A Tainted Victory

Tariq Alhomayed
Asharq Alawsat

After the Russian war with Georgia, discussion began in our Arab world on the return of the bipolar system in international politics and the impact this may have on our region. In fact the Syrians rushed to welcome this idea since the misfortunes of some may be of benefit to others. But what happened after the swift Russian defeat over tiny Georgia, which is geographically and militarily small, and following the powerlessness of American and Western diplomacy to confront Moscow’s military action in the Caucuses, was that Russia fell into an economic dilemma.

Before we elaborate, we must acknowledge that today’s economic crisis is universal. However there is another reason behind Moscow’s current crisis, apart from the international economic crisis and the decrease in oil prices, which is the war against Georgia and increasing tension between Moscow and the West.

The golden rule in economics states that capital is surrounded by caution and this was the case for Russia. According to a Reuters report, approximately 36 billion US dollars worth of foreign investment has been taken out of Russia since early August. This coincided with a decrease in the price of oil, upon which Moscow is depending in order to restore its previous status as an influential international player both politically and economically. With the drop in petrol prices, Russia finds itself in a real dilemma as it faces the international community.

Of course, the world will undergo its economic crisis, with collapses and losses that affect individuals and institutions and when it is over, the world economy will recover. But the problem for Russia lies in restoring confidence in its political decisions.

This is not a personal interpretation; this is what reports published by international institutions have stated. With the deterioration of relations between Russia and the World Trade Organization for example, and increasing escalation with NATO, it is certain that capital itself will stay away from regions where the risks are growing especially that the economic crisis in Moscow has pushed the government to halt trading two days in a row to curtail a quick collapse and major losses.

Russian Prime Minister Vladimir Putin moved to reassure foreign investors by saying that his country, “wants integration with the world economy,” stressing that “We are banking on private initiative, entrepreneurial freedom, openness and rational integration with the world economy and we see any attempts at throwing us back to the times of the Cold War as a direct threat to our modernisation project.”

He added, “A standoff is not our choice. Nor will there be any politically motivated market closure or a break up of economic relations by Russia.”

In conclusion, it is clear that we are as far away as we could be from a bipolar political system and the return of the Cold War between Washington and Moscow. Moreover, the swift victory that Russia enjoyed over Georgia and the diplomatic debacle to which America was subjected to were merely temporary since Moscow is paying a heavy price for its military triumph, the losses of which may be serious if oil prices stabilize at US $40 [per barrel].

Making the wrong political decisions bears a heavy political and economic price and the degree of its suffering varies between one country and another depending on the strength of the economy. Washington’s political recklessness, for instance, has cost America a great deal, but its economy can cope and its political system is flexible and open to correction. The Russian economy however, cannot cope since it relies upon petrol, and its political system does not enjoy the flexibility that America does.