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Johnson's Russia List


April 13, 2000    
This Date's Issues: 4244  4245  4246

 Johnson's Russia List
13 April 2000

[Note from David Johnson:
1. Reuters: Elaine Monaghan, Albright to perform balancing act in Central Asia.
2. Moscow Times: Yulia Latynina, Problems Easy To Diagnose, Hard to Cure.
3. APN: Russians distrust international organisations.
4. Reuters: Russian Recovery May Not Be Sustainable, IMF Says.
5. Nezavisimaya Gazeta: Vyahirev Will Have to Solve Chubais's Problems. New Problems With Fuel Supplies to RAO UES May Appear Already in Spring.
6. Items re economic reform. (Sergei Generalov of German 
Gref's Center for Strategic Research on fuel and energy issues;
appointment of Andrei Illarionov as Putin advisor)
7. AP: Russian Proposes Nuke Waste Import.
8. Thomas Graham testimony on Russia's Presidential Elections before the Senate Committee on Foreign Relations.]


Albright to perform balancing act in Central Asia
April 12, 2000
By Elaine Monaghan

WASHINGTON, (Reuters) - Secretary of State Madeleine Albright will have to 
perform a delicate balancing act stressing human rights while defending U.S. 
interests when she visits three states in the volatile Central Asian region 
later this week. 

The three, oil-rich Kazakhstan, Kyrgyzstan and Uzbekistan, all face new 
challenges as former Soviet states trying to build democracies and guarding 
their borders against insurgents and drug trafficking. 

But they also came under fire in the State Department's 1999 human rights 
report for the conduct of elections, corruption and rights abuses. 

Albright's visit is seen as a signal of continuing U.S. interest in the 
region, hemmed in by Russia, Iran and Afghanistan and subject to various 
pressures including Islamic fundamentalism and poverty. 

Her visit follows separate trips in the last month by CIA Director George 
Tenet and FBI Director Louis Freeh to a region scarred by cross-border 
bombings, where Caspian Sea oil attracts the big powers. 

On her way to Central Asia, Albright will visit Ukraine on Friday to 
underline U.S. support for the government of Prime Minister Viktor Yushchenko 
and to encourage his reforms. 

``The Yushchenko government offers to our mind one of the best hopes we've 
seen for Ukraine to really make some progress on the economic front because 
frankly they've been stalled for years without any real progress,'' a U.S. 
official said. 

In Central Asia, Albright is expected to deliver a tough message, especially 
in Kyrgyzstan, where she will be on Sunday. 

``In Kyrgyzstan we have been really concerned by the way the parliamentary 
elections were conducted in February. They really didn't measure up to 
international standards,'' a U.S. official said. 


``What we're finding is this is an uneven process. The democratic process in 
a country like Kyrgyzstan which started out so well is susceptible to 
challenges and bumps in the road and big setbacks,'' the U.S. official added. 

But the trip, which crosses through Kazakhstan on Saturday and Uzbekistan 
next Monday and Tuesday, is about more than human rights. 

``We've got a tremendous interest in helping these countries build the 
capacity to deal with transborder problems that are endemic to Central and 
South Asia,'' the official said. 

Part of this would be addressed with aid of about $3 million each to help 
better patrol their borders, he said. 

With training and vehicles and a counter-terrorism conference to be held in 
Washington in June, the United States would help them fight the ``terror, 
drug-running and arms proliferation problems'' coming out of Afghanistan, the 
world's biggest producer of opium, the raw material of heroin. 

The United States is also concerned about the spread of Islamic 
fundamentalism from Pakistan and Iran -- all factors which the official said 
had the potential to destabilize these ''real fragile democracies''. 

Albright is also expected to meet representatives of U.S. oil companies in 
Kazakhstan, which depends on Soviet-era pipelines controlled by Russia to 
export its oil. 

The country is awaiting the completion of a 930-mile pipeline from Western 
Kazakhstan to Russia's Novorossiisk port, which is expected to come on line 
in 2001. 

In Azerbaijan, across the Caspian Sea from Kazakhstan, the United States is 
promoting a 1,075-mile oil pipeline from the capital Baku and Ceyhan in 
Turkey because that route bypasses Russia and another rival Iran. 

The official said Albright would urge Kazakhstan to lift a recently imposed 
cap on oil exports which forced foreign companies to sell oil locally at 
below-market prices. 

``This is a very anti-market activity which sends a bad signal,'' the 
official said. 


Moscow Times
April 12, 2000 
INSIDE RUSSIA: Problems Easy To Diagnose, Hard to Cure 
By Yulia Latynina 

Vladimir Putin's win in the first round of elections was seen by many 
observers as the first sign of quick changes in Russia. Putin holds a hand of 
trumps. His hands have been untied so that reforms can be conducted. 

But to institute reforms, it's not enough to have a reformer; he's got to 
know what to do. Here the nation faces a paradox: The existing order clearly 
will lead to a collapse of the economy and social fabric. But it's not clear 
how the illness should be treated. 

Historically, there have been instances in which a single legislative act has 
radically changed the structure of a society, such as the abolition of 
slavery by U.S. President Abraham Lincoln or the introduction of free prices 
in Russia on Jan. 1, 1992. Sometimes these reforms were incomplete; sometimes 
they led to tragic consequences - such as the American Civil War. They always 
had bitter opponents and ardent supporters, whose clashes have ripped nations 

In today's Russia, diagnosing the problem is easy - disrespect for property 
rights, the arbitrariness of the authorities, corruption, high taxes - it's 
writing the prescription that's impossible. 

The typical sign of a society incapable of reforming itself is one in which 
the consequences of reform might be no better than the illness itself. For 
example, the loss of control over governors has led to arbitrary rule in the 
regions. Control can be reestablished, with governors being appointed rather 
than elected. But this measure means changing the arbitrariness of governors 
for the arbitrariness of the Kremlin. 

Another example: "The family" and Boris Berezovsky helped put Putin in power. 
Now everyone is trying to guess how he will treat his patrons - leave them in 
power or bring charges against them. But both options are equally 
catastrophic. Option one: The people remaining in power would be those who 
have turned that power into a highly profitable financial instrument. Option 
two: The nation's leader would be someone appointed to the regime who turned 
on those who placed him on the throne. 

Long-existing social ills have caused irreversible changes in the nation's 
economy. This means that abolishing the cause of the illness won't lead to a 
cure. For example, practically all of our problems can be traced to high 
taxes, which have led to the formation of a wholly separate ruling class, a 
class of individuals who control financial resources. Sometimes it's a 
director who, in spite of the shareholders' will, channels production to his 
own firms. Sometimes it's a bureaucrat who, for a bribe, will write off a 
business's taxes. 

But it's doubtful that a reduction of taxes would do away with this system. 
It's too well established and has petrified; it's convenient for all members 
of the ruling class. 

True, we can look to the people, the mass of disinherited citizens with no 
rights who pay all the costs of the existing system. But the people are too 
disorganized to conduct reforms. Any attempt by the people to organize would 
lead to the creation of a party that, in turn, would become a force within 
the system. And the leaders of such a party would immediately plug themselves 
into the existing system. They prefer not to change the rules of the game, 
but to earn for themselves as much money as possible by playing it. 

Yulia Latynina writes for Segodnya. 


April 12, 2000
Russians distrust international organisations

In April, Independent Research Center ROMIR conducted a regular poll on a 
random basis. The polls comprised 1500 respondents in 94 Russian Federation`s 
settlements (160 points of survey, 40 subjects of the Russian Federation). 
The Russians were put a question which international organisations they trust 

The polls showed: 2% of respondents fully confided in European Union, and 
15.2% confided in to a certain extent. Those who had not very much confidence 
in EU amounted to 22.9%, and totally distrusted 27%. 32.9% of respondents 
found difficulty in answering.

There were practically no Russians who gave full credence to NATO. The 
respondents who confided in NATO to a certain extent made up 5.7%. The 
Russian giving not very much credence to NATO made 15.7%, and totally 
distrusting 59.7%. Around 18% of respondents found difficulty in answering.

2.8% of respondents totally trusted Organisation of United Nations. Those who 
confided to UN to a certain extent totalled 17.5%. Respondents giving not 
very much credence to the Organisation made up 24.5%, and 30.6% of 
respondents accounted for those who totally distrusted UN. 24.5% of citizens 
found difficulty in answering.

Thus, the polls illustrated not much, on the whole, confidence in 
international organisations, particularly, in NATO, though Russian society 
was reticent to take acting President Vladimir Putin`s statement on 
possibility to join the military alliance.

It is essential, there was a great number of respondents who were difficulty 
in answering which demonstrated their poor knowledge of international 
organisations` activity.


Russian Recovery May Not Be Sustainable, IMF Says

WASHINGTON, Apr 12, 2000 -- (Reuters) Russia's surprisingly strong economic 
recovery is built on a narrow and possibly unsustainable base, and more work 
is needed to build a market economy, the International Monetary Fund said on 

In its twice-yearly World Economic Outlook, the IMF conceded that Russia's 
economy outperformed IMF expectations in 1999, recording growth of 3.2 
percent and inflation of a lower-than-expected 86 percent.

But capital flight remained a major problem and exports did not rise 
significantly in response to a weaker ruble.

"These improvements have been built on a narrow and not necessarily 
sustainable base, including higher prices of energy exports, ongoing import 
compression and - associated with this - increases in industrial production 
driven mainly by import substitution," the IMF said.

It said Russian economic growth would slow to 1.5 percent this year, half the 
3 percent expected by Russian officials. It projected a 1.4 percent output 
rise in 2001 and said consumer prices would rise 20 percent this year and 16 
percent in 2001.

The IMF said it was unclear to what extent the economy would be affected by 
Russia's military crackdown in breakaway Chechnya and the future cost of 
reconstruction there.

Russia, with a stop-start record on economic reforms, is the IMF's largest 
single borrower, although the latest IMF loan to Russia has been frozen for 
months amid bickering on what Russia must do to win the cash.

Wednesday's IMF report said Russia needed to improve its tax system and 
reduce pressures to use central bank money to finance its budget deficit. 
Further reforms were needed in the banking sector, including a legal 
framework to make it easier to close down troubled banks, it said.

"Much remains to be done to develop the institutional and legal underpinnings 
of a market economy and hence to provide a reliable framework for improving 
governance, strengthening the rule of law, reducing corruption and attracting 
the long-term capital needed for deep restructuring and sustained growth," 
the IMF said.

It said economic prospects were mixed elsewhere in the former Soviet Union, 
and it predicted slim growth of 0.5 percent in Ukraine this year, rising to 3 
percent in 2001.

Belarus, where reform-oriented policy has long lagged that elsewhere in the 
region will record no growth this year and 2 percent growth next year, the 
IMF said.

"Firm commitment to significant monetary and fiscal tightening, together with 
extensive liberalization and restructuring, would be needed to turn the 
economic prospects around," the IMF said.


Russia Today press summaries
Nezavisimaya Gazeta
April 12, 2000
Vyahirev Will Have to Solve Chubais's Problems
New Problems With Fuel Supplies to RAO UES May Appear Already in Spring

The gas monopoly Gazprom will again become responsible for taking the country 
out of the energy crisis. The attempt of Rem Vyahirev to force the national 
energy grid RAO UES to pay its debts for gas by means of a 30 per cent 
reduction of current supplies, ended in vain. The government had to make its 
choice between Chubais's threat of switching off electricity in plants and 
cities and Vyahirev's threat of reduction of gas output. And it chose the 
latter again, thus taking the side of head of RAO UES Anatoly Chubais in the 

President-elect Vladimir Putin commissioned deputy premier Victor Hristenko 
to settle the conflict between the gas industry and the energy grid.

At yesterday's meeting between the monopolists, which took place at 
Hristenko's office, Rem Vyahirev had to agree to raise gas supplies to 
electric stations by two million cubic meters. It is smaller than what 
Chubais had hoped for, but enough to prevent switching off electricity in 
residential areas. Nevertheless, Chubais said that shutoffs would take place 
in some parts of Russia.

RAO UES prefers to use gas practically for free to paying for another type of 
fuel mazut. At the same time, Gazprom has to decline profitable export 
contracts, because the energy sector in Russia demands more and more gas.

Besides, RAO UES cannot solve the problem of creating joint energy and coal 
companies, because it does not want to invest in this industry.

Today, Rem Vyahirev will go to the Krasnoyarsk region to visit the Berezovsky 
coal cut, which is planned to become a part of such a joint coal and energy 
company. Thus, Vyahirev will have to take care of Chubais's problems.

The possible consequence of the conflict between monopolists will be raising 
electricity tariffs for households and industries.


April 12, 2000
[Items re economic reform]

14:26 Today's issue of the Vedomosti newspaper carries an interview of 
Sergei Generalov, who is in charge of studies relating to the fuel and energy 
sector at German Gref's Center for Strategic Research. The ex-fuel and energy 
minister gave an account of how the elaboration of a strategy for the sector 
is proceeding at the Center. According to Generalov, in order to decide on a 
strategy it is necessary to pass "several road junctions" and the first one - 
"stringent regulation by the state or a liberal economy" - the Center has 
already passed: a decision was taken in favor of a "right turn." The next 
junction: determining the challenges before the sector - whether it is a 
"supplier of money for the budget and of hard currency for hard currency 
reserves" or it must supply the requirements of the country in fuel and 
energy. But that is not all: further it will have to be understood whether 
the fuel and energy sector must "become the engine that will pull out the 
rest of the economy through the increase of investments and growth of 
purchases" or its role will be to create conditions for the development of 
the rest of the economy as a whole." Generalov considers that the sector must 
primarily meet "all the requirements of the economy with due regard for its 
growth prospects," while at the same time remaining a supplier of hard 
currency and revenue (the second part, though, is but an auxiliary objective 
because "otherwise it could all be taken from the sector entirely)." If 
Russia needs the fuel and energy sector only as a "feeding trough," Generalov 
regards as quite adequate such "exotic" measures as "market imposition of 
export duties" by way of their sale at an auction: he who pays more will 

16:59 - Andrei Illarionov, the director of the Institute of Economic 
Analysis, has been appointed an adviser to the President by a Putin decree, 
RIA news agency reported just now. Recall that Union of Right Forces (SPS) 
leader Sergei Kiriyenko on the night of the elections foretold Illarionov a 
post in Putin's government. In the economic community Illarionov is known for 
his resolute, even "extreme" points of view on major issues and for his lack 
of disposition toward compromises. Illarionov is an "ultra-liberal," and his 
appearance in the presidential entourage, most likely, should 
"counterbalance" the influence of both the "statists" and the "mild liberals" 
led by Yevgeny Yasin, grouping around Gref's Center. It is not the first time 
that Andrei Illarionov will consult the country's leaders. In 1992-93 he was 
the first deputy head of the Working Center of Economic Reforms under the 
government of Gaidar, in 1993 an adviser to Prime Minister Chernomyrdin and 
the head of the Center of Analysis and Planning under the premier. In July 
1993 he quarreled with Chernomyrdin; in particular, sharply condemned the 
policy pursued by Central Bank Chairman Viktor Gerashchenko (the provision of 
credits for enterprises by the bank). On February 7, 1994, he sent in his 
resignation, accusing Chernomyrdin of "an economic coup." In the same year he 
became the head of the Institute of Economic Analysis. 


Russian Proposes Nuke Waste Import
April 11, 2000

MOSCOW (AP) - The Ministry of Atomic Energy said Tuesday it wants to import 
20,000 tons of nuclear waste to Russia to boost the country's economy, but 
parliament would first have to cancel a law forbidding most of such imports. 

Under the proposed program, countries exporting nuclear waste to Russia would 
pay $21 billion over 10 years. Most of the waste would be spent fuel rods 
from civilian nuclear power plants in Europe and Asia, Minister of Atomic 
Energy Yevgeny Adamov said. 

The expected earnings are nearly equal to Russia's entire federal budget in 

``The deal is extremely beneficial for (the ministry), and we are intending 
to carry it out,'' Adamov said. 

Deputy Minister Valentin Ivanov said the plan is at a stage of ``market 
research'' to study global demand among countries eager to unload their 
waste, and lobbying parliament. About 200,000 tons of nuclear waste is now 
stored at temporary sites worldwide. 

The ministry plan proposes recycling the waste at the Mayak facility in the 
Ural Mountains. 

The process extracts usable nuclear material for new fuel rods while 
improving safety by reducing the material's potential to be used in weapons, 
said Ivanov, the ministry's top nuclear scientist. 

The spent fuel would travel across European Russia or Siberia by rail in 
armored wagons. 

Both Russian and foreign environmental groups object to the plan, which has 
been under discussion for several years, saying Russia is already awash in 
nuclear waste from domestic sources. 

``This is an extremely dangerous and cynical deal to generate billions of 
dollars which will add to the enormous environmental problems that already 
exist in Russia,'' Greenpeace nuclear campaigner Tobias Muenchmeyer said in a 
press release. 

A 1992 law forbids importing nuclear materials from foreign countries other 
than former East Bloc nations with existing contracts. 

Russia now imports spent fuel rods from Ukraine, Bulgaria, Slovakia and 
Hungary for reprocessing, a system established during Soviet times. 

Meanwhile, Adamov said his ministry plans to make $550 million reprocessing 
Soviet bomb-grade material into civilian reactor fuel this year under a 
U.S.-sponsored program begun in 1993. The program aims to reduce available 
bomb-grade material and reduce the risk of theft. 


Date: Wed, 12 Apr 2000 
From: Tom Graham <> 
Subject: Senate Testimony

Attached is testimony I prepared for the Senate Foreign Relations
Committee April 12.

Prepared Statement
On Russia's Presidential Elections
For The Senate Committee on Foreign Relations
April 12, 2000

Thomas E. Graham, Jr.
Senior Associate
Carnegie Endowment for International Peace

Although there has been a certain thaw in our relations with Russia over
the past few weeks, it is still safe to say that they have reached their
nadir since the breakup of the Soviet Union. During the past year, senior
Russian government officials have at times resorted to rhetoric reminiscent
of the Cold War. The United States is treated with increasing suspicion in
commentary in Russia's mainstream press. Department of State polling has
traced a steady decline in favorable opinion of the United States among
Russians from over 70 percent in 1993 to just 47 percent earlier this year. 

Meanwhile, in the United States, the once prevailing image of Russia as an
aspiring democracy has given way to one of Russia as a hapless land of
massive corruption, pervaded by organized crime. The American political
establishment suffers from a severe case of Russia fatigue. Growing
numbers of Americans believe that Russia simply does not matter that much
any longer in the world and that the United States can and should pursue
its interests with little reference to Russia. Few Americans would
advocate gratuitously harming Russia, but equally few are prepared to spend
much time, energy, or money to nurture good relations with Russia.

Three events over the past year and a half were pivotal in fueling this
deterioration in relations: Russia's financial collapse in August 1998, the
Kosovo conflict, and Chechnya.

The financial collapse marked the failure of the grand project of quickly
building a vibrant democracy and robust market economy in Russia along
Western lines. For many Russians, it confirmed suspicions that the West
was not trying to help their country rebuild but rather seeking to turn it
into a third-rate power. In the West, and particularly in the United
States, we began to take a more sinister view of Russia. Because we tend
to think there is something natural about the emergence of democracies and
market economies, many Americans see the problems in Russia as a sign of
some profound moral flaw in Russia's national character.

The Kosovo conflict, at a time when NATO was adopting a new strategic
doctrine and adding new members, confirmed Russians' worst fears about the
Alliance. Moreover, Kosovo underscored just how far Russia's international
standing had fallen during the nineties and how little its voice mattered
in world affairs, even in Europe, a region of vital significance to Russia.
While many in the West hailed the role that then President Yeltsin played
in bringing the conflict to an end on NATO's terms, much of the Russian
political elite interpreted this as a sign of Russia's weakness; some even
saw it as a betrayal of Russia's interests. While most Americans saw the
Russian "dash to Pristina" as an ill-conceived act of desperation, most
Russians applauded it as a demonstration of Russia's will and ability to
carry out a military operation even in the face of NATO's opposition. 

Chechnya has dramatically underscored the gap between Russian and American
elites and broader publics. While we have been appalled by the brutality
of Moscow's military operation, Russians have approved it as necessary to
putting an end to the terrorist threat emanating from Chechnya, restoring
order to a Russian territory, and safeguarding the country's territorial
integrity. Against the background of what Russians saw as an illegal and
inhumane NATO air campaign in Kosovo, Russians have been incensed by the
West's criticism of their actions in Chechnya. The criticism is, to their
minds, evidence of a double standard, of a refusal to treat Russia as an
equal, and of an unwillingness to appreciate the depths of the problems
Russia now confronts, problems, moreover, that many Russians believe arose
out of their following Western advice over the past decade.

Both Russian and American leaders would like to halt - and if possible
reverse - this deterioration in relations before it does irreparable harm.
Each side recognizes that the other will remain critical to its own
security and well-being well into the future. The emergence of a new
leadership in Russia, the transfer of power from President Yeltsin to
President Putin, provides an opportunity to put the relationship back on
track. Whether this opportunity will be seized remains an open question.
Much, to be sure, will depend on the course the new Russian leadership
takes. There are actions, for example, in Chechnya and, more broadly, in
the area of human rights and civic freedoms, that the Russian government
could take that would undermine all hopes for near-term improvement in

At the same time, in plotting our course toward improved relations, we need
to take a hard look at Putin, appreciate the complexity of the problems
confronting him and the constraints on his ability to act, separate the
substance from the style of Russian foreign policy and determine where
differences over substance preclude productive interaction, and articulate
clearly what we need from Russia to build public support at home for active
engagement with Russia. Moreover, we need to keep our goals in line with
Russia's capabilities if we are to avoid the cycle of great expectations
followed by profound disappointment and mutual acrimony that has bedeviled
the relationship over the last several years. 

Russian Democracy Fragile at Best

Putin's election as president on March 26 marked the first democratic
transfer of power in Russian history, the Clinton Administration and many
commentators have maintained. And, indeed, the election probably met
minimal standards for being declared democratic and free and fair. Turnout
was just under 69 percent; the voters had a choice of eleven candidates
representing a range of political views. While there have been charges of
fraud, and it is likely that fraud did occur in some districts, no one has
offered credible evidence of massive fraud that would have denied Putin
victory in the first round. The official electoral results were in line
with pre-election polling. The only surprise was that the communist party
candidate did better than expected, and that was unlikely the result of
widespread fraud. Consequently, we can be confident that Putin's election
at some level represents the will of the Russian people.

This is not to say that all is well with democracy in Russia. Far from
it, particularly when one looks beyond the simple mechanics of voting and
vote counting to the deeper political structures and the vitality of
democratic virtues. At a minimum, Putin's phenomenal rise from political
obscurity to Russia's highest office in eight months should give pause to
anyone concerned about the consolidation of democracy. The rapidity with
which Russians swung from overwhelming support for former Prime Minister
Primakov to overwhelming support for Putin underscores how unstructured
Russian society is, how poorly societal interests are articulated, and,
thus, how easy the electorate is to manipulate. That Putin's rise came
against the background of a shockingly brutal, but seemingly successful,
military operation in Chechnya should raise concerns about the standing in
Russian society of the democratic virtues of tolerance and compromise. The
Kremlin's cynical use of its near monopoly of the media last fall to
destroy Putin's rivals with half-truths and fabrications was hardly
democratic in spirit, even if those opponents engaged in similar tactics

More troublesome is the near total absence in Russia of accountability to
the public, the bedrock of democracy. As many commentators have pointed
out, Putin failed to lay out a detailed political and economic program
during the presidential campaign. He sent contradictory signals on his
commitment to economic reform and democracy, telling different audiences
what they wanted to hear. This is hardly unheard of in countries we call
democratic without reservation. But the point is that the Russian public
has no effective means to hold Putin accountable. Russia lacks a dense
network of civic organizations to put pressure on the government between
elections and check its behavior. Moreover, other elected officials, who
might act as a democratic check on Putin, are no more beholden to their
electorates than he is.

Constraints Confronting Putin

The reverse side of this lack of accountability is that Putin's popular
mandate brings him very little in the political arena in which he must now
operate, one that is dominated by the competing elite circles and
coalitions that have emerged over the past decade. There are few ways he
can mobilize his popular support for political advantage now that the
elections are over. There are no indications, for example, that the people
are about to take to the streets in support of Putin as they did for
Yeltsin a decade ago. Putin will require other resources to manage and
discipline these elites, a task that is essential to his carrying out his
agenda, whatever it might turn out to be. We should not overestimate his
chances. He faces serious constraints. Four stand out.

First, although the Russian Constitution invests the president with vast
powers, something that has given rise to the myth of a "superpresidency,"
in practice, his power is much less. Over the past decade, multiple
autonomous centers of power have emerged as a result of the devolution,
fragmentation, privatization, and erosion of state power. In relative
terms, considerable power now lies in the hands of regional elites and
business magnates, or "oligarchs" as they are often called. 

The levers that Russian leaders once used to control regional elites have
all atrophied. The dense, countrywide administrative structures of the
Communist Party of the Soviet Union collapsed with the breakup of the
Soviet Union and have yet to be replaced. Law enforcement agencies and the
courts, even if nominally subordinate to Moscow, often do the bidding of
regional leaders, because their officials are dependent on the goodwill of
those leaders for housing, conveniences, and other amenities. Regional
military commanders often cut deals with local elites to ensure an adequate
flow of energy and provisions to their garrisons. As a result, the loyalty
of the institutions of coercion to the Kremlin is dubious at best outside
of Moscow. 

The Russian president may be the strongest of all the centers of power,
and he may be able to enforce his will on one or more of the competing
centers. But even one-on-one, victory is not ensured; within just the past
week Putin had to back down from an effort to depose the governor of his
home region, St. Petersburg, a man for whom he has expressed contempt in
public, because of the governor's formidable regional political machine.
This failure only underscores the point that Putin certainly lacks the
resources to take all the competing power centers on at once. In other
words, he cannot govern the country against the wishes of the regional
barons and oligarchs. At best, he can exploit the contradictions among
them to expand his own room for maneuver, enhance his own power and
authority, and rebuild the state as an autonomous entity. Success in such
an effort is uncertain, however; it will require considerable political
will, imagination, skill, and time.

Second, the resources are lacking for the vigorous pursuit of rebuilding
the state, which Putin has set as his primary goal. In the past decade,
Russia has experienced a socio-economic collapse unprecedented for a great
power not defeated in a major war. The economy has been cut in half.
Russia's GNP is now roughly 7 percent of the United States'. Although tax
collection has improved over the past several months, the Russian federal
budget still amounts to about $25 billion at current exchange rates, that
is, roughly what the United States spends on the Intelligence Community
alone. Putin does not have resources to spend more on the military and
security services, pay off pension and wage arrears, rebuild a shattered
public health system and a deteriorating educational system, build up an
independent judiciary, aggressively combat corruption, create the
institutions of a well-functioning market economy, and so on. He will have
to make difficult choices.

Third, Putin lacks sufficient loyalists to man the government. The
conventional wisdom in Moscow is that it takes some 400 people to staff the
key positions in the government and presidential administration. According
to informed Moscow sources, Putin's bench of loyalists is very narrow,
perhaps as few as forty people, largely drawn from his security services
associates from St. Petersburg. Many of these individuals already hold
important positions in Moscow, such as Sergey Ivanov, Security Council
secretary, and Nikolay Petrushev, FSB director. Consequently, Putin will
have to reach out beyond his loyalists to staff the government. Even if he
appoints "technocrats," as he most likely will, they will be connected to
one or another elite coalition vying for power and influence in Moscow;
that is simply the nature of the Russian politics. This will produce a
coalition government Russian-style, based not on political parties, but on
elite coalitions and lobbies. Such a coalition will inevitably erode the
cohesion and effectiveness of Putin's government.

Fourth, and perhaps most important, there should be serious questions
about Putin's leadership abilities. Contrary to the conventional wisdom in
Washington, we know much about Putin, more, for example, than we knew about
either Gorbachev or Yeltsin when they assumed power. Little in his
biography, however, is encouraging on the key question of whether he is
prepared to lead Russia. His KGB days in Leningrad and East Germany, his
term as deputy mayor of St. Petersburg in the early nineties, and his
positions in Moscow since 1996 all suggest a man of limited horizons and
narrow goals. He has spent most of his career as a deputy or less; rarely,
has he been in charge. There is nothing in his background to suggest that
he ever harbored ambitions to rise to the pinnacle of power in Russia,
nothing to indicate that he has honed the political skills needed to impose
his will on Russia's unruly political system. He may know the West better
than any Russian leader since Lenin, because of his KGB experience, but he
probably understands Russia more poorly than any Russian leader in the
twentieth century - there is little evidence that he traveled widely around
the country before he became Prime Minister last August. 

Putin may surprise us, as have other gray figures in Russian history. He
may turn out to be a forceful, energetic, effective leader with a
compelling vision of what Russian can be both at home and abroad around
which he can rally competing elites. Certainly, that is what the numerous
Kremlin emissaries to this town over the past few months would like us to
believe. At the moment, however, we are right to have our doubts. 

Emerging Elite Consensus

Despite the constraints on Putin, there is still room for progress on the
economic front, in the consolidation of society, and in the pursuit of a
more coherent foreign policy. With a different president perhaps even more
progress could be made, for the past decade has not passed in vain, despite
all the frustrations, disappointments, and setbacks. A broad, if shallow,
consensus has emerged across the political spectrum - including most
emphatically the communists - as Russians have come to realize that there
can be no return to the Soviet past, even if many vehemently disagree with
the policies of the past decade. Ideological cleavages have given way to
competition among vested political/economic issues as the defining feature
of Russian politics. This change is reflected in the composition of the
new Duma, which is dominated by non-ideological, pragmatic - some would say
cynical - deputies. 

For all the resentment of the West, mainstream political figures admit that
Russians themselves bear ultimate responsibility for what has become of
their country. Moreover, in the past two to three years, they have come to
accept the predicament their country faces. Putin himself made this point
emphatically in a document he released at the end of last year, before
Yeltsin's resignation, entitled "Russia at the Turn of the Millennium."
Among other things, he noted that the Russian economy would have to grow at
8 percent a year for the next fifteen years for Russians to enjoy the
standard of living now enjoyed by Spain and Portugal. Finally, Russians
now realize that they must rely first of all on themselves in any effort to
rebuild their country and regain their standing in the world.

In addition to this consensus, an improved economic outlook will give the
Russian government more room for maneuver. The financial collapse of
August 1998 turned out to be a blessing in disguise. The sharp devaluation
of the ruble followed by a sharp rise in oil prices has fueled an economic
recovery over the past year. In 1999, the economy turned in its first year
of undoubted economic growth in the past decade, with GNP rising by over 3
percent. Forecasts for this year are for continued growth, perhaps as high
as 5 percent. In the absence of more thoroughgoing reforms, this recovery
remains fragile. But, for the moment, it has brought more money into the
economy, increased tax collection, and put considerably more resources at
the government's disposal. 

What will this consensus and increased resources mean for Russian economic
policy, domestic politics, and foreign policy over the near term? 

On the economic front, we are likely to see progress on building a more
favorable environment for investment, both domestic and private. But we
are unlikely to see the radical breakthrough some are predicting: Even if
the government comes up with a radical plan, implementation will be spotty,
for that will require millions of Russians to change deep-seated habits and
weak government institutions, particularly the judiciary, to enforce new
legislation. Nevertheless, over the next several months, we are likely to
see a new tax code that reduces and rationalizes taxes, progress on
production sharing arrangements, and improved protection of minority
shareholders' rights. The outlook for land reform is less certain. It
remains a contentious issue, as it is in all societies moving away from
traditional to more market-based forms of landholding, but support for land
reform is growing. Over a quarter of Russia's eighty-nine regions have
already passed laws permitting the buying and selling of land, despite the
absence of an overarching federal land code.

On domestic politics, Putin has set his primary goal as rebuilding the
state. Progress will be slow, as Putin will have to sort out arrangements
with still powerful regional elites if he is to create a flexible,
productive federal system. Restoring order, another of Putin's priorities,
could put some democratic freedoms at risk, particularly since Putin will
have to rely on security services that have been left largely unreformed
since the breakup of the Soviet Union. Moreover, Putin's own comments on
the press, including his labeling of RFE/RL correspondent Babitskiy as a
traitor for reporting on the Chechen side of the Chechen conflict, suggest
less than a full commitment to some democratic freedoms. 

Progress is also likely to be slow on two issues of great importance to the
United States: corruption and the war in Chechnya. The corruption problem
is massive; there are no simple quick solutions. Moreover, since virtually
everyone is guilty in some way, unless the issue is treated with extreme
care, any anti-corruption campaign risks looking like a politically
motivated attack on one's opponents. Such an approach would create more
problems than it would solve, while undermining efforts to democratize
Russia. Bringing the Chechen conflict to a "victorious" end remains an
imperative for Putin, in part because the military's loyalty is critical to
his own power position and the military is intent on crushing the Chechen
rebels. Moreover, in the eyes of the Russian public it is still his most
visible success. Without major successes in other areas, Putin will have
little room for negotiating a political solution to Chechnya. That said,
as Chechnya looks increasingly like a quagmire, he will be seeking a
face-saving way out of the conflict.

Foreign Policy under Putin

The broad outlines of Putin's foreign policy have emerged over the past
several weeks in three documents that have been released or discussed
publicly: the national security concept, the military doctrine, and the
foreign policy concept. These documents have been in the works for several
months and reflect not simply Putin's preferences but those of the Russian
political elite as a whole. Three aspects of these documents merit
particular stress.

First, they make clear that the major threat to Russia's security arises
from internal decline and decay. As a result, the first goal of Russian
foreign policy is to help create conditions that are conducive to internal
reconstruction. This entails ensuring continued Russian access to Western
money, technology, and markets, which is critical to economic recovery, as
well as working to integrate Russia into the global economy as smoothly as
possible. In the short-term, it also calls for stepped up efforts to
restore relations with the IMF and to move ahead on debt restructuring or
relief with the Paris Club. 

Most important, the requirements of internal reconstruction require that
Russia avoid confrontation whenever and wherever possible. In particular,
the Russian leadership understands that it cannot afford a complete break
in relations with the West, even if it wants to pursue its own interests
more aggressively in Europe, the Middle East, East Asia, and the CIS. In
addition, while the Kremlin will continue to talk of Russia as a major
force in world affairs, in practice it will tend to focus on those few
areas that are genuinely critical to its own recovery, which include
strategic relations with the United States, European security matters, the
Caspian region, Iran, and the CIS, as well as admission to the World Trade
Organization and access to Western markets. In other words, Russia will
act like a regional, rather than a world, power, no matter what the rhetoric.

Second, as a result of developments over the past few years, Russia's
attitude toward the outside world has changed. In an earlier version of
the national security concept adopted in 1997, Russia saw the outside
world, and particularly the West, as relatively benign. The latest foreign
policy documents make it clear, however, that the West looms as something
of a threat. The opening paragraphs of the new national security doctrine,
for example, sharply contrast Russia's effort to build a multipolar world
in which economic and political factors play an increasingly greater role
with the alleged effort of the West led by the United States' to dominate
international relations through unilateral actions, often involving the use
of force.

Third, the Russian political elite is well aware that disarray and lack of
coordination in foreign policy decision-making and implementation have only
exacerbated problems arising from Moscow's shrinking resource base. The
rapid turnover in key personnel - five Prime Ministers, three Foreign
Ministers, three Defense Ministers, five Ministers of Finance, five heads
of the Presidential Administration, and seven Security Council secretaries
since January 1, 1996 - has hampered the pursuit of a coherent foreign
policy, as have rivalries among ministries and large commercial entities,
such as the gas monopoly, Gazprom, and one of Russia's leading oil
companies, Lukoil. In the past, it often seemed that Russian policy was
not so much set by the government as by the agencies that had assets to
bring to bear on the issue, with decisions being made on the basis of
narrow bureaucratic concerns rather than national interests. If Putin can
impose greater coordination and coherence on Russian foreign policy - a big
if - Russia could play a much more effective and active role abroad despite
its current weakness.

Given these fundamental concerns, Putin will likely continue to reengage
the West, and the United States in particular, as he has since he became
acting President three and a half months ago. He is pressing for Duma
ratification of START-2, which could occur this Friday. He will engage
more actively in discussions of ABM Treaty modification, START-3, and
national missile defense, despite deep-seated concerns about U.S. policies
on missile defense. He will seek to invigorate Russia's contacts with
NATO, as was evident in his decision earlier this year to meet with NATO's
secretary general over the objections of his military. 

If Putin turns out to be a strong leader, despite continuing doubts, the
West could have greater confidence in his ability to cut deals and make
them stick. That would be a major improvement over the last years of the
Yeltsin era. Nevertheless, it would be a grave mistake to think that rapid
progress can be made on many of the issues on the U.S.-Russian agenda: ABM
modification/START-3, Russian-Iranian relations, Caspian pipelines, and so
on. These are complex matters that would be difficult to resolve even with
much greater mutual trust than now exists.

U.S. Policy

Despite all the uncertainties about Putin and his policies, the United
States should seize the opportunity of a new Russian leadership to reengage
Russia in an effort to reverse the deterioration in our relations. This is
not the place to go into to detail on how to approach specific issues, but
some guidelines are in order.

The first task is to rebuild the trust that has been lost over the past
few years, for that is indispensable to productive negotiation on strategic
issues and non-proliferation concerns that lie at the top of our agenda
with Russia. We can begin to do this in part by talking in less grandiose
terms and more realistically about the quality of our relations with
Russia. The Administration's earlier talk of "strategic partnership"
created expectations in Russia that we were never prepared to meet, and our
failure to meet them led many Russians to ascribe to us pernicious motives
we never in fact entertained. Now is the time for a little honesty. Our
relationship with Russia is not yet one of genuine partnership, nor is it
likely to become one over the next few years. Building such a relationship
is a worthy goal, but, for the moment, we have a mixed relationship of
cooperation, competition, and neglect, depending on the specific issue.
There is nothing unusual or wrong with this. This is the type of relations
we enjoy with most countries around the world. We need to say this publicly.

In line with the real nature of our relations, we should make clear in our
public pronouncements and private conversations that the intensity of our
engagement with Russia will vary from issue to issue. On some issues, such
as the strategic nuclear balance and proliferation of weapons of mass
destruction, Russia will be the central focus of our policy. On others,
such as European security, it will be one among a number of key players,
but not necessarily the most important. On still others, such as security
in East Asia, it will play a lesser role. On a range of global economic
matters, it will be a secondary consideration at best. We also need to
make clear that the continuation of Russia's brutal war in Chechnya will
put strict limits on how far relations can improve.

In addition, as we seek to reengage with Russia, we need to appreciate
Russia's limited capacity to engage, both material and psychological. For
this reason, it is imperative that the United States set realistic goals
that take into account Russia's dwindling resources and focus on issues
where Russia remains relevant. That will produce the best chances for the
success that is necessary to build public support in the United States for
continued constructive engagement. On issues of economic and domestic
political development, we should resist demanding too much of Russia, as we
have in the past. We need to appreciate the full complexity of the
challenges facing Russia as it moves away from its Soviet past and
recognize that our own understanding of the processes underway there is far
from complete. Instead of pressing programs on Russians, we should let
them take the initiative, while underscoring our readiness to help if the
programs and policies they adopt make political and economic sense.

Finally, in engaging Russia, we should remain a respectful distance from
the Russian leadership, in sharp contrast to the Clinton Administration's
approach with Yeltsin. Intense relations will only warp our perceptions of
developments in Russia, in particular by blinding us to the downsides, as
happened with the Administration's embrace of Yeltsin. At the same time,
we need to build a broader network of contacts, in Moscow and in the
regions, both to obtain a fuller and more balanced picture of the situation
in Russia and to help rebuild the reservoir of goodwill that has been
drained over the last seven years.

Such engagement might lack the high drama of the past few years, and it
might sound pedestrian to some. But only by lowering our expectations, by
understanding where our interests overlap and conflict with Russia's, and
by acknowledging the limits on our ability to cooperate, in short, only
through greater realism, can we hope to put back on track relations with a
country that will continue to be vital to our own security and well-being
well into the future.


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