>> i think china has done itself and us a considerable disservice by supporting the dollar over the past years, and really helping us fund the deficit. in the sense they've almost masked our fiscal problems by keeping interest rates lower than they otherwise would have

been. and i don't think we can continue on that route. we want transitions to be gradual, not sudden because it makes for disruption and all kinds of other unpleasantness is. but fundamentally i think the chinese supported the dollar for their own trade and export purposes, by virtue of buying treasury bonds, treasury bills and so forth and kept interest rates lower than it otherwise would've been an kept pressure off our political system. so i don't think that's a good formula going forward. you also want to do things at a recent days, otherwise as i said a moment ago. >> i would agree with you. right now the question that many investors are asking in the world is where is growth going to come from. they look at the u.s. and europe and japan, and the headwinds that they all face.

and they see china and other asian economies still following a very export dependent growth model. so the best thing china can do i think for china and the u.s. and the world is to move resolutely forward as quick as they can to implement its own five year plan, to move from an economy that was based on export led growth to one that is based much more on home-grown domestic demand consumption led growth. right now if you look at yields on treasury bonds, there's no shortage of demand for treasury bonds. people think that china is financing our budget deficit. i would just ask one question for you guys. david mentioned there were 14 billion, 14 trillion-dollar outstanding u.s. treasury securities. can one person gas, you know,

what percentage of the 14 trillion china owns? 8%, all right. you are right. it's 8%. >> it would be 12% of the publicly owned debt. >> it's a% of outstanding treasuries, 12%. china is the largest foreign holder of u.s. treasury securities, but the overwhelmingly large fraction of u.s. treasury securities are owned by americans. >> still a percentage owned by foreigners totally and still now over 30 some%, which is a? >> about 31. >> i think the greatest growth opportunities are investing in conferences that talk about u.s.-china relationship. [laughter] more of them than anything else. with that observation from a very wise investor --

>> mary says the final question. there's a clock suggesting we probably due to questions. depends on how long the question isn't how long the answer is. >> i am with a consulting group at my question is related to the solution for u.s. to improve on trade balance. germany, which is country with very high labor costs, but somehow it has managed to maintain surplus for many, many years. so, if you ask, follow or adopt some of these german model, will you gentlemen think that you would have u.s. to significantly improve trade deficit? if not, what would be something?

thank you. >> i will give you one response. i think there are things we can learn from germany. for example, they are very good as you know, from your question, niche manufacturing of sort of things that go inside things, if you want to call it that. their education system is very well geared towards the job market. and there are other, may very well be of the lessons from germany. one other observation. their exchange rate is a lot lower than it would be if it was an independent exchange rate because the euro is an exchange rate for the whole euro area. that's and not in considerable advantage in terms of competitiveness. i think i'm right in saying the wages in german have remained flat for some period of time. sort of a social compact almost, but i wouldn't disregard the currency, to mention of this which comes from the fact that their currency, their exchange

rate doesn't reflect german economic situation but rather it reflects europe's. just as somebody said, i guess it was david loevinger, said the world would benefit greatly from a increased domestic growth in germany. >> exporting is a really cheap currency. germany, united states and china relatively speaking have a lower currency let's say than japan in terms of values and it's helping exports. >> who was referred when? >> united states, germany and china. >> depends on what you compare ours to. >> i am saying all of them have relatively lower currencies. >> i agree. >> japan's currency is very expensive and that's what i think they're exports have been hurt for a while. >> yes, ma'am. >> thank you. i'm don alexander and i run an

international consortium of banks involving transaction banking internationally and we're very concerned about the fact that we are looking at these two economies, and david loevinger, thank you for your help on a lot of things were looking at. one of the concerns is that we are going to export our way out of the problems, and some of the message from u.s. and also some of the message that china is looking at. you're looking at the two largest economies, oath with the same solution. and in an export import equation there's at least two sides of that equation. and i do not hear any country and he and his interest-rate in their hand and gently up and dancing we will help import your way out of this problem. i'd love to hear this group opine on some of that. david coming to touch on some of it but i would like to more of it, please. >> ships colliding mid ocean. somebody? spent with a discussion about -- china's five year plan to i

guess the question we deposed is are the objectives of the five year plan going to be attained, and even if they are is that a rapid enough pays? >> it is going to be attained i think. only talk about this plan, it will not just become the world will not be driven, just determined by the export. it will be driven by domestic demand. it is in the people's and. they of social security, and then they think they can spend the money and the world trade maintain. and also in the plan i think some of the other characteristic like paying attention to the ordinary people's life, increasing the income of the people, and also happening with climate change and also energy conservation. >> the emphasis on the emerging industries, which five, probably

seven related to energy, more energy so that determines opportunity for cooperation between china and other countries including united states. that's an area of opportunity. at the same that i think china should be sensitive to really introduce the market by state companies continue to enter a dominance in fields. so that's very of cooperation, not monopoly. >> that we have reached the end of our time. i do think david may be right that is going to be tremendous industry in china-u.s. conferences but i think the reality of life is as somebody else said i think that for both of our countries and 21st century tremendous amount is dependent on our ability forging constructive element but i also think leadership on the enormous transnational issues will affect the global economy would economies to countries being able to forge constructively. thank you all very much.

[applause] >> we are almost urged his way of a terrific day of discussions on global china. when we first, mary at the "washington post," when we thought of this day, the theme of global china was a much around how is china's investment and economic activities around the world changing the global economy, how is a change the societies in which china is investing, and how does the rest of the world reacted it from an economic as well as a political perspective. we heard some skepticism about some of the impact that china is having in some markets in africa and elsewhere. i thought i would just by way of very short introductions to this panel make four points from the experience that we have as an advisory from working with clients in africa and elsewhere.

the first thing i would say is there's a great diversity in the nature of chinese investment, not just one shade and one for. second of all what we've seen in a number of traffic and countries is and elsewhere that china is, in fact, building infrastructure that no other institution particularly in this economic global environ is willing to build. the third is from a western perspective certainly it's important to remember that a lot of these economies the relative western record of investment is not always as good as is imagined. and, of course, it is also not always to the western investors in these countries are as truly free market in contrast to the state-owned entities that are investing on behalf of china and chinese investors in these markets. i will just end with one quick anecdote. i was recently in a meeting in african country with an african minister with some western energy companies to invest. an issue of chinese competitiveness came up and the western executive said very

meaningfully to the african minister, he have to be very careful, these chinese are just here to exploit you, to which the abdomen is to look at the western investors and why have you been here for the last 50 years? we have to remember that there is a complicated story. i think we have on the panel here really terrific individuals who can give us very diverse perspectives on impact of china going out in the world. and on my left first is sri mulyani indrawati, managing director of the world bank who joined the bank in 2010 and is now responsible for the bank's operations in latin america, craig and east asia pacific, middle east and north africa, busy parts of the world. are importantly, was serve as minister of finance prior to come to the world bank, a country of enormous complexity and impact and one which is very much feeling that chinese investment trend in the world in

asia. she holds a pc in economics from university of illinois and a ba in economics from the university of indonesia. to her left is kurt campbell, secretary of state of the state for east asia and pacific affairs who joined the administration in june 2009 and previously the founder of a very important think tank in washington, the center for a new american security. he has served as capacities of government over many, many years and has certainly understood very well the intersection of policy and economics as it relates to china's role in the world. to his left is mr. mingjian bi is a senior advisor in u.s. office of china international capital corporation. and is in the capacity head of its investment banking operations in new york and in the united states and has been very active in a bunch of landmark cross-border transactions coming out of china. and, finally, we're very privileged to have with us

jianye wang who is someone who from that respect it seemed very much of chinese capital is is being deployed both on behalf of chinese companies as well as around the world and has himself a background at the imf. so a very decent group of people who deserve an extensive introduction. but without i think what we're going to do is start with sri mulyani indrawati and she will give her opening remarks at which the others will follow and then we'll have discussion just as we said earlier today. >> thank you. i think i will start by saying that china role in the world economy, and three jeff mitchell, latin america, europe, this is related to their own trouble to overcome their own income trap specs every says china is going to become the largest economy in the world if

china is going. they are now the largest exporter in the world. at the second largest importer in the world. and definitely in this case by 2030 they will be 15 times south korean size economy in the world. so it has huge implications. if you look at the trades as mentioned are you this is going to be an area with china in the past, the trend of the trade to many of the developing countries including latin america, eastern europe, africa included and the rest of asia. the growing export is really visible. i mean, portion of the developing countries as export destination has dropped from about 85% to only 74%. now, what is the rule of china in this case in many parts of the world, and developing

country? i think unique position because china becoming there he began large at the same time they are still in the position of middle income country. and there is feeling that there is approximately of a challenge. many of the developing countries you, they share the same problem that is inequality, poverty, problem of domestically how to provide social change in the way they have to build their own fiscal opposition into a more consolidated transparent and sustainable one. population is going to be. so that many the current issue really match with many development country. so there's a feeling they are not that far if your target changing of development expedient, china is become more

relevant according to many developing country. and that's why we develop the south is becoming now very popular in many developing country. that is a challenge which is beyond trade and investment. off of trade and investment is different it will be very important in driving the growth for china themselves but also for many developing country. and the other aspect, chime in order for them to export their knowledge of development in many parts of the world, they using these old. the figure is not easy to get what is actually a credible figure but it seems there is from the size of china for only 600 million in 2003, and now it's over a billion by 2000. they are focusing in your you mentioned which is infrastructure. the question is now for all of us is everybody expecting, at this is because we just finished our annual meeting in the bank and we met with quite a lot of

client from latin america, from africa, from south asia, eastern europe. they see china now becoming playing a very important role, whether this is in front of the oda, or even trade partner. but some country have some inside. it is not more like personal anxiety in the sense that china is going to import certain value. some of the anxiety is more on the science your for example, certain country in latin america, when china have an interest to invest definitely on a natural resource, they feel if they're going to go to the same pays their natural resource is going to be just finished next for five years. how do we manage this kind of very overwhelming size of economy, when they're dealing with more time of

next-generation economic development. so here the, for them to be able to overcome the middle income trap, to improve their development model of growth, they've changed the development strategy. and that's has huge implications to the previous sessions are discussing about that but they are more a more domestic base are more looking on quality, more sustainability, they have to be more friendly in environmental aspect. and that's actually not only for the their domestic policy for them to growth model, but model will also reflect in the way engage with many developing countries. that will actually become a possible aspect instance if it's going to come with fdi, they certainly cannot close their eyes on in government aspect.

they have treatment to indigenous people and so on. many of the pattern even now with the bank without coming to africa, there is cooperation between how they're going to design how they are asking the bank to work with the government on the policy which is favorable, while they are therefore putting on -- [inaudible] using the capital. there is a cooperation because it is disciplined and benchmarking for china in term of what kind of operation which is more acceptable to many countries. the perception as she mentioned, the statement, is going to be a threat or more and opportunity? and for the china own interest, they want to be seen as an opportunity. this is mutual benefit thing interaction. and that's like coming with a packet of freeze of perception or acceptable is going to be very important. and naturally thin as a china is going to play more important

role in shaping many global policy, whether this is an investment, fdi, wto, but also on the environment of compliance and the technology. and they are actually investing quite a lot. china is now using resource on research on energy i think the highest, and they have become the biggest and most on solar energy absorbed. on renewable energy would be one area which domestically is very important but also it can have significant influence affect to many developing countries. for latin america, i think that perception that is more on natural resource because china once natural resource. but it is also partner on manufacturing base. it is the area where they see themselves more competition or more complementary to latin

america. many countries actually in the past which they had more accessing fdi now having china coming with maybe a different approach, is going to great a lot of opportunity. eastern europe, maybe there's not really change in the trade. i think it is run 5%, from last decade up to the latest figures provided. it is going very fast anyway china penetrating first, but unnatural resort i think this to more or less at the very early beginning. bustled engine so it is going to be very we are seen as an opportunity. so i guess in short we say that being middle income country while at the same time in terms of largest economy in the world, china have many places which can provide an opportunity. but at the same time, the challenge for them to actually present themselves to become a

country with largest country but on domestic issue, but most importantly their domestic issue is actually flexing many global developer issue also. so if they address domestic issue consistently it will also serve a good for the global public party. i think it's more or less the summary. >> great, thank you. could you comment on from your perspective from the bank, and just because chief economist and he comes here, how do you see that investment strategy evolving? we know we have had many discussions today that what has been the strategy to date. hobbies who are focusing on the investments in other emerging markets the qwerty see the strategy evolving? how would a change would you say over the next 10 years? >> i don't know there's such a thing invest in strategy.

maybe it's development for company offer country like china. you have to take a little bit more on the ground, more view. i would go to that in a moment, but given the time constraint, let me give you a broad picture. and also i listen which was said in a section and some things need to be quickly. i give you broad picture of china's trade and investment. you are increasingly important china's foreign trade so far this year continued its robust performance, despite market slow down in developed markets. including u.s. and the europe. in august the latest development

-- data, increasing year on year, export growth significantly lower. people talk about exchange-rate. growth much lower than import growth, but still robust, double digits. only importantly emerging in developing economies. asia, africa, middle east, latin america accounted for 54% of china's exports in 2007. during the last three years, global prices, turmoil and subsequent recovery. last year china's export share to this developing countries, visibly increased offsetting the

decline shared of north america and europe. while many commentators tended to focus on china's exports, i would like to now say a few words on china's exports. merchandise export. if you can't exports and goods and services, china's number one in. [inaudible] export of goods and services, way ahead. even this country, the united states, 70%, gdp of services. labor working in manufacturing. export of goods and services, you is probably a had a china. even commodity exports used to be half, maybe not less than half. maybe 45, 46% of them.

do you know what is -- [inaudible] they got blueprint from california. part from japan, from taiwan, from southeast asia. and they put them together and put label made in china in the export. it's made in the world. what is value added in china? it is part of the value. by definition, you have, you imports, 56% of the products, valley of the product and then you put value added, labor, rent, and you export. so that's -- but now export. i want to say china is really a very large importer and rapidly

expanding markets. many people like to say china's model increased consumption. china's -- [inaudible] in the last three years has increased at more than 50%. china's consumption, household consumption in real terms, okay, from 2007, 2010 increased by about 5.5% each year. sold 18 million automobiles plaster. how many automobiles sold here last year? housing, telecom, insurance, even luxury goods. largest market. consumption, real consumption, it's a growing.

imports increased the 1.4 trillion in 2010. and if you believe, could well be 1.7 trillion this year. over 70% of chinese imports are from asia, africa, middle east, latin american and caribbean. china's demands is increasing within asia. in terms of trade between china and other emerging antidumping countries has moved in favor. from 2000-2010, sub-saharan africa in terms of trade are almost 50%. middle east, almost 90%. latin america, 25%. during that same period. china's has declined by almost

20%. in those developing countries, in terms of trade, improved primarily because the rising world demand, in part lifted by china, while these countries export. foreign trade and investment are closely related. foreign invested enterprises contributed to over half of china's trade for many years. however, there is a large asymmetry between china's inward and outward investment. i think that's the subject of last panel discussed. if you look at china's external partners, foreign investment to china stop by the end of 2010 because of many numbers the you take the government number, chinese official number. 1.3 trillion u.s. dollars. right or wrong, it's a large

number. 60% of china's. how about china's outbound investment? .3 trillion. only seven-8% of china's total access. china's outbound foreign investment has been highly concentrated in developing countries. how much? over 90% china's outbound stopped in developing countries. >> if we could just move onto the other panelists so we can have a discussion afterwards if that's okay and come back to your final point. if we could do that. >> i think we have limited time. >> maybe if you could address your expense of the cross-border trade. what are the lessons learned about cross-border investment, the kind of deals and invited for those transactions?

>> actually if you look at the number, because people told us long time ago, okay, foreign investment in china may be 20% and plus return. foreign-exchange of reserve investment you make, a few points. the problem is you don't have the capability. so i will focus on, you know, if you look at the long-term investment, he was going to be the carrier? if you look at the current path, about 90% of china's overseas,. [inaudible] it's done, only 10%. and more than 55% in resources. in fact, they owe enterprises -- if you look at the system,

usually good conditions don't really prompt or provide the drive to really invest outside. if you really look at investment outside now is fixed on enterprises in resource centers. it's survival here. if you have mining company, explosive domestic demand, and you know, defeating internal reserve, what is your response? so you have to go outside, right? so that really push going out. just survival. >> is that a directed strategy from the very top? >> yeah, i tell you. we saw hundreds of billions sitting very quietly within

china. despite of all encouragement from the federal government and also political, that's what happens. so you would have to look at the enterprise networks. what is the real drive? that drive the strongest for survival. if you look at, like last few years, the power sector, became very active. and, of course, in the last 30 years they really gain competitive edge. so rapid development like our friends, ceo. china is still technology. very strong. but the real drive for the last few years is what? is cost of deteriorating of environment. china is about 4% of a lot of power companies.

and here, united states, 10%. a billion people. would you put your investment? it's very natural. so it's not necessarily, you know, incentive not necessary make the outcome. and also if you look at future, china for direct investment very much depends on the growth of its competitiveness, of its entities. especially private entity. the good thing is if you look at the current, i don't want to show that picture, but in the consumer area, increased by 17 times last five years. in industrial, grow by seven times come and market cap doubles. a lot of leaders in those areas. but now if, so that's the hope

for china's long-term advancement. otherwise you can see certain areas like construction infrastructure, you already see obvious advantage, competitive advantage, strength. its culture and other things. but most of industry, you know, we still have to, you know, survive for this contract. >> just global economics. >> so i take, if you don't grow enough, then you end up with more selfless capital channeled through china's welfare. that's my summary. >> hard, just in your an observation on this whole question, this is what china is not about, does that create a competitive landscape?

how does the u.s. react? what are your thoughts on that? >> first of all, thank you very much. it's great to be a and i want to commend oxford analytica and the "washington post" for this incredibly innovative approach. as we sit here and discuss probably the central factor of our lives going forward, the dynamism of the region and china, the center, there are probably hundreds of other meetings taking place in washington on some smaller development in afghanistan or iraq. and i just hope that over the course of the next several years we can help reverse some of that and spend more of our time focusing on these absolutely critical issues that will define our future when most of the history of the 21st century is going to be written here. i apologize. but i am used government. usually we come with powerpoint. it is often said that i worked in the pentagon and one of the generals i worked for used to say, power corrupts, but powerpoint corrupts absolutely. and it's a great book. so i which is, if i can, --

>> we are delighted you didn't bring powerpoint. >> i know we want have a discussion going forward here today. just to the regional grouping that has been put on the table, latin america, africa and latin america i would just add a fourth, also to import a look at the pacific as well as many other characteristics of thunder development resources in terms of some natural gas that frankly united more with some of these other places than with asia as a whole, and cheesy different strategies that are applied here in this respect. i think generally speaking you for a great discussion on the economic dynamics of this, but what are the political implications, what can we glean from developments in terms of investment or activities with respect to china about not only the american response but are there larger strategic aspirations in mind in beijing. i think what's interesting if you look at the situation

globally, is how generally underdeveloped the political strategic rationale is for many of the activities. in fact, chinese leadership have been in many respects either uninterested or have not yet thought about how to cultivate some of these relationships that have been developed over the course of the last decade, and translates them into political power or to particular global initiatives. you see a few areas where you might imagine that there would be some of these dynamics, but they are largely absent. the competition that used to take place between taiwan and china for recognition and various aspects at the international regard, most of that has been held in advanced given substantial progress that we've seen in the central diplomatic cease-fire between taiwan and china so that has not really been a factor. there has been some utilization of some of these relationships

with respect to china's desire not to be cornered in international scenarios. so for instance, in the g20 come and climate negotiations, on issues associate with currency there have been occasional interactions to ensure that china is not put in uncomfortable situations either on climate our current issues. some of that has been successful, some of it is again relatively underdeveloped. so i would say generally speaking, you did not see the same sort of political and strategic trajectory of china that you might have seen in the 1800s. [inaudible] >> that you might've seen with european and other forms of imperial activity in some of these places. the question is that a lagging indicator? is it something we will see over time? or in fact are they relatively absent as my colleague has

indicated. is this much more about the need for driving the dramatic industrial creativity and appetite of china going forward. what's interesting is that you find on a places that you visit growing apprehensive anxieties about chinese workers, and not, you know, spreading the wealth, these sorts of things. i think they are much more attentive to those issues now than they were a couple years ago. it's not clear they were being necessary manifested in other policies going forward, but clearly that has been an issue. a second issue that you have to ask is in many of these places developing issues are still extraordinary important. has china as their activity and engagement has grown in the places demonstrated an interest in cooperating with other states or institutions with regard to global norms of development and investment? and i think what's interesting today is that china has been

generally reluctant to join in a global norms discussions about investment, or the provision of aid and assistance. one of the things we find generally, both in our bilateral dialogue with china but larger setting, we just came from the pacific island forum in which chinese allies and, frankly, will do our own investment and we will do our own quid pro quo on a bilateral context. we're not particularly interested in sharing the full dynamics of our overall engagement. and then lastly, because we want to begin a discussion, i think the most interesting discussion is how does this set of interactions affect, and we really can't call the soft power because it's really much more than soft power. it is the attractiveness of the chinese system. clearly when you talk about the kind of strategic competition that is put on the table here, i think the most interesting dimension of that is not so much

the competition but the comparison of two systems that are at work right now globally. what's of interest of course is that we on the outside work closely and see and interact with chinese friends on the record basis. we see the clear dichotomy in chinese performance and activism. a tremendously asserted engage china on the global scene. and you see it in every possible encounter with your chinese friends. but that's also matched with something that is not as widely regarded inside china paper illness, and uncertainty, and anxiety about developing issues, questions about debate and dialogue. and so the nature of this external assertiveness and uncertainty domestically creates interesting juxtapositions. but on the global scene there clearly is an attractiveness, a certain model of development, and friends in latin america in

particular, but also in africa are comparing the performance of an authoritarian driven command economy with some relish is on the side, with some of the challenges that we are facing in the united states. i've spent most of my time abroad, and i will tell you that the difficulties in some of the most basic aspects, of basically implementing the democratic system in the united states is something that is watched with some growing apprehension, particularly by our friends in asia, but also elsewhere. i think it is the case, in conclusion, that one of the things that's important about a conference like this is to understand more fully the complex motivations of a country like china, and the need to have a closer dialogue between the united states and china, not just on central issues, about how we engage on macroeconomic

policy and the like, a more global conversation about how we propose to work together in places farther afield. thank you. >> thank you very much, kurt. if i could just, with you, ms. indrawati, on the evolution of models of government, what people are looking for, and economic governance, when countries will choose not just an american model our chinese model, and hybrids that are more indigenous and have more resonance within the own systems. what would be briefly your experience in indonesia, where do you think indonesia is going to go? it has at its expense with great influence from western financial institutions, english in china. where you see indonesia turning its path? >> will, for indonesia we have a crisis in 97-98. and then at time we adopted a package of the imf reform, we

just adopted to change the way the economy governance, but it came with all the political revolution if you call that, just like in movies, change of the regime and so on. so we changed quite a lot about political governance, some democratic, centralized open economy, political system, economy. we adopt policy, change, state finance going very open. so it's a good principle. but to be honest, you put in the country that is still very weak, there is incompatibility. so you can see that within 15 years of transition, the first five years really struggle. the growth is really minimum. but i think we build the institutions gradually, so now we look at institute and others development when you compare with middle east experience of this arab spring, experience,

they look as good example. if you look at them years ago it was really a very deep struggle. now, how you're going to ask about what model, i mean, this gets one option. i guess this is maybe also true in many of my conversation with many developing countries financed with ministers and prime ministers, many developing countries really want to build their what you call infrastructures to accelerate their development goals achievement, poverty reduction and saw. and that, they need capital, they need advancement of development projects, and they see it in china as a very good example in which when they build roads, when they built power, when they build dams in this case, is very execution. many developing countries like in indonesia now, if you talk about infrastructure, it becomes the highest priority and the

development is slow because you have to do with the land, you have to deal with the indigenous environment and all these things. the question is, are we going to put this as a trade off if you want to move fast, you have to sacrifice the element of human rights? environmental, indigenous rights? all those aspects. this is the area which is become -- deathly many developing don't want when you become open democrat, this and this. people will demand you to deliver the good results, but at the same time also abide with this principle. [inaudible] >> i don't think the. but they need to, development is there. and, of course, and after you see in latin america, when a

different come when execution is effected you can see the growth is there. because you seek it is there. so there is a struggle related in governance and effectiveness of delivery of the growth, vis-à-vis maybe they need to be more partnership but this inclusive, if you caught that with not because very popular one. inclusive should not slowing down but it is slowing down in a way because you have to consult with so many stakeholders. so this is the area from the give up and thinking out it is, tried to balance the gap. >> thank you very much. we have time for a few questions. let's see, right here in front. >> thank you. i am from duke energy. we heard the chinese central bank --

[inaudible] thank you for your comments today. [inaudible] how are those considerations adjusted, or not? >> i'm not able to answer the question as policy. but i think china is making substantial advantage, balances in this environmental, energy infrastructure. so people are very good at exploring its advantages. so, in fact, this became the strength. when i say okay, when you really want to invest outside, you have to have competitive strength. before they can be arrived the right decision. if it is wrong decision it won't survive. so actually environmental part of the opportunity become very

important part of overseas investment for chinese entities. now, that's my answer. >> one more or no? i thought you were stopping us. [inaudible] [inaudible] >> i almost was heard today without someone asking me about this. and i was beginning to wonder because it happens everyday since i've i've been in this job. and it was getting near 5:00 and

i thought maybe this could be the first day it doesn't come. first of all i think would be fair to say one of the highest priorities of secretary clinton and infect state department is to do with possible to increase these us. but not just all thesis. but thesis for students, trained the kind of opportunities for visits, particularly from countries like china. generally the good news is that no countries students have increased as a percentage faster than china over the last five years. in fact, it outpaces every other country in the world. tourism is improving that there are a lot of structural challenges which we can talk about at some other time. i think the point that i would leave you with is that there are many aspects of what we would call a post-9/11 environment. how it's affected our psychology, our geography or the geographical focus on the middle east was in other places of the

key to it from the pacific century of news for a while. but it's also the case one of the things that came out of many of the reports was that the state department had too much control over these issues. so very much of that has now shifted to the department of homeland security. and so any variety, associate with these's, visa waiver program's, there's a complex set of checks and balances that have been put in place in the last several years with a tendency as is the american way to respond, or to over react to certain dynamics associated with security. and so the security issues i think have played an enormously important role in how a variety of scenario's and practices have developed. i think there's a deep recognition that as we go forward one of the most important things that we can do in terms of our recovery after

economic and immigration is not simply welcome chinese investment in to the united states but also to encourage larger numbers of asian visitors? jan. see our lovely vistas and spend some money. [laughter] >> we have time for a couple more questions. >> e. -- thank you. with regards to going overseas. structurally you are dealing with things that might be newer for the chinese companies like greater disclosure to the local stock exchange, and then even a preference where the local government or the local partner takes a preferred share positioned versus the chinese partner or how is that being dealt with? this might be more towards cicc directed.

>> you mean lower share as chinese investments are made a number of emerging markets as terms of those investment. that is, what is the peace that is given to the local company, local partner, statement have the is evolving to in my own view, it see a number of chinese companies are managing that better. what would you are ub.net can how china is structuring these deals in emerging markets? >> i think emerging markets, i think, i think the general feeling, of course i work in world bank. i work in africa, quite many times. so i think the general feeling is very much different. there's a saying in united states is big brother of development country. china, africa at least is, you know, big brother of developing country. different feeling here. when you say okay, you want to

get china into overall system of international aid, i think you're talking about different thing. you have experts from europe staying in fancy house and this and that, and you have 16 chinese experts squeezing very small space. talking about different society or different level. so basically, you know, your question i think usually those questions are solved and more friendly, more like brotherhood type of environment. so i think, yeah, i work in world bank. all these dialogue, i was part of for many years. >> this is exactly what i said earlier. the middle income country themselves, china is standard of operations and behaviors has been seen more like close to middle income country. that is, a few more familiar

with the. that's why this has become effective part of china. but what you're asking is is there any other requirement in the market disclosure, transparency and treatment. i think are becoming because it's really serving the china own interest to become, at the think that's part of the acceptability. >> one word. i do think that one of the challenges that we have is that some of the traditional labels that developed out of, you know, middle income and developing really just no longer fit how to think about china. it's so large, it's so distorted the rest of the other comparisons that i don't think it is particularly helpful. it is also the case, i watch with great admiration and i enjoy very much chinese friends, depending on if i'm a, certain environments, china insist we are a great power and we want to be treated exactly as a great power. but then in another obama, we

are a poor developing country, please have mercy on us. and i think what's going to be, what's going to be challenging for china, i think they're pretty effectively manage to keep one foot on each boat and not alienate or, you know, have the other can't figure out how they are actually playing them. but those boats are going in two different directions. i think they will have to get that, i think they recognize more and more, and it's going to be harder to convince countries like latin america, in latin america, africa, that we are just like you. they are a great power. >> you've got the largest economy in the world and much lower gdp to capital. final question. >> actually i want to comment. not long ago, china was a very poor country. even nowadays, in gdp terms,

four to 5000 range. and, of course, kurt is right, china israel large coastal, and it is different. this experience, have devised poverty we experienced a so when we dealing with developing country counterparts, we thought of same thing. we are not paying lip service. for mutual respect. >> that's what it resonates. probably as it does in a lot of developing countries. >> the way we would deal in investment, we generally believe trade and investment among most powerful driver of growth. and we believe choice and investment has to be mutual, has to be mutual.

you mentioned assistance. compare our foreign assistance to our country, you said that the global system consistently is different. because we believe foreign assistance is a small part of that. and the objective is to help our partners, the donors and that concept, our partners to increase their long-term growth potential. but to provide our assistance, over 70% over infrastructure. those countries need electricity, need road, deepwater. if you compare developing countries, their foreign assistance and the portion of economic productive sector region, much, much smaller. >> thank you. the clock has been on zero for about five or eight minutes, so i would like to survive this

panel. so before merry -- i would like to thank our panel for just a very rich and successful discussion. [applause] >> satellite events to tell you about today. -- satellite events to tell you about today. ..

>> running five times. the last time from prison. eugene debs lost, but he changed political history. he's one of the 14 men feature inside c-span's new weekly series, "the contenders." live from the debs' home friday, 8 l p.m. eastern. get a preview about debs and watch some of our series, c-span.org/the contenders. >> should always start with the assumption that when a politician or a ceo is say something, they're not telling you the truth. now, they may be telling you the truth, but the burden should be on them to prove it. >> he's an eagle scout, held a brief stint as editor of mother jones magazine, directed and produced three of the top ten grossing documentaries of all time and also a best-selling author. his latest is "here comes trouble," and sunday on "in

depth" your chance to call, e-mail and tweet michael moore live on c-span2. >> last weekend vladimir piewt been said he would run for the russian presidency after the current president announced he would not seek re-election in march. next, russia analysts discuss the effect that could have on u.s./russia relations. from the center for national interests, this is 90 minutes. [inaudible conversations] >> welcome to the center for the national interest. we have a distinguished panel, an important topic and, hopefully, we'll be able to produce some light in addition, as i'm sure we will produce some heat because the issue we're

going to deal with, u.s./russian interaction s difficult and controversial. before i introduce the panel, however, let me conduct some institutional business and then introduce a new colleague at the center, the managing new editor -- [inaudible] can you stand up, leads? [applause] he's a former chief executive officer, editor and publisher of congressional quarterly, a distinguished author, and we're absolutely delighted to have you with us. we're also delighted to have this panel. the panel is based on the book about u.s./russian rivalry, edited by my colleague, paul sanders, executive director of the center. and we have two american contributors to the book. tom graham, former senior

official in the -- [inaudible] administration on the policy at the state department, senior director for russia and your or asia -- eurasia and sam charap who is the associate director at the center for american progress. he is increasingly recognized as an emerging but already major experts on russia and of its space. let me say that this is, clearly, a very difficult issue because if you look at the u.s./russian relations during last several years, particularly since president obama came to office, there was significant progress in some areas. i am not sure that there was enough progress to say that we have achieved a lasting breakthrough. and it is quite clear that there are a number of issues, serious

disagreements remain. and that is particularly true regarding u.s./russian interaction in the -- [inaudible] space where we have, clearly, different perspectives. many of us believe different interests, and it is also quite clear that neither russia, nor the united states quite controls the situation. we have a number of countries in that region who dared to have their own interests and increasingly to act on the basis of what they believe the interests, and sometimes moscow and washington are not just acting, they're also reacting. they're not just creating situations, they're managing situations. it's difficult, it is controversial, and i think it is likely to become more difficult and controversial after this weekend's events in moscow.

i am talking, of course, about president putin deciding that he would be coming back to power. those of us who have watched that remarkable united russia party congress -- [inaudible] like myself we felt back in moscow during the days of communism, during party congresses it was all very well orchestrated, it looked quite impressive. but during party congress, communist party congresses because i guess the party congresses were supposed to be longer would last for several days. they at least would proceed with the world. they would elect their candidates. this time it was, i have to say, i have to give them credit. they were quite efficient and did not want to waste any time. [laughter] prime minister putin came to the

boardroom and is said that president medvedev would be leading the united russia party. no vote. some applause. clearly, a lot of people in the whole -- [inaudible] were surprised because they thought it would be president putin who would lead the party to the elections, and they thought that perhaps he would be be -- he who would be leading the party would become the candidate. there was some initial -- [inaudible] stood up, applauded, then president med yesterday e -- medvedev announced because he would be precouped with elections -- [applause] it would be prime minister putin

who'd run for presidency. even more applause. no vote, no discussion, everything was arranged. that is what i would call new efficiency russian style. unfortunately for russia, they cannot have that kind of efficiency in the -- [inaudible] space. and unfortunately for them they're discovering that not only with countries like georgia which, obviously, have a very different foreign policy, but even like belarus and ukraine, russia has difficult issues. based on different economic interests, but also on different foreign policy perspectives. how should we deal with all of that? what does it mean? we have a very distinguished panel. paul, you will start? >> i'll start. i'll start. well, thank you very much,

>> there were a number of ongoing conflicts that the so-called frozen conflicts, also some others. and really that any of those

conflicts at any time could become unfrozen or escalate or turn into a situation like what happened in georgia and that it was important for the united states and russia to talk together about the region and about those kinds of problems and ways to try to manage problems like that so that a small problem didn't become a big problem. that conflicts didn't expand beyond the region when they start to become wider disputes. so that was conceptually how the project originated. since the two russian authors are not here and since two very

capable american authors are here, what i might do is just very briefly to talk about some of the russian perspectives that came through in the course of the project. some of the key points of difference between the united states and russia. and then at the end maybe a couple of comments about prime minister putin/president medvedev, the transition that we're all expecting to see over the course of the next few months. the first thing i would say in thinking about russian perspectives on this region and these issues and the american role there, and i don't think it's probably news to anyone, is that there is really very clear and lasting frustration on

russia's part with the american role in the former soviet region. a resentment of america's real almost dominance during the period of the decade of of the 1990s when rush ha was in some very -- russia was in some very difficult circumstances. irritation among many be about the american presence, marry american base -- particularly american bases in central asia. suspicion of u.s. democracy promotion, its methods and also its goals and kind of a regular complaint about u.s. double standards. i apologize to those of you who are here from the state department because i'm sure that you hear about these things all

the time. [laughter] another, i think, view that came through very frequently is the sense that russia should have special rights in this region of the former soviet union. president medvedev, of course, talked famously a little while ago about russia's privileged interests in this region, and that's clearly a very widespread sentiment based both on geography and on shared history. there were a couple of things, though, that struck me as somewhat surprising, i guess, in conducting this project. and i thought i might share those too. one that was really especially striking to me, and it's a relatively narrow issue, but i think it has wider implications,

is the real russian focus. ask be it comes through in -- and it comes through in the two papers. on the coa zack memorandum. i think, frankly, very few people in washington remember what the kozak memorandum is. this was, of course, an effort to resolve the dispute between moldova and -- >> and it's not like coz -- [inaudible] >> right, right. former russian official, and russia played a very instrumental role in negotiating an agreement, and they kind of thought there was a deal, and putin was on his way to moldova to witness the signing of this, and then the united states and the europeans at the last minute kind of sewer screened -- intervened, and the mull dove vans decided they department want to do it -- didn't want to do it after all. and for a lot of people in washington and i think in the

rest to of the united states, yu know, it's not an issue that people have focused on really intensively or think about. but our two russian authors in this volume and certainly a number of other people who i spoke to really felt that this was something, a development that had a very major impact on particularly then-president putin's thinking about what the united states was trying to do. in the former soviet region. and really contributed to putin's, at that time, disillusionment with the united states. and i think the one wider implication of this is, you know, we have a tendency in the united states when we think about ourselves as the sole

superpower not always to focus on the fact that some of the decisions that we make can really have a disproportionate impact on others compared to the level of priority for us. and i'm not saying that to endorse the kozak memorandum or that particular solution to the problem. but i think it's something that bears thinking about. another thing that i found a little bit surprising was the relative lack of concern among many of the people who i talk to and, certainly, the two authors, about china's role in the former soviet union which is something, you know, that a lot of people in the united states are, are very focused on. but there was really a sense among a number of russian

participants in the dialogue meetings and also the authors that, you know, china has a very important economic role particularly in central asia but has not really attempted to have any kind of political role, and that's fine with us. where i think many people in the united states might expect that the economic role that china has is not necessarily the end of the role that it will have and may evolve into something else. you know, i don't want to talk too long, so in the interest of time let me just mention very briefly three points of tension that i see, one very important

american priority that i see and then get into the putin and medvedev business. in terms of points of tension, clearly, this issue of russia's special rights collides with an american sense that the united states needs to be very active in this region supporting the sovereignty of countries in the former soviet union and also trying to promote democracy. and i think going forward that has the potential to be one of the most challenging issues to deal with. secondly, certainly the war in georgia is not so much in the headlines, but that remains a point of tension and disagreement in the relationship along with the other frozen

conflicts that it will be important for both sides to work together to avoid violence in the future. finally, the energy pipelines clearly another area of tension that has already become in the past a serious issue. russia's assertiveness in terms of its energy diplomacy, i think, subsided somewhat in recent years that coincided in many ways with medvedev's leadership. but, of course, it also coincided with some changes in energy prices. so i'm not sure that i would try to attribute that necessarily too much to one versus the other. finally, a very important american interest moving forward

is not directly in the region, but right next to the former soviet union. and that of course s afghanistan. and the gradual u.s. withdrawal from afghanistan and afghanistan's post-u.s. security and stability. and most immediately it strike me that it is a very major priority for the united states to try to expand as much as possible our ability not only to transport people and supplies and materials into afghanistan, but also outward. and russia agreed to the two-way transit at the lisbon/nato/russia council meeting. but the deaf anything of what is

permitted -- definition of what is permitted is still fairly narrow. it seems after the last week and everything that's been discussed in pakistan that it would be highly desirable to be in a position to withdraw as much as we can through the former soviet region including central asia and russia rather than having to go through pakistan. just very briefly on putin and medvedev, and i'm sure this will be a topic for more discussion during the questions. you know, we have at this point every reason to think that putin has been broadly supportive of medvedev's foreign policy approach if we can even call it medvedev's foreign policy approach and not a putin/medvedev approach or medvedev/putin approach. and if you look at the public statements that the two of them have made, i think there is

relatively little difference in how they define russia's interests. at the same time, you know, putin clearly has a very different style. he may also give somewhat different weight to some russian interests versus others. and tipping the balance on some issues could make a difference to the united states. and finally, you know, it's very clear that after having already been president once during a period when the u.s./russian relationship went through a lot of ups and downs, putin returning to the kremlin as president would be bringing a lot of baggage with him both in russia and in the united states, and in the united states i would say particularly in the congress. which becomes, obviously, quite

important to confirming u.s. officials, ratifying agreements, passing any legislation that may need to be passed. and my very last point, i guess, is that, you know, we're all assuming, of course, that putin will return to the presidency, medvedev supposedly will be the prime minister. but it strikes me that this is a time period where it's dangerous to make too many assumptions. and i think what happened with alexei kudrin, his criticism of medvedev and then his subsequent firing, you know, it makes clear that there are a number of strains inside that system and inside that leadership that make it, perhaps, less predictable than in the past. thank you. >> well, thank you very much. actually, what happened to

kudrin is quite remarkable in two respects. first, of course, he came to washington totally unaware of what would happen a day later. it's his own party congress. and he have learned about this development in the u.s. capitol which, i guess, partly would explain his very angry response. but the second thing about kudrin, and i think that's what paul was talking about, things are not quite black and white in moscow. it's not like liberals around medvedev, it's not like security services around putin, it is a bit more complicated with more shades of gray. i think that sam is very good in terms of talking about shades of gray both in russia and in the u.s./russian relationship. [laughter] >> thank you, dmitri. and thank you, paul, for inviting me and my co-author, unfortunately, could not be here today. to contribute to the volume and to present today.

our paper tries to rethink, um, u.s. approaches to the region. the region that we call post-soviet eurasia, the 13 former members that are not 'em i. or nato -- e.u. or nato. and we start by russian policies in the region both in u.s. and in russia, namely that many kinds of behaviors that is many in the u.s. find objectionable are rooted in unalterable historical drivers. so the argument goes, russia meddles because of security and economic imperatives mimicking the similar behavior of the russian empire and the soviet union before it. um, and i think we, we argue that this core assumption about the causes of russian conduct in the region is flawed both because it rests on a historical deterministic logic, it is this way now because it was that way before, and more importantly because of the questionable

linkage between the russian federation and the two previous states with similar geographic cores. [inaudible] for their neighbors by nature. after all, one was called the russian empire, and the other was founded on an ideology that envisioned itself on the forefront of the global movement. it is, however, one of the 15 successor states of the soviet union, and it also happens to be the one where the all-union elite largely still control foreign and defense policy. and that leads to a reference point with the other successor states was not prerevolutionary russia or ussr's relationships with its neighbors, but the habits of seeing the other former ss rs as constituent subunits of the same state continued after the soviet collapse. these are manifested themselves institutionally. until 2000 relations with these

countries were handled by a separate ministry, the ministry for cis affairs and not the ministry of foreign affairs. it was simply not made to deal with this part of the world. in other words, we argue that when moscow meddles in its neighborhood, it does so not out of security imtives, but out of -- imperatives, but out of habit. we argue it's crucial because if we assume an inherent, fundamental and immutable clash of interests between the u.s. and russia, then the u.s. is presented with a stark choice. either a grand bargain or a neoconservative sort of rollback approach. but since that assumption is flawed, u.s. interests and priorities can and should be examined in a different light, and what we argue is needed is a fundamental reimagining of the region itself. a more effective u.s. engagement strategy for the region, we argue, should be based on three principles. first, u.s. policy should be

predicated on their respective merits, not their value bargaining chips or other countries. start with the basic questions of what american interests are at stake in a given bilateral relationship, and that should also mean paying little attention to leaders' pronouncements of geopolitical loyalty. second, the u.s. should broaden engagement with the stateses in the region not just in terms of our resources, but diplomatically, economically and culturally. finally, the u.s. should emphasize transparency and win/win opportunities while simultaneously rejecting russian notions of sphere of influence and the arguments from post- soviet union governments themselves. such a strategy is more than just a simple jettisoning of great game analogies. it requires playing a new game which positions the u.s. as a potential full partner without reference to our or their relations with russia. it also asks us to fully reimagine the region outside of

the historical context of the baggage of the cold war and the great game before that. what would determine u.s. policy in this region which is comprised of numerous small states with varying degrees of development, governance problems and foreign policy sophistication? to the north with serious development resource and governance problems of its own, a rising economic and geopolitical power to the east and an unpredictable international spoiler to the south and connections to europe, south asia and the middle east that hold the potential to bring dividends of trade and cooperation but also instability and alienation. how would a decision maker in washington determine u.s. interests and actions in the region? what would u.s. policy look like? how would the u.s. prioritize its relationships? and we conclude that they would in a number of cases look differently than they do today. in terms of which countries receive the bulk of policymakers ' time and attention.

we also argue we can more effectively facilitate democratic development. currently, the debate seems polarized between those who argue that the should forget about value when engaging in post-soviet eurasia. our point is that our values are consistent. democratic governance creates better stability over time. we also note that despite -- [inaudible] largely responsible for shortcomings in democratic practices in their own countries. outside of the zero-sum frame we can see these countries for what they are, warts and all. and focus more effectively on deeper engagement with all of them to further all of our interests including furthering democratic transformation. we also imagine that a reimagined look would have a -- our focus on russia has distracted us from the underlying tensions that form an integral part of these conflicts. the russia factor's clearly an important one but not sufficient

for accounting for the status quo. and finally, we argue that a reimagined look at the region will help the u.s. deal with the coming challenge from china. and it is here that the thought experiment i conducted a little earlier becomes immediately applicable. clearly, we should not get stuck again in a paradigm that prizes the role of an external great power over the region's domestic dynamics. the first step must be actually reimagining the region itself, a strategy based on, um, one where each state and issue is assessed on it merits, where engagement is broad-based and long lasting and where spheres of influence are rejected and the potential for cooperation across the region is emphasized. in short, the best china and eurasia strategy is an independent engagement of the cubs of -- countries themselves. we can avoid repeating the mistakes of previous approaches to russia and eurasia in our approach to china which, of course, is emerging as the pivotal power of the 21st

century. so i'll leave at that. thank you. >> when you talk about paying less attention to geopolitical geopolitical -- [inaudible] of countries in the region, do you mean to suggest the -- [inaudible] wants to move west to be part of europe institutions, is prepared to be independent from russia, that this should not be a major consideration for american policymakers? >> no. what we argue is that pronouncements of geopolitical loyalty on their face as opposed to concrete actions towards moving towards institutional integration, for example, should be, um, should be less of a determining factor. >> like, for instance, if somebody's prepared to send troops to afghanistan, would it be important -- [inaudible] >> well, institutional integration with your atlantic structures is based on domestic reform and, you know, not sending troops abroad. so in the case of -- i think

you're referring to georgia. >> i am referring to georgia. [laughter] >> the decision should be made based on the merits of georgia's readiness for membership in your atlantic institutions and determine whether it's in their interest that georgia become a member. >> thank you very much. >> sure. >> tom? >> thank you very much, dmitri, and, paul, thank you very much for inviting me to participate both in the initial volume and in this discussion today. i want to make three brief points. about russia, united states and this ring -- and this region that we're talking about today. first point is that the former soviet space doesn't exist. it doesn't exist as a unified geopolitical space despite the efforts of moscow in the early 1990s to reserve a certain common geopolitical environment through the creation of the cis. i think this is a fiction that moscow itself has increasingly

abandoned, that it focuses more on the constituent parts of this region, central asia, the caucuses, the european parts of, of this region as opposed to anything like former soviet space a be. i think this is also something that the united states needs to increasingly adapt in the way it talk abouts about this part of the world. i think the if you look at the way the american administration have organized themselves over the past decade beginning with the bush administration, there's actually recognition of this. so we put south -- central asia with south asia in both the state department and in the, and in the nsc. i think the pentagon was way ahead of this long before the state department, and the nsc came to that conclusion. we have a european region that includes ukraine, belarus and

moldova, but also russia and all the states of western and eastern europe, and we have a caucuses renal that we really -- region, that we really need to envision as including the north caucuses of russia proper, the south caucasian states, and i would argue, the neighboring region particularly turkey, iran and iraq. and moving forward we need to think about u.s./russian relations not in terms of what we once called the former soviet space, but in terms of these new geopolitical configurations. the second point is that i think it's quite clear that aggressive competition between the united states and russia along russia's periphery in ukraine n georgia and in central asia poison the entire u.s./russian relationship. certainly during the bush administration. less so now because there have been efforts made by the obama administration to temper some of that competition.

now, the differences and the problems do not arise from a misunderstanding, from the lack of communication or the lack of transparency. and i'm not sure how far transparency goes in this respect. your money or your life is a fairly transparent statement, but it's not one that's conducive to building rapport between the two parties involved in part because there's a conflict of interest in that situation and something similar arises when we talk about russia and the united states and all the regions along russia's periphery. fundamental conflict of interest. and here i disagree with sam. i think history's important. you can reimagine, you can rethink about things, but history plays an important role in the way societies view their own interests, and it takes time to change. ask so for rush -- and so for russia this region has been if

not a sphere of influence, certainly a sphere of interest but privileged interest as president medvedev once put it. and the reasons for this are obvious. what we call the former soviet space, as sam has noted, is also the former imperial space. it's this region that gave russia geopolitical heft for the past 300 years. it's this region that the russia elites rightly or wrongly still think is critical to their own security. and i would argue today there's even a very deep psychological aspect to this, to russia's own sense of it role in the world, its role as a great power. because what do great powers do if not radiate power into neighboring regions? so russia, moscow for the past two decades has looked askance at any other power's penetration into this part of the world as a

challenge to russia's own sense of itself as a great power. now, for the united states, clearly, we look at this differently. we do not recognize the sphere of influence for any power in that part of the world. we prefer what's called geopolitical pluralism. geopolitical pluralism that acts as a barrier, a guard against the reemergence in eurasia of a threat of soviet dimensions. now, it's clear for the past 20 years up to this moment that that has been directed against russia because the only power that can conceivably rebuild that type of threat and that, of that dimension was russia. and so we supported quite consistently the independence and sovereignty of all the states that emerged from the soviet union as a way of blocking the reemergence of that threat.

we advocated multiple pipelines out of the region out of central asia as way of undermining and eroding russia's control of the energy resources of eurasia. and quite frankly, we advocated democracy and free markets was we thought that this would lead to a pro-western orientation and all the countries of this region, a pro-western orientation that would give us a foothold on the ground in these countries and a place to monitor and, if necessary, counter what we saw as inimical actions by the russian state. and so what we've done for most of the past two decades and particularly in the past decade as russia rebuilt its power is to try to manage the conflict of interest between our countries along russia's border so that it did as little damage as possible

to the overall relationship. and this leads to the third point. i think the question about this region going forward, and that is is there a way that the united states and russia can move beyond what has been a history of competition to one of cooperation in this area? can we do this taking into account the new realities that are emerging in a time of tremendous flux in the global environment? start with some, i think, axioms of this new, emerging geopolitical environment. first, russia and the united states are no longer strategic rivals. we no longer pose strategic threats to one another as we did during the cold war. second, i think this is a point that needs to be stressed particularly given some of the rhetoric that's coming out of moscow, and that is that russia's no longer the dynamic core of eurasia the way it has

been for the past 300 years. if you look around russia's periphery, i think you can make a good argument that all those regions, all those states are more dynamic politically, economically, demographically than russia is itself. and so we see the chinese penetrating into central asia, perhaps only commercially at the moment, but certainly if you're willing to think out a few years, politically and a security realm as well. we see the growth and radicalization of islamic movements that penetrate into central asia and the caucuses. if we think about the caucuses itself, russia doesn't reliably control the north caucuses, let alone speaking of the southern caucasian states. no matter where its military forces might be at the moment. and even despite the current disarray in europe and all the questions about the future of the european union, it's quite

interesting that you crane is still tilting towards europe despite what moscow has done over the past several years to push it in the other direction. so russia faces a period where what it really needs to do is to create stability along its borders, to give it time to rebuild itself so that sometime in the future under the best of circumstances it might become once again that dynamic core in eurasia. for the united states, the challenge is somewhat different. and in some ways simpler. we simply immediate in the current environment -- need in the current environment to adjust, rebuild, construct the security balances that will provide for an overall global equilibrium all along russia's periphery starting with northeast asia, around afghanistan, into the broader middle east, into europe and be even now in the arctic region

which has become a new frontier and will become the contested one because it changes in the climate. now, i would argue that the united states is better off, will have a better chance of creating these types of balances if there's a strong russian partner to deal with. now, this is, obviously, not as a sole player, but as one of many in creating these regional balances. ask by the same -- and by the same token, i think that russia will be better able to create the stability it needs along the borders if it recognizes the necessity of a robust american presence all along its peripheries. and so the question now is whether one can persuade washington and moscow to move in that direction. if we can, if moscow and washington accept this, then i think you can say that the u.s./russian relationship is going to move towards what the bush administration would have

called a qualitatively new relationship based on a common strategic purpose that has potential to last well into the future. if we can't persuade moscow and washington in this, then i would say the reset is, basically, where the relationship is. there is not going to be any qualitative improvement. what we're going to do is change more or less for worse on the margins. >> tom, thank you very much. and i think i ask you a question, can we -- [inaudible] moscow and washington? i found your presentation very persuasive. i remember back in the 1990s when there were a lot of illusions in the united states about russia, about the yeltsin government, about russian democracy, there was a very profound be article in -- [inaudible] by an american foreign service officer. i thought it really was

courageous and profound about what was happening with the russian leadership, how instead of democracies they were getting several different clans competing with each other. and some of this article also appeared in cables from the assembly in moscow. tom graham was author. so if tom graham was in charge of american foreign policy and if some of our russian coercers were in charge of the russian foreign policy, i guess we would be on the path of saving the reset and making it more substantial and perhaps even irreversible. but let me make one observation. the difficulty we have with this region, whatever we call it, that most of russian neighbors are not real friends of russia. with the notable exception of

armenia and kazahkstan, most russian neighbors do not urge the united states to have close relations with moscow. that's not to say they want russian/american conflict. they don't want to be in between, at least most of them, but basically when the united states does not even need to create trouble in the post-soviet region, we have a lot of newly independent countries, some democratic, some not so democratic, coming to the united states and asking for support against what they perceive as russian meddling in their affairs. and this is a serious, complicating factor in the u.s./russian relationship in the region. few people would know more about that than ambassador of kazahkstan who i'm sure will be able to speak for himself if we

can persuade you. >> [inaudible] [laughter] >> fortunately, fortunately for bulgaria, you are no longer, you're no longer direct russian neighbor. but ambassador, we're delighted to have you with us and you have an important perspective, and we're looking forward to your participation. we have a number of experienced ask knowledgeable people in the audience. we want to enable everybody who wants to participate to do so, and then in that spirit, please try to limit yourself to one question or comment. and also when you do so, please, identify yourself briefly. who would like to start? >> [inaudible] american foreign policy council. i would just note, paul, having drawn attention to the importance of -- [inaudible] memorandum that william hill at the other table probably knows more about that than anyone else

on this side to have atlantic. he has a book coming out in a few weeks that looks at the kozak memorandum and the broader context of russian policy. so everything you always wanted to know about the memorandum and were afraid to ask, coming out. >> thank you for this promotion. [laughter] >> i didn't put him up to it. i swear. [laughter] >> marvin? >> you mentioned the rise of the islamic movement, i think, were the words that you used in central asia and the caucasus. and you also mentioned the importance of 900 years of -- 300 years of russian history. 100 years ago or thereabouts there was a rise of a movement in soviet central asia. the communists dealt with it by simply crushing it physically, destroying it. but the roots of that movement exist today according to current reporting, and i'm wondering to what extent that has to be regarded as something serious

and a possible threat to existing governments in that region, and to what extent if it is that kind of threat that might give rise to the idea of america and russia cooperating and trying to handle that kind of a problem? >> well, i mean, i think, certainly, if you look at central asia, the central asian states now that, first of all, your earlier movements didn't disappear totally. they're part of the history. and that is being reinforced by a certain development that we've seen outside of the region throughout the broader middle east and afghanistan and so forth. problems that erupted in insurgencies in the early post-soviet period have somewhat quieted down, but i think the questions have, are slowly reemerging, particularly as you

look at the state of societies in central asia, the tremendous poverty, um, the great disparities in wealth

>> and the united states as well as with the states of the region. it's going to have to be the way you're going to deal with it if you're going to deal with this problem over the long term. so my sense is this is what we ought to be talking about now. when we think about our own situation in afghanistan, i think a major part of that discussion ought to be not focused simply on afghanistan and pakistan and how important those are, but we really need a genuine regional dimension to this, and that is what has been lacking, i think, most glaringly in the strategies that we've pursued over the past couple of years. >> judge? >> i wanted to ask a question -- >> could you introduce yourself? >> george levey, i'm with the center for intelligence, research and analysis. i wanted to ask a question about history. um, paul, you mentioned the reaction in moscow to our

reaction to the kozak not in moldova and how pivotal that seemed to be in shaping putin's exceptions of what we were attempting to do on russia's periphery. and, tom, you mentioned the approach that we took to russia's periphery during the 1990s and beyond based on this concept of geopolitical pluralism. it strikes me that there's a word here that we ought to be thinking about on the u.s. side that weaves through all these events, and that's containment. after the soviet union fell, there was a transition that u.s. policy went through in taking our soviet policy of containment and adapting it to this new situation. and it was aimed at containing russian influence on the periphery, and there was some

intellectual justification for this at the time. it was uncertain whether the soviet union would be able to recreate an entity in this geographic space that might be threatening to us. but i wonder if we're now at the point where we need to address much more explicitly, um, to what degree we ought to be focused on containing russian influence in these states, and can we get beyond an almost instinctive pushback when there's some sort of russian involvement? and i think the kozak plan from russia's point of view spoke to an almost knee jerk reaction that when russian troops are going to be on the ground, there must be something wrong, and it's in the u.s. interests to push back against that. can we devise something that's more nuanced here, that takes into account the perceptions and interests of russia's neighbors, um, about russian involvement,

but distinguishes between things that we can live with and might even be in u.s. interest to support and things that really aren't in our interest? >> you were in the administration during the kozak plan, right? [laughter] why don't you start. >> i mean, during the entire bush administration, as i say, now we are recreating the conditions or creating the conditions that make the reset necessary in that relationship. so that's a great service to the obama administration. [laughter] >> look, i mean, george was in the administration too. you worked in the vice president's office, with respect you? >> [inaudible] >> exactly. >> that was vice president cheney. [laughter] >> but, you know, there was a knee jerk reaction at that point. clear sensitivity to anything that would, any action that the united states would take that

would legitimate russian actions or presence beyond -- [inaudible] you clearly saw that in central asia, and it also came up with the kozak memorandum. i think what the russians found particularly disturbing about this is that we did this at the last hour. it isn't as if they saw this coming. but at the moment that the plan dropped on the desks of people in washington, they looked at -- in particular the military aspects of it -- and were immediately on the phones to people in the region trying to reverse the decision to make sure that that memorandum wasn't assigned or agreed to in i way. in the any way. you know, the point that i would make looking forward is that russia simply isn't the threat that it was to us 20 years ago, certainly, and with 20 years of

experience we also ought to realize that what we feared in the early post-soviet period is unlikely in the next decade or not. so we need to rethink how we think about a russian presence in this part of the world. by the same token, we have our own interest, and we need to pursue our own interests in that part of the world. but it doesn't have to be done this an explicitly anti-russian way. building commercial contacts, having a political presence, all these things are legitimate, and i think the russian government, moscow and even putin recognize these as legitimate activities as long as they're not framed in the context of trying to push back russian influence in that part of the world. and that, i think, type of policy at least creates the framework for a more productive relationship. i'll make one pointment one additional point. i think we're in a somewhat more

difficult division now than we would have been a decade ago. a decade ago we could have made this type of or pursued this type of policy n a sense challenged russia to demonstrate that it was prepared to act in a cooperative, benevolent fashion beyond its borders. and because of the condition of our own country at that point, if russians turned out not to be prepared to do that, we had many ways of pushing back and preserbing our position. we -- preserving our position. we risked very little in creating that challenge to russia. today because of reasons i don't need to go into here, we don't have the same sort of margin for error as we did before. be so i think you've got to prepare the ground in conversation with moscow much more carefully than we would have had ten years ago. >> there are just inherent limits to how far the u.s./russian relationship can really develop in an environment when we don't trust each other.

and maybe we're justified in not trusting even other. each other. but, you know, i think we need to think about that and to recognize that and to accept the fact that if we think it's necessary to pursue some variant on the containment policy, that there are really limits to what we can expect from russia at the same time that we're taking that approach to them. because they're going to react to that, and it's going to effect how they view us. secondly, you know, if we get past that, then, you know, yes, russia has important interests in this part of the world, and many of those interests are legitimate. but there's a question of, you know, how does russia try to assert its interests and what

are the specific tools and methods that it uses. and i don't think that, you know, russia has always made the best choices in that regard in terms of how it advances its own interests, and that creates reactions in those countries and also here. then, finally, you know, and this is a little bit related to the previous point, you know, there's an issue of institutions in those countries. and, you know, if the countries on russia's periphery had been independent for longer than 20 years and had only developed and consolidated political systems and institutions and procedures and, you know, opera