I don’t know what U.S. Treasury Secretary Henry Paulson was thinking during his visit to Moscow earlier this week, but I bet he wishes his aides had given a better debriefing. Dispensing with some pleasantries, he finally got the chance to give Vladimir Putin his elevator pitch. After buttering him up with some flattery and profuse congratulations over the country’s booming oil wealth, Paulson opened a discussion about potentially having Russia’s sovereign wealth fund pour its billions into the struggling U.S. economy, and thereby help save him from a disastrous recession-tending tenure. Paulson laid it on pretty thick with the promises, talking about favorable conditions for Russian investors in the United States, his desire to see them make it into the WTO, and even the possibility, though difficult, to get Congress to drop Jackson-Vanik. Putin knows a panhandler when he sees one, and immediately started having fun with his flustered guest – already plans were in motion, it seemed, to play this capital invitation to their advantage.
The WSJ Economics blog called it a “game of semantics,” but I thought I could recognize this tongue-in-cheek tone. Putin quipped “Since we do not have a sovereign wealth fund yet, you are confusing us with someone else. (…) But we are ready to do it (create a SWF), especially if you want us to.“Just one day later, it seems that the Russians feel rather disgusted over the “desperate” state of the U.S. economy, and emboldened to brush off criticism. When President Medvedev was interviewed about Sen. John McCain’s proposal to eject Russia from the G8, he commented that Washington had better worry more about getting its own economy together before evangelizing democracy abroad: “The Group of Eight exists not because someone likes or dislikes it, but because objectively, they are the biggest world economies and the most serious players from the foreign policy point of view. Any attempts to put restrictions on anyone in this capacity will damage the entire world order. (…) I am sure that any administration of the United States of America, if it wishes to succeed, among other things, in overcoming essentially a depression that exists in the American economic market, must conduct a pragmatic policy inside the country and abroad.“Did Paulson just offer to sell the Russians a free pass on human rights in exchange for bailing out the U.S. economy? Of course not, but neither would we call it a successful trip. It is very interesting how quickly the link between Russian investment in the United States and rejection of democracy criticisms was assumed to be firmly established. Besides, the Secretary of Treasury should know by now that the most important targets of the Kremlin’s upcoming acquisition spree will be in European energy assets, properties that it values more than foreign army bases.They should just ask the Chinese to prop up America. Again.