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Washington and Moscow: Back to the Cold War?

It's just a month into the presidency of George W. Bush, and U.S. relations with Russia look to be heading for a big chill. Capturing headlines is the announcement on Feb. 20 that the FBI had charged one of its own senior agents with allegedly spying for Russia for 15 years. But that comes on top of several blasts of cold war rhetoric from Administration officials. First, in early February, CIA Director George J. Tenet called Russia a threat to U.S. security. Then, on Feb. 14, Pentagon chief Donald Rumsfeld declared Russia a "part of the [nuclear proliferation] problem"--a key reason the U.S. is pushing to build a national missile defense shield to protect itself and its allies.

What's behind the verbal assaults? Political tactics, partly. Russia fiercely opposes Bush's pet defense project on the grounds that it could start a new arms race, so the new U.S. President's team is wasting no time in undermining Russian President Vladimir V. Putin's position. But there's more to the rhetoric than that: Putin is working hard to revamp Russia's ailing defense industry and boost conventional arms exports to former client states around the globe. Big sales of Russian military hardware to China and India, as well as plans to renew defense trading with Iran, North Korea, and Libya, are causing deep concern in the Bush Administration.

ARMING CHINA. The numbers are already impressive. After plunging to $1.8 billion in 1993, Russia's arms exports last year hit a post-Soviet era high of $4 billion, compared with $12 billion in direct foreign military sales by the U.S. About 70% of Russia's exports in 2000 went to China, which snapped up 10 sophisticated Sukhoi fighters, eight Sukhoi combat trainers, a laser-guided defense system, antiship missiles, and a Russian destroyer. Now, Russian defense sources say China is considering a purchase of Russian-made Airborne Warning & Control System (AWACS) planes. Such technology could put Beijing in a position to weaken Taipei's dominance over the skies above the Taiwan Strait, analysts say.

Iran is just as big a concern for the U.S. Risking sanctions, Russia late last year tore up what had been a secret agreement reached by the Clinton Administration and Yeltsin's Kremlin to ban new sales of weapons to Iran. Now, Russian defense sources say a deal seems imminent that could unlock more than $1.5 billion in contracts previously put on ice. Iran wants to buy antiaircraft systems and Sukhoi fighters as well as mines, torpedoes, and antiship missiles to modernize its maritime weapons system. "If sales of maritime weapons go through, that could directly threaten the U.S. Navy and its allies in the Gulf," says Pavel Felgenhauer, an independent military analyst in Moscow.

U.S. officials are also concerned about Russian transfers of nuclear technology to Iran. Since 1995, Russia has been building a civilian nuclear power plant in Bushehr, Iran. Russia's support for the plant "represents a serious problem," says a senior Administration official. That's because Washington fears some Russian technology could be leaked to develop Iran's nuclear missile capabilities. Russian officials deny their government is violating international treaties on nuclear nonproliferation.

Putin is likely to have a hard time convincing the Bush team that he has a serious argument against missile defense if he keeps supplying the likes of Iran. Even some Russian analysts criticize him for arming countries that could one day use them against Russia itself. For now, though, Putin seems intent on securing short-term gains in hard currency and political clout from Russia's comeback in the global arms business. U.S.-Russian relations are likely to suffer further as a result. A fresh scandal involving alleged kickbacks to Italian government officials could destabilize the ruling center-left coalition before parliamentary elections this spring and give an extra boost to opposition leader Silvio Berlusconi. Italian daily La Repubblica reported on Feb. 16 that Telecom Italia's 1997 purchase of a 29% stake in Telecom Serbia for $416 million involved alleged kickbacks of up to $15 million to officials in the government of then Prime Minister Romano Prodi's center-left coalition, according to sources close to former Yugoslav President Slobodan Milosevic. Telecom Italia was then state-owned.

Now, opposition leaders are attacking Foreign Minister Lamberto Dini and demanding a parliamentary investigation into the deal. Dini claims the Foreign Ministry had no knowledge of the Telecom Italia negotiations. He told La Repubblica that he believes he is being "framed by the U.S. Central Intelligence Agency" for having opposed U.S. policy in the Balkans. In 1997, officials at the U.S. State Dept. and the U.N. criticized the telecom deal, claiming that hard currency from Telecom Italia helped shore up Milosevic and later fund his war in Kosovo. Serb officials are now launching their own investigation.

If the inquiries turn up serious revelations, the center-left's already long-shot hopes for a win in Italy's parliamentary elections would be all but killed. Evidence of kickbacks would also confirm that Italy is still a long way from cleaning up corruption, despite efforts by crusading magistrates since the early 1990s.

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