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The Crown Capital Management

International Relations A troubled

relationship frays further

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President Barack Obama shakes hands with Russias President Vladimir Putin in a

bilateral meeting during the G20 Summit, Monday, June 18, 2012, in Los Cabos,

Mexico.

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For Russia and the United States, this year began with a new

row that revived the atmosphere of a Cold War and deepenedthe political crisis in Russia.

As 2012 drew to a close the two countries adopted legislationpenalising each other for alleged human rights abuses.

Shortly before the New Year, U.S. President Barack Obamasigned into law a bill that blacklists Russian officials allegedlyimplicated in the death of Russian lawyer Sergei Magnitskyand in other gross violations of human rights. The 37-year-old lawyer, in 2009, died in a Russian prison where he was

sent to by some Interior Ministry officials after blowing thewhistle on their multi-million tax scam.

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Russia hit back by adopting an anti-Magnitsky law that not onlymirrored American sanctions but also banned U.S. adoptions ofRussian orphans. It is for the first time in the history of their relations

that Russia/the Soviet Union and the U.S. have resorted toblacklisting each others citizens on the basis of their human rightsrecord.

In the opinion of Russias Foreign Minister Sergei Lavrov, theMagnitskyAct was a Republican conspiracy to destroy Mr. Obamasreset policy of constructively engaging Russia. The U.S. Congressadopted the Magnitsky Act on the same day it finally repealed thefour decades-old Jackson-Vanik amendment, which required Russiato undergo every year a humiliating certification of its human rightsrecord to qualify for normal trade relations with the U.S.

Russian President Vladimir Putin called the U.S. move a slap inRussias face.

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Why does one country feel entitled to extend its jurisdiction to

the entire world? This undermines the fundamental principles

of international law, he told a press conference last month.

Americans, who keep people jailed for years without being

charged at Abu Ghraib and Guantnamo and who have

legalised torture in their own country, have no business

lecturing Russia on human rights, the Russian leader said.

LEAVING THE DOOR AJAR

Despite Russias anger, its response to the Magnitsky Act was

largely a symbolic gesture that did not really hurt U.S.interests. Hardly any American officials will be harmed by not

being able to travel to Russia or keep their money in a

Russian bank

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. Analysts were quick to note that if Mr. Putin really wanted to hit

the U.S. where it hurts he could have imposed restrictions on

American companies in Russia or shut off U.S. logisticslifelines to Afghanistan that run through Russia. By sparing

U.S. interests, Mr. Putin sent a signal that Moscow is still

open to doing business with Washington.

However, the U.S. sanctions and the Russian retaliation badly

poisoned the air between the two countries. Both sides

promised to keep adding new names to their blacklists of

persona non grata.

The reset is unravelling at the seams, said political scientist

Boris Shmelyov. The two countries are a step or two away

from a new round of the Cold War.

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ADOPTIONS AND PUTINS IMAGE

The ban on American adoptions of Russian orphans, especially

children with disabilities, hardened Mr. Putins image in the

West as a cruel and vindictive autocrat, who used children as

hostages in his political disputes with Washington. Critics said

that for tens of thousands of Russian disabled orphans,foreign adoption was the only chance to find a family.

Russians almost never adopt such children as they need

expensive treatment and rehabilitation that are not available in

Russia for free. Children with serious health problems

accounted for a fair share of more than 60,000 Russianorphans adopted by Americans over the past two decades.

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Mr. Obama will now come under increased pressure from the

Congress to put human rights at the top of his Russia agenda.Several European countries are weighing the option of

adopting their versions of the Magnitsky Act.

While the Magnitsky Act was driven by U.S. political battles, the

anti-Magnitsky law had more to do with Russian domestic

politics than with foreign policy. Apart from outlawing U.S.

adoptions, the Bill allows Russian authorities to ban

politically-active non-governmental organisations (NGO) that

receive American funds or engage in activities that representa threat to the interests of the Russian Federation. It also

bars Russians who also have dual Russian-American

citizenship from participating in political NGOs

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. Mr. Putin thereby sought to kill two birds with one stone: strike

a blow against his foes and boost popularity among hisconservative constituency by stoking anti-Americanism. In arecent poll, more than 75 per cent of Russians said that theysupported the ban on American adoptions of Russianorphans.

At the same time the adoption ban met with indignation amongthe more enlightened middle classes and reignited urbanprotests that were sparked by Mr. Putins decision to reclaimthe presidency last year. Up to 30,000 demonstratorsmarched through central Moscow earlier this monthdenouncing the ban as cannibalistic and branding itsadvocates scoundrels.

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ATTEMPT AT CONSOLIDATION

Analysts said Mr. Putin is trying to firm up his grip on power by pittingthe conservative working class provinces susceptible tomanipulation by state-run television against the increasinglyOpposition-minded big cities.

The Kremlin hopes to consolidate sections of society on the issue offoreign encroachment on Russias sovereignty, said analyst Dmitry

Oreshkin. The Kremlin narrative is: there are enemies all around,so we must rally around our leader.

However, Mr. Putins tactic had a bad downside: it provoked a split inthe Russian elites. For the first time in recent history, several seniorministers, including a Deputy Prime Minister and the Foreign

Minister, registered their opposition to the orphan adoption ban onthe grounds that it violated Russian and international legislation. Thedisagreement was apparently not serious enough for any of theministers to resign, but it may be just the tip of an iceberg.

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One section of the elitemodernisersfavourliberalisation and foreign investment to speed up growthwhile the other more conservative section, dominated bysecurity cadres, fear that greater openness to the worldwould undermine their positions in power and therefore

advocate tightening the screws on the Opposition andbuilding new walls between Russia and the West.

The conflict that has long been brewing in society has now

spilt over to the ruling elite, which until a few months agowas united, said billionaire Mikhail Prokhorov, who lastyear ran for President and set up his own party, CivilPlatform.

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Mr. Putin, who had long played the role of above-the-fight arbiterfor rival power groups, is now seen to have joined the

conservatives. Experts said his demonstrative refusal to

investigate and prosecute the officials blamed forMagnitskys

death showed how much he treasures the support of security

clans, while the adoption ban demonstrated how little hecares for his international reputation and Russias relations

with the West.

The anti-Magnitsky law is a catastrophe for Mr. Putin. Theroad taken by the Kremlin will soon lead to a real crisis of his

legitimacy, said Gleb Pavlovsky, a former Kremlin PR

strategist.