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07.09.07
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Russia Profile Weekly Experts Panel: Flexing Muscles At The IMF
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Introduced by Vladimir Frolov
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Contributors: Stephen Blank, Ethan S. Burger, Nikolas Gvosdev, Vlad Sobell
When Moscow announced the resumption of patrols by Russian strategic bombers, much noise was made in the Western press about Russia’s Cold War-style muscle-flexing.
But this rather innocent training exercise does not say much about the growing influence and effectiveness in international affairs that Russia has been able to muster thanks to its increasing economic might.
In a development that surprised many, Russia last week sought to block the candidacy of French politician Dominique Strauss-Kahn to be the next Executive Director of the International Monetary Fund (IMF).
Strauss-Cahn was nominated by the European Union, which together with the United States holds a controlling 85 percent of IMF voting rights. Under an informal deal between the two, the EU nominates the IMF Executive Director while Washington traditionally nominates the head of the World Bank. Until a week ago nothing seemed to threaten Strauss-Kahn’s candidacy.
Then Moscow questioned his competence to lead the IMF at the time when the institution is undergoing an identity crisis and has to deal with the effects of the international credit squeeze The U.S. mortgage crisis has put pressure on the financial systems of the developing countries that are experiencing another outflow of liquidity on par with the 1997 crisis that crushed the economies of Asian tigers and nearly bankrupted Russia.
Russian IMF director Alexei Mozhin stated that nothing in Strauss-Kahn’s record demonstrated he has skills to deal with such daunting problems.
Observing the tradition to have a European lead the IMF, Russia then nominated a well-known Czech economist, Joseph Tosovsky. A former Czech prime minister and head of the Czech Central Bank, Tosovsky currently serves as director of the International Clearing Bank in Switzerland.
Russia also questioned the right of the EU and the United States to decide among themselves who would lead the international financial institutions, claiming the right of the emerging economic giants – Brazil, Russia, India and China - to have a direct say in this process.
Although Moscow controls only 2.7 percent of the IMF votes, it has been able to secure the backing of the other BRIC nations in support of Tosovsky’s candidacy.
Surprisingly, the United States endorsed Russia’s idea of competitive elections for the IMF head. Although the EU has refused to budge on Strauss-Kahn’s candidacy, it made a major concession by declaring its willingness to consider nominating non-EU nationals to the post in the future.
Russia may well score an important international victory.
What does this development say about Russia’s role in international finance and international economics? What are the real reasons behind Russia’s move to torpedo the EU’s candidate? Does Russia want to claim the role of the IMF reformer? Is it thus positioning itself as a leader of the BRIC nations? Would the United States want to quietly support Russia against the EU? Why did the EU make such a swift concession on its historic prerogative to nominate the IMF director? What does this tell us about Russia’s ability to use its newly gained soft financial power to affect foreign policy outcomes?
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Vlad Sobell, Senior Analyst, Daiwa Research Institute, London
Moscow’s surprise proposal to nominate Josef Tosovsky for the post of the IMF director tends to be seen as yet another manifestation of an “increasingly resurgent” Russia. In this vein, some commentators have cast it in excessively Machiavellian tones, for example as a ploy to curry favor with Czech public opinion in the context of the controversial plans to locate U.S. anti-missile defenses in the Czech Republic (a large majority of Czechs already oppose the deployment of these facilities in their country).
Moscow is also being depicted as opportunistically exploiting the growing frustration among the newly emerging powers with the existing inequitable arrangements. As Vladimir Frolov suggests, Russia’s move can be seen as an attempt to position itself as an informal leader of the BRIC club.
While it is impossible to conclusively invalidate such interpretations, I believe that we should go for the simplest and patently obvious motive: Tosovsky’s nomination is yet another manifestation of the secular shift in the balance of global power away from the West and towards the other emerging powers led by Russia and China.
Having shaken off communism, these civilizations are catching up with lost time and, supported by their surging economies, are establishing their proper place in the global system. Theoretically, the West should be pleased with this development, as it vindicates its fundamental belief that capitalism (and not communism) is the way of the future.
Since communism was a deformation, preventing these countries from playing their appropriate roles in the global system, their exclusion from the Bretton Woods system could be accepted as its logical and natural consequence. However, with communism gone, Moscow is now signaling that time has come to normalize/modernize the system in line with the changing realities on the ground.
While I would play down any conspiratorial interpretations, it cannot be denied that Russia’s nomination of Tosovsky is an audacious manifestation of its newly found assertiveness and a masterpiece of Machiavellian skills.
Fully adhering to the convention, Moscow has nominated a European. But in a stark departure from the rules, it has opted for a “New European.” This highlights the inequity of the EU nominee being selected by the big boys (and a girl) of the “Old Europe,” who obviously would not dream of looking eastwards for a suitable candidate.
But why is the EU ignoring the heroes of post-communist transition, such as the former Governor of the National Bank of Poland Leszek Balcerowicz? Russia has thus succeeded in making itself look more democratic and politically correct than the EU.
Furthermore, as a citizen of New Europe, Tosovsky is theoretically closer to Washington’s heart than the archetypal “Old European” Strauss-Kahn. In this respect, it is the United States that Moscow has put in an uncomfortable position. Washington surely would be nonplussed by having to support France, which “betrayed” it over Iraq, while spurning a citizen of that part of Europe where the United States still has genuine friends. But, then again, backing Tosovsky would mean siding with an “authoritarian” and “resurgent” Russia against its supposed allies in Western Europe.
The story is also full of delightful ironies. Here we have the former communist oppressor nominating and ex-central banker and prime minister of a formerly oppressed country to a key financial post in Washington – to lead an organization that Moscow once saw as the fulcrum of U.S. imperialism. At the same time, the Czech government and President Vaclav Klaus feel obliged to ridicule Russia’s initiative and profess to enthusiastically back the official EU candidate, Strauss-Kahn.
Evidently, French and Old European nationalism is acceptable, but New European nationalism is a sin. Official Prague, which once was more orthodox than Moscow itself, is now exposed as a blind follower of its new “imperial master” in Brussels.
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Ethan S. Burger, Scholar-in-Residence, School of International Service, American University, & Adjunct Professor, Georgetown University Law Center, Washington, D.C.
Indeed, we need to take a fresh look at the effectiveness of the IMF and multinational organizations. Russia's proposal may have the unforeseen positive consequence of stimulating some fresh thinking, which is usually a positive development. Tradition should not be the driving force in deciding the issue of who should be in charge of these vital institutions.
Not only the IMF, but also the World Bank and UN, taken in their entirety, have not produced optimal results over the last 50 years, nor have their operations been models for well-managed entities. Though some branches and offices of these organizations have performed quite well, corruption and the lack of any control over expenses have been well-documented.
I must admit that I don't know a lot about Czech economist Josef Tosovsky other than what I read about him in newspapers, but at first glance he seems better qualified to lead the IMF than Dominique Strauss-Kahn, who is certainly a capable individual. Last time I looked, the Czech Republic was in the European Union (and NATO), so I don't see why the proposal should feel threatening to Western states and not be given serious consideration.
It would be a shame if this important issue were to be resolved simply as a contest between the French and Russian recommendations, although I am a great fan of Nicolas Sarkozy, who has demonstrated great creativity in his cabinet choices and policy proposals to reinvigorate France.
Personally, it seems appropriate if the new IMF head came from a non-OECD/non-EU country, provided s/he were properly qualified and had the right demeanor. Possibly the selection of someone from Chile or Singapore might send a good message to the world. If the individual had a degree from a major Western university, it might reassure the skeptics.
Furthermore, since so many positions at these organizations are sinecures held by overpaid members of their countries' elites who often don't pay their fair share of taxes, either at their job location or to their home country, perhaps it would be a good idea to relocate all three international organizations.
Perhaps the IMF should be relocated to Jakarta or Lagos, the United Nations to Jerusalem or Kigali, and the World Bank to Baghdad or Hanoi. This would reflect the changing nature of international politics. With globalization and improvements in air travel and telecommunications, moving these bodies would mean they would be closer to where they could do the most good.
Such relocations might have the added advantage of leading to personnel turnover so that only the more dedicated individuals are interested in such jobs. Of course, consultants could telecommute or be brought in from abroad to contribute to areas where expertise was lacking.
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Nikolas Gvosdev, Editor, The National Interest, Washington DC.
It is important to put this development into context. What transpired this past week is yet another sign that post-World War II global order, predicated upon the economic and political dominance of the Euro-Atlantic world, is giving way to a more multi-polar global system, where other actors are gaining in importance.
There is no guarantee that Russia could maintain any position as leader of the BRIC coalition within the IMF or other international organizations. At present, it suited India, China and Brazil to follow Moscow’s lead. But does Russia really see itself in the terms laid out last year by Wang Yizhou, deputy director of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, as a country that is "non-Western, non-European and non-member of the developed world,” the terms Wang used to describe BRIC?
I think what we have seen with the run-up to the IMF election is the emergence of Russia as the “spoiler” state—by itself unable to decisively shape any particular outcome, but at the same time capable of serving as a “pole of attraction” for others with concerns so as to form temporary coalitions of convenience. But these will always be shifting and somewhat unstable—Russia aligned with China and India one day, Europeans the next day, and with the United States another time.
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Stephen Blank, The US Army War College, Carlyle Barracks, PA
(Dr. Blank’s views as contributed to Russia Profile do not represent the position of the U.S. Army, Defense Department or the U.S. Government)
Undoubtedly this episode testifies to Russia's aggressiveness in moving to implement President Vladimir Putin's repeated statements about changing the architecture of international economic relations and about claiming a role to be among the deciding voices in these policies.
But it is also another example of a blunt, heavy-handed move simply for the sake of asserting Russia's importance and power. It remains to be seen whether the IMF will actually undertake new policy departures to satisfy Russia's interests rather than those of other powers.
Certainly Russia's move is not about the qualifications of the various nominees, for Strauss-Kahn's economic leadership credentials go back a long way. Perhaps Russia may assert leadership for the BRIC nations for now, but it will soon be superseded by China. Frankly, I do not fully understand the motives behind Washington's support for Russia and the EU's surrender, but if Washington thinks this will help mollify Moscow and that it gains by wounding the EU, it is gravely mistaken.
Success will only embolden Russian leaders to continue to behave aggressively simply for the sake of gaining in status, and not for responsible policy. Their own economic policies are ample testimony to that point.
Perhaps Moscow wants to pose as an economic reformer in the IMF, but its past policy suggests no basis for doing so other than to score political points. And while this shows it can use its power (there's nothing soft about this) to gain points, it remains to be seen what it actually gained other than boosting its reputation for being a bull in a china shop. As for leadership in the BRIC, perhaps it gains somewhat here now, but those gains will be evanescent. |
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