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Analysis From Washington: Private Firms and Moscow's Foreign Policy

Washington, 25 October 1996 (RFE/RL) -- A Scandinavian foreign policy expert remarked recently that "NATO may or may not expand eastward, but Russia's Gazprom has already moved west. And its move in that direction already has had important foreign policy consequences for Eastern Europe."

As this comment suggests, the giant Russian gas company is now actively involved in selling energy to and acquiring infrastructure in precisely those countries that are now seeking closer ties with the West. Not surprisingly, this private Russian company on occasion has used its position in the economies of these states to advance the political interests of the Russian government.

And in a number of other countries, Russian firms involved in selling raw materials, arms, and other goods have also acted in conjunction with the Russian government, sometimes clearly advancing Russian state interests and sometimes perhaps forcing the Russian state to promote the interests of the enterprises themselves.

Such cooperation between private firms and governments has occurred in many countries, but for several reasons, this linkage may be especially significant in the Russian case.

On the one hand, neither the newly privatized Russian enterprises nor the Russian government has yet had the time to work out what the proper limits of these relationships should be. Instead, both have tended to continue to assume that the firms should serve the interests of the state.

And on the other, many Western governments often consider the rise of privatized Russian firms as a good thing in and of itself and thus tend to view the activities of these firms abroad as something entirely natural and beyond criticism.

That combination of circumstances means that such linkages pose serious challenges to Russia's neighbors, to the broader international community and to Russia itself.

Russia's immediate neighbors, and especially the former Soviet republics in which some recently privatized Russian firms have serious equities, face perhaps the most immediately threatening challenge. Giant Russian firms like Gazprom in many cases have the economic muscle there to influence if not dictate policy on a wide range of issues.

And because of Western attitudes, these countries often can do so more effectively and efficiently than the Russian government itself. Their pressures, unlike those of the Russian state, look both to many in these countries and to even more in the West as benign, the natural workings of the market.

At one level, of course, that is entirely true. These firms do enjoy real advantages and on a level playing field, they could expect to do better than many local firms against whom they are competing.

But there are three ways in which the playing field in many of these countries is anything but level. And that poses a challenge to both these countries and Western states interested in the economic development and security of these former Soviet bloc states and in the stability of the region.

Recently privatized Russian firms in their Soviet past often extended onto the territory of these now foreign countries, but their management�s are far from thinking of these countries as independent states. As a result, they often simply run roughshod over the local governments.

These Russian firms often use their economic power to extract political concessions for Moscow that have nothing to do with the economic activities of the firms themselves. That is clearly illegitimate, but neither these countries nor the West have yet found a way to counter it.

Enterprises quite often seek to achieve their economic and political goals with the direct support of the Russian government. Thus, the Russian government has sometimes failed to pay governments in the region monies that Moscow owes them in order to force these countries to sell off assets to the giant Russian firms.

Neither these countries nor the West has not yet found a formula to deal with these challenges in a timely and effective way. But Moscow itself will not escape a special challenge that such linkages pose to any government that tries to exploit the power of its country's firms abroad.

Indeed, some recent Russian press commentary suggests, Moscow is already discovering that the activities of its private firms abroad can be a two-edged sword.

While these firms may indeed help promote Russian interests, they also may become a constraint on the actions of the Russian state and even force it to do things it does not want.

Dealing with this new phenomenon is not going to be easy for anyone; but recognizing that it exists is certainly a necessary first step.