Russia’s Skeptical G8 Partners

Poor oil-rich Russia. It is trying so hard to have its turn as chair of the elite Group of Eight countries taken seriously. President Vladimir Putin, perhaps hoping to elevate the presidential summit talks in St. Petersburg in July, has laid out an ambitious agenda. He plans to lead his colleagues in erudite conversations about education, infectious diseases, and – to make sure that no one dozes off – “energy security.”

And what has Putin gotten for his efforts? Not much. The Bush administration, led by Vice President Dick Cheney (but with his boss’s explicit approval), recently accused Russia of backsliding into its old “evil empire” ways. Putin shot back, portraying the United States as “Comrade Wolf,” ready to pounce on any nation that leaves itself vulnerable. Suspense seems to be building around how Bush and Putin will greet each other when they meet in St. Petersburg.

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Europeans, for their part, are still hysterical about getting caught up in the Russia-Ukraine gas dispute that left their pipelines dry for a few days at the beginning of this year. They see discussing “energy security” with Russia as akin to chatting about water safety with Comrade Crocodile.

Of course, people who really want to be unkind will point out the absurdity of Russia’s membership in a club that includes the giant economies of US, Germany, Japan, England, France, Italy, and (less so) Canada. Why wasn’t Chinese president Hu Jintao, whose country’s economy is the world’s second largest (when measured at world prices), given a seat at the table instead of Putin? After all, even with all its energy resources, and even with today’s sky-high oil and gas prices, Russia’s national income is only about the size of Greater Los Angeles.

Perhaps what Putin needs to do is stop suffering all the criticisms and go on the offensive. He could start by pointing out to his smugly democratic counterparts that he is probably more popular in Russia today than any of them are in their own countries. He might actually win a fair election tomorrow (not that he would ever risk finding out). Few of the others could make the same claim with a straight face.

Of course, Putin’s success over the past few years in killing off any semblance of a free press – and when an ex-KGB man “kills off” a free press, it is not just a figure of speech – has helped mute open opposition. Even so, Putin does seem genuinely popular among a public longing for a leader who can anchor their country without sinking it.

Putin might also argue that Russia’s fiscal position is far stronger that of the other G8 members. Yes, it helps that Siberia turned out to be a giant oil well, with the government sucking up much of the money. Venezuelan President Hugo Chavez is balancing his country’s books, too, for now.

But, to be fair, oil is not the whole story. Most economists advocate rich countries’ replacing their complex and antiquated tax codes with a simple low flat tax, and they bemoan the fact that so few countries have tried it. Putin, however, implemented such a policy a few years ago, and the results have been nothing short of miraculous.

Of course, the other G8 leaders might be less enamored of some of Russia’s other approaches to addressing budget problems. Most G8 countries seem incapable of achieving the political consensus required to take necessary steps such as raising the retirement age or significantly cutting the indexation of benefits to inflation. Russia, by contrast, has essentially abandoned its pensioners by inflating away the value of their incomes.

Indeed, many of the elderly in rural Russia are forced to sustain themselves by growing potatoes on the tiny plots of land that the government allows them to till. That is, assuming they survive at all: since the fall of the Berlin Wall, Russian male life expectancy has plummeted from 65 years to around 60 years. There is growing evidence that the stress of transition is the leading cause of death, even above big killers in postcommunist Russia such as alcohol, murder, and AIDS. Should Putin tell his colleagues that they, too, could balance their countries’ intergenerational accounts by starving the elderly?

So perhaps Putin had better not try to push his country’s accomplishments too far. Maybe the best plan is simply to let the vodka flow and hope for a round of smiles in the photo ops. In any case, when Putin tells his guests how they can pay Russia more to improve their own “energy security,” he may finally get the respect that he craves.