Will President Trump be good for Russia?

by Chris Weafer

While many in America, and in many other countries around the world are openly fearful of how the Trump presidency may impact them and their way of life, in Moscow there is a clear sense of relief. That relief is not so much out of a firm conviction that President Trump will be good for Russia but more from a sense that Russia has dodged a bullet. Relations between Washington and Moscow would either have deteriorated under a Clinton presidency or, at minimum, not improved. Ahead of the late January inauguration of Donald trump, there is at least a sense that conditions are being put in place which will allow for calmer or pragmatic relations and this will be good for investment and the economy.

But, is that assumption overly naïve, i.e., the default assumption in a bitterly contested election, or can both countries now enter a new friendlier phase?

There is no doubt that Russia, in particular the perception of Russia in the western media, has suffered considerable collateral damage during the latter part of the US presidential election. The Kremlin was all but accused by US security agencies of hacking into the Democrats’ email system and that translated as an indisputable fact in the media. President Putin was vilified as deliberately interfering in the election process. The reality is that no matter what Trump may personally want, it will not be easy to simply suppress all that bad feeling and pretend it never happened. The relationship between Washington and Moscow is today as bad as it has ever been since the end of the Soviet Union. Many people believe that the two sides are close to entering a new Cold War while others now accept that to be already the case.

So let’s assume that President Trump will, at least initially, be more open to rebuilding a better relationship with President Putin. What can he actually do to make that happen?

The first point to make is that while Trump will make all key decisions, the direction of his administration’s foreign policy is expected to be orchestrated by Vice President Pence and by his Foreign Secretary. They are expected to take a more pragmatic stance and will likely have to negotiate with Congress and other vested interests in order to progress the administration’s policy priorities. As we heard in the election campaign, these are almost entirely domestic. President Trump will have to engage in a lot of old-style political horse-trading with Congress and with government agencies to get support for his more important domestic policies, such as immigration control and trade protection. Geopolitical policies may have to be given up, diluted or changed to facilitate such deals.

Syria is still expected to be the most contentious and dangerous issue both sides will have to deal with in the near future. A calming of events in the Levant in early 2017 seems like wishful thinking at this stage so both sides will still be engaged in the conflict. President Trump cannot afford to be seen weak, either in front of his military or internationally, in what is likely to be his first geopolitical test. The question is whether Russia and America will start to cooperate, or stay out of each other’s way or whether there may be an increasing risk of a conflict?

There is also a question mark over how much involvement the new Administration will wish to have regarding Ukraine. There is no evidence that President Trump has any personal interest in events in Ukraine. Very likely he will be more inclined to make clear it is Europe’s problem to solve and let Germany and France take a lead in negotiations with Kyiv and Moscow. Here also the Vice President is expected to have more of a hands-on role than the president.

The previous hope for even a first step reduction in financial sector sanctions by the EU in January now seems completely extinguished. The accusations over Syria and the demonizing of Russia in the US election have almost certainly put paid to that. The EU is expected to roll over sanctions for another six months and review again in June. Any adjustment then also seems like wishful thinking at this stage but of course a lot can happen in a six-month period, not least of which will be the French Presidential election and the UK either triggering the Brexit and/or facing an early general election.

One potentially positive factor may be that the big US corporations who have important business in Russia may get better access to the new administration than they had with the Obama administration. Many businesses which have profitable operations in Russia or who rely on Russia as a source of critical materials are expected to try and press for at least a more pragmatic and less confrontational relationship for the next four years. After all, one of Trump’s consistent messages over the past two years is that he is pro-business.

The relationship between both sides may also depend on whether the escalating show of strength between Russia and NATO continues. Moscow very publicly sailed part of its northern fleet through the English Channel and is regularly accused of buzzing NATO airspace with military aircraft. NATO has been building forward bases in the Baltic countries and also deploying navy ships near Russia’s coasts. A step back by both sides would be a clear sign of the hoped for pragmatism while an escalation, especially in the early days of the new US administration, will be taken as a very bad signal by investors and businesses.

Beyond any initial enthusiasm for a Trump victory by the political nationalists and media commentators in Moscow, the real concern may be that Trump is completely unknown and untested in geopolitics; a black box. It is unknown how he may engage with China over that country’s expansion in the South China Sea or indeed how he would have reacted to the events in Ukraine in March 2014. That will worry the Kremlin as much as leaders in other capital cities.

In reality while geopolitical perception is very important, especially for big international businesses worried about reputation as much as financial risk, whether Russia becomes an attractive investment location again will be decided by the actions of the government in Moscow and not in Washington. The country has survived the last three years of sanctions and low oil revenues remarkably well. But resilience, a not inappropriately overused word to describe the economy, is not enough.

Russia needs to get back to the targeted 3.5-4.5 per cent annual growth the country needs to boost investment and restore both business and consumer confidence. Making that happen is almost entirely in the hands of the Kremlin administration and the government. The list of what needs to be done is very clear. In that sense the more important election will be that scheduled for March 2018, and the policies prioritized by the administration after that, and not the election just completed on the other side of the world.