June 8, 2006

June 8, 2006 | Commentary on Russia

Was expansion to G-8 a case of Russian to judgment?

Leaders of the world's freest countries will flock to an increasingly unfree nation next month. That's when the annual Group of 8, or G-8, meeting will draw the leaders of Britain, Italy, France, Germany, Canada, Japan and the United States to Russia.

The first seven have plenty in common, including a commitment to democracy, liberty and the rule of law. It's no surprise that in the post-World War II era these countries have built the strongest economies in the world.

The "odd man out" of that gang is the host country Russia.

It was invited to attend meetings of the then-G-7 in the early 1990s. The idea was to prop up Boris Yeltsin by making Russia look like a member of the club, even though it didn't actually qualify based on income or economic growth. Eventually, this Russia photo-op turned into a full membership.

But the Russian economy falls woefully short of first world standards. Recently, in fact, it's regressed. It claims to support free markets and the rule of law, but under President Vladimir Putin (a former KGB official elected in 2000) Russia increasingly serves as a haven for corrupt government officials and uneven law enforcement.

Ask William Browder, an American businessman who works extensively in Russia. At least he used to, until six months ago when Moscow denied him a visa to return to the country.

Browder, the foreigner with the most money invested in Russia, recently told Newsweek International that dealing with the Russian government is "like trying to fight the shadows. You'll never know who your opponent is."

Browder points out that many Russian companies aren't merely linked to the Kremlin -- often they're partially owned by the government. That includes energy giant Gazprom, which is 51 percent state-owned.

That socialist approach breeds corruption. "In 2000, we discovered that the management of Gazprom had stolen 9.6 percent of the reserves for their own economic benefit," Browder said. Still, it took eight months for Putin to fire Gazprom's CEO.

Because the government is so involved with the economy, business executives such as Browder often find themselves dealing with the Russian secret police. That's a particular problem, Browder says, because "they are accountable to nobody; they don't ever justify their actions."

Businessmen aren't alone in struggling against the Russian government. Nonprofits are being targeted as well. With a recent law, the Kremlin gave itself the power to regulate some half a million NGOs, including 148,000 public policy organizations. Last month Putin signed executive orders that gave the Russian bureaucracy broad control of these non-governmental organizations.

The Heritage Foundation's Yevgeny Volk, a Moscow-based analyst subject to the new law, says the regulations spring from the Russian government's concern about the famed "color revolutions" such as those in Georgia, Ukraine and Kyrgyzstan. Foreign NGOs supported those revolts, which replaced autocratic, Soviet-style rulers with democratically elected governments.

Putin's obviously concerned the same thing could happen to his government, so he's making it clear he won't allow foreigners to finance political activities in Russia. His government will hassle NGOs and tie them up in so much red tape they won't be able to function effectively. For example, NGOs now must explain how much they spend for office supplies. Putin wants to highlight that his government's sword is mightier than an NGO's box of pens.

The world's freest economies aren't doing the Russian people any favors by pretending that Putin's government belongs in the G-8.

It's time for the democratic leaders to drop the charade and insist that Russia prove it's dedicated to open markets and the rule of law. When it does, it can earn its place in the international community and make life better for its citizens.

Edwin Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute and co-author of the new book Getting America Right.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

First Appeared in the Chicago Sun-Times