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Building BRICS of Foreign Aid: Ushering in Russian Foreign Aid

October 22, 2012

Russia has finally found its stride again in the international donor community. After having been a massive donor as part of the Soviet Union – providing some 26 billion dollars in 1986 alone – Russia actually received more assistance than it donated through the 1990s. It was not until 2010 that Britain stopped its aid program to Russia (and China), and the US is now no longer a donor either.

Russia is now spending around 500 million dollars a year on foreign aid and has set up an agency for direct aid while also backing the creation of a multi-billion dollar crisis response fund to help its neighbors such as Belarus which is struggling through the economic crisis.

Russia aims to maintain its regional influence and rebuild its public image through its foreign aid program. Officially stated, the goal is to “strengthen the credibility of Russia and promote an unbiased attitude to the Russian Federation in the international community“.

Russian aid has so far been distributed mainly through multilateral organizations such as the World Bank and the UN. While Mr. Putin has declared that this trend will continue, it is on condition of more Russian influence. According to one analysis by Bear Sterns, Russia “is sending a strong message that it has its own interests and that the U.S and European Union must take these on board […] It cannot just be steamrollered”. In an article from 2012 Mr. Putin announced that: “We intend to be consistent in proceeding from our own interests and goals rather than decisions dictated by someone else”.

Not a country to beat around the bush, Russia has made it clear that it will try and seek regional advantages via its aid program. In a 2007 concept paper on Russian foreign aid, the government declared a goal to create a “belt of good neighborliness” along Russian borders to help address issues like drug trafficking and cross-border crime. Putin has further added that: “our foreign policy objectives are strategic in nature and not based on opportunistic considerations”.

One controversial example of past Russian foreign policy was the closure of a US Manas airbase in Kyrgyzstan. It is alleged that in 2009 Russia tried to use the promise of 2 billion dollar aid and debt relief package to pressure Kyrgyzstan into closing down the air base. The President of Kyrgyzstan, Kurmanbek Bakiyev, announced the decision to close the base in February on the same day Russia unveiled the huge aid package to the impoverished Central Asian country. This has been a hot geopolitical issue with implications for the Afghan war as well as US-Russia relations in general. It now seems that, in the end, Russia got its wish granted as the base is set to close in 2014.

Another place Russia was trying to reinstate herself as a major player was Africa. Then President Medvedev acknowledged that Russia was almost too late in engaging with Africa” and that “work with our African partners should have been started earlier.However, Ana Cristina Alves, a senior researcher from Global Powers and Africa, in a recent article stated that Africa is not a priority for Moscow right now. “The impression I have is that Russia’s engagement in Africa is being mostly conducted by private Russian interests to explore mineral resources without any support from their Russian government.”

One explanation for this might be that Russia feels that the challenges of doing business in and with Africa is outweighing the benefits that might come from it. There is also a certain element of political risk involved in investing in North Africa. Russian companies, such as Russian Railways, have already lost many projects (for example the construction of the Bengazi-Sirt railway at the total cost of $2.7 billion) due to the events in Libya. Finally another member of the BRICS group, China, might be simply too hard to compete with when it comes to business opportunities in Africa. As documented on this blog China is very dynamic and active in Africa and has low-cost financing in sufficient amounts for nearly all investment projects planned for the continent.

Russia is ushering in a new era with the reelection of President Putin. President Medvedev is said to have been more focused on Russia-African economic policies during his four years in office compared with Vladimir Putin’s previous eight. It is now any ones guess which direction President Putin will lead the country and what consequences it will have for Africa and the rest of the developing world.

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