Sat, Jan 07, 2006 page9

• Back in business, Russia flexes its muscles with the turn of a tap

  With Moscow now heading the G8, the recent gas dispute shows that Russia is still a powerful player in the region and is not at all afraid to let others know

  • By William Keegan / THE GUARDIAN
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  You have got to hand it to the Russians. Some of us are now completely at their mercy. I refer not just to the ownership of London's Chelsea soccer club which I have supported since my youth.

  No, everything in that department seems to be almost embarrassingly under control. No, I am more interested at the moment in Russian builders and the shot recently fired across Western Europe's bows by the Russian controllers of so much of the rest of Europe's supplies of natural gas.

  First the builders.

  In common with many Londoners we have got the builders in, doing essential renovations. This is London 2005-2006: the architect is Iranian, his assistant Italian, the master builder Russian. Most of the master builder's employees are Russian. They are brilliant craftsmen.

  Most of the people who have visited the house recently -- sorry, I mean the site, have been seriously impressed by the quality of the work. Unfortunately this high quality work has been going on an unconscionably long time, our rental agreement elsewhere has run out, and we have had to move back to the site. When I dared to suggest to the foreman that, even by normal building standards it was turning out to be a long job, he replied "long -- but good."

  I told this story to a friend, who commented "Yes, they took a long time over the Winter Palace."

  At all events, our family has known for some time that we are at the mercy of the Russians, and we are now -- I fear predictably -- camping at the top of the house. What we didn't know until more recently was that we might be sharing dependence on the Russians with large parts of Europe, as the smooth supply of Russian gas became dependent on the outcome of a heated dispute between the Kremlin and Ukraine.

  As I write, the immediate threat seems to have disappeared and, after much Christmas/New Year diplomacy, a deal has been agreed and the gas pipelines are working as normal.

  But what is really interesting is that, on the verge, and indeed in the early days of the Kremlin assuming the 2006 presidency of the Group of Eight (the US, Japan, Germany, France, the UK, Italy, Canada and Russia itself) Russia was to launch such a policy.

  The adoption of "Wild East" capitalism after the collapse of communism may have severely weakened the Russian economy, and it is dubious whether, statistically, it deserves to rank as the eighth largest industrial democracy. It is also questionable whether it is a democracy. Indeed, it was the desire of the West to encourage Russia in the direction of "market economics" and democracy that lay behind the diplomacy that made it a member of the G8.

  When he observes the behavior of the largest democracy in the G7, namely the US, President Putin must laugh heartily at lectures on democracy. It remains a huge scandal that the original election of US President George W. Bush in November 1999 was only achieved, after massive controversy over the way the state of Florida counted its votes, through a decision of the US Supreme Court. Nevertheless, that's the way it is in US politics and we can see the way it is in Russia, where authoritarian traditions die hard, as Putin's resigning economic adviser has recently reminded us.

  The significance of the use of economic weapons as a political tool against Ukraine can hardly be overestimated. Russia may have a long way to go as a modern industrial power, but in a world where the writing is on the wall for long term supplies of energy, Russia sees itself as back in business as a major economic power.

  So far from heralding the End of History the collapse of the Soviet Union, and almost everything that has happened since, points to the return of history and good (or bad) old fashioned political economy.
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