Will Russia Act Like a Mature Free-Market Democracy? Don't Hold Your Breath

By Ian Bremmer and Nouriel Roubini

May 29, 2012 | Last Updated

Russia has become an authoritarian state built on Putin's reputation as a tough guy and the export of oil, gas and other natural resources.

By Ian Bremmer and Nouriel Roubini
May 29, 2012 

This joint piece on geopolitics will be published in the Financial Times later this week.

• Russia is turning less relevant as a political power and as an emerging market. In contrast to the other BRICS, Russia has become an authoritarian state built on Putin's reputation as a tough guy and the export of oil, gas, other natural resources and little else.
• The G7+1 cannot become a G8 until Russia begins to act like a mature free-market democracy, and it's hard to work up much optimism on that front.
• There are those in Russia who argue that their country can become a modern European state rather than the "Eurasian nation" of Putin's dreams—these are the people U.S. and European leaders should be talking to if they want to build new ties with Moscow.

Here we are again. Syria's government has killed dozens more of its own citizens, and what does its old ally, Russia, do? It obstructs a substantive UN Security Council response. This has become a predictable story, but it raises a fundamental question: What is Russia's place in today's world?

Russian membership in Western organizations is not exactly yielding positive results. The G7+1 cannot become a G8 until Russia begins to act like a mature free-market democracy. It's hard to work up much optimism on that score with President Vladimir Putin claiming that recent protests in his country are choreographed by Western spies and that he couldn't make it to the latest G8 summit at Camp David because he was busy putting together his new cabinet—always a complicated chore in an authoritarian country. Putin's absence made little difference as discussion turned to Afghanistan and the eurozone, where Russia can't help, and to Iran and Syria, where Russia is part of the problem.

So if its government isn't interested in Western clubs, can we classify Russia as a dynamic emerging market? Not a chance. In China, a communist party has engineered a complex, high-powered economic engine that has lifted the country from abject poverty to become the world's second-largest economy. India has produced some of the world's more innovative private-sector companies. Brazil is now an increasingly self-confident democracy with a well-diversified economy and a growing international profile.

Russia, by contrast, has become an authoritarian state built on Putin's reputation as a tough guy and the export of oil, gas, other natural resources and little else. Corruption is endemic. Graft is a particular problem in most developing countries, and Transparency International's global corruption index ranks Turkey at 61st, Brazil at 73rd and China at 75th. Russia ranks 143rd.

In addition, much of Russia's commercial elite still views the country as a wealth generator but not a long-term investment bet. Capital flight, a chronic problem, has reportedly accelerated since Putin's re-election in March. The country's population is falling because health care is poor, socially driven diseases such as alcoholism are rampant and well-educated Russians are leaving in search of better opportunities elsewhere. When the Soviet Union collapsed in 1991, Russia inherited some 148 million citizens. Today, there are fewer than 142 million. UN studies have warned that the population could fall by 30% over the next four decades, with obvious implications for growth.

Are things improving? During Russia's most recent Potemkin election campaign, Putin spent more time bragging about the stability he established during his last stint as president than about any grand plans for the country's future. Russia is also about to become less transparent as Putin has formed a cabinet with reformers who may not have real power and has brought administrative heavyweights onto his presidential staff. The risk is that policy will be made not in Russia's ministries but behind closed doors inside the Kremlin.

Mitt Romney, the Republican Party's likely presidential nominee, recently referred to Russia as America's "no. 1 geopolitical foe." That's absurd, not because Russia isn't increasingly antagonistic to U.S. interests, but because Russia is becoming less relevant—as a political power and as an attractive emerging market. Russia's fellow BRICS may have no interest in dismissing Moscow from their club, but the rest of us can (and should) stop speaking of Russia as if it belongs in this company.

There are those in Russia who argue that their country can become a modern European state rather than the "Eurasian nation" of Putin's dreams. These include some of the reformers around Prime Minister Dmitry Medvedev, much of the country's urban middle class, internet- and social-media-savvy young people, a new generation of entrepreneurs fed up with Byzantine restrictions and regulations, intellectuals and much of the media. Members of all these groups want a democratic Russia with an innovative, modern economy driven by private-sector ingenuity, and they recently have taken to the streets to make themselves heard.

For the moment, the Kremlin has managed to ignore these voices, acting like neither a BRIC nor a member in good standing of the G8. Washington should not make the same mistake. If U.S. and European leaders genuinely want to build new ties with Moscow, these are the people they should be talking to.