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Forgiving Old Debts: Russia’s Diplomatic Maneuver

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With economies experiencing contractions across the globe and with governments in the third world most vulnerable, discussions of debt relief have been revived. Yet, forgiving old debts is nothing new to the Kremlin. For the Russian government, it has been just one part of a wider diplomatic toolkit to rekindle ties that have faltered since the end of the Cold War.

Once the primary backer of numerous states over large swathes of the globe, Moscow largely retreated from the non-Soviet space during the presidency of Boris Yeltsin and it continued to not be a primary concern during Vladimir Putin’s first two terms as head of state. However, Russia’s resurgence on the international arena over the past few years has not only made the country more willing to re-engage with the region but also more capable.

International media has primarily viewed this through the lens of military strength. Whether it is sending trainers and advisors to the Central African Republic, allegedly supporting rebels in Libya, or deploying Wagner Group forces to fight an Islamic State-offshoot in Mozambique, the focus has primarily been conflict-oriented. However, less explored is the quieter and more economic measures that the Russian government has taken in order to win hearts and minds outside of the West.

As part of a debt-for-development programme, Russia has forgiven approximately $20 billion worth of debt to various African governments that was accrued during the Soviet period. Beneficiaries include the Commonwealth nation of Tanzania and Francophonie member Madagascar, along with others. In forgiving these loans, the Kremlin has acknowledged a reality that many countries continue to deny: such debts are unpayable. At the first ever Russia-Africa Summit, Putin stated explicitly that “It was not only an act of generosity, but also a manifestation of pragmatism, because many of the African states were not able to pay interest on these loans.”

These measures have yielded concrete benefits for the previously indebted countries. For example, the decision to forgive Mozambique’s $40 million debt was done in conjunction with the United Nations World Food Programme, with the money that was intended for debt repayment instead being used to provide free school meals for 150,000 children over the course of five years.

While Russia will potentially be losing some money in the short term, debt forgiveness is likely to open new doors moving forward. Many of the countries that have seen their debts written off have significant economic and geopolitical potential. With improved political relations as a consequence, it is hoped that Russian companies will get preferential treatment should contracts be offered to international firms. This could help explain the Kremlin’s decision to forgive 90% of North Korea’s $11 billion debt despite the latter’s weak position. Russia has been eager to develop a trans-Korean gas pipeline that would transport fuel to South Korea. While the likelihood of this being realised remains slim, in the context of Pyongyang’s inability to repay the debt in any case, it is a reasonable gamble to make on the part of the Russian government.

This is somewhat similar to China’s efforts over the past few years, albeit in an inverse form. With Beijing less cash-strapped than Moscow, it is able to invest directly whereas Russia is using debt forgiveness to redirect cash payments away from servicing old debts and instead towards domestic reinvestments. Free projects, such as the Chinese-funded and constructed headquarters of the African Union, have been followed by ever-growing economic and political relations.

Russia’s debt policy has been used to strengthen existing alliances and partnerships. While not all Soviet-era allies have retained close ties to Moscow, many have done so continuously since the Cold War. One of the biggest beneficiaries of Russian debt forgiveness has been Cuba. In July 2014, ahead of a visit to the island nation by Putin, the Russian government wrote off 90% of Cuban debt. Though Russia was not only the country that showed willingness to restructure Cuba’s debt obligations at the time, it was by far the most generous. China restructured approximately $6 billion while Japan and Mexico forgave $1.4 billion and $478 million, respectively; Russia forgave $32 billion.

The decision did reaffirm the close relations between Moscow and Havana. Cuba has repeatedly voted in support of the Russian Federation at the United Nations on sensitive topics, such as Crimea, and Russian firms have received multiple drilling and mining contracts from the Caribbean country.

However, this strategy has its limitations. The overwhelming majority of these debts date back to the Soviet era and are therefore limited in scope. Some countries, such as Angola and Ethiopia (which saw most of their debts forgiven in the 1990’s), were primarily recipients of military support during civil wars so their debts were not as vast as other heavily indebted countries with other creditors. Since then, despite respite from Moscow, such countries have continued to become increasingly burdened by growing debts. While Ethiopia is often heralded as an example of rapid economic growth, its debt, both in total but also has a percentage of GDP, has grown considerably during the post-Soviet era.

While debt relief is undeniably beneficial to the third world, the fact that Russian-owned debts constitute a mere fraction of all foreign-owned debts in most cases means that the act of writing debts off cannot achieve much in of themselves. Consequently, in several countries, the gesture is mostly a PR move. In the case of Afghanistan, where Russia was the largest creditor due to loans handed out during the 1980’s, Kabul had for decades refused to recognise the debt. The decision to forgive the debt was therefore more of a signal of a desire to improve relations than any hope to achieve instantaneously tangible rewards.

The largest stumbling block for the Kremlin’s efforts remain structural issues afflicting the indebted nations, the nature of which vary considerably from country to country. For example, while Russia has forgiven a majority of Iraq’s debt to the country, which in turn helped revive talks over potential oil contracts, the continued instability in the Middle Eastern nation makes it difficult to reap many benefits. Though it is true that Baghdad has continued to purchase Russian T-90 tanks and attack helicopters, this is more of a sign that Russia has partially managed to pivot Iraq away from the United States’ sphere of influence as opposed to gaining economically.

With the onset of coronavirus, however, Russia might not be the leading debt forgiver for very long. In places such as sub-Saharan Africa, where economies are expected to continue shrinking while deficits are set to grow, other creditors could potentially step in and likewise forgive debts. In April of this year, G20 leaders agreed to extend debt relief in the form of a moratorium on debt repayment yet this can only serve as a short term solution. With many governments already increasing their borrowing, creditor nations are well positioned to leverage their position in order to improve geopolitical relationships as well as set the stage for favourable contracts for their firms. If more countries follow Moscow’s path, then the significance of what the Kremlin has done will only recede and lose much of its relevance.

Debt forgiveness can win friends but can only go so far. For Russia’s diplomatic maneuvers to stick, they will need to continue complementing it with other efforts, such as improving trade and boosting security partnerships, in order to truly make the most of its financial generosity.

Naman Karl-Thomas Habtom is the Senior Vice President of the Cambridge Middle East and North Africa Forum and a writer with a focus on security policy.

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Relegating the “Russia Problem” to Turkey

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Image credit: Prezident.Az

Turkey’s foreign policy is at a crossroads. Its Eurasianist twist is gaining momentum and looking east is becoming a new norm. Expanding its reach into Central Asia, in the hope of forming an alliance of sorts with the Turkic-speaking countries — Kazakhstan, Uzbekistan, Kyrgyzstan, and Turkmenistan — is beginning to look more realistic. In the north, the north-east, in Ukraine, Georgia, and Azerbaijan, there is an identifiable geopolitical arc where Turkey is increasingly able to puncture Russia’s underbelly.

Take Azerbaijan’s victory in Second Karabakh War. It is rarely noticed that the military triumph has also transformed the country into a springboard for Turkey’s energy, cultural and geopolitical interests in the Caspian Sea region of Central Asia. Just two months after the November ceasefire in Nagorno-Karabakh, Turkey signed a new trade deal with Azerbaijan. Turkey also sees benefits from January’s Azerbaijan-Turkmenistan agreement which aims to jointly develop the Dostluk (Friendship) gas field under the Caspian Sea, and it recently hosted a trilateral meeting with the Azerbaijani and Turkmen foreign ministers. The progress around Dostlug removes a significant roadblock on the implementation of the much-touted Trans-Caspian Pipeline (TCP) which would allow gas to flow through the South Caucasus to Europe. Neither Russia nor Iran welcome this — both oppose Turkey’s ambitions of becoming an energy hub and finding new sources of energy.

Official visits followed. On March 6-9, Turkish Foreign Minister Mevlüt Çavuşoğlu visited Uzbekistan, Turkmenistan, and Kyrgyzstan. Defense cooperation, preferential trade deals, and a free trade agreement were discussed in Tashkent. Turkey also resurrected a regional trade agreement during a March 4 virtual meeting of the so-called Economic Cooperation Organization which was formed in 1985 to facilitate trade between Turkey, Iran, and Pakistan. Though it has been largely moribund, the timing of its re-emergence is important as it is designed to be a piece in the new Turkish jigsaw.

Turkey is slowly trying to build an economic and cultural basis for cooperation based on the Turkish Cooperation and Coordination Agency founded in 1991 and the Turkic Council in 2009. Although Turkey’s economic presence in the region remains overshadowed by China and Russia, there is a potential to exploit. Regional dependence on Russia and China is not always welcome and Central Asian states looking for alternatives to re-balance see Turkey as a good candidate. Furthermore, states such as Kyrgyzstan and Turkmenistan are also cash-strapped, which increases the potential for Turkish involvement.

There is also another dimension to the eastward push. Turkey increasingly views Ukraine, Georgia, and Azerbaijan as parts of an emerging geopolitical area that can help it balance Russia’s growing military presence in the Black Sea and in the South Caucasus. With this in mind, Turkey is stepping up its military cooperation not only with Azerbaijan, but also with Georgia and Ukraine. The recent visit of Ukraine’s President Volodymyr Zelenskyy to Turkey highlighted the defense and economic spheres. This builds upon ongoing work of joint drone production, increasing arms trade, and naval cooperation between the two Black Sea states.

The trilateral Azerbaijan-Georgia-Turkey partnership works in support of Georgia’s push to join NATO. Joint military drills are also taking place involving scenarios of repelling enemy attacks targeting the regional infrastructure.

Even though Turkey and Russia have shown that they are able to cooperate in different theaters, notably in Syria, they nonetheless remain geopolitical competitors with diverging visions. There is an emerging two-pronged strategy Turkey is now pursuing to address what President Recep Tayyip Erdoğan sees as a geopolitical imbalance. Cooperate with Vladimir Putin where possible, but cooperate with regional powers hostile to Russia where necessary.

There is one final theme for Turkey to exploit. The West knows its limits. The Caspian Sea is too far, while an over-close relationship with Ukraine and Georgia seems too risky. This creates a potential for cooperation between Turkey and the collective West. Delegating the “Russia problem” to Turkey could be beneficial, though it cannot change the balance of power overnight and there will be setbacks down the road.

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The Future of the Arctic

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The harsh ecological conditions of the Arctic in the past have sustained economic activity in the region. Climate change, new technologies and innovations open new perspectives for the development of these territories. The Arctic has turned into one of the hotspots of geopolitics: global and regional players are striving to expand their borders. Watching the Arctic is a complex problem, so the solution can only be secured by integrating the forces of all parties in the Arctic.

It is impossible to discuss the development of the Arctic from the standpoint “whether we are going to exploit it or not”, as the industrial development of the Arctic started about 100 years ago. Today 10 million people live around Arctic, only about 10% of them are indigenous peoples. The main question is how we can make this development responsible and sustainable to ensure all three aspects – economic, social and environmental – in the long term and who should be a stakeholder in this activity.

Scientists from Russia, Norway and Iceland, despite the difficulties and deteriorating relations between Russia and the West, are conducting an active dialogue on the future of the Arctic. They call for enhanced cooperation and joint development of the Arctic for the benefit of humanity, not for geopolitical confrontation, because “Together we are stronger.” Scientists have also called for attracting the capabilities of space satellites to conquer the Arctic and solve various tasks and problems. They hope to strengthen public and private investment in human capital, for better education, to attract more talented people, to create high-paying  jobs for young people, to create and develop smart cities. The Arctic is an excellent opportunity for a clean and green economy, for Industry 4.0 and for the creation of new industries.

As part of the High North Dialogue Arctic 2050: Mapping the future, a panel discussion was held on April 23, 2021. The umbrella theme of all Arctic 2050 presentations: Mapping The Future of the Arctic and exhibitors tried to give their views on development and change in the Arctic over the next few decades from the standpoint of economy, trade and maritime transport, energy, ecology and social trends. During the panel Russian scientists from the Skolkovo School of Management, one of the leading research centers in Russia and their Norwegian colleagues discussed possible scenarios for the development of the Arctic in the next 30 years

Although almost all exhibitors were wary of more accurate predictions given the many factors that potentially determine the course of events in this area, the general impression that could be gained from different presentations is that greater importance is expected in this area in world economic and traffic flows. Development opportunities in mining, energy and maritime transport are great, but there are also great unknowns and potential temptations regarding the mutual rivalry of countries in this area, regulating legal and policy frameworks for the implementation of development policies and finally regarding climate change and risk environment.

The ability to think long-term, and to maintain a balance between all three dimensions, is what is called a ‘sustainable mindset’ and this is exactly what the Arctic needs from leaders now and in the future. A new leadership agenda emerges in each and every sector, reflecting the paradigm shift: policymakers will have to work towards creating an enabling environment, incentivizing more responsible investment in the Arctic, instead of trying to find a balance between economic activity and environmental footprint business needs to turn away from the cost reduction imperative and concentrate on creating innovation in technology and business models that together will make it possible to do business in the Arctic sustainably, which means both at the new level of productivity as well as in an environmentally and socially responsible manner. NGOs must concentrate on facilitating multi-stakeholder dialogs aimed at finding a balance of interests, rather than lobbying for limiting policies and challenging business activity in the region.  What is more important, is that, just as with the triple bottom line, these paradigm shifts should be synchronized and synergetic. The sustainable future of the Arctic tarts with the sustainable thinking of the leaders of today.

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Disagreements between States Should Be Resolved in a Peaceful Manner Based on International Law

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Russian Foreign Minister Sergey Lavrov has appreciated the role of Pakistan in the peace process of Afghanistan. He said that Russia expects that the meeting of the extended ‘Troika’ will give a necessary impetus to the Intra-Afghan negotiation and active role of Pakistan in the preparation of this event is appreciable.

Visiting Russian Foreign Minister Lavrov expressed these views during in an interview and its important points are shared below:

Q1.: Recently, another round of consultations took place in Moscow as part of the extended “Troika” on Afghanistan, which will likely to be followed by a session of talks in Doha. What are the prospects for an intra-Afghan dialogue given that the government of President Ashraf Ghani avoids such negotiations? How will peace and security in South Asia be affected by India’s unilateral actions in Kashmir, its active participation in the “Quad” (USA-India-Japan-Australia) and its dispute over the border areas with China?

Answer: We expect that the meeting of the extended “Troika” of March 18, 2021 will give a necessary impetus to the intra-Afghan negotiations. We note the active role of the Pakistani side in the preparation of this event. Moscow also hosted separate meetings between the Afghan delegation (headed by the Chairman of the High Council for National Reconciliation Abdullah Abdullah) and representatives of the Taliban. We consider it important that both sides speak in favour of intensifying the intra-Afghan negotiation process.

As for New Delhi’s participation in the “Quad”, we proceed from the fact that India as a responsible world power determines its foreign policy priorities by itself. At the same time we are convinced that disagreements between states in any region of the world including, of course, South Asia, should be resolved in a peaceful, civilized manner based on international law. Russia as a permanent member of the UN Security Council is ready to assist this in every possible way.

In principle we do not support the creation of divisive geopolitical structures in the spirit of the cold war. In modern conditions there is demand for such multilateral associations, initiatives and concepts which are based on the principles of inclusiveness, collegiality and equality. It is this philosophy that underlies the activities of the Shanghai Cooperation Organization, of which Moscow, Islamabad and New Delhi are members, he said.

Russia is interested in building up cooperation with the Pakistani, Indian and other partners in Eurasia. We have common interests, above all, ensuring security and improving the quality of life of the peoples of our countries. A unifying agenda is being promoted by the initiative of Russian President Vladimir Putin to develop Greater Eurasian Partnership. Participation in it is open to all states of the continent, including the members of the EAEU, SCO, ASEAN, as well as, in case there is such interest, the European Union. Systematic implementation of the initiative will not only strengthen positive connectivity and improve the competitiveness of all participants but will also be a solid foundation in building a common continental space of peace and stability, he said.

Q2.: Your comments on the global multilateral response to the COVID-19 pandemic and the issue of equitable distribution of coronavirus vaccines. What role could the UN and other multilateral organizations play in resolving conflicts and ensuring the rule of law in relations between states?

Answer: Despite efforts to curb the coronavirus infection, unfortunately, the international community has not fully coped with this dangerous challenge. The current crisis not only reminds of the enduring value of a human life but also shows again that sooner or later most of the problems of our time become common. To tackle them efficiently we need to unite. Therefore from the very beginning we urged our partners to take joint steps. Now it is especially important to suspend trade barriers, illegitimate sanctions and restrictions in the financial, technological and information spheres.

The epidemic has demythologized the idea of superiority of the ultra-liberal model of development. It is obvious that self-sufficient countries with clearly formulated national interests demonstrate greater stress resistance. Those who took the path of ceding their independence, part of national sovereignty to others lost. We regard WHO as the main international platform for coordinating global efforts in the fight against the pandemic. We presume that, on the whole, the Organization is coping with its functions. We will continue to provide multifaceted support to it.

Russia is one of the leaders in the field of global health care. We will continue to contribute to international efforts to combat COVID-19. We will continue to help the affected states both in bilateral formats and within multilateral structures. Our accumulated potential for countering infections allowed us to develop and launch the production of the Sputnik V vaccine in a short space of time. To date two more Russian vaccines against the new coronavirus infection have been registered.

Now the priority is vaccination of the population. Of course, the issue of an equitable distribution of coronavirus vaccines is very sensitive, especially for the poorest countries. In this regard we are ready to deliver safe and efficient Russian vaccines on a transparent basis. A lot of work is being done on this track. We have agreements on the supply of our vaccines with more than 50 states. A number of countries have launched the production of Sputnik V.

As for the second part of the question, the subjunctive mood is not entirely appropriate here. Same as 75 years ago, the UN is the “cornerstone” of the international legal architecture and its Security Council bears the primary responsibility for maintaining international peace and security.

Despite the growing challenges, the UN on the whole successfully copes with its responsibilities to resolve conflicts. As an example, I can mention more than ten peacekeeping operations currently deployed in various parts of the world. Even amid the difficulties caused by the pandemic, the Blue Helmets continue to fulfill their duty with dignity.

Russia as a founding member of the UN and a permanent member of the Security Council advocates strengthening the central role of the Organization in the world affairs. Our constant priority is to contribute to the formation of a more just and democratic, multipolar world order. It should be based on the UN Charter and not on dubious concepts such as the “rules-based order” promoted by Washington and its allies.

Q3.: How close are the views of Russia and Pakistan on the various regional and international issues such as Afghanistan, peace and prosperity in South Asia and the Middle East? What are the plans for the development of trade and economic cooperation between the two countries especially in energy and other sectors as well as in defense?

Answer: Moscow and Islamabad enjoy friendly, constructive relations which are based on the concurrence or similarity of approaches to the majority of topical issues of the international and regional agenda. Among them are the issues of strategic stability and of course Afghanistan. Suffice it to say that during the 75th session of the UN General Assembly the Pakistani partners supported all draft resolutions submitted by Russia and co-sponsored most of them. And, of course, we appreciate the contribution of Islamabad to the advancement of national reconciliation in Afghanistan, including through the mechanism of the extended “Troika” as mentioned above. I would like to note that our states are consistent proponents of settling conflicts including in the Middle East and North Africa solely by political and diplomatic means in compliance with the principles of the UN Charter.

In the area of bilateral relations our priorities are well known. These are, above all, cooperation in combatting terrorism as well as trade and economic ties. We will continue to provide assistance in strengthening the anti-terrorist potential of the Pakistani law enforcement agencies through joint exercises including “Druzhba” (Friendship) and the “Arabian Monsoon”.

In the field of practical cooperation we also have a lot to be proud of. The past year saw a record volume of bilateral trade: it grew by 46% and reached $790 million. We are making necessary efforts to start the construction of the North-South gas pipeline – the flagship project in the energy sector. We hope that all remaining technical issues will be agreed upon in the very near future. Russian companies are ready to participate in the modernization of the energy sector and the railroad system of Pakistan.

From our partner RIAC

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