The Presidential Inbox Series: Russia

Thursday, June 27, 2013
Andrei Shleifer
Professor of Economics, Harvard University; Coauthor, “Why Moscow Says No: A Question of Russian Interests, Not Psychology,” Foreign Affairs
Julia Ioffe
Senior Editor, New Republic
Managing Director, Kissinger Associates; Former Senior Director for Russia, National Security Council

Experts discuss Russia.

The Presidential Inbox series examines the major issues confronting the U.S. administration in the foreign policy arena.

THOMAS GRAHAM: Good evening. I want to welcome you to the sixth in the series of presidential inbox. This evening we're going to discuss Russia.

My name is Tom Graham. We have two excellent commentators with us tonight: Julia Joffe --


GRAHAM: Ioffe.

IOFFE: Sorry.

GRAHAM: See, I know I'd get it wrong—from the New Republic, and Andrei Shleifer from Harvard University.

I want to begin by saying that I think the world has done a tremendous job in setting the stage for a discussion tonight. (Laughter.) Edward Snowden is holed up somewhere in a transit in Sheremetyevo. Some people who have been there might have some sympathy for him at this point. (Laughter.) Yesterday Mikhail Khodorkovsky celebrated his 50th birthday and nearly 10 years in prison. Last week, in Berlin, the president of the United States announced his desire to work with Russia on further strategic nuclear reductions, an idea that the Russians have poured a lot of cold water on Since then. And, of course, we're still trying to work out the parameters of the international conference on Syria. And earlier this week representatives from the United States, Russia and the U.N. met, and, as far as I understand, made no progress. So there's a lot to talk about tonight. But I want to start not on these specific issues but on some broad questions about Russia and the—and the U.S.-Russian relationship.

So once again, Julia and Andrei, welcome. And since this is a presidential briefing, I want you to put yourselves in the Oval Office. And you have, if you're really lucky, 15 minutes to brief the president of the United States, maybe a little bit more, probably less, and probably a lot less than that. And so you're standing there preparing this briefing. And I think the question is, what are the three key points that you want to president to take away? What three things does he need to understand about Russia if he's going to be able to devise and execute an effective policy? Andrei?

ANDREI SHLEIFER: OK. Thank you very much, and thank you for the opportunity to be here. Let me make the three points actually quite briefly. I would say the three central points are the following.

First, Vladimir Putin is the most popular politician in Russia. He is there to stay in the foreseeable future. You know, there may be a revolution from below, but I wouldn't hope for that or count for—on that—maybe hope for that but not count on that. Putin is there to stay. And perhaps, like Yelstin, he'll designate a successor, perhaps he'll stay there for a long time. So your counterpart in the foreseeable future is going to be Putin.

The second point I would make is that the economy of Russia is obviously slowing down. It's almost inconceivable that it's going to have the same economic performance in the next decade as it did in the previous decade.

That has interesting economic implications, but it has a political implication, which is that to the extent that Putin succeeded in being enormously popular in Russia based on the economic performance in the first decade of the—of the century, he's going to need to find alternative ways of staying in power; that is to say, popularity for economic growth is not going to keep him popular. And that's relevant because, you know, if we remember, both Gorbachev and Yeltsin essentially lost all of their popularity as a consequence of sharp declines of oil prices and poor economic performance and were in fact—lost power, left power as a consequence.

The third point is, again, related to the point on the economy, is that Russia's economy is to a large extent energy-driven, which means that Russia is interested in high energy prices, which means at least to me that it has a very keen interest in instability in the world. And in that respect, its basic interest, political interest, economic interests are either orthogonal or opposed to the interests of the United States. They like instability because instability helps oil prices, because it prevents U.S. dominance, and it makes Russia more central. So that seems to me to be a third important point.

GRAHAM: Julia, the same three points or something different?

IOFFE: Something different. I would—I would maybe expound on some of the things Andrei said.

Putin might be the most popular politician in Russia, and he is definitely there to stay for the foreseeable future, but he is, as a colleague of mine put it, the most passively supported leader as well. He's done such a good job clearing the political playing field of any viable opposition and has done a really good job of making himself seem inevitable and without alternatives.

But it's not that people out—if you go out in the provinces or—I mean, he's not much liked in the cities, but if you go out in the provinces, people know that he's—he and his friends have stolen a lot of money, that he's not maybe doing the best job as president, but they will always say, but who else would there be? Or they say, well, he's at least been in power for—now, you know, in his 13th year; he's stolen a lot of money; he's at least somewhat sated; if we get a new guy in there, he'll be hungry, and he'll start stealing from scratch. So—(laughter)—so he's the most popular, but that popularity comes with a caveat.

The second point I would make is that it's—the country is very much in transition. I think even though the protests in this Snow Revolution, as it was called, failed, it did—it did shake Putin up, I think, and economically, he's been shaken up by a declining economy, flatlining oil and gas production and competition from other places globally. There was recently a piece in The Wall Street Journal about an energy pivot towards Asia, which we've never seen before. Europe was always the market.

They're trying—they're starting to scramble. They're trying to find ways of finding economic stability. They're also trying to find ways to find political stability, and so we're seeing a lot of strange draconian social laws coming down, like banning gay propaganda. Today there was a law discussed that would ban more than three marriages, so you couldn't get married a fourth or fifth time. There was a law being discussed --

SHLEIFER: It's a relevant issue in New York City, I gather—(inaudible)—(laughter) --

IOFFE: And for the oligarchs too.

GRAHAM (?): And Putin.

IOFFE: A low being discussed that you can't criticize the Red Army, you know, that fought during the second world war. There was rumors that there would be a law introduced banning oral sex.

So there's this kind of return to traditionalism that is kind of artificial and kind of panicked, and I think it's very much a response to what was seen as a Western imposition with these pro-democracy protests. And Putin said as much when he blamed Hillary Clinton for fomenting them.

And then in terms of Russia globally, I think, I would tell the president that he's dealing with—I've called Russia a global—a geopolitical racketeer. You know, how the hell is Russia involved in the Edward Snowden case? How did he end up—you know, there are certainly ways to get from Hong Kong to Quito without flying through Moscow. (Laughter.) But somehow Moscow shows up and makes—you know, like, makes a little money off—like, you know, geopolitical capital off of the situation.

It's a country that, in its mind, is still shadowboxing with these old demons of the Cold War and still thinks that it should be involved in a lot of these key geopolitical problems, and so it often, you know, insinuates itself into situations, like the Edward Snowden case, where we would not expect them to show up. And like Andrei said, their interests are orthogonal to ours, and in that case we're dealing with a roving checkmate. Often, whatever we do, they're going to try to do the opposite because what's good for America is bad for them, what's bad for them is—you know, there's a lot of, you know, cutting-off-your-nose-to-spite-your-face kind of stuff, and that's really hard to deal with because it's not—it's not really a logic based on interests.

GRAHAM: Let's focus a bit on Putin right now. I mean the president is always interested in that person sitting across the table. Thirteen years ago the question was, who is Mr. Putin? And in the past 13 years, people have devised various answers to that question. But I think it's very much now in his third term, because he faces a different set of political and economic and geopolitical circumstances, that there still is a question of who is this individual, what drives him, what's his self-image, what does he hope to accomplish in the next four, five, six, 12 years as he stays as president?

Julia, do you want to start for that?

IOFFE: Yes. I would say the Mr. Putin that we saw sheepishly sitting across the table from Larry King is not the Mr. Putin we're dealing with today. The Mr. Putin we're dealing with today is drifting closer toward the Gadhafi model of presidency. You know, he's become a caricature in the West for—you know, diving for ancient urns, for wrestling with tigers. These are things he thinks he is. He is—he's also—but at the same time he is that old Mr. Putin in the sense that he still is that old KGB agent who is slightly paranoid, doesn't trust the U.S., doesn't think that he can do—that they can't really be allies.

He's also, I think, kind of—this became very clear last winter—that he's kind of isolated himself and seems to operate in his own informational universe. I think him crying the night of the election was indicative of that. I think he thought he won a hard-fought battle against foreign forces—or foreign-sponsored domestic forces that were going to destabilize Russia. And he won by a landslide and he cried.

So you're dealing with a guy with a slightly—with a world view that's a little warped at the edges, and one that is preparing to stay for a long time, and probably doesn't really—probably knows that he has to think about an exit strategy but is probably kicking that can down the road.

GRAHAM: Andrei, do you want to --

SHLEIFER: You know, I don't think I can have any insight into Putin's psyche, but let me say how I think about it. I think that first and foremost, he probably wants to stay in power, to remain president of Russia. I think he likes the job. And I don't know whether he likes power for its own sake or whether he likes the various benefits of the job, like Berlusconi; I'm not sure. But I think we can safely assume that he wants to stay in power.

IOFFE: Sorry, let me interrupt you for a second. I think he also thinks that he is saying Russia and that what's he doing for Russia is --

SHLEIFER: I'm coming to that. I think he --

IOFFE: Sorry.

SHLEIFER: My next point was he probably believes that he is the best person for the job.

IOFFE: Mmm hmm. Right.

SHLEIFER: So we agree on that. But just like Cristina Kirchner believes she's the best person for Argentina and Erdogan believes he is the best person for Turkey, and so on. But that seems to me a bit besides the point, whether he actually believes that.

It seems to me, again, so the question becomes, how can he stay in power? The easiest way and the best way, which has worked in many countries, is economic growth. And it has worked miracles for him in his first decade. You know, he had very good economic policy and very favorable oil prices, with tremendous economic growth, and he became authentically, genuinely popular.

That option is, at least given what one expects to happen to energy prices and energy sector, is not available. He is still going to do everything he can to maintain government spending, to deliver some economic growth. I think the reorientation of the energy sector toward China is the obvious and obviously rational strategy in this—from this perspective. I think all the things he's done to suppress competition in the gas sector are obvious and obviously rational strategies, from the perspective, but they may not be enough. They may not be enough. Oil prices can fall a lot.

So what is the complementary or alternative strategy? It is obviously a political strategy of there being no alternative to himself. That means there will be more political repression in Russia, there will be more aggressive efforts to eliminate opponents, and so on. This is thus—it seems to logically follow from the necessity of staying in power in the absence of economic growth.

GRAHAM: Could we stay on this? I mean, if you look at Putin 13 years ago, you know, my view was, this was a man who thought he had a mission, an historic mission, coming at the end of the Yeltsin period, to rebuild Russia, to regather the Russian lands, define or regain Russia's proper place in world affairs.

Has that ended now? I mean, is this really simply about staying in power? Does he have a vision for Russia—the role that Russia should play in the world that actually resonates with the large share not only of the Russian political elite but a large share of the—of the Russian population at this point?

SHLEIFER: You want to pick this up?

IOFFE: I think his—I think his vision is similar to what it was (sic) now. Now it's kind of perpetuating it. It's making sure the country stays stable—"stability" is still a favorite word—that—I mean, and you see it on certain actions like what he announced in St. Petersburg, that he's dipping into these—you know, these funds to do infrastructure. It's just to keep the kind of—the shower of money going.

I—but yeah, I think he thinks that he's still building Russia into—back into a global superpower, a—what he thinks is a European country, a country that has elites that can compete on a—on the global stage and, you know, a strong, dynamic economy and a counterweight to America on the global stage.

SHLEIFER: I mean, I guess I do not see extremely high levels of ambition for Russia. But again, I'm not an insider in this discussion.

Seems to me that one of the most important things that has characterized the Putin government is extreme caution, in many respects. So for example in Georgia, the Russian troops have never gone to Tbilisi. In various interventions—not physical interventions but political interventions—in the near abroad, Russia has been a bit aggressive, but certainly nothing compared to how aggressive the Soviet Union was, which was in fact a geopolitically ambitious country.

And I think the reason for that, I would guess—but I don't know—is that this kind of aggression or aggressiveness is risky, and it's risky for a country which is not particularly rich, and it's personally extremely risky. And so my guess is that it's probably—that this is probably a better characterization of what we see than some kind of, you know, Mussolini-like national ambition.

IOFFE: Can I—can I add one thing to that? I think these two things don't really contradict each other. I think he does have this vision for Russia, but at the same time, he is—he is a conservative in the most literal sense; he's a standpatter. You see it on—you see it in his approach to the Middle East: We just keep everything the same; let's just try to, like—try to find a political negotiated solution out of this; let's not have any power change hands. You see this at home. It's just—it's just trying to keep the status quo going as long as possible.

GRAHAM: Andrei, if he's risk-averse, what does this mean for how far he's prepared to go in confronting the United States?

Julia, you said that he likes to sort of poke us in the eye all the time. If we do A, he's going to do B. But if he is a deeply conservative figure, aren't there limits in how far he will go in confronting the United States in any range of issues, whether it be Syria, Iran, the former Soviet space?

SHLEIFER: Well, let me make a couple points. The first point, which I think is very important to bear in mind, is that despite all the rhetoric and despite all the bluster, there's been quite a substantial amount of cooperation between the United States and Russia over the last decade. There's been an enormous amount of cooperation in Afghanistan. There's been at least some cooperation on Iran, and likewise with many—on many other issues.

How far he would be prepared to go I guess to some extent depends on what are the—what are the situations in which there will be that imperative. I mean, it seems to me that the equilibrium we see between the United States and Russia at the moment is one in which the United States doesn't challenge Russia too much and Russia is not that aggressive with respect to the United States. And so that seems to me to be—again, if we're talking about briefing the president and making forecasts—you know, economists like to say that it's very dangerous to make forecasts, especially about the future, but that seems to me to be a practically useful way to think about reality.

IOFFE: I was going to add that the ways in which Russia—I would agree that there has been a tremendous amount of cooperation despite the saber-rattling. The things in which Russia does challenge the U.S. have been very low-cost things. So for example, vetoing resolutions that—you know, on Syria in the U.N. don't really cost all that much because there is a hesitation—a very obvious hesitation inside the White House about what to do about Syria. So vetoing will get—will piss off Susan Rice but is not really going to do anything because it—Obama's not dying to go in there anyway.

On Edward Snowden, OK, they let him pass through. I mean, now they've clearly lost their appetite for the headache he's causing them, and Lavrov last night said, you know, the sooner he gets out of here, the better. So they see that it's already—you know, the costs—the political costs are kind of starting to mount. But originally, it was just, you know, he's just passing through. He—I—and really, what can America do to them? So these are very kind of low-cost pokes here and there.

GRAHAM: Right, but when you see Russia sort of opposing the United States, it does a lot of this in conjunction with China now. And you know, we've all noted that the—you know, the first trip that the new president of China made, Xi, was to Russia, talked to Putin. There were a whole host of documents signed, all sorts of promises for the future. Where does China figure in Putin and Russia's universe at this point? And how important of a counterweight to the United States do you think they believe China is?

IOFFE: I would think China is a very—very recently popping up on his radar. Before it was very hard for the Russian companies to strike energy deals with American companies. The Chinese drive a hard bargain, and the Russians are used to a captive audience or energy clientele in Europe. And they kind of—you know, Putin still had this old Cold War—like, the West, Europe, that was his—he would—he often talks about—or used to talk about how Russia was a European country, how we're Europe, or part of Europe, Europe, Europe.

Asia was something that Russia kind of didn't want to be associated with. It's like a lesser brand. You know, it—you—it was—it's something that's almost offensive. If you say—if you say something like, oh, this looks—you know, this building looks kind of Asian. Like, what? No, it's European. I think there was, like, a weird status, like, a psychological status thing going on there too.

But I think now they're starting to realize that they can't—they can't ignore China anymore, especially given what's happening in the Russian far east, which is increasingly depopulated and border some of the most densely populated Chinese provinces, and there's increasing amounts of spillover there. And also, it's just a bigger energy market.

SHLEIFER: So let me—so I think—you know, when I was growing up in Russia in the '60s, you know, China and Russia had really quite a bad relationship. And in fact, some of you here may remember the border incident where, in fact, people thought that the countries would go to war.

I think that at the moment it seems completely obvious that China is Russia's best bet for economic growth. The reason for that is that the world energy sector is undergoing extraordinary changes. We see enormous increases in world oil supplies, which probably does not mean anything good for prices in the long run. We also see enormous increases in the world gas supply, which probably doesn't mean anything good for prices in the intermediate term. We also see the fact that the Europeans are, in fact, happy to take advantage of alternative supplies of energy, particularly of gas. And we also see that to a certain extent, the Europeans are getting suck of Russia.

Given all that and given the fact that the Russian economy in the foreseeable future, certainly, you know, maybe not in the next 50 or 100 years but certainly over the period of Mr. Putin's tenure, is going to be an energy-based economy, it seems to me that the first imperative for the Russian government is to figure out how to sell oil and gas. And there is a country next door with infinite amounts of capital, with forecast of 8 or 10 percent growth in the foreseeable future and with nearly unlimited demand for Russian oil and gas, you know, not far from where the stuff is.

So, you know, it doesn't take a great genius to figure out that, to a first approximation, that has to be the future, so—particularly because, you know, just to come back to the same point, which is that Mr. Putin's position, if history is any guide, is much more precarious if the Russian economy really does poorly. If you add to all that the fact that both Russia and China have some sympathy for the principle that one shouldn't interfere too much in the affairs of other countries and overthrow despicable regimes and have actually a variety of other common interests that are opposed to those of the United States, you know, it's not that hard to see the writing on the wall.

GRAHAM: If I understand you correctly, you would argue that it's the pragmatic reasons—it's growing the economy, the energy situation—that are driving the relationship with China as opposed to the geopolitical --

SHLEIFER: I would guess that's—again, I don't want to reject geopolitical, but it seems to me that the energy considerations and the growth considerations are most of it.

GRAHAM: Could we turn to another question that is widely debated in the United States right now? And that's the whole issue of human rights and political freedoms in Russia.

Julia, you mentioned not only the turn to traditionalism, but we've seen this tightening of the screws ever since Putin returned as president in the spring of last year.

There are people in the United States, in the Congress, that are urging the—and pressuring the president to be much more public in criticism of what he sees happening domestically in Russia, and we see a number of opposition figures, particularly a systemic opposition coming here and also urging a much more forceful criticism of what's happening in Russia.

The president has been largely silent on this. The administration, as you know, did not put a lot of effort into getting the Magnitsky bill through Congress, to say the least. And—(inaudible) --

IOFFE: They were actively trying to block it, yeah.

GRAHAM: Exactly—and hasn't been very energetic in the way it has pursued that possibility right now. What would you tell the president about how he should deal with this issue? What are the consequences both for the overall U.S.-Russian relationship if he takes a much more forceful stand, and more important, I would argue, what would be the consequences for the type of internal developments we say we'd like to see in Russia? Julia?

IOFFE: So I think there's very—what you can do as an American president to influence the human rights situation in Russia is not great at all. You would probably set yourself back in other things, and if you press on them too hard, you might even maybe make it worse.

You're also—you have to understand that you're dealing with a very cynical—a very cynical leadership that when you tell them, you know, we're concerned about these human rights violations, they're like, yeah, you're concerned? Sure you are. You know, and it's seen as, like, it's just one way of maintaining an American hegemony is this rhetoric of defending human rights. It's not seen—Russians in general don't really quite believe that Americans are sincere about this, that this is just another way to hector Russia, to lecture Russia. And so I think even behind closed doors, it's not seen as a genuine concern, and it's seen as, you know, stay out of our business or, you know, what about—you guys have capital punishment; we don't have capital punishment. You know, there's—you will get it thrown back in your face.

Or in certain cases—there was one instance where, you know, Obama did try to raise the case of Khodorkovsky with Medvedev when he was president at an Asian summit, and he said, you know, I'd love to do something, but my boss, you know—(laughter)—won't really let me do anything.

GRAHAM: (Inaudible)—the prime minister—oh, he's the boss then, right?

IOFFE: Right, right.


IOFFE: It was then—you know—yeah, a parliamentary—(laughter)—I guess, republic, but—four years. You know, and who even knows if that's a real thing? Maybe it's just, you know, good cop, bad cop.

But there's not—there's not much you can do on it, so why—you know, why anger them, and why—you know, and preclude them from cooperating on things that you actually might need from them, like a transit post to Afghanistan in Ulyanovsk or cooperation on Iran, which they—which they are more willing to do behind closed doors than they let on. It's—again, you know, there is public bluster, but things get done behind closed doors. So I think some stuff on human rights does get mentioned, but I think there is a recognition that there's not much that the U.S. can do.

GRAHAM: And you would think that's the right approach?

IOFFE: I mean, it's the only feasible approach. Like, if these human—these NGOs that are being shut—they're—you know, just this week one—Golos, the election monitoring group that was so central to the disputed elections of 2011, the Duma elections, was just shut down for six months because they refused to declare themselves a foreign agent. A human rights organization run by Lev Ponomaryov was just evicted from their offices in downtown Moscow on trumped-up charges. You know, these people are already seen as foreign agents, and to have the U.S. publicly stepping in for them doesn't make it look all that much better. It doesn't really help them on the ground either.

GRAHAM: Andrei, any thoughts on this?

SHLEIFER: Well, let me make a couple points, first just, again, on the same line that I've been—I've started, which is that unfortunately, given the imperatives of power, I think it's very likely that things in Russia, from the human rights perspective, are going to get worse before they get better. And so I think that's something that we need to recognize.

Second point, I think I agree that Putin uses U.S. criticism on human rights to his own benefit quite successfully. I would say, however, that it seems to me that, at least to the opposition in Russia, which is—has to be there and is important and will play a much larger role in the future, as it was in the 1970s, the support of the world is quite important. And so I don't think that speaking up as a strategy—speaking up against violations of human rights as a strategy for bringing immediate benefits is going to work. But despite that, I think it is important.

IOFFE: But I have to add there that especially once the anti-Americanism switch was flipped on and flipped on very effectively and all the polls immediately showed an uptick in anti-American sentiment across Russia—this was during the protests and through the election cycle—you saw—what you saw on the part of the opposition, on the part of these NGOs a very visible kind of backing away from anything that might be perceived as foreign influence, foreign money.

MR. : Right.

IOFFE: Some people, you know, like Lyudmila Alekseyeva's Helsinki Group—you know, the—Michael McFaul had a birthday dinner—very public birthday dinner for her shortly after this NGO law was passed at Spaso House—but all the others, the younger generation, the Navalnys of the world, are very, very careful in, you know, not traveling to the U.S., not having—not associating too much with the Western press, like just trying to seem as indigenous as possible and as unaffiliated with the West as possible.

GRAHAM: We've been doing this briefing now for 30 minutes. I'm going to turn it over to the members in just a minute, but I want to ask one last question. I can imagine the president listening to the two of you and saying, look, I've got a lot on my plate, you know—domestically, internationally.

And so the question I want to ask at the end is, how important is this? If I decide to spend my valuable time engaging with Russia, what can I hope to gain over the next three years? And if I just walk away from this and leave it to my secretary of state and some others, what's the price I'm going to pay for disengaging?

IOFFE: I don't think the costs of—well, you've seen a slight—you know, a demotion of the Russia portfolio, especially once the reset kind of --

GRAHAM: Un-reset.

IOFFE:—well, as it was shut down on the Moscow side. I think it's been scaled down because there's an acknowledgment that there's tons of other stuff going in the world. The president's a busy man, and there's a very conscious decision made that you know what—if they're not going to play ball, we're not going to—we're not even going to try to play with them.

And I think, you know, as we get out of Afghanistan, Russia's going to be less important. Syria eventually will—you know, there will be some kind of resolution there. They're not going to matter as much in the Middle East. On Iran, they're not that helpful anyway—like, you know, get what you can out of them, but don't waste too much time on them is what I would say.

SHLEIFER: Yeah, I would take, I guess, a somewhat different perspective, because my view of the world is, I guess, to a first approximation, you never know what's going to happen next. The cooperation with Russia has been extremely important in Afghanistan. None of us, I think, know exactly what's going to happen in Iran. None of us, I think, know exactly what's going to happen in Syria. And the—none of us actually know exactly what's going to happen in North Korea or in Korea. And these situations tend to come up.

So unpleasant and unsatisfying as it is to engage with Russia, at the moment it seems to be the case that the option value of maintaining some kind of a relationship that could be turned in a more cooperative one in the future is quite substantial.

So I agree with what you've said, but it seems to me that one needs to keep in mind that, you know, we need friends.

IOFFE: Sure, I mean, but they're never—they're never going to be our friend—well, they might be. For—in the near future, I don't see that happen, right? And I think that—I think that keeping the lines of communication open and some level of cooperation is great, but in—but I think it is wise right now to kind of—to not engage.

GRAHAM: So four years from now, it may or may not be in the presidential inbox, right?

IOFFE: I mean, it always will be. It has to be. It's—the question is the extent.

GRAHAM: Let me turn to the questions now. Would you please—we have microphones—wait for the microphone, state your name and then state a very pithy question, and we'll try to get through as many as we can in the remaining 25 minutes. Right down here.

QUESTIONER: Bill Luers. Tom, thank you for this program.

Two questions the president, it seems to me, would ask you both is, I'm interested in nonproliferation, in reducing the missiles that we both have, I'm interested in controlling the fissile material, I want to work with you on this; and he says, when you get rid of your ABMs, we'll do more.

The second is, both countries have placed a high priority on this conference on Syria. They both believe it could get them out of a problem they're in. And despite the difficulties between them, they've made very serious efforts to do this, and this may be one of the answers that both of them have.

GRAHAM: Was that a question or is that --

QUESTIONER: No, I say I'm the president. Answer my questions. (Laughter.) I want you to tell me what do I do about --

GRAHAM: Those two issues.

QUESTIONER:—the nonproliferation and what do I do about Syria.

IOFFE: I think with nonproliferation you have to—you have to make it interesting to the Russians and also not too invasive, as we saw Putin—like you said, poured a lot of cold water on it, saying that the current regime is too invasive militarily.

On Syria, I would question your assumption that Russia puts a lot of stock in this conference. I think it's window dressing and a box to check to say that, look, we tried. You know, we tried to have a—you know, we can't—we're not going to get in on the ground there.

At the same time, they're, you know, giving cover to Assad, shipping weapons to Assad and, you know, helping turn the tide against the rebels, which, you know, kind of shifts the dynamic going into the conference, right? If he's in a strong position or if he thinks that he's on the verge of retaking the country or retaking even Aleppo, what's Assad's interest in going to the conference to begin with?

GRAHAM: Andrei.

SHLEIFER: I'll pass. I'll pass.

GRAHAM: OK. Right here on the right-hand side.

QUESTIONER: Felice Gaer, the Jacob Blaustein Institute. The statement was made that Russia doesn't do anything that's too risky, and that they're actually risk averse. But from my vantage point, on the issue of human rights in the United Nations, they have stepped up as the leader of the ant-human rights forces in one forum after another. I wonder why you consider that not to be risk averse—why you consider that to he risk averse.

IOFFE: Why do you consider that to be risky, though?

QUESTIONER: Well, the United States does stand for human rights, and the United States does—is the leader in the Human Rights Council, General Assembly, elsewhere, on country-specific and other kinds of human rights issues. They have established themselves as the opponent of this, and they're leading a group that consists—I'll give you one example—cross-regional group at the General Assembly—Russia, China, Iran, Belarus, Syria—shall I go on? It's 10.

IOFFE: No, no, no. I understand.

QUESTIONER: And it's just the 10 of them, and they are that group. So why would you consider this to be risk averse? And isn't it rather that they see weakness in a situation like Syria than that they see risk there, that leads them to want to just revert to the grand old days of the Soviet model?

IOFFE: Should I --

SHLEIFER: Either of us can answer. (Laughter.)

IOFFE: I would say that it's actually—I would argue that it is actually risk-averse. It's just continuing a tradition. You know, it's the same roster of players that the Soviet Union played with, that Russia's comfortable playing with. It's continuing a pattern that we've seen for a long time. It's a pattern that's—you know, I think MID—sorry, the Russian Foreign Ministry—has been one of the most conservative forces within the Russian government, and I think they're doing what they've always done. And actually, providing a counterweight to Russia's—to America in the United Nations just keeps things at a standstill. And being a stick-in-the-mud kind of keeps the status quo, you know, alive and well. It's—I think it's actually—it's a tactic to—again, it's standpatter tactic to maintain the status. And that I would argue is very risk-averse.

SHLEIFER: We should all count our blessing if the riskiest thing that Russia does is make trouble at the United Nations. (Laughter.) If you look at Georgia, Russia was extremely careful. And if you look at policies of gas, if you look at policies toward Ukraine or Belarus, Russia has been extremely careful. If you look at—you know, compare Turkey and Russia toward demonstrators in their capital cities, I mean, there's just a sea of different with how guarded the Russian government was compared to the Turkish government.

IOFFE: Except for on May 6—except for on May 6, yeah.

SHLEIFER: There is a sea of difference. So I think that is not a controversial statement that Russia has been extremely guarded or Putin has been extremely guarded in what he does. That doesn't mean that he's not going to make trouble whenever he can, if it's not too costly to do so.

GRAHAM: Way in the back here on the—on the aisle.

QUESTIONER: My name is Leanid Kijkovsky (ph). I'm an Orthodox priest. It is a rare occurrence that I appreciate things that Putin says, but there was one reported occurrence when he supposedly asked President Obama, what makes you think that the situation in Syria after Assad will be a better situation? So if I'm addressing President Obama, what is it that makes you think that what is after Assad will be better in Syria—given the experience in Iraq, in Afghanistan, in Egypt, and you can make the list longer.

GRAHAM: And since this is on Russia, I guess the question is what do you tell President Putin as to why this would better after Assad goes?

IOFFE: I mean, I—here, I agree with the—with the Russians on this, the Russian logic. I mean, the Russian analysis of the situation has borne them out. In some respect, it was a self-fulfilling prophecy. I think if they had not given as much cover to Assad in the early stages, when it was just demonstrations, we may not have gotten to this point. But now that we're here, now that there's violence and quite a bit of it, I think their analysis of the situation is right, that you don't know that what comes after Assad is going to be any better.

GRAHAM: Andrei?

SHLEIFER: (Inaudible.)

GRAHAM: Down in the front here. Hatma (ph).

QUESTIONER: Hatma Disai (ph) --

GRAHAM: Wait for the --

QUESTIONER: Hatma Disai (ph), Harriman professor at Columbia.

Getting back to the economy, when the crisis hit Russia 2007 and early 2008, and oil prices collapsed, and then there was lot of call from the leadership, both president and also Medvedev, for diversificazia ee modernizatia (ph)—diversification and modernization. It would seem that four, five years later, back to the energy-driven economic policy, with very limited and very supervised role for foreign investment, if at all, do you think Medvedev and Berkovitch (ph) and people in the government agree with this kind of emphasis—former finance minister Alexei Kudrin—I mean, is there any opposition to some discussion on this policy emphasis on energy?

SHLEIFER: I don't know, but I doubt it matters what they think. (Laughter.)

Look, the Russian economy collapsed, I think, by something like 10 percent in 2009, and in—the fact that the government actually pursued extremely wise policies in the early 2000s and has saved a great deal of money has enabled it to spend that money and to avoid social and political problems.

The difficulty—it's very clear, I think, to any economist, ourselves included, that it would be a much wiser strategy if Russia could figure out how to increase productivity and how to diversify the economy and how to create genuine economic growth. These imperatives, unfortunately, at the moment conflict with political imperatives of maintaining control of the population and maintaining control of the economy. And again, as we keep saying on this panel, when economic and political imperatives conflict, I think we can be pretty certain, as we've seen in Argentina, for example, that the political imperatives will win out.

And I think that's what we see in Russia. I think that if Putin saw a way to maintain political stability while improving the economy, as he did in the early 2000s, I'm sure he would grab that opportunity. And as you've indicated, there are plenty of advisers in his circle who could show the way. But I think that at the moment, he probably sees the—this objective as being—(audio break)—that we nationalization—one of the most striking facts about the Russian economy in the 2000s is the dramatic difference in productivity performance of private and nationalized energy sectors. It's really quite extraordinary if you look at the data. Yet what we see now is nationalization of the energy sector, which goes in exactly the opposite direction of improvements of productivity.

IOFFE: I would add, actually, that, you know, in those four years in between when we started talking about "novatse" (ph) and "modernizatse" (ph) and the return to an emphasis on natural resources, there was a ton of money spent on all those projects in between, and a lot of it, as we see—most of it, as we see, has produced nothing except for some, you know, modernist buildings out in Skolkovo.

And I think what you have to understand is that even if—and I think it's a big "if"—this was a genuine policy that had a lot of political will behind it, a lot of these things, once they're implemented, degenerate into and disintegrate into gibberish and corruption.

I personally know of one computer programmer in Moscow, for example, who was approached by two contractors who asked him to write a program for him that would—for them that would store data, and they would pay him a hundred thousand dollars. He wrote them the program. You know, they had gotten a government contract for this. He wrote the program for them, turned it over and never heard from them again. And he said, you know, I've—in all the decades I've been coding, I've never written a program that's right on the first round—(laughter)—you need to go—you need to debug it; you need to—and what he realized is the program was never going to be used. It was just the, like, fig leaf to get this money from the budget. And I think that's the kind of things we saw happening.

I know another Russian businessman who was—who sells networking technology, and when he goes to sell it to state enterprises, for example, he says, OK, this package of software—of hardware costs a hundred thousand dollars, and they say, OK, can we buy it from you for $200,000? (Laughter.)

So I think a lot of these—even if these initiatives are well-meant and even if we think that Putin really thought this was going to be—he was really going to try and diversify the economy, again, by the—as it gets implemented, it just disintegrates.

GRAHAM: I'm going to go here and then back over here. So right --

QUESTIONER: Hi—(inaudible)—there was a report on the BBC Newshour recently that—interviewing Russians that the perception in Russia is that the Westerners hate them. And it was in those very terms, very stark terms. Do you think that's true? And if so, what can be done to ameliorate that? It seems to me that we have no reason to hate Russians, and Russians shouldn't perceive that. But what can be done to sort of enhance the level of sort of civility and—not necessarily total trust but comfort with each other so that it's not a—you know, it's not necessarily a special relationship, but it's a civil relationship?

IOFFE: I don't think that—first of all, Russians are obsessed with what we think about them. They're always asking, like, so what does America think about this small thing that happened here? I'm, like, America does not know that this is happening.

GRAHAM: (Chuckles.)

IOFFE: Nor do they care.

GRAHAM: (Inaudible.)

IOFFE: Yeah, no—and they get—I remember when—for example, when Mitt Romney said that thing about Russia being America's number one geopolitical enemy, the Russians freaked out in this kind of good way. And I was asked to come on Russian opposition TV and discuss this.

And I was, like, I hate to break it to you guys, but you're not our number one geopolitical enemy, but—you're not even really a priority anymore; you may be, like, number 10, maybe number 15. And they were, like, what? (Laughter.) No, why, how? How is this—how did this happen?

Like—and I think this is something that is—that they see in the—in their own media. I think they're still—I think people still inhabit a space in which, just like they see America as their—you know, as their yang, they think that Americans see them as their yin, and they don't realize that America has kind of moved on and gotten a new boyfriend.

And I think that there's not much that the U.S. can do because if you go and watch Russian TV, read what's in Russian papers, there is a big tilt toward anti-Americanism, especially in the last year, and especially on TV where most people still get their information. So even if, you know, as the America embassy does, you bring over the Albineli (ph) company and you bring over, like, college orchestras to—you know, and have concerts at Spaso House and try to do these panels and clubs and events, what most Russians are seeing is on their TV, and that's that we hate them, that we're out to get them, that we want to conquer them, that we want to trip them up, that we're just obsessed with them as they are. So I don't think it's really something that we can change.

SHLEIFER: Well, I would not exaggerate it. Let me just add one—(inaudible). I think that I agree completely with the power of state television in serving the political purposes of the government. But I would also point out, which I think is really quite fundamental, that in the last 20 years I would guess tens of millions of Russians have traveled abroad. So that will put some context into the claim that—fear of the West or distrust of the West is so universal.

GRAHAM: We have to stop on time. I see it's 7:00 already, so I think we've run out of time for questions. But I want to ask you to join me in thanking our panelists for a very lively discussion this evening. (Applause.) Well done.

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