25 Years of US-Russia Relations: Afternoon Sessions

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American Today News

– Ladies and gentlemen, if you could take your seats, please, so that we can begin the next panel. Okay. – Well, ladies and gentlemen, I think we can go ahead and get started, here. And I’m Dan Russell, and I’m happy to have a very distinguished panel here to speak about the commercial and economic part of US relations. And I’d like to commend Angela and Andy for including this on the program. This is not a group we usually do this with, and I think it’s certainly an important part of the relationship that perhaps doesn’t get as much attention in this town as it deserves. And I think we wanna try to cover a couple of questions today, first about the state of the Russian economy, but I think even more importantly, to get some first-hand views from businessmen who’ve been very, very involved in Russia for the last couple of decades. And then to talk a little bit about the role of the private sector and what dialogue can do in terms of buttressing the relations.

I’ll introduce everybody individually. You’ve got all their bios as we start with the speakers, but I think I’d like to make a few comments at the beginning to sort of frame the discussion, particularly on Russia’s economy. And I’d like to start with five basic points here. And all of these are fairly obvious I think, but I think they’re worth repeating. First, Russia’s economy has adjusted to the twin shocks of lower oil prices and sanctions better than most observers expected. Real GDP contracted about three percent in 2015, with a sharp drop in national income and consumer demand. But it easily could have been worse, and Russia’s move to a flexible exchange rate, I think, deserves much of the credit for buffering the shock. Second, sanctions, since we’re in Washington, that’s always a part of the discussion.

I think the impact of sanctions were significant, particular the sectoral sanctions that limited access to foreign capital. But let’s be clear that the oil price collapse was the main driver in Russia’s recession. And to put it another way, sanctions reinforced the impact of the decline in oil prices. And by the way, Russia’s own counter-sanctions, banning imported foodstuffs from the European Union, the United States and other countries drove up food prices by 15 or 20 percent. Now, all of that said, I think it’s important to keep in mind that the easing of sanctions would have a limited effect on economic recovery, and in terms of metrics, I turn to the World Bank. The World Bank did an alternative economic forecast scenario for 2017 with sanctions lifted. And that alternative scenario posits a GDP gain of less than one percent this year, basically from the expected rise in investor and consumer confidence, but no appreciable benefit from a sanctions lift from 2018 and beyond. And that’s what brings me to my third point: Russia’s economic growth model woes predate the 2014 oil price collapse and imposition of sanctions. Russia’s economic performance never fully recovered from the last global financial crisis, and growth has been dropping steadily since 2011.

So, if we go back to 2013 and we look at the numbers, you’ll find that growth had dropped to percent, despite the fact that the average price of oil was $108 a barrel. So fourth is: Russia’s recovery is going to be slow. Their recession has, appears to have bottomed-out, and we’re gonna see very modest growth this year, probably in the one to one and a half percent range. But the Russian leadership’s goal of four-plus percent economic growth in the near-term is simply unrealistic.

Which brings me to my last and fifth point on the economy, and probably most importantly, that the elephant in the room remains Russia’s lack of comprehensive structural reform. And the unlikelihood of such reforms before the 2018 presidential election. At its core, a structural reform program would reduce the state’s role in the economy and increase competition. Russians know exactly what’s to be done. We’ve all seen plenty of Russian plans for reform throughout the Putin years. We’re going to see another one shortly, when former deputy prime minister Alexei Kudrin rolls his out, later this spring, but I think the important point here is that without structural reform, at least in my opinion, the bottom line is that growth forecasts above two percent in the medium term seem unachievable. And with that, I’d like to turn to our first discussant here on the panel, who is Feodor Voitolovsky. He’s a rising star in Russian academia. He’s the head of the political section at the Center for North American Studies at IMEMO. That is the Institute of World Economy and International Relations.

He also teaches at AMGEMO, the other alphabet soup, very important academic institution, Moscow State Institute of International Relations. Feodor is probably best known as one of the co-authors of IMEMO’s strategic global forecast, 2030. And its annual forecasts on Russia in the world economic and foreign policy. And with that, Feodor, over to you. – Thank you very much, Dan. I’m very grateful to Georgetown University for inviting me, and I’m really puzzled by Angela and Andrew, who have asked to speak about economic issues, because I’m a political scientist. It’s much easier for me to talk about IMF treaty, or START treaty or everything like that, but this time, especially in this, you know, company, brilliant company of professionals from the economy, it’s a hard task for me, but I’ll try to do my best.

So I want to focus on a historic perspective and you know, on the development of economic ties. Not only between modern Russia and the United States, but I want to try to concentrate attention on a longer-term period, because to my mind the logic of sanctions, the logic of current economic attitudes towards Russia, ah, in the United States nowadays, reminds a lot from the period of Cold War era and reminds a lot from attitudes and politics different administrations used against the Soviet Union. Principally different country. Principally different, and principally different economy. In the Cold War era period. What is different? Different ideological motivation of the Soviet Union, different social, economic, and political system. At least, market economy was not the basement of the Soviet economy; it was absolutely different economy. But at the same time, the United States are using principles of, you know, sanctions and punishment for inappropriate behavior towards not, you know, one of the principle economies, or major economies of this world, but very significant regional economy with global ties, and we’re highly interdependent with other countries, including American partners and allies.

Including the EU and NATO members. What is giving background for such assumption for me? First of all, from the beginning, Soviet/American economic relations, in terms of trade investment, were developing in a very different manner. If we compare it to, ah, to relations with modern Russia. But the politics always were, you know, prevailing over economic motivation. And this logic is continuing to develop. What gives me such, you know, background? First of all, from the beginning, when the United States didn’t have official, diplomatic relations with the Soviet Union, unofficially economic ties developed. And in 1924, the Amtwork Company, cooperative company for developing trade within the Soviet Union and the United States developed. But it worked only for six years, because in 1929 and then in 1930, the United States applied first sanctions against trade with the Soviet Union. They even reached to embargo and, ah, had very negative, you know, influence. Not only on economic ties between two countries, but also on political relations.

Only in 1937, relations restored. And the two countries signed an agreement on trade relations. And this was the beginning of the positive period, first positive period in official Soviet and American economic ties. It lasted until 1947, and you know, this period and the wave of positive relations each time, you know, it changed with very negative cramp in mutual trade, mainly trade and economic ties, mainly caused not be economic reasons, but mainly by political. The paradox is that this logic continues. After the Second World War, when the United States helped a lot to the Soviet Union with land lease programs and supported strongly, you know, Soviet’s economy with not only military stuff but also raw materials, technologies, and different goods. In 1947, the Department of Commerce of the United States denounced this trade agreement and, you know, this period which, ah, lasted for more than 25 years, was one of the hardest periods in Soviet/American trade. The Commission on Export Control has been established, sanctions were applied, sanctions, different kinds of sanctions on the technology sector, on trade, and only in 1972 in the developing, under the logic of detente, relations started to develop in a normal way, and you know, the agreement between two countries has been prepared.

But it changed soon, with opposite logic. Of sanctions and pressure because of Jewish migration from the Soviet Union and prohibitions which the Soviet government used, and all of you know Jackson-Vanik, and it and its consequences. Then there was a very long-term negative period which lasted during, at first, ah, during the Carter administration and the Reagan administration, but it has changed with another positive period, which started in 1987 and lasted, to my mind, until 1993 or something like that. The change, political change in Russia has been supported strongly with the economic romance with the United States, very short period and very small in terms of figures, in terms of figures of real trade and investment. But very significant for developing of principles, of market economy in Russia and developing of political, you know, a political system of Russia and its economic background. American advisors played a special role in the development of the Russian economic system.

First, American enterprise, and I believe some of the people who came there in the 1990s are sitting here. They started a lot of new beginnings in Soviet Union and in Russia, and you know, this positive period lasted for some time, but because of political risks in an unstable Russian political system, relations and economic relations were decreasing. The next positive period was again motivated by political, by political decisions and official course. And in 2001, after Russia supported the United States after 9/11, and gave support in Afghanistan and relations between the two presidents developed positively, another period of development of trade and investment and the common interest towards each other has started. It decreased, it degraded with the degradation of political attitudes and the political relations on high official levels and on military political levels. But with policy already set, in 2009, another new positive wave has started, another positive cycle in Russian/American economic relations, and it lasted until the Ukrainian crisis, 2013. What was main features of this period? First, exponential growth of trade.

Because from a very, you know, tiny figures, it mounted to figures which have become significant for the Russian economy. In 2011, it amounted to 42 billions of dollars which is not a significant figure in terms of American foreign trade, but it was significant for Russian foreign trade and the United States has become, had become 10th trade partner for modern Russia. In 2013, the figure was approximately the same. 41 and a dot-two billions of dollars, and that figure of foreign direct investments in, American foreign direct investments in Russia was about 10 billions of dollars, which is also significant for Russian economy. Maybe it’s absolutely, you know, not significant figure for American flows of foreign direct investments, but for Russia again, it was significant.

What has happened after the Ukrainian crisis? Now we have only 20 billions of dollars in our trade turnover. Foreign direct investments, American foreign direct investments in Russia decreased to less than three billions of dollars. Russian foreign direct investments in the United States are approximately the same, but it is absolutely incomparable to amounts of trade, for example, the United States are having with China. For obvious reasons. And absolutely incomparable to the amounts of trade that Russia used to have before the crisis. With the European Union, it was approximately about 400 billions of dollars, and with China, all of you know that the United States are having 600 billions of dollars in trade turnover, and with China, from Deng Xiaoping’s policy of openness and reforms, American policy, even including sanctions after Tiananmen, even including sanctions after the Taiwan crisis in 1996, was always based on economic rational motivation, and not on political logic.

With Russia, the situation was opposite from the beginning and the paradox is, it’s developed in the opposite direction not only during the Cold War period, but after it. And it was highly dependent on political decisions and political attitudes. So we are facing the problem when the principle feature of this problem is that economic background did not become a buffer for normal relations when a political situation is getting into crisis. That’s it. – Thank you very much, Feodor, for that historic perspective on sanctions. I’d just add a note: you know, we all see very low numbers in terms of foreign direct investment and trade turnover, and certainly there’s been a decline. But I think one thing, many of us who worked on this for years have been stymied by those numbers because with the development of the global economy and global firms, those numbers are not very representative of actual trade and investment. And in fact, Ernst and Young took a crack at this before the crisis, to look backwards at 2012, at who are the biggest investors in Russia? And if you look in FDI, on the official Russian government site, you’ll see Bahamas, Cyprus, not necessarily big players.

But Ernst and Young looked at the metrics of job creation and infrastructure creation and the United States was roughly about a quarter of foreign investment in Russia, and the European Union together was about 60 percent. So if you took the United States, the European Union and Japan, you got to around 95 percent of foreign investment, and I think that’s fairly representative. When we go to the St. Petersburg international forum, for instance, and you look at CEOs who are interested in being there and participating, I think, again, you see more representative, where about three-quarters of them are from Europe and about a quarter of them are from the United States. But with that, we’d like to turn to the business part of our panel, here. And I think building on what Feodor said, because this is, this conference is about 25 years of the US/Russia relations, it’s important to look backward as well as to look forward. And I’d, I will tell you that, of the four friends sitting here, I think we were all in Russia in the early 1990s and well into the 2000s, so it’s interesting to see, I think, what attracted all of you to invest and do business in Russia in the first place, and how you navigated previous crises, because we certainly had a crisis in ’98, and in 2008, you can argue this one is different with the political overlay, but there’s some lessons to be learned there.

And also, how you see certainly the short and long terms. And we’re going to start with Mike Calvey. Mike is the founder and senior partner of Baring Private Equity International and Baring Vostok Capital Partners. Mike founded Baring in 1994, and he’s been involved in nearly all the investments of both funds since their inception. He previously worked at the European Bank for Reconstruction and Development, and Solomon Brothers, as well, in both cases looking at energy investments in Eastern Europe and Russia. And with that, Mike. – Thanks, Dan. So, I got involved in investing in Russia differently from many of the other people. I didn’t study Russian in university. Didn’t have, I don’t have Russian ethnic roots or anything else. I, you know, grew up in the Midwest and went to work for a bank in New York on oil and gas projects and was moving to their London office when my boss joined the EBRD, Ron Freeman, as their chief investment officer.

So he brought me to the EBRD. It was in 19, August of 1991, the month when the coup happened; an interesting time. I thought briefly that I made a really stupid career move. But you know, then with Yeltsin and all the changes that happened, it turned out to be a brilliant time. But you know, why I specifically decided to move to Russia, I remember meeting Bob Strauss, former US ambassador, in the late Soviet period, and he was talking to a group of young, you know, young people like me. And he said: if I was a young man, and I had just $10,000 to my name, I’d move to Russia and bet it all on Russia. But if I was an old man and I had $10 million, I would still only bet $10,000 on Russia. (laughter) But I, you know, I was young and had only about $10,000 so it seemed like the right move. And I moved to Moscow in 1994, helped to raise one of the first investment funds, you know, together with some of the other people that are up here, now, and you know, 23 years later, still actively investing in Russia.

Baring Vostok has invested, over that time, more than three billion dollars into Russian companies. About 74 Russian companies, including many that became, you know, famous and leading companies in their sectors. Like Vimpocom, one of the leading mobile phone operators. Yandex, which is the, like the Google of Russia. European Medical Center. Vito, One-C, STS Television Channel and many others. You know, I guess I’ll just make sort of two, two groups of comments. One is about what’s the outlook now, for the economy and business and what role has business played or does business play, foreign business, in the overall relationship. So I’m not gonna repeat the comments which Dan made, all of which I agree, in comparison with the crises in 1998 and 2008, which we saw, which were very steep crises followed by a V-shaped recovery. This time, you know, the downturn has been less steep and the expectation from everyone is that the recovery will also be less pronounced. So people don’t expect very fast economic growth coming out of this, but it’s still a good environment, I think, to invest because economic statistics don’t tell the whole story.

And I’ll give three examples. This is something similar to what Vladimir Ma said last night, but there’s a secular change that’s happening in economies around the world that’s driven by the internet and changes in customer behavior and the same things that are happening everywhere in the world are happening also in Russia. So we see, really, transformative business growing very fast, you know, in the online marketplaces, E-commerce, and even the way businesses find customers or suppliers and transact, and some of these things actually have a negative effect on the economy, like Vladimir said last night, but they’re, they create outstanding businesses that are taking advantage of the opportunity, and they’re good for the economy overall. So we own 32 businesses now, and the average growth rate and revenues, the average growth rate and revenues in our portfolio last year was more than 30 percent, in ruble terms.

So really, you know, opportunities to invest in significant sized companies that are growing as fast or faster than their peers, anywhere else in the world. So that’s one thing. The second this is that, for the first time in the 23 years I’ve been involved in Russia, inflation is coming down towards a low, single-digit number, and interest rates are also coming down significantly. The central bank rate is actually much higher than the rate at which banks borrow, er, take money from customers in deposits and pay them deposit interest rates. So for the, you know, Russia has been an outlier if you compare it to similar sized emerging markets like India or Brazil, it doesn’t have any long-term domestic institutional capital. There were no mortgages, there was no life insurance market, there was no domestic asset management, and the main reason was that if you could get 10 percent interest rate in Rubles putting your money in a bank, guaranteed by the Russian government, why would you take any risk to invest in shares or something else like that? But when the interest rate you get is only six percent, and inflation is four percent or something like that, and the trends are they’re both going down, people start to look elsewhere to make higher returns.

So this is really a game-changer. We see a number of industries that are huge in other parts of the world that are really at an infancy still, in Russia, and which over the next 10 years, have potential for huge growth. So that presents, also, an interesting, I think, investment opportunity. And the last thing is about foreign direct investment and what’s changed as a result of the sanctions. So obviously, sanctions have caused, have been part of the reason why foreign direct investment in Russia fell very sharply, compared to, say, 2012 or 13. But I think there’s also a change in the sourcing of new foreign direct investment. I don’t really, I don’t agree with what Dan said about, historically, obviously foreign direct investment was dominated by European, North American strategic investors. Today, you see more and more Chinese and also you see a lot of interest from Arab countries in the Middle East. But the type of foreign direct investment which they can do is different. It’s different in the industries that they comprise. So in the, you know, some of the biggest investors from the US were, you know, global brands and consumer goods manufacturing or retail, or you know, some of the world’s biggest natural resource companies, and I think what you see, you know, you don’t see such a big activity from the Chinese companies.

They don’t have global consumer brands and retailers outside of the internet. So you see the big internet players from China, Alibaba is the number one E-commerce company in Russia today, JD.com, various others, they’re growing very fast, but outside of the internet, you know, you see it more in manufacturing, infrastructure, natural resources, which were areas which were not high on the priority list for US or European strategic investors. And from the Middle East, they’re mostly looking to invest in big Russian companies, so it’s more like portfolio investment, rather than strategic investment.

But I think my sense is that, you know, the Chinese especially are very slow to ramp up. They’re signing lots of protocols to invest, but not actually investing a lot of cash, but that’s, it’s starting to build momentum and it’s going to become, you know, much bigger over time. So, about the role of business. Obviously, the companies that we’ve invested in have helped to transform Russia; it’s made it much more open and modern and transparent economy and they’ve changed their customer’s lives by offering better quality products or services. But besides that, I think that the role we’ve played has also, you know, made Russia better and it’s good for US/Russia relations as well. And when we first started investing, in the 1990s, money in companies was often made around the company but not inside the company. You know, it was by having your own trading relationships or something else like that. People were undermining companies as a way to make money, because nobody really believed in making money from the shares. And you know, we’ve really helped to change that.

We and other foreign investors like us have helped to change that with a number of very high-profile success stories that have, you know, in their turn, inspired lots of other entrepreneurs or other people. Seeing the power of keeping the money inside the company, being transparent about the profits, establishing the right kind of governance, where management is paid, you know, big money for big results but it’s all done transparently. As opposed to, you know, non-transparency and where people are not paid, they’re encouraged to look for money elsewhere. So the right sort of corporate governance practices that work everywhere else in the world has worked to make the economy, you know, more transparent. And I guess the other thing we always do is, we try to benchmark our companies against their best peers everywhere else in the world.

And so, you know, we and other people like us have helped Russian companies develop a culture where they’re constantly looking around the world for who’s doing things better. And what, you know, what best ideas can be copied. And Russians are great at this. We find, you know, when the incentives are right, Russian managers and entrepreneurs are brilliant at moving very quickly. Maybe even better than most other countries. Especially, you know, adapting to or responding to problems or changes, and that sort of culture kind of, also, I think is like a ripple effect that, you know, has been adopted across most of the successful companies in Russia. And that’s, you know, foreign investors like us have really been, have really played an instrumental role, I think, in seeing that happen.

And I, you know, it’s obviously a tragedy to all of us, you know, watching the failure of US/Russia relations now. And you know, I think it’s, the US policy is long overdue for a critical reassessment and some changes, and it’s really extremely sad watching what’s happening now in Washington, which probably, probably, you know, is going to make it impossible for any sort of fair and objective reassessment to take place, and so, they way we look at it, you know, we sort of assume that, sadly, the situation, you know the sanctions will probably remain in place for a very long time, and you have to assume if you’re going to make money investing in a Russian company, you assume that you’re buying it now at a discount.

You have to assume that you’ll be selling it also at a discount. And the only way you’re gonna really make money is through fundamental growth of the company. And thankfully, there’s a lot of companies that are growing really fast, you know, with unique businesses, great management teams, and you can make excellent returns compared to many other places, just from that fundamental growth, but I think that a, sort of, you know, cold and sober assessment of the situation doesn’t give any encouragement about what should be taking place on the political side. And so, you know, we’re pretty pessimistic about that. – Thank you, Mike. Next up, we’ve got Drew Guff, who is the managing director and founding partner of Siguler Guff, which is a private equity investment firm.

In the 1990s, Drew formed a Russian Partners company, one of the earliest private equity funds in post-communist Russia. And today, Russian Partners actively manages a portfolio not only in Russia, but in other former Soviet republics. Drew? – Thanks, Dan. As, ah, I’m Drew Guff, and Mike Calvey always tells the story of when I used to call him sometimes on deals in Russia, his wife would answer the phone and I would say: hi, this is Drew Guff calling for Mike. Is Mike there? And she would turn to Mike and say: Mike, (speaking Russian) Drew-Guff is calling you.

(laughing) So I go by Drew-Guff, sometimes, in the familia Drew-Guff. This really brings, I have to say, you know, I’m kind of struck by a sense of nostalgia up here, because first of all, it’s very rare that the four of us get together. At least, the three of us, and I got to know Peter later, were the kind of three crazy Americans who went over to Russia in the late ’80s, early ’90s, really on this sense of adventure. The same country that brought you communism was the same country that was pulling it down and rebuilding, remodeling what was a failing economy. And the amount of energy and passion and dynamism that it took to do that is breathtaking. You rarely see, I’m an investor who invests across all the emerging markets in private equity, and you rarely see that amount of forward momentum and energy at any given time, and seeing that, I know, was something that was really attractive to me. And I’m sure, as well as for Mike and Charlie. So we really could write the book, I think, of kind of the inside story of the 25 years of post-communist history.

Whether or not we would ever have the bad judgment to write that book is another question, but it would be extremely entertaining because I, (laughing) I’ve got the goods on them, and they’ve got the goods on me, and we’ve got the goods on lots of other people, but Mike is right: if you look at how we’re all long-term investors, and it’s very different from the hedge fund world. The hedge fund world, people buy stocks, you can do it from London or New York behind the safety of your computer screen, and your money is hot. It can flow in and in a crisis it can flow back out. What’s rare about this group, and we rarely assemble on a panel, which is giving me this intense sense of nostalgia here, is that private equity money is long, very long-term. Tends to be shorter-term in the States, because there’s more liquidity in investments. Capital markets work better. But in Russia, it’s quite long-term investments and a lot of the household names of companies that provide services and products, that has changed the life of everyday, ordinary Russians, have come from the, you know, probably, see, that’s how exciting it is: people are throwing chairs already.

(laughing) But those, I’d say it’s probably about four billion dollars that this group has put to work in Russia. Actually, Mike, if you’re three, it’s about five billion dollars, that this group has put to work. And some of those companies are really well known. Mike and Charlie have been in Yandex, which everybody uses, there are, you know, we started the TV channel, MTV Russia, Music Television Russia. It was revolutionary at the time. We owned it together with Viacom. STS was one of Mike’s investments. If you want to have your blood tested and you go to medical diagnostics, in vitro, In Vitra is one of our companies. Matiditya Medical Centers, Radio Siem, (speaking Russian), all those companies that are kind of household names were things that grew up with the investment and backing of these crazy foreign investors who raised these private equity funds. And for 20 years, the returns on those funds had been really excellent. If we benchmark private equity returns around the world and up until February, up until the Ukraine crisis, 2014, the returns on those private investments were really excellent.

They were always top quartile, and investors really knew who to go to to make those investments. So the, I would describe where we are today as kind of a pause. There’s a break in the action. Interest in Russia right now, I would say, is, ah, neutral or muted. Partly because of the politics, but also because of another phenomenon that we see going on in Brazil. If you were to look at the macro picture of Russia and Brazil and you took the names off and you just looked at GDP growth, you looked at reliance of the economy on exports, if you looked at worker productivity, you know, if you looked at, the budget is one area which differs greatly, but in foreign trade, foreign investment capital flows, stock market trends, and you took the names off, it really would be a kind of Coke and Pepsi taste test. Brazil looks a lot like Russia and vice-versa right now. And in that sense, those that invested before 2014, those that invested before the fall in the price of oil, those that invested before the commodity crisis, have seen a depreciation of the value of their investments.

And we’re now at a new resetting level. I think we’ve got a fairly stable ruble again, we’ve got a fairly stable real in Brazil. And the two economies are very much dependent on the makeup of their, of the economy, that is largely commodity-dependent. So, same goes for Canada, same goes for Australia. We’re seeing a kind of reset on the investment landscape. But I think there will be a hangover for some time, regarding attracting new investment to Russia. I can’t disagree with any aspect of what Dan said in summarizing where the Russian economy is. I think, you know, unless there is meaningful, structural economic reform, Russia can’t get to the growth rates it needs, now, to really attract large capital flows.

I do think, in terms of the business relationship between the US and Russia, previous to this administration, CEOs were discouraged from going to Russia, investing in Russia, going to St. Petersburg for the International Economic Forum. That’s gone. And so I think you’ll start to see those that can do business there and those that want to do business there will feel like the shackles are off. But I think that the larger picture, how investible is Russia right now? Is it doing the things that it needs to do to attract investors back, particularly foreign investors back? I think we’re not quite there yet, and I don’t think we’ll see anything happen until after the 20, after the 2018 election. But so I would highlight one area where I think Russia has had a real leading edge, and as we go back and look at our portfolio, Mike’s portfolio, Charlie’s portfolio, and we look at: what have been the real successes? In the past five or 10 years? It’s true, not just for Russia, it’s true for China, it’s true for India, if you look at the greatest successes, the biggest growth rates, they were businesses that didn’t exist before, at all.

It’s not a converted juice plant, it’s not a cement factory, it’s not a bank. It’s in the area where people have really made the transition to the digital economy. So how people search for things, how people find things, how people order things, how they pay for things, how they have them delivered. All of that is a secular change that’s changing life in the developed markets and also in the developing economies. And if you look at the returns from the Yandexes or the Epans or the, or any of the, or Alibaba for that matter. The biggest returns in emerging markets have come from technology and the shift to the digital economy. Today, you’ll find tremendous numbers of Chinese in Silicon Valley, tremendous numbers of Indians, and more and more Russians and Eastern Europeans, and Ukrainians and Belarusians, in Silicon Valley. And they’re now grafting on to kind of the pyramid of commercialization of developed economy businesses. Partly because they see greater opportunities there. But they also occupy an interesting zone that is an interesting buffer area. And we’ll continue to see, I think, the best, brightest spots coming out of Russia for the next five years, and former Soviet Union, will be these companies that really are using human capital for their growth.

And not being dependent on the commodities sector. Not being dependent on natural resources. So I think human resources will continue to be the story. Some of which is leaving permanently. Some of which is occupying this kind of global citizen status, which is investible and are creating some really good, high-level, well-paying jobs in Russia and former Soviet Union. – So, thanks. Thank you, Drew. Now, we’ll shift gears a little bit and go to Peter O’Brien. And Peter is on the board of directors of TMK, and for those of you who don’t know TMK, TMK is one of the largest Russian private sector companies, with international reach.

It’s one of the leading global manufacturers of steel pipe for the oil and gas industry, and it operates production facilities, not only in Russia, but in the United States, Canada, Romania, Oman, Kazakhstan, and it also has research and development centers in Russia and the United States. So TMK came to the United States as a foreign investor, much like companies go to Russia. Now, Peter, like everybody else up here, has lots of experience in Russia.

He’s the chairman of the board of Trans Fin M, which is a Russian railroad and transportation leasing company. Earlier in his career, he was the vice president of Troika Dialogue Investment Bank. Which, talking about Drew’s nostalgia, we all remember Troika Dialogue from the ’90s. And he went on to hold other positions, including executive director of Morgan Stanley in Russia and vice president for finance investments of Rosneft. Pete? – Thanks, Dan. So, to start with your first point, how did, how did I sort of get started and interested in Russia, I was fortunate enough to have a phenomenal language teacher in high school, from junior year of high school, that taught the Russian language, and I continued it in university. And shortly after university, I was a junior appointee to the treasury department under secretary Benson, and was asked to do a visit with the administration team in February ’93, to Vancouver.

Some of you might remember the first summit between Yeltsin and Clinton in Vancouver. And I was asked to help organize a few press events with my Russian colleagues, and I realized that my Russian was really bad. So I thought it had been really good after six years of studying it, but I realized it was really bad. So that was, together with my Irish guilt complex, that was the real motivation for me to move to Moscow. Which, in the end, I did full time in 1995. And ended up working, my first real job there was for Troika Dialogue, as Dan mentioned, which was a great, young, small investment bank with a few other expats, but largely Russians, at a very early stage in the development of Russian capital markets. Then, after the crisis in ’98, an important point, I also met my wife there in 1995. We were married there in 1998. We now have two kids. We’re back living in the States now as our kids finish up high school. But after leaving in ’98 for a little while, I came back to Russia for Morgan Stanley and then ended up moving to Rosneft in 2006 to help do their IPO.

We raised $11 billion of equity at a very high evaluation in 2006, and then a year later, this might shock you guys if you’ve forgotten, Drew, but we did a $22 billion bridge financing deal at 25 basis points over LIBOR. So, the price of money has obviously moved quite a bit for Russian creditors, irrespective of sanctions. A couple points, I think one of the things many of us have always said in living, and trying to work, and help advance the economy in Russia is: wouldn’t it be great to have a long period of low oil prices? Wouldn’t that actually force some of the changes that are probably necessary? Well, we have had that now for some time, and I think we’re all hopeful that, whether it’s that or the 2018 election, and the lack of growth recently and maybe the need to address some domestic issues. We’re all hopeful that these issues will come together over the next year or two and help continue to improve the economy in Russia and make it more amenable to foreign investment. On the oil sector, just a couple thoughts. I had a recent discussion with a senior executive at a super major, and was asking about their Russian business, which he had been a part of since the early ’90s, and this gentleman always talked about how much potential Russia had, and how many phenomenal geologists there were and engineers and they were really, really, very bullish about, even if it was very long-term, the potential for their business in Russia.

But he said to me a couple weeks ago, he said: you know, we’ve shut our office. We had one very talented staff member we had to let go, because we just couldn’t get it through the business plan this year, and in the end, at these oil prices, which we think we’ll be at for some time, we’ve got a lot more to do in North America. And we’ve all lived the last 25 years looking at big headline deals in Russia, and a lot of them have been oil sector or financing for the oil space. And we’ve probably all benefited from the budgets that those large companies have and the attention that they can draw in the media, et cetera, when things are going well, but they’re probably not gonna be there for quite a while, and that’s not because of sanctions.

It’s because, economically, it’s just not interesting. Whether it’s the oil price or just maybe some of the risks in Russia. Second sector I’d like to talk briefly about is the financial sector. When I joined Morgan Stanley in 2000, Russia was less than a three or four million dollar business for Morgan Stanley, globally. And that’s just on the investment banking side. And I moved there from London in 2002, we were up to five million. When I left for Rosneft, we were at almost 150 million. And that’s investment banking, so that’s advisory and underwriting revenue. It’s very high-margin. And Russia was actually the third most profitable, in the amount of millions of dollars, franchise of Morgan Stanley in all of Europe. So it was only behind Germany and the UK, in 2006. Unfortunately, it declined substantially after 2007, obviously, with the ’08 oil crisis and oil price collapse, Lehman Brothers, Georgia, Ukraine, et cetera, but we do see some green shoots.

I still talk to my colleagues there and at other investment banks and just in the past 15 months, we’ve seen 14 equity issues out of the Russian capital markets, several of them IPOs. Largely, much more domestic-driven now than European and US investors, but some US investors, starting to dip their toes back in. But the financial sector and the competitive space in Moscow has certainly become much more driven by Spare Bank and VTB and Atcretia, that previously would have been UFG, Deutche, Credit Suisse, Morgan Stanley, JP Morgan, et cetera. Renaissance. Last thing I’d like to touch on is just the people.

And I think my experience on a few corporate boards now in Russia I think is fairly representative of business anywhere, whether Russia or the United States or anywhere. All these companies are different. And there are a lot of good people, and there are some less good people. And I think if you look at doing business in Russia, or joining a board or making an investment in Russia, it’s first and foremost about finding the people that you can spend time with and sincerely feel that you can trust and that your interests are aligned. And I have to say that over my 25 years or so of being there, that’s getting a lot easier to do than it would have been in the 1990s. To actually figure out who’s sitting across the table from you, you know, whether they’ve been educated in the West or not, or they’ve just had a chance to make some money and they understand business better, it’s a lot easier than it used to be. Unfortunately, and my last point is, if we think about who’s gonna be running the country, Russian Federation, in say, 20 years, ah, you know, clearly some of the recent activity, whether Ukraine or otherwise, or the remaining levels of corruption or difficulties with property rights, that still exist, although you could say they’re improving, but some people still feel vulnerable.

These are all big issues that need to be addressed, but in no small part, the sanctions have definitely had a large impact on a lot of my friends, who have left. Whether they were financial services professionals or lawyers or accountants, many of them have just left, because capital markets deals in Russia aren’t happening to the same level, and the brain drain that we would have had to Silicon Valley or other places has been complemented by a lot of musky fellows, or folks that worked at one of the big four firms or law firms, and would have been great partners for us all in Russia, over the next 20 to 30 years. So hopefully, some of them come back. There’s also an education issue in Russia that needs to be addressed. A lot of our contemporaries would have left because their children, they feel their children can get better education in the UK or the US.

So that’s another huge issue, I think Russia needs to compete on. But I think a lot about who will be running Russia in 20 years, and hopefully it’s a friend of mine. (laughing) – And Charlie Ryan is gonna be our last speaker. Charlie is another veteran of this whole scene at UFG Asset Management. He spent lots of his time, like most everybody on our panel here in Moscow as a banker. Again, first with EBRD and then probably best known to most of us with UFG and with Deutche Bank, where he was the chief executive officer in Russia.

– So I would, I guess, agree with Drew that there is a certain nostalgia about getting this crowd together. We’re all a lot older; some of us have less hair. And we definitely have been through quite a ride together. I was thinking in terms of structuring what I would talk about in terms of what I, the three phases of my career over this 25 years that I spent, most of it, living there. The answer to the question of why I went, funny enough, I wrote my college thesis on Soviet foreign policy in Africa, which meant a lot of what I was doing it on was based on Professor Legvold’s work. And, you know, certainly was at that point thinking that what I might do with my life was somehow get involved in the US side of the Cold War. When I got out of college, it was over.

So I had to find something much less interesting to do, so I went to Wall Street, and when the wall came down and I went over to Russia to work for EBRD, I think in some naive sense, I thought I was gonna be a capitalist version of John Reed. I didn’t think I would end up in Russia for 16 years. Certainly didn’t think I’d be working there today. But I guess, wanted a front-row seat to observe the return of the market, the return of capitalism and freedom, I guess, in the same way that he enjoyed watching the communists show up. In terms of the work at EBRD, we were pretty optimistic and I guess, perhaps, naive in retrospect.

But I do think that, notwithstanding the general failure of the brand of reform, I think a lot of what we did today is missed, and a lot of the basic building blocks were a function of a collaboration between Russians and institutions like the EBRD. You know, when we showed up, you didn’t have accounting firms, you didn’t have law firms, and in fact, you know, even today when you look not only at the pretty wide range of Western firms that are operating in Moscow, even the Russian ones that have now grown up to compete with the Western law firms are staffed by people who got their training at some of these Western legal firms that, many of which were set up with technical assistance and other support that came from this collaboration. I think maybe just a fun anecdote, because I guess we’ve all been talking a long time, you know, one of the more interesting parts of my time at EBRD is that I spent a lot of time with President Putin when he was deputy mayor of St. Petersburg, and I’m thinking here about how the Russians perceived the Western approach of: we’re here with our money to help.

And certainly today he’s much more blunt, you know, about how he views it, but I remember at the time, we were trying to make an investment in Leninits. It was an old Soviet military-industrial firm that Gillette, the razor blade company, wanted to put some money into to produce razor blades. At this point in time, the Russian tax code was not the very reformed version we have today. If we actually paid our taxes on the investment, we would be paying about 140 percent of our turnover in taxes.

So obviously, it didn’t make for a very attractive investment. So what we needed to do was to get a waiver. Because obviously, EBRD, Americans, we had to comply. We had to comply with whatever the rules were, and the only way to make the investment was to get the city of St. Petersburg to give us a waiver. So I worked all night to prepare this, I guess, the 1992 version of a Powerpoint. It was basically a horizontal, you know, printed out at the Hotel Europe, and I go into Mr.

Putin’s office to pitch him on why we should get tax waivers, and he, I guess, had just come in from somewhere, he looked tired, didn’t seem in a very good mood, and he said: I saw your presentation and I get it. We’re not, we don’t really need to go through it. I was pretty grumpy, because I’d worked hard on this and it had not been easy to print it at the Hotel Europe, so I said: really, tell me, what do you get? And then he got really annoyed and he said: I’ll tell you what I get. He said: we’re new to power, we wanna stay in power. Staying in power means providing people with some objective benefit of our period in power, which basically means jobs. Jobs require capital. We don’t have any of that just now. Which means, and foreigners do, so that requires foreigners, and foreigners require tax breaks. Ergo, tax breaks means we stay in power. (laughing) And I said: alright, I guess you do get it. But my point simply is that it was a very pragmatic view of A, the benefit of foreigners, the benefit of our advice.

And how to apply government policy. At the very same time in this part of my life, I was connected to my dear friend, and sadly to have passed, Boris Federov, and this is right around the time that he wrote the letter to Cam DeSue, saying: no thanks, don’t send us the next tranche of the IMF funding. Which clearly made the US Treasury apoplectic. Did not amuse Prime Minister Charin Amirden, but there’s always been a group of people in Russia that felt, at least, ambivalent about “aid”. And I think we’ve seen that really blossom, particularly in the current period. The second phase in my life over there was as an entrepreneur, where I set up a bank and was advising companies.

And here I wanna highlight something that I think is interesting about America and Russia. And I guess the very brief way I encapsulate what I perceived is that a lot of our business was doing M&A; basically advising foreign investors in their negotiations with Russian firms. And if you do a compare and contrast of a deal we did for Siemens, a deal we did for BP, and a deal we did for International Paper, as you move west, as you get further and further away, people get more nervous, particularly when you got to the US.

When we were doing a deal for this German conglomerate, Siemens, I never met the CEO. I met, you know, with the executive vice president for business development, and he just sort of let me know when the board approved the deal, and it happened very quickly, and there’s really no geopolitical discussion. I remember when we were working for BP, Lord Brown asked me to fly to Los Angeles to present to his board. As I was on my way to the airport, I got a call from his office saying he’s realized how ridiculous it is, and that he should just do it himself. No need to come to LA.

When we were doing our work on behalf of International Paper, we had to go meet with the board two or three times, and generally speaking, at the board meetings, I must admit it felt like it was my deal, not Mr. Farachi’s deal, so the funny thing was that the US boards, US decision makers, were always a little more cautious and concerned, particularly than Europeans. And I think that has been an element of the economic relationship is that, generally speaking, the Europeans were much more willing to engage and for whatever reason, in our country, it’s always been a little more of a gamble, a bet. It was somehow distinct and special. I guess the last phase of my life over there, as Drew was alluding to, was being involved in, I guess, doing something like what I did at EBRD, these private equity investments. And there I wanted to talk a little bit about the space that we’re allowed to occupy. So, you know, one of the things, I think, and it’s connected to sanctions, it’s connected to the sorts of entrepreneurs in Russia that really want to talk to a guy like Mike Calvey or Drew Guff or Charlie, and you know, one thing I can say is that, in the same way that I feel that we really did contribute something in setting up some of this basic infrastructure for a market economy, I also would like to say that I think having a relatively small but nonetheless active group of providers of private capital, you know, obviously Baring’s being the largest, Drew’s been doing this about the same length of time, I think, has also provided, as both Drew and Mike referred to, a real spur to giving entrepreneurs who wanted an option.

Not all the entrepreneurs do. There are some people in Russia, I guess, like Peter said, you know, they’re very different economic actors. You know, but for all the Russian entrepreneurs that just wanna run their business for cash and don’t really care about transparency and corporate governance, there is a large number of extremely talented men and women that are willing to jump through the hoops, still, and to comply just like we have to as Americans, with the global rules, and whom, I hope, even if we’re selling their businesses at a discount, like Mike said, they see the benefits of this connection to our way of doing things, which, hopefully, more and more becomes a Russian way on the business side. But it is sad, you know, it is disappointing and frustrating that a lot of these things we’d hoped would come to pass have not.

And you know, certainly from the business standpoint, you know, we’re gonna occupy the space we’re allowed. So the sanctions have put another constraint on that. This lack of available capital, Drew mentioned, puts a constraint on that. Funny enough, the hot money’s already back in. Apparently, about 40 percent (unintelligible) are now owned by US hedge funds. So, they’ll be out once Mrs. Naibulin starts dropping rates, but I just wanna, I guess, conclude by simply saying that, you know, on the economic side of the relationship, it has inevitably, particularly with the US, does get impacted and is colored by this bad karma. And these unmet expectations on both sides. Even to the point where today a lot of people don’t realize that the sanctions on Russia are nothing like the sanctions on Iran. The truth of the matter is that Europe and Russian, in particular, are so economically integrated that if you were to apply Iranian style sanctions, it simply wouldn’t work, because Germans wouldn’t be able to cook their meals on their stoves. Obviously, a lot of things that are vital to life as we know it in Russia would not be possible without the trade back and forth between the EU and Russia.

That being said, there’s certainly a perception that the sanctions apply everywhere and to everything. And I think Al Suez was referred to, in terms of job-owning executives, and to not go into St. Petersburg. Job-owning financial institutions into not participating in the Russian-Euro bond, there’s definitely a pall, you know, over economic activity. Even to the point, sometimes, when some Americans seem to act like we’re somehow disloyal to our country by continuing to invest there.

Which is also a shame, because as I said, we’re economic actors, we’re trying to invest our client’s money, and we’re compliant. We’re operating within the space that we are allowed. And so I guess, on that, I’m very, very happy to be here. And thank you very much, I should have mentioned, to Georgetown, and to Angela and Andy for organizing it. It’s fun. – Thanks, Drew. (applause) Thank you, Charlie. So, I think, you know, in terms of the takeaway, looking at what we’ve had on the business side, I mean, everybody talked about the infrastructure and modernization of the economy, and I think everybody can be proud of the role that’s been played in corporate governance and transparency and in basically making, helping Russians make Russia a more modern business environment.

In terms of opportunities, everybody’s talked about innovative economy being certainly part of the future. And about the necessity of, certainly, structural reform. Better protection of property rights and other things that are hardy perennials. One thing I’d like to touch on before we open up for questions is a little bit about the economic dialogue. Because as somebody who’s worked on the political side, one of the things that strikes me right now, and I travel to Russia as much as you all do, I mean, trying to have a reasonable discussion about Ukraine or Crimea is nearly impossible with anybody, no matter where they sit on the political spectrum, because they have some emotional connection to this, or because of their political view. And there are lots of constraints on, on those discussions. If you flip to the economic side, it’s completely different. The debate in Russia about where to go with the economy is pretty open. People are extremely critical of the government and of their counterparts.

They’re pretty willing to talk to all of us about all of these things, and at the same time, through this very, very difficult period where, particularly, the governments shut down their dialogue, we kind of all continued. Not only on a personal basis, but I would say, the US Russia Business Council, we probably have paradoxically better ties with (speaking Russian), Business Russia, with the Russian Association of Industrialists and Entrepreneurs. In fact, I think there’s been a feeling on the business side that we need to spend more time together and try to do some things together on, not only on dialogue and talking about private/public partnerships, what we do about business education, all of these issues, to sort of try to add some modest ballast to the relationship, while the political relationship is so difficult. But I don’t know, I’d be interested in what you all think about business dialogue and, you know, where we go from here in terms of trying to connect what we’re all doing to the political discussion that’s taking place on the other panels. – Ah, well, I’ll just say a few words.

I mean, I, the fact that we’re all here is, is a great start. Bill Courtney has been running the Russia, ah, Rand Business Elite group. It started, it started, really, with the early days under Jeremy Azrael, getting a bunch, basically, getting the business people of the day, the oligarchs, together with the European and US CEOs. And it’s continued on. It says something about the power of relationships. You know, we’re, those of us who do business here, and also in emerging markets, there are, the reliance on relationships in emerging market investing is so much greater than in the US.

We have institutions, accepted norms, and relationships are just much more important in terms of investing in Russia. I remember having dinner with Don Kendall a few years ago, and he said that when he turned 90, President Putin called him on his birthday to wish him happy birthday. Now, I can’t imagine any US president calling a retired CEO of an international company that invested in the United States to wish him a happy birthday on his 90th birthday.

It just is, sort of, unheard of. But Don Kendall’s a major figure. You know, but I’m, Charlie talked about relationships, Peter talked about relationships, they are so important and they tend to be much stronger between, you know, when you have a counter-party, you’re relying a little bit less on good law. You’re relying a little bit less on good court systems. And so the power of those relationships are extremely strong. And I’m happy to say they, the quality of those relationships are better, I have seen, than in a lot of other emerging market investing. And that’s, if you were to compare it to China or India, for example, one of the most corrupt places on Earth. That people just don’t realize. The power of relationships with Russian counterparts is really important, so it’s been one of the things that’s remained through all these bad times. I wish there was, kind of, more dynamism in getting business people together.

But there have been some very good attempts at it, and just the fact that Angela and Andy have invited us here to be here today is just another good sign of it. I mean, I think Dan, when you go around the table at the US Russia Business Council and talk about, ah, how are companies doing in Russia, the answer is usually, except for recent issues: pretty well.

My profit margins are good, and when we have problems, the Russian government is often there to step in and help. That’s been our, ah, that’s been our experience, too. – Thanks. Feodor, and I’m particularly interested in your views, because IMEMO and the Atlantic Council, sort of strange bedfellows, have certainly worked together looking ahead on strategic issues together. – Yeah, we have issued recently a common strategic forecast til 2035, which is called: Global System on the Brink. But I want to focus on our domestic political effects, which sanctions and the US policy towards Russia after Crimea caused.

Another paradox is that, on the one hand, sanctions caused, which were aimed, initially, from the beginning, to have influence on so-called inner circle of Vladimir Putin, but not to hurt the whole economy. They had the opposite effect. They influenced on the economy, they influenced on private enterprise, but probably not on the inner circle. So strongly as they were aimed to. But the paradox is that on the one hand, in Russian economic, domestic political discussion on the economy, it has become, you know, sanctions have become a reason for some voices for import substitution, for counter-sanctions, for all these negative, you know, policies. Not, you know, market-based, aimed by political motivation and targeted to, you know, to have a response for Western attitudes. But on the other hand, Western sanctions had a very positive effect, because together with, you know, the decrease of oil prices, they made our government think about structural reforms, about stronger institutions, about more responsible monetary policy, and I want to emphasize that, during all this period, Russian monetary policy of Russian central bank was absolutely liberal, and very conservative in terms of measures they used.

In terms of regulation of markets, in terms of usage of, you know, financial market and non-market instruments, it stimulated very, development of very liberal approach. And I think that Vladimir Putin, himself, was not against of it; he supported this course. Now, he supports a dialogue, a discussion, between a different group of economists in our country and you know, everybody here knows that some preparations of ideas, of new ideas for the new government after the elections of 2018 are taking place in Moscow, and you know, a lot of think-tanks are involved in this process. But what I think will be more significant than even sanction relief, the most significant could be the policy which could be more driven by economic interests, more driven by motivation of private enterprise, of course, including private enterprise working in Russia, for private enterprise. But you know, for many reasons, during all this period of sanctions, exchange of sanctions, I think Russian government was trying to play the game, I’m not trying to implicate them, but were trying to play the game which can be more based on the logic of market economy and more based on the logic of economic interdependence than Western governments.

That’s the paradox. – I certainly hope you’re right. – I believe I am right. – I mean, we’ve seen the balance. Everybody in the international business community has been very impressed with what the central bank’s done. In terms of going to a, you know, a full float of the ruble, avoiding capital controls, but at the same time, many of our companies, their biggest concerns have been, as you rightly identified, the protectionist measures on import substitution, localization, more restrictions on government procurement.

Because I think, you know, if you ask what’s the, if you were gonna sum out what’s wrong with the Russian economy in one word, it’s lack of competition. And the concern is that this protectionist wave which we also have here in the United States. – Dan, mostly these protectionist measures were caused by external, you know, influence. Mostly, they were motivated with sanctions. That’s, that was the response. This is the paradox. – Funny enough, there’s an interesting little slice of this, which is if you think that, you know, given the rapid process of change and the developments, there were some things the Russians didn’t build that most countries have. Like, I think one of the more interesting moments during the post-Ukraine sort of political crisis was the discovery that the domestic payment system was run by Visa. Most countries have their own payment system, and so it could be interpreted as an act of economic nationalism or, you know, restrictive, but nonetheless, probably a good idea to have your own domestic payment system, you know? And the fact that it could then be turned off by someone– (unintelligible interjection) Well, but I’m just saying, if I, you know, most countries do.

I think the other funny one was the discovery that a huge proportion of Russian government data was stored on AWS servers in Washington state. Again, it’s a perfectly rational economic choice because it’s a very cheap and reliable provider, but I can also understand why it might not be the place where you, from a national security standpoint, you wanted all of your ministry’s documents. – Yeah, I think all of us spent a lot of time explaining to Russians what’s the American view and explaining to Americans what’s the Russian view, but there’s no doubt in my mind that sanctions have had an effect to basically weaken the people who are the most pro-American and kind of, you know, liberal in their thinking, in the classic sense, and strengthen, kind of, you know, hardliners and nationalists.

But I don’t know what makes me more depressed, to listen to the Russian TV or to listen to what is sometimes said in the US Congress. You know, both using selective facts and not alternative facts, but selective facts where they just choose to focus on certain facts and ignore the others, on both sides. And it’s, you know, it’s very unbalanced and depressing. – Let’s try to open up for questions here, and we’ll let, please, we all know who Andy is, but if you could please state your name when you, and your affiliation when you ask your question, please? – Well, Mike, I, as a basketball player, will watch basketball. That’s my recommendation. That’s my answer. – What was the question? – The question being, getting depressed watching– – What is there to watch on TV? – And the American news. First of all, we’re delighted to, Angela and I are very happy to give you the opportunity to have a reunion here, and share this nostalgic feeling, and hope we can do it more often.

Drew, I was a little bit amused when you mentioned the company, In Vitro, as it reminded me of the gaishniki, the gaishniki, the road police, when they pull you over, always threatening to send you to the vrach, you know, with the big needle. With the gaishniki, are they using In Vitro? – Yeah, our needles are clean, don’t worry about it. – I don’t doubt that. My question, and Mike started to get to it with his last, last comment, now, we’re in three years of sanctions and about two and a half years of sectoral sanctions, what is the observation of decisions that the Russian companies are making? And sometimes more strategic decisions they’re making that they may not have made in a non-sanctions environment? I understand some of the decisions are, at least, about our investments, are driven by concerns about the investment environment and the lower oil price, but the decisions that you see that companies are making that in some ways are maybe not in their best interest if they had this alternative, and maybe not in our best interest, either? – I can do one quick one.

– Peter? – So, about two years ago or a year and a half ago, TMK had a, a Euro bond that was gonna be coming due soon and they were gonna have to come up with several hundred million dollars within a year or two to pay it back. And it was clear to me that at some point, I guess it was roughly a year after Ukraine, that the senior management and the owner, effectively, had come to the view that they really shouldn’t expect to be able to finance themselves at all.

In international capital markets for the foreseeable future. So, they went to some of the Russian banks, raised money at a much higher rate, in rubles, as you would expect, a much higher rate. And did a tender offer for a Euro bond that wasn’t due for another year, just in order to reduce that refinancing risk, and we had a long debate about it, and the optimists on the board thought that we might be able to do better if we just waited a little bit, but they were very clear that they, you know, received, whether it was guidance from the very top in Russia or just didn’t wanna take the risk of having to refinance in a year if things hadn’t gotten better, and I thought that was a pity, because it definitely cost the company 10 to $15 million of net profit, the higher financing costs.

But they chose to do it just to reduce that risk. – All companies have hunkered down, and are, have cut costs, have made the assumption they can’t get financing or they can’t sell themselves or can’t go public for their foreseeable future. That’s been one big effect. And the other big effect on sanctions, which is the unfortunate, you know, boomerang negative effect is that the companies that need financing the most were the ones most hurt by the sanctions.

The big state companies, they can go to the well-capitalized big banks and state banks. Small and medium-sized enterprises got hit the worst and the hardest by the sanctions. And we see it across our portfolios and across the economy. – Most of the companies that we own, the kind of companies that are not directly affected by the sanctions, I think actually, the oil price drop has had a much bigger effect on Russian business and economy because it, you know, caused the currency to go down with it so if you’re a foreign investor, measuring your investments in dollars, that’s just an immediate and unavoidable hit. But it also wreaked havoc in the banking system, with, you know, the Russian banks raising their interest rates very high, and it’s caused a huge slow down in lending and focus on deleveraging. So the sanctions have played a part to that, but I think it’s like 70/30 or 80/20, you know, skewed towards the oil price having a bigger impact on company decisions.

With the ruble falling, also the focus on ruble-ization of your thinking and sources of supply, you know, buying stuff locally, not because the government is telling you to, but because everything that’s sourced locally is now two times cheaper than whatever you could buy abroad. – Yes, sir? – Thank you. Stefan Meister from the German Council on Foreign Relations. You mentioned rightly the big success story of the digital economy. I think that this is, was one of the most dynamic, or is the most dynamic industries in Russia. Private sector or startups with big companies, that always amazed me. At the same time, we observe at the moment the growing pressure, especially on the digital economy, giving the state more information. That’s maybe also a trend we observe in other countries, but also a shift from the Russian model of open internet to the Chinese model of closed internet. I think, which is a very negative development. Do you see a trend there? And what signals does it send to you, as American business? – You know, I, one of the investments that Mike and I have in common is this investment in Yandex.

I’m still on the board at Yandex, which is a company that’s sort of on the front line of this whole discussion, and I think one thing that is important to keep in context is that, not only does Russia not have the great firewall, like China does, but it also hasn’t kicked out Google. In other words, I think one of the things that people forget is how liberal Russia is in some ways.

I mean, like John Stuart Mill, obviously, but the, you know, like for example, yogurt is not a strategic good in Russia. Apparently it is in France. You know, there’s a lot of places where the Russians are happy to have private capital, even foreign capital. I think on the question of data security, you know, certainly it’s putting a big burden on a lot of global digital players who are having to think about how they would adapt their business to then have to keep the data inside Russia. On the other hand, you know, it’s really not just a Russian problem; it’s really a European issue. Which is that most of the internet traffic in Europe is run on American companies’ sites. It just is a fact that, you know, Yandex is the largest node in Europe, because it’s the one large internet company in Europe. The, and certainly those national security concerns, et cetera, are a big worry, but up til now, and I guess, knock on wood, you know, the internet in Russia’s quite free, and certainly more free than it is in some countries in Asia.

And at this point, notwithstanding the restrictions on mass media, any Russian who wants to, at any time, can look at just about anything on the internet. There was a big debate about 10 years ago when the Russian government was seriously considering what to do with the internet and whether there should be more, you know, a great firewall or something else like that, and to their credit, they decided that it’s not something that can be controlled that way, and that Russia would be better off with an open internet. And so that has succeeded, so, the companies like Yandex that are winning, are doing it despite fierce competition from Google, and it’s because Russian users view it as a better resource. – Yes sir? – Good afternoon. I’m Nick Wandra from the US Department of Energy, and I wanna ask about a term that recurred in this discussion a couple of times, and that is: structural reform. First, as Western businessmen, what do you mean, specifically, when you say “structural reform”? And secondly, when a Russian government counterpart hears that term, what do you think they think that means? – I have an economist.

(laughing) Or, a political scientist. – You want me to start? – Sure, whoever. – First of all, we need to look at the picture from the beginning. I know, I’m a historian, by my background. And from the beginning, Russia didn’t have any normal market institutions in 1991. It has created everything from the beginning. Banking system, insurance system, you know, model of regulation, financial market. Everything. You know, of course the process is taking a lot of time. The process is encountering a lot of domestic, political, social, and other troubles. But Russia is still keeping a very liberal model of taxes. And that’s a paradox. Even in times of crisis, even in times when social obligations are growing, Russia is trying to catch up in a Western, not European but American, approach towards taxation. Of course, a lot of people from private enterprise will say that there are a lot of covert taxes. There are a lot of taxes which are working, you know, indirectly, but at any rate, the taxation system is rather liberal. We do not have a serious, strong court system.

And it’s one of our biggest problems. We do not have, and, ah, probably Mike mentioned it, a real insurance market. Yeah, and our banking sector is developing, but look what Russian government has done to protect the banking system during the last three years. A lot of toxic banks, which had toxic assets, they were closed and they went through as a nation, so our government is doing something. Maybe, probably not in the proper speed. And it always encounters, you know, domestic, political pressure from groups of political elite in society, which are not interested in, you know, in development of a normal market economy and integration into, you know, a global economy because they are nationalists.

It’s obvious for any developing country, there are people who would prefer absolutely no market vision of an economy. But I, I think that it is also a generation problem. Because my generation is the first one which grew up, I’m 37, during post-Soviet period, and never seen a socialist, you know, centralized, non-market economy, and my generation, people of my age and a little bit older, a little bit younger, are coming into power and most of them are very rational, pragmatic technocrats. – So, when I think of structural reform, just me personally, since you asked the panelists to, I think of simplification and modernization of regulations across sectors. I think of reduction in state involvement in the different sectors of the economy. I think of strengthening of the court system. Those are– – And pension reform. I’d add pension reform to that. – Strengthening of the court system can’t be a structural reform; that’s a long-term process. It’s gonna take a long time. – Bill? – Yes, Bill Courtney, Rand Corporation. About a year ago, Russia tried to float a sovereign bond in New York.

It was not sanctioned, but Treasury and State called New York banks to discourage them to do that. So that’s part of the gray zone around sanctions. How helpful would it be for investors if that gray zone were reduced, if you will? For example, one imagines that the Trump administration might not do what the Obama administration did last year. – Yeah, I agree. I think that gray zone, the halo effect of sanctions probably will, by, will probably just disappear. And that may be a first sign of some pickup for, or a first signal to foreign investors that they can follow the actual language, the technical, actual, four-corners of the document language of sanctions.

Which allows for, you know, a lot of investment in Russia. It’s really only certain sectors, certain areas of the economy that are under sanction. So I agree, I think the– – I think it’s an interesting sort of nuance here, which is that historically, because investors that are in Russia, who have operated there and have the relationships and the experience, tend to continue investing, that I think part of the problem with the overall pall of the, is even if you actually took the time to read the sanctions, like Drew’s suggesting, you’d find that they’re relatively narrow and specific, but I think one thing that is currently very much affected by the gray zone is, and irrespective of some change, is new entrants are not coming.

You know, new investors, new strategics aren’t– – I fully agree. Boards of directors that might have been open to greenlighting a Russian investment today, it’s, you know, the question that would be asked is: why? It could be too difficult. Why should we do it, why should we undertake it? And, ah, I agree. – Absolutely. Dina, for the last question. (unintelligible interjection) Okay, Harley? – Thank you. Harley Balzer, recently retired from Georgetown. I guess my own experience in the last 25 years when on three very different kinds of boards, the first one was a board of directors for Soros’s International Science Foundation. We put $300 million into supporting scientists, education, and the internet.

Soros is, of course, now the Russian equivalent of a four-letter word. The second was a program that, ah, Dan and Andy both had a lot to do with, the Basic Research Higher Education Program that set up 20-some centers of research and education in Russia. Putin bragged about them in 2014 in one of his election documents, but they are now no longer being funded. And the third one is the board of trustees of the European University in St.

Petersburg. The only Russian institution that’s actually gotten its graduates hired by Ivy League Universities to teach. And it is now on the chopping block. The best info we have on that is that, even though the excuse is “we don’t have a gymnasium for 250 graduate students,” the real problem is that Dmitri Medvedyev is part of a group that has invested in renovating the building next door, complete with luxury elevators to get your car up to your apartment, and they want our palace, too.

With, I don’t expect the top levels of the Russian government to do much to support human capital. You folks know a lot of the Russian business people, and I’d love to hear whether you’re seeing signs of something creative from them to try to do something about corporate governance, and especially about investing in education and science. Thanks. – We hire a lot of people from, you know, Moscow University, especially phys-tech and (speaking Russian) economic and places like that, and they’re outstanding. You know, and highly motivated, hungry, super well-educated. I think there’s an issue with brain drain for the people who are in their 40s, who made a lot of money 20 years ago, 10 years ago, and they can’t make money as easily in Russia today. So that takes a lot harder work and it’s a tougher slog and so people like that, a lot of them are making that kind of calculation that, you know, it’s not worth it, but for the younger people in their 20s and 30s, we still see lots of young, motivated people, lots of entrepreneurs and things like that, so, you know, unfortunately I think, as a result of the geopolitical environment, there’s a lot of good and well-intended, you know, Western initiatives, including from NGOs and from philanthropic activities that are, that are being canceled, and that’s obviously very self-damaging for Russia.

But it’s not, you know, you have to put it in– (unintelligible interjection) Well, for sure, we see it with the universities. – I think there’s two layers here. One is that you have private actors like Mike’s firm, mine, et cetera, that are hiring kids. You know, Yandex has a school of data that’s their attempt to create more data scientists. You know, in fact, so Andrei Kortunev was familiar with the work of the US Russia Foundation that had this Eureka Program, where we were pairing American universities who are strong in science and technology with Russian universities to create tech transfer offices, and to build sort of an infrastructure for providing Russian scientists with a path towards getting their intellectual property commercialized. But I will agree that a lot of these initiatives now are, anything that was involved collaboration, particularly involved, you know, funding from questionable foreign organizations is, it’s not very popular. And it can get you in trouble. So I think this private sector action will continue, but I do think a lot of these government-sponsored forms of collaboration and support, for the time being, unfortunately are not going to work.

(overlapping interjections) – Yeah, private companies will pick up some slack. But I wouldn’t overstate it. We have two companies that, in former Soviet Union zone, Russia, and former CIS countries, employ about 10,000 computer programmers. But that’s a drop in the bucket. The real business of education has got to be funded by the government, and the government is not putting the money into it; the budget’s not there for it.

I mean, what we as private investors can do and what Russian companies can do is, barely scratches the surface of, you know, of basically having a better education system and more money available for the university system and primary education, so it’s a matter of national priority, I think. And you know, the Russian government, so, for foreign investors, anybody who invests in Russian government bonds, you feel safe. Because it’s run with a tight, you know, a tight fist. Not looking to do a lot of deficit spending. And you know, the priorities of education get balanced off against security, defense spending, and a lot of other things that take up, you know, budget rubles, so I think it’s more of an internal will question or a question of internal priorities for the government to decide where it wants to spend its money. – There are some private sector initiatives, though. I mean, Gherman Graff at Spare Bank has a fabulous university for the professional development of his staff. Which I think is certainly world class. And a lot of private sector US CEOs and other C-Suite people have spoken there. We’ve tried to help Yale University and the Moscow School of Management at Skulcova try to establish a partnership with private sector support.

These are small initiatives, but they do exist. – I could speak briefly on TMK and Rosneft. I know TMK will prioritize what they’re doing in Skulcova and also in Ukatrinborg, where Mr. Propyonsky is from, and they have substantial industrial production. And Rosneft would also be supportive of Skulcova and very supportive of the Energy Institute of Gupkina. So, fairly specific to their businesses. – So we promised that we’d try to end on time and help Andy and Angela get back on schedule here, so thank you all very much. Thanks to our panelists, thank you Feodor, thank you to our business group. (applause) – Ladies and gentlemen, can you please take your seats so we can start the last panel? – Well, good afternoon. My name’s Andy Kutchins, I’m here with Georgetown University and it’s a co-chair with my friend and colleague, Angela, of the conference, and delighted to be chairing the final, the final panel today. There are, as everybody knows, some eternal questions in Russia, you know, one is: (speaking Russian) Who’s guilty? To some extent, we addressed that a bit in the morning and earlier, although it was quite balanced, I think in the way it was done.

And now is really the harder part. (speaking Russian) What’s to do? And we try to look ahead and see how we might extricate ourselves from this really, truly abysmal state of affairs in the bilateral relationship. It’s not only abysmal, but it’s actually extremely dangerous. The bulletin of atomic scientists and their famous doomsday clock is now at two and a half minutes to midnight, which is, you know, their kind of measurement of how close we are to Armageddon, basically. The last time it was at two and a half minutes to midnight was in 1953, the year that Uncle Joe died. In the fall, when I was working on a report on US/Russia relations, it was at three minutes before midnight, and I’d interviewed 42 former US and Russian policymakers, some in this room, and others that have participated in the conference about the relationship to try to get a sense of what’s happened in 25 years, and one of the quotes that really stuck with me was from a former Secretary of Defense, Bill Perry, at Stanford, and he said: Andy, we are sleepwalking on nukes.

Sleepwalking on nukes. Of course, the reference to Christopher Clarke’s brilliant history of how Europe slept-walked into World War One. And there’s been some discussion earlier in the morning about the proximity of US, NATO, Russian military forces in the Middle East, of course, in Europe and the Baltics. Also in East Asia. There’s a lot of deconfliction to be done. But it’s, it’s quite striking that we’ve reached this point where the decision to put it at two and half minutes before midnight, principally because of what’s happened in the US/Russia relationship.

Okay, we have a really excellent panel, set of panelists, and it’s quite geographically diverse. We have Paula Dobriansky, based in Boston. Andrei Kotinov, based in Moscow. Stefan Meister, based in Berlin. Arkady Ostrovsky, based in London. And Paul Du Quenoy, based in Beirut. So, we’re gonna move in alphabetical order, as we have in the program. And so first, let me introduce, say a little bit more, about Paula.

Paula is a foreign policy expert and former diplomat, specializing in national security affairs. She’s currently a senior fellow in the Future of Diplomacy Project at Harvard University’s Belfour Center for Science and International Affairs. And during her more than 25 years in government, she held Senate-confirmed, high level positions, including Undersecretary of State for Global Affairs for eight years, 2001 to 2009, Director of European and Soviet Affairs at the White House National Security Council, Deputy Assistant Secretary of State for Human Rights and Humanitarian Affairs, and Deputy Head of the Delegation to the 1990 Copenhagen Conference on Security and Cooperation on Europe. So, Paula, you bring a wealth of experience and insight and knowledge on this topic.

What do you think we can do now? – Alright well, first, Andy, let me commend you and Angela for holding this conference. I think it’s very timely and I think it’s also crucial to have thought given to these questions. In my few minutes up front, I’m not gonna answer that so specifically, yet. (laughing) But, let me at least make four basic points that I think are relevant to addressing that question. The first is as you described earlier, it was described: what’s the state of the relationship? I think most would say that the relationship is at one of its lowest ebbs. Some would use the term that it’s stalemated, some will say it’s frozen, but it is at a very low point. I know that a number of issues were also mentioned, but let me take a moment, if I can, because I do think some of these are relevant also to the question of: how do you go forward? Because some of these issues, there are some fundamental differences on, and you know, how do you overcome that? Or do you, can you? The first being is, I think, the issue of Russia’s annexation of Crimea and also of the aggression in Ukraine, is clearly an issue that impacts not only the United States but also west, Western Europe.

The fact that there are sanctions in place, and we’re gonna be hearing from our German colleague, but I was struck by the fact that very recently the German foreign minister, who I interacted with when I was in government, Sigmar Gabrielle, just recently made a statement indicating the continuation of these sanctions because of a lack of reconciliation and movement. Relative to Minsk. There’s also the question in this same basket of the actions in Syria, and the human tragedy that came forward. So one, I mention that as a backdrop, secondly, another area that is a very fundamental area is just the outlook that, from Washington and maybe the West, and then from Moscow, over what should be the framework, the international framework, or the term that’s used: the liberal international order.

It’s fundamentally different. Here, there’s strongly-held views, I would say, certainly by the United States and I think by the West, in terms of the fact that this architecture has held together the global community, in terms of peace, stability and security. Some will argue that the values undergirding it must remain in place, but that with a changed global environment, should one look at reform? So here, as a second key point, I would just say though, there’s really a fundamental difference of outlook over questions of values and over questions of these institutions.

And the role which they play. I would say, thirdly, I also have to put in the mix the concern forward, which is the concern just about what movements could be next from Moscow, from Russia? The Baltic states have been very outspoken, and you know that, but let me pick out the Nordic states. I’ve been very struck by the fact that many of the Nordic countries have come forward and have really expressed a range of political, economic, and military concerns of intent, and what does this mean for, again, a kind of, ah, peace and stability? Finally, I will say on this, just this first point, there’s the backdrop which we all know, which is the question of the engagement and involvement and interference in the electoral processes that are afoot, not only the United States, Europe, we’re having investigations taking place on this about hacking, so the questions here, I would just say, is first, starting with the premise that I think that those who may have different ways that they look at the relationship and different ways they think we should go forward, I would say that there is, I think, a general consensus that we are at a really low ebb, in terms of the state of the relationship.

And it’s difficult to find a way forward, if you don’t have a common basis from which to spring from. If there are some fundamental differences that have to be taken into account. My second main point is: I think one thing that characterizes this period, strikingly so, at least that I can remember, and when I think back to times of the Cold War, I really don’t remember this, in particular, and that is the fact that we have a really, a negative political domestic climate.

Both here and also in Russia. I’d say, in both contexts. When you look at, actually, some polls, and there’s a Gallup poll that basically said that seven in 10 Americans told pollsters that they had an unfavorable view of Russia. By the way, there have also been polls taken there, and I think you will also find some of the same, in terms of the outlook, at least as has been reported. I mention that because how does that factor in when you’re, if you try to look and find, ah, common areas, and if your domestic constituencies also have, certainly, strongly-held views? The third that I would say is the question of: alright, with this backdrop, does it mean that we should not try to find, ah, basically, areas of common interest? My answer is: yes we should. And I think there are a number of areas that have been mentioned, and that have been focused on, and I will be glad to go a little bit more into that, but let me cite something that strikes me. And that is that there are a number of institutions who have put forth reports and actually are focused on this question in a very deep way.

But, the interesting thing is, what they have in common is trying to find a way forward and engage, but they have a different framework for doing so. And let me just mention, quickly, the three. One is the Atlantic Council just put a report forward, and they came forward with a term of, well, we should follow a policy of constrainment. And they defined that new term, a constrainment, if you will, in saying that one should look at concerted efforts to constrain aggressive actions and continue with sanction policy, but at the same time, adopt a policy of principled engagement. Then there’s the Center for the National Interest, which also put forth a report. I believe you had a number of speakers who’ve also written pieces for that particular report, earlier here today, and that’s on looking at a new direction in US/Russia relations. And it was interesting, when you read that report, and some of the ideas put forward, they’re very focused on particular areas, versus a broad approach. And then finally, again, these are only a few examples, there are others, the ELB Group just met.

They were started in 2010, and it’s interesting in hearing some of the reports back from that, that again, sort of very clearly defined areas that don’t seem to be areas of compromise. And that are non-starters, but that there are some areas that should be considered. So, in my short minutes up front, because we’ll have a more robust discussion, I’ll just say that I think for policy, you know, kind of policy to succeed in this approach, I think that it really depends on this whole issue of whether there is, whether there are, excuse me, areas for compromise. Compromise actually, in coming to the table, and not just having the sake of discussion for the sake of discussion, and also, I will say that, and this is obviously just from the US perspective, I think that there have been, there’s been a view that certain kinds of conduct that has emanated from Russia, that it’s difficult to move forward unless there’s a change in that conduct.

So, yes, there should be a way forward, and it’s a question of how to find it. – Thanks very much, Paula. I’m not sure if I’m gonna adopt the word: constrainment. To my vocabulary. I will take the opportunity to mention the report that I wrote for the Center on Global Interest, which I used the words: elevation and calibration. But you’ll have to read the report to see what I meant about that, okay? – I apologize for not mentioning yours, but you did write, and I thought I would go outside of Georgetown a little bit.

– And you’re one of my interviewees, thank you. Our next speaker is an old friend, Andrei Kortunov, the Director General of the Russian International Affairs Council. Prior to being elected Director General, Dr. Kortunov was the Deputy Director of the Institute for USA and Canada Studies of the Russian Academy of Sciences in Moscow. He’s also the founder and the first president of the Moscow Public Science Foundation. Remember that, back in the 1990s. He graduated from Megimu and completed his post-graduate studies, also at the Institute for USA and Canada Studies. A place well-known to us, back from Soviet Days. He’s taught Russian foreign policy at a number of US institutions, and, ah, written many, many articles, over 120, and really one of Russia’s most thoughtful, ah, analysts and thinkers about international relations and international security.

So, Andrei, welcome. – Well, thank you, thank you Andy, and I’m grateful that I have an opportunity to be here and to participate in this event, which, frankly speaking, makes me a little bit more optimistic for the future of the relationship than I often feel, outside of this building and this city. And the big question, of course, where the reality is. Is it here, or is it somewhere else within the beltway? Since I’m the only person from Moscow on this panel, I would respectfully ask to grant me not five minutes, but five and a half minutes.

Since I’m not a native speaker. – Oh, we give you five to seven. – Okay, five to seven. First of all, since a couple of documents were mentioned here already about US/Russian relations, I cannot resist temptation to mention the report that we just released together with CSAS, on opportunities in the relationship. And we tried to identify low-hanging fruits, and came up with, I think, eight or nine of them.

Some of them are not really toxic. Some of them are. Some would require bilateral relations to be changed for the better. Some of them would require multilateral approach, but definitely, if there is a will, there is a way. I don’t want to retell the report. You can find it on the CIS website. But let me try to be a little bit more theoretical. You inspired me, talking about constrainment and about terms. I would like to offer, for your consideration, an adjective: hybrid. You know, it’s fashionable these days to take a look at hybrid phenomena in this world. You know, hybrid political regimes, or hybrid economic model, or hybrid war.

And usually, this adjective has a negative meaning. There is something bad in being hybrid. I would venture to say that probably the best that we can expect in the relationship is this hybrid relationship in the years to come. And this is not to say that by hybrid, I mean a mixture of cooperation-confrontation, I think that would be too primitive an approach.

But when I talk about hybrid, I mean that we have two overlapping agendas in that relationship. And each of these agendas has its own logic, its own constituency, its own stakeholders, and its own momentum. The old agenda is something that we, essentially, inherited from the 21st century. We’ve simply failed, for a variety of reasons, we’ve failed to clean the mess left in the end of the Cold War, and we instead tried to sweep this garbage under the carpet, and now this garbage is back again, in front of our eyes. And when I think about what major items constitute this agenda, it is of course: arms race and arms control. I think, to a large extent, it’s non-proliferation. Which I consider to be essentially a problem of the 20th century, at least, state non-proliferation. I think that most of regional conflicts are inherited from the previous century. You go to Korea, a divided nation, you go to the Middle East and the Israeli/Palestinian question is something that we inherited from mid-20th century. So, it doesn’t mean that this agenda is always divisive, negative. I think, you know, it also constitutes an important stimulus, an important incentive for cooperation, but we should consider it as something that we have to clean behind us and to move ahead.

And there is a new agenda, the agenda of the 21st century. Sometimes we downplay this agenda or ignore this agenda, but I think it is nevertheless quite important, this agenda consists of emerging problems and emerging opportunities in the relationship. We can talk about issues like climate change or migration management. We can talk about international terrorism. We can talk about more general problems of the global governance, including the reform of major international institutions. Specifically the reform of the United Nations, which is really a brimming problem for all of us. We can talk about food security, we can talk about arctic. I think this is a new agenda, and this agenda involves entirely different groups of stakeholders on both sides.

Again, I don’t want to imply that this agenda is necessarily a positive one. I think that we can see clashes of interests, about climate change or about food security between Russia and the United States, but these will be very different clashes of interest. Compared to what we have right now, in the Ukraine, or even in Syria. So in fact I think we should try to balance the two agendas. Definitely, we should not lose the sight of the first one. It is important and I agree with Paula that there are certain issues that will continue to poison the relationship unless we approach them. We cannot move ahead at any desirable speed, if we do not approach Ukraine. It’s evident that this is something that we have to approach. There are more general issues. You know, we have to deal with our narratives. We have to deal with our perceptions of the future. What is desirable, what is feasible, what is fair and what is not fair. And right now, probably for the United States, it’s a little bit more complicated than for Russia, because it is one of those rare cases when Russia turns out to be a little bit more predictable than this country.

Usually, it’s the other way around, of course. And at the same time, I think that it would be important especially for us, as people who claim to be experts in the relationship, to keep in mind this emerging agenda. Not to forget this emergent agenda, because we are, if we are thinking about how to stabilize the relationship, and hopefully how to change this relationship for the better, we are not able, we will not be able to do that if we rely only on traditional stakeholders on both sides.

This is what I wanted to say. Thank you. – Thank you very much, Andrei. You know, you said you were in kind of an optimistic mood in this room, and I must say that, ah, if in the RIAC CSAS report, you’re able to identify eight or nine pieces of low-hanging fruit on the agenda of US/Russia relations, well– – Well, not that low, but you know. (laughing) Not beyond our reach, I would say. – I see, I see. Okay, let me turn now to our third speaker, Dr. Stefan Meister, who has been the head of the Robert Bosch Center for Central and Eastern Europe, Russia, and Central Asia at the German Council of Foreign Relations, DGAP, since January of 2017. Congratulations on your new position. That’s quite, ah– – Growing up.

(laughing) – Yeah. You’ve sort of timed simultaneously with the inauguration of the Trump administration, no doubt. Previously, Stefan (laughing). – Whatever that means. – Just, nothing. (laughing) Make of it what you will. (laughing) He was senior policy fellow at the European Council on Foreign Relations, Wider Europe Team, and a senior fellow also at DCAP. And his areas of research include Russian domestic, foreign and energy policy, EU/Russia relations, Russia’s policy towards post-Soviet countries, and he writes widely on Germany’s Russia policy, of course. In 2013, he edited a volume on Russia’s policy towards the post-Soviet countries with Gnomos. He was a visiting fellow at the Trans-Atlantic Academy in Washington, and co-authored the book, The Eastern Question: Russia, the West and Europe’s Gray Zone.

Which I was happy to contribute to one of the chapters to, that came out in 2016. So, Stefan, the floor is yours. – Thank you. First of all, I would like to thank you, Andy, and Angela for inviting me for this event, and adding also two European perspectives to the US/Russian discussion we have here. And I’m more or less presenting also the German perspective and I think this is what I want to do, I want to give you an impression how Germany sees, at the moment, Russia and the Russian/US relations, and then I will give some recommendations, how to deal (speaking foreign language) with Russia.

Germany is seen as crucial with regard to Russia, but the German/Russian relations have never been at such a low level since the end of the Cold War. We observe the failure to change to interweavement policy, we observed the failure of partnership for modernization, and we observed, in the end, the deny of the Russian leadership to modernize their country. Europe is no model, anymore, for this Russian leadership. I think this is very crucial. And modernization seems to be even dangerous for the Putin system. From a German perspective, Russian leadership has not rewarded Germany’s role in stopping NATO enlargement towards Ukraine and Georgia. No other Western state has invested so much in post-Soviet Russia and was criticized for its policy of appeasement, and there are many other words, but this has now become alienated from today’s Russian leadership very substantially, with the Ukraine crisis, with the annexation of Crimea.

I think this is really a fundamental shift we observe at the moment. In the German discourse and in the German elites. Talking about US/Russia relations from an EU, and in particular, German perspective, Berlin realized that we are sitting in the same boat with Moscow at the same time, at the moment. Neither Russian nor German leadership knows what Trump really wants, and both are skeptical in terms of his priorities and unpredictability. Germany is looking for allies in dealing with the new US president, but Russia is no option.

Russian leadership has destroyed any trust and made it nearly impossible through its lack of compromise in Ukraine, and the disinformation campaign in Europe, to have a proactive and cooperative approach towards the Kremlin. We observe that the German main parties decided not to raise the relations with Russia as a main topic for this year’s federal election campaign, even the Social Democrats don’t raise the topic because so sensible at the moment.

And I think this turning point has started with the Russian Syria campaign. Both Putin and Trump do not trust in, and undermine, international law and institutions. Both believe in deals of great leaders and do not care about the interests of small states. That will bring them into conflict with EU policy. International law and international institutions are at the heart of German foreign policy. Also, as a learning process from the past, for Germany, the European Union is the top priority in its policy. If there is a conflict with Russia or the US, Germany will always choose to support the integrity of the EU for stability and welfare in Europe. A bilateral deal with Germany is not on the table. Only with the EU. The big concern about a fast deal between Putin and Trump on Ukraine and European security seems to be gone. Russian leadership misperceived Donald Trump in its first euphoria, but not based on facts, but maybe more on their own narratives and propaganda.

There is an understanding that while the US is the number one priority for Moscow, Russia is not a priority for Trump. I think here he stands also in the tradition of his predecessor. While Germany and most of the EU would always have an interest to reengage with Moscow on a rule-based fundament, in terms of security and energy policy, as well as, in Europe, as well as in the common neighborhood. Russia is focused mainly on the US, to strike a deal.

Germany offers platforms and measures on trust building and arms control; we remember the OSC chairmanship of Germany last year, which was a huge investment of the German government, also with regard to Russia. But Russia is mainly focused on striking a deal with the US and mainly focused on US policy. Russian leadership is missing the opportunity to reengage with Berlin and other EU member states, because it believes that, with the upcoming European elections and Trump, its bargaining position will improve, anyway. Germany would give much to the Kremlin if it would show any small signal of compromise with regard to Ukraine. The longer Putin waits, in my opinion, the more it will be willing to find, the more difficult it will be to find a common ground. This damage is very substantial, but Russian leadership seems to have no interest to stop its destructive policy. At the same time, the fundament of our bilateral relations is deteriorating. Russia is now in position 16 for German export, behind Poland, Czech Republic and Hungary, and for imports, in position 13, behind Poland and Czech Republic. This is not, first of all, due to sanctions, but to the investment climate in Russia and the role of the state in the economy.

Even if Nord Stream Two will be built, the global energy market is already changing and pipeline gas will play a lesser role in the future. The change on the German energy market through the energy vendor will lead to less oil and gas demand. The reinvention of the big German energy companies to mixed and mainly electricity companies has also impact on the Russian lobby in Germany. All what is linked with Russia is now securitized in Europe, and I think that’s a big change. The dominance of politics over the economy will last longer, also, if sanctions will be abolished.

There is a consensus among the German elites that sanctions should be lifted only if there is progress in eastern Ukraine. I think therefore the French election seems to become more important to Germany than the election of Donald Trump, to stand together on the sanctions in Europe. But if there would be an alternative, I think we don’t stick to the sanctions. Sanctions are not a goal, in itself, but it needs some kind of signal and compromise also from the Russian side.

I think the lack of any fundament in the US/Russia relations for a reset or grand bargaining and the failure of the pivot to China should lead to a refocus of Russian leadership to Europe. Instead, Russian leadership feels strong with its success in Syria, Ukraine, and disinformation campaigns. I think all this will play back, because Russia is lacking any constructive and positive agenda at the moment. The short-term gains cannot belie over the structural deficit of the current Russian policy. But I don’t see the starting point, at the moment, for progress or the new modus vivendi. We are looking for the starting point, but it’s difficult to find it. I think we somehow have to accept that we have different perceptions, at the moment, of crucial issues. And we need to prepare also for scenarios. It was interesting we had, yesterday, at size, a similar discussion also discussing on what to do in the Western/Russian relations, and my impression, I think, as I also discussed this with Angela, was the Russian side is very much focusing on the big question of order, finding a new framework of the relations, while we are focusing on the small steps.

You know, I think we have to rebuild trust and that’s very difficult, and I don’t think that we will find a big, the big topics to do so, but we need to have these small steps, and I think I completely agree we need to have confidence-building measures, we need an update in arms control, we need agreements in cyber and disinformation, we need to reanimate, also, platforms like NATO Russia Council, and we need to talk and to find solutions in Ukraine. I think there’s a lot of to-do, and I think the US and the European Union should work there together, also, in dealing with Russia. And yeah, we all have to have, we all have this hope, yeah, that they are, that there will be a possibility for a new model soon, mainly, but I think that the basis has to be rebuilt, the trust has to be rebuilt, and I think that’s the most challenging thing.

Thank you. – Thank you very much, Stefan. Indeed, we do have a lot to do. I’m not quite sure how much will there is to do it. – That’s the question. – But we will continue. Let me now turn to Dr. Arkady Ostrovsky, our next speaker, who is the Russian Eastern European editor of The Economist. Prior to this role, he was the Moscow bureau chief for The Economist, reporting on the annexation of Crimea, the war in Ukraine, and many other subjects. He worked, he joined the paper in March of 2007, after working for 10 years with the Financial Times, where he also covered Russian politics and business, including the Yukos Affair. I wanna point out that Arkady’s terrific, relatively new book, The Invention of Russia: the Journey from Gorbachev’s Freedom to Putin’s War, really an excellent book, but basically a narrative of the history of post-Soviet Russia, and the late Soviet period, as well, through the lens of what happens with media and the media business and media’s relationship with power. I wanna congratulate him, as just two days ago he was awarded the Overseas Press Club of America Best Non-Fiction in International Affairs. (applause) – Thank you very much.

– Not too shabby. Arkady, the floor is yours. – Thank you very much. Thank you Andy and thank you Angela for inviting me, for organizing this event. It is a great honor. As for the prize of the book, I must also thank two people in particular who, I think, made it a great success in, or, ah, relatively good success, in the West. One is Vladimir Putin. (laughter) And the second one is Donald Trump, now. Who made it, both made it very, very topical. So, I’m, as a lot of journalists, I’m grateful.

For keeping us busy. – Good for business. – Yeah, Putin is good for business and war is good for selling papers. I think it’s a great subject, and I imagine that a few years ago, the idea of, you know, a conference on 25 years on from the end of the Cold War would have been of great, but mostly academic, interest. And suddenly, I think it’s of extreme relevance. And as Dame Judy Dench says as M in one of the Bond movies: God, I miss the Cold War. (laughing) And I think this has actually, now, stopped being a joke and become quite a real thing, and I’ll try to talk about it because I think what we’re living through is not as some of us tried to write, looking for historical references, a return to the Cold War, but it’s the result of the end of the Cold War. Or the way in which the end of the Cold War had been perceived both in Russia and in the West.

And I think we are slightly out of date looking, if we are just looking at the Russia/US relations and conflict, because I think it is much more, ah, I don’t like the word “global” but it’s sort of a broader opposition from the one it was in the Cold War when it was two systems and two ideologies, because we are looking, really, at the standoff between liberal order and liberalism and nationalism and populism. And those two phenomenons do not, no longer, confined to any one country. They can be, as we’ve seen with Brexit, with the rise of populism and nationalism in Europe, Marine Le Pen, thankfully Germany is much more immune, but FD, Alternative for Deutchland’s making inroads and of course, the election of President Trump. This phenomenon is now, you know, the frontier is a lot less clear. And the reason I think that studying the end of the Cold War is so essential is because, ultimately, it’s how the two countries which, you know, represented two systems, had perceived the end of the Cold War that has led us where we are today.

In Russia, I’m not gonna go through the history of Russia, certainly not in this audience where you know better, much better than I do, Russia has emerged from the end of the Soviet Union without a clear idea, status, but with a thought, a sort of premise, that once the communist system was gone, once the Soviet government, the Bolsheviks were gone, Russia would become what became a sort of most important word of the ’90s, would become a “normal” country. It would join the civilized world and become, it would move towards the West.

Russia went through its own, and I not for a second want to address the question of who lost Russia, because I don’t think Russia was anybody’s to lose, apart from its own elites, just as America is nobody’s to lose apart from its own elites. Every elite has responsibility for what happens. And so in country order, the relationship between the two have shaped what happened inside both of those. The crucial point as we know, as Secretary Albright rightly focused, zoomed in on, was in ’99, it was not just the bombing of Belgrade, it was also a year after the Russian financial crisis, which drew a line under a lot of efforts to make Russia into a market economy, or functioning market economy. It was a disillusionment with the, with the liberals, with the Westernizers in the Russian government, with the failure of some of the efforts to deliver on that promise or the expectation at the end of the Soviet Union that was ultimately sublimated into anti-Americanism in 1999.

I’m not judging whether the action was right or wrong, I’m merely stating what, I think, for a lot of Russians the turning point was in ’99. And of course, the rhetoric also is sectorial, but as I said, the rhetoric of the Bush senior administration, which declared a victory in the Cold War, and the combination of the words “victory” and “war” immediately conjured up in mind the idea of a military triumph, which I think has played a very cruel joke on America itself, because it enhanced the idea of military powers as a tool of foreign policy, in spreading democracy, and victories can be also quite a dangerous thing. And Russia of course, or Putin, has used that rhetoric. Because if Russia was defeated, then it was only natural that one day it would seek a revenge. And that rhetoric paved the way for Putin, allowing Putin to exploit all the traumas that were associated with the end of the Soviet Union. Now, it also had another very important consequence, I think, for America and the West.

Which is why I think we do miss the Cold War. The Cold War did sustain and mobilize the West intellectually. And the idea of liberal order, when President Reagan, Prime Minister Margaret Thatcher could both, what one might call sentimental patriots or nationalists, but believed that it was in the best national interests of both, of the West, to stand for freedom. And Russia was defeated not by the American military power, but by the idea of America as a symbol of freedom, and the supremacy of human life over anything else. It was that model, and Gorbachev’s aversion to violence and refusal to suppress that notion with force that has basically led to the end of the Soviet Union, when the advantages of America as a model of freedom became just too obvious to anyone, and people did not wish, unlike today, to believe in propaganda. Today, we have a situation where, I mean, Putin understood that we’ve been writing about Russia for a long time as if it has been a separate issue from the West; we now see Russia in a very different light, as being in many ways a precursor to the processes that are happening in the Western societies.

For the second time in the past 100 years, Russia has been a laboratory of ideas, just as it was a magnet for the left in the 1920s and ’30s, it’s now become a beacon of nationalism and macho nationalism for the right. And some of the comments made by Steven Bannon and the Alt Right in America testify to that only too clearly. Now, one thing which Putin understood, not straightaway but pretty early on, was the importance of ideas and narratives. Over anything else, so it was partly that Russia couldn’t really become a, after the oil boom, could not sustain that economic growth, that he came up with, you know, he brushed off the narrative of imperial nationalism, which manifested itself, culminated in the annexation of Crimea and the war in Ukraine, which was very much staged for television cameras. I think what happened with the liberals, both in Russia, and in almost sort of a caricature way, and then in the West, is that the liberals have become technocrats.

In Russia, we had the governments of Yegor Gaidar, of Anatoly Chubais, who talked about the IMF, who talked about fiscal discipline, monetary measures, which was all very good, but not for a country that was living through a post-imperial syndrome and trauma. In the West, the liberals have turned into technocrats. Again, started talking about purely economic issues, trade treaties, et cetera, believing that that’s what people wanted. I think the war in Iraq and the beginning of the decline in American productivity at the same time also contributed to the sense of loss and loss of status, loss of direction, and people started looking for narrative and idea.

And both Trump and Putin, different as they are, in many, in one respect are very similar, in that both are post-modernist television personalities. Putin began, as you know, as a very low-ranking KGB officer in Dresden, the least prestigious posting in one of the least prestigious postings in the KGB, not even part of the First Directorate of Intelligence Service, but managed to build an image by stripping down and dressing up as brilliantly described in Fiona Hill and Cliff Gaddi’s book, Mr. Putin: Operative in the Kremlin, as Mr. Ban, a character from a British cartoon, managed to basically elevate himself into the idea of an all powerful, great, James Bond spy who can fly planes, who can dive, who can ride, who can do all those things. And use the myth of the KGB as this mysterious and very knowledgeable organization which certainly existed. President Trump fashioned himself as a self-made, great businessman and mogul, although he was a rich kid who misspent other people’s money and teetered on the brink of bankruptcy several times.

But through television, through apprentice, he has built himself into a figure, nationally, of great success and business triumph. So, different as they are, they use the media and the narrative very powerfully, and what’s more, they’ve offered something, a historic narrative, which the liberals have given up after the end of the Cold War, because they believed it was unnecessary, because they believe this was the end of history. We gave up, including The Economist, where I’m very proud to serve, we gave up the sort of historic narratives. Allowing Putin, the likes of Putin and Trump to seize that. We should have been more careful students of the writing of those who were responsible for liberal order and democracy in Europe after the Second World War, and I would just like to, almost to the end, to quote, I almost know it by heart because I’ve been citing it nonstop for the past few months, ever since Trump’s election, it’s a quote from George Orwell, who’s not accidentally, whose 1984 has become the top, best-seller both in America this year, after Trump’s inauguration, and two years earlier it became the top-seller in Russia, after Russia’s invasion of Ukraine.

In 1940, in his review of Mein Kampf, George Orwell wrote: Hitler has grasped the falsity of the hedonistic attitude to life. Nearly all Western thought since the last war, certainly all progressive thought, has assumed, tacitly, that human beings desire nothing beyond ease, security, and avoidance of pain. The socialist who finds his children playing with soldiers is usually upset, but he is not able to think of a substitute for the tin soldiers. A tin pacifist somehow won’t do. Hitler knows that human beings don’t only want comfort, safety, short working hours, hygiene, birth control, and in general, common sense. They also, at least intermittently, want struggle, self-sacrifice, not to mention drums, flags and loyalty parades. However they may be as economic theories, fascism and Nazism are psychologically far sounder than any hedonistic conception of life. The same is probably true of Stalin’s militarized version of socialism.

Now, I don’t want to stretch the parallels. I’m not for a second suggesting that Putin is Stalin. He is not; that would be disrespectful to millions of Stalin’s victims, and not for a second would I suggest that Trump is Hitler. It’s merely talking about the importance of those heroic narratives. We live in the television era where you don’t need mass mobilization, you don’t need mass wars, as Russia demonstrated only too clearly both in its annexation of Crimea and the war in eastern Ukraine, and subsequently in meddling in German politics, through disinformation. You can use television, you can use foreign policy as raw material for television cameras and give people that satisfaction. Now, this is all pretty gloomy. I do think that, however, we do have a great silver lining. I think the election in the US has actually achieved a sort of, had a sort of sobering effect on Europe, ah, and I think the French, just out of the spirit of being controversial and contrary, will now look very carefully at their choice.

– You mean, being French? – Yeah, being French. (laughing) I think Germany is very aware of it, and I think Russia hasn’t become whatever it is that Donald Trump and Michael Flynn and President Putin might have wanted to do. They’ve actually achieved the opposite. Russia has become a toxic issue. As Stefan says, for the first time in German history, SBD, which was based around the idea of aus politic, doesn’t want to discuss aus politic, and doesn’t want to discuss Russia. Russian ambassador to the US is not a persona non grata, obviously, but it’s somebody, I would imagine, any American official would be very, very worried about being seen in public. What’s more, I think we’ve had a big turn. The biggest change is the left has turned away from Russia, both in Europe and in the US. If Putin supports Trump, there must be something wrong with the idea of the left and Putin. I think that’s very important. And on the other hand, the Republican, the traditional Republican party, from what I can, I don’t want to be presumptuous and talk about US politics, but I think, sees, is quite troubled by some of the statements that Trump has been making about Putin.

Including the one that there are a lot of killers in the world. The result of all this is we all might end up looking from the outside, and maybe this is wishful thinking but we might end up with a much stronger US team, looking at Russia, than we’ve had in the past, perhaps, 30 or 40 years. The appointments of a MacMaster, Mattis, the hopeful appointment of Fiona Hill, one of the best analysts of Russia and Putin, actually gives quite a lot of hope.

And Rex Tillerson, who, whatever he may do with his knowledge, certainly knows how Russia operates, being in the middle of the Yukos Affair, as the head of, as the right-hand man of Lee Raymond at Exxon. So I think it will be, I think the relationship will be a lot less, you know, we’re used to worrying about the tension between the US, we’re now worried about the friendship between the, and the grand bargain, between the two presidents. I think actually it will be a much tougher relationship, and I think the danger lies in the two falling out and controlling, obviously, two nuclear buttons. I think the key issue will remain, as it has been over the past few years, Ukraine. The conflict in Ukraine and what we do, and I would like, I would leave with that, but I would like to raise a point that we need to be a lot more honest when we talk about the issue of Ukraine, because the Minsk II agreements are, what I would call them, in effect.

And certainly in the Kremlin’s mind is nothing else but a capitulation agreement by Ukraine and by the West. And nobody would be more interested in implementing those than President Vladimir Putin. And I think we need to be honest and think of reformatting that for the sake of making Ukraine, which is so crucial, as everybody knows, to what happens both to security in Europe and in Russia, a key issue. Rather than trying to make the Europeans, ourselves, feel good about the fact that we imposed sanctions, which we know perfectly well have no effect on Putin’s behavior whatsoever. – You’re not that optimistic, though. (laughing) The good news is that we’re in for a much tougher relationship. Which I– – And that Kislyak cannot meet US officials. – Well, he’s under the table over there. No, but I think– – It’s a major accomplishment. – It’s, it may very well be coming, coming to this. Because the Trump administration is a very curious combination of some, you know, very serious people. – Yes, absolutely. – Secretary of Defense, Secretary of State, National Security Council, and, but a high degree of chaos and self-inflicted mistakes being made within the White House itself.

What side will prevail remains to be seen. Let me turn now to our, ah, last speaker but not least speaker on the panel, not by a long shot, Dr. Paul Du Quenoy, who is professor at the American University of Beirut. – Someday I’m gonna teach you how to say my name right, Andy. – Quenoy; Quenoy. Quenoy: do I got it? – Yeah. – Quenoy. (microphone crackling) And was previously at the American University in Cairo. This is kind of a homecoming for Paul, as he did his PhD in history here at Georgetown University, under the supervision of the late Richard Steikes. So, always happy to see Paul back here. He is a very astute observer, in particular, of Middle East politics, Russia’s activities in the Middle East, and he moonlights, or maybe moonlights is not quite the right term, but moonlights in business as an investor.

So has a varied perspective, I think, on the matter at hand. Paul? – Well, thank you, Andy, for that very full biography. And thank you, Angela, for organizing this wonderful conference here today. Thank you all for staying until the bitter end. I’m happy to be the last panelist, because my assessment is the gloomiest of all. So I’m gonna send you off into Friday night very, very sad.

I’m sorry. (unintelligible interjection) – It looks like it’s alphabetically, but it’s actually, ah– – It’s even getting worse. (laughing) – If you take out my party Q, that’s quite correct. It should be last, so. Q comes after O. So, my response, short answer to this question you asked at the beginning, (speaking Russian) is a very, not very nice (speaking Russian). Or: get used to it. Because, and I’ll speak to you as a split personality, first as an historian and then as an investor venture capitalist. As an historian, I wanna draw your attention back to professor Talbman’s very insightful summary of the Cold War this morning, and observe to you that, in fact, relations have been an awfully lot worse than they are now.

That we have had near nuclear war within living memory, in the Cuban Missile Crisis. That, in the early 1980s, particularly, were not a great time in US/Soviet relations, if you wanna make that continuum argument. And that what we have now is not pleasant, a low ebb, quite difficult, but not at all unprecedented. In the history of US/Russian relations, again, within the relatively short-term history that we’re looking at, and as the only historian on the panel today, it seems to me that this is something that we should simply accept.

That nations, throughout time, have had irreconcilable interests. And we’re going to move into what a businessman and venture capitalist would now think of this, and very often, the deal doesn’t go through. You cannot reach common ground. It’s never a surprise. It’s almost to be expected. The state of nature of our species is conflict. Any understanding of US/Russian relations, particularly with relation to the Middle East today has to embrace that idea. And I don’t wanna repeat what my fellow panelists have been saying, most of which I agree very much with, so I’m going to limit my commentary largely to the situation in Syria.

I’ll start by saying that the Arab perspective is, of course, quite different, and our idea of two and a half minutes to midnight is when you go out at night in Beirut. – For dinner. – Well, you might start dinner around 11 and you’d meet your friends at like two and a half minutes to midnight, and you get home at six in the morning. But that’s how things can change when you cross cultural boundaries, and indeed, if you look at the situation today in Syria, it seems to me very much like that problem is intractable. That neither side has a real interest in solving it, or in taking the steps necessary to reach a productive solution.

From the Russian point of view, which is what I study academically, since I’ve left Georgetown, it’s my sort of new, long-term project, I’ll say that, and again, if I can make a more general comment, the current Russian international strategy seems to me almost hopelessly unrealistic. I’m sure I’m not going to get the Order of Friendship for saying what I’m about to say, but it is very, very difficult to act as a great power when your economy is smaller than Spain’s. And trying to maintain, reestablish and maintain, a permanent hegemony over post-Soviet space is a very, very difficult challenge for Russia today. We did actually see that, despite the very bold move in Crimea and eastern Ukraine, Russia’s actions were actually quite limited. How was Ukraine taken over? Was it an invasion? No, they infiltrated little green men, announced that they didn’t know what they were doing there and then had the annexation referendum. In the eastern Ukraine, they tend to blame local people for being radical Russian nationalists, who don’t enjoy the support, or the unanimous support, of the Russian government.

Putin boasted that Russian soldiers could take Kiev within two weeks if they did a blitzkrieg style attack on Ukraine. My question was: if he’s so powerful, why didn’t he do it? Same thing in Syria. Russia’s involvement in Syria was largely limited to an air campaign. They don’t have what we call: boots on the ground. They have their small air base and their naval installation at Avaya, but so what? If you look at general Russian policy in promoting Russia as a rival center of power in the world, it is mainly diplomatic.

Trying, again, to draw in people like Marine Le Pen, who is meeting with Putin today, in Moscow. Supporting the Hungarian far right, which now has a big stake in that country’s government. Looking at extremists, nationalist extremists in other places as a potential axis of support. And also a cultural diplomacy, arguing that Russia, if it is not a military superpower anymore, at least is a cultural superpower. How nice. But at the same time, it doesn’t solve the fundamental problem that they’re seeking much loftier goals than they can possibly achieve.

And in the Syrian case, particularly, what we see there is an inability to abide by successive agreements, all of these ceasefires which prove to be very brittle, which are routinely violated by the Russians, you know, with impunity, but also in a way that is actually quite, seems quite designed to cause them to break down. We have these attacks on hospitals, the attacks on the aid convoys that happened the last time I spoke at Georgetown, that had happened, I think, the day before, completely ruining my plan for the talk.

But nevertheless, creating a fruitful discussion. It doesn’t– – You got a good turnout. – Oh yeah. How many people RSVP’d for that? – 100? – More, I think, yeah. That was pretty good, yeah. But anyhow, this continuing problem where there seems to be no basis for an agreement. Now, from the American perspective, of course, backing away from Syria is also not palatable. President Trump ran a campaign promising to eradicate ISIS, which still controls large parts of the country. He said he’d do it within 30 days, so he’s a bit late on that, but I don’t think this is something he’s willing to give up any time soon. The only silver lining that we have is these unconfirmed reports of intelligence sharing between the American and Russian military within Syria.

The American advisors to the Iraqi army are supposedly sharing information, but our government denies this. The Russian press is saying that this is a very good idea if it were true, but nobody quite wants to admit that degree of cooperation. Any sort of climb-down from these flashpoints, if you wanna talk about Cold War flashpoints, we can talk now about new Cold War flashpoints, would seriously undermine the authority of both presidential administrations, both the Trump administration and Putin’s regime, would suffer mightily if they admitted that they were going to back down.

And it seems like the only acceptable solution in Syria for the United States would be a complete Russian withdrawal. And that the only acceptable solution for Russia would be a permanent Russian presence. Obviously, this is not a problem that will be solved while either man is in charge of his country, and in Putin’s case, that’s probably gonna be a lifetime appointment. I think that’s fair to say. In Ukraine, at the same time, if I can extend my comments northward, it seems like it’s the same problem. Trump’s already said that Putin would have to return Crimea to Ukraine. Raise your hand if you think that’s going to happen. Nobody? Oh, I agree. But that, nevertheless, without that, there is simply no way forward. There is no avenue of pursue a rapprochement. I think very cynically, again, I do work in business, that that’s partially by design. Russia’s approach to foreign policy problems does tend to be highly legalistic, and they understand very well, for example, what the requirements for NATO membership are.

And I made this point in my last talk here in September, but in both Georgia and Ukraine, there was a large constituency for NATO membership. One of the NATO rules is that you have to have unquestioned territorial integrity to join the alliance, and with frozen conflicts in eastern Ukraine, and also in (speaking foreign language), guess what? You have a complete disruption of territorial integrity. So even if these populations wanted to join NATO, they wouldn’t be allowed to because they don’t meet the requirements of the law, right? And I think that’s a very cynical move, and that may be very well all Putin wants out of his involvement in those countries.

As he tries to build a powerbase, perhaps successfully, to reestablish something like a Russian hegemony over post-Soviet space. Now, the challenge is clearly there. We can debate the importance of the sanctions. It’s completely clear that the Russians would very much like to have those sanctions removed. We do not know what was said in all of those conversations. Nobody seems to remember, between Jeff Sessions and Michael Flynn and ambassador Kislyak. Is he behind the curtains, Andy? And until we do know that content, we can only guess. If I had to guess, and Angela and I had talked about his at dinner, I think in December, I would be willing to say that they probably discussed ways to remove the sanctions.

Tillerson, as CEO of Exxon Mobile, presided over something like very close to a billion dollar investment in oil exploration in the Kara Sea, a project that’s now frozen because of the sanctions. I would be really surprised if he didn’t want to remove that. Maybe he’s become an idealist, but I doubt it. So there clearly were contacts, and we can surmise, probably guess correctly that these did have to do with the removal of sanctions. It doesn’t look like that’s going to happen now. The public opinion in the United States militates strongly against that. Many people like John McCain, who’s still very vocal about this, would like to make those sanctions, in fact, stronger. Also, in some of the European countries. So I don’t think you’re going to see that kind of climb-down that would be necessary to strike some kind of grand deal.

I don’t think we’ll have any, suddenly, idealism in the ranks of diplomacy. What I can say is that I do think America and Russia will cooperate in these kind of low-hanging problems that Andrei mentioned, where if there is a point of common interest, we can act on that. And from my point of view, not just cynical but also historically trained here at Georgetown, it seems to me that it’s perfectly reasonable to expect common solutions to emerge from discussions of that type. Even at the height of the Cold War, the United States and the Soviet Union were capable of cutting trade deals.

Alright, so it’s quite possible that we can find common axes of agreement on, perhaps, minor issues, but issues that are important and may serve as a larger basis for a future understanding. I’m encouraged by this intelligence sharing. Because Russia does have a problem with radical Islam, the official media tends to ignore this, but it’s actually quite bigger than they would like you to believe, so solving that common concern might be in the interest of both countries, and I think that would be, if I had to give the president advice, and I wouldn’t want that sort of job, but if I did, I would say pursue that as your major policy goal. To would be universally popular, probably effective, and could lead to a larger understanding which would otherwise be elusive. – Okay, thank you Paul. Essentially, there are fundamentally irreconcilable differences. Or, they’re gonna be, remain irreconcilable for a long time to come. But within that framework, as we did during the Cold War, we can find islands of cooperation.

– Very small ones. – And maybe some measures to mitigate the existing dangers. – Very minor ones. – Such as more deconfliction. Let me just turn back to, maybe to Andrei first, and Paula, as we have kind of gotten quite a bit gloomier as we’ve gone down around here. – Sorry. – No, no, no, that’s, it’s, let 1,000 flowers bloom. This is what makes things interesting, right? Andrei, what’s your perspective on just how irreconcilable the situation is? – Well, you know, history teaches us that nations can compete for resources or for trade routes, for markets.

They might have territorial disputes. They might have religious contradictions or ideological contradictions. We don’t see anything like that between Russia and the United States. I think that what Trump tries to sell to the US public, and correct me if I’m wrong, and the real challenge for the United States, is not Russia. It’s another country to the east-south of the Russian borders. And if it is the case, we have to conclude that Russia, for the United States, or the United States for Russia, for this matter, is an enemy of convenience. It’s cheap. It’s affordable to have Russia as an enemy for this country. Likewise, it is affordable to have the United States as an arch-enemy for the Kremlin. It’s much more difficult for Russia, would be, right now to argue that China, with its growth, with its potential territorial claims, or whatever it is, the Yellow Peril, that that is something that represents a real challenge. I think that what we see now, if you put aside the logic and the dynamics of the current unfortunate developments, it’s an artificial situation. There are not too many real crises of practical interest between our two countries, in my view.

Okay, maybe I’m wrong, incorrect. Second, you know, speaking of Russia, you know the discussions that we often have in this city about Russia, or rather, you have in this city, about Russia remind me of the old Soviet discussions about the United States. On the other hand, it was maintained that the United States was on the trajectory of rapid and steep decline. You know, capitalism is in the crisis, and this crisis is likely to get deeper and deeper. On the other hand, Uncle Sam was so omnipotent that he could influence everything in the world, including add to problems that the Soviet Union confronted. From bad harvest to distant movement, or nationalist movements somewhere in the Baltics.

I would venture to say that, for this country, it is important to look at the sources of the problems that this country encounters. And I think that the big issue for all of us should be whether we’re really entering a new period in the history of the mankind, these ideas of deglobalization and protectionism and the renaissance of hard power, is it something that is likely to last for long, or is it just a small aberration of history and maybe already, this year will show us that liberalism is back and that, you know, the European Union is on the uprising trajectory. I think this is the big question. Because in my view, even if you take a very critical opinion on Putin, definitely he is not the core of the problem. He is a symptom of the problem. At least, that would be my idea. And of course, for Russia, it is really important to see how the world is going to evolve. Because if you look at the developments over the last couple of years, if you include Brexit and the elections of Trump and the Middle East implosion, they fit rather nicely into the world outlook which dominates the political thinking in Moscow today.

So if you do, if you want to do something with Russia, prove this viewpoint wrong. So far, the jury is still in the session. We don’t know; we can only hope. – Hope dies last. Paula, please. – I, ah, I’ll start with the point: I do believe there are irreconcilable differences. And in fact, I think in my opening remarks I inasmuch said that, so we sort of circle at the end. I actually think, as I heard us go down the line, I don’t think there was a difference on that. Maybe in the degrees, but each of us, in different ways, had stated that there were areas that, you know, we don’t see, certainly during this period, and under these circumstances, a coming together and a forward movement, and I mentioned the, those three reports, not to get myself in trouble, but not to recognize other outstanding work, but I did intentionally because what was striking to me, actually, starting with the one that has coined the term “constrainment” and then mentioning that the end, the ELB Group, they all are different in terms of the tone, the tenor, their history.

But what brings them together is the interest and the activism and trying to identify areas of common ground, however big or however small, depending upon where you’re sitting. And they have different outlooks, definitively. But the second point, I also think, that’s important here that has to be taken into account is what I referred to, which to me is very striking, is this issue about attitudes. Domestic attitudes. Because, with the comments made about sanctions, and I only referenced it briefly, and also about Ukraine, to me, something that can certainly be said about our legislative branch, they differ on so many things, so vigorously, but quite frankly, on this issue, Republicans and Democrats have been strikingly very united.

In the sense of, one, there’s been legislation that says: sanctions should not be lifted. And there’s already a marker that’s been laid down on that very clearly. So to circle back on that point, and with respect to Ukraine, also markers were laid down in the midst of what was, really, a very intense and difficult atmosphere. Some of you may recall, ah, congress came forward and supported the issue of arms to Ukraine, the request, which our executive branch opted, under the Obama administration, opted not to do. So, I just wanna factor in attitudes here. We spoke about political will, but I think there are some strongly held attitudes. And finally, you know, on the issue about what are the areas I think that is part of this, and I think Andrei, you know, shared an interesting range and issues that, actually, when I was Undersecretary for Global Affairs, many of those issues were issues I was dealing with. I was dealing with climate change and other related type issues. But I think there’s also an element to be injected in this conversation, and that is an element of pragmatism.

What do I mean by pragmatism? We have differences in the arctic. And I hear a lot about the arctic, particularly from many of the Nordic countries, and what’s taking place in terms of Russian activism. Let me put it that way. But I would make the point here, there’s also the issue of fundamental search and rescue, and the issue of who has what in terms of capabilities. So I also find, and I’ll inject that, it depends on your definition of small, in that context, (laughing) well, life-threatening situations, and from where you’re sitting. That’s my only point, is there, there are areas that are of pragmatic concern to all. So, but I do think that it’s a changed environment, and one in which there are some strongly-held differences, and it’s difficult to spring from, but the silver lining are all of these various reports and the thinking that’s going into it, which to me also conveys a real dedication to try to look at the situation, but also to be thinking creatively. And maybe pragmatically. – Yeah, I think there’s certainly a consensus that there’s no easy way out of this.

Let me ask you one quick question, then turn to the audience. So, I agree that, of course, that the Trump administration has close to no degrees of freedom for the moment with Russia, it would seem. Partly because of the bipartisan consensus in congress and general ant-Russian mood, but then, of course, the dark cloud of the investigation about possible collusion on the campaign. So, Mr. Tillerson, though, is going to Moscow. In the first half of April. What do you think is gonna be on his agenda, what is on the Russian agenda, what should be on their agenda in this first meeting? – Well, if the question is directed to me– – There you go. – Yeah, I can definitely share my views on that. First of all, I think that (coughing) Secretary Tillerson comes to Moscow to discuss the first summit meeting between the two presidents. And again, the history of US/Russian and the US/Soviet relations implies that these personal relations are important. I think that, realistically, one can imagine a gradual restoration of communication lines, which are unfortunately almost absent right now. I would say that there might be an attempt to discuss a preliminary agenda for the new dialogue.

For example, I think that despite all the statements that we heard from the White House recently, the United States is interested in maintaining the two pillars of the US/Russian arms control. Namely the IMF treaty and the New START treaty, and both are under question right now, as we know. So that would be important. I think that, definitely, we cannot avoid discussing two major regional situations: Ukraine and Syria. And the big issue is whether the United States is interested, or it is willing, to consider both or any of these issues as a priority for the administration’s foreign policy. I don’t think that we can take it for granted. I can imagine that there’ll be an attempt to sell to Russia a tougher US position towards Iran. I think it is something that we can expect. I’m not sure that it will be successful, but I think it’s quite imaginable.

I think there might be a discussion on international terrorism, as well. And maybe we can move as far as to consider some reincarnation of the late US/Russian intelligence cooperation committee, a so-called Armitage-Trubnikov Commission, which functioned after 9/11, and I think it functioned pretty well, especially in Afghanistan. So there are a couple of issues which, in my view, are, can be considered, if not low-hanging fruits, at least the fruits that we can reach out to. Later on, I think it will depend on whether you can build, or rather we can build, on this success story or not. But frankly, you know, I cannot imagine any major concessions that Moscow would be ready to grant to Donald Trump right away. At least, not until the presidential elections of 2018. Because the Russian system is stagnant but stable. And I don’t think that Putin and his leadership face any immediate challenges that would compel the leadership to make any dramatic changes in its foreign policy or in its relations with the West. – I would add North Korea, to that. – Well, that’s right, that’s, yeah. North Korea is important. – Andy, can I go next? – Yes.

– Alright, ah, I think arms control is the obvious one, because it’s easy. And no strong domestic constituency would oppose arms control. Can you imagine anyone opposing arms control? – Yes. – Well, not that many people, right? But you– – Well, that’s the question, yeah. The military. – Well, alright, but at least the conversation is about it and about non-proliferation, this is an obvious juncture. Again, since Tillerson was the CEO of Exxon Mobile, I would be absolutely astonished if they didn’t raise the question of at least some of the sanctions, or a partial easing of the sanctions. You don’t flush a billion-dollar business deal. If you can at all avoid it. You don’t even flush a $100 million business deal, if you can at all avoid it. So I think that’s probably pretty likely. From the Russian point of view, what should they seek? Yes, I think it is about moving the sanctions, because they are causing damage, including to Russia’s budget and including to its military budget, which is set to be reduced within the next two to three years.

There’s also domestic rumblings about social service being cut, so this financial strain of the sanctions is having perhaps not a massive effect, it’s not going to cause probably not going to cause a revolution, but certainly an appreciable effect that Putin would probably want to do without. So that would be a very smart question to raise if the American Secretary of State’s visiting. – Okay, thank you. Arkady? – Can I start with the previous question? About whether the differences are irreconcilable? – Sure. – Because I think we are, again, I think it’s really important we move away, we are in the new reality. We had Trump elections, we are having Brexit, and we’re talking as if nothing happened, okay? So, I think it’s– – We are? – Yeah, we are, because we’re talking about America and the irreconcilable differences with Russia.

Now, is the difference, and I would say the differences are not irreconcilable at all. In fact, there is a lot more common ground. On the Putin/Trump side, is there a reconcilable difference between Trump and Putin and the way that President Trump said that the New York Times and the CNN and the media outlets are the enemies of the people? And in which Putin said: the television is lying. Is there really an irreconcilable difference between the two when, in his inauguration speech, President Trump doesn’t mention the words freedom or democracy? And Russia trumpets it as a great victory of the end of American liberal interventionism? That’s on the one side. Now, let me give you a positive one on the other side.

The, those who came out in the marches on New York and Washington and California, those young people who can compete, who feel confident about themselves, and therefore do not need nostalgia, who are not going to buy into the whole idea that we can reconstruct the 1950s America, are they that different from the, those who came out in Belotna, in Moscow in 2011 and ’12? There was a new generation born in 1991. They’ve come of age. They’re 25 to 30 year olds now, who actually have a hell of a lot more in common than we think, and who have exactly the same interests. And those interests are, as I said, I mean, they’re completely the same. They are in globalization, they are in competition, they are in the liberal order, and so we should stop talking as if Trump does represent the interests, you know, for a long time we’ve been arguing in the media and in politics that Vladimir Putin, whatever his support levels, does not represent.

That has been the narrative of President Obama. That Vladimir Putin does not act in the best interest of the Russian people, and I agree with that. Does President Trump act in the best interest of all Americans, of those who can, you know, who are active? I’m not sure. Now, in terms of what the two can discuss, and I, by the way, I’m much more, having been reporting on the business side and having been reporting on the Yukos Affair extensively, and being in the room when Mikhail Khodorkovsky got his telephone call in front of Lee Raymond and Rex Tillerson– – So was I. – Sorry? – So was I; I chaired the panel. – Yeah you remember that moment when Lee Raymond walked out. When Khodorkovsky walked out first, having just spoken to Putin about buying a large stake in Yukos. Tillerson has not been a pushover. I think whatever he was as a businessman actually does give him a much better understanding of how Russia really works. He was in the room, he knows who Yegor Sechin is, he knows who Tim Shenkur and Putin’s sort of close circle are, so one thing that Secretary Tillerson will never be able to claim, unlike many others, is ignorance.

He knows exactly what’s going on and how the Kremlin operates. I would say that the key issue Tillerson and Lavrov should be discussing in preparing the agenda for the two presidents is the issue of Ukraine. Look, we, for all as I think Stefan said, and I couldn’t agree more, for all the NATO enlargement, we’ve had Russia first attacking Georgia and then attacking Ukraine. We have, in, you know, 25 years after the end of the Cold War, we have 10,000 people dead in a war in Ukraine on the eastern borders of Ukraine. Right? – Minimum. – Minimum, 10,000 people have died. Already, more are dying. And the key question we need, and Ukraine is in the danger, perhaps not as great a danger as it was a year ago, but Ukraine is still in the danger of being a failed state and disintegrating. And the key issue that should be addressed is Ukraine, because everything else stems from that.

Everything else, you know, Syria, cyber, et cetera. So and if it means that we have an opening there where we say: we need security in Europe. And we need to make, to stop, we need to draw, and this time it does really need to be a red line, which will protect, and in return for changing the format for you, President Putin, stepping back from your, from imposing capitulation agreement in Ukraine, and in return for that, yes, Minsk will go, and that means some sanctions will go. Then we should go for it. – Right, I completely agree with that. Ukraine is at the essence of the problem. I do not believe that the Russians will raise the sanctions issue, because they are fully aware– – And Putin loves sanctions. – There are no, well, whether they love them or not, there are no degrees of freedom right now on sanctions. The sanctions will get worse, harder before they, before they get better. Okay, I’ve got Paula, then quickly to Angela.

I know we’ve got, oh, you’re talking about five minutes. I know we’re– – Mine is a 30-second, because they’ve already given a lot of points about the meeting. The two quick ones that I wanna mention: it’s worth noting Secretary Tillerson just had a meeting with the full Senate Foreign Relations Committee over lunch, and I cannot imagine that Ukraine would not be a very strong recommendation, given what I said before, thinking about the summit and his visit to Moscow, as well as Syria.

Those are two issues that definitively, I look at the congress and their engagement, and I just wanted to swing back. I think it is worth noting, because Arkady, your point, I think you were the one who mentioned before the cabinet members, and I think we need to also remind ourselves it was in full display when they went up, they testified, they’ve been very outspoken, all of them in different points in time, bottom line is I also, they give very strong advice to the president and to this agenda going forward. I think we need to remind ourselves of that fact, as well, in this, and the president has been listening. – The president does listen. He’s listened on at least a couple of things.

One, he’s been turned on the value of NATO. You do not mess with NATO right now. But he’s also been turned by Mr. Tillerson on the value of the Foreign Corrupt Practices Act. And that is a positive sign. Stefan, please. – Just a short note, I think the main challenge at the moment is between the US and Russia to find a common language and to identify the topics both really find relevant.

Because I think that’s the shock, also, in Moscow. If they try to use, or try to raise the topics they normally raise with the US and they work, like nuclear, like New START, or arms control, Trump seems to have no idea what this is about, and seems to be not prepared for this, so I think from the Russian perspective it’s, for the moment, completely unclear what works, what flies, in Washington, and I think Tillerson might be the right person to, just to get in contact and to prepare the Trump meeting, but also, I don’t know, if he can explain what will fly under President Trump in the US, but I think there’s really, there’s really a problem in finding common priorities at the moment.

That’s my impression. – That was remarkable, in the first telephone call, when Mr. Putin raised the possibility about we’re interested in extending the New START treaty beyond its expiration date in 2021, Mr. Trump went off on some kind of tangent, diatribe, wasn’t clear that he was aware what the treaty was all about, but then he decided it was bad. (laughing) – Because it was a treaty of Obama. – Yes. (laughing) I’m afraid that we are really running out of time here. It’s about five o’clock and it’s been a long day. And I would like to, first of all, thank the panelists here for this discussion. I think it’s been quite interesting and illuminating in some ways, and in some ways that maybe the situation is not quite so dark as it may seem, but one lesson I’ve always told myself with the Soviet Union and Russia over the last nearly 40 years, you know: low expectations.

Less disappointment. And I think many of my Russian friends feel the same way about the United States. You know, keep low expectations and you’re less likely to be disappointed. And there are some fundamentally important things that are just too important for us to ignore. But before I let you all go, I would like to extend some thanks to people who need to be thanked for the conference. First of all, the Carnegie Corporation of New York, I wanna acknowledge again, had several participants at the conference, to Noel Perette, Yevgeni Sherbakov, Pat Nicholas, and Deanna Arsenienne. And it was one year ago that Angela and I had a gleam in our eye about the idea of this conference, that we should do something.

Both of us had written a lot about US/Russia relations and were concerned about the way things were going. Didn’t anticipate quite where they would go over the next, the next year, but so the idea was to have a 25th, look at the relationship at a 25-year perspective, which would have put us at December and January, right? Well, it was Deanna that said: well, maybe you should do it in March, because then there will be a new administration and they’ll have people in place, and that would be a more propitious time to have the conference. And you know, well, it was a brilliant idea. Not so much because new people are in place. Many people aren’t in place. But simply because of the topic itself and just how relevant and timely it is. And it was just a couple of days ago that Deanna revealed to me that it was actually Varton Gregorian whose suggestion it was to hold the conference in March.

And if I may paraphrase our president right now, about Varton: I knew that guy, he’s a smart guy. (laughing) Thank you to Varton Gregorian and the Carnegie Corporation of New York. They do so much for our field, for trying to do what we can with the US/Russia relationship, and we’re very, very grateful for that. The Coca-Cola company, Clyde Tuggle and Cathlene Black. Coke has been very active in Russia for decades and has also supported important fora for dialogue like this and they are also a real friend to the field. Next, all the participants in the conference, both the speakers and the audience.

And those that are watching virtually, I mean, thank you very much for your time, your insight, and your interest in this vitally important relationship. It matters a lot. And finally, I wanna turn to Georgetown personnel. Firstly, Dean Joel Hellman, who’s been very supportive of this in the school of foreign service. And the work that we do at Series. And then, within Series of course, itself, I wanna acknowledge a first associate director, Dr. Ben Loering, who’s been very supportive, and a number of students, graduate students, who have helped out: Eva Kim, Kate Baum, Medina Bejianava, April Gordon, Valentino Grabatsch, and Rebecca Ruel. But perhaps most importantly, I wanna acknowledge our conference coordinator: Sarah Radomsky. Sarah, where are you? Please stand up. (applause) This was a pretty big conference, you know, for essentially one person to be coordinating. And Sarah did a wonderful job, and this was her first conference. I can only say, Sarah, I hope this will not be your last conference, because you’ve done such a tremendous job that none of this would be possible.

And finally, I really want to extend my thanks and appreciation to Angela Stent, the co-chair of the conference. A friend and colleague, it’s been a real pleasure working together to put this together and other activities and we look forward to doing more things like this in the future. So thanks so much to everybody for staying with us, and we look forward to continuing the discussion in another place, at another time.

Thank you. (applause) .

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