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Why outlook for US-Russia 'reset' looks bearish

Missile defense disputes, mutual suspicion, and US and Russian campaign rhetoric are all breeding acrimony – and the uncertainty is having an economic impact in Russia.

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Attitudes toward the US have fluctuated among Russians since the USSR collapsed more than 20 years ago. During the 1990s, the Kremlin sought to align itself with Western policies, but over the past decade, under now president-elect Vladimir Putin, it has carved out a more independent stance, often irritating Washington with uncooperative acts, such as two UN Security Council vetoes of resolutions aimed at international intervention in Syria's crisis.

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But most Russian experts point out that occasional quarrels over big issues like NATO expansion and missile defense – which often have a distinct cold war ring to them – are more than compensated by many examples of Russia's progressive integration into the world community over recent years. Russia is a member of the G8, it sits on the Council of Europe, and late last year it finally joined the World Trade Organization. The military confrontation that once divided Europe into armed camps has dissipated, most former Soviet allies are now members of NATO, and this month Russia even offered its former enemy the use of an advanced Russian airbase in the Volga region of Ulyanovsk to help ease the strain of resupplying embattled NATO forces in Afghanistan.

A poll carried out by the independent, Moscow-based Levada Center earlier this month found that 42 percent of Russians think relations with the US are either "friendly," "good neighborly," or "normal and peaceful," while 47 percent thought they are "cool" or "tense" and just 4 percent said they are "hostile."

During his recent election campaign, Putin played heavily on anti-Western themes, including what he described as the US drive to attain "absolute invulnerability" at the expense of everyone else.

Business observers say that spike in anti-American attitudes, brought on by Putin's rhetoric, may have caused a surge in capital flight from Russia. According to official figures, just over $84 billion left Russia in 2011. But in the first three months of 2012 – which coincided with the election campaign –capital flight was more than $35 billion, a huge jump.

"Any uncertainty, such as we saw during the election, can lead to a jump in capital flight," and a worsening investment climate for Russia, says Valery Dmitriyev, an expert with the BKS Financial Group in Moscow. "If there is some negative remark from the US about Russia, or an initiative by our government that's unwelcome in the US, it can make things worse. It's all connected."

As Moscow nervously eyes the US electoral struggle, in which its stakes are clearly all on Obama, it's hard to explain why Obama's hand-picked emissary, US ambassador Michael McFaul, appears to be at the center of a Kremlin-instigated campaign of harassment. Mr. McFaul has complained that his phone accounts are being hacked, and that he's being harassed by a state-run TV network. Last week, Russian Foreign Minister Sergei Lavrov slammed him for "arrogance" when he restated US missile defense policy in an interview.

"This is probably inertia left over from the Russian presidential election, which did a lot to polarize Russian-American relations in the public mind," says Dmitry Suslov, an expert with the independent Council on Foreign and Defense Policies in Moscow.

"The real targets of all this are Russian opposition leaders and human rights activists, and McFaul is just caught in the crossfire. But it's unfortunate, because McFaul is not only the official representative of the US, he is closely tied to Obama and the policy of 'reset.' So any blow against him means a blow against Obama as well," Mr. Suslov adds.

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