Russia’s Economic Imperialism

Russia’s use of natural gas to exert economic and political pressure on Ukraine has caused grave concern in the West. But Russia’s pressure on Georgia has been even heavier – and has scarcely been noticed.

In Georgia, as in Ukraine, Russian President Vladimir Putin seeks to implement the doctrine of a “liberal empire” put forward in October 2003 by Anatoli Chubais, the chairman of United Energy System (RAO UES), Russia’s energy monopoly. According to Chubais, Russia will never find a place in either NATO or the European Union, so it must create an alternativeto both, a new empire of its own.

It can do this by using its huge and rich public-private monopolies to take over the key industries and economic institutions of former Soviet republics, thereby laying the groundwork for political domination. The resulting empire will be liberal, according to Chubais’s definition, because it can be built with money rather than tanks.

Russia’s first step in fulfilling this plan in the South Caucasus was directed against Armenia, its strategic partner in the region. Seizing on a $93 million debt that Armenia owed to Russia, the Putin administration demanded payment in either cash or equity in Armenia’s major industries. Cash-strapped Armenia had no alternative but to hand over the shares, which it did in a 2002 treaty candidly titled “Possessions in Exchange for Debt” – a reminder of the infamous “debt-for-equity” swaps of the Yeltsin years (another Chubais invention), which spawned Russia’s oligarchs.