January 27, 1998    
This Date's Issues: 3031• 3032 • 

Johnson's Russia List
#3031
27 January 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Joe Pickett: Re: 3028-Bivens/Report from Harvard Symposium.
(Life in Keezel).
2. Itar-Tass: Yabloko Leader Favors European Abm System.
3. Donna Seifer: Corrections of fact to JRL 3027 Mark Franchetti/
Film tsar.
4. Moscow Times: David McHugh, Primakov Plan Sees Sidelined President.
5. The Guardian (UK): James Meek, Russia feels sea change in US policy.
6. Theresa Fallon: Patriarch Alexei.
7. Reuters: Primakov talks tough on Russian regions.
8. RUSSIA AND U.S. SANCTIONS POLICY by Toby Gati, Wynn Segall and J. 
Robert Joyce.
9. Reuters: Russia, US vow to overcome differences.
10. Reuters: Albright finds respite from criticism at meetings.] 

*******

#1
Date: Tue, 26 Jan 1999 
From: "Joseph M. Pickett" <joe@pi.ccl.ru> 
Subject: Re: 3028-Bivens/Report from Harvard Symposium

Re: #3028, 1/23/99 Moscow Times story on Russian investment symposium

Dear David,
Greetings from Perm, Russia. I'm certainly no expert on Russia, but
I've been here long enough to give a few observations. Given the decay of
Russia that I've born witness to the last 2 1/2 years, I wasn't too
surprised by the description of the proceedings in Cambridge. I do wonder
though if people like Lawrence Summers really can "feel the tragedy of what
has happened" in Russia. If they really did, more effective actions would
have been taken to really build Russian industry and prevent corruption.
I've been in Moscow and St. Petersburg, and as anyone who has been around
Russia knows, it bears no resemblence to life in the provinces. 
I've spent a lot more time in the outlying regions surrounding Perm,
and that's where I have seen the real devastation of the last 7 years.
There's a town 5 hours north of Perm called Keezel. It's nothing special in
Russia. It's decaying and dying. It should take 3 hours to get to Keezel by
bus but the roads are neglected due to lack of money. The only other option
is the old electric train that runs to Keezel. It is unheated and freezing
inside in subzero weather, which is most days November through March. Most
Russians must take the electric train. It's much cheaper than buses and
sometimes you can fool the conductor and not pay at all. Most people don't
like being dishonest but that's what you have to do when you have no money.
There is no work at all in Keezel. The coal mine closed years ago. In
Keezel, I can tell you for a fact that some people are eating dogs, others
are giving their last kopecks to buy a loaf of bread, 15 people died of
alcohol poisoning last month, some roads are buried under 6 feet snow
drifts and old ladies have to struggle through them by foot to get to the
market. Bus service is so poor that often people must walk miles on foot in
-30 degree weather. There is no phone service in parts of the town because
thieves stole the phone cables and steal them whenever they're replaced.
There is no police force to stop them. Apartments have broken toilets, no
gas, running water only in the kitchen, certainly no hot water ever. Only
the elderly with their pensions receive money. And in fact, these people
are actually BETTER off than people in Siberia. Out there some of them
don't even have heat or food at all.
If people like Summers want to see the tragedy and feel Russians' pain,
they should hop on a train to Perm. But tell them to come platzcart, third
class, like most Russians have to do. It's tough to go first or second
class when you aren't paid for 3-6 months. It's not a bad ride, only 22
hours. The toilets are locked half the time, but one gets accustomed to
that. Also, tell them to load up on rubles before they venture out of
Moscow. Food prices are 200%-300% higher out here than before the ruble
crash. They can even stay here with me in my apartment. Then I'll take them
on a tour of places like Keezel and then they'll have something really
valuable to talk about at the next meeting in Cambridge. 

Joe Pickett
Peace Corps Volunteer
Perm, Russia
joe@pi.ccl.ru 

*******

#2
Yabloko Leader Favors European Abm System.

MOSCOW, January 26 (Itar-Tass) - The Russian participation in forming a
European ABM system is the most correct way to develop the defense ability of
the country in future, leader of the Yabloko movement Grigory Yavlinsky said
at the State Duma on Tuesday after a meeting with U.S. Secretary of State
Madeleine Albright. 
In the words of Yavlinsky, it is essentially important for Russia to take
part
in debates on the ABM system bearing mind "a danger of single selective
strikes exists for us... That concerns Europe, that concerns Russia." He
thinks it is, firstly, necessary to decide on the creation of an ABM system
for Europe and a considerable part of Russia and then discuss the creation of
a similar system for the Asian part of the country. 
It is beneficial for Russia to avoid the development of defense systems
in the
West, Yavlinsky said. That is necessary for the promotion of the Russian
technical potential and the solution of several economic tasks, including
those of the defense industry, he added. 
In the words of Yavlinsky, "Russia has such elements of defensive systems
which are not possessed by any other country of the world." The Russian SS-300
system is at least 3-4 years ahead of the American Patriot, he noted. 

*******

#3
Date: Tue, 26 Jan 1999
From: Donna Seifer <dseifer@teleport.com>
Subject: Corrections of fact to JRL 3027 #5

RE: JRL 3027 #5 January 24 1999: 
Mark Franchetti, Film tsar is cast as Yeltsin's heir. Nikita Mikhailkov. 

A few corrections are in order:
1. Nikita Sergeevich Mikhalkov is spelled MIKHALKOV.
2. He was born October 21,1945, is therefore 53 years old today.
3. His brother Andrei Sergeevich Konchalovsky is not a "half-brother," 
but a full first degree (rodnoi) brother, 8 years Nikita's senior.
4. Mikhalkov conceived his "Barber of Siberia" over 10 years ago, 
hardly as a bid for political or presidential power, although 
those who know something of Mikhalkov's sensibilities, patriotism 
and talent, will not be overly surprised at the current
speculation.
Having written an academic analysis of Mikhalkov's work in 1988, I felt
a need to offer these corrections. 

*******

#4
Moscow Times
January 27, 1999 
Primakov Plan Sees Sidelined President 
By David McHugh
Staff Writer

It was billed as a political peace treaty between the parliament and the
government, but a deal Prime Minister Yevgeny Primakov sent to the State Duma
would formalize Boris Yeltsin's figurehead status - and even includes
presidential retirement perks as a sweetener. 
Yeltsin, however, was not pleased. 
The Kremlin issued statements Tuesday saying Yeltsin thought the Primakov
proposal - which would require the president to give up his powers to dismiss
parliament until the end of the year - was unconstitutional. 
It was the first sign of discord between the often-impulsive president,
hospitalized for treatment of a bleeding ulcer, and Primakov, whom he turned
to five months ago to break a political deadlock. 
As a consolation for abdicating some power, Yeltsin would get a guarantee of
immunity from future prosecution for any illegal deed that he might be accused
of from his eight years at the head of one of the world's most corrupt and
economically troubled states. 
He would also get retirement perks - once he's ready to leave, of course.
They
would include a pension, health insurance, security guards and a life-time
seat in the Federation Council, parliament's upper house. 
Primakov said Yeltsin had in fact asked him to make such an overture to the
parliament. 
But a number of observers drew attention to wording in the proposal where
Primakov said that "in case of your approval of the proposed approach, I could
obtain the agreement of the president of the Russian Federation." 
Some said it looked as if Primakov was making the move on his own
initiative,
without Yeltsin's consent. 
Mikhail Berger, editor of the Segodnya daily, wrote in a front-page article
that "from the letter, it is absolutely clear that Primakov has taken the
wheel of state power in his own hands and is conducting his own dialogue with
legislators, acting without, though not necessarily against, the will of Boris
Yeltsin." 
The Duma would also have to agree to tie its hands. It would have to drop
its
sleepy impeachment hearings against Yeltsin. And it would have to lay aside
its constitutional power to topple the government with a vote of no-
confidence, at least until parliamentary elections set for December. That
would give Primakov breathing room if his support from the Communist
opposition in the Duma sours under the pressure of continued economic woes and
election year rhetoric. 
Approved in September with Communist support and named several Communist-
backed ministers, Primakov has so far maintained his broad-based support by
making no controversial or risky decisions. But a further collapse in the
ruble, now worth a little more than one-fourth of its August value, could
quickly undermine his position. 
On Tuesday, the prime minister insisted his peace overture to the Duma
was not
a powerplay. 
"The issue was discussed with the president and he gave instructions to
think
over a system of measures to guarantee accord between the branches of power
and various political forces for the pre-election period," Primakov said. 
That was echoed by Yeltsin's chief of staff, Nikolai Bordyuzha, and by
senior
staffer Oleg Sysuyev. Sysuyev said on NTV television Tuesday evening that
Yeltsin told Primakov in December to begin working on a proposal "that would
help society reach agreement and hold elections under stable conditions." 
A Kremlin statement confirmed Yeltsin's support for Primakov's efforts to
achieve harmony between the branches of government: "He did and does support
efforts made in this area by Prime Minister Yevgeny Primakov. ... The
president is an active advocate of cooperation between all branches of
authority in this sphere." 
But the statement added that "at the same time, he opposes all
limitations on
their constitutional rights." 
Bordyuzha claimed there was no contradiction between Yeltsin's and
Primakov's
positions, saying the proposal could be modified after debate and discussion
with legislative leaders. 
"Today, measures are being worked out that may be radical or moderate,"
Bordyuzha said. 
Yeltsin often has swiftly lashed out at those he thinks insufficiently
respect
his position and authority. Victims have included several top staffers and
former Prime Minister Viktor Chernomyrdin, whom he dumped in March after
Chernomyrdin appeared to position himself as Yeltsin's successor. 
The plan's resignation guarantees would be a key element of any scenario
involving Yeltsin stepping down before the end of his term in 2000. The
president, who turns 68 on Monday, has been hospitalized five times since re-
election in 1996. 
Yeltsin was shoved to the political sidelines after the Aug. 17 ruble
collapse
toppled the government of Prime Minister Sergei Kiriyenko and severely damaged
his own political prestige. At the time, Yeltsin's staff began negotiating
resignation guarantees, but the issue was shelved after Yeltsin's choice of
Primakov as prime minister broke a political deadlock and dampened speculation
Yeltsin's resignation might be imminent. 
The Communists rejected a similar political peace treaty at that time, even
though Yeltsin signed it. They complained that it had no legal force, an
objection that appeared to be overcome by the latest proposal, which proposes
putting the deal in the form of legislation. 
Hard-line Communists have raised the possibility of prosecuting Yeltsin
after
he leaves office, remembering how Yeltsin imprisoned members of their camp in
the wake of failed coups in August 1991 and October 1993. 
The proposed agreement got a mixed reception. Oleg Morozov, head of the
centrist Russia's regions faction, said he welcome the proposals but said
changes might be necessary. 
Viktor Ilyukhin, a leader of the no-compromise wing of the Communists,
said he
would never agree to dropping impeachment proceedings, and has said he would
oppose any immunity from prosecution. 
Valentin Kuptsov, a senior Communist in the Duma, said for Communists
dropping
impeachment was "the biggest and most painful question." 
Deputy Alexander Shokhin, former head of the Our Home Is Russia group in the
Duma and a former deputy prime minister, said the proposal was legal nonsense
since it would in effect suspend the constitution. 
Under the Constitution, Yeltsin retains on paper the power to dismiss
Primakov
at any time, though such a move would almost certainly precipitate another
political crisis worse than the one Yeltsin survived in the wake of the ruble
collapse. 
Primakov has been given a free hand to name ministers and handle the day-to-
day running of the economy, while Yeltsin remains either in the hospital or at
his dachas outside Moscow, coming to the Kremlin only once in a while. 

******

#5
The Guardian (UK)
26 January 1999
[for personal use only]
Russia feels sea change in US policy 
James Meek in Moscow on a loss of kudos in the global arena 

When Russia's acting leader, Yevgeny Primakov, met his old friend Madeleine
Albright, the US secretary of state, in Moscow last night, nothing about
the encounter suggested a sea change in the wary, cordial, occasionally
petulant relationship that has existed between the two former cold war
adversaries since the Soviet Union collapsed. 
But the change is real. Behind the formal statements of mutual respect,
Moscow is reeling from the realisation that the US no longer considers
Russia a mature member of the big-power community.
Russian commentators pounced on the fact that in his State of the Union
address last week, President Bill Clinton mentioned Russia only as a
dangerous storehouse of badly maintained nuclear weapons.
The Commersant Daily newspaper said Mr Clinton had effectively announced a
new US policy towards Russia: not support, but neutralisation. "Russia is
now almost officially declared to be 'Upper Volta with rockets'. But while
in the cold war years this was simply a propaganda clich , it is now
treated as reality, necessitating concrete actions," the paper said.
Sergei Rogov, the head of Moscow's US and Canada Institute, noted how the
official US terms for relations with Russia have changed from "strategic
partnership" to "pragmatic partnership" to "realistic partnership". Now, he
said, the talk was of plain realism - the partnership had gone.
In the past two months Washington has issued a stream of policy challenges
to Moscow - bombing Iraq, threatening to bomb Serbia, trying to rewrite a
27-year-old cold war treaty banning the building of anti-missile defences
around cities, and slapping sanctions on Moscow institutes accused of
helping Iran build weapons.
Once, Russia's furious responses to each move - right up to withdrawing its
ambassadors from Washington and London over Iraq - would have set alarm
bells ringing in the West. Now Russia's anger is seen as posturing, a
predictable inconvenience.
It has taken a long time for Russia's neighbours to accept that its armed
forces are barely capable of defending Russia, let alone mounting overseas
operations, but yesterday the commander of the armed forces of tiny
ex-Soviet Estonia, one-hundredth the size of its neighbour, admitted Russia
no longer posed a threat.
The most influential foreign affairs adviser in another former Soviet
republic, Azerbaijan, said yesterday that his country wanted to see US and
Turkish bases on its soil.
Despairingly, the popular Moscow daily Moskovsky Komsomolets said Ukraine,
the biggest ex-Soviet state after Russia, was turning into a Nato ally -
and there was little Russia could do to stop it.
In a sign of the side-lining of Russia, Washington says its plans for an
anti-missile shield over the US have nothing to do with the Soviet nuclear
arsenal but are aimed against future long-range rockets from such countries
as North Korea.
With Russia's entire federal budget less than half that of Texas, the US no
longer takes seriously threats such as Moscow's yesterday, that any US
anti-missile system would be countered by new Russian weapons -
particularly when Russia is seeking US help in everything from debt
restructuring and food aid to the millennium bug. The long-term danger for
the West is of discounting Russian pride and alienating the country too
deeply for too long.
"Sooner or later, Moscow will again be a major international player," Mr
Rogov said in a recent speech. "That is why it matters whether the Russian
Federation comes back as a responsible player, contributing to global
prosperity and peace. The alternative is for Russia to bear grudges against
the new world order."

******* 

#6
Date: Tue, 26 Jan 1999 
From: (Theresa Fallon) Giovanni.CREMONINI@delrus.cec.eu.int
Subject: Patriarch Alexei

Perhaps some of your readers can clear up this vexing question for me
regarding Patriarch Alexei, the head of the Russian Orthodox Church. I
have heard the many rumors that he was a colonel in the KGB but someone
told me that he had admitted to this. Is it only rumor or did he indeed
come out and admit his former ties to the KGB?

Thanks for your assistance.

Theresa Fallon
London School of Economics 

*******

#7
Primakov talks tough on Russian regions

MOSCOW, Jan 26 (Reuters) - In a country preoccupied by economic crisis that
has brought it to the edge of bankruptcy, academic-sounding talk about the
meaning of the word ``federalism'' may not seem particularly urgent. 
But in a speech to a conference on Tuesday Prime Minister Yevgeny Primakov
made the case that sorting out the complex relationships among Russia's 89
regions could make or break the country's transition to democracy and the rule
of law. 
``The perfection of federal relations, the strengthening of Russian
statehood
is the sole and single task of the day,'' Primakov told a conference of
regional officials. 
``Our constitution calls Russia a democratic, federal, rule-of-law state.
But
this is not a statement of an accomplished fact. Rather this is the aim which
we must achieve,'' he said. 
Primakov said there were some 30 territorial disputes between regions that
would have to be sorted out. He also said regions should halt limits on
transport of food, measures that some regions had taken to combat shortages. 
He urged the regions to resolve their quarrels within the framework of
Russia's post-Soviet constitution. 
Primakov has spoken in the past about the need to work out a sounder
foundation for relations between Russia's regions. 
When he was first named to head the government last September amid a sudden
economic crash and a bitter political showdown in Moscow, he devoted a large
part of his first address to parliament to warnings about separatism. 
Analysts in Moscow said Primakov may be less concerned with the threat of
renewed war, like the 1994-96 conflict with breakaway Chechnya, than with
money. 
Andrei Piontkovsky of the Centre for Strategic Studies said the threat of
secession by regions was exaggerated, but the economic stakes involved were
real. 
Primakov's draft 1999 budget calls for regions to give up some revenues to
help fund tax cuts, earning harsh words from regional bosses like Alexander
Lebed, governor of Siberia's Krasnoyarsk region and a likely presidential
contender. 
``It is a question of the economic relation between the regions and the
centre. Our budget is only 25 billion. It is less than many states in the
United States, less then the private wealth of Bill Gates,'' Piontkovsky told
Reuters. 
``The only long-term solutions to such problems will be the economic
development of the country,'' he said. 

*******

#8
Date: Tue, 26 Jan 99 
From: "Tapio Christiansen" <tchristiansen@akingump.com>
Subject: Russia and U.S. Sanctions Policy

David, 
There has been a lot of coverage lately on U.S. sanctions and Russia. Your 
readers, therefore, may find interesting the following overview of U.S. - 
Russia sanctions policy.

RUSSIA AND U.S. SANCTIONS POLICY
By: Toby Gati, Senior International Advisor, Wynn Segall and J. Robert 
Joyce

This article originally appeared in the winter 1999 edition of the U.S. - 
Russia Business Council's quarterly report, Russia Business Watch. A 
longer version of this article dealing with sanctions issues as they affect 
Russia and the NIS can be found at Akin Gump's web site at 
http://www.akingump.com under "what's new".

Overview 

U.S. economic sanctions are an irritant in U.S.-Russian relations and 
create a variety of potential obstacles for U.S. and foreign companies with 
business interests in Russia. Although the United States adopted fewer new 
sanctions laws in 1998 than in previous years, U.S. policy remains volatile 
and difficult to predict. Sanctions legislation often provides members of 
Congress with an easy way to demonstrate resolve and appeal to domestic 
constituencies in response to complex international developments.
At present, U.S. sanctions pose relatively few direct impediments to trade 
and investment in Russia and most other NIS states. Laws restricting U.S. 
funding and assistance programs dating back to the Cold War era-such as 
Jackson-Vanik restrictions on MFN status-continue to impose conditions on 
U.S. funding programs for Russia based on human rights, promotion of 
democracy and other policy considerations. Other U.S. 
proliferation-related sanctions laws provide a basis for future U.S. 
sanctions against Russia or other NIS states. 

U.S. policymakers in the Executive Branch will be reluctant to impose new 
sanctions against Russia that could aggravate already volatile political 
and economic conditions, foster a nationalist backlash or otherwise 
undermine larger U.S. economic and strategic interests in the region. 
However, U.S. sanctions against countries that border the NIS--especially 
Iran--have had a significant impact on U.S.-Russian commercial relations 
and have contributed to increased diplomatic tensions. Disagreements 
between U.S. and Russian officials over the use of force as well as the 
scope, legality and effectiveness of UN sanctions against Iraq and the 
former Yugoslav Republics are also a source of tension in bilateral 
relations. These differences can be expected to continue, especially if 
members of Congress continue to target sanctions measures against countries 
that engage in cooperative arrangements with nations subject to U.S. 
embargoes.
Sanctions Legislation in the 105th Congress

Although various sanctions policy initiatives lost momentum in the weeks 
leading up to the elections, Congress overwhelming supported one new 
sanctions bill--the International Religious Freedom Act of 1998. The new 
law requires the U.S. President to impose punitive measures against foreign 
governments that promote or permit religious persecution within their 
borders. Possible sanctions include a reduction or suspension of U.S. 
development assistance and opposition by U.S. executive directors of 
international financial institutions to proposed extensions of loans to the 
sanctioned country. The President can waive these sanctions if he 
determines that a waiver serves the "important national interests" of the 
United States. Other legislation from the 105th Congress could set the 
stage for restrictions on U.S. assistance to Russia, Ukraine and other 
countries based on proliferation and other foreign policy or national 
security considerations. 

There also was movement in the 105th Congress to remove or limit the scope 
of some established sanctions programs. The final Congressional spending 
bill scales back Section 907 of the Freedom Support Act by allowing the 
Export-Import Bank, Overseas Private Investment Corporation and Trade and 
Development Agency to deal directly with the government of Azerbaijan. The 
spending bill also grants the President the power to waive many of the 
nuclear-related sanctions imposed against India and Pakistan under the 
Glenn Amendment of the Arms Export Control Act, which President Clinton did 
on December 1, 1998. These more positive developments suggest that the 
various private sector coalitions formed to combat the proliferation of 
U.S. sanctions programs over the past two years have had some success in 
stemming the tide of legislative sanctions actions. 

Systemic sanctions reform initiatives championed by Senator Richard Lugar 
(R-IN), Representatives Lee Hamilton (D-IN), Phil Crane (R-IL), and others 
gained momentum in the 105th Congress. However, the Hamilton-Lugar 
Sanctions Reform Bill--which would have forced Congress and the 
Administration to adopt a more deliberative and disciplined approach to new 
sanctions regimes--never passed despite gaining 39 cosponsors in the Senate 
and more than 100 in the House. With the establishment of a bipartisan 
18-member Sanctions Task Force in July 1998, adoption of a sanctions reform 
proposal may be delayed even further. This Task Force has yet to issue any 
report, and it is unclear whether it ever will. Nevertheless, the 
Sanctions Reform bill will certainly be re-introduced in both the House and 
the Senate in the 106th Congress.

Despite the defeat of Iran-Libya Sanctions Act (ILSA) author Alfonse 
D'Amato (R-NY), the results of the November 1998 elections are unlikely to 
cause a significant change in the approach of Congress to sanctions issues. 
Many members of Congress support a tough sanctions policy. Moreover, with 
Representative Hamilton retiring from Congress, the House will lose a key 
advocate of sanctions reform, and the Clinton Administration may have 
neither the will nor the political capital to resist new sanctions 
initiatives in Congress this year. 

Senator Lugar has stated that he will continue to make sanctions reform a 
high priority and that he and other members of Congress from both parties 
continue to work behind the scenes with U.S. business groups and the 
Administration to line up support for sanctions reform. However, unless 
the Clinton Administration and supporters of sanctions reform in Congress 
can resolve their differences, comprehensive sanctions reform will continue 
to face an uphill battle.

The Quest for Caspian Oil

Enforcement of the Iran-Libya Sanctions Act

Perhaps nowhere are U.S. sanctions issues more critical than in the Caspian 
Sea region, where U.S. sanctions against Iran pose an obstacle to the 
development of the area's substantial oil and gas reserves. The United 
States has a range of commercial and strategic interests in the 
region--including an interest in preventing a potential lock by Russia on 
access to the region's strategic energy resources. These interests can 
conflict with U.S. efforts to isolate Iran. 
In the absence of a rapprochement with Teheran, U.S. officials would like 
to make it as difficult as possible for non-U.S. companies to engage in 
commercial activities in Iran--particularly in the oil and gas sector--that 
are off-limits to American companies. U.S. policymakers are especially 
eager to impede Iran's ability to gain revenue as an overland conduit for 
Caspian oil. However, as illustrated last spring when the Administration 
issued a "national interest" waiver to prevent the imposition of ILSA 
sanctions against Gazprom and other companies associated with the South 
Pars venture in Iran, extraterritorial sanctions can jeopardize larger U.S. 
interests and efforts to isolate rogue states. 

Upon announcing the waiver, Secretary of State Madeleine Albright stated: 
"[We] would expect that a review of our national interests in future ILSA 
cases involving Iran similar to South Pars, involving exploration and 
production of Iranian oil and gas, would result in like decisions with 
regard to waivers for EU companies." She warned, however, that the 
Administration "will carefully examine any proposals for trans-Iranian 
pipeline constructionţfor possible implications under ILSA and take 
whatever action is appropriate." Thus, it remains unclear how the 
Administration will deal with ILSA issues in future cases, although both 
diplomatic and political considerations will weigh heavily in any decision.

ILSA does not appear, however, to be deterring European companies from 
exploring the option of developing oil and gas pipelines from the Caspian 
region through Iran to the Persian Gulf. U.S. companies do not have this 
option because of the comprehensive U.S. embargo administered by the 
Treasury Department's Office of Foreign Assets Control (OFAC). European 
companies are also free to use Iranian equipment and services in oil and 
gas exploration in the Caspian region and to engage in oil swaps with Iran, 
while U.S. sanctions preclude similar actions by U.S. companies. 
Consequently, U.S. companies face serious obstacles when seeking to take 
part in oil and gas exploration, production and transportation projects in 
the Caspian region.

Russian Interests in the Caspian Basin

Russian and Iranian officials have recently held extensive high-level 
discussions on Caspian energy development and other common commercial 
interests in an effort to build closer bilateral economic ties. Russian 
involvement in Iranian energy sector projects already is a significant 
source of tension in U.S.-Russian relations. Most controversial from the 
U.S. perspective is the ongoing Russian assistance to the nuclear reactor 
at Bushehr. On November 24, Russia and Iran signed an accord to speed up 
completion of this nuclear reactor as well as to undertake feasibility 
studies for additional nuclear reactors at the Bushehr site. Officials in 
the Clinton Administration believe that the project could help Iran to 
develop nuclear weapons. 

Russia's energy giant, Gazprom, Total S.A. of France, and Petronas of 
Malaysia continue to develop Iran's South Pars gas field. Some members of 
Congress harshly criticized the Administration for taking a "soft" approach 
to enforcement of ILSA when it granted the "national interest" waiver for 
Gazprom and other companies last spring. If the Russian Duma's vote on 
October 21 to support increased military and technical cooperation with 
Iran reflects a broader consensus in Moscow, the Administration could face 
increasing pressure from members of Congress to more strictly enforce ILSA 
against Russian companies which invest in Iran in the future.

U.S. Efforts to Promote the East-West Pipeline

Increasing U.S. media coverage and a flurry of visits to Washington by 
leaders of Central Asian nations has helped to heighten Congressional focus 
on the Caspian Sea region. While this might generate stronger diplomatic 
support for involving U.S. companies in Caspian projects, it will also 
inject U.S. strategic and political concerns about Iran into discussions 
over pipeline routes--concerns not always shared by Iran's neighbors.

At this time, the Clinton Administration is promoting the development of 
multiple pipelines, including an East-West corridor pipeline extending from 
Baku to Ceyhan, to enhance U.S. regional influence and further isolate 
Iran. U.S. and foreign oil companies thus far have declined to commit the 
necessary capital resources for development of this East-West pipeline 
route. The major pipeline consortium in Azerbaijan, the Azerbaijan 
International Operating Company (AIOC), appears to favor a much shorter and 
less expensive pipeline extending from Baku to the Georgian port of Supsa 
on the Black Sea, but has repeatedly delayed making a formal decision on 
this issue. Senior U.S. and Turkish officials are lobbying intensely for 
the consortium to select the East-West corridor, and the AIOC will probably 
support, in principle, the long-term development of this route. 
Nonetheless, the AIOC consortium is unlikely to select the East-West route 
without a promise of more significant U.S. and Turkish financial support. 
(In a related development, on December 9, three major oil companies signed 
an agreement with the government of Kazakhstan to conduct a feasibility 
study of all possible trans-Caspian oil and natural gas pipeline routes.) 
Interested oil companies and the Clinton Administration appear to agree 
that the East-West route is at the present time not commercially viable 
given current levels of production. Thus, Iran will continue to offer 
attractive pipeline alternatives for those engaged in the development of 
Caspian Sea energy resources.

Evolving U.S. Policy Toward Iran?

In a speech to the United Nations in September 1998, the Iranian Foreign 
Minister rebuffed U.S. calls for the opening of an official U.S.-Iranian 
dialogue. Nonetheless, some recent Iranian statements suggest there may be 
growing areas of common interest with the United States that could lead to 
a gradual improvement in bilateral relations. Under Secretary of State 
Thomas Pickering noted that the United States views with "interest" and as 
a "positive sign" statements by Iranian officials that they are concerned 
with arms proliferation and international terrorism--areas where the 
Administration wants to encourage Iranian moderation. In addition, the 
United States and Iran share growing misgivings regarding the Taliban 
regime now governing Afghanistan. On December 7, 1998, the Clinton 
Administration signaled its approval of anti-drug enforcement actions taken 
by Teheran by announcing that it had removed Iran from the U.S. list of 
countries considered major drug producers.

While policymakers from both sides are looking for a clearer opportunity to 
warm the frosty bilateral relations, they remain guarded in evaluating each 
other's statements and actions. Consequently, neither an easing of 
existing U.S. sanctions against Iran nor an acceptance by Teheran of a U.S. 
offer for direct talks is likely any time soon. For example, U.S. energy 
companies have recently sought approval for a limited waiver of U.S. 
sanctions to permit oil swaps of Caspian oil through Iran. Thus far, the 
U.S. government has rejected at least one such request, while review of 
another proposal is on hold in the interagency review process within the 
Executive Branch. On December 8, Ambassador Richard Morningstar, Special 
Advisor to the President and Secretary of State for Caspian Basin Diplomacy,
told a U.S.-Russia Business Council/Cambridge Energy Research Associates 
conference that "the United States will not approve oil swaps that would 
have a negative effect on East-West pipelines," a statement which may 
signal that the Clinton Administration will refuse to grant any waivers 
until an East-West pipeline is approved, if then.


Russia and Iran: Proliferation and Other Issues

Restrictions on U.S. Foreign Aid

The final version of the Foreign Operations bill approved by Congress in 
October 1998 establishes a basis to restrict U.S. assistance to Russia if 
Russia continues to assist Iran in the nuclear energy and ballistic missile 
technology sectors. Specifically, the legislation requires the President 
to certify that Russia no longer provides Iran with "technical expertise, 
training, technology, or equipment necessary to develop a nuclear reactor, 
related nuclear research facilities or programs, or ballistic missile 
capability" as a precondition for release of 50 percent of funds allocated 
for Russia. The provisions also provide a basis for a presidential waiver 
of this requirement. But in order to grant this waiver, the President must 
determine that making such funds available to Russia is vital to the 
national security interests of the United States and that Russia is taking 
meaningful steps to curtail the transfer of the concerned technology and 
technological expertise. 
The Iran Missile Proliferation Bill

These provisions are similar to those of an earlier Congressional 
initiative, vetoed by President Clinton this past summer, designed to 
combat alleged Russian transfers of missile technology to Iran. That 
legislation-the Iran Missile Proliferation Sanctions Act of 1997-provided 
for punitive action against foreign companies supplying such technology to 
Iran. Congress clearly passed this legislation with Russia as its 
principal target. 

Russian Assurances and U.S. Doubts

Russian officials have taken several actions and made many public 
statements reaffirming a shared interest with the United States in 
preventing the spread of proliferation-related technology to Iran and other 
countries. However, doubts remain in Congress and the Administration about 
the Russian government's ability and commitment to control such transfers. 
President Clinton coupled his veto of the Iran Missile Proliferation Bill 
with punitive action against seven Russian companies suspected of 
transferring missile technology to Iran that essentially bars them from 
doing business with U.S. firms. Senior U.S. officials continued to 
increase the pressure on their Russian counterparts to take steps to halt 
these transfers. White House National Security Council spokesman P.J. 
Crowley, referring to meetings held by Deputy Secretary of State Strobe 
Talbott in Moscow in December, stated: "The key issue now is for Russia to 
take action that will demonstrate that technology leakages have stopped. 
We made clear that a failure to fix these problems will hurt [the 
U.S.-Russian] relationship." On January 12, 1999, the United States 
imposed trade penalties and revoked bilateral assistance to three prominent 
Russian nuclear production and training institutions. The move, in advance 
of a trip to Moscow by Secretary Albright, drew official condemnation from 
the Primakov government and some Russian lawmakers have described the 
United States' efforts as direct interference in Russian sovereign affairs. 

The U.S. government has also threatened that it would find it difficult to 
renew the agreement under which U.S. companies can launch commercial 
satellites aboard Russian rockets -- a move which would hurt not only the 
Russian government and the Kazakh government, but many prominent U.S. 
companies as well. The Russians continue to vociferously protest the 
sanctions as "groundless," threatening to make a "quite tough" response, 
and the media is portraying the dispute as one that could contribute to a 
cooling of U.S. - Russian relations. 

The Administration opposed the missile proliferation bill last year because 
it would have established a very low triggering threshold for punitive 
action and would have left little room for the exercise of presidential 
discretion. Key members of Congress have indicated they may introduce 
similar but even more punitive sanctions measures this year that could 
target the Russian government. In an effort to make a presidential veto 
more difficult, they are considering tying such provisions to other 
legislation strongly supported by the Administration. Thus, proliferation 
and other issues associated with Iran's efforts to acquire weapons of mass 
destruction, including biological weapons, are likely to be the subject of 
highly partisan debates in 1999.

Conclusion

Although the United States does not currently maintain punitive sanctions 
specifically against Russia, many sanctions laws could be turned against 
the country. Closer Russian-Iranian cooperation in particular raises the 
possibility of new U.S. sanctions initiatives in coming months. While the 
Clinton Administration has sought to moderate this arena of policy debate, 
given its own problems and the uncertain political direction of the new 
Russian government, the potential for damaging sanctions issues to arise 
remains great.

*******

#9
FOCUS-Russia, US vow to overcome differences
By Timothy Heritage

MOSCOW, Jan 26 (Reuters) - The United States and Russia failed to reconcile
all their differences during a visit by U.S. Secretary of State Madeleine
Albright on Tuesday but pledged not to let the disputes sour relations. 
``There are a number of issues that are on the table when we talk. On
some we
agree totally and on some of them we disagree partially,'' Albright told a
joint news conference with Foreign Minister Igor Ivanov after two days of
talks in Moscow. 
``But I think that is in the spirit of two important countries who have
their
own national interests and is perfectly proper. What I found most interesting
out of this visit is our ability to speak in frankness and friendship with
each other about the common problems we face.'' 
She said she had expressed this view during a 25-minute telephone
conversation
on Tuesday with President Boris Yeltsin, who is recovering in hospital from a
stomach ulcer, and during a dinner with Prime Minister Yevgeny Primakov on
Monday. 
Yet as the news conference ended, Russia's Foreign Ministry issued a
statement
strongly condemning the deaths of civilians in what Iraq said was a U.S.
missile attack on Monday. 
``Nothing can justify new deaths among the civilian population of Iraq,
which
has already been bled dry by the hardships of many years of blockade,'' it
said. 
The strong wording highlighted the strains in a relationship carefully
tended
since the collapse of the Soviet Union in 1991. 
Albright arrived on Monday to try to narrow differences on issues including
arms control, sales of Russian technology to Iran, and the crises in Iraq and
Yugoslavia's Kosovo province. 
Ivanov, who met her on both Monday and Tuesday, said Russia and the United
States' overall strategic goals coincided and described the talks as
constructive and productive. 
``We think the lack of agreement of our views on some issues must not be an
obstacle to the development of our partnerly relations,'' he said. 
The two sides also signed an agreement which Albright said would allow the
United States to resume cooperation with Russia over the launching of
satellites. 
But Ivanov also pointed to Russia's concerns on a series of issues,
including
U.S. plans for an anti-missile defence system that might breach the Russia-
U.S. Anti-Ballistic Missile treaty. 
``We firmly believe that further reduction of strategic missiles can be done
only on the condition that we are certain this agreement will be preserved and
observed as a cornerstone of strategic stability,'' he said. 
Ivanov rejected any ``pressure'' to curb Russian technology exports after
U.S.
criticism of Moscow's cooperation with Iran. 
He also said Russia was worried by any use of force without approval of the
United Nations Security Council, making clear Moscow's opposition to
U.S.-British air strikes against Iraq and to any plans to use force against
Yugoslavia over Kosovo. 
Albright failed to persuade the Russian parliament to ratify the START-2
arms
reduction pact which has been approved by the U.S. Senate. But both sides
reported progress towards agreement on amending the Conventional Forces in
Europe (CFE) to reflect the post-Cold War military balance. They said they
hoped an amended CFE pact would be ready for signing by November. 
Despite their differences over Kosovo, Russia and the United States issued a
joint statement on the crisis expressing concern at the violence in the
Yugoslav province. 
On the economy, Albright made clear that Washington and the International
Monetary Fund would support new loans to Russia only if it pushed ahead with
reforms. 
``It is necessary for there to be an economic programme and a budget that is
realistic, that provides a sense of confidence to various creditors and allows
Russia to proceed down the road of a market economy,'' she said. 
Ivanov told Russian Television, however, that Russia would not trade
diplomatic concessions for financial support -- ``a billion for Kosovo,
another billion for Iraq'' as he put it. 
Albright also met Moscow Mayor Yuri Luzhkov on Monday and regional governor
Alexander Lebed and liberal leader Grigory Yavlinsky on Tuesday. All three are
likely to run for the presidency when Yeltsin's term ends in 2000. 
She later joined Ivanov for an evening of opera at the Bolshoi Theatre. She
was due to fly to Saudi Arabia early on Wednesday for talks likely to focus on
Iraq. 

*******

#10
Albright finds respite from criticism at meetings
By Elizabeth Piper

MOSCOW, Jan 26 (Reuters) - U.S. Secretary of State Madeleine Albright found
some respite from earfuls of complaints in Moscow during conciliatory meetings
with two of Russia's presidential hopefuls on Tuesday. 
Albright, visiting during an unusually awkward period in relations
between the
former Cold War foes, met regional governor Alexander Lebed and liberal leader
Grigory Yavlinsky in an elite Moscow hotel. 
Both potential candidates for the presidential election in mid-2000
touched on
issues that have become sore points between the two powers, but walked out of
their interviews with a bounce in their step. 
Albright faced a barrage of criticism on Monday as Russian leaders leapt
up to
complain about Washington's policies toward Iraq, Kosovo and a major arms
treaty. 
A senior aide said the onslaught had prompted her to say she was ``struck by
the accumulation of issues that were preoccupying the Russians, leading them
to ask if there had been a change in U.S. policy towards Russia.'' 
But Yavlinsky told reporters his talks had been useful and Albright
supported
his ideas on sticky issues such as the International Monetary Fund's
activities in Russia. 
Albright also expressed her interest in his plan to create, with Russian
involvement, an Anti-Ballistic Missile (ABM) treaty for the whole of Europe,
he said. 
``Our meeting was a helpful exchange of opinions,'' he told reporters. Lebed
said his meeting was pleasant and they had not mentioned President Boris
Yeltsin, who is sidelined in hospital recovering from a stomach ulcer. 
The atmosphere was a sharp contrast to Monday, when Moscow Mayor Yuri
Luzhkov,
a leading potential candidate for the presidency, had sharply criticised U.S.
policy toward Kosovo and Iraq and expressed concern that Washington would pull
out of the ABM treaty, U.S. aides said. 
Lebed said his chat with Albright -- which he said lasted ``considerably
longer than Yavlinsky's meeting'' -- had focused on ways to tackle rising
crime and political and economic problems. 
Yavlinsky said Albright agreed with his analysis that Russia should work out
its own economic plan to pull itself out of a crippling financial crisis which
has led to a rouble devaluation, job losses and soaring prices. 
The IMF has criticised Russian economic policy, particularly the 1999
budget,
and declined to release new funds for now. 
Yavlinsky said talks with an IMF mission in Russia to monitor the economy
should be limited to restructuring Russia's debt to the Fund. 
On Monday, the Communist speaker of the State Duma, the lower house of
parliament, said he had told Albright that IMF missions were unfair. 
``I said to her there was a feeling the IMF missions are mocking our
government,'' Gennady Seleznyov said. ``She understands Russian very well and
of course understood what I said and answered that she did not think this was
intentional.'' 

********