U.S.-Russia economic tensions show

Sunday, May 26, 2002

ST. PETERSBURG, Russia -- President Bush and Russian President Vladimir Putin told a national Russian television audience Saturday they hoped the new relationship between the former rivals would help speed Russia's economic recovery.

But their comments, in fielding questions from university students and faculty at St. Petersburg University, also revealed some economic tensions.

Putin blamed some Cold War-era U.S. trade restrictions for making it harder for Russia to export high-tech goods. And Bush said that, while he supports Moscow's entry into the World Trade Organization, he opposes bending the group's stiff standards to make it happen.

Commerce Secretary Don Evans will decide within weeks whether to declare Russia a "market economy," a designation important for its entry into the Geneva-based organization that sets and polices world trade rules.

It would represent approval from the United States, the WTO's biggest member, of Russia's efforts to move from a government-controlled economy to the free market. Membership itself will depend on Russian negotiations with individual WTO members over how it will lower trade barriers.

The decision comes at a time of trade tensions between the two countries over U.S. tariffs on Russian steel and Russian restrictions on U.S. poultry products.

Still, disagreements were few in the good-natured and often playful exchanges between the two leaders in Putin's hometown. Bush called Putin "my friend" and referred to him as "Vladimir" several times. Putin called him "George."

The event, similar to one the two held in Texas last year, was broadcast live on Russian television. Putin graduated from the school in 1975 when it was known as Leningrad State.

A day after signing the most sweeping arms-reduction pact in history, the two leaders heralded an era of new good political and economic will.

"A strong, prosperous and peaceful Russia is good for America," Bush said.

Putin praised the treaty and a second pact that outlines a new strategic relationship between the United States and Russia.

In Bush's recorded weekly radio address Saturday, he praised the summit accomplishments and Russia's warming relations with the United States and Europe.

"President Putin and I are putting the old rivalries of our nation firmly behind us, with a new treaty that reduces our nuclear arsenals to their lowest levels in decades," he said. "After centuries of isolation and suspicion, Russia is finding its place in the family of Europe. And that is truly historic."

At a news conference, Secretary of State Colin Powell said the two countries would keep trying to resolve differences over Russia's nuclear assistance to Iran. The United States is concerned the assistance could help Iran develop nuclear weapons; Russia insists the technology is being used for nonmilitary purposes.

"I hope that we will be able to solve this going forward," Powell said.

Powell also expressed concerns about Russia's short- and medium-range nuclear weapons, which were not covered by Friday's agreement. "We still have some, they have many more," he said.

But he focused on the positive, saying the summit had made the world safer by cutting nuclear arsenals and strengthening personal ties between U.S. and Russian leaders.

One sign of the warming relationship was that most students' questions were on economic issues.

Asked why Russia's biggest exports were basic products like oil and wood rather than high-tech products, Putin got in a gentle dig at U.S. restrictions that he said discriminated against Russian products.

"We need nondiscriminatory access to world markets and U.S. markets," he said. "We don't want preferences ... we don't want special favors."

Bush reiterated his support for repealing the Jackson-Vanik trade law of the 1970s that ties Russia's trade status to its progress on Jewish emigration. The repeal is bogged down in Congress.

Bush praised Russia's flat tax as fairer than taxes in some Western countries. But he said Russia's export tax worked against its own interests.

One questioner asked Bush what specific steps were needed for Russia to join the WTO.

"Starting with having a president who thinks you should be in the WTO. And I think you ought to be," Bush said. "I vote 'aye,' assuming that the Russian government continues to reform their economy ... and make a market-based economy work."

WTO membership would make Russia a more predictable place for foreign investment. But difficult economic changes are needed, and some U.S. trading partners have voiced concern that Russia not be given exemptions from those rules.

"George said it very well. The president of Russia has to want to be a member of the WTO. And he said that he's for it. If that's sufficient, I'm in," Putin said, drawing laughter.

Anti-globalization activists were among a few hundred protesters who followed Bush on Saturday. Leaders of the protests, which included Communists and nationalists, were driven away by plainclothes security personnel. The protests were small compared with those attended by 20,000 demonstrators when Bush visited Berlin on Thursday.

The university forum was the highlight of a day in which the presidents took in Russian sights and culture.

They laid a wreath of yellow and red roses at the Monument to the Motherland in Piskarevskoye Cemetery, which contains the mass graves of some 600,000 victims of the 900-day Nazi siege of Leningrad during World War II.

Afterward, they toured the Hermitage museum, the largest art museum in Russia. Walking arm-in-arm with their wives, Bush and Putin climbed the marble staircase just inside the entrance to see masterpieces by Da Vinci, Rembrandt and others.

In the evening, the Bushes and the Putins attended a performance of "The Nutcracker" ballet before heading for an evening boat cruise on the Neva River. During the early summer, the sun barely goes down in St. Petersburg and some light remains in the sky near midnight.

Bush leaves for Paris on Sunday.

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