected next year to send up to 400,000 tonnes of crude to a Russian pipeline instead of the BP-led pipeline through Georgia, in part because of instability there. Hence Russia wants to bring South Ossetia under Russian control to day any benefits to the USA and Europe.

Russian President Medvedev, who also challenged that Russia was ready for any sanctions by NATO, including the alliance opting to halt relations with Moscow altogether. "We are a big economy today," said Vladislav Reznik, chairman of the State Duma Financial Markets Committee. "Whether they like it or not, we have to be reckoned with." Yevgeny Fyodorov, chairman of the Duma's Economic Policy and Entrepreneurship Committee, was even blunter. "It's a political bluff," he said. "It's an absolute certainty that the Americans won't impose any sanctions because they themselves would suffer."

Russia is the biggest economy still outside the WTO, whose members account for more than 95 percent of global trade. Russia has finalized bilateral agreements with all of the WTO's 153 member countries except for Georgia, which rescinded its 2006 backing when Russia severed trade and transport links following a spying dispute between the two countries. If the United States moves to reconsider its support for Russia's WTO bid, Moscow will retaliate, Afanasyev said. Russia has "a rich arsenal" of countermeasures at its disposal, he said, referring to a deal that allows the United States larger import meat quotas, among others.

The economic costs of possible sanctions, such as delayed WTO entry, may not be significant, said a senior Western economist. "Russia would not suffer much -- if any -- immediate economic pain as a result of such a delay, since the direct trade effects of accession (the impact of tariff changes and improved access to foreign markets) will be limited," Both Russia and the West would only gain from changes such as the "reduction in formal and informal barriers to foreign investment in key service sectors and the overhaul of technical regulations.

The next meeting to consider Russia’s WTO bid has been scheduled for Sept. 18. Yury Afanasyev, the top trade official in charge of WTO accession talks at the Russian mission in Geneva said "I haven't noticed that they've actively welcomed us into the WTO anyway." But Russia has not received any signs that the United States planned to withdraw its support of Russia’s bid to join the global trade body. It is not clear if the U.S. administration intended to revoke support for Russia’s WTO bid. Bush indicated that Russia might find itself isolated if it lost U.S. support. "In recent years, Russia has sought to integrate into the diplomatic, political, economic, and security structures of the 21st century. The United States has supported those efforts," Bush said now Russia is putting its aspirations at risk by taking actions in Georgia that are inconsistent with the principles of those institutions.

In 2007, there was a 57 percent growth in U.S. imports to Russia and bilateral trade of $27 billion, Gutierrez noted, including "significant growth not only in the extractive industries but in products as diverse as innovative pharmaceuticals, farm machinery, information technology and an increasing array of services." U.S.-Russian economic interdependence was underlined by Commerce Secretary Gutierrez in June, when he wrote in a commentary in Izvestia that Washington was eager to "expand our economic relationship." Among the U.S. companies that rely heavily on a thriving Russian economy are struggling U.S. auto giants General Motors and Ford, whose Russia sales make up some of the gap being felt back home. Also, for U.S. aircraft maker Boeing, whose Moscow engineering center is the company's biggest outside of Seattle, business has been lucrative here. Perhaps no other country is able to offer the United States as broad a range of partnership opportunities or capabilities for cooperation in every scientific or technical sphere.

The Georgia crisis has alarmed other former Soviet republics with sizeable Russian minorities, particularly Ukraine and the Baltic states. Ukrainian President Viktor Yushchenko, who like Saakashvili has irked Moscow by seeking to join NATO and move out of Moscow’s orbit, has condemned Russia’s war with Georgia. Yushchenko said he wanted to raise the question of increasing Russia’s rent on its Sevastopol base in Ukraine’s Crimea region, the headquarters of the Russian Black Sea fleet. Moscow says any renegotiation would break a 1997 deal under which Moscow leases the base for $98 million (53 million pounds) a year until 2017. The problem over Crimea is this. Crimea was handed over to Ukraine from the Russian Soviet Republic by Nikita Khrushchev in 1954. However ethnic Russians still make up the majority of its nearly 2 million inhabitants. It is also home to the Russian navy's Black Sea Fleet at Sevastopol, on which Russia has a lease until 2017. Sevastopol has resonance in Russian history, from the siege by the British and French in 1854-55. There have been small demonstrations there recently calling for Crimea to be returned to Russia.

An Observation

Focus: US-led West seems to have got a primary worry now; they’re concerned that Russo-Georgian war and the NATO role in it could offer some food for thinking and the world could even see though the anti-Islamic agenda of the West leading to the Sept 11 event and its aftermath affecting Muslims the world over. They don’t want the current Caucasus crisis is “unnecessarily” linked to that.

Although the stated cause of the war is indpenedece, the real motive behind the georgian attack and Russian counter-attack seems to be purely economic and both Russia and USA have vested "pipeline" interests in keeping the turmoil on. Escalation of the conflcit would be determined by the resolution of this issue.
- Sri Lanka Guardian