Bargaining Over Bombs
With North Korea thumbing its nose at the world — and, for that matter, Iran possibly doing the same — Russia’s cooperation will be indispensable to any nuclear nonproliferation initiatives being pushed by President Barack Obama. And because so much of diplomacy is personal, the world has been watching to see how the new Obama administration gets along with its counterparts in Moscow.
 So far there have been several major face-to-face meetings between the two sides, with a pivotal summit set for July, when Obama visits Russian President Dmitry Medvedev in Moscow. In the meantime, Secretary of State Hillary Clinton famously gave a “reset” button to Russian Foreign Minister Sergey Lavrov at their first official meeting in March, and more recently, Lavrov visited Washington this month to report on whether anyone was actually pressing that reset button.
The trip also highlighted a major bilateral initiative: replacing the Strategic Arms Reduction Treaty (START), which expires in December 2009. The pact has since been overshadowed by North Korea’s latest nuclear provocation, but it remains crucial to nonproliferation efforts between the United States and Russia, which together hold 90 percent of the world’s nuclear weapons. It’s also one of the few areas where the two countries agree they have a vested interest.
“We have a lot to do in the field of nuclear nonproliferation. This is a field which is one of the most successful areas of our cooperation. And today, we have outlined some preliminary steps which will enable us to strengthen security around the world,” Minister Lavrov said during a joint press conference with Secretary Clinton at the State Department on May 7.
Clinton echoed that sentiment. “[O]ur leadership in the area of arms control and nonproliferation is of such profound global concern that that is at the top of the list,” she said, noting that despite disagreements over other issues such as Georgia and Iran, “the United States and Russia bear a special responsibility” to be role models in nuclear disarmament.
Likewise, Lavrov stressed that the reduction of strategic weapons shouldn’t be held “hostage” by other policy differences.
But those differences are hard to overlook. Specifically with START, Moscow is hoping to link the nuclear talks with U.S. plans to deploy a missile defense system in Europe, which Russia vehemently opposes. So far, Obama has been reviewing deployment of the missile defense system, but he hasn’t scrapped it altogether — hinting that there wouldn’t be a need for such a program if Russia helped persuade Iran to give up its own nuclear ambitions.
Nevertheless, Russia and the United States both seem to recognize the urgency of replacing START, a landmark agreement signed in 1991 that obliges the two superpowers to cut their nuclear warheads down to 6,000 each and their delivery vehicles to 1,600 each. A follow-up agreement in 2002 further slashed the goal to between 1,700 and 2,200 warheads apiece by December 2012.
If START expires, it would be a devastating blow to already-strained U.S.-Russian relations, with neither side able to inspect or verify the other’s nuclear stockpile. It would also significantly undermine efforts to convince Iran, North Korea and other nations to abandon their nuclear aims.
That’s why U.S. and Russian negotiators have launched discussions to come up with a successor agreement that could potentially be the “reset” both sides are seeking.
Lavrov says such a reset is long overdue. “I will not reveal a great secret if I say that the state of Russia-American relations has seriously deteriorated,” the characteristically blunt foreign minister told an audience at the Carnegie Endowment for International Peace during his Washington visit. “So if we’re serious about the need to reset our relations, then we must get rid of the toxic assets inherited from last year.”
But he quickly qualified that statement with the admonition that those toxic fumes have been emanating from Washington. “The choice has not been ours. The plans of the previous U.S. administration have carried with them a serious damage to Russia’s security,” he charged, citing President George W. Bush’s support for NATO expansion to include former Soviet bloc nations, as well as the proposed missile defense shield in Eastern Europe — which Moscow views as an antagonistic infringement on its borders.
Lavrov also soundly dismissed suggestions that Obama tie missile defense in Europe to progress on the Iranian front, arguing that the problem of Iran should be dealt exclusively within the “P5 plus one” negotiating format (with Britain, China, France, Russia and the United States, plus Germany). He also urged the Obama administration to consider the plan that then-President Vladimir Putin proposed in 2007 offering alternative missile defense sites in Azerbaijan or southern Russia.
In addition to the missile defense squabble, Russia is also demanding that the United States reduce the number of delivery vehicles it has on top of its nukes in any new agreement. According to a recent State Department assessment, as of January this year, Russia held 3,909 nuclear warheads and 814 delivery vehicles, while the United States had 5,576 warheads and 1,198 delivery vehicles. (Russia though has four to six times as many tactical nuclear weapons as the United States, and has looked at them as a way to offset the gap in their conventional capabilities, according to Steven Pifer of the Brookings Institution.)
Moscow is eyeing U.S. delivery systems because it worries that nuclear warheads removed from systems would simply be replaced by conventional weapons. The United States has signaled some flexibility in considering the issue, but it also said it wouldn’t concede to another Russian proposal that stored nuclear warheads be counted in the new deal.
If they can iron out the details, it’s expected that the two nations will settle on a maximum ceiling of about 1,000 to 1,500 deployed nuclear warheads each.
“START I is no longer an effective instrument of control in the field of strategic arms. Therefore we see no point in extending it,” Lavrov explained at the Carnegie discussion. “We need a new document and we are working hard to prepare it. There is a hope that before the end of the year, we will be able to arrive at a mutually acceptable language of a new treaty, although time is running short and fast.”
To that end, negotiators are busy preparing progress reports that will be given to Presidents Obama and Medvedev at the Moscow Summit in July. Lavrov said he is optimistic about the personal dynamics between the two leaders based on their initial meeting in London in April, although he cautioned that “chemistry be accompanied by progress on the substance of the issues.”
And for Lavrov, the most mutually beneficial issue at the moment is the nuclear arsenal that once defined the relationship between the onetime foes during the Cold War. “We can achieve quite a lot together in the field of nuclear nonproliferation. All the time we reiterate how important it is to strengthen the nonproliferation treaty, a key element of the contemporary system of international security,” he said. “It is no secret that the nonproliferation regime based on [the Non-Proliferation Treaty] is going through very difficult times, and we must keep in mind that the fate of the global nonproliferation system depends to a great extent on the position of our two countries who are major nuclear powers.”
special day.”
During his visit to Washington in early May, Russian Foreign Minister Sergey Lavrov took a break from politics by inaugurating the Arthur M. Sackler exhibition, “The Tsars and the East: Gifts from Turkey and Iran in The Moscow Kremlin,” pictured above (with Julian Raby, director of the Sackler and the Freer Gallery of Art, to his right). At the exhibit’s debut, Lavrov said that “politics is not the only area where our people show an interest in each other.”
Front page photo: State Department Photo by Michael Gross
Atlantic Council Awards Visionary Leaders
As in past years, the numbers from the Atlantic Council’s 2009 Annual Distinguished Leadership Awards Dinner speak to the leadership behind the council itself. Among the 900 attendees at the April 29 event were guests from 54 nations, four former heads of state and government, as well as nearly 50 ambassadors and three dozen members of Congress and the Obama administration.
 The evening also commemorated two other big numbers: the 20th anniversary of the fall of the Berlin Wall along with NATO’s 60th anniversary, two decisive developments that have shaped the transatlantic relationship that is the heart of the council’s work. But over the years, the Atlantic Council of the United States has branched out to encompass an interlocking network of global issues that impact U.S.-European relations, including financial instability, climate change, energy security and failed states, to name a few.
Still, the fundamental partnership and its role in addressing the world’s far-reaching problems remain at the core of the council’s work. To that end, the awards ceremony honored leaders in the “four pillars” of transatlantic relations: policy, military, business and the arts.
Former U.S. President George H.W. Bush along with former German Chancellor Helmut Kohl were honored for their international leadership during the Berlin Wall’s fall; Gen. David Petraeus for his military leadership as head of U.S. Central Command; Samuel Palmisano for his business acumen as president, chairman and CEO of IBM; and for his artistic prowess, the council honored singer Thomas Hampson, who has performed in nearly every major opera house in the world over the last 25 years.
 Like the impressive roster of honorees, even the prestigious lineup of introducers required their own introductions: Defense Secretary Robert Gates (introducing Bush Sr.), former National Security Advisor Zbigniew Brzezinski (introducing Horst Teltschik, who in turn accepted the award for Chancellor Kohl), current National Security Advisor James L. Jones (for Gen. Petraeus) and former National Security Advisor Lt. Gen. Brent Scowcroft (for IBM’s Palmisano) were among the flurry of speakers at the dinner, which was held at the Ritz-Carlton Washington hotel.
Though jam-packed, it was a fast-paced awards ceremony that featured a potpourri of Washington players who helped usher in a whole new ballgame in transatlantic relations — cementing the reunification of Germany, the demise of Soviet communism, and the emergence of modern-day Europe.
And although the evening largely focused on the monumental achievements of the 1980s and early ’90s, it also offered a glimpse into today’s challenges, from Afghanistan to the global economic crisis.
It also shed light on the personal behind-the-scenes diplomacy that shaped one of the most consequential relationships of the immediate post-Cold War era.
“I’ve just arrived from Berlin. It is like witnessing an enormous fair. It has the atmosphere of a festival. The frontiers are absolutely open,” Chancellor Kohl said to then President Bush in a Nov. 10, 1989, phone call — fascinating snippets of which were included in the dinner brochure.
“The reforms in Poland are moving ahead,” the chancellor said. “They have a new government with fine people. They are too idealistic with too little professionalism. Many of their professionals have spent the last couple of years in prison, not a place where one can learn how to govern. They are committed to democracy and market economics; we must help them,” Kohl urged Bush.
The person taking notes at during that phone conversation was Robert Gates, who was on hand to share his own insights into that historic moment and to present Bush with the Atlantic Council award. “[I]t is certainly interesting and humbling to look around and be in front of so many of my former bosses: Zbig Brzezinski, Brent Scowcroft and of course President Bush — a reminder, if nothing else, of what it is always like to be staff,” the defense secretary quipped.
Gates — who was assistant to President Bush and deputy national security adviser from 1989 to 1991 — praised the elder Bush for “his extraordinary decency, his integrity and his remarkable sense of humor.”
 “One of the great privileges of my life was to be at President Bush’s side as he provided inspired leadership to a world that in a span of less than 36 months experienced the liberation of Eastern Europe, the reunification of Germany into NATO, the victory of the West in the Cold War, the first Cold War, the first Gulf War and the collapse of the Soviet Union,” Gates said.
And of that phone call that he recorded, Gates recalled: “Reflecting on that period, I later wrote, the imagination reels at the thought of a less experienced and skilled president trying to exploit the liberation of Eastern Europe or dealing with the final crisis and death throes of the Russian and Soviet empire. As the communist bloc was disintegrating, it was George Bush’s skilled yet quiet statecraft that made a revolutionary time seem much less dangerous than it actually was,” he praised.
“The truth is, I love this man. I went to Texas A&M for him; I would walk through fire for him. I would even come to a Washington, D.C., dinner for him,” Gates joked, “because I believe he is one of the greatest American patriots of all time.”
For his part, George H.W. Bush simply thanked the “capable men and women I had at my side during four years of genuine change and challenge,” quipping that today more people ask about his wife Barbara than about him, even though “I was the president for god’s sake.”
Bush also noted the pivotal vision of Mikhail Gorbachev in the Cold War transition, and of course Kohl, who couldn’t make it to the ceremony that evening due to health reasons. Bush is scheduled to meet Kohl though in Berlin this fall to mark the official 20th anniversary of the wall’s collapse.
“It wasn’t as easy back then as it seems now,” Bush told the Atlantic Council audience. “But it’s been said that hope is putting faith to work when doubting would be easier. And at that tense time in the early 1980s, it would have been easy to doubt Germany’s ability to stay with the United States and NATO. But such doubters would have been underestimating Helmut.”
 In a letter, Kohl echoed just how momentous those accomplishments were that today may be taken for granted. “Germany got back its full sovereignty after 45 years. The German-Polish border had finally been settled; the Warsaw Pact peacefully disbanded; 500, 000 troops left Central Europe,” the German chancellor wrote. “The East-West conflict had ended and with it the bipolar world. Europe was not divided anymore. The Soviet Union broke up into 15 sovereign states. The communist ideology is gone. We signed the most far-reaching arms-control and arms-reduction agreements. New democracies and market economies were developing. Ladies and gentleman, that’s all? What a miracle.”
Polish-born American statesman Zbigniew Brzezinski specifically credited part of that miracle to Kohl’s diplomatic skills. “[H]e recognized unconditionally the then-still-new German-Polish frontier created after the end of World War II by taking away a large slice of Germany, awarding it to Poland in compensation for territories that the Soviet Union had taken from Poland,” said Brzezinski, an Atlantic Council international advisory board member. “Kohl helped to end the civil war in Central Europe between Germans and Poles, and then he struggled mightily to make certain that the newly freed Central Europe is then included in NATO, and that he did, because he had a sense of strategic vision.”
Brzezinski, national security advisor under Jimmy Carter, actually told that story at an international conference in Beijing eight years ago. Kohl happened to be in the audience and personally invited Brzezinski to dinner afterward. As the two drove to an Italian restaurant in Beijing, Kohl was interrupted by a news of an emergency: Washington and New York had just been attacked.
Brzezinski recalled how he watched as the former German chancellor was riveted by the 9/11 terrorist strikes half a world away. “And I was struck again by the intensity of his feeling that America was attacked, that Europe had to be with America … I was profoundly moved.”
Today of course, with the Cold War behind it, the United States must confront a slew of new threats, notably in Afghanistan, where U.S. forces continue to hunt down the perpetrators of 9/11 and where NATO troops face their biggest post-Cold War battle.
On that front, military leadership award winner Gen. Petraeus rebuffed criticisms that NATO isn’t pulling its weight against the Taliban in Afghanistan. “[W]ith the recent announcement of the new U.S. strategy for Afghanistan and Pakistan, and with the conduct of the NATO summit earlier this month, new resources have been pledged and new resolve has been demonstrated. Indeed, the United States and other NATO nations have committed substantially more troopers and additional resources to ensure that we can achieve progress in Afghanistan,” said Petraeus, rejecting the notion that the war effort had become a strictly American one.
But the 35-year military veteran — who holds a doctorate in international relations — admitted that cooperation is easier said than done. “Winston Churchill was right when he observed that the only thing worse than having allies is not having them,” he quipped. “As difficult as it may be, at times, to work with men and women who wear the uniforms of different countries who come from different cultures and who speak different languages, working together is vitally necessary.”
That global outlook is reflected in the Atlantic Council’s own evolving mission over the past 48 years. To that end, several new programs were announced at the dinner, including the Eurasia Energy Center focusing on the Black Sea-Caspian region; the Michael Ansari Center for Atlantic-African Partnership; the South Asia Center dealing with Pakistan and Afghanistan as well as India, Bangladesh, Iran, China and Central Asia; and a new global business and economics program.
The business arena in fact very much symbolizes the new Germany and its integral relationship with the West almost two decades after reunification — one facet of globalization that companies such as IBM have capitalized on. And IBM chief and honoree Samuel Palmisano personifies that drive.
Since Palmisano took the helm as president in 2000 and then chairman and CEO two years later — after joining the company since 1973 — IBM has acquired more than 100 companies, experienced record earnings and cash flow, and has invested more than $50 billion in research and development.
Its latest venture will be convening a “smart cities” summit in Berlin this month to devise innovative strategies for urban expansion. It’s all part of what Palmisano calls the “infusion of intelligence into companies and entire industries,” producing smart power grids, smart health care and the like.
“And it isn’t theoretical. We see aspects of smarter cities all around us. Smarter traffic in Singapore, Stockholm and Brisbane, smart grids in Houston and Malta, smart buildings in Shanghai and Boulder, smart public safety in New York and Chicago, a smart bay in Galway, smart health care in Paris, smart food tracking in Norway,” Palmisano said.
 “I think all of us here tonight know that we have arrived at a defining moment in history. We’ve faced a series of wake-up calls in this first decade of the 21st century — 9/11, climate change, oil, global supply chains, the global movement of work, and now the global financial crisis. Unrelated developments? I would suggest that all of these are actually about the same subject — the reality of global integration.
“We now understand that simply connecting things isn’t enough,” he continued. “If we don’t make our economic, technological and social systems truly systems — and by that I mean they are reliable, transparent, trustworthy and secure — then they will not be sustainable. Worse, societies may react to their disruption in short-sighted, self-defeating ways. They will recede from global trade and dialogue. They will call for protectionism. They will re-erect walls.
“Some of the people here tonight know about walls,” Palmisano added. “President Bush and Chancellor Kohl led the world 20 years ago in bringing down the Berlin Wall, whose anniversary we celebrate tonight. Centuries from now, that bold act of leadership will be seen as having not only reunified a nation, but ushered in a new era of global progress.
“The key, as I said, is leadership. If we are really going to drive meaningful change, we need to get smarter about how we work together,” Palmisano concluded — a message that certainly rings true for the transatlantic leaders in the audience.
From top photo to bottom:
From left, Atlantic Council President and CEO Frederick Kempe; IBM Chairman, CEO and President Samuel Palmisano; Horst Teltschik, national security advisor to former German Chancellor Helmut Kohl; former U.S. President George H.W. Bush; Commander of U.S. Central Command Gen. David Petraeus; baritone Thomas Hampson; and Atlantic Council Chairman former Sen. Chuck Hagel attend the Atlantic Council of the United States 2009 Annual Awards Dinner, which honored Bush, Kohl, Petraeus, Palmisano and Hampson for their distinguished leadership in their respective fields.
Gen. David Petraeus, commander of U.S. Central Command, left, talks with National Security Advisor Gen. James Jones at the Atlantic Council Annual Awards Dinner, which celebrated the 20th anniversary of the fall of the Berlin Wall as well as the 60th anniversary of NATO.
From left, former Secretary of State and retired Gen. Colin Powell, former National Security Advisor Brent Scowcroft, and former Spanish President Jose Maria Aznar attend the 2009 Atlantic Council Annual Awards Dinner, held at the Ritz-Carlton Washington hotel.
From left, Ambassador of Egypt Sameh Shoukry, Ambassador of Afghanistan Said Tayeb Jawad, and columnist Joe Klein of Time magazine attend the 2009 Atlantic Council Annual Awards Dinner.
From left, Ambassador of Cyprus Andreas S. Kakouris, Ambassador of Hungary Ferenc Somogyi, former U.S. Chief of Protocol Lucky Roosevelt, Ambassador of Malta Mark Miceli-Farrugia, and President of the Foreign Policy Group Ambassador Timothy Towell attend the 2009 Atlantic Council Annual Awards Dinner.
Front page photo from left, Defense Secretary Robert Gates, former President George H.W. Bush, and former National Security Advisor Brent Scowcroft share a laugh at the Atlantic Council Annual Awards Dinner.
IFE Bestows ‘Civility Award’ to Chinese Envoy
Special to the Diplomatic Pouch contributed by Larry Luxner
 In late 2007, Hillary Clinton — then a candidate for president — observed that “America’s relationship with China will be the most important bilateral relationship in the world this century.”
That mantra was underscored repeatedly at a lavish event May 5, held at the sprawling new Chinese Embassy on International Place in the Van Ness neighborhood.
In keeping with the evening’s focus on Sino-American friendship and harmony, the nonprofit Institute for Education (IFE) bestowed its “Civility Award” upon Chinese Ambassador Zhou Wenzhong — “in honor of China’s outstanding performance in the 29th Olympiad and, more importantly, its leadership on the world stage.”
Past recipients of the award include two Washington mayors, Anthony Williams and Adrian Fenty, and two Republican lawmakers, Sen. Susan Collins of Maine and Rep. Tom Davis of Virginia.
The 2009 Opinion Leaders Dinner Forum, whose theme was “China and the United States: A Vital Partnership,” marked the first time that so many senior Chinese diplomats and U.S. media heavyweights have shared a meal and hospitality in the nation’s capital.
These included Gerard Baker and Jerry Seib of the Wall Street Journal; David Broder of the Washington Post; Thomas Omestad of US News & World Report; and Judy Woodruff of PBS’s “The News Hour With Jim Lehrer.”
 Guests enjoyed an exclusive tour of the embassy — the last public design by world-famous architect I.M. Pei — then sat down to a dinner of corn soup, roast codfish, broccoli and carrots, desserts, fruits and Chinese tea.
Some 100 guests including “opinion leaders” watched as former U.S. Secretary of State Lawrence Eagleburger presented the award to Zhou.
“It is important that the People’s Republic of China understand us, and that we understand them,” said Eagleburger, 78, who spent three hours driving in the rain from his home in Charlottesville, Va., despite recent major surgery, to attend the event. “Within the next decade, it will be China and the United States that will be determining — more than any two other countries — the future of this world. It is the most responsible relationship we have, and it must prosper.”
Eagleburger — who along with Henry Kissinger was closely involved with the Nixon administration’s efforts to forge initial relations between Washington and Beijing — is the only Foreign Service officer to have been named secretary of state. As such, the veteran diplomat presented Zhou with a portrait of himself by noted artist Peter Max, who was raised in Shanghai and has painted portraits, posters and installations for six U.S. presidents from Gerald Ford to Barack Obama.
Zhou, who seemed pleased with the portrait, toasted Sino-American relations and called for “opening up new areas” of bilateral cooperation.
“Needless to say, we disagree from time to time, but I think it’s inevitable for any two countries to disagree on one issue or another. The important thing is to figure out how to settle these issues,” said the ambassador, who took up his post just over four years ago.
Considering the venue, this clearly wasn’t the moment to discuss China’s persistent human rights abuses, its detention of journalists or Beijing’s burgeoning trade surplus in the face of U.S. economic pain.
In fact, Zhou hammered home the “harmony” theme, noting that harmony — pronounced “hé xié” in Mandarin — is one of the most often used words in China.
“We have a set of goals for pushing harmony in the world. Harmony is a part of Chinese history. Buddhism tries to seek harmony in oneself. Taoism seeks harmony with nature. Confucianism develops harmony within society. And we want to develop a foreign policy based on this traditional aspect of Chinese history.”
IFE, which sponsored the event, says its mission is “to recognize, encourage and promote civility and leadership locally, nationally and in the world community.” The Washington-based group says it “also encourages youth global citizenship with programs that foster intercultural understanding.”
 As such, the organizers of this event were Kathy Kemper, a tennis coach who founded and currently heads IFE, as well as George Vradenburg, chairman of the Institute for Education Civility Program.
Before stepping down to enjoy the rest of the evening — including a classical music performance by pianist Jiayne Yang and violinist Ying Jin — Ambassador Zhou thanked the many print and broadcast journalists in attendance for their hard work.
“For years, they have tried to cover China as objectively as they possibly can. They have played a very critical role in helping people here understand what’s going on in China,” he said. “The embassy will continue to do all it can to help these journalists do their job.”
From top photo to bottom:
Chinese Ambassador Zhou Wenzhong received the Institute for Education’s “Civility Award” at a May 5 ceremony held at the Chinese Embassy. In addition, he was given a portrait done by artist Peter Max (front page) presented by former U.S. Secretary of State Lawrence Eagleburger (front page left) and George Vradenburg, chairman of the Institute for Education Civility Program.
From left, Rep. Rick Larsen (D-Wash.); Kathy Kemper, founder and CEO of the Institute for Education; Xie Feng, deputy chief of mission at the Chinese Embassy; and Rep. Mark Steven Kirk (R-Ill.) attend the Institute for Education’s Civility Award 2009 Opinion Leaders Dinner Forum at the Chinese Embassy. Kirk and Larsen head up the U.S. China Working Group.
Founder and CEO of the Institute for Education Kathy Kemper, center, poses with Gerard Baker, left, and Jerry Seib, top editors at the Wall Street Journal, at the Institute for Education’s Civility Award 2009 Opinion Leaders Dinner Forum.
Photos: Larry Luxner
Baltic States Nervous as Ever About Big Neighbor
Special to the Diplomatic Pouch contributed by Larry Luxner
On May 16, some 120 Latvians, Lithuanians, Estonians and U.S. academics gathered at the Renaissance Mayflower Hotel for a conference elaborately titled “Baltic Regional Security: Old Threats and New Challenges.”
But for most of those in attendance, those threats and challenges could be neatly summed up in one word: Russia.
 Latvian President Valdis Zatlers, the keynote speaker, devoted a good part of his 30-minute lecture during the daylong conference to the perceived Kremlin menace, warning that Moscow could seek to turn current economic turmoil in the three tiny Baltic states to its own advantage.
“We should not be naive,” warned Zatlers, whose appearance was sponsored by the Joint Baltic American National Committee (JBANC), based in Rockville, Md.
“The last couple of years have shown that Russia is — more than at any time since the end of the Cold War — prone to unilateral action,” said the Latvian leader. “Just a few examples of this are suspension of the CFE [Conventional Forces in Europe] treaty, its war against Georgia, the gas cutoff to Europe and its disregard of commitments followed by claims of privileged spheres of influence.”
He added: “Some in Russia see the crisis as an opportunity to influence its ties among the countries as they become weaker due to the crisis. Others find it useful to use available media tools to highlight economic difficulties in countries of interest, in order to provoke additional tensions.”
Zatlers acknowledged that “the greatest immediate threat to Baltic security is the economic downturn,” which will cause Latvia’s GDP to tumble by as much as 12 percent this year. Lithuania and Estonia are only slightly better off — their economies will probably shrink by 8 percent to 10 percent in 2009 (also see “Latvia Sobers Up As the Party Ends” and “Baltic Neighbors Lithuania, Estonia Clean Up Their Own Economic Houses” in the May 2009 issue of The Washington Diplomat).
“In the near future, we have to avoid becoming vulnerable to social instability and external political pressures,” warned the Latvian president. “We must avoid becoming easy prey to radicalization of the political process. Therefore, it is crucial that we do all in our power to overcome these difficulties.”
It’s a safe bet that the Russian Embassy did not send a representative to the JBANC seminar, which devoted much of its program to analyzing the actions of former president (and now prime minister) Vladimir Putin and his handpicked successor, Dmitry Medvedev.
Indeed, Zatlers was hardly the only one to sound the alarm on Moscow.
Janusz Bugajski is director of the New European Democracies Project at the Washington-based Center for Strategic and International Studies. “Democratic institutions will be severely tested for the first time since the collapse of communism,” argued Bugajski. “We may witness a succession of weak governments and more radical opposition that will seek to tap into populist sentiments. In a worst-case scenario, social conflict may escalate and minority populations may be targeted.”
It’s likely, he said, that in such a scenario, “a belligerent Russia will exploit Baltic turmoil” in an attempt to regain control over the three states, which enjoyed a few years of autonomy before being forcibly occupied by the Soviet Union following World War I. Latvia, Lithuania and Estonia all regained their independence following the breakup of the Soviet Union and, until recently, enjoyed some of the world’s fastest growth rates.
“Russia defines its national interests at the expense of its neighbors,” Bugajski charged. “In the case of the Baltic states, Russian officials seek to marginalize all three countries, regardless of whether they are inside or outside of NATO. From the Kremlin’s standpoint, the economic downturn among its former colonies presents an ideal opportunity to inject itself into local political structures.”
Bugajski claimed that Russia’s actions are “no longer based on ideological convictions” but on lucrative business deals in countries where former communists now hold positions of power.
“There have been various attempts at bribery and political blackmail by Russia to discredit local politicians or influence policies to become more pro-Russian,” he said, calling such actions a deliberate provocation. “Even though Moscow’s resources have been depleted by the financial crisis, the expansion of Russian influence ranks as a top priority for the Kremlin.”
And one way Moscow continues to exert influence over the Baltics is through control of energy resources.
Robert Nurick, senior fellow at the James Martin Center for Nonproliferation Studies, noted that Europe imports 60 percent of its natural gas needs, and that half those imports come from Russia. For the Baltics, those numbers are considerably higher.
“Energy generates 25 percent of Russia’s total GDP, and export revenues are clearly critical to Russia’s economic recovery,” said Nurick, an expert on Russia and arms control. “The Baltic states feel themselves in a particularly vulnerable position, especially in the case of Lithuania.”
Nurick explained that because of their former status as Soviet republics, the Baltics’ electrical and other energy infrastructure networks are almost entirely connected to Russia, rather than to the rest of Europe.
“Up until a few years ago, much of the Western discussion reflected the view that the problem was too much Russian gas. But when you look at what’s happening inside Russia, and compare their own production forecast with their supply and delivery commitment, the problem will very shortly be too little gas,” he warned. “The numbers simply don’t add up. This is one reason Russia is so anxious to monopolize all gas supplies from Central Asia, so they can meet both domestic demand and continue to control supplies to the rest of Europe.”
Nurick urged action to immediately reduce Russia’s leverage over Europe and “provide a margin of safety to the Baltic states.” One alternative is to construct a transmission line from the Baltics to nearby Sweden. But that, he said, “depends on creation of a functioning internal market for electricity which does not exist now.”
Another possibility is to build a liquefied natural gas facility just off the Baltic coast to supplement Russian natural gas. He also advocates the construction of a nuclear power plant to lessen dependence on Russian energy.
As world oil prices have dropped, Moscow has lost some of its clout. But that’s not necessarily a good thing, warned Harri Tiido, representing the Estonian Foreign Ministry.
“We have to be afraid when Russia is strong,” Tiido told his rapt audience, “but we have to be more afraid when Russia is weak.”
From left, wife of the Latvian ambassador Elena Pildegovica, Mrs. Lilita Zatlere, President of Latvia Valdis Zatlers, and Ambassador of Latvia Andrejs Pildegovics attend the 2009 U.S. Baltic Gala at the Renaissance Mayflower Hotel and sponsored by the U.S.-Baltic Foundation, which followed the eighth biennial Joint Baltic American National Committee’s 2009 conference on Baltic regional security.
HSBC Banks on Embassy Business
HSBC was recently ranked the sixth-largest company and the largest bank in Forbes Global 2000 list of biggest companies. Now, the international powerhouse is increasing its local presence with its newest branch in Georgetown in its pursuit to capture more global business — particularly the embassy market — in Washington.
 “You’ve heard people say that Washington, D.C., is the center of the banking business,” explained Aimee Daniels, HSBC’s mid-Atlantic regional president. “Now in terms of HSBC operations, I think the bank will be headquartered out of New York but our mid-Atlantic operation is headquartered right here at 1130 Connecticut Avenue.”
The Connecticut Avenue office was established four years ago and over the last two years, HSBC has opened an additional eight branches in D.C., Maryland and Virginia, with their newest location at the top of Georgetown in Northwest Washington. The former manager of the Connecticut Avenue office, Joseph Reamer, will be managing the new Georgetown location.
“The diplomatic business was our first business and our core business, and our largest business right now,” Daniels said, “but we also have a commercial business working with international-oriented middle market firms and we have a commercial real estate business. Georgetown is a natural extension.”
She added: “So proximity to the embassies is one of the reasons that we wanted to be [in Georgetown], and you know we’re really focused on banking the international community. I think a lot of people who live in the Georgetown area are from other countries or travel a lot.”
The embassies of Saudi Arabia, Uruguay, Mongolia and Ukraine have locations directly in Georgetown, and HSBC has garnered a coveted spot at 1715 Wisconsin Ave., NW, which has a rare parking lot for added convenience.
Most banks have shied away from the embassy banking business since 2004, when Riggs Bank was fined $25 million for failing to adequately monitor suspicious activities, after which stringent new regulations on international transactions were imposed on the banking industry.
But HSBC officials say that with its global focus, the bank boasts an infrastructure that is prepared to handle the intricacies of embassy business. “It is a heavily compliance-oriented business,” said Daniels. “We have the same regulations [as U.S. banks]. It is important to have a good compliance program in place so you don’t have the problems Riggs had.
“A lot of countries do a lot of their procurement out of the United States. Even with the economy, this is one of the safest places to put your money,” Daniels added, noting that in 2005, HSBC bought the embassy portfolio from Wachovia bank. Today, HSBC has a staff catering to the 180 embassies in Washington, including 13 employees dedicated to working with the embassies and diplomats. Between them, these employees each have between 15 to 20 years of experience in embassy banking, and together they speak about 20 different languages, with many transactions conducted in Arabic, Spanish, Portuguese and Mandarin.
“I think that language and cultural understanding are very important and I think the embassy business [has] a much more relationship focus,” Daniels told the Diplomatic Pouch. “I mean these are such strong personal relationships. We tend to bank the embassy and then we tend to bank the diplomats themselves and get to know people very well.”
And because diplomats tend to have accounts in other nations and other specific needs, HSBC creates services specifically for them. “When someone comes from another country, we get them set up with a credit card and bank products and services right away. That’s actually one of the biggest problems that people from foreign countries face,” Daniels explained. “Because we bank the embassy, we do things for the employees. Often when people come to this country it is a shock, because we are such a debit and credit country and many people from other countries are used to only using cash.”
To that end, the bank has created a core product called HSBC Premier for its global clients, whereby “you could have an account here and you can travel anywhere in the world and go into the HSBC, and you’ll be recognize, get help with whatever you need, you can transfer, control the account, which allows customers to access online, their accounts throughout the world,” Daniels said.
At the May 7 grand opening of the Georgetown branch, HSBC welcomed D.C. Mayor Adrian Fenty and other city officials. They also presented the Georgetown Library with a check for $10,000 and another $10,000 to Hyde Elementary School.
“[This] is just the beginning,” Daniels said. “We are looking at the process of adding several branches in the area.”
And with branches in 86 countries and territories, along with 480 branches in the United States, the nation’s capital seems to be an ideal market to penetrate. As Daniels pointed out: “We often say we are the largest [bank] in the world, that a lot of people haven’t heard of, but that is not true in the diplomatic community.”
Among the attendees at the May 7 grand opening of HSBC Bank’s new Georgetown branch were, from left: Laura Humphries, senior vice president and district executive of HSBC Bank USA; Michael Brown, councilman-at-large with the Council of the District of Columbia; Aimee Daniels, executive vice president and regional president of HSBC Bank USA; D.C. Mayor Adrian Fenty; Joseph Reamer, HSBC Georgetown branch manager; and Christopher Davies, senior executive vice president and head of commercial banking in North America for HSBC.
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