Wall Street Journal:
By CHRISTOPHER COX

At Moscow State University in 1988, Ronald Reagan talked to students about freedom and democracy. "Nothing would please my heart more," he said, than to see Russia flourish as a free enterprise democracy "in my lifetime." Having made strides economically but now backsliding on promises of democracy, Vladimir Putin needs to show that his nation belongs in the same league with the other G-7 members.

Mr. Putin's presence at the G-8 meeting, starting today in Sea Island, Ga., is part anachronism. Russia was originally invited to observe, and then in 1998 to join, the political discussions at the G-7 as a vote of support for Boris Yeltsin's economic and democratic reforms. But Russia under Mr. Putin is less of a legitimate democracy and a free society today than it was then.

What, then, are we to make of Russia's continued participation in the G-8 -- and what should America ask of this country with such extraordinary potential and such disturbing autocratic tendencies?

Answering these questions requires honest acknowledgment of the circumstances that have given rise to Mr. Putin's autocracy. After a steady diet of corrupt policies in the 1990s sullied the name of democratic reform, the impoverished Russians were quick to endorse Mr. Putin's pledge to moderate the pace of change. He used that confidence to systematically reverse post-Soviet liberties enjoyed by the Russian people.

Mr. Putin's "managed democracy" is now an oxymoronic excuse for sham elections -- such as those in March 2004 -- that were roundly criticized by international observers. Any media outlet with a national reach independent of the government has been closed. Government control and manipulation of the remaining media, the rampant use of government resources for pro-government candidates, and the unabashed use of the state's prosecutorial powers to silence opponents are now the order of the day. Mr. Putin's promised "dictatorship of the law" has in practice been a government that, as Colin Powell has said, is not "fully tethered to the law."

Just two weeks ago, Mr. Putin delivered a speech to the nation attacking independent organizations that defend human rights and democracy for serving "dubious" interests and receiving private funding from the very G-8 countries he claims Russia emulates. These organizations -- of independent journalists, think-tanks, and government watchdogs -- are all that is left of the nascent democracy movement in Russia. The day after the speech, thugs attacked the office of a human rights group in Tatarstan.

The head of Yukos Oil, Mikhail Khodorkovsky -- who has provided funding for such NGOs -- ran afoul of Mr. Putin's unwritten law that past business dealings will not be scrutinized if one stays out of politics. Like Mr. Khodorkovsky, now jailed on charges of tax evasion, those in business and the media who challenge the Kremlin suffer a selective application of the law.

There is tragedy in all of this, because despite all the lost time and all the reversals, Russia still has not lost the opportunity to become a modern, free-enterprise democracy. Neither the complete collapse of its economy in 1998, nor the unmitigated corruption, default on IMF loans, official lawlessness and growing autocracy, have taken away that potential.

Last year, Russia's economy grew by 7.2%. The national government has a $100-billion surplus. And while Russia's increased oil production and the high price of oil account for most of this, Mr. Putin's economic policies -- including his 13% personal flat tax -- have played a role. Today, for the first time in Russian history, a nascent mortgage market exists and entrepreneurship is flourishing.

But Russia badly needs more foreign direct investment if it is to succeed in modernizing its inefficient and unprofitable industrial base. And Mr. Putin's evident plans to use his unprecedented power to limit freedom and supersede the rule of law are as frightening to investors as is sluggish economic growth.

The same can be said for Mr. Putin's foreign policy, which has antagonized not only America but also much of Europe and Central Asia. In Iran, Russia has been a major source of nuclear material and know-how, all in pursuit of hard currency. Although he finally did suspend construction of the nuclear facility at Bushehr, Mr. Putin seems willing to align as much with Tehran as with the West. Russia should use the G-8 meeting to pledge much greater cooperation in preventing the proliferation of nuclear, chemical and biological technology to terrorists. The U.S. should ask for, and Russia should offer, greater cooperation in intelligence sharing.

Will the new Russia -- unlike the old Soviet Union -- live within its borders in cooperation with its neighbors? There remain many reasons for concern, but the constructive manner in which Moscow dealt with the Rose Revolution in Georgia provides hope. At the G-8 summit, Russia must commit to actively encourage Kremlin-backed separatists in Georgia and Moldova to seek agreements, and it should view American and European troops in Central Asia and Georgia as contributing to Russia's own security.

Ultimately, Mr. Putin supported basing U.S. forces in Uzbekistan and Kyrgyzstan for operations in Afghanistan, despite opposition from his military. But Russia's aggressive efforts since then to frustrate U.S. leadership in the United Nations and in Iraq cut deeply, inasmuch as Moscow has benefited from U.S. efforts in Afghanistan, Georgia and elsewhere in the region.

Russia can assist in the transfer of sovereignty to Iraq. This should begin at Sea Island with its agreement to significant reductions in Saddam-era debt. Russia has every reason to get behind the Greater Middle East Initiative to promote democratic freedom in the region. Russia also needs to face the reality that its policy in Chechnya has -- like the disastrous Soviet policy in Afghanistan -- turned it into a breeding ground for terrorism. Success in the war on terror requires Russia to bring in outside actors and seek a political solution.

Above all, whether Russia becomes a legitimate member of the G-8 will depend upon a commitment to civil liberties, democracy and the rule of law going well beyond the rhetoric of Mr. Putin's recent speech. There could be no stronger signal of this, to Russia and to the world, than a pledge by the Russian president to abide by the current constitutional limit of two terms. That would at least make possible the first democratic handover of executive power from incumbent to opposition in Russian history -- a sure sign of "unmanaged" democracy.

Russia's participation in the G-8, and its opportunity to host the 2006 G-8 summit as currently planned, is a privilege premised on voluntary adherence to the norms of democracy. But more than a decade after the collapse of the Soviet Empire, and six years after G-8 admission, Russia has failed to complete a successful transition from communism to free enterprise, and from a Soviet police state to a stable, securely democratic society.

"Freedom," President Reagan said in his Moscow address, could blossom in Russia "like the fresh green sapling planted over Tolstoy's grave." Perhaps, beginning at Sea Island, President Putin will take concrete steps to guarantee freedom under the law and make common cause with the world's democracies. If so, then Russia's government will finally have earned an economic and political status consistent with both the standards of the other G-8 nations and the extraordinary cultural achievements of its own citizens.

Mr. Cox, a U.S. Representative from California, is chairman of the House Policy Committee, and chairman of the Homeland Security Committee.