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Eyeing 'Axis of Evil,' Russia Sees Bottom Line

Commerce: U.S. officials warn that trade with Iran, Iraq and North Korea will cost Moscow goodwill. But the Kremlin needs cash.


MOSCOW — The more U.S. officials press Russia to abandon deals with Iran, Iraq and North Korea, the closer Moscow's relations appear to become with the nations President Bush calls the "axis of evil."

Russia has plans for a $40-billion trade deal with Iraq and more nuclear reactor sales to Iran and is pushing a project to link the Trans-Siberian Railroad with lines belonging to North Korea.

Whenever Russia cozies up to these states, U.S. officials like to point out that losing American goodwill can be expensive. A good relationship with the United States would be worth a lot more financially to Russia than whatever Iran, Iraq or North Korea can offer, they argue.

Many observers speculate that Russia's cooperation with the three countries has a political edge, designed to prod America and enable Moscow to compete for global influence.

But one motivation may be more fiscal than political. Russian President Vladimir V. Putin is pursuing a more muscular and pragmatic direction in Russian foreign relations--one in which the bottom line is economic.

"It has become clear in Russia that America thinks first and foremost about pursuing its own economic and political interests. And Russia, following suit, is starting to profess the same policies," said Alexander A. Konovalov, head of the Institute for Strategic Assessment, a Moscow think tank.

"Russia has long had relations with all three states.... And it would be stupid if Russia all of a sudden decided to sever all business contacts with these three countries just as a concession to Washington," Konovalov said. "Russia cannot afford to make such an expensive gift."

Russian analysts point to neighboring Ukraine, which under U.S. pressure dumped a $45-million deal to supply turbines to a nuclear power station in Iran four years ago.

Russia made the deal instead, and the power plant, in Bushehr on the west coast of Iran, is now nearly complete. Russia has floated draft plans to supply a total of six nuclear reactors to Iran, despite intense U.S. opposition.

"Russia remembers very well the time when Ukraine pulled out of the Bushehr project in exchange for American promises to invest money in Ukraine's economy," said Anton Khlopkov, an analyst with the Center for Policy Studies in Russia, a Moscow-based think tank.

"The U.S. never delivered, and now Ukraine is kicking itself for having dropped out. Today, Ukraine is trying to restore ties with Iran," Khlopkov said. "Naturally, Russia does not want to find itself in that situation."

Russia is Iraq's biggest trade partner, followed by France and Egypt.

U.S. De-Emphasis

At the White House, one official sought to play down the threat posed to U.S.-Russian relations by the planned business deals.

He said that although the United States has registered its objections to the Russian plans to build more nuclear reactors for Iran, U.S. officials don't believe that the Iraq trade deal will amount to much and don't see anything necessarily wrong with the Russian-North Korean railroad plans.

On the issue of North Korea, the U.S. official said that although the North has been "politically isolated," the country has long had business contacts with the Russians that the United States has not found objectionable. North and South Korea have agreed on a joint railroad venture, and the U.S. official noted that the United States also plans talks with the North Koreans about possible joint projects.

The official, who asked to remain unidentified, said the discussed plans for a deal with Iraq amount to "kind of a phony agreement. Nobody expects anything to come of them." He added that the U.S. simply wants the Russians to observe the terms of U.N. sanctions on Iraq.

Like the U.S. official, Russian analysts are skeptical of the $40-billion deal, which Moscow insists wouldn't breach U.N. sanctions against Iraq imposed after its 1990 invasion of Kuwait.

"There is a strong suspicion that Saddam Hussein will not pay Russia anything. All this talk about $40 billion is nothing but hot air," Konovalov said. "It is merely an Iraqi propaganda gimmick."

Still, U.S. Defense Secretary Donald H. Rumsfeld has objected to Russia's ties to the countries, warning that investors would shy away from Russia if it made deals with nations such as Iraq.

"To the extent that Russia decides that it wants to parade its relationships with countries like Iraq and Libya and Syria and Cuba and North Korea, it sends a message out across the globe that that is what Russia thinks is a good thing to do, to deal with the terrorist states," Rumsfeld said. "It's almost like self-executing."

In response, Russian Foreign Ministry spokesman Boris Malakhov warned against mixing U.S. foreign policy with the interests of investors.

"Mixing ideology with economic ties is a thing of the past, which was characteristic of the Cold War that Russia and the United States worked to end," he said.

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