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Johnson's Russia List


March 26, 1999    
This Date's Issues: 3111   

Johnson's Russia List
"The bible of serious Russia watchers"
March 26, 1999

[Note from David Johnson:
1. Kyodo: Rubin urges new economic reform program for Russia.
2. Moscow Times editorial: West Unwise To Overlook UN, Russia.
3. The Times (UK) editorial: MEANWHILE IN MOSCOW. Even a weak Russia still 
needs handling with care.

4. Moscow Times: Jonas Bernstein, PARTY LINES: Kremlin Court Endgame Hits 
Earlier Victors.

5. Vlad Ivanenko: Gavriil Popov on reform.
6. Reuters: Caspian oil bonanza More hype than reality?
7. Komsomolskaya Pravda: Yelena Ovcharenko, Which Way Has Premier Turned 
Russia's Helm? (Paper Lauds Primakov Decision To Call Off U.S. Visit).

8. Warsaw's Rzeczpospolita: Slawomir Popowski, Can Postcommunism Be 
Reformed? (Polish Analysts View 'Divisions' in Region).

9. International Herald Tribune: David Hoffman, Russia's Grand Reform 
Hopes Wilt.

10. AP: Legality of NATO Attack Discussed.] 


Rubin urges new economic reform program for Russia

WASHINGTON, March 25 (Kyodo) -- A new economic reform program backed by the
International Monetary Fund (IMF) needs to be worked out for Russia if it
expects additional assistance from the fund, U.S. Treasury Secretary Robert
Rubin said Thursday. 

''The most significant and useful step the international community can take''
for Russia is to work out a new reform program with the IMF, Rubin told

But the program has to ensure sound macroeconomic policy in Russia, Rubin
said, noting the need for the country to put its deficit-ridden budget in

The Russian government pledged a set of reform measures in July last year in
exchange for a 22.6 billion dollar aid package brokered by the IMF, but the
country's economic reform framework virtually collapsed in mid-August after
the government devalued the ruble. 

Russia has so far received 4.8 billion dollars from the package, but no more
aid is expected until a new budget and reform program that meets IMF
conditions is crafted. 

''While the international community can do its part, Russia has to also do its
part,'' Rubin said. 

IMF Managing Director Michel Camdessus will meet with Russian Prime Minister
Yevgeny Primakov in Moscow over the weekend. 

Primakov had been set to visit Washington earlier this week to hold discussion
with Camdessus on Russian finances, but the crisis in Kosovo forced him to
cancel the trip. 

Rubin said, ''I don't think that that (the cancellation) should affect the
IMF's negotiations with Russia.'' 


Moscow Times
March 26, 1999
EDITORIAL: West Unwise To Overlook UN, Russia 

Bombing Serbian forces -- to check their advance, and to force Slobodan
Milosevic to agree to NATO peacekeepers in Kosovo - is a logical way to
handle a difficult situation. It is a choice among evils; not intervening
would also mean killings and chaos in Yugoslavia. 

But even if the decision has been carefully thought out in Washington,
moving forward to bomb Yugoslavia without really consulting either Moscow
or the United Nations looks cavalier. 

That Washington felt no need to do this shows what months and months of
U.S. video-game bombing campaigns around the world - from Sudan and
Afghanistan to Iraq, repeatedly - has done to desensitize Americans to what
bombing means. 

This could be seen in the bored lack of attention with which Americans
greeted each new attack on Iraqi territory. And it can be seen in the way
that few U.S. or European politicians or media see much wrong with NATO
going it alone with something as weighty as bombing a nation in Europe. 

Moscow's influence has waned, and the Kremlin can no longer realistically
expect serious consideration from Washington on many international matters.
But on Serbia? Surely someone on the U.S. State Department's Russia desk
has read "Anna Karenina," or at least remembers how World War I broke out. 

Washington seems to think the Kremlin will again resign itself to its own
irrelevance. And Washington may be right - but at what cost will this
resignation come? Witness the violence outside the U.S. Embassy in Moscow.
Witness the rise from the ashes of political obscurity of Vladimir
Zhirinovsky and the other nationalists - nine months before new State Duma

Boris Yeltsin is right: Washington should have gotten its bombing campaign
approved by the UN. The Clinton administration did not even seriously try
to do this. 

What's most alarming here is that Washington seems to see NATO as an
acceptable surrogate for the UN - one Washington even prefers because it
runs the show. NATO members are never going to adopt a resolution
condemning, say, U.S. behavior in Latin America. 

Already NATO has taken over some duties from the UN - the peacekeepers in
Bosnia, for example, are generally seen as NATO peacekeepers. 

But NATO "approval" of an attack by U.S. warplanes on a sovereign nation
can in no way substitute for United Nations approval. Better late than
never, Washington should get the UN on board. Even trying would also help
mollify Russia - which, if it could ultimately keep the nationalists out of
the Duma, would benefit for years. 


The Times (UK)
March 26 1999
Even a weak Russia still needs handling with care 

The roar of Nato bombers over Yugoslavia has been accompanied by uproar in
Russia. Moscow's anger over what President Yeltsin calls the West's "naked
aggression" against Belgrade has sent the temperature in an already cooling
East-West relationship down towards Cold War depths. Threats emanating from
different ministerial offices in Moscow this week have included the possible
use of force, the arming of Belgrade in defiance of an international embargo,
and pulling out of weapons and security agreements. The rattling of rusty
Russian sabres is causing concern in Western capitals but not enough to
dissuade Nato governments from the course on which they have embarked. They do
not want relations with Moscow to suffer "collateral damage"; but they also
know that its rage is impotent. If Mr Yeltsin's impoverished and chaotic state
is to win the loans it needs to pay its debts this year, it cannot match words
with deeds. 

The Kremlin is, in truth, playing both sides against the middle. Mr Yeltsin
denounced the airstrikes as a "terrifying and tragic mistake" which could
provoke war in Europe, while reining in more hot-headed government colleagues
by saying that Russia will keep to the moral high ground and refrain from
force. Meanwhile, his Prime Minister, Yevgeni Primakov, has quietly been
rescheduling the IMF talks that he postponed in protest on Tuesday. Moscow
desperately wants the IMF lending, suspended after Russia's financial collapse
last August, to be resumed. But the key to these loans, now the West has
learnt to worry about throwing good money after bad, lies in deeper economic
reform than is so far on offer. Mr Primakov says that Russia does not intend
to lose its economic partnerships with the West by retreating into isolation. 

Manifestations of rage over Kosovo are both popular and political.
Nationalists in Moscow threw eggs and urinated on the steps of the US Embassy.
Not for the first time, the Communist-dominated Duma postponed ratifying the
1993 Start 2 arms reduction treaty. The Foreign Minister says there is no
point in going to Nato's 50th anniverary party next month; Russia's Nato envoy
has been ordered home. 

Moscow's anger stems less from fellow-feeling for Serbia, historically a Slav
"little brother", than from humiliation that the United Nations, the one
international club where it sits at the top table, has been sidelined over
Kosovo. Nato did not seek explicit approval from the UN Security Council,
partly because Russia, one of five permanent members, would have used its
veto. A Security Council debate, called at Russia's insistence as the bombing
started, was inevitably inconclusive; Kofi Annan, the Secretary-General,
diplomatically chided Belgrade for intransigence and Nato for failing to go
through the Council. Russia has called on the six-nation Contact Group of
Kosovo mediators to meet in Moscow; but it has not made the prospect enticing.

The West is, however, alarmed enough at the new low point in its relations
with Moscow for President Clinton and TonyBlair to have talked to Mr Yeltsin
at length on the telephone. With the carrot of IMF money still before it,
Russia has, so far at least, endorsed the US reading of Kosovo, agreeing that
President Milosevic is to blame. But, if no new loans materialise, Moscow
could come to feel it has nothing to lose by snatching up its stick. There is
no reason to "lose Russia" over Kosovo; but Moscow's bruised pride will
require gentle handling in the weeks ahead. 


Moscow Times
March 26, 1999 
PARTY LINES: Kremlin Court Endgame Hits Earlier Victors 
By Jonas Bernstein
Staff Writer 

While the NATO warplanes roaring over Yugoslavia have drowned out Russia's
domestic political drama, the running battle between the Kremlin and the
forces behind Prosecutor General Yury Skuratov is starting to look like the
endgame. Under siege is the Kremlin administration's "property management"
department, the personal fiefdom of veteran Yeltsin crony Pavel Borodin. 

The allegations of corrupt business dealings between Borodin's department
and the Swiss firm Mabetex have highlighted one among the various empires
that have come and gone in the shadows of Yeltsin's Kremlin. The first to
collapse was the one allegedly sponsored by Alexander Korzhakov, when he
was Yeltsin's all-powerful chief bodyguard. Composed of such structures as
the National Sports Fund and Bank Natsionalny Kredit (both now essentially
defunct), this empire crashed in 1996, after Korzhakov lost out in a palace
intrigue surrounding Yeltsin's re-election campaign. 

>From the ashes of Korzhakov's fiefdom arose one controlled by a man who
had been his supplicant and protg, and who was ultimately his nemesis -
Boris Berezovsky. Most recently, it has been the turn of Berezovsky's
dominion - including everything from car dealerships to airlines to oil
companies to media - to meet its Waterloo, embodied in Yevgeny Primakov. 

Until now, Borodin's empire managed to escape the limelight. Which is
amazing, given that the Kremlin "housekeeper" has evaluated the property
under his control at an astronomical $600 billion. While that is
undoubtedly high, Borodin's realm includes everything from Russian property
abroad to children's recreation facilities and airlines at home. 

Where did it come from? It was the property of the Soviet Communist Party,
which Yeltsin nationalized and handed over to the presidential
administration after banning the party in 1992. And while Borodin has
repeatedly insisted his empire is profit-making, former Finance Minister
Boris Fyodorov wrote back in 1994 that these facilities, still state-owned
and servicing officialdom, were costing the taxpayer $1 billion. 

One wonders how the IMF viewed this. Perhaps they just see it as a cost of
pushing reform in Russia forward through the Duma. Yeltsin once, on the eve
of a key Duma vote, openly urged wavering deputies to see Borodin about
housing problems they might be having. Now that kingdom is under seige. On
Thursday came reports that prosecutors had seized documents belonging to
Borodin's department from offices located within the Kremlin's walls. It
was a striking sign of the degree to which President Yelstin's powers have
atrophied. And, no doubt, the significance of that event could not have
been lost on the embattled Yeltsin inner circle - meaning first daughter
and image adviser Tatyana Dyachenko, the ghostwriter of Yeltsin's memoirs
Valentin Yumashev and, reportedly, Berezovsky (even still). Watching these
events, they must have wondered, would anyone have dared to try to seize
Kremlin documents when the roost was ruled by Korzhakov? Or by Chubais, who
was Korzhakov's immediate replacement as the Kremlin gatekeeper? No way;
it would have been unthinkable. 

The bitter irony for the inner circle is that it was they themselves who
engineered the removal of both Korzhakov and Chubais. Now there is no one
left to help protect the family jewels. Such is the endgame of power for
power's own sake. 


Date: Thu, 25 Mar 1999 
From: Vlad Ivanenko <>
Subject: Gavriil Popov on reform

Dear David:

The University of Western Ontario hosted Gavriil Popov who had a talk with
the community members on March 24. Dr. Popov was one of the leaders of the
Inter-regional group of deputies in the Supreme Soviet, together with
Andrei Sakharov and Boris Eltsin, and served as the mayor of Moscow in
1991. Presently, he is the president of International University in
Moscow, a private college established in accordance with an agreement
signed by Bush and Gorbachev a while ago. I hope that the summary of his
talk is of interest to the readers of JRL.

Vlad Ivanenko, Ph.D. candidate in economics
The University of Western Ontario

Gavriil Popov presented his version of how the reform was initiated and
suggested a scenario of future developments. He said that initially the
democrats, including himself, believed in a possibility of partnership
with the USA, whose moral leadership in international affairs was at that
time unquestionable. The matter was not of what course should Russia to
follow but rather of how to satisfy requirements that the US requested
Russia to implement. However, as things went on, it became clear that
there was a fundamental difference in positions between the US and Russia.
The latter expected to be treated as a partner. Meanwhile, the truth,
which the Russian leadership started to realize, was that the US was not
interested in preserving Russia as a major international player. Rather,
the American government sought to reduce the status of Russia to that of a
middle-sized country (e.g. Sweden), with high dependency on itself. Popov
stated that such approach could not work because of natural sense of state
preservation in Russia. [The last point was unclear. Popov indicated that
such a large country, as Russia, could not last as a centralized state
unless there is a common interest for regions to stay together. My
impression was that he referred to protection against a common threat, not
necessarily military. - V.I.]

Abandoning the strategy of partnership with the US took time but it became
complete when the last defender of the idea, Boris Eltsin, gave in last
September. Russia moved in its second stage of reform that Popov described
as more mature and promising. The new strategy is yet under discussion but
several restrictions on the next developments are known

1) There will be no return to either the American plan of reform advocated
in the last years or to the previous socialist system. The voters signaled
unequivocally that both market reformers and hard-line communists are
2) The majority voting system does not work in Russia properly and is to
be modified. Electorate is disorganized and does not understand the
meaning of representative democracy. Chosen leaders do not often realize
the constraints on their behavior and treat newly granted authority as a
voters' carte blanche. The sense of ethnicity is stronger that individual
preferences in many cases;
3) Social orientation of the state should not be preserved. The state
assumes full responsibility for social services (education, medical care,
even for industries of social importance) on a larger scale;
4) Raw materials oriented export is a temporary phenomenon. The state has
to select a few technologically advanced industries with international
competitive edge and to preserve them by all means.

The question of funding for such an expensive program was not elaborated
in details. Apart from the need for a priority system (which Popov started
with agriculture and the conversion of military complex) in state funding,
the other suggestions included partial protection of the domestic market
(a subsidy to domestic producers at expense of import-oriented consumers)
and a shift in taxation from income tax that is hard to administer to
"resource consumption" tax - which sounded as inverse of VAT - that is
supposedly easier to monitor. Foreign investments were cautiously welcomed
but not from the US that seemed to be mistrusted. Popov stated that if
Russia does not get new credits it is ready to move alone and to default
on IMF loan. This development seems to be politically appealing at the
moment. Popov indicated that "we know how much IMF bureaucrats got in
commissions on their loans" and implicated that they conspired with
Russian counterparts to embezzle funds. He had harsh words towards the US
decision to put an embezzler named "Yaponchik" in prison on evidence
fabricated by Russian authority. According to Popov Yaponchik negotiated
to return back to Russia money embezzled from bank "Chara" but interested
persons agreed with unspecified American officials to stop him.

There was a sensitive moment in the discussion when Popov tried to
identify what trade partners could Russia find after default citing
"rogue" states and what products Russia might sell to them. But the
general impression was that default is expected and becomes an asset in
pre-election campaign of those politicians who advised to beware of IMF
deals in advance.

Popov presented ideas in a clear form (apart from state finance and the
role of central government) with a bit of humor and was positively
received by the audience.


Caspian oil bonanza More hype than reality?
By Haitham Haddadin

NEW YORK, March 25 (Reuters) - Touted in recent years as a potential New
Middle East, the Caspian region's oil and gas prospects whet the appetites of
oil tycoons. But now some are mulling whether it is worthwhile to stay. 

Oil analysts say despite the region's significant potential hydrocarbon
reserves, the Caspian can by no means match the low-cost crude supplies from
the Middle East, especially in the current low oil-price environment. 

``It's 90 percent hype on the Caspian. The reality is less significant than
what it has been made up to be,'' Vahan Zanoyan, president of Washington-based
Petroleum Finance Co., told a recent seminar in New York. 

``The (U.S.) State Department had exaggerated the reserves estimates, saying
the Caspian was the next Middle East. It does have some potential but it is
nowhere near to being a strategic region,'' Zanoyan added. 

That potential has resulted in an oil and gas rush to the region by
international firms. Azerbaijan has already singed contracts totally $40
billion to $50 billion with 16 consortia. 

When a BP-led consortium signed one of those deals, an $8 billion contract to
develop oil fields offshore Azerbaijan, it was dubbed ``the deal of the
century.'' But now some are ready to pack their bags and leave, saying they're
not striking economically viable oil. 

A Russian-American oil consortium, LUKArco, said this week it could leave
Azerbaijan soon if seismic data from a field it is exploring do not point to
sufficient reserves. 

If it does leave, this will make the consortium the third to close down
operations there this year after North Absheron Operating Co., a BP Amoco-led
oil consortium, and the Caspian International Petroleum Co. (CIPCO). 


According to U.S. Energy Information Agency statistics, possible oil reserves
in Caspian -- an area defined as the former Soviet republics of Kazakhstan,
Turkmenistan, Uzbekistan and Azerbaijan -- are close to 160 billion barrels. 

This is roughly a quarter of the Middle East reserves. 

The Caspian's proven reserves of 16 billion to 32 billion barrels compare with
about 22 billion barrels in the United States and 17 billion in the North Sea,
the EIA says. 

Analysts say a key obstacle to developing that potential is the difficulty of
getting the oil to Western markets due to the lack of sufficient export
pipelines. That dearth of pipelines is exacerbated by competition between the
nations bordering the Caspian Sea over which pipeline route should be

The Paris-based International Energy Agency (IEA) says that although the
construction of new pipelines has become a priority, most routing options are
fraught with technical, financial, legal or political difficulties. 

But it sees Caspian oil production hitting 3.9 million barrels per day by
2010, barring a continuing slide in oil prices and if investments in the
region were to continue at the current rate and enough export outlets are

Petroleum Finance Co.'s Zanoyan, however, said the real issue is not the
potential, but above-ground risks clouding any foreseeable future the
resources will be commercialized. 

``Even if (oil) prices are not as low as they are now...Caspian oil and gas is
still at a distinct competitive disadvantage compared to much more attractive
oil-producing regions like the Middle East,'' Zanoyan added. 

With oil wallowing at low levels -- benchmark Brent now sits between $13 and
$14 a barrel compared with $25 two years ago -- the higher cost of deeper
drilling in the Caspian seems to justify the fears. 

It costs about $5 to produce a barrel of Caspian crude, almost halfway between
Saudi Arabia's rock-bottom operating cost of $1.50 a barrel and the North
Sea's whopping $13. 

Zanoyan said he doubted there was enough exportable oil to justify another
export pipeline in addition to two existing ones. 


But despite the difficulites, some in the oil sector still see a bonus in the
region. French oil services firm Bouygues Offshore, which is bidding to build
part of a 1,580-kilometre (990-mile) crude export pipeline from Kazakhstan to
Russia's Black Sea Coast, is optimistic. 

``With the low oil prices of today, there is less ambition than a year ago.
But there are still a lot of oil fields to be developed (in the Caspian). So
at $5 to $7, cost is alright, if we can export the oil,'' Bouygues Chief
Executive Officer Herve Le Bouc told Reuters in an interview in New York. 

``There has been exaggeration; last year, the Caspian was said to have more
oil than Saudi Arabia, but we never believed it. Now, it is the other way
around, with people saying there's nothing anymore, which is not true as
well,'' said Mirreille Arvier, investor relations manager at Bouygues. 

``The Caspian will be another North Sea, but with more difficult
environment,'' she said. ``This is not because of geological or seismic
conditions but because of the industrial environment. In the North Sea, you
have industrial countries and you're able to get any kind of services or
materials you need.'' 


Paper Lauds Primakov Decision To Call Off U.S. Visit 

Komsomolskaya Pravda
March 25, 1999
[translation for personal use only]
Article by Yelena Ovcharenko: "Which Way Has Premier Turned Russia's Helm?" 

When the pilot of the "Rossiya" [presidential 
plane] headed back to Moscow over the Atlantic, did it mark a 
simultaneous turnaround in our country's foreign policy? Did it mark an 
about-turn in relations with the West? Will Russia, bristling with 
missiles, review existing agreements, anathematize its world creditors, 
and rely on the "Slav brotherhood"? 

Who else will applaud this airborne political maneuver apart from most 
of the Duma, the still-patriotic section of the Russian population that 
is eking out a living, and the Serbs, whom God has already punished by 
sending them as a leader Milosevic, who is playing his own personal 
ambitious game? 

There are more questions than answers. And the main question is: Does that 
turn of the helm mark a return to the country's recent past with its 
uncompromising game of "allies and adversaries"? Is Premier Primakov 
nostalgic for it? After all, the "young reformers" have long since 
decided where they stand on what needs to be done in what way in foreign 
policy -- to forget that foreign policy even exists until such time as we 
can put some sort of clothes on our "third-world" native country. 

Yevgeniy Maksimovich could not fail to be aware of the fact that Milosevic 
would most probably not value his turning back -- he has already 
demonstrated his "gratitude" to Russia for its attempts to bring about a 
political settlement. And the Americans would not stand on ceremony with 
him. And NATO would time its first strikes to coincide with the Russian 
guest's visit to Washington -- to show the world who is boss. On the eve 
of the alliance's 50th anniversary this accompaniment accurately conveyed 
the current alignment of forces in diplomacy. Primakov knew all this. And 
he had therefore set off already thinking about the possibility of 
changing course in midair over the Atlantic. He spoke to Gore twice -- 
the last time straight after the news of the failure of the Holbrooke 
mission. He decided to turn back. He then contacted the Russian 
president, who said: "You have made the right decision." They spoke again 
in Moscow. That is, after a sleepless night. That is, the decision was so 
serious that even a strong man like Yevgeniy Maksimovich needed to hear 
it again -- that it was correct, that there was no way forward. 

There really was not. There was only shame and humiliation for a country 
which would not have succeeded in balancing the loan and the 
"consolation" prize in the shape of a number of deals. What is happening 
in Russia with loans is well-known, so obtaining allegedly astronomical 
sums from contracts with America is very problematic. 

In return for this money we would have had to make concessions in some 
very abstract ways. Namely, on the "country's national interests" -- 
which, of course, cannot be used to cook food or pay pensions. Are we 
citizens of a once-great country ready for this? Or behind the crumbling 
facade and the faded lines on the map does the dream of making it, of 
standing firm, and of gradually starting to make repairs and renovations 
before things all come crashing down still live on? 

Primakov made a decision which cast him as a leader who can grasp the bigger 
picture. In their last conversation Gore effectively suggested that 
Primakov share the responsibility for the military action and that they 
sign a joint document to that effect. The Russian premier could not agree 
to this. Certain people even in Russia will not understand him. But the 
unsentimental financier Michel Camdessus did. And, barely having landed 
in the United States, he telephoned the Russian premier himself. Because 
there is a "politics of actions," and those who are capable of taking 
those actions usually benefit immeasurably more. I do not know which 
units will be more convenient to use for those who will be assessing the 
abandoned Washington visit in terms of the hypothetical sums that Russia 
had still hoped to obtain. But those who try to simultaneously accuse 
Primakov of betraying Russian interests will have to come to terms with 
the reality -- that someone who had acted differently in this situation 
could hardly be premier of Russia. 


Polish Analysts View 'Divisions' in Region 

Warsaw's Rzeczpospolita in Polish
19 March 1999
[translation for personal use only]
Report by Slawomir Popowski: "Can Postcommunism Be Reformed?" 

Ten years after the great breakthrough -- the 
"Autumn of the Peoples" of 1989 and the collapse of the Soviet empire in 
1991 -- Europe faces the threat of another disruption. One that may be 
more dangerous than a split into military blocs. At issue is a cultural 
split, a division into states that have somewhat dealt with the legacy of 
communism and those that are immersed in it up to their ears, incapable 
of carrying out the necessary political and economic reforms. 

The hopes born in the late 1980's for a relatively painless systemic 
transformation of postcommunist states and the establishment of real 
democracy and an efficient market economy in them are thus failing. Few 
states have managed that. The majority have already lost that chance. For 
a log time to come, it seems. 

The line of the new division -- cultural and, consequentially, also 
political -- will run along the eastern borders of Poland. Are we aware 
of all the implications that will largely affect our security and 
international position? This is the basic question that an annual Eastern 
Studies Center [OSW] report entitled "1998: The End of an Illusion?" by 
Jacek Cichocki, Grzegorz Gromadzki, Tadeusz A. Olszanski, Wojciech 
Paczynski, Witold Rodkiewicz, Bartlomiej Sienkiewicz and Wojciech 
Stanislawski is trying to answer. 

A Sick Russia 

The OSW experts claim that 1998 was a breakthrough year in the recent 
history of the states of the former Soviet Union and the Balkans. For the 
very first time the developments of that year so acutely revealed 
processes that will determine the political and economic situation on 
huge areas of Europe and Asia for the next few years to come. 

Russia should be mentioned first. The diagnosis formulated in the report is 
cruel: the events of 1998 showed that this country does not stand a 
chance of becoming a stable free market democracy over the next several 
years. It has been publicly declared that Russia is laying the 
foundations for a democratic state, yet the actual changes have been 
going in an entirely different direction. Seven years of transformation 
have led to an oligarchy-cum-clan economic and political system that has 
dramatically weakened state structures. Politics has been reduced to a 
fight between oligarchic groups determined to defend their interests. 
Added to that is an obscure proprietorship structure and widespread

The economic crisis that came in August 1998 only intensified these 
phenomena. The government crisis has created a vacuum in the very center 
of political life. That, in turn, has paralyzed state institutions. The 
economic crisis is so deep that it leaves no hope that the economic 
situation will improve or that at least the status of the 1990's can be 
regained in the years to come. Moscow Left to Its Own Resources [subhead] 

The only rescue could be foreign loans, but Russia is already so heavily 
indebted (circa $140 billion), that nobody is willing to take the risk. 
Especially as, the authors of the report claim, the West ever less 
respects the bankrupting Russia. It is no longer seen as a threat to 
global stability. Not big enough a threat, in any case, to keep 
subsidizing it at all costs. In the nearest future Russia will thus be 
increasingly left to its own resources, with all the consequences: 
stagnation, social tension, and political conflicts.(more) 19 Mar wojnicka/ 
Moscow Mayor Yuriy Luzhkov and Prime Minister Yevgeniy Primakov currently 
stand the biggest chances for winning the presidential elections. Both 
reject the Western market economy model and suggest a closer undefined 
"Euro-Asian option." Also, both support state control and the 
reestablishment of Russia's role of an empire. 

The hitherto liberal-reformist forces seen to be the most pro-West stand 
the smallest chances of winning the parliamentary elections that are to 
be held at the end of this year. They were pushed beyond the pale last 
year, and some Moscow analysts doubt if they can even make the 5-percent 
threshold in the elections to the Duma. 

Considering that the loss of Moscow's international prestige has done nothing
change the mentality of Russia's political elites who continue to dream 
their dreams of restoring power, anti-West and anti-U.S. sentiments 
should be expected to intensify in the foreign policy. "For as long as 
the current generation of Russian politicians continues to relate the 
capabilities and position of their state to that of the USSR with no 
regard for the social and cultural costs that the nations of Russia have 
had to pay for the 'past glory of the state,'" the authors of the report 
write, "no significant internal transformations in Russia should be expected."

Ukraine Torn Apart 

The assessment of the chances Ukraine stands also leaves little room for 
optimism. The OSW experts argue that despite the declared willingness to 
integrate with the West and the efforts made in this direction, Kiev is 
incapable of successfully implementing reforms. Ukraine has not made the 
reform effort that would bring it closer to European standards. The state 
is even incapable of executing taxes from the companies it owns, yet none 
of the significant political forces are coming forth with a project for 
dramatically improving the condition of the state. 

The society is divided. A large majority see their future in close-knit 
ties with Russia. Under these circumstances, the authors of the report 
write, on the one hand Kiev is cooperating with Western structures, 
whilst on the other it is involved in -- for example -- joint defense of 
the CIS air space. 

The upcoming presidential elections will change nothing in this respect. 
Even if the candidate fielded by the communist left wins, only political 
rhetoric will change at most. "Ukraine will remain straddled between the 
West and Russia, being closer to the latter without making a definite 
choice, however. You cannot win the elections without the support of the 
procommunist and pro-Russian electorate of eastern Ukraine, but then 
neither can you run the country against the will of the elites who see 
significant independence of Moscow as their economic interest. 

Just like in Russia, there are currently no bigger chances for liberal 
economic reforms in Ukraine. 

"Stable" Belarus 

By comparison with the two aforesaid states, Belarus seems "stable." 
The most probable scenario is that Aleksander Lukashenka's regime will 
remain in power for the next several years. The opposition is very 
feeble, and although it is announcing presidential elections, its 
activity is symbolic. The OSW experts claim that only Moscow could lead 
to ousting the regime, but the majority of Russian elites find Lukashenka 
either convenient or harmless. 

Defending his position and influence, Lukashenka does not agree to integration
with Russia, as that would imply the incorporation of Belarus. This is 
the main guarantee that it can retain independence in the nearest future. 
The economic outlook is not that bright. In a state that is run along the 
principles of a collective farm, there can be no talk of liberal reforms. 
This means that the process of economic degradation will proceed. 

Balkan Disintegration 

Finally, the Balkans. Including Bulgaria and Romania. The authors of the 
report claim the process of the disintegration of Yugoslavia has reached 
the proportions of the "30-Year War," which causes that the entire region 
shall remain the area of long-term destabilization. The establishment of 
ever new "protectorates" holding back the extermination of particular 
ethnic groups will not suffice to stop the process. Bosnia-Herzegovina is 
an example. Emissaries from the West continually have to solve the 
problems emerging there. 

The destabilization on the territory of the former Yugoslavia is 
affecting the situation in Bulgaria and Romania, if only because of the 
trade restrictions in this region. Moreover, Romania and Bulgaria are 
currently paying the price for launching systemic reforms too late. This 
could be an explanation for the dropping support for the reform-oriented 
governments that have recently risen to power in Sofia and Bucharest. 
Both countries have also been seriously affected by the Russian crisis. 

Polish Watch Point 

All the countries covered by the report are suffering a structural state 
crisis. In each of one of them the tax system has crashed, the state 
monopoly on resorting to force has collapsed, the justice administration 
system has failed, power has become corrupted and ridden by crime, and 
control over the entire national territory has been lost. As a result, 
the economies are becoming naturalized, financial systems are collapsing, 
the state apparatuses and infrastructures are falling apart, and -- in 
the words of the OSW experts -- social relations are becoming archaic. 

What this means for Poland, the authors of the report conclude, is that 
our eastern border may become (has already become) the dividing line 
between dramatic economic and cultural contrasts. And thus, "whilst 
becoming a part of the Western world, we will thus concurrently acquire 
the status of 'a front-line state.' Not because of a new aggressive 
policy launched in the East, but because of the economic collapse in that 
region." What can we do to avoid or, at best, minimize the effects of such a 
division? Most of all, we should assess the situation realistically. As 
we are struggling to stimulate our own economic growth, we do not have 
the necessary economic resources to affect the situation in neighboring 
states. At the same time, however, Poland will be the first to bear the 
brunt of economic and social destabilization in neighboring states. 
Membership in NATO does not solve any of these problems. The report 
states it is exclusively an insurance policy of sorts in case a situation 
directly threatening Poland developed in the East. 

The only structure capable of doing anything to diminish the "cultural 
contrast" along Poland's border is the EU that we shall join within the 
next 3-4 years. Perhaps by that time the EU will develop its own policy 
regarding the countries lying east of Poland, yet it would be very bad if 
the EU saw us merely as a "border watch point" the maintenance costs 
(political and economic) of which we were to carry ourselves. 

That is why, apart from attributing a "privileged" status with countries 
such as Lithuania and Ukraine (even at the price of Moscow's 
dissatisfaction), the pace of our negotiations on membership in the EU 
and the dialog on policy in general (both domestic and EU) regarding our 
partners beyond the eastern border are so important. The big depression 
in the East, according to pessimists, is only but beginning. 

[Description of Source: Rzeczpospolita -- Independent, centrist political and 
economic daily] 


International Herald Tribune
March 26, 1999
[for personal use only]
Russia's Grand Reform Hopes Wilt
By David Hoffman Washington Post Service

MOSCOW - Two years ago, when Russia reluctantly signed an agreement with the
North Atlantic Treaty Organization, there were signs that the Titan of Eurasia
was being welcomed into the West. 

Russia floated Eurobonds, its tycoons jetted to London and New York in search
of capital and, at the Denver summit talks that summer, President Boris
Yeltsin was toasted by the exclusive club of the wealthy nations.

But when Prime Minister Yevgeni Primakov aborted his visit to Washington and
turned his plane around in midair this week, it was a sign of how difficult
Russia's road to integration with the West had become. 

The Balkans crisis, and Russia's economic woes, have thrown into sharp relief
how the earlier hopes have been dashed.

Now, Russia is practically begging to get back into the International Monetary
Fund lending program. It is all but closed off from borrowing new capital on
global markets, and many analysts think it will default on some of its
existing external debts.

The tycoons have been shipwrecked by the ruble and debt crisis of August. The
Balkans attack has led Russia to freeze its already-weak connections with the
Atlantic alliance. And Mr. Yeltsin's direct, personal protests against the
Yugoslavia offensive were all but ignored.

Russia does not appear to be marching deliberately toward a new isolation from
the West, according to many analysts and politicians here. Rather, it appears
to be sliding down a slope, flailing about, out of weakness, humiliation and

Grigori Yavlinsky, the economist and leader of the centrist Yabloko bloc in
Parliament, compared the midair maneuver by Mr. Primakov to the exploits of a
famous Soviet pilot, Valeri Chkalov, who was known for his daring stunts, but
who eventually pushed the envelope too far and died in a crash.

For Russia, the question being asked by many politicians and analysts today is
how to avoid Chkalov's fate. The attack on Yugoslavia has reignited an all-
important argument about whether Russia is heading for renewed isolation from
the global community, and whether it can afford it.

Both Mr. Yeltsin and Mr. Primakov are being buffeted by conflicting demands
and needs. They have taken a rhetorical leap away from the West in their
reaction to the bombing of Yugoslavia, but they have been desperately clinging
to the hope that they can revive badly-needed Western financial a id.

In his appearances on Thursday, Mr. Primakov denounced the NATO attack as an
''enormous threat to stability'' but then insisted that in two days he would
be back at the table with the IMF managing- director, Michel Camdessus, with
whom he was supposed to meet in Washington. 

Mr. Primakov said, ''We are reckoning on fruitful talks with the IMF'' and
took pains to emphasize that Russia ''remains an organic part of the world
community and there is no isolationism.''

But the ever-cautious Mr. Primakov also betrayed some uncertainty about
whether Russia will get fresh loans to cover the $4.5 billion coming due to
the IMF this year.

He told cabinet ministers Thursday that ''inner resources must be mobilized
now, to the maximum mobilized and used.'' 

Mr. Primakov's remarks came as Russians also saw their favorite street
barometer of the economy take another dive: The ruble exchange rate weakened
dramatically against the dollar and again hit new lows for the year.

On the NATO attack, Mr. Yeltsin's words were strong, too, saying it was a
''gross error by the Americans, American diplomacy and Clinton, a gross

But Mr. Yeltsin's actions spoke volumes about Russia's weaknesses. He quickly
and firmly rejected the idea that Russia could take any military response to
the Balkans attack, as had been suggested by some nationalists and Communists.

''There are so-called extreme measures,'' he said. ''However, we decided not
to use extreme measures. We decided to be above this. In other words, in the
moral sense, we are above America.''

Igor Bunin, a political analyst, said that Russian public opinion was also
rent by conflicting attitudes toward the West that have come out in recent
days. ''If you follow our polls,'' he said, ''you will notice that the love
for the West which occurred spontaneously at the end of the 1980s, the
beginning of the 1990s, is waning. The honeymoon lasted until 1994-95, and
then anti-Western, anti-American sentiments appeared. There was a crisis of

The economic crisis last August demonstrated that ''Russia would not be able
to survive going its own special way,'' he added, ''and Russians felt they
desperately needed Western money.''

''After the United States inflicted this strike on Yugoslavia, many people
felt this urge to tweak Americans on the nose,'' he said, ''to show them that
they are not the only hegemony in the world.'' 

Mr. Bunin said Mr. Primakov was a pragmatist trying to balance the conflicting
desires. ''On one hand he is trying to raise people's national pride and
dignity when he turns around his plane. On the other hand, he is not severing
ties with the West.''

The strike on Yugoslavia, unleashing emotional blasts from the nationalists
and Communists who dominate the lower house of Parliament may once again put
off another key piece of unfinished business between Russia and the West, the
START-2 strategic arms treaty. 

Signed in 1993 but still unratified by the State Duma, the lower house of
Parliament, there were signs in recent weeks that it could soon be approved.
Mr. Yeltsin sent a compromise version to the Duma, and debate was set for
April 2.


Legality of NATO Attack Discussed
March 25, 1999

WASHINGTON (AP) -- Legal justification for the U.S.-led NATO air offensive
against Yugoslavia is written in no diplomatic charter, international law or
U.N. Security Council resolution. At best, scholars say, the Clinton
administration can rely on an unwritten principle that allows intervention to
protect people besieged by their own government.

The administration lists a range of practical and political reasons for the
attack. The trouble in Yugoslavia could spread to neighboring states,
President Clinton said. Belgrade has failed to abide by international
agreements. But for the strikes, Yugoslavia would continue attacks on the
independence-seeking ethnic Albanians in the Kosovo province of Serbia.

International legal scholars see scant legal backing for the NATO action
beyond the unwritten principle of ``humanitarian intervention'' that permits
nations to violate the sovereignty of another to stop widespread human rights

``I don't know any neighboring state that's been threatened, and I don't see
how this (attack) can be self-defense,'' said Allan Gerson, a senior fellow in
international law at the Council on Foreign Relations. As for Yugoslavia's
refusal to settle the Kosovo crisis peacefully, he said, ``I don't know of any
precedent that gives you the right to go to war against any party that refuses
to reach a settlement at the peace table.''

But Gerson said the strictures of international law must move aside in an
emergency. ``When you have massive human rights abuses, it's important that
you respond immediately,'' he said.

Asked specifically to explain the legalities of the strikes, State Department
spokesman James Rubin cited three factors: Yugoslavia's failure to negotiate
seriously to avoid further conflict in Kosovo, its failure to comply with its
own earlier cease-fire agreement and the renewed Yugoslav offensive in Kosovo.

Attorney General Janet Reno said Thursday the Justice Department had told the
White House that U.S. participation in the NATO mission ``was constitutionally
and otherwise lawfully authorized.''

Anthony Arend, a professor of government at Georgetown University and co-
author of a 1993 book, ``International Law and the Use of Force,'' said there
is ``a customary practice adopted since 1945 that allows states to intervene
in any number of circumstances to promote justice.''

Yugoslav President Slobodan Milosevic has repeatedly cast the strikes as a
violation of his country's sovereignty.

In Moscow, Russian President Boris Yeltsin called the strikes ``outright
aggression.'' Russian Foreign Minister Igor Ivanov said the military action
``has no justification, legal, political or moral.''

Ted Galen Carter of Washington's libertarian Cato Institute said the
administration was ``guilty of committing a flagrant, shameful act of
aggression'' by ``attacking a country that has not attacked the United States,
a U.S. ally or even a neighboring state.''

The U.N. Security Council has passed no resolution authorizing the use of
force -- indeed, permanent members Russia and possibly China would have vetoed
such a proposal.

The Security Council ``should be involved in any decision to resort to
force,'' said U.N. Secretary-General Kofi Annan.

The U.N. charter permits the use of force in self-defense if a country is
attacked from the outside, but the Kosovo case is internal to Yugoslavia. The
charter recognizes regional organizations such as NATO but permits their use
of force only if the United Nations specifically authorizes it. Further, the
charter explicitly orders member states to refrain from the use of force
against the territorial integrity of any state.

The Dutch ambassador to the United Nations, Peter van Walsum, said NATO would
``prefer to be able to base its action on a specific Security Council
resolution'' and he defended Annan's assertion of U.N. authority.

``If, however, due to one or two permanent members' rigid interpretation of
the concept of domestic jurisdiction, such a resolution is not attainable, we
cannot sit back and simply let the humanitarian catastrophe occur,'' van
Walsum said at Wednesday's Security Council meeting.

A formal treaty dating to the founding of the United Nations after World War
II not only empowers, but requires nations to intervene to stop genocide,
according to Neil Kritz of the United States Institute for Peace. While
Yugoslav forces have been accused of carrying out massacres of Kosovar
civilians, international officials have not yet termed the situation in Kosovo
a genocide.



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