By Carroll Colley
Washington is on the verge of completing an improbable trifecta in U.S.-Russian relations. In August, the Obama administration helped guide Russia across the finish line for World Trade Organization membership. Congress is now fast tracking an end to the Jackson-Vanik amendment, a piece of Cold War-era legislation that ties trade policy to human rights, and one that has remained a bone of contention between Moscow and Washington for more than twenty years. Finally, Congress is also about to establish "permanent normalized trade relations" with Russia.
So why are relations on the verge of a potentially serious turn for the worse-and perhaps a reassessment of the "reset" in U.S.-Russian relations? Because this legislation will also include the so-called Magnitsky Act, which publicly rebukes the Kremlin for its poor human rights record.
Sergei Magnitsky, an attorney investigating a corruption case involving tax fraud charges against a UK-based investment firm, announced he had uncovered evidence of collusion among police, organized crime figures, bankers, and the Russian judiciary to push the company out of business. In November 2008, Magnitsky was arrested on corruption charges and held for 11 months without trial. He then died in prison under disputed circumstances. An independent human rights organization, Moscow Helsinki Group, has accused Russian security of torturing him. Magnitsky's death provoked international criticism, but a defiant Russian government continues with a posthumous criminal case against him.
The Magnitsky Act will publicly name and shame Russian officials involved in the case, bar them from receiving US visas, and freeze any assets they hold in the United States. Moscow, as you might imagine, is incensed. The Kremlin sees the bill as evidence of continued anti-Russian sentiment in the United States - -Mitt Romney's campaign comments about Russia were grist for this mill -- and as an intrusion by the U.S. into Russia's domestic affairs. The House looks set to vote on the legislation tomorrow, the third anniversary of Magnitsky's death. The Kremlin promises to respond to the bill's passage by retaliating in kind.
The Magnitsky Act won't damage President Vladimir Putin inside Russia. He remains Russia's dominant political figure, his approval numbers are strong, and few Russians closely followed details of this case. Yet, Moscow remains extremely sensitive to international charges of human rights abuses and corruption of government officials. That leaders of Russia's nascent opposition movement have endorsed the Magnitsky Act aggravates the Kremlin even more.
Moscow has already floated suggestions for a 'black list' of US officials, including those connected with the extradition and trial of convicted arms dealer Viktor Bout or with the prison at Guantanamo Bay. Of more concern is the likelihood of increased pressure on U.S. industry operating in Russia, including, for example, unannounced tax inspections of U.S. companies, delayed or denied licensing or registration procedures, and other bureaucratic complications.
While the Magnitsky Act will punish those involved in the case, it won't do much to improve Russia's human rights regime in the near term. Several incidents since Putin's inauguration in May demonstrate that the state continues to use force to weaken the political opposition. Russian officials recently announced the arrest of political activist Leonid Razvozzhayev on charges of orchestrating a series of riots. Razvozzhayev insists that Russian security officials kidnapped him in Ukraine where he was applying for political asylum, transported him back to Russia, and gained a confession from him by torturing him and threatening his children. Politically connected murders of journalists and human rights activists are no closer to being resolved.
U.S.-Russian relations are now likely to enter a period of strain and recrimination, though pragmatism on both sides will prevent a total collapse. The U.S.-Russian "reset" was a good idea at the time and produced significant results, but there is only so much it can accomplish with so much continuing mistrust on both sides.
Carroll Colley is an analyst in Eurasia Group's Eurasia practice.
By Carlos Ramirez
Allegations that WalMart-Mexico's executives bribed local officials to speed up permitting for new stores highlight the issues of corruption in Mexico, but will have little impact. In the short term, the Mexican federal government has announced an investigation regarding the federal permits granted to the retailer. But that seems to be a political response to the growing criticism of inaction by the authorities rather than a serious case against the company. Because the allegations of wrongdoing relate to local-level permitting, any federal investigation will likely turn up little, if anything, of note. Furthermore, with the present federal administration entering its last few months, the investigation will probably fail to reach any meaningful result before its November 30 deadline.
In reality, federal officials are legally constrained from pursuing the allegations. They would first need a formal accusation by a third party before being able to launch any investigation regarding the alleged bribery. Furthermore, the division of powers under Mexico's constitution gives states and municipalities control over construction and most environmental permits, and national prosecutors have limited leeway to investigate local affairs other than when federal crimes are suspected.
A formal investigation at the state and/or municipal levels is even less likely. Since Mexico's transition to democracy, political power has shifted from the once all-powerful presidency toward the 32 state governors and the mayors of some of Mexico's biggest cities. The governors have strengthened their leverage over important decision-making within their jurisdiction through their control of local institutions. Increased budgetary and debt resources, with little related accountability and transparency (which increase the likelihood of corruption), have only reinforced the governors' political clout. Moreover, because the alleged corruption occurred five or six years ago, and reelection is banned in Mexico, politicians who served at that time will no longer be in office, which would further complicate a formal investigation.
Ultimately, both federal and local governments welcome companies that bring jobs and economic activity and that will likely to trump other considerations. WalMart-Mexico is currently Mexico's largest private sector employer with more than 210,000 employees. Local and federal authorities are unlikely to constrain WalMart-Mexico's growth, particularly when citizens cite jobs as among their principal concerns. In fact, federal and local authorities are likely to continue to regard the company as an important contributor to the economy.
In the short term the most likely immediate outcome for WalMart-Mexico is increased scrutiny of its operations by the media, competitors, and NGOs that oppose its presence in the country, but this is unlikely to hamper the company's ability to keep expanding in Mexico.
The episode does raise questions about whether Mexico's next president, to be chosen in July, will be able to tackle the lack of local-level transparency and accountability. Not only do governors face few checks, but the ban on reelection also means that politicians have few incentives to govern with any concern for their longer-term public reputation. If Enrique Pena Nieto from the Revolutionary Institutional Party (PRI) wins the July election, cooperation between federal and local authorities would improve in some areas. Calderon was frustrated with the lack of cooperation from the states on security, leading to tense relations, especially with PRI governors.
But the fact that the PRI controls most states and many municipalities means there are few incentives for a PRI president to seriously attempt to improve transparency. If elected, Pena Nieto is likely to prioritize the need to win support from governors for his own agenda, rather than pursue the complex political reforms needed to seriously tackle accountability and transparency issues at a local level.
Carlos Ramirez is an analyst with Eurasia Group's Latin America practice.
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By Adam Siegel
Colombian president Juan Manuel Santos is likely to open the Sixth Summit of the Americas in Cartagena next month with a standard welcome for Barack Obama and the 33 other leaders of the Western Hemisphere, but maybe there's a more fitting greeting for the U.S. president: "This is an intervention." After decades of partnering with the U.S. to pursue an aggressive, often controversial 'war on drugs,' a number of Latin American leaders say they're ready to discuss major shifts in regional anti-drug policy. Some of them have begun talk of "decriminalization" -- and they want to do it at the Summit, where the United States will have no choice but to talk up the merits of the prohibition policies it has long favored.
The former presidents of Brazil, Colombia, and Mexico generated headlines in 2009 by jointly declaring that "the war on drugs has failed" and calling for decriminalization of marijuana, but the commentary was dismissed in some quarters as an easy argument to make for men no longer politically accountable as heads of state. Since then, however, several sitting Latin American leaders (on both the left and right) have called for candid debate of current drug policy. Among them: Mexico's Felipe Calderon, Costa Rica's Laura Chinchilla, Argentina's Cristina Kirchner, Guatemala's Otto Perez Molina, and Colombia's Santos -- who told Britain's The Observer last year that "A new approach should try and take away the violent profit that comes with drug trafficking... If that means legalizing, and the world thinks that's the solution, I will welcome it."
Santos' caveat -- "[if] the world thinks that's the solution" -- nods to the global reach of Latin America's drug trafficking organizations, underscoring the desire for a debate that includes producers and consumers (who are concentrated in the U.S. and Europe). This distinction is important; indeed, personal consumption of drugs like marijuana and cocaine is already technically decriminalized in Mexico, Costa Rica, and Colombia, while the total number of convictions for personal drug possession in Guatemala and Argentina combined was just 161 in 2009, according to the Inter-American Drug Abuse Control Commission. So when an ex-military general like Perez or a former defense minister like Santos talks about decriminalization, it's not because they care so much about personal liberties. Rather, they have one major goal in mind: choking off the resources that fuel drug cartels and the violence they practice.
As Perez explained recently in advance of a Central American conference on alternative drug strategy sponsored by his administration in Antigua, "drugs are expensive precisely because they are prohibited...traffickers will lose if they cease to be profitable." While no detailed proposal is yet on the table, his idea of decriminalization is clear: create a legal framework to make the production and transport of cocaine legal, at least throughout Central America -- a region through which approximately 80 percent of the cocaine heading to the United States stops. Bringing the business of this $37 billion industry out into the open, it is assumed, would reduce the imperative of traffickers to corrupt public officials and their need to use violence against both governments and rivals for access to the best trafficking routes.
Other leaders, from Vice President Joe Biden to Nicaraguan president Daniel Ortega, have rejected the decriminalization proposals out of hand. Nevertheless, the coordinator of Obama's trip to Colombia recently indicated that the U.S. was "ready to have a good dialogue between all countries to hear their views," though he reiterated that U.S. opposition to any legalization will not change. Of the suggestions offered at the Guatemala conference last weekend, some could be endorsed by the U.S. -- such as the creation of a regional Central American court for trying traffickers that would reduce local corruption and relieve pressure on national justice systems, while others -- mandating that the U.S. take "co-responsibility" and pay individual countries for every drug raid or plant eradicated -- don't stand a chance.
Obama's challenge at the Summit will be to offer policy alternatives to the status quo. Latin American leaders warn that Washington has asked them to take tough choices over the years, and they want to see the U.S. demonstrate the political courage to consider a few of their own. Latin Americans are far from united on decriminalization or any other single solution, but the gathering in Cartagena will make clear that they have become increasingly willing and able to propose new ideas they know that Washington won't like. If Guatemala's Perez Molina gets his way, we'll even see him start discussions on a formal drug transit corridor for moving cocaine between South America and the United States.
Wartime U.S. presidents talk often of the need to "listen to the generals on the ground." In coming years, beginning in Cartagena, Washington can expect its "frontline partners" in the war on drugs to offer up strategies and ideas that U.S. policymakers won't like. Some Latin American leaders may give Obama a break during an election year, but they aren't prepared to wait much longer.
Adam Siegel is a researcher in Eurasia Group's Latin America practice.
LUIS ROBAYO/AFP/Getty Images
By Jenia Ustinova
Before the December 4th, 2011 elections in Russia, no one could have imagined an anti-government rally in Moscow could attract tens of thousands of mainstream middle class students and professionals to march alongside socialists and nationalists. But the election results and the perception of fraud and irregularities spurred massive demonstrations. Those protests have brought politics back into the open after a decade in which President-elect Vladimir Putin was granted almost complete political freedom by Russians who wanted little more in return than stability and rising standards of living. Criticism of the turnout at the March 10 opposition rally (20,000 attended) underscores the dramatic shift in the Russian political context over the last three months.
It was inevitable that the turnout at the opposition rallies would decline from the estimated peak of more than 100,000 who showed up on February 4 in subfreezing temperatures. With Putin scoring a clear win in the March 4 presidential election, the protests lost momentum. After the initial outburst it's hard to maintain enthusiasm, especially when most protesters are asking for greater accountability and transparency, and less corruption. These people want an evolution not a revolution that will disrupt their lives. Like it or not, these are people who have other plans for the weekend than attending protests.
Putin's calculus on how to govern Russia for the next six years will in part assume that the opposition will once again be marginalized as protest numbers dissipate and the Kremlin adopts a divide and conquer strategy. Putin may consider some concessions on electoral reform (for the middle class), and will likely provide additional social spending (for the poor and the regions) before hoping to return to business as usual in Moscow.
But the genie is out of the bottle. The opposition will continue to challenge Putin and the regime. The rallies have already raised questions about Putin's legitimacy that will linger with the general public and with the political elite, weakening Putin. Opposition leaders meanwhile have grown stronger and can now attempt to channel their support into formal organizations and challenge system's hold on power at the local and regional levels.
Meanwhile, the Kremlin's room for maneuver has shrunk considerably. It will attempt to shore up its declining popularity with additional pension and salary hikes, but discontent is now sufficiently strong that any policy misstep or miscalculation by the authorities could spark a powerful public reaction. Any number of events from a national tragedy (such as the sinking of the nuclear submarine Kursk) to prolonged economic dislocation (like the recent financial crisis) could set off new protests.
Jenia Ustinova is an analyst with Eurasia Group's Russia practice.
KIRILL KUDRYAVTSEV/AFP/Getty Images)
By Yael Levine
On Sept. 16, the Kremlin's latest experiment in "managed democracy" ended in disaster when Russia's third-richest man, Nets owner and oligarch Mikhail Prokhorov, made his dramatic exit from the Right Cause party and exposed Russia's behind-the-scenes political dealings. In an abruptly called press conference replete with zingy one-liners, Prokhorov declared that representatives of the president's administration had mounted a raid on Right Cause. Cameras flashed and journalists tweeted as Prokhorov signed and displayed a document ordering the party's executive committee dissolved and its most prominent members fired. Less than a day later, he resigned. But far from auguring change, the hubbub will likely only encourage the Kremlin to consolidate around Prime Minister Vladimir Putin's United Russia party and forgo building even the façade of a multiparty system.
Right Cause was born in 2008 as the product of three liberal parties that had watched their popular support dwindle to 1 percent or less of the voting population by the end of Putin's presidency. When Prokhorov unexpectedly stepped up to head Right Cause in June, everyone assumed he was part of a Kremlin ploy to reinvigorate the party as an avenue for disaffected liberals to let off steam-harmlessly. As poster boy, Prokhorov's job was merely to provide the funds and cache the party required to mount a respectable campaign for the Duma elections this December.
So it was surprising to many when Prokhorov seemed to take being an opposition leader seriously. A Right Cause manifesto he published last month on the party's website (which has been "in reconstruction" since last week) and on his blog was harshly critical of Russia's authoritarian political system and hollow judicial one. He was likewise insistent about adding Yevgeny Roizman, a controversial anti-drug activist and former Duma deputy that the Kremlin disapproved of, to the party's ranks. And he reportedly planned to organize some sort of tent camp for Right Cause supporters -- a throwback to Ukraine's Orange Revolution and to what is probably Putin's worst nightmare. By the time the party congress came around, the Kremlin, it would seem, had had enough. During the first day of the party congress, a split emerged between the pro-Prokhorov faction (some of whom were literally locked out of the day's meetings) and the anti-Prokhorov faction (who seemed to have been sent expressly to hijack Right Cause).
The height of the drama came when Prokhorov called Vladislav Surkov (Russia's answer to Karl Rove) a puppet-master and said that he blocked real political competition. This affront to Russia's democracy "manager" likely went unnoticed by the bulk of the population, since only a sanitized version aired on television. But those who followed the events closely were among Russia's newspaper- and blog-reading elite -- precisely the constituency Right Cause was designed to placate. They watched as a Kremlin that thought it could have its cake and eat it too was chastened. And the Kremlin itself was surely paying attention as Right Cause, a party it had co-opted for public consumption, morphed into an embarrassment that needed covering up. Shaken by the fiasco, the Kremlin will be careful to limit its electioneering efforts in the run up to the Duma elections and to the presidential race in March to pumping up United Russia.
Yael Levine is a member of Eurasia Group's Eurasia practice.
NATALIA KOLESNIKOVA/AFP/Getty Images
By Christopher Garman and Jefferson Finch
At first glance it would appear that Brazilian President Dilma Rousseff has successfully weathered her administration's first political crisis: a scandal that led to the resignation of her chief of staff, Antonio Palocci (his second departure from a Workers' Party government due to accusations of shady dealings). Indeed, it'd be easy to think that it might be smooth sailing for the rest of the year. The president substituted Palocci with Gleisi Hoffman, a senator whom she knows well and who is loyal to her; the market's trepidation about inflation appears to be receding for the moment; and the latest unemployment data, released yesterday, reveal that seasonally adjusted unemployment has reached an all-time low of 5.9 percent. What's more, a public opinion survey conducted by Datafolha in June found that Brazilians' impression of the Rousseff administration had improved a little since March, with 49 percent of respondents saying her government was "good" or "great," compared with 47 percent before.
But Rousseff's political future might not be as rosy. If you dig a little deeper, a different, more challenging picture emerges. The same Datafolha poll found that the share of respondents who think inflation will stay high jumped from 41 percent in March to 51 percent in June. Likewise, the portion of respondents who think their purchasing power will increase dropped from 43 to 33 percent. Meanwhile, the National Confederation of Industry found that 71 percent of the people they spoke to expect inflation to increase over the next year, the highest percent in roughly a decade.
To make matters worse, consumer confidence is starting to drop. Datafolha discovered that 17 percent of respondents think the economy will worsen, almost double the number (9 percent) who felt that way in March. These shifts in popular sentiment may not be dramatic enough to change the political calculus of Rousseff's advisors, some who think her popularity might even rise later this year. But they do hint that the economic foundation of Rousseff's popularity is splintering. As Brazilians feel their purchasing power sapped, the rosy halo around Rousseff will likely start to fade. That said, the president's downhill slide will probably be gradual. After all, we're talking about higher inflation, not runaway inflation, and slower growth (just under 4 percent for 2011), not recession.
Christopher Garman is head of Eurasia Group's Latin America practice. Jefferson Finch is an associate in the practice.
EVARISTO SA/AFP/Getty Images
By Ian Bremmer and David Gordon
Individual hackers and organized crime organizations have targeted businesses for years, but cyberattacks have rarely created political risk. They do now. The centralization of data networks -- both in energy distribution (the move to the smart grid) and information technology more broadly (the shift to cloud computing) -- is increasing the vulnerability of states to potentially debilitating cyberattacks. As governments become more directly and actively involved in cyberspace, geopolitics and cybersecurity will collide in three major ways.
First, new cyber capacity allows governments to project power in a world where direct military strikes are much more costly and dangerous. There have been plenty of stories about well-funded efforts from inside China to manipulate access to the Internet, but it's the almost-certainly state-sponsored Stuxnet attacks on Iran's industrial infrastructure that provide the clearest early glimpse of what tomorrow's carefully targeted state-sponsored attack might look like. When a missile is launched, everyone knows where it came from. Cyberattacks are a very different story.
Second, we'll see more cyber conflicts between state-owned companies and multinational corporations, providing state capitalists with tools that give them a competitive commercial advantage. China and Chinese companies are by far the biggest concern here. Throw in Beijing's indigenous innovation plans, which are designed to ensure that China develops its own advanced technology, and this is probably the world's most important source of direct conflict between states and corporations.
Third, there is the increasing fallout from the WikiLeaks problem, as those sympathetic to Julian Assange unleash attacks on governments and the corporations that support them in targeting WikiLeaks and its founder. In fact, the principal cybersecurity concern of governments has shifted from potential attacks by al Qaeda or Chinese security forces to radicalized info -- anarchists undertaking a debilitating attack against critical infrastructure, a key government agency, or a pillar of the financial system. Whether attacks are waged for power (state versus state), profit (particularly among state capitalists), or for 'the people,' (as in the WikiLeaks case), this will be a wildcard to watch in 2011.
On Friday, we'll talk about Top Risk no. 4: China -- and why its policymakers will frustrate much of the international community this year.
Ian Bremmer is president of Eurasia Group. David Gordon is the firm's head of research.
JIM WATSON/AFP/Getty Images
The 11 people arrested and accused of spying for Russia have titillated the tabloids and reminded Cold War veterans of the good old days. But they won't do much damage to U.S.-Russian relations. In fact, the two governments are getting along much better at the moment. There are three major reasons for this, and all of them have to do with the view from the Kremlin.
recently ailing economy is now feeling much better. The financial crisis
inflicted more damage on Russia
than on most other emerging markets, in part because of a steep drop in oil
prices. When Obama first proposed a "reset" in U.S.-Russian relations, Moscow was hemorrhaging
reserves, and Kremlin officials hadn't arrived at any clear idea on what to do
about it. Prime Minister Vladimir Putin was traveling the country assuring local workers
that complacent oligarchs, not state officials, were to blame for the
volatility, and that their government would ensure that all would again be
well. President Dmitry Medvedev and his more western-oriented advisors were
beginning to look like convenient scapegoats should the public become restive
and Putin run out of businessmen to punish.
Things have changed. The economy has picked up thanks to some skillful economic management and a rise in oil prices out of the danger zone.
is feeling much better about its neighborhood. The Orange Revolution is now a
distant memory. In 2004, a presidential election in Ukraine lifted the Putin-endorsed
Viktor Yanukovych over Viktor Yushchenko. But Ukrainian nationalists and
several Western governments charged fraud, and the race was re-run. Yushchenko
won the do-over, fueling suspicion and hostility in Moscow. But his leadership earned little
public confidence during his five-year tenure, and Ukraine's latest election elevated
Yanukovych, who has now taken his country's bid to join NATO off the table for the foreseeable future.
Alex Wong/Getty Images
By Eurasia Group analysts Allyson Benton and Patrick Esteruelas
As the Mexican government continues to face serious public security problems caused by the nation's drug cartels, fears are mounting that investors may lose confidence. In Mexico's current economic climate, where GDP could contract by as much as 8 percent in 2009, according to the OECD, any potential downward pressure on the economy sets off alarm bells.
Since he took office in 2006, President Felipe Calderon has pursued a twofold strategy against organized crime. The government has deployed the military to key drug trafficking regions in the north and along the west coast to root out cartels. It has also pushed important institutional reforms through congress to help make the country's police forces and judicial system more efficient. Nonetheless, the level of narcotrafficking violence has grown nearly threefold during Calderon's time in office, from an average of 2,195 deaths in 2006 and 2007 to an estimated 6,000 total deaths expected in 2009. In addition, drug traffickers appear to be moving into other illicit activities like extortion rackets and kidnapping rings, as the number of such reported crimes has risen dramatically in the past two years. These rising public security problems could suggest that Mexico is heading along the same path as Colombia, but there are some important distinctions to consider.
A few factors, in particular, make Mexico's state of affairs quite different from the situation in Colombia. First, the government still maintains control over its territory and has not ceded ground to narcotraffickers at any time. Second, although the fight against the cartels has resulted in higher rates of violence, the hostility remains largely contained in a few states and among narcotraffickers vying for improved positions within the cartels or between them. Third, Mexico's drug trafficking violence on a per capital basis remains significantly lower than Colombia's. Even after years of President Alvaro Uribe's successful hard-line security policy against Colombia's narcotraffickers, violence in this country remains quite high: There were a total of 16,000 reported homicides in 2008 in a country of 45 million people. In Mexico, in contrast, narcotrafficking related violence is expected to cause about 6,000 casualties in 2009, in a country of more than 100 million. Fourth, Mexico's narcotraffickers have not targeted civilians in order to support a campaign of fear against the government, even if they do continue to target public officials specifically involved in the fight against them.
In Colombia, in contrast, the nation's narcotraffickers embarked on a public fear campaign that targeted civilians and political elites, even if they had little to do with narcotrafficking or the fight against it. Finally, and most important, Mexico's narcotraffickers have no unifying political agenda. In contrast, Colombia's narcotraffickers -- in particular, the Revolutionary Armed Forces of Colombia (FARC) -- originated out of a drive to see their left-leaning interests represented in the nation's political and party system, and they still claim to have such political aims. A unifying political agenda, however tenuous, helps reinforce the structural integrity and thus durability of groups when under pressure from the government.
In the end, the stark contrasts between Mexico and Colombia explain why investor confidence in Mexico does not appear to have waned as a result of the country's public security woes. As long as President Calderon stays firm in his stance against organized crime, investors will continue to base their judgments about Mexico on the government's capacity to push through badly needed fiscal and economic reforms rather than the level of narcotrafficking violence.
FERNANDO CASTILLO/AFP/Getty Images
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.