West has little leverage over Moscow after Georgia

UNITED NATIONS (Reuters) - The Georgia crisis has brought home an uncomfortable lesson for Western powers outraged at Russia's ruthless invasion of a neighboring state: there is no big stick they can reach for to punish Moscow.

So far NATO and Russia have both suspended joint activities and the European Union will consider the future of a proposed partnership agreement with Moscow next month.

But the years since the collapse of communism nearly two decades ago have entangled Russia and its former Western foes in a web of mutual ties -- political, economic and military -- that matter to both sides.

Russia has made no suggestion it wants to sever cooperation with the West -- merely put it on what Moscow would see as a more equal footing.

As Russian units carry out a partial pullback in Georgia and the quest for a diplomatic arrangement gathers pace, the question now is which side needs the other more, and each is already maneuvering to show that the other has more to lose.

Since the crisis began with Tbilisi's August 7-8 assault on its Moscow-backed breakaway province of South Ossetia, Western military intervention in support of Georgia, an aspirant for NATO membership but not a member, was never an option.

While loudly denouncing Russia for a disproportionate response that took its troops and tanks deep into Georgia, Western officials have made little secret of their view that Georgian President Mikheil Saakashvili blundered.

U.N. sanctions against Russia are also out of the question -- Russia has a veto in the Security Council.

For highly visible retaliation against Moscow that leaves membership of the big international clubs: excluding Russia from the Group of Eight (G8) top industrial democracies or blocking its bid to join the World Trade Organization (WTO).

ANGRY RUSSIA

The most prominent advocates of that have been the two U.S. presidential candidates. Republican John McCain has long advocated kicking Russia out of the G8 while Democrat Barack Obama has called for a review of Moscow's WTO bid.

But governments have been in no rush to take up such proposals. "Taking sideswipes at the Russians by excluding them from the G8 and so on is highly demonstrative but it's not necessarily going to change Russian behavior," said one senior Western diplomat, speaking on condition he was not identified.

"The bottom line is there's not a huge number of levers that we can use."

Robert Legvold, a political science professor at Columbia University's Harriman Institute, said such ideas were likely to recur along with increased sentiment in the U.S. Congress for blocking a U.S.-Russian civil nuclear accord, signed in May.

"Now if you were to ask me will any of that work, my answer is no, I don't think it'll have much effect on the Russians other than to deepen their very angry mood at the moment," Legvold said.

In a recent "see-if-we-care" reaction from Moscow, Mikhail Gorbachev, the last leader of the Soviet Union, dismissed talk of excluding Russia from the G8, the WTO and the NATO-Russia Council as "empty threats."

"For some time now, Russians have been wondering: If our opinion counts for nothing in those institutions, do we really need them? Just to sit at the nicely set dinner table and listen to lectures?" he wrote in the New York Times this week.

For an older generation of Western politicians, dealing with a hostile Moscow is nothing new. But whereas the old Soviet Union was an economic basket-case, today's resurgent Russian nationalism rides a tide of petrodollars from soaring oil prices, and western Europe depends on Russian oil and gas.

INDISPENSABLE

Russia, moreover, has been deliberately involved in Western attempts to contain perceived threats from Iran and the Taliban insurgency in Afghanistan, and its role has become close to indispensable.

In an interview on Friday with the Russian daily Kommersant, U.S. Ambassador John Beyrle praised Moscow's help with U.N. sanctions against Iran over its nuclear program. "Russia has a very good dialogue, contacts with authorities in Iran that has been very helpful throughout," he said.

Russian Foreign Minister Sergei Lavrov this week also raised Moscow's transit support for NATO forces in Afghanistan. "I can only say that Russia needs cooperation with NATO no more than NATO needs Russia," he told reporters.

Western officials argue, however, that Russia's military walkover in Georgia and the strategic gains it made as a result have come at a cost in other areas.

"They are paying a price in terms of their reputation internationally, the readiness of companies to invest in Russia, the state of the Russian stock market, and there'll be some Russians who are mindful of that," the senior diplomat said.

"I think what we have to try and do is play into the debate that's certainly going on in Russia as to how it can best advance its interests across the board."

(Editing by Vicki Allen)