July 26, 1999   
This Date's Issues: 3407 • 3408 • 

Johnson's Russia List
#3408
26 July 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Jamestown Foundation: Summary of conference on 
"Russia: What Went Wrong? Which Way Now?"
2. Heritage Foundation: Ariel Cohen, NEW PRIME MINISTER’S VISIT IS AN 
OPPORTUNITY TO IMPROVE U.S.-RUSSIAN RELATIONS.]

*******

>From the Jamestown Foundation
www.jamestown.org
The Jamestown Foundation
528 18th Street NW
Washington, DC 20036 

Conference Summary
"Russia: What Went Wrong? Which Way Now?"
conference organized by the Jamestown Foundation on 9-10 June 1999 asked:
What went wrong in Russia since 1991 and why? How much responsibility does
the West bear for Russia's present predicament? What is Russia's likely
trajectory in the near to medium term? What are the options for future
Western policy? 

OVERVIEW 

What went wrong and why. 

The "Washington consensus," commonly known as "shock therapy," came in for
almost unanimous criticism. There was agreement that its focus on
stabilization, liberalization and privatization, and its neglect of all
other considerations, had been inappropriate for Russia. The problem,
Grzegorz Kolodko and Peter Reddaway stressed, was that it ignored the
supreme importance of institution-building. Kolodko added that the
Washington consensus had been inappropriate even for Poland and other
successful transition states; the key to Poland's success had been its
choice of "therapy without shock." 

Because institution-building was ignored, Russia today is plagued by the
virtual absence of civil society and the rule of law. Political parties
are poorly developed. Parliament is a Potemkin village. The president has
huge formal powers but government at both federal and regional level is
weak and unable to enforce its decisions. 

David Satter joined Reddaway in indicting the venality of the Yeltsin
leadership. Purely in order to retain his own grip on power, Yeltsin
sold Russia's crown jewels -- its state-owned industries and natural
resources -- for a song to a closed circle of cronies and handed state
power over to the regional leaders. Satter stressed the moral aspect of
Russia's crisis: Yeltsin, he said, had turned the country into a
kleptocracy. Russia had become a "soft state," said John Dunlop, while
Thomas Graham warned that Russia was on its way to becoming a dysfunctional
of "failed" state incapable of collecting taxes, paying its army and
protecting its citizens. 

Several speakers (Fritz Ermath, Andrei Piontkowsky, Peter Rutland,
Elizabeth Teague) argued that "the stealing of the state" began during the
Gorbachev leadership and was under way well before Yeltsin came to power.
Others pointed out, too, that not everything that went wrong could be
attributed to avoidable human error. Marshal Goldman, Jan Nowak and
Richard Pipes drew attention to the burden of history, pointing out that
communism lasted seventy-five years in Russia and only forty or so in
Central European countries such as Poland, Hungary and the Czech Republic.
And, while communism was forced on the populations of Central and Eastern
Europe from outside, in Russia it had been home-grown. 

Pipes argued that the roots of Russia's present problems are primarily
cultural. It is not just a matter of Russia's seventy-five years of
communism versus Eastern Europe's forty years. He disagreed with Alexander
Solzhenitsyn's contention that Marxism was a foreign creed planted in
alien Russian soil and argued instead that, in Russia, communism was
grafted onto the tsarist heritage of undemocratic rule. Russia is a
classic low-trust society in which te leaders have never trusted the led
or the population their leaders. Post-Soviet Russia had, accordingly,
virtually no prior experience of private enterprise, private property, rule
of law or individual rights on which to build. 

Speakers discounted any suggestion that Russia might be genetically unable
to change or that its future path was irrevocably predetermined by its
history and culture. Goldman and others warned, however, that the attempt
to reform would be even harder and more painful the second time around. 

Rutland pointed to the importance of initial conditions, arguing that
certain destinations may be precluded from some starting points. Many
speakers contrasted Russia's experience with that of Poland. Zbigniew
Brzezinski, Kolodko and Nowak all drew attention to the advantages Poland
had enjoyed thanks to the fact that, even under communism, it had retained
a vibrant civil society and some private enterprise and that, when Poland
began its reforms, they enjoyed genuine popular support. 

There were also practical explanations for why Russia's transition has been
so painful. Teague pointed out that Soviet central planners built Russia's
economy according to political considerations and located huge industrial
enterprises in places that made no economic sense. This meant that
restructuring was always going to be more painful in Russia than in
countries such as Poland, where the foundations of modern industry were
laid before the communists took over. 

The question of Western responsibility. "Western aid was marginal,"
Goldman declared. "It makes no sense to ask 'Who lost Russia?' Russians
lost Russia." Simes and Rutland agreed that the West had not had the power
to force a change in Russian policy, though Rutland argued that Western
financial aid had compounded bad Russian policy choices and enabled the
Russian government temporarily to postpone some tough choices. 

Reddaway took the opposite line. While agreeing that the primary
responsibility lay with Yeltsin and his entourage, he insisted the West
was also at fault since, in urging Russia to adopt the "Washington
consensus," it pushed Russia toward an economic program that was
unsuitable for it. The West pressed Russia to continue these policies even
after it became clear that they were not working and that they were deeply
unpopular with the Russian people. 

Russia's near- to mid-term prospects. Ermath depicted Russia as a hybrid
characterized by internal instability and external stability. The fact
that many members of Russian society had acquired a stake in the system
had created a tendency toward stabilization that blocked progress toward
genuine economic and political reform while, at the same time, preventing
Russia from lurching into either anarchy or dictatorship. Similarly, Teague
argued that vested interests at both federal and regional levels were so
strong that significant change was unlikely in the short term. Reddaway
by contrast recalled the unexpected twists and turns of Russian history
and warned that Russia might again, as in 1917, set off along a path no
one had foreseen. 

Both Ermath and Reddaway agreed that Western analysts must be prepared for
any opportunity to resume dialogue with Russia's leaders. Reddaway felt
that such an opportunity was unlikely for at least a decade, while Ermath
saw a possible window of opportunity following the next round of Russian
and US presidential elections. 

Graham, meanwhile, argued that Russia had been in secular decline since the
mid-1970s. He predicted that Russia would grow less and less active in
world affairs and would be more and more at risk of becoming an apple of
discord between more advanced and competitive powers. The possibility of "a
world without Russia" must be taken seriously by Western governments
because of the magnitude of the potential consequences for the US and its
allies. 

Options for Western policy. 

Differences over what went wrong made for little consensus between speakers
over what the West should do next. 

There was universal agreement that the West must put its policy emphasis on
the principles of democracy rather than, as has so far tended to be the
case, on individual leaders such as Gorbachev or Yeltsin. 

The West must be ready to engage Russia in dialogue as soon as an
opportunity presents itself. 

To the extent that Western policy focuses on any one sector of Russian
society, it should seek to develop dialogue with members of the younger
generation, regardless of their political persuasion. 

Everyone agreed, too, on the importance of fighting corruption and
organized crime. Corruption within Russia was a major deterrent to Western
investment. Russian organized crime was already making its presence felt in
Western countries and there was a risk that it could become a seriously
destabilizing force. It was in the West's interests to cooperate fully
with the Russian authorities to restrain the spread of crime. 

Several of these points were covered in Kolodko's fifteen-point "Plan for
Russia," outlined below. Kolodko called on the West to send experts to
Russia not from Western countries but from Central and Eastern Europe
since the latter have first-hand experience of the problems involved in
transition. 

SUMMARIES OF PRESENTATIONS 

SESSION 1: What went wrong in Russia and why? 

John Dunlop of the Hoover Institution identified the failure to build a
state governed by the rule of law as "the single greatest failure of the
Yeltsin presidency." In concrete terms, Dunlop indicted Yeltsin's failure
to call parliamentary elections or to adopt a new, post-Soviet constitution
as soon as Russia became independent, when there was support for liberal
ideas and a popular mandate for reform might have been secured. This
failure set off a chain reaction that led to further political setbacks and
catastrophes. In the absence of an agreed legal framework, relations
between the executive and the legislature were reduced to a naked struggle
for power. This provoked the bloody confrontation between president and
parliament that occurred in October 1993. That showdown, Dunlop argued, so
traumatized Yeltsin that, from that time on, he trusted no-one but his
immediate entourage. The closed nature of Kremlin decision-making spawned
the disastrous decision to invade Chechnya. Meanwhile, Yeltsin tolerated a
climate of lawlessness among his inner circle that not only made possible
the massive misappropriation of state assets but reduced Russia to what
political scientists would call a "soft" or "failed" state. "For Yeltsin,"
Dunlop concluded, "such issues as freedom of the press, freedom of speech,
and freedom of movement pale before the perceived necessity of dealing
brutally with political opponents and enemies." 

Not everything had gone wrong, Dunlop contended. He praised "the continued
miracle of glasnost" and pointed to the moral authority of the Yabloko
party as proof that there was a Russian alternative to the lawless path
followed by the Yeltsin leadership. 

Jan Nowak, former director of Radio Free Europe's Polish Service, asked
why it had proved harder to turn Russia from an adversary into a partner
than had been the case with Poland, Hungary and other former communist
countries. The Russian experience showed, he said, that "legal structures
can be quickly transformed, but a mentality shaped by totalitarian
propaganda over almost seventy-five years cannot be changed overnight."
Poland's experience of communism was much briefer than Russia's. The
architects of Poland's economic reforms, unlike Russia's, trained in the
US or Western Europe. The greatest threat to Russia today was the mindset
of its leaders, which was that of the former ruling elite. This meant that,
so far from trying to isolate or penalize Russia, the West must redouble
its efforts to engage Russia in dialogue. The focus must be on the younger
generation. Western countries should encourage young people from the former
USSR, regardless of their political outlook, to come and study at Western
institutions. Western broadcasting to the region should be maintained and
strengthened. 

David Satter, Senior Fellow with the Jamestown Foundation, argued that
Russia's crisis sprang from the immoral and lawless manner in which
Russia's transition was carried out. He identified three main issues. First
was the expropriation of citizens' savings that followed the government's
1992 decision to free prices without indexing savings to inflation.
Second was the way in which the government launched its privatization
program. Because the savings of the population had been wiped out, state
assets that should have been distributed to the benefit of the whole
population fell into the hands of a small circle of corrupt insiders. The
dishonest way in which privatization was carried out frightened investors
away. The third factor was Yeltsin's decision forcibly to dissolve
parliament in October 1993. In the absence of the rule of law, the drive
to create a class of wealthy private owners created a situation in which
effort was directed "not toward producing wealth, but toward stealing it."
Satter called on Western policymakers, in their dealings with Russia, to
support the principles of democracy rather than any specific leader or
group of leaders. Particular emphasis should be placed on the fight
against corruption, since this was an area in which the West could play a
useful role. 

The moderator, Elizabeth Teague of the Jamestown Foundation, traced the
roots of Russia's hybrid economy back to Gorbachev's leadership. The
directors of big Soviet enterprises had wanted to acquire de iure those
ownership rights that they felt they already possessed de facto. But they
had no interest in investing in the enterprises they coveted -- merely in
controlling the assets. Lack of early liberalization under both Gorbachev
and Yeltsin made it possible for them to realize this ambition. 

Teague referred to the distinction made by Freedom House between two reform
models. The countries that had made the fastest progress tended to be
those that had experienced substantial periods of national independence
and economic prosperity prior to the communist takeover. In Albania,
Bulgaria, Czechoslovakia, Hungary, Lithuania and Poland, the collapse of
communism brought to power a new generation of reform-oriented, democratic
leaders with non-communist, often dissident backgrounds. 

The pattern was different in the post-Soviet states (Estonia and Latvia
excepted). There, post- communist political elites consisted largely of
members of the former nomenklatura who had adjusted to the new conditions.
The presence of former dissidents in these elites was negligible. Also
significant was the fact that, in countries falling into the first category
(the Czech Republic excepted), former Communist Parties reformed
themselves into Social Democratic parties and followed agendas that
differed little from those of the reformers. This was not the case in
Russia and other countries falling into the second category. 

SESSION 2: Western policies: what went right, what went wrong, and what
could have been done differently? 

Andrei Piontkowski of Moscow's Center for Strategic Studies said he did not
think the blame for what had happened in Russia lay with the West. Western
mistakes, he said, had consisted not of individual misguided decisions
but of a general failure to understand the unique character of
post-communist Russia. Why had Russia's entrepreneurs been able to
privatize state property with such apparent ease? The collapse of the USSR
in 1991 marked not a decisive break with the past but the culmination of a
process that dated back to the Gorbachev period. Unlike business people in
Poland and other Central European states, Russia's new entrepreneurs had no
interest in taking on the responsibilities that go with private
ownership. All they proved interested in was privatizing the cash flow of
the enterprises they had managed in the Soviet period. Russian capitalism
was unique because the new owners knew that their industries would be
bailed out by the state and that, regardless how inefficiently they were
managed, they would never go bankrupt. Not only had the West failed to
appreciate what was going on; in general, its power to influence Russian
policy had proved rather weak. "Never in the field of human conflict,"
Piontkowski concluded, "have so many been robbed of so much by so few." 

Peter Rutland of Wesleyan University and the Jamestown Foundation agreed
with Piontkowski about the extent of Western guilt. How influential had
Western advice to Russia been? "Not very." Russia's problems had complex
and profound historical causes that could not be reduced to the
machinations of small cliques of leaders in either the Kremlin or
Washington. Rutland saw the IMF more as a spectator than a puppet-master
in the Russian reform process. Though he noted that Western financial aid
to Russia was "not trivial" and had "compounded bad Russian policy
choices," Rutland argued that the West had not had the power to force a
change in Russian policy. All the West was likely to have done was to have
helped successive Russian governments to postpone some tough choices for a
few years. On the plus side, Western aid had helped to keep a nuclear-
armed Russia peaceful and engaged with the West. 

Rutland stressed Russia's uniqueness, both politically and economically. It
is now recognized, he said, that the conditions from which a nation starts
can make an important difference to the success or failure of its efforts
to build a market economy and liberal democracy. Certain destinations are
precluded from some starting points. 

Had there been a realistic alternative to the reforms that Russia carried
out? Perhaps. Russia might, for example, have followed a protectionist
strategy, erecting tariff barriers to protect domestic industry and,
instead of privatizing state assets, controlling the dollar-earning sectors
of the economy in order to capture a higher proportion of their revenues
for the state and maintain the living standards of the population. The
only problem with this scenario, Rutland said, was that it would have been
perceived by both the US and Russia's oligarchs as alien to their
interests. 

Dimitri Simes of the Nixon Center said that Russia was primarily
responsible for its current problems. In view of its support for
Gorbachev and its apprehension when faced with the potential breakup of the
USSR, the Bush Administration could hardly be blamed for the rise of
Yeltsin or the Soviet collapse. President Nixon's 1993 proposal for a
Marshall Plan for Russia, conditional on reforms involving respect for rule
of law and building compromise between president and parliament, had
presented a promising alternative to the Washington consensus. But it was
rejected by Yeltsin since it would have required him to work with a
Supreme Soviet that he had already decided was inimical to his agenda. 

The Clinton administration, by contrast, contributed to Russia's economic
decline by preaching a single economic model and backing undemocratic and
corrupt politicians. Western loans went directly to fund Yeltsin's
reelection campaign and were therefore unwise. Simes felt, too, that it was
unfortunate that NATO expansion was followed so rapidly by military
intervention in Kosovo. While Russia was now so weak that it represented,
at least in the short term, a much reduced threat to the USA and its
allies, Simes regretted that much damage had been done to relations between
Russia and the West and that they would be difficult and time-consuming to
repair. 

Delivering the keynote address, Zbigniew Brzezinski of the Center for
Strategic and International Studies asked what the US should have done
differently. He concluded that things would not have turned out
significantly differently in Russia had the West not supported Gorbachev
and, after him, Yeltsin, or if it had refused to lend Russia money. The
West might, Brzezinski said, have tried harder to restrict crime and
corruption, to bolster local government and to show support for those
Russian citizens who criticized Russia's war against Chechnya. He did not
however think that this would made a significant difference to the
outcome. What happened in Russia in 1991 was a revolt by the elite. There
was no counter-elite in Russia as there had been in Poland, no equivalent
to the Catholic Church, no Walesa, no Solidarity. Who would be in power in
Russia today, Brzezinski wondered, if the USSR were still existence?
Which members of today's leadership would be excluded from the government?
Everyone could think of two or three names, but not many more. 

Russia's present Time of Troubles would not be quickly over. The West's
task was to make things easier for Russia, so it should continue to give
economic aid. The West must however make it clear that, if Russia is to
become an effective, modern and civilized society, its place is in Europe.
Geopolitically, Brzezinski saw only two choices for Russia: national
suicide or joining the West. Russia must not, therefore, be automatically
excluded from NATO membership. Now was not, of course, a suitable moment
for Russia to join, if only because Russia at present did not want to do
so. But once Russia was ready and willing to meet the accession criteria,
it should not be excluded. 

SESSION 3: Russia's likely trajectory in the near to medium term 

Fritz Ermath, formerly of the Central Intelligence Agency, looked ahead to
how Russia was likely to perform through the term of the next Russian
president, that is, until around 2004. 

It was important to discuss where the West had gone wrong, Ermath said,
because there was a chance the US might get another shot at aiding
Russia's transition after the Russian and American presidential elections,
and the US must be ready. Today's Russia was a hybrid entity: not a
democracy, lacking a real market economy, not a true federation, not a
state of law, yet containing sprouts of all four. This hybridized entity
combined internal instability with external stability. Most political and
business leaders and even large groups of the general population had
acquired a stake in the system, even if it was only a negative stake
founded on apprehension that the alternatives might be even worse. This
stabilizing tendency blocked progress toward genuine economic and political
reform but, at the same time, prevented Russia from lurching into either
anarchy or dictatorship. 

Ermath predicted that what he called "the logic of stable instability"
would persist through the medium term. Elections would be held on schedule
but the economy would probably continue to stagnate. Collapse of the
system seemed unlikely. On the international front, Russia would not become
a reliable partner of the US and its allies. Nor would it turn into a
rogue state. Moreover, there would be scope for a new reform effort should
conditions grow so intolerable that a critical mass of people switched
their support to a leader promising a fresh approach. In such
circumstances, the West must be ready to seize the opportunity for
dialogue. 

Thomas Graham of the Carnegie Endowment for International Peace agreed that
Russia might get another chance of reform if it could muddle through the
next round of parliamentary and presidential elections. But he went on to
raise the prospect of "a world without Russia." Russia is accustomed to
think of itself, in the words of Andrei Kozyrev, as "doomed to be a great
power." Yet, Graham pointed out, the country had been in secular decline
for at least the past quarter of a century -- since about the time that it
achieved nuclear parity with the US. Russia's long-term weakness
signified a geo-political and geo-economic shift of historic dimensions. At
present, Russia had no external enemies. But, the less active Russia became
in world affairs, the more at risk it would grow of becoming an object of
competition between more advanced and competitive powers. Russia was
already surrounded by countries and regions all of which were more dynamic
than itself. 

There was, moreover, a real danger that Russia might decline from a
"failing" into a "failed" state, incapable of exercising the core
functions of a modern state such as collecting taxes and protecting the
rights of its citizens. The possibility of "a world without Russia" must be
given serious consideration because of the magnitude of its potential
consequences for the US and its allies. 

Grzegorz Kolodko, former deputy prime minister and minister of finance of
Poland, singled out the "Washington consensus" for criticism. Shock
therapy had worked no better in Poland than in Russia. The reason was that
its focus on stabilization, liberalization and privatization neglected the
essential importance of a gradual process of institution-building. Kolodko
presented a fifteen-point "Plan for Russia" which called for Russia to (1)
undertake radical action against organized crime; (2) ensure financial
stabilization; (3) reform its public finances; (4) encourage small
businesses; (5) restructure large, obsolete enterprises; (6) aim for
agricultural self- sufficiency; (7) reform foreign trade procedures; (8)
invest in human capital; (9) reform its legal system. Meanwhile, Kolodko
urged the Western world to (10) partially forgive Russia's foreign debt;
(11) admit Russia to the World Trade Organization; (12) sponsor a package
of regional development programs under UNDP auspices; (13) provide
international financing to upgrade Russia's roads, railways and
telecommunications; (14) provide World Bank help to build social safety
nets; (15) sponsor OECD advice on how to make Russia's institutional and
legal frameworks more investor-friendly. 

Kolodko recognized that the success of this program would depend on the
achievement of a political consensus in Moscow that is currently lacking.
He urged that, rather than Western experts, experts from Central and
Eastern Europe should be sent to Russia since they have first-hand
experience of the problems of transition. 

SESSION 4: What now are the options for Western policy? 

Marshal Goldman of Harvard University said what was needed was a
fundamental overhaul and transformation of Russia's underlying culture.
This was not something that Western aid could achieve. Borrowing the
experience of other countries -- for example, when drafting laws -- would
work only if the new laws were designed to ensure that they reflected and
interacted with Russian culture. Goldman though it would be some time
before Russia would welcome Western advice again. For the next few years,
the West would be well advised to keep a low profile. 

Goldman recommended several modest goals that could be facilitated by
Western contacts, in particular, student exchanges, traineeships in
Western firms, and town-twinnings. The last could be used in the fight
against corruption, with a sister-city offering funding for specific
projects in return for an undertaking by the Russian partner to hold down
the Mafia. 

Change would be painful not only for Russia but also for the West. The West
could usefully ease import barriers and open its markets to Russian goods
such as steel and textiles. Getting American interest groups to agree to
that could however prove even harder than persuading the Russians to
change their culture. 

Richard Pipes of Harvard University agreed that Russia's problems were
primarily cultural and rooted in centuries-old tradition compounded by
seventy-five years of communism. The West should be cautious about offering
advice and must above all not try to solve Russia's problems for it. The
West must not support specific political parties or individual
presidential candidates. It should be warned by the way in which some
Russians have tended to blame the West for the difficulties it has
experienced since 1991. 

Peter Reddaway of George Washington University said the primary blame for
what went wrong in Russia since 1991 lay with Yeltsin, who had sold off
Russia's national assets in order to maintain himself in power. But the
West and, in particular, the US, also bore some responsibility since they
had pursued unwise policies towards Russia. The US and the IMF had pushed
Russia to adopt an economic program that was not suitable for it. Those who
warned that it was unsuitable had been ignored. The US had urged Russia to
continue the policy after it became clear that it was not working. It had
adopted a paternalistic attitude to Russia and over-personalized its
relations with Yeltsin, associating itself with leaders who were unpopular
in Russia, such as Chubais. It colluded in the subversion of democracy by
putting pressure on the Russian government to push unpopular policies
through parliament. This fostered the view among increasing numbers of
Russians that the West was bent on destroying their country. It would take
one or two decades to repair the damage done to East/West relations. In
the meantime, the West would have to get used to being disliked and to
recognize that this meant that its influence would be correspondingly
diminished. 

The West needed to conduct a full and honest assessment of where it went
wrong. Russians must be included in this process. The West must start to
listen to them and to do so with some humility. The aim should be to
produce some sort of US, or joint US/Russian, statement acknowledging that
the West bore a degree of responsibility for what went wrong, expressing
regret and undertaking to work together to elaborate more suitable
approaches in future. 

Finally, Reddaway said, the West must be prepared for nasty surprises. The
best outcome that could be hoped for was that Russia would muddle through
in Latin American mode. But Russia had taken unexpected turns in the past
(most notably in 1917) and the possibility could not be ruled out that it
might do so again. 

*******

Date: Mon, 26 Jul 1999 
From: "Cohen, Ariel" <ariel.cohen@heritage.org> 

NEW PRIME MINISTER’S VISIT IS AN OPPORTUNITY TO 
IMPROVE U.S.-RUSSIAN RELATIONS
By Ariel Cohen, Ph.D.
Ariel Cohen, Ph.D., is Senior Policy Analyst in Russian and Eurasian
Studies at the Kathryn and Shelby Cullom Davis International Studies Center
of The Heritage Foundation.

On July 27, Russia’s new Prime Minister Sergei Stepashin will visit
Washington, D.C. Stepashin, who succeeds Evgeny Primakov, was the former
Interior and Justice minister. His appointment by President Boris Yeltsin
and Primakov’s removal were seen by many in Washington as an attempt to
salvage Russian relations with the West, since Primakov had often and
openly opposed the United States on many issues, including Iran, Iraq, and
the war in Yugoslavia.

U.S.-Russian relations throughout the conflict in Kosovo were at their
lowest since the end of the Cold War. First, Moscow and Washington bitterly
disagreed over the intervention. Then Moscow equated a military move
against Yugoslavian President Slobodan Milosevic with aggression against
Russia. However, Russia’s financial crisis, talk of a ground offensive
mounted by the members of the North Atlantic Treaty Organization (NATO),
and possibly Milosevic’s brutality prompted Moscow to help bring peace to
Yugoslavia. Now, Russia has joined the NATO effort to police the peace
process. Both the Kremlin and the White House feel pressure to show that
they are serious about improving relations between Russia and the United
States. Stepashin’s visit offers them an opportunity to do so.

Because Stepashin, a pragmatist, is a political unknown in Washington, the
upcoming visit will be a diplomatic debut. In addition to establishing
smoother relations with Washington, Stepashin hopes to facilitate the
release of a $4.5 billion loan announced by International Monetary Fund
(IMF) Managing Director Michel Camdessus last March.

For its part, the Clinton Administration has an ambitious agenda for the
meeting with Stepashin. Issues include such strategic security concerns as
negotiating the status of the 1972 Anti-Ballistic Missile (ABM) Treaty;
Russia’s proliferation of weapons of mass destruction (WMD), especially to
Iran and China; and space and technological cooperation in the future.

To ensure closer relations with Moscow under Prime Minister Stepashin, the
Administration should:

Formulate a new framework for constructive relations with Russia. Under
Evgeny Primakov as Foreign Minister (January 1996 to August 1998) and Prime
Minister (August 1998 to May 1999), Russia retreated from the close
partnership Presidents Yeltsin and Clinton had worked to establish.
Primakov’s anti-American stance was evidence of the Cold War nostalgia
afflicting many of the old Soviet foreign policy elite who remained in
positions of power in Moscow. Primakov also maintained a relationship with
such ideological opponents of America as Saddam Hussein of Iraq, which made
cooperation difficult on many fronts.

Primakov was fired, among other things, because Yeltsin understands that
Russia needs Western investment and technology more than the West needs
Russia. Moscow will need Washington’s cooperation to move the Russian
economy out of its current slide. At the meeting with Stepashin, Washington
should build upon Russia’s cooperation in Bosnia and Kosovo to pursue
initiatives in three broad areas: 1) Economic development and establishing
the rule of law in Russia to create conditions for increased Western
private investment; 2) improving military cooperation by encouraging
cooperation on peacekeeping in Kosovo, better civilian-military relations,
and the renewal of the Partnership for Peace, and 3) cooperating on
strategic concerns, including non-proliferation, moving beyond the 1972 ABM
Treaty, and establishing a new framework for negotiations on missile defense. 

Urge Russia to reduce and eventually eliminate its dependence on IMF
credits. Russia’s dependence on assistance from the IMF and Western
countries puts Russians more in debt and does not provide an incentive to
reform the failing economy. Russia’s inability to meet the requirements of
previous IMF loans has led to frustration in the West and resentment within
Russia, which undermines good relations. Rather than seeking additional
assistance that will not improve Russia’s desperate economic situation,
Stepashin’s government must pursue comprehensive reforms that encourage
private foreign investment, a far better foundation for economic growth. 

Demand an investigation of bilateral and multilateral Western financial aid
programs. According to the Russian State Duma and Central Bank officials,
IMF and other loans have been mishandled and possibly embezzled by Bank
officials. Even former Russian Prime Minister Viktor Chernomyrdin admitted
some World Bank credits, such as the coal industry credit, have
disappeared. Such allegations of multimillion-dollar corruption at the
highest levels of government in Russia involving funds from the IMF and the
World Bank undermine the hard-won trust of Western lenders and investors.
Russia needs to expose the activities of the officials involved in such
scandals as the FIMACO affair, in which the Central Bank siphoned hundreds
of millions of dollars through an unknown offshore company to play Russia’s
highly lucrative short-term bond market. To begin the process of renewing
confidence in Russia’s market, Clinton Administration officials should ask
Prime Minister Stepashin to release the results of the Central Bank audit
recently conducted by PriceWaterhouseLybrand.

Establish a comprehensive program of reforms. Russia needs to conduct an
unprecedented crackdown on crime and corruption. As a former top law
enforcement official, Stepashin knows how corrupt the Russian economy is
and that little will change unless Moscow pursues reform. Western knowledge
and experts could facilitate the process-a lesson demonstrated in the Czech
Republic, Poland, Hungary, Bulgaria, and the Baltic States-but the Russians
must perform the bulk of the work. These reforms include: strengthening the
judicial system; introducing a currency board (provided ample hard currency
reserves are available); reducing industry and agriculture subsidies;
passing a land code to encourage the development of construction; promoting
private farming and agribusiness; reducing the pervasive barter system in
unmarketable, uncompetitive goods; and downsizing the military. While the
Russians must perform the brunt of the work, 

The United States should offer technical advice and support from government
and private sector experts in business, non-governmental organizations
(NGOs), professional associations, and academic institutions. The
experience of pro-reform efforts in Novgorod the Great, Nizhny Novgorod,
Samara, and Saratov indicates that such technical assistance should be
regionally focused and driven by local beneficiaries’ demands. U.S.
institutions should be encouraged to sponsor Russian graduate students,
young managers, and administrators to give them exposure to the workings of
a free market. But Russians know best what they need. And it is the next
generation of Russians, who grew up under Gorbachev’s perestroyka and
Yeltsin’s reforms, that offers the best hope for Russia’s future.

Restore NATO-Russian cooperation. After the beginning of the war in Kosovo,
Russia suspended all its military-to-military contacts with NATO and its
members. This was a negative development, which needs to be reversed. The
sensation-seeking dash by Russian paratroopers to the Pristina airport
after the peace agreement was announced was an example of the destabilizing
actions that strained NATO-Russian relations. The only NATO-Russian
cooperation underway today occurs within the framework of the Kosovo
peacekeeping force (KFOR), which is proceeding quite well. Both NATO and
Russian commanders in Kosovo have expressed satisfaction with the
cooperation between their troops on the ground. Washington should offer to
restore not only Russian-NATO military-to-military contacts to the
pre-Kosovo levels and return Russian military representatives to NATO’s
headquarters in Brussels, but build ties between the NATO members and
Russian forces with military educational exchanges, joint rescue missions,
and other confidence building measures. 

Expand joint U.S.-Russian cooperation on strategic arms and
non-proliferation. Russia proved itself a difficult partner on a number of
strategic issues, including missile defense. The Duma has resisted
ratification of the START II Treaty since 1993. To improve relations, the
United States, and Russia should concentrate their efforts on resolving
outstanding differences, including:

1. Missile defense agreements. The ABM Treaty is a relic of the Cold War
between the Soviet Union and the United States. The treaty barred the
United States from deploying a missile defense system for the protection of
its national territory. Today, the threat of missile attack no longer rests
with the two nuclear superpowers of the 1970s. Several countries, some of
which are hostile to the United States, such as Iran, Iraq, Pakistan,
India, and North Korea, are developing nuclear weapons and ballistic
missile programs. 
At the recent summit of the Group of 8 (G-8) industrial countries in
Cologne, Presidents Bill Clinton and Boris Yeltsin committed to holding
negotiations on both the ABM Treaty and the Strategic Arms Reduction Treaty
III (START III) this fall. The joint statement is faulty; it assumes that
Russia can seek modifications to the ABM Treaty as if it is a party to the
treaty. The ABM Treaty, however, was concluded between the United States
and the Soviet Union, which no longer exists. The diplomatic record
demonstrates that the Russian Federation is not today, and has never been,
a party to the Treaty. In fact, the ABM Treaty is no longer valid because
no state, including Russia, is capable of fulfilling the obligations it
imposed on the Soviet Union. House Majority Leader Richard Armey (R-TX) and
House Majority Whip Tom DeLay (R-TX) described this problem with the joint
Cologne statement in a June 28 letter to President Clinton.

At the upcoming meeting with Stephasin, U.S. officials should announce two
modifications to the Cologne joint statement: 1) that the topic of the
negotiations is to be cooperation during the transition period to full
deployment of missile defense systems, not modifying the ABM Treaty; and 2)
that the forum for the negotiations should be the Defense and Space Talks.
The Clinton Administration walked out of these talks in 1993. They should
be revived as an appropriate forum for discussing deployment of ballistic
missile defenses. Such talks could be opened to other states interested in
missile defense. 

These modifications would allow Russia, which is not a party to the legally
defunct ABM Treaty, to participate in the negotiations this fall.

2. START III Talks. The logic of the first Strategic Arms Reduction Treaty
(START I) was anchored in the Cold War reality of a bipolar world when
imposing equal ceilings for the number of nuclear warheads in an arsenal
made sense. However, the proposed Strategic Arms Reduction Treaty (START
III) will occur in a very different strategic environment. Russia’s gross
national product is $280 billion and falling; its military budget in 1998
is estimated around $4 billion. Its nuclear deterrent is deteriorating.
According to Russia’s military and political leaders, the country will have
difficulty sustaining even 1,000 nuclear weapons in 2010. It is in Russia’s
national security interest to have a manageable weapons reduction process
in place. At the same time, new WMD programs in highly unstable countries,
such as Iran, Iraq, and North Korea, put the American lives at increased
risk. These new threats may justify asymmetric reduction of warheads,
whereby the United States will require maintaining more than the 2,500
warheads envisaged in START III.

Washington should make it clear to Stepashin that the United States does
not see Russia as a threat, and that the U.S. arsenal is not aimed at
deterring Russia. What will determine the number of the U.S. strategic
nuclear weapons more are ballistic missile development programs in China,
North Korea, and Iran, which are likely to pose a more strategic threat to
U.S. territory and U.S. allies. The United States should adjust its
strategic nuclear targeting policy to meet these multiple threats
simultaneously, which would mean an even larger U.S. arsenal is necessary. 

3. Russia’s military doctrine. Washington should impress upon Stepashin
that it is aware Russia modified its military doctrine to reflect a greater
reliance on of both tactical and strategic nuclear weapons. U.S. officials
should state clearly and unequivocally that the United States views this
policy shift as unnecessarily destabilizing. They should encourage
Stepashin to convince Moscow that it has more to gain by seeking
cooperation with other countries and less to gain by boosting its nuclear
posture. 

4. The sale of WMD technology to Iran. Despite numerous protests from the
Administration, Russia’s state agencies-such as the nuclear energy ministry
Minatom, the International Space Agency, and the Energia space technology
company-are supplying Tehran with technologies to help Iran build weapons
of mass destruction, including modern rocket engines. Unless this
technology transfer is brought to an immediate end, Iran will be capable of
deploying its first nuclear-tipped missiles aimed at targets throughout the
Middle East and Europe by 2001. Washington should be firm in obtaining full
disclosure from Russia regarding all arms deals and technology transfer
agreements with Iran. The Kremlin should cooperate in ensuring that all
Iranian nuclear, missile, chemical, and biological weapons programs cease.

5. Cooperative threat reduction programs. To facilitate confidence building
measures, U.S. and Russian decisionmakers should focus on such important
issues as the dismantling of ballistic missiles and strategic bombers;
chemical weapons destruction; and the retooling of biological weapons
production facilities for civilian use, including pharmaceutical and
agricultural product development. These Defense and Energy Department
programs are funded by Congress through the Nunn-Lugar initiative. There
are allegations that some of these funds have been used to support Russia’s
strategic weapons modernization and proliferation activities. Washington
should work with Stephashin to include in these programs nuclear warhead
destruction and accountability and transparency measures to ensure that
U.S. taxpayer funds are not wasted.

CONCLUSION
Prime Minister Stepashin’s American debut offers Washington an opportunity
to improve relations with Russia by addressing substantive issues. Even in
the aftermath of Kosovo, with stronger than ever anti-American sentiments
in Russia, a lot can be achieved by developing a working relationship with
Primakov’s successor. 

The Administration needs to address important U.S. national security
concerns, such as national missile defense and non-proliferation, and
develop strong relations with Stepashin’s government. Moreover, the United
States should seek effective measures to assist Russia’s democratic
movement in its difficult quest to build the rule of law, a full-fledged
market economy, and a participatory democracy. These tasks will require
decades of economic and political stability.

The Russian delegation must leave Washington with a clear sense that the
military operation in Serbia was not directed against Russia, and that the
United States values good relations with Moscow. But to achieve such
relations, Russia must work with Washington to eliminate points of
friction, such as its proliferation of weapons of mass destruction and its
resistance to a missile defense system to protect Americans. Waiting until
after presidential elections in both countries have changed the key players
could prove costly to the economic, military, security and diplomatic
dimensions of U.S.-Russian relations in the next century. 

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