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Medvedev's U.S. Tour A Mixture Of Business, Politics


Russian President Dmitry Medvedev (left) with California Governor Arnold Schwarzenegger in San Francisco on June 23
WASHINGTON -- Russian President Dmitry Medvedev has arrived in the United States for a visit aimed primarily at wooing U.S. investors he hopes will help launch Russia's technology sector into the 21st century.

Medvedev begins his trip in California's Silicon Valley, the global epicenter of cutting-edge technology companies and home to deep-pocket investors looking to expand their portfolios.

Under the northern California sun, the Russian leader will meet with representatives from computer giant Cisco Systems, which reportedly has pledged to "dramatically" increase its investment in Russia.

Medvedev will also sit down for talks with Google and Microsoft, according to Craig Barrett, the former CEO of technology giant Intel, which Medvedev has tapped to help build Russia's own version of Silicon Valley in the town of Skolkovo, just outside Moscow.

Speaking in Russia at last week's St. Petersburg International Economic Forum, Barrett said Medvedev's time in California would give him the chance to "see some good examples...that will help to sharpen his resolve" to diversify Russia's energy-centric economy.

'We Have Taken Steps'

Medvedev's own message last week to Russian and foreign investors at the economic forum was blunt. Russia, he said, had "changed."

"The creation of favorable conditions for investors is perhaps our most important task," he said. "We have taken steps in that direction in the past, although we haven't been successful in everything. But today we put this goal at the center of our actions."

California Governor Arnold Schwarzenegger
Among other overtures to foreign investors, Medvedev announced plans to cut capital gains taxes, slash the number of companies with restrictions on foreign investment, reduce the number of state-owned companies, and crack down on police corruption.

Medvedev is expected to press that message during his trip to California, where he'll also give a talk at Stanford University and meet with Republican Governor Arnold Schwarzenegger.

Alexander Shokhin, who heads the Russian Union of Industrialists and Entrepreneurs, told "The New York Times" that before Medvedev heads to Washington on the third day of his visit, aircraft giant Boeing is expected to sign a contract to sell $3 billion worth of 737s to Russia.

The United States is Russia's eighth-biggest trading partner, with $18.4 billion in goods changing hands annually.

But Medvedev may find that U.S. investors are still wary of the Russian business climate. In the latest Global Competitiveness Report, Russia dropped 12 spots, to 63 out of 137. Transparency International's corruption index ranks Russia near the bottom.

Changes Must Occur

Matthew Rojansky, deputy director of the Russia and Eurasia Program at the Carnegie Endowment for International Peace, says policy changes need to happen before investors will fully commit to Russia.

"You have Medvedev writing articles and giving speeches and saying all the right things about Russian modernization, but you don't have a tremendous amount of robust policy content there," Rojansky says. "You have a couple of discrete ideas -- you have the Skolkovo City of Innovation, the 'Silicon Valley for Moscow' idea. And they've put a lot of political and economic capital into that. But you don't have any really deep-seated efforts to reform the Russian economy writ large, or the Russian political system, which underpins the economy."

But Medvedev can still expect a warm political reception in Washington. Ties between the United States and Russia have grown notably stronger in the past year. Since Obama came to office in 2009 pledging a "reset" in Russian-U.S. relations, the two leaders have signed a new nuclear arms control agreement, presented a united front against Iran in the UN, and forged broad cooperation on Afghanistan.

Shift To Politics

Rojansky says that while Medvedev's U.S. visit is being billed "as sort of a technology, innovation, modernization, trade kind of visit," in Washington the trip will shift focus to more political issues.

"They have a pending START agreement, which hasn't been ratified by either side yet," he says. "They have the 1-2-3 civilian nuclear cooperation agreement [establishing guidelines for bilateral nuclear deals], which is both a security issue and an economic issue. You have pretty significant cooperation on trans-shipment to Afghanistan, because the Russians have recognized a shared interest and stability in Afghanistan.

"And you have the U.S. and Russia beginning to work together more on counternarcotics, which is the Russians' big concern in Afghanistan. You have the situation in Kyrgyzstan, of course. So you have a wide range of very clear, very classic security issues that I think will probably be first on the agenda."

Among the political items on their agenda, Medvedev and Obama are expected to adopt a joint declaration on the situation in Kyrgyzstan, where the interim government estimates as many as 2,000 people may have been killed in ongoing clashes between ethnic Uzbeks and Kyrgyz. The violence has also imperiled a scheduled June 27 referendum on legitimizing the rule of the interim government.

Discussing the crisis in a phone call earlier this week, U.S. Secretary of State Hillary Clinton and Russian counterpart Sergei Lavrov encouraged Kyrgyz authorities to conduct the referendum according to international standards and pledged to coordinate humanitarian assistance to the Central Asian nation.

written by Heather Maher, with contributions from Richard Solash in Washington
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