July 28, 1997  
This Date's Issues: 1091 •1092  •1093

Johnson's Russia List [list two]
#1093
28 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. Novoye Vremya: Article based on report written by I. Bunin, 
A. Zudin, B. Makarenko, and K. Roslavlev of Center of Political 
Technologies, "Hot Autumn? Political Forecasts of Social Scientists: 
Reforms, Confrontation, Stagnation."
2. Nezavisimaya Gazeta: Dmitry Lvov, WAYS OUT OF THE CRISIS.
The Scale and Functions of State Intervention in the Economy are
in Need of Thorough Review. (With comment by Renfrey Clarke).
3. Don Hill (RFE/RL): Western Press Review: Caspian Oil Draws 
Worlds' Attention To Caucasus.
4. Washington Times: Martin Sieff, Baltic republics see bigger NATO 
as key to safety.]

********

Novoye Vremya in Russian No. 29, 27 Jul (Signed to press 22
Jul 97) pp 9-10
[Article based on report written by I. Bunin, A. Zudin, B. Makarenko,
and K. Roslavlev of Center of Political Technologies: "Hot Autumn? 
Political Forecasts of Social Scientists: Reforms, Confrontation,
Stagnation"]

It is possible to speak today of a new algorithm of the state
machinery's operation that sets apart the second term of B.
Yeltsin's presidency from the first. Changes that have happened
since February 1997 are extremely deep: in actual fact what we
have is an attempt at a radical renovation of the entire regime.
The personnel and program revolution launched by Yeltsin after his
recovery has acquired its of dynamics. There have emerged two main
champions of the new dynamic style. We have in mind Chubays and
Nemtsov. Under the situation, appearing inevitably in the role of
negative personages are Chernomyrdin and his former government: such
a logic has emerged naturally. Even so, the president and both the
first deputy premiers may have normal working and personal
relationship with the premier. Shadow Chernomyrdin [subhead] Once
Yeltsin resumed political activity, Viktor Stepanovich's
[Chernomyrdin's] main success was the fact that he managed to keep
his premier's position.... However, the renovation of the government
has resulted in the fact that he is no longer the only head. A
triumvirate has emerged. More than that, the public opinion is
inclined to regard Chubays, who is the main engine of reforms, rather
than the actual head of the cabinet. In actual fact, Chernomyrdin
has receded into shadows limiting himself to performing official
functions. The premier's vacation was accompanied by yet another wave
of rumors of his impending dismissal. One may assume that this sort
of rumors will henceforth invariably accompany Chernomyrdin's
activities. It is not a matter of the president's possible
dissatisfaction at all. Simply, rumors of Chernomyrdin's impending
dismissal are turning into a potent means of psychological pressure
on the parliamentary opposition. Chubays' Sect [subhead] The
"red-haired's" strategy, naturally enough, consisted in taking root
in the power structures. In other words, he concentrated mainly on
solving current problems. The most important areas where Chubays was
especially conspicuously active were: a) the initiation of a whole
package of reforms; b) the attempt to take over control of the key
departments in the government; c) the impulse to concentrate in his
hands the fibers of "the center-regions" relationship. Chubays'
successful start in his new position is attributed to more than his
personal qualities. Of importance here were his personal relations
with the president's "inner circle" and his active public relations
campaign. Most certainly, the image of "privatizer of Russia" bears
such a powerful negative charge that any serious change of heart on
this score is hardly possible. The list of Chubays' achievements
over recent months is rather vast. He managed to install himself in
the very core of the government and, in a wider sense, in the core of
the entire system of the executive authority. Having passed under
his control were the financial departments as well as the "inner
cabinet of ministers" -- the Commission for Day-to-Day Questions. 
Chubays' men were infiltrated into the government staff as well. He
has kept indirect control over the presidential staff. He began to
try to build bridges with the Federation Council and the regional
heads and, which is as important, he found a path to establishing
contacts in the State Duma's corridors Having ended up in the sphere
of his direct control is the Council for Local Self-Government under
the President of Russia created to consolidate the mayors of big
cities as a potential counterbalance to regional leaders. Chubays has
suffered a perceptible defeat only in his attempt to remove Maritime
Kray Governor Ye. Nazdratenko in whose defense the entire
gubernatorial corps was up in arms. The party support base remains
the weakest part of Chubays' arsenal of resources. Gaydar's party
lost its raison d'etre once he took up the position of first deputy
premier. Now the party cannot criticize the government which,
according to Gaydar, has adopted "our ideas;" nor can it approve of
its performance. One thing is clear: the DVR [Russia's Democratic
Choice] has laid claim to being another "party of power." This may
mean sosuring relations with the NDR [Russia Is Our Home]. There
have been announced an organizational restructuring of the Gaydar
party. It is hard to imagine at this point how could it be converted
from being a "sect" into an efficient political organization. Lonely
Nemtsov [subhead] The "Nizhniy Novgorod engine] is the youngest
within the government triumvirate. But he is the most popular. He
became part of the federal authority in one fell swoop. However, the
phase of "blossoming" of his image seems to be coming to an end. 
Nemtsov's popularity rating has stopped soaring. Turning their back
on him are now referent groups owing to excessive populism and some
too "daring" moves and utterances which are taken as vulgar. This is
attributed to his provincial roots. The media have come to feature
some disparaging articles showing up "lightweight" qualities of
Nemtsov as a politician. According to VTsIOM [All-Russia Center for
the Study of Public Opinion] the president's popularity rating of the
former Nizhniy Novgorod governor began creeping down in June 1997. 
Whereas he was 10 percent ahead of A. Lebed "in direct confrontation"
in May, they ran neck and neck in June. Nevertheless, the public
resource remains the most important for Nemtsov. Like Chubays, he
was installed in his office by the president, which gives him more
weighty advantages. Chubays is, if one may say so, "rational"
whereas Nemtsov is "sole [dushevnyy]" favorite of Boris Yeltsin. In
all likelihood, Nemtsov's relationship with the presidential family
is shaping up well. Nemtsov has scored a number of "personal"
victories during the intervening time: he penetrated into such key
economic structures as Gazprom, and RAO YeES Rossii [Integrated
Energy Systems of Russia], and had his debut widely advertised
internationally, among other such things. However, Nemtsov is not
rated too high among the elite, both Moscow elite and the
gubernatorial corps. As far as they are concerned, he is too
young.... He has clearly fallen out with Moscow's officials over his
order to give up foreign-made cars for Russian cars and his
anti-corruption initiatives. The governors simply regard him as a
"habitual talker" who had ruined his region and moved to Moscow just
when the going was good. Nemtsov is total failure with regard to
securing a party backing. G. Yavlinskiy is trying to keep him away
from Yabloko and continues to criticize the government thus
endangering Nemtsov. The chances that Yavlinskiy may let Nemtsov
take the top line in the Yabloko list during the 1999 parliamentary
elections are close on zero. The prospect of ending up in the DVR
can hardly suit Nemtsov himself. Finally, real reforms in the social
sphere will get under way some time and this would affect Nemtsov's
popularity at once.... Thus, it is possible to forecast that the
positions of this politicians will be gradually weakening in the
forceable period. Virtually all politicians and political observers
agree that Russia is in for a crisis in the fall of 1997. 
Predictions of a "hot autumn" have become common in newspaper and
television commentaries. As a matter of fact, summer is a
traditional "dead season" in Russian politics. Furthermore, this is
a vacation time when the level of social tensions markedly drops. 
The worsening of the political situation in the fall has become a
"seasonal" factor of sorts. Several further circumstances may
compound the seasonal worsening. This will be the time when the
renewed government could be asked what it did during the more than
six months of its existence. Should none of the social ills be
alleviated and this becomes compounded by the launch of social
reforms, the government will become an ideal target for the
opposition's attacks. This coming November marks 80 years of the
October coup, something the Communists would want to mark "in a
militant way." How realistic are predictions of a catastrophe based
on all those things? It is possible to single out three main
"autumnal" scenarios. The criterion that separates them from one
another is the factor which was defined as determining above -- the
rate of effectiveness of reforms. "Success" Scenario [subhead] It is
based on the assumption that the reformers manage to deliver the
goods and all ordinary citizens would come to appreciate the fruits
of their efforts. The pensions arrears will be paid up, arrears to
the military will be actively paid up, delays of wages will grow
shorter. Another favorable condition could be the start of economic
recovery. In this event, concrete achievements will be attributed to
the "young reformers." Premier Chernomyrdin will not be able to
emerge from the shadows after all. President Yeltsin will become
finally convinced of the correctness of the chosen course. The
government will have a good headstart for launching painful social
reforms. The Communists' anniversary demonstrations will become
token. The Duma will be left with no more reserves to reject the
government-proposed budget. It will be possible to rather quietly
navigate around all the critical points. In the event the new cabinet
passes this efficiency test, it is possible with great certainty to
forecast that it will stay on until the year 2000. At some point, if
the reformers enjoy continued success, the question may arise of
replacing Chernomyrdin as premier: if everything works out by
itself, can he be dropped? Such a scenario is not too feasible,
however. "Skidding" Scenario [subhead] Under this scenario
everything remains roughly as it is -- not better not worse. No
notable improvement on any social problem. The reformers' cavalry
attack does not work, they become too far detached from reality.
Despite this, the possibility to continue along the course (making
the necessary adjustments to it) remains if the young reformers
assume supporting roles and Chernomyrdin takes up the reins of the
government. Under such a situation the president-premier link
becomes reestablished. The head of the cabinet, using his prestige
among the deputy corps, "presses through" the next year's budget.
Under the "skidding" scenario, the government will most likely
survive until the year 2000. However, Chernomyrdin's stocks will
soar and he will come to be regarded as a realistic candidate of the
"party of power" in the presidential elections. "Collapse" Scenario 
[subhead] Under this scenario, the system proves unable to stand the
pace of the race and begins to come apart at the seams. All
outstanding problems grow even worse. The country is swept by a wave
of mass protests. The non-reformer part of the elite (especially the
regional elite) become opposed the regime. The State Duma decides
for a head on clash with the executive authority raising the question
on no confidence in the government. The "collapse" scenario allows
for three different developments: a) Backed by the president, the
reformers begin to accelerate the conflict for their part: the Duma
becomes dissolved, a referendum on the future of Lenin's mausoleum is
called, an attempt is made to revise the election legislation.... In
other words, they are moving up their last reserves. In actual fact
"playing at revolution" begins. This bodes nothing good to them, the
regime and the country. Reforms will have to be forgotten. The
situation will grow so unpredictable that it can best be described as
"chaotization." Most probably the whole thing will end up with the
reformers' becoming "purged out" of the government. It is not ruled
out that this may entail the collapse of the entire political regime;
b) The president, realizing the impending danger, manages to stop
the slipping along toward confrontation. The reformers leave the
government, and Chernomyrdin takes personal charge of it. Like in
the "skidding" scenario, he manages to agree with the Duma on a
compromise budget. This, however, will deal an irreparable blow to
the reforms. The chances of the "party of power" in future
parliamentary elections and presidential elections will become
doubtful; c) The wave of protests proves so powerful that it sweeps
aside the entire government, including Chernomyrdin. The president
is left with no other choice than to offer to head the cabinet to one
of the alternative figures -- Stroyev, Luzhkov, or someone else in
this line. From the point of view of reforming the country, this
option proves even worse than the previous one. Under the
politicians of this type, there finally becomes formed a "clan
economy," an economy of perks and privileges. Unfortunately, the
probability of the most dangerous "chaotization" scenario cannot be
regarded as infinitely small. The president is so thoroughly sealed
off from external influences that he may realize too late that his
intervention is necessary. The "young reformers" may get carried
away and go too far and the routes of retreat will prove to be cut
off not only to them but also to the president. The State Duma's
protests will not be taken into account in this event because they
"are coming from the enemy." In order to alert the president to it
will require powerful pressure from all the elite groups. It is,
however, hard to imagine that Yeltsin has become so detached from
reality. A deliberate venture outside the ground covered by the
Constitution is unlikely for a number of reasons: a) the regime has
a birth injury and nobody wants a repetition of the October 1993
developments; b) Yeltsin is thinking about his own place in history
which makes almost impossible his turning to authoritarian methods; 
c) Chubays, who despite everything belongs with the democratic
culture, and it is much more difficult for him than, say, to
Korzhakov, to opt for the use of force. Of course, if the social
situation sharply worsens, the Communists may want to ride on the
crest of the wave of protest and be less that today afraid of early
elections. At some point, they may cross the Rubicon and on their
own initiative to raise the question of vote of no confidence in the
government. They will most surely reject the draft budget. However,
the government is able to live on without an approved budget. As for
early parliamentary elections, the Communists are supposed to clearly
realize that they will in this event lose their exclusive control of
the Duma which they have at the moment. They prestige of the main
partner in the dialogue with the authority will be crippled once and
for all. All these things do not quite mesh with their
"establishmentization" tenet. The most probable is (as always) the
"skidding" scenario with a sprinkling of elements of the other
scenarios. In all likelihood, the fall of 1997 will prove to be
"moderately hot." But should the current government manage to
survive the promised crisis, it may. with minimal losses, to exist
until the year 2000 when election factors will come into effect.

**********

Date: Mon, 28 Jul 1997 18:44:48 +0400 (WSU DST)
From: austgreen@glas.apc.org (Renfrey Clarke)
Subject: Academician Lvov's economic strategy for Russia

Dear David,

I missed this article when it first appeared in Nezavisimaya
Gazeta on July 1, then spotted it a few days ago and decided it
needed translating and putting around. It bears comparison with
Menshikov's views; you might supply a JRL reference for the text
that Menshikov posted in mid-June.
I suppose the point that should be made is that it is by no
means true that in terms of economic strategy Russians throughout
the 1990s have faced a choice between Chubais and Nina Andreeva,
between a tightly defined set of neo-liberal prescriptions (borne
down, it sometimes seems, by the red-headed one on stone tablets
from Mount Sinai) and Brezhnevite stagnation. As Lvov's article
suggests, the range of possible approaches has always been
extensive, on both sides of the socialist/capitalist divide.
You'd never guess it from the Western or (with some honourable
exceptions, primarily NG) the Russian media, but especially in
the last few years the debate among academic economists in Russia
on what ought to be done has been quite vigorous.

Keep on stirring!

Renfrey Clarke

----------------------

Dmitry Lvov

WAYS OUT OF THE CRISIS
The Scale and Functions of State Intervention in the Economy are
in Need of Thorough Review
Nezavisimaya Gazeta
July 1, 1997
(Dmitry Semenovich Lvov is a member of the Russian Academy of
Sciences, Academic Secretary of the Division of the Economy of
the Russian Academy of Sciences, and Deputy Director of TsEMI
RAN.)

[NG: The position of the scholars in the Division of the Economy
of the Russian Academy of Sciences differs substantially from
that of the government, both as regards the assessments made of
the current social and economic situation, and with respect to
the program of action for the immediate and longer term. The
scholars' position has been set out in a report entitled
"Directions of a Medium-Term Program for the Social and Economic
Development of Russia". The most important elements of this
report are set out below in an article by the division's academic
secretary, Dmitry Lvov.]

The country is in the teeth of an extremely acute financial
crisis. Only 61 per cent of the federal budget's revenue
projections for the first quarter of this year were fulfilled.
Despite the announcement by the government of measures to improve
the collection of taxes, income from this source reached only 60
per cent of the quarterly plan. This is happening because of the
failure to deal with the main cause of the budget crisis: the
dramatic deterioration in the financial position of enterprises
in the productive sector, where the proportion of loss-making
firms is approximately 50 per cent. Calculations show that this
factor accounts for more than 65 per cent of the decline in
budget revenues, with 22 per cent due to the fallin production
and 13 per cent attributable to the degradation of the structure
of production.
Non-inflationary avenues for cancelling the government's
budget deficit have in essence ceased to exist. Now the
government sees its only way out as being through massive
cutbacks to the expenditure items of the federal budget. This
ultimately means forcing millions of Russian families to
"sequester" their own budgets. Such is the natural consequence of
the anti-inflation policy which has been pursued by the
government, and which has now driven the authorities into a
corner.
The main point on which we part company with the government
is in our view of the acceptability of using such a means for
solving the problem. The attachment of the reformers to abstract
neo-liberal models has prevented them from making the necessary
evaluations of other options for leading the country out of
crisis. These options include the one which is now being put
forward by the scholars of the Division of the Economy of the
Russian Academy of Sciences. The essence of this plan lies in
ending the profound gap between the available economic potential
for material production, and the output of goods and services
that has been achieved under the impact of restrictions on demand
and financing.
Within the economy a huge potential has now accumulated,
consisting of viable productive facilities that are standing
idle. In terms of employment this represents about a quarter of
the potential total, and in terms of basic assets about 40 per
cent. As a result of the low level of use of productive
facilities and of inadequate reaction by producers to market
signals, redundant expenditures [izbytochnye zatraty] in the real
sector of the economy in 1996 amounted to 15 per cent of GDP, or
40 per cent of net income.
These are huge losses. But at the same time, they have to be
seen as a resource for reviving the economy.
In the years from 1998 to 2000 the effect of "reviving"
productive facilities could amount to an increase of 22-23 per
cent in production in manufacturinging industry (an average of 7
per cent per year), and across industry as a whole, taking
account of the positive impact on the extractive sectors, of as
much as 6 per cent per year. There is no need to dwell on the
huge social effect of employing this idle potential.
But for the factor represented by these idle productive
facilities to come into play, it is necessary to ensure an
increase in the circulating funds of the real sector. To this
end, it is essential to resort to credit emissions for strictly
defined purposes and in the minimal necessary amounts. With the
help of reasonable protectionist measures, it is necessary to
direct this increased effective demand from enterprises toward
the purchase of Russian products.
A carefully organised and managed credit emission would make
it possible to overcome the crisis of non-payments and to
stimulate economic growth, even if it were to involve a certain
rise in inflation. This step must be taken while giving due
regard to the need to end the "bottlenecks" in the system of
monetary circulation which now create artificial barriers to
increased investment activity. At the same time it is necessary
to strictly monitor the rise in prices in order to ensure that
the level of inflation does not exceed acceptable bounds of 2-2.5
per cent per month (about 35 per cent per year).
The structure of prices of Russian products has to be
brought into line with the natural-material [natural'no-
veshchestvennye] proportions that have become established in our
market. To this end it is necessary to stabilise and then lower
prices for energy sources and transport services. The latter goal
might be achieved through lowering value-added tax rates and
excises. But calculations show that the loss of tax revenues from
natural monopolies would in this case be 1.8 times [45 per cent]
less than the additional income received as a result of such an
action by the sectors that consume energy sources and transport
services.
It is also essential to make a shift to a system of taxation
that stimulates the growth of production. To this end, the tax
base has to be defined on the basis of profits following the
writing off of expenditures on renewing basic capital stock and
on ensuring the technical development of production.
Taking into account the redistribution of capital in recent
years from the real sector into the trade and financial sectors,
it would be desirable during the early stages of a tax reform to
shift the centre of gravity of tax collection from material
production to the profits of banking and commercial capital.
The axis of the suggested policy of social and economic
renewal needs to be the reform of incomes, backed up by the
simultaneous reform of taxes, of housing and communal payments,
of pensions, and of the financing of health care. This must be
accompanied by the introduction of corresponding big changes in
the formation of the budget and of extra-budgetary funds.
It should be borne in mind that our low wages are blocking
and will continue to block the implementation of reforms. In
market economies the income received by a worker is distributed
in roughly the following proportions: direct taxes take up 20-40
per cent, housing costs 25-30 per cent, payments into non-state
pension funds about 5 per cent, insurance another 5 per cent, and
purchases of goods and payment for diverse services, up to 30-40
per cent.
In our economy the proportions are totally different.
Spending on the purchase of goods and services takes up 70-80 per
cent. The wages received by workers barely suffice for food. If
the present extremely low level of wages is retained, the state
simply cannot refuse to accept responsibility for solving most of
the problems involved in ensuring that the population live normal
lives.
If at the first stage of the reforms the prices of goods and
services were liberalised, the time has now come to liberalise
wages as well.
I shall dwell on one more vital point in our proposals. We
consider that not only solving the accumulated socio-economic
problems, but even mitigating their acuteness is impossible in
principle so long as the advantages of economic freedom and of
the possession of property are enjoyed by an extremely narrow
social layer that has prospered from the redivision of property
and that continues to extract profits from the chaos that now
reigns in the management of state property.
In order to fundamentally change the present situation, it
is essential to decide on large-scale, interrelated measures in
the areas of property relations and the distribution of incomes.
The primary task of institutional reforms is to finally
create an effective system for managing the property that remains
in the hands of the state, including the packets of shares held
by the state in privatised enterprises. The flow of income from
state property can and should be substantially increased,
principally through the sale of rights to the use of this
property to commercial organisations through open auctions. This
is the first thing. Second, the major part of this flow should be
reoriented directly to each Russian family. All citizens should
receive an income from payments by commercial organisations, of
any form of property ownership, for the use of unprivatised
resources. The third point is that the strategy of creating an
effective mechanism for the management of state property as the
most important source of family incomes has to be supplemented by
special measures to redistribute incomes, focused on the
immediate term. The essence of these measures consists of
redirecting part of the incomes of the "topmost groups" toward
supporting the social layers whose most elementary needs are
denied. The methods used should include higher taxes on real
estate and on luxury items.
The government argues that the course it has followed -
involving a rapid increase in the role of direct individual
payment and of the voluntary savings of families in satisfying
the most important social needs (for housing, education and
health care, as well as provision for the elderly), and also
involving gradual cuts in state subsidies for the providers of
social welfare services - is linked with an increase in the
incomes of the broad mass of the population. But is the
government really observing these essential conditions for a
socially-oriented economic policy? The answer is obvious: it is
not.
Instead, it has resorted to placing unprecedented pressure
on legislators to pass its new Tax Code and its draft laws for
the sequestering of the 1997 budget and for the emergency
restructuring of housing and communal payments. These are all
described as the only possible alternatives for curing the
economy. But behind these actions one is entitled to see another
logic as well, a scheme in which the economy is by no means the
primary consideration.
In recent years the central authorities, resting on liberal
declarations, have to a considerable degree freed themselves from
responsibility for supporting social welfare and the main life-
support systems of the population, transferring this
responsibility to the regions. The regional budgets are required
to pay all the subsidies for maintaining housing and communal
services and most of the expenditures on other sectors of the
social infrastructure. The hands of the central authorities are
thus freed. The federal government as it sees fit can help or not
help, throw in money or not throw it in, while at the same time
tightly binding the regional authorities to itself. In the space
of three years (this is the period in which it is planned to
carry out thee main tasks of housing and communal reform!) it is
possible to do a great deal along these lines.
We are already used to the fact that politics in Russia
enjoys priority over the economy. This tradition became implanted
long ago. Here I am not even discussing the justice from a
political point of view of the government's latest scheme. I am
concerned only with its economic and social consequences, and
with the fact that the victims of this planned action will once
again become the broad layers of the population.
Thus, when experts of the Division of the Economy of the
Russian Academy of Sciences analysed the housing and communal
service reform as proposed in the government's scheme, they came
to the following conclusions.
The reform will lead to a fall in the real disposable income
of the population as a whole of 5 per cent by the year 2000 and
of 9 per cent by 2003. By the year 2000 the poorest 20 per cent
of the population will as a result of the reform lose 13 per cent
of their real incomes on a yearly basis, and by 2003 this loss
will reach 18 per cent. Those who will lose relatively little are
the groups that make up the most prosperous 20 per cent of the
population. Their real incomes will fall under the impact of the
housing and communal service reform by 3 and 6 per cent
respectively. As we see, these figures provide a poor match for
the optimistic forecasts of the government and for its assurances
that the reform will make it possible to transfer the main burden
of the additional expenses of the population to the wealthy
social layers.
Ignoring these prospects is simply unacceptable, since even
without this new burden the social situation in the country is
strained to the limit. But this is not the only thing. A further
fall in real incomes will be extremely dangerous for the
additional reason that it blocks the path that leads out of
crisis and to the growth of the Russian economy. The conclusion
flows directly from our analysis that such growth remains the
only practical means for unravelling the knot of social and
economic problems.
I think that the above main points of the suggested medium-
term program of action show sufficiently clearly our position on
the scale, function and forms that state intervention needs to
have in the Russian economy. Summing up this position, it is
possible to say the following: there cannot be any question of
the state continuing to participate in the economy and in state
social programs in the spirit of neo-liberal ideology. Nor can
there be any question of state resources or of the levers of
state intervention in the economy serving the private interests
of particular people to the detriment of the interests of society
as a whole. But this, of course, is a widespread feature of
today's Russian reality. Such a state is really too expensive,
even if with the help of a sequester it reduces the budget
deficit to zero.

**********

Western Press Review: Caspian Oil Draws Worlds' Attention To Caucasus
By Don Hill

Prague, 28 July 1997 (RFE/RL) -- The visit to Washington Tuesday of
Azerbaijan's president, Heydar Aliyev, following a recent U.S. stopover by
Georgian President Eduard Shevardnadze, attracted some Western press
attention to the Caucasus this weekend. The press also examined chaos in
Cambodia.

WASHINGTON POST: Oil and geography propels Azerbaijan to forefront of U.S.
foreign policy
Discussion in "The Washington Post" and in "The Financial Times of London"
of Aliyev's visit and his scheduled meeting Friday with U.S. President Bill
Clinton centers on the power of oil to win influence in the U.S. capital. 
In a news analysis in yesterday's "Washington Post," Thomas W. Lippman
wrote: "The visiting head of state who will have lunch with President
Clinton this week and stay at Blair House as an honored guest has an
unusual background: a former general in the Soviet Union's KGB security
forces who was dismissed from the Politburo for alleged corruption a decade
ago. But that was then, this is now. Today Heydar Aliyev, 73, is the
elected president of the Republic of Azerbaijan, a small but vital central
Asian country propelled into the forefront of U.S. interests by oil and
geography. 
Led by Deputy Secretary of State Strobe Talbott, the Clinton
administration has developed an ambitious strategy for the former Soviet
republics of Central Asia, aimed at bolstering their independence from
Moscow, limiting the influence of Iran, and settling regional conflicts to
expedite development of the vast oil reserves beneath the Caspian Sea." 
Lippman wrote: "To Azerbaijan's neighbor and arch-rival, Armenia, the
administration's courtship of Aliyev shows the power of oil to sanitize
what the Armenians depict as an unsavory and oppressive regime. To
administration officials and Azerbaijan's supporters, Aliyev deserves
credit for stabilizing his country, undertaking economic reforms and
defying neighboring Iran by encouraging U.S. oil companies to participate
in developing the Caspian fields. 
"Even before he arrives, Aliyev has administration support for one of
his key objectives, an end to a ban on aid to his country imposed by
Congress because of Azerbaijan's territorial conflict with neighboring
Armenia."

FINANCIAL TIMES: Azerbaijan is linchpin in U.S. battle to control Caspian oil
Writing in an analysis from Moscow, Charles Glover says today: "Mr.
Aliyev will be the second ruler from the Caucasus to receive red-carpet
treatment from the United States this month, as the region becomes a
linchpin in the U.S. strategy to control Caspian Sea oil reserves.
(Shevardnadze) also met with Mr. Clinton two weeks ago." 
Glover writes: "For ten years, Azerbaijan has been fighting with Armenia
over the Nagorno Karabakh enclave. But U.S. efforts to mediate have been
hindered by a ban on aid to Azerbaijan imposed by the U.S. Congress.
Congressional leaders have cited human rights concerns as the reason for
the ban, though Azerbaijan officials blame in on a powerful Armenian lobby
in Washington."

FINANCIAL TIMES: Slow reforms in Caucasus threatens proposed oil pipeline
In another news analysis today, Frances Williams writes from Geneva
about the slow pace of U.N.-sponsored talks on fighting in the Georgian
Abkhazia province. Here, too, he says, oil figures in world interest in
what might be otherwise only a local issue. 
Williams writes: "Three days of United Nations-sponsored discussions
between representatives of Georgia and the breakaway province of Abkhazia
ended at the weekend with agreement on little more than to go on talking.
Mr. Liviu Bota, the UN's special representative for Georgia, said that the
meeting nevertheless had achieved its primary purpose, which was to reduce
the threat of renewed fighting when the present mandate of Russian
peacekeeping troops expires later this month." 
Williams says: "Georgia's nascent economic recovery, as well as plans to
build a lucrative oil pipeline across its territory could be jeopardized by
renewed violence." 

WASHINGTON TIMES: Shevardnadze bringing U.S. into geopolitical heart of
Eurasia
Commentator Georgie Ann Geyer interviewed Shevardnadze during his
Washington call, and found him altogether charming, effective, and a
valuable influence over his oil-rich region. She wrote in yesterday's
"Times": "Today, (Shevardnadze) has been so successful that not only is
little Georgia, with only five million people, one of the prime examples of
democracy and free-enterprise development in the world, but it has been
accepted as the strategic pivot of the oil-rich and increasingly important
Caucasus and Central Asia regions that until 1991 remained under Moscow's
communist control. The results of his meetings with President Clinton and
others here were substantive. " 
Geyer said: "Despite his successes -- or perhaps because of them -- Mr.
Shevardnadze often looks weary these days. There are few world leaders who
have been through as much and have ended up as charming and as
intellectually honest as he is. As Soviet foreign minister, he was pivotal
in deconstructing and reforming the greatest totalitarian state in our
times. As president of Georgia, he is now midwifing the oil of the Caspian
for the industrialized world and bringing the United States squarely into
the geopolitical heart of Eurasia." 

********

Washington Times
28 July 1997
[for personal use only]
Baltic republics see bigger NATO as key to safety
By Martin Sieff
THE WASHINGTON TIMES

VILNIUS, Lithuania
N o one will be praying harder for the first round of NATO expansion to
succeed than the leaders of the three Baltic republics. Their futures may
well depend on it. 
All three countries -- Estonia, Latvia and Lithuania -- won independence
after World War I, ending 200 years of subjugation by the Russian czars.
But just over 20 years later they were taken over by Soviet dictator Josef
Stalin and their populations were mercilessly purged.
Then came the horrors of Nazi occupation and the Holocaust, followed by
yet another period of Soviet conquest and more purges. Free again after the
collapse of the Soviet Union in 1990, they see the expansion of NATO to
their borders -- and eventual membership -- as their best hope for staying
that way.
"We were trying to qualify [for the first round] of NATO expansion. We
didn't succeed," acknowledged Kestutus Jankauskas, head of the Security
Policy Division of the Lithuanian Foreign Ministry, in an interview last week.
But he said his country was delighted by the decision taken July 8 and 9
in Madrid to invite Poland, the Czech Republic and Hungary to join,
"because that extends the [alliance's] zone of stability to our borders."
If Poland's entry into NATO is ratified by the 16 member countries, he
added with obvious satisfaction, "We will have a common border with a NATO
member state by the year 1999."
The Baltic leaders had other reasons to be satisfied with the Madrid
summit: While they never had a realistic chance to be included in the first
round of expansion, several NATO members, as well as the three new
candidates, argued strongly for their inclusion in the next round.
But they also face one of the biggest obstacles of all the NATO
applicants: the determined opposition of Russia, which is particularly
adamant that none of the former Soviet republics should join the alliance.
Nevertheless, several Baltic leaders said at Madrid that they saw a real
chance of being invited to join NATO within two years.
"I maintain, yes! The Baltic countries will be in the next round of
enlargement in 1999," Lithuanian President Algirdas Brazauskas told
reporters attending the summit.
Estonian President Lennar Meri agreed with him, saying, "We of Estonia
are now looking to 1999, along with Slovenia and Romania."
Latvian President Buntis Ulmanis would not set a date but said he was
"confident that soon the Baltic region will be as influential and respected
in European policy as the Mediterranean region is today."
One of Baltics' strongest allies in the drive for membership will be
Poland, that country's foreign minister Dariusz Rosati told The Washington
Times late last week in Warsaw.
Immediately after being invited to join NATO in Madrid, Poland, the
Czech Republic and Hungary held "Three Plus Three" talks with the Baltic
leaders and pledged to advance their case as best they could.
Some in Central Europe are already calling this the Baltic states'
"Trojan Horse" strategy, relying on the advocacy of the three new alliance
members to pave the way for their admission.
Welcoming the support of the three, President Meri of Estonia said:
"There is no question that the Baltic states will have the same chance [of
NATO admission] as Slovenia and Romania in the next round."
In Warsaw, Mr. Rosati was less certain, questioning whether NATO's
current members will be willing to extend their security umbrella over the
Baltics in the face of Russia's strong objections.
"The problem is that there is not enough political support in Western
countries to give them the security [to] support their borders," Mr. Rosati
said.
"If the Russians entered Tallinn," the capital of Estonia, Mr. Rosati
said he doubted the West would be willing to use the threat of a nuclear
strike to force a withdrawal.
In Vilnius, Mr. Jankauskas said that even before the Madrid meetings he
believed NATO members were moving toward serious consideration of the three
Baltic countries. "We have the sense that NATO support is growing for our
candidacy," he said.
Mr. Jankauskas said Lithuanian policy-makers were encouraged when
Secretary of State Madeleine K. Albright, visiting Vilnius earlier this
month, said, "No country should be rejected [by NATO] because of its
position on the map."
Meanwhile, the three states are forging close defense links among
themselves and with Poland.
"Poland is our strategic partner. [Lithuania] is developing a number of
joint projects with Poland, including a joint peacekeeping battalion," Mr.
Jankauskas said. 
The two countries have also established a joint parliamentary assembly
and a joint presidential council to formalize their close cooperation, he
said.
And since 1990, the three Baltic nations have established air defense
cooperation, a Baltic assembly, a Baltic Council of Ministers, free-trade
agreements and the joint guarding of their mutual borders, he said.
Increased cooperation with their larger and stronger neighbors is
central to the strategy of the Baltic nations, Mr. Jankauskas said.
The "Via Baltica [the Baltic common road] does not start in Tallinn and
end on the Lithuanian-Polish border," he said. "This road should connect
Helsinki and Warsaw," drawing everything from Finland to Poland into a
single region, he said.
Martin Sieff is touring Central Europe to assess the impact of NATO
enlargement on the winners and losers.

********