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June 11, 1999    
This Date's Issues: 3335 33363337


Johnson's Russia List
#3336
11 June 1999
davidjohnson@erols.com

********

Date: Thu, 10 Jun 1999 
From: Tom Graham <tgraham@ceip.org> 
Subject: A World without Russia?

A World Without Russia?
Jamestown Foundation Conference
Washington, DC
June 9, 1999

Thomas E. Graham, Jr.
Senior Associate
Carnegie Endowment for International Peace
Prior to joining the Carnegie Endowment in September 1998, Mr. Graham was a
Foreign Service Officer on academic leave with RAND in Moscow from 1997 to
1998. From 1994-1997, he served as Head of the Political/Internal Unit and
then Acting Political Counselor at the U.S. Embassy in Moscow.


For the past decade, reform, economic and political, has dominated
discussion first of the Soviet Union and then of Russia. Russian
President Yeltsin and his successive Prime Ministers have stressed their
commitment to reform; Western governments, particularly the Clinton
Administration, have made assisting Russia's transition to democracy and
a market economy the centerpiece of their policy. Through all the zigs
and zags of Russian domestic politics and economic performance, the
Administration has - until quite recently - assured us that Russia was
making steady, albeit at times slow, progress in economic reform and
democratization. In September 1997, Deputy Secretary of State Strobe
Talbott went so far as to declare that Russia was at "the end of the
beginning" of its journey toward becoming a "normal, modern state." "It
may be," he said, "on the brink of a breakthrough."

We all now know how off the mark that prediction was. The financial
collapse of last August shattered all illusions about Russia's
trajectory. It marked the failure of the West's policy of the past
seven years, the end of the grand liberal project of rapidly
transforming Russia into a normal market economy and democratic polity.
Debate, both in Russia and the West, naturally turned to the question of
what went wrong and who was to blame. And, in that guise, the question
of reform has continued to frame discussion of Russia.

But August should have raised another issue, one that, well into the
next century, will have greater consequences for U.S. strategic
interests than the question of reform: the fate of Russian power.
Although talk of Russian weakness is now commonplace, little thought has
been given to the consequences of long-term weakness. But arguably we
are witnessing a geo-political and geo-economic shift of historic
dimensions, one in which Russia will become less and less an actor in
world affairs, while running the risk of becoming an object of
competition among more advanced and dynamic powers. This shift, if it
indeed occurs, will have far-reaching consequences for all the regions
bordering on Russia and thereby for our global strategic interests. It
is only prudent that we begin to contemplate a world without Russia.

Many will take exception to this notion. The prevailing opinion in the
West is that Russia, as former Russian Foreign Minister Kozyrev once put
it, is doomed, by virtue of its size, geographic location, economic
potential, and cultural legacy, to be a Great Power. And the only
question is whether that power will be wielded by an anti-Western,
authoritarian regime or a pro-Western, democratic one.

But a look at Russia over the past quarter of a century reveals a
country in secular decline, while analysis of the present underscores
just how formidable, prolonged, and uncertain a project rebuilding
Russia will be, even under the most favorable domestic and international
circumstances. Those circumstances are, however, rapidly changing in
ways that do not augur well for any early improvement in Russia's
international standing and prestige.

Secular Decline

To begin with, secular decline. In the intense focus on the travails
of post-Soviet Russia, there is a tendency to forget that Russia's
decline began at least a quarter of a century ago, ironically at the
very moment the Soviet Union had attended nuclear parity with the United
States and billions of petrodollars had begun to flow into the country
as the result of global energy crises. The Brezhnev era was at best a
"period of stagnation," as Gorbachev later declared. The problems, if
not their full gravity, were well-known to both Western and Soviet
analysts at the time.

The reasons for the decline lay both in the fundamental flaws of Soviet
political and economic structures and in specific, misguided policies.
As we all know, the Soviet system proved incapable of dealing with the
demands of the information-technological revolution, which was gathering
momentum in the 1970's. Brutal coercion may have been capable of
industrializing the Soviet Union in the 1930’s and repression may have
been compatible with industrial growth thereafter, but they became
counterproductive when progress came to depend on creativity,
innovation, and initiative, as it did with the advent of the information
age. The rigidities and incentive system of the Plan increased the
risks and downsides of adopting new technologies. The closed nature of
society retarded an appreciation of the depth of the Soviet Union's
problems, the articulation of innovative solutions, and the diffusion of
new technologies. And the rejection of "bourgeois" economics deprived
the leadership of the tools, such as economic indicators, to measure the
country's economic performance and the instruments, such as, monetary
and fiscal policies, to halt or reverse the decline.

At the same time, the system bred corruption and disrespect for the
law. A "shadow economy," or underground market, became essential to
filling the gaps in the Plan and providing the consumer goods and
services demanded by an increasingly urbanized and sophisticated
population. But it also generated mafias and fed corruption at all
levels. As Martin Malia has written, "since this underground market
was created by, and responded to, genuine social needs, not crass
'speculation,' it to some degree involved the whole population; thus
everyone was criminalized in some measure, for everyone had to have a
little 'racket' or 'deal' in order to survive. … So everyone was always
guilty of something, and an indispensable activity was stigmatized and
stunted."

By the end of the Brezhnev era, the signs of decay were everywhere. CIA
figures of that time showed the GDP growth rate had fallen from 5.1% in
1966-1970 to 2.3% in 1976-1980. Some Russian economists have suggested
that the rates were actually 2 percentage points lower. Thus, it is
likely that by the end of the Brezhnev period, GDP growth was
negative. Public health had deteriorated to such an extent that the
leadership simply suppressed information on health conditions. The
leadership had grown corrupt and cynical, and the population apathetic.

In the face of widespread socio-economic decay, the Brezhnev leadership
squandered scarce resources on a vast military buildup and foreign
adventures rather than invest them in modernizing industry, rebuilding
much-neglected industrial and agrarian infrastructure, or repairing a
dilapidated health system. In the 1970's, the Soviet Union intervened
in regional conflicts in Africa, the Middle East, and Central America.
The imperial adventures eventually ended in tragedy in Afghanistan,
where a misguided intervention led to a prolonged conflict and ultimate
defeat. That, as much as anything else, raised profound doubts, both at
home and abroad, about Moscow's military capabilities, strategic vision,
and political will and judgment.

The external expansion and oil wealth - along with the United States'
crisis of confidence in the aftermath of Vietnam and Watergate - masked
the slow, steady erosion of Soviet power in the 1970's. Nevertheless,
even then, the generation of Soviet leaders that would take over in the
mid-1980's - Gorbachev, Ryzhkov, Ligachev, Yakovlev, Shevardnadze -
recognized the pervasive rot and was determined to restore the country's
vitality. In a major speech in December 1984 before he assumed power,
Gorbachev argued that radical steps were necessary to ensure that the
Soviet Union entered the next millennium "as a great and prosperous
power."

In the broadest terms, Gorbachev's reform effort contained three
facets: Glasnost' was intended to invigorate Soviet ideology;
perestroyka, to revitalize the economy; demokratizatsiya, to modernize
the political system. In the end, however, they did not save the Soviet
Union; they only accelerated its demise, each in its own way.

? Glasnost', by allowing the truth to come out on the crimes of Lenin
and Stalin, irreparably discredited the regime's legitimizing principle,
Marxism-Leninism; severely tarnished its two founding myths, the October
Revolution and the Soviet victory in the Second World War; and gave the
lie to the rhetoric of the Soviet state as a voluntary union of
independent republics.

? Perestroyka left the country suspended in a void between the old
command system and the new market economy, into which economic
performance ultimately collapsed. By the end of the Gorbachev period,
even official Soviet statistics revealed an accelerating decline in
economic output.

? Demokratizatsiya broke the power of the party-state apparatus that
once held the country in its iron grip, but failed to produce a coherent
set of new institutions of governance. Gorbachev sought to graft new
entities - the Congress of People's Deputies and the Presidency - onto
the party-state bodies he was dismantling. He never fleshed them out.
Eventually, the breakdown of central institutions led to "the parade of
sovereignties" of the union republics.

By the time of the putsch in August 1991, the country Gorbachev had set
out to revive was in a shambles. That his effort ended in failure was
almost foreordained, for revitalizing the Soviet system was an
impossible task. Indeed, by 1988, Gorbachev himself and his advisors
seemed to have realized that they would have to abandon the Soviet
system in fact, if not in name, if the country was to enter the next
century as a viable state; hence, the embrace of glasnost', perestroyka,
and demokratizatsiya. These processes, however, weakened the state,
undermined economic performance, and strengthened separatist and
nationalist tendencies. All that threatened the country's unity, to
which Gorbachev remained firmly committed. Thus, he faced a choice he
did not want to make, between the reform necessary to maintain Soviet
power and the Union threatened by that very reform. By refusing to
choose, Gorbachev sealed his fate.

Yeltsin was prepared to make that choice, as we know, in favor of
reform. His and his advisors' logic was simple. The necessary reform
would never be undertaken if they tried to harmonize their program with
the other, more conservative non-Russian republics. Yeltsin articulated
that position in an address before the Russian legislature in October
1991:

? We do not have the possibility of linking the reform timetable with
the achievement of all-embracing interrepublican agreement on this
issue. Russia recognizes the right of each republic to determine its
own strategy and tactics in economic policy, but we are not going to go
out of our way to fit in with others. For us, the time of marking time
has passed. An economically strong Russia will have substantially
greater possibilities for supporting her neighbors than a Russia
standing on the verge of economic collapse.

Yeltsin and his advisors, however, did not have a detailed or
well-conceived strategy for reforming Russia. The most thought went
into the economic component, where the goal was to break the state
monopoly over the economy, to privatize much of the country's economic
assets, to monetize the economy, to integrate Russia into the global
economy, and thereby to lay the basis for the emergence of a strong
market economy. But even here much of the detail was lacking, as one
of the Russian Government's foreign advisors of the time has written.

As we all know, the past seven and a half years have been rocky, and the
financial collapse of last August put an end to the grand liberal
project of rapidly building a market economy and democratic society. A
passionate debate has erupted over what went wrong and why, and who is
to blame (less energy has been devoted to the other accursed question of
Russian history, what is to be done?). But there can be no doubt that
Yeltsin's policies have not produced the long-sought and long-promised
recovery. Russia remains a country in decline.

At some level, we all appreciate the depth of changes in Russia's
status. But some matters bear repetition, for they underscore how
profound this loss has been and how devastating it has been to Russians'
psyches.

? Moscow lost its empire in Central East Europe in the space of several
months in 1989; with the breakup of the Soviet Union in 1991, it lost
half the population, 40% of the GNP, and a quarter of the territory it
once controlled overnight.

? The economy controlled by Moscow has already fallen in absolute GNP
from third in the world in 1987 to fifteenth in 1996 (behind India,
Australia, the Netherlands, and South Korea and just ahead of Mexico,
Switzerland, and Argentina). In 1987, Soviet GNP was about 30 percent
of U.S. GNP; today, Russia's GNP is less than 5 percent of the United
States'. Russian GNP is now roughly a third of Soviet GNP at its peak
(1989).

? Russia has been transformed from a "misindustialized economy" in the
Soviet period to a "deindustrialized economy" in the post-Soviet
period. Between 1990 and 1996, the share of the natural resources
sector in industrial production rose from 24% to 51%, while the share of
the machine-building sector fell from 31% to 16% and that of light
industry from 12% to 2%. (Machine-building did, however, revive
somewhat in 1997. )

? Public health is in a shambles. Over the past decade, the life
expectancy of Russian males has declined from the mid-sixties to 61.
Contagious diseases, such as tuberculosis and diphtheria, are making
comebacks. According to Harvard demographer Nicholas Eberstadt,
"Russia's health profile no longer remotely resembles that of a
developed country; in fact, it is worse in a variety of respects than
those of many Third World countries."

? The Red Army, once the pride of the country, is on the verge of ruin,
according to a leading Duma expert, as a consequence of slashed budgets,
neglect, corruption, political infighting, and failed reform. The
Ministry of Internal Affairs (MVD), Russia’s police force, is
universally considered to be deeply corrupt and ineffective. Even the
Federal Security Service (FSB), the successor to the once feared KGB,
has faced serious budget constraints and experienced a sharp decline in
its ability to monitor and control society. As we know, the military
and security forces proved woefully incapable of putting down an
insurrection in the small republic of Chechnya. More worrisome to the
leadership, Russia faces formidable financial and technological
challenges in maintaining the long-term credibility of its strategic
nuclear deterrent, arguably its sole claim to Great-Power status.

? The country has lost its sense of identity and purpose. Russia is no
longer the bearer of a grand idea or engaged in a grand project, such as
building socialism, with the power to attract considerable support
abroad. Nothing has emerged to replace Marxism-Leninism as a
legitimizing principle.

? Not only does the country lack a grand mission, it has become abjectly
reliant the on West for the resources to rebuild. In the immediate
future, it needs Western credits to deal with a mounting debt burden.
Over the longer run, it requires technology and capital, available only
in the West, to modernize its economy.

To be sure, the nature of the decline, its pace, and its impact on the
Russian people, both materially and psychologically, have changed over
time. What began as the agony of a moribund system has transformed into
the deterioration of a misguided or incomplete reform effort. The pace
has quickened since the breakup of the Soviet Union, largely because
tinkering with the system gave way to conscious dismantling of it
without proper thought or sufficient energy being devoted to creating
new institutions. And the impact has changed, in part because
heightened expectations of the first years after the Soviet breakup have
been far from fulfilled. The key point is, however, that Russia has
been on the downward slope for a quarter of a century, the decline has
accelerated since 1991, and the end is not in sight.

Fragmentation and Succession

The decline has fueled, and been fueled by, the fragmentation, erosion,
and degeneration of state power, both political and economic, over the
past dozen years. Fragmentation is a complex process, with multiple
causes beyond socio-economic deterioration. In part, it has been the
consequence of conscious policy decisions first by Gorbachev and then by
Yeltsin to modernize the Russian economy and political system by
dismantling the hypercentralized Soviet state. In part, it has been the
result of global trends, especially in telecommunications and
information technology, that have tended to diffuse power worldwide.
And, in part, it has been the by-product of bitter inter-elite rivalries
and governmental disarray in Moscow that have eroded the state's
capacity to govern effectively and allowed ambitious regional leaders to
seize greater power locally and aggressive businessmen to appropriate
vast assets across Russia.

As a result, Moscow now has only a minimal capacity to mobilize - or
extract - resources for national purposes, either at home or abroad. It
no longer reliably wields power and authority, as it has traditionally,
through the control of the institutions of coercion, the regulation of
economic activity, and the ability to command the loyalty of or instill
fear in the people.

Moscow does not fully control the institutions of coercion nominally
subordinate to it. Military commanders are known to cut deals with
regional and local governments in order to ensure themselves
uninterrupted supplies of energy and provisions. Some military
garrisons are supported with money from local entrepreneurs. Military
officers and MVD and FSB officials routinely moonlight to earn extra
income - or to cover for unpaid wages. As a result, the loyalty of the
military and security forces to the central government - even of the
elite units around Moscow - is dubious. This does not mean that they
would carry out the will of local leaders - there is little evidence
that they would - but rather that they would not necessarily defend the
central government in a crisis.

Similarly, Moscow does not manage a reliable countrywide financial and
monetary system. Last August the financial system finally collapsed, as
a consequence of Moscow's inability to collect taxes and its effort to
cover the budget deficit through foreign borrowing and the issuance of
various domestic debt instruments that amounted to little more than a
massive pyramid scheme. The ruble remains the national currency, but
the overwhelming majority of commercial transactions, up to 75 percent
by some estimates, take place outside the monetized sector, in the form
of barter or currency surrogates.

Finally, for the first extended period in modern Russian history, the
state is neither feared nor respected. The lack of fear is evident in
the pervasive tax and draft evasion, as well as in such mundane matters
as the widespread non-observance of traffic regulations. The lack of
respect is evident in the general disregard for national holidays and
monuments and the profound public distrust of high-ranking government
officials and central government institutions, repeatedly recorded in
public opinion polls. Kremlin intrigue feeds cynicism about the state,
while Yeltsin's deteriorating health, both physical and mental,
reinforces pervasive doubts about the state’s strength and will.

Moscow's weakness is now generally recognized in the West, and much
attention has been focused on regional governors and presidents and the
leaders of major financial-industrial groups, or the so-called
"oligarchs," as the real holders of power. This view, however, tends to
exaggerate the role of these figures. Governors and presidents may be
the most powerful men at the regional level, but their power is limited
by local elites, much as Yeltsin's is constrained by national and
regional elites. The mayors of administrative centers, especially if
popularly elected, and the heads of major enterprises, particularly if
they provide the bulk of funds to the regional budget, often act as
effective counterweights to governors or presidents. The electoral
cycle from September 1996 through February 1997 provided a graphic
illustration of these limits: Incumbents won only twenty-four of fifty
elections. Similarly, the oligarchs have been facing growing
competition from regional businessmen for well over a year. The
financial meltdown of August and the ensuing economic turmoil only
further undermined their positions outside Moscow and forced many to
downsize their empires and some out of business.

Thus, the weakening of power in Moscow, contrary to widespread
impressions in both Russia and the West, has not created strong
regions. Rather, the situation is better summed up as follows: "Weak
center - weak regions.” That is, the striking feature of the Russian
political and economic system is the absence of concentrations of power
anywhere in the country capable alone of controlling the situation or of
creating a coalition for that purpose. In this sense, Russia has become
"feudalized".

The erosion of state power has been accelerated in recent years by an
intense succession struggle, which will end at the earliest with the
transfer of power to Yeltsin's successor. Analysts differ on when it
began in earnest, but most would agree it was well underway by the time
of the financial collapse last August. In fact, it commenced much
earlier, in late 1995, when the Communists, after an impressive showing
in the Duma elections, appeared on the fast track to victory in the
presidential elections the following June.

There is no need to review Yeltsin's dramatic come-from-behind
victory. Much has already been written on that score. Suffice it to
say, Yeltsin's reelection should have removed the issue of succession
from the political agenda for two to three years. And it would have had
it not been for his precarious health. We now know that Yeltsin
suffered a life-threatening heart problem between rounds of the
presidential elections. In the fall, he underwent quintuple coronary
by-pass surgery. Since then, his absences from active politics have
increased in both frequency and duration, despite repeated assurances
from Kremlin spokesmen and doctors that nothing is seriously wrong with
his health.

Yeltsin's health now lies at the heart of Russian politics, a source of
great uncertainty that complicates the calculations of would-be
successors and aspiring power brokers. According to the Constitution,
should he leave office prematurely for any reason, the Prime Minister
would serve as acting President for three months, during which elections
would be held for a permanent successor. As a consequence, would-be
successors have to be prepared to run at a moment's notice, while making
preparations for elections in mid-2000, should Yeltsin serve out his
term. In many instances, the exigencies of short- and long-term
campaigns contradict one another. Many candidates, including
Krasnoyarsk Governor Lebed and Moscow Mayor Luzhkov, have suffered at
least tactical loses for "false starts" in the presidential campaign.
Likewise, the power brokers face the problem of needing a candidate for
both a sprint and a marathon. Often, however, that means backing - or
wavering between - two or more candidates, whose interests do not
necessarily overlap.

In addition, Yeltsin's dubious health turns the prime ministership into
a central field of battle, with deleterious effects for the smooth
functioning of the government. The possibility of patronage, command
over an executive apparatus with lines into every region, and the chance
that one will become acting president all make the Prime Minister a key
figure in the succession drama. Since 1996, all prime ministers have
been viewed as successors, including both Chernomyrdin and Primakov, who
had obvious political weight, as well as Kiriyenko, however implausible
that might seem in retrospect. The new prime minister, Sergey
Stephashin, is already being viewed as a potential successor,
particularly by people close to privatization architect and current RAO
YeES chairman Chubays, who felt uncomfortable with the earlier field of
candidates. To a large degree, the rapid turnover in prime ministers
over the past year and a half is a reflection of the sharpening
succession struggle.

The turnover is also a consequence of the political instincts and
insecurities of Yeltsin, who insists that he will serve out his term and
pass power to a successor who will preserve his legacy. There is more
than concern about his legacy at work, however. As numerous
commentators have noted, Yeltsin is profoundly jealous of his
prerogatives as President and deeply resents any suggestion of a
campaign to succeed him. This makes the job of the Prime Minister
almost untenable. Because of Yeltsin's frailties, any prime minister is
compelled to assume greater responsibility and authority, even to
encroach on presidential prerogatives, if only to keep the government at
a minimal level of efficiency and coherency and to represent Russia with
dignity abroad. This inevitably enhances his attractiveness as a
presidential candidate, which in turn raises the risk that Yeltsin will
come to see him as a rival.

Assuming the responsibility without provoking Yeltsin's ire is a line no
prime minister has been able to toe for long. Yeltsin fired both
Chernomyrdin in March 1998 and Primakov more recently in large part
because they appeared too presidential. And he did this with a seeming
lack of concern for the consequences for Russia's development.
Chernomyrdin was fired at just the moment that the country needed
governmental stability and strong leadership to deal with the mounting
pressures of a global financial crisis, which finally overtook Russia
five months later. Likewise, Primakov was fired just as he was
beginning to push through the Duma key legislation required by the much
needed loan agreement with the IMF.

As has so often been the case in Russian history, power now takes
precedence over policy. The uncertainties about succession - and its
far-reaching consequences for concrete individuals, including the
question of physical survival for some - only concentrates the focus on
power. Not surprisingly, the victim is Russia, for no one is prepared
to risk the tough, unpopular measures needed to address the country's
deepening ills. This situation can change only with Yeltsin's
departure.

The experience of the past twenty-five years has put Russia in an
unenviable position. Secular decline leaves Moscow with fewer resources
to bring to bear on the problems facing Russia. Fragmentation reduces
its capacity to use those decreasing resources effectively. And the
succession struggle saps its will to deploy them vigorously. What does
this portend for Russia's future, both in the short, medium, and long
runs? At a minimum, that rebuilding Russia is going to be longer and
more arduous than many observers - and certainly Western governments -
thought just a few years ago.

Short-Term Muddle or Worse?

In the short run, in the midst of a bitter succession struggle, the best
possible outcome is muddling through. That was apparently Primakov's
judgment when he was appointed Prime Minister last September. Although
his critics accused him of lacking a long-term economic strategy - and
Yeltsin himself gave that as one primary reason for dismissing him -
most observers give him credit for stabilizing a very difficult economic
and political situation over the past winter. And in this he defied the
doomsayers.

If the latter had been correct, Russia would already be stuck in a
vicious hyperinflationary cycle, the economy would be in a free fall,
and the dispossessed middle class would be protesting in the streets of
Moscow and other major urban centers. This has not happened, in large
part because Primakov, Central Bank Chairman Gerashchenko, and First
Deputy Prime Minister Maslyukov (who oversaw marcoeconomic policy)
proved more adept at managing the politics and economics of a period of
turmoil than most observers thought possible. Inflation is down to 2-3
percent a month, not the 40-50% some people were predicting. The ruble
to dollar rate is about 25 to 1, not 100 to 1. The Government managed
to negotiate a deal with the IMF, although it is not clear that it could
have pushed the necessary legislation through the Duma to satisfy the
IMF's conditions. And there are some indications that industry is




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