Why outlook for US-Russia 'reset' looks bearish

Missile defense disputes, mutual suspicion, and US and Russian campaign rhetoric are all breeding acrimony – and the uncertainty is having an economic impact in Russia.

Despite the best efforts of President Obama to tamp down controversy, the already troubled US-Russia relationship is looming as a potentially acrimonious foreign policy issue in the coming US presidential election.

Mr. Obama came into office pledging to "reset" ties between Moscow and Washington after several years of deep chill, and there have been some real accomplishments, including a comprehensive nuclear arms reduction accord, New START, which will slash atomic arsenals on both sides by about a third.

But in recent weeks, the "reset" has begun to look shaky. A longstanding rift between Russia and the US over Pentagon plans to build a missile defense shield in Europe has moved into a troubling phase and an accidental slip involving a hot microphone revealed that President Obama's strategy for dealing with Russia is at sharp odds with that of his likely Republican challenger Mitt Romney.

At a nuclear security conference in Seoul late last month, journalists overheard a private conversation in which Obama asked outgoing Russian President Dmitry Medvedev to put off the expected angry clash over missile defense until after he's safely reelected in November, when he will have "more flexibility" to find common ground.                           .

Mr. Romney pounced, not merely at the appearance of secret diplomacy by Obama, but seemingly at Russia itself.

"[Russia] is without question our No. 1 geopolitical foe, they fight every cause for the world's worst actors, the idea that he has some more flexibility in mind for Russia is very, very troubling indeed," Romney said in an interview with CNN. "The idea that our president is planning on doing something with them that he's not willing to tell the American people before the election is something I find very, very alarming."

While Romney later walked back those remarks, allowing that Russia is an "opponent" rather than an enemy of the US, the battle lines are clearly drawn. On one side is a Republican challenger who sees the "reset" as unjustifiable coddling of a hostile and authoritarian Russian regime, soon to grow harsher with the Kremlin return of foreign policy hard-liner Vladimir Putin.

On the other side is Obama, who advocates a "dual track" relationship, in which Washington conducts business-as-usual with Moscow on big strategic, political, and economic matters and expresses its criticisms of Russia's track record on democracy and human rights through other channels.

Longstanding ups and downs

Attitudes toward the US have fluctuated among Russians since the USSR collapsed more than 20 years ago. During the 1990s, the Kremlin sought to align itself with Western policies, but over the past decade, under now president-elect Vladimir Putin, it has carved out a more independent stance, often irritating Washington with uncooperative acts, such as two UN Security Council vetoes of resolutions aimed at international intervention in Syria's crisis.

But most Russian experts point out that occasional quarrels over big issues like NATO expansion and missile defense – which often have a distinct cold war ring to them – are more than compensated by many examples of Russia's progressive integration into the world community over recent years. Russia is a member of the G8, it sits on the Council of Europe, and late last year it finally joined the World Trade Organization. The military confrontation that once divided Europe into armed camps has dissipated, most former Soviet allies are now members of NATO, and this month Russia even offered its former enemy the use of an advanced Russian airbase in the Volga region of Ulyanovsk to help ease the strain of resupplying embattled NATO forces in Afghanistan.

A poll carried out by the independent, Moscow-based Levada Center earlier this month found that 42 percent of Russians think relations with the US are either "friendly," "good neighborly," or "normal and peaceful," while 47 percent thought they are "cool" or "tense" and just 4 percent said they are "hostile."

During his recent election campaign, Putin played heavily on anti-Western themes, including what he described as the US drive to attain "absolute invulnerability" at the expense of everyone else.

Business observers say that spike in anti-American attitudes, brought on by Putin's rhetoric, may have caused a surge in capital flight from Russia. According to official figures, just over $84 billion left Russia in 2011. But in the first three months of 2012 – which coincided with the election campaign –capital flight was more than $35 billion, a huge jump.

"Any uncertainty, such as we saw during the election, can lead to a jump in capital flight," and a worsening investment climate for Russia, says Valery Dmitriyev, an expert with the BKS Financial Group in Moscow. "If there is some negative remark from the US about Russia, or an initiative by our government that's unwelcome in the US, it can make things worse. It's all connected."

As Moscow nervously eyes the US electoral struggle, in which its stakes are clearly all on Obama, it's hard to explain why Obama's hand-picked emissary, US ambassador Michael McFaul, appears to be at the center of a Kremlin-instigated campaign of harassment. Mr. McFaul has complained that his phone accounts are being hacked, and that he's being harassed by a state-run TV network. Last week, Russian Foreign Minister Sergei Lavrov slammed him for "arrogance" when he restated US missile defense policy in an interview.

"This is probably inertia left over from the Russian presidential election, which did a lot to polarize Russian-American relations in the public mind," says Dmitry Suslov, an expert with the independent Council on Foreign and Defense Policies in Moscow.

"The real targets of all this are Russian opposition leaders and human rights activists, and McFaul is just caught in the crossfire. But it's unfortunate, because McFaul is not only the official representative of the US, he is closely tied to Obama and the policy of 'reset.' So any blow against him means a blow against Obama as well," Mr. Suslov adds.