Monday, June 11, 2007

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Drezner gets interesting results from Vladimir Putin

Hey, remember that Foreign Affairs essay I wrote called "The New New World Order?" If you don't, that's OK -- but it appears that Vladimir Putin has been reading it. From the Financial Times' Neil Buckley and Catherine Belton:

Russian president Vladimir Putin called on Sunday for a radical overhaul of the world’s financial and trade institutions to reflect the growing economic power of emerging market countries – including Russia.

Mr Putin said the world needed to create a new international financial architecture to replace an existing model that had become “archaic, undemocratic and unwieldy”....

His speech on financial institutions suggested that, along with an aggressive recent campaign against US “unilateralism” in foreign policy, he was also seeking to challenge western dominance of the world economic order.

Mr Putin said 50 years ago, 60 per cent of world gross domestic product came from the Group of Seven industrial nations. Today, 60 per cent of world GDP came from outside the G7.

“The interests of stable economic development would be best served by a new architecture of international economic relations based on trust and mutually beneficial integration,” Mr Putin said.

The Russian president said there was increasing evidence that existing organisations were “not doing a good job regulating global economic relations”.

“Institutions created with a focus on a small number of active players sometimes look archaic, undemocratic and unwieldy. They are a far cry from recognising the existing balance of power,” he said.

What's interesting about this speech is that Putin is correct in describing the state of the world, but not necessarily correct in his belief that "a new architecture of international economic relations" is going to serve Russia's interests.

Consider that Russia is already a member of one powerful club -- the G-8. Any realistic reform of global economic governance is going to give China and India more power than Russia relative to the status quo, because Russia still has the great power trappings it inherited from the Cold War. Indeed, unless we're talking about energy or nuclear weapons, Russia would be a less powerful actor after any reform effort.

Putin probably does not believe this, given sustained interest in the Russian economy and the comfort of high oil prices. Russia, however, should be very wary of what it wishes for -- it might just get it.

UPDATE: Brad Setser offers up a different new new world order:

This new international order is just dominated by big national institutions -- SAFE and the PBoC, the Bank of Russia, the Saudi Arabian Monetary Agency, the Abu Dhabi Investment Authority and the like -- not big international institutions. The international financial institutions of the old international economic order -- the IMF for example -- are still around. But they don't have as much influence as they once did.

posted by Dan on 06.11.07 at 10:19 AM


It's also interesting that even Putin seems to still think that "G-7" is a meaningful measure, implying that Russia's *not* a natural member of the group.

posted by: Jacob T. Levy on 06.11.07 at 10:19 AM [permalink]

Chi bono? If the Russians were truly interested in reforming international institutions to reflect the balance of power they wouldn't be holding the arcane Security Council structure hostage by threatening veto power whenever the issue arises. Putin's remark is a platitude, nothing more.

posted by: Patrick Roath on 06.11.07 at 10:19 AM [permalink]

Am I missing something? Or is it equally possible that Putin or his staff have been reading Krasner's 1976 article?

posted by: arthur on 06.11.07 at 10:19 AM [permalink]

Vladimir Putin is not thinking of the changes that Dan is thinking of. He is thinking of rebalancing, yes, but only in Russia's benefit. In his mind, Russia once more is a central player in the world.

Regarding investments in Russia, I think the permanent undercurrent of capital escaping from Russia has lately become stonger. Several oligarchs are diversifying and quietly moving out of Russia. Oil firms for one have been reducing investments in Russia.

posted by: jaim klein on 06.11.07 at 10:19 AM [permalink]

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