#8 - JRL 7064
Analysis: Russia straddling the divide-II
By Sam Vaknin
UPI Senior Business Correspondent

SKOPJE, Macedonia, Feb. 13 (UPI) -- Russia's affinity with the United States runs deeper than the confluence of commercial interests.

Russian capitalism is far more "Anglo-Saxon" than Old Europe's. The federation has an educated but cheap and abundant labor force, a patchy welfare state, exportable natural endowments, a low tax burden and a pressing need for unhindered inflows of foreign investment.

Russia's only hope of steady economic growth is the expansion of its energy behemoths abroad. Last year it became a net foreign direct investor. It has a vested interest in globalization and world order that coincide with America's. China, for instance, is as much Russia's potential adversary as it is the United State's.

Russia welcomed the demise of the Taliban and is content with regime changes in Iraq and North Korea -- all American exploits. It can -- and does -- contribute to America's global priorities. Collaboration between the two countries' intelligence services has never been closer. Hence also the thaw in Russia's relations with its erstwhile foe, Israel.

Russia's population is hungry and abrasively materialistic. Its robber barons are more American in spirit than any British or French entrepreneur. Russia's business ethos is reminiscent of 19th century frontier America, not of 21st century staid Germany.

Russia is driven by kaleidoscopically shifting coalitions within a narrow elite, not by its masses -- and the elite wants money, a lot of it and now. In Russia's unbreakable cycle, money yields power which leads to more money. The country is a functioning democracy but elections there do not revolve around the economy. Most taxes are evaded by most taxpayers and half the gross national product is underground. Ordinary people crave law and order -- or, at least a semblance thereof.

Hence President Vladimir Putin's rock idol popularity. He caters to the needs of the elite by cozying up to the West and, in particular, to the United States -- even as he provides the lower classes with a sense of direction and security they lacked since 1985. But Putin is a serendipitous president. He enjoys the aftereffects of a sharply devalued, export-enhancing, imports-depressing ruble and the vertiginous tripling of oil prices, Russia's main foreign exchange generator.

The last years of former President Boris Yeltsin were so traumatic that the bickering cogs and wheels of Russia's establishment united behind the only vote-getter they could lay their hands on: Putin, an obscure politician and former KGB officer. To a large extent, he proved to be an agreeable puppet, concerned mostly with self-preservation and the imaginary projection of illusory power.

Putin's great asset is his pragmatism and realistic assessment of the shambles that Russia has become and of his own limitations. He has turned himself into a kind of benevolent and enlightened arbiter among feuding interests -- and as the merciless and diligent executioner of the decisions of the inner cabals of power.

Hitherto he kept everyone satisfied. But Iraq is his first real test. Everyone demands commitments backed by actions. Both the Europeans and the Americans want him to put his vote at the Security Council where his mouth is. The armed services want him to oppose war in Iraq. The intelligence services are divided. The Muslim population inside Russia -- and surrounding it on all sides -- is restive and virulently anti-American.

The oil industry is terrified of America' domination of the world's second largest proven reserves, but also craves to do business in the United States. Intellectuals and Russian diplomats worry about America's apparent disregard for the world order spawned by the horrors of World War II. The average Russian regards the Iraqi stalemate as an internal American affair. "It is not our war," is a common refrain, growing commoner.

Putin has played it admirably nimbly. Whether he ultimately succeeds in this impossible act of balancing remains to be seen. The smart money says he will. But if the last three years have taught us anything it is that the smart money is often disastrously wrong.