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Johnson's Russia List


June 13, 2000    
This Date's Issues: 4364  4365

Johnson's Russia List
13 June 2000

[Note from David Johnson:
1. VOA: Peter Heinlein on 10th anniversary of declaration of independence.
2. RFE/RL: Paul Goble, Borders And Frontiers. (Finland)
3. Dave Stone: re 4362/Putin's travels.
4. Joel Moses: Symposium on Policy Dilemmas of Post-Soviet Countries.
5. East European Constitutional Review: Thomas Graham, Putin's Russia.
Why Economic Reform Requires Political Support. Reflections on US 
Policy Toward Russia.
6. Financial Times (UK): Tea baron with a taste for battle: PROFILE 
IGOR LISINENKO, MAISKY CHAI: The ex-naval officer conquered Russia's 
tea industry. Then he tackled politics, says John Thornhill.]


Voice of America

INTRO: Russia has observed the 10th anniversary of 
its declaration of independence with a glittering 
Kremlin ceremony. But as V-O-A Correspondent Peter 
Heinlein reports from Moscow, the day is ignored by 
most Russians and actively protested by others. 
TEXT: For many Russians, June 12th is simply another 
day to spend at the country house. There are no fireworks, 
no big parades. 
But June 12th is Independence Day, the day in 1990 
when the Russian Federation made its largely symbolic 
declaration of independence from the Soviet Union.
Under President Boris Yeltsin, the day became a 
national holiday. And on this 10th anniversary of the 
declaration, Russia's second president, Vladimir 
Putin, hosted former President Yeltsin along with the 
patriarch of the Russian Orthodox Church and hundreds 
of other dignitaries at a grand Kremlin reception.
President Putin told the gathering that the nature of 
Russia's statehood has changed. He said, "a multi-
party system has appeared, as well as laws on private 
property and freedom of the mass media."
But for many, if not most Russians, independence has 
meant little in the way of positive change. 
Political analysts noted with dismay during the past 
presidential election that not a single significant 
political force has emerged in the country since the 
collapse of the Soviet Union. Free-press activists 
say efforts to build an independent media have largely 
been stymied, and the concept of private property is 
still not firmly established.
Opinion surveys consistently show that most Russians 
feel life has gotten worse in the past 10 years.
Several political and citizens groups took advantage 
of the Independence Day holiday to stage protest marches and demonstrations. 
Activists of the Young Communist League scheduled a 
rally to express their outrage at the disintegration 
of the Soviet Union. Ultranationalist Vladimir 
Zhirinovsky led his followers in a march down a main Moscow thoroughfare.
And a smaller group calling itself the Revolutionary 
Contact Association picketed near the Kremlin against 
the war in Chechnya and against what organizer Boris 
Stumakhin called the return of a fascist dictatorship.
Mr. Stumakhin says political police are ruling the 
country -- as he puts it - "just as it was during 
Soviet times under Stalin and Brezhnev." 
He says that when totalitarianism collapsed in 1991, 
Russians thought they would have a free, democratic 
state forever. But, he added, "now we see it was only 
a thaw, like the one during Khrushchev's time (after 
Stalin), and it has ended, just like the Khrushchev thaw did."
Forty-two-year-old Leonid Posetselsky stands in front 
of a statue of Karl Marx holding a placard saying 
"independence for Chechnya." He says he worries that 
Russia's new leaders seem intent on reversing the 
defeats the country suffered, not just in the first 
Chechen war, but in Afghanistan and even in the Cold War.
Mr. Posetselsky says it is said that Russia lost the 
Cold War, and -- in his words - "now Mr. Putin is 
leading those who want to re-fight it." Mr. 
Posetselsky predicts an even worse defeat if that kind of 
thinking continues.
In his Independence Day speech, President Putin tried 
to put a positive spin on the past decade. But he 
acknowledged that, in his words, "we were too 
romantic, even naive." The solution, he said, is a 
stronger, more centralized state dedicated to stemming 
"the degradation and decline of culture." 


Russia: Analysis From Washington -- Borders And Frontiers
By Paul Goble

Washington, 12 June 2000 (RFE/RL) -- Increased economic and cultural contacts 
across national frontiers have simultaneously reduced the practical 
importance of many borders for people living there while increasing political 
sensitivies in national capitals about these demarcation lines. 

Both those trends were very much on public view last week during Finnish 
President Tarja Halonen's first official visit to Moscow. On the one hand, 
both Finnish and Russian officials welcomed the expansion of cooperation 
across the Finnish-Russian border. 

But on the other, Russian President Vladimir Putin said that discussions in 
Finland and elsewhere about the possibility of changing that border could 
"ruin" relations between the two states.

Halonen spent last Tuesday and Wednesday in Moscow at the invitation of 
Putin, but she devoted much of her time meeting with regional officials in 
the Federation Council as well as with leaders of Russian businesses. During 
these sessions, she talked about promoting both cross-border cooperation and 
the European Union's Northern Dimension program.

Both of these links have become more important over the last few years as 
Finnish firms have expanded their activities not only in neighboring Karelia 
but also in adjoining Russian regions. Last week, for example, Karelia's 
foreign minister announced that his republic will join Finland to build a 
large wood processing plant near Lake Ladoga.

Moreover, Finland's trade minister who accompanied Halonen noted that Finland 
now serves not only as a major transshipment route for Russian exports but 
also as an increasingly important investor in firms in the northern regions 
of the Russian Federation, with approximately 4,000 Finnish enterprises now 
maintaining contact with them. 

Russian Federation Council Chairman Yegor Stroyev was among the many Russian 
officials praising Halonen's work in this area. "She has managed to 
coordinate work in this direction of not only European states but also of all 
Russia's northern regions -- from Kaliningrad to Chukotka," he said.

St. Petersburg Governor Vladimir Yakovlev also welcomed her work in helping 
his region to integrate into Europe as well as expanding cooperation with 
Finnish concerns in the energy sector.

Putin too praised Halonen's cooperative efforts, publicly noting that "not 
only are we both lawyers, but we are also both practical people," something 
he said "speaks well for the continuation of our dialogue."

But the Russian president introduced one jarring element into the 
conversation. At their joint news conference on Wednesday, Putin said that 
there must not be any discussion of changing the political border between the 
two countries lest that undermine relations between Moscow and Helsinki.

"I believe that engaging in such discussions is very dangerous," he said. 
"Finland and Russia have established good relations in the past decades," but 
he suggested that he was "worried" that "any discussions" about borders will 
"ruin these relations." 

Putin's remarks appear to reflect three things: 

First, the otherwise entirely welcomed expansion of ties across the border 
between the two countries which have reduced its significance for many people 
living in the region Helsinki ceded to Moscow after the 1940 Winter War. 

Second, a recent poll which showed that 70 percent of the inhabitants of that 
region would welcome its return in whole or in part to Finland and the 
opportunity that would bring with it for them to become Finnish citizens. 

And third, efforts by some in Finland to promote the idea that these World 
War II-era border changes should be reversed in whole or in part. Among the 
most internationally prominent of these are a group of activists centered 
around the ProKarelia website ( 
These groups immediately denounced what they said were Putin's efforts to 
muzzle them and reported with approval Halonen's statement at the joint 
Moscow news conference that Finns have the right to talk about anything they 
want, including Karelia. 

At the official level, however, both Moscow and Helsinki insist that there 
are no territorial disputes between them. But the consequences of increased 
ties across their border are likely to include ever more public discussions 
about the meanings of borders and frontiers for both sides. 


Date: Mon, 12 Jun 2000 
From: Dave Stone <>
Subject: 4362/Putin's travels

Michael McGuire's Chicago _Tribune_ article (JRL #4362) included the line:
"'He's the first Russian leader since Peter the Great to spend more than a few
weeks outside the country,' said Russian expert Marshall Goldman of Wellesley
College, referring during a visit to Moscow to Putin's service abroad with
the KGB."

I'm assuming Goldman was misquoted here--Lenin, Nicholas II, and Catherine
the Great all leapt immediately to mind as people who spent large amounts
of time abroad. I'd add Anna and Peter III. I'm not up on the travel
plans of the young heirs of the 19th century, but I'm sure that at least
some of them made Grand Tours like Nicholas II did.

Granted, this is a small point, but McGuire's statement is exactly the kind
of factoid that could be erroneously seized upon and repeated, especially
since we know so little about Putin anyway.

David Stone Office: (785) 532-6730
History Department Fax: (785) 532-7004
208 Eisenhower Hall Email:
Kansas State University
Manhattan, KS 66506


From: (Joel Moses)
Date: Mon, 12 Jun
Subject: Symposium on Policy Dilemmas of Post-Soviet Countries

I would call the attention of JRL subscribers to a recently published 
symposium of articles which should be of particular interest to them. The 
symposium, which I edited, is entitled "Policy Dilemmas of Post-Soviet 
Countries." The symposium focuses on the inherent dilemmas and 
contradictions between policies intended to advance foreign investment and 
privatization since 1991 and long-term democratization in post-Soviet 
countries. The symposium appears in the current issue (Vol. 28, No. 1 2000) 
of POLICY STUDIES JOURNAL. The articles go beyond mere theory or 
speculation. Each is an originally researched case-study based on primary 
resources, interviews, surveys, and observations in the actual country by the 
authors and supplemented with extensive tables, figures, and graphs. 
Contributing authors and their articles include: Stephen Wegren (State 
Withdrawal and the Impact of Marketization on Rural Russia), Patricia Davis 
and Peter Dombrowski (International Assistance to the Former Soviet Union: 
Conditions and Transitions), Kathryn Stoner-Weiss (Foreign Direct 
Investment and Democratic Development in the Russian Provinces: A 
Preliminary Analysis), Alfred Evans (Economic Resources and Political 
Power at the Local Level in Post-Soviet Russia), and Terry Clark 
(Privatization and Democratization in Lithuania: A Case Study of Who 
Benefits in Siauliai). Single copies of this particular issue of POLICY 
STUDIES JOURNAL can be purchased by contacting either Mack Shelley, the 
editor-in-chief of the journal (, or Stuart Nagel of 
the Policy Studies Organization (


Subject: U.S. Russia Policy
Date: Mon, 12 Jun 2000 15:19:07 -0400
From: Tom Graham <>

East European Constitutional Review (Winter/Spring 2000) 
A Quarterly Published by New York University Law School and Central
European University

Putin's Russia
Why Economic Reform Requires Political Support 
Reflections on US Policy Toward Russia
By Thomas E. Graham, Jr.
Thomas E. Graham, Jr., a senior associate at the Carnegie Endowment for
International Peace, was the chief political analyst at the US embassy in
Moscow from 1994 to 1997. This article draws extensively on the report by a
US working group on "US-Russian Relations at the Turn of the Century,"
coauthored by Thomas Graham and Arnold Horelick. The working group was
organized by the Carnegie Endowment for International Peace. The full text
of the report is available at the Carnegie Endowment website,
Mr. Graham, however, is solely responsible for the contents of this article.

Does Russia matter any longer? This is the first and fundamental question
we must ask, as we contemplate US policy toward Russia in the post-Yeltsin
era. It is a mark of how much the world has changed over the past
generation that this question now has to be posed. Twenty years ago, no one
asked because the answer was axiomatic. Russia, in the guise of the Soviet
Union, was the other superpower, the ideological rival; US-Soviet relations
defined the international system. Quite rightly, the Soviet Union was the
central focus of US foreign policy, the prism through which all other
issues were viewed. The rivalry was pursued around the globe: Europe was
the key battlefield; the Middle East, with its vast energy resources, was a
close second.
Nuclear deterrence made each side wary of letting competition escalate into
violent confrontations, although each side engaged in violent conflicts
with the other's proxies- outside the regions of core strategic interest to
both-primarily in Africa and Southeast Asia. 

The breakup of the Soviet Union eight years ago did little to change our
perception that Russia was central to our own security and well-being,
although the nature of its importance and the character of the US-Russian
relationship itself had changed dramatically. Russia was no longer the
United States' strategic adversary; indeed, it was not an adversary at all.
Rather, the Clinton administration came to office calling for a "strategic
alliance with Russian reform." The goal was, as Deputy Secretary of State
Strobe Talbott repeatedly reminded us, to help Russia's reformers transform
their country into "a normal, modern state-democratic in its governance,
abiding by its own constitution and by its own laws, market-oriented and
prosperous in its economic development, at peace with itself and with the
rest of the world" ("The End of the Beginning: The Emergence of a New
Russia," an address delivered at Stanford University, September 19, 1997;
text available at Such a
Russia could be a near-equal partner with the United States in building
peace and ensuring stability around the globe, but primarily in Eurasia. 

How distant those objectives seem today after the sharp deterioration in
US-Russian relations and the mutual disillusionment of the past two years.
The financial crisis of August 1998 marked the end of the grand project of
rapidly turning Russia into a stable democracy with a market economy, a
goal that had been the focus of so much effort, at least on the part of the
US administration (whether the Russian government shared our aims is now an
open question, given the revelations of the past year regarding the extent
of high-level corruption in Russia). Although the Clinton administration
continues to talk of Russia as a major power, it has clearly downgraded
relations. America's policies on NATO expansion, Iraq, Kosovo, and national
missile defense all demonstrate that the administration is prepared to give
precedence to many other matters over Russia. These policies, along with
the Bank of New York scandal and the war in Chechnya, have strained the
relationship. Indeed, US-Russian relations today are arguably at their
lowest point since the demise of the Soviet Union. 

Moreover, Russia itself at the end of the Yeltsin era looks like a failed
or failing state. Russia's socio-economic collapse, largely unanticipated,
has been unprecedented for a Great Power, let alone a super-power, not
defeated in a major war. In a little more than a decade, the economy
controlled by Moscow has fallen in absolute GNP from third in the world
(behind the United States and Japan) to sixteenth (behind India, Mexico,
and South Korea, and just ahead of Argentina). Russian GNP is now roughly a
third of Soviet GNP at its peak (1989); since the breakup of the Soviet
Union, Russia's economy has plummeted by nearly half. At the same time,
Russia has been transformed from a misindustrialized economy (the result of
the Soviet leadership's near-exclusive focus on the military-industrial
complex) into a deindustrialized economy (the unintended consequence of
misguided reform policies). Between 1990 and 1996, the share of the
natural-resources sector in industrial production rose from 24 percent to
51 percent, while the share of the machine-building sector fell from 31
percent to 16 percent and that of light industry from 12 percent to 2
percent. (The situation has improved little, even with the rapid growth in
industrial production since the August 1998 financial crisis.) (Data on GNP
has been drawn from the World Bank's World Development Indicators, update
July 1, 1999, and A. Illarionov, ed., Rossiya v menyayushchemsya mire
[Moscow: Institute of Economic Analysis, 1997], Tables 4.3.1 and 4.5.1. See
also Vladimir Popov, "Vyvoz syr'ya-eto ne stydno," Ekspert 41 [November 2,
1998], available at . Vladimir Putin lays out the basic
parameters of Russia's economic decline in his "Russia on the Threshold of
the Millennium." The text may be found in English at english/statVP_engl_1.html) 

Russia's fate over the past decade has diverged radically from that of the
United States, which is experiencing its longest economic expansion in
history. We are now the world's preeminent power, with no plausible rival
on the horizon; the administration is fond of speaking of the United States
as the "indispensable nation." The power asymmetries between the United
States and Russia are enormous, and, by most estimates, will only grow over
the next few years. Again, economic data illustrate the point: in 1987,
Soviet GNP was about 30 percent of US GNP; today, Russia's GNP is roughly 5
percent of the United States'. The gap is still increasing, even though
Russia's GNP grew by over 3 percent in 1999, because the US economy grew by
just over 4 percent. 

Why should the United States, at the height of its power, care much about
Russia, which has reached its lowest point in centuries in terms of
relative power? Many observers, in fact, would argue that the United States
need not be concerned. In Congress and in the wider foreign policy
community, the "Forget Russia" school has steadily gained adherents over
the past few years. This school argues that Russia simply does not
matter much in the world any longer and does not merit a lot of our time,
money, or effort. The sharp decrease in overall funding for US assistance
to the former Soviet Union and the redirection of even those limited funds
away from Russia illustrates the low regard with which Russia is held by
much of the foreign policy establishment. (Funding for US govern-ment
assistance to the NIS under the Freedom Support Act declined from $2.5
billion in FY 1994 to $847 million in FY 1999, according to the FY 1999
Annual Report to Congress of the Coordinator of US Assistance to the NIS.)
The meager interest in the congressional hearings on corruption in Russia
last fall-committee meetings were poorly attended- provides another

Nevertheless, such an approach remains misguided, for Russia continues to
matter in many of the areas it used to, albeit in different ways, even if
it no longer occupies center stage in US priorities and must compete for
attention with Europe, China, Japan, and other countries and regions. Most
immediately, Russia matters because it possesses a vast nuclear arsenal,
abundant quantities of fissile material, and the technology and know-how to
build weapons of mass destruction. In addition, Russia borders on regions
of great strategic interest to the United States: Europe, the Middle East,
and East Asia. It retains its veto in the UN Security Council and thus the
ability to thwart US initiatives brought before that body. And, finally,
Russia is richly endowed with natural resources and a well-educated
population, two factors that give it considerable economic potential over
the long run, even if Russia's economy is mired in a deep depression at the

But we are no longer concerned so much by Russia's strength as by its
weakness. In other words, Russia matters less for what it can do than for
what it cannot do. This is the most dramatic change of the last twenty
years. A generation ago, we worried about the great military capabilities
of the Soviet Union wedded to hostile intentions. Now we are more concerned
by the risk of loose nukes-by the deterioration in Russia's capacity to
ensure the safety and security of weapons of mass destruction and the
proliferation problems that lessened capacity creates. A generation ago, we
worried about Soviet aggression in Europe and the Middle East. Now we are
far more concerned that instability and a breakdown in governance in Russia
could spill over and destabilize its neighbors, many of which are fragile
states themselves. A generation ago, we worried that the Soviet Union's
veto in the Security Council undermined the effectiveness of the United
Nations. Now we are-or at least should be-concerned that Russia's weakness,
coupled with growing resentment of the United States, has increasingly
tempted us to circumvent the Security Council in pursuit of our goals. A
generation ago we worried about the implications of the Soviet Union's
economic potential for its military might. Now we are more concerned that
Russia's decline could reach levels that would transform it into an object
of competition among more-advanced economic powers. 

Paradoxically, for the next decade at least, the weaker Russia grows in
absolute terms, the more it will matter to the United States. For that
would exacerbate all the problems arising from what Russia cannot do and,
at the extreme, would lead to Russia's becoming a so-called failed or
disintegrating state. Few people in Washington would welcome the
opportu-nity to contemplate the implications of state collapse in
connection with such problems as loose nukes, nonproliferation, and
stability in Eurasia. On the other hand, Russia's revival would ease all
those concerns. Ideally, of course, we would like to see Russia revive as a
friendly power, as a normal country with which we could both cooperate and
compete. But even a less-than-friendly Russia would be incapable of
resurrecting the global threat to US security that the Soviet Union once
posed. It would have neither the economic and conventional military prowess
nor the ideological appeal for that. Moreover, even in a revival scenario,
Russia is likely to continue to fall behind the world's leading economic
powers, and its conventional military forces would prove no match for the
United States' in the regions vital to our interests. As a result, Russia
would matter less to the United States than several other developed and
devel-oping nations in Europe and East Asia. 

* * * *

Strangely, then, a key goal of US policy in the post-Yeltsin era should be
to make Russia matter less by helping it regain its strength. A second goal
should be to rebuild goodwill for the United States among the Russian
elites and the broader public to increase the chances that a reviving
Russia will also be a friendly Russia. Achieving both these goals will
require that the United States rebuild relations with Russia, which have
suffered greatly over the past decade in large measure as the result of the
Clinton administration's flawed policies. Formulating appropriate policies
will require understanding why
those policies fell so far short of their goals. 

It was not, of course, supposed to turn out that way. The Clinton
administration came to office with the best of intentions vis--vis Russia,
determined to help transform Russia into a robust democracy, based on a
prosperous market economy, and a constructive partner for the United States
around the globe. The administration may have devoted considerable time to
security matters in its first years-ensuring that Russia kept its
commitments to withdraw its troops from Central Europe and the Baltics and
working with Russia to persuade Ukraine to let the Soviet nuclear weapons
on its territory be withdrawn to Russia for dismantling. But the
administration's real enthusiasm lay in the grand project of transforming
Russia domesti-cally. From the very beginning, it was deeply involved in
Russian domestic politics, calibrating the timing of its public statements
and announcements of significant initiatives to the domestic political
needs of President Yeltsin and a group of "radical reformers." The
admin-istration played a leading role in forging the "Washington
consensus"-the focus on monetary and fiscal measures for the purpose of
macroeconomic stabilization- that became the West's guide in pressing
economic reform in Russia. Those espousing this consensus devised an
extensive package of assistance programs to further democratization and

Even in the security realm, the administration packaged issues in ways
intended to bolster-or at least not undermine-Russia's reformers. It was
more than willing to trade symbolism for substance. Russia, for example,
was treated publicly as a major power-note its inclusion in the G-8 or
cochairmanship of the Mideast peace process-even though it brought little
to the table. President Yeltsin was hailed as a leading world figure,
despite his at times embarrassing behavior and increasingly ragged record
of delivering on his promises. All this was intended to bolster Yeltsin
and the radical reformers at home, even while the United States pursued
policies without giving much heed to Russia, for example, on NATO
enlargement or Caspian pipelines. 
As the Clinton administration draws to the close of its second term, it has
little to show for its efforts. Instead of a sustained economic recovery
built on market principles and a robust democratic polity, we find Russia
mired in a deep socioeconomic depression with its democratic achievements
unconsolidated and at growing risk. While US technical assistance imparted
a considerable body of information on democratic and market structures and
institutions to Russians, much of it was inappropriate for Russian
traditions and conditions. Some of the policies we strongly backed, such as
"cash" privatization or the issuance of government bonds (GKOs), were in
practice corrupted for the benefit of a small elite, which greatly enriched
itself while the over-whelming majority of the population endured a sharp
deterioration in living standards. Finally, as already noted, a
constructive US-Russian partnership now appears a distant dream. 

There are many reasons for this failed policy. The United States and its
Western partners lacked a coherent strategy for advancing economic and
demo-cratic reform and they did not put sufficient effort into coordinating
its implementation. The programs, particularly in their initial phases,
were too reliant on Western consultants without a deep knowledge of Russia.
But most important, the administration did not move energetically enough to
build public support in Russia for its policies or for those it was
encour-aging the Russian government to pursue, nor-what is truly remarkable
for an administration that paid such close attention to public opinion in
the United States-did it press its Russian partners to build a solid
domestic base. In the end, the administration found itself strongly backing
a small unpopular group of radical reformers, pressing ahead with their
program against the wishes of the majority in the Duma and without much
public support. Not only was the economic program not implemented but the
way in which it was pursued cast doubt on American support for the
democratization of Russia. 

In the security realm, the administration was finally undone by its
pretense. Trading symbolism for substance, treating Russia publicly as a
Great Power and jollying Yeltsin as a leading world figure, worked as long
as the Russians thought their country would recover quickly-with Western
assistance-and that they would soon be able to insist on substance, in
addition to the symbols. This approach produced some undoubted achievements
in the Clinton administra-tion's first years in managing the old Soviet
nuclear arsenal and Russian troop withdrawals from Central Europe and the
Baltics. But as the promised economic recovery retreated into the distance,
Russian elites increasingly saw US policies, such as NATO expansion,
support for multiple pipelines out of the Caspian region, or opposition to
Russian-Iranian cooperation in the nuclear field, as efforts to take
advantage of Russia's weakness. Over time, these elites became ever less
satisfied with symbols and began to demand a real voice, which the US
administration was less inclined to give, in part because of the gaping
asymmetries in power between the two countries. The growing disjunction
between the administration's words about Russia's importance and the
treatment it meted out only fueled greater resentment within Russia. 

The Russians themselves must, of course, bear ultimate responsibility for
the failure of the reform effort, with the radical reformers bearing the
lion's share: their technocratic approach, deep-seated disdain for public
opinion, and callous disregard for the suffering their policies would
engender undermined the chances of success from the very beginning.
Similarly, the Russian elites' resistance to facing up to the depths of
their country's predicament and their own Great Power pretensions have only
complicated efforts to keep US-Russian relations on track. But it is
remarkable for just how long the Clinton administration refused to
acknowledge the obvious failings of the Russian reformers, the obstacles
its policies were encountering, and the mounting difficulties plaguing
relations with Russia (some would argue it has yet to take that step). The
American public was repeatedly assured that relations were on track and
that Russia was making steady progress in building a democracy and market
economy, despite some inevitable bumps along the way. A little less than a
year before the August financial crash, Deputy Secretary Talbott was
arguing that Russia was at "the end of the beginning" of its journey toward
becoming a "normal, modern state." "It may be," he said, "on the brink of a
breakthrough" (address at Stanford University, September 19, 1997). This
failure to deal forthrightly with the problems, and to acknowledge their
seriousness, was perhaps the fatal flaw in the administration's approach to

This flaw arose from, and was constantly rein-forced by, the
administration's overly close relationship with Yeltsin and a small group
of radical reformers, which distorted its perception of the real situation
in Russia. Management of relations was concentrated in the hands of a small
circle of senior officials on both sides and focused on the domestic
transformation of Russia. This arrangement required constant interaction
and a high level of trust to function effectively. The result was that
administration officials relied heavily on their Russian partners for
insights as to what was happening in Russia and how to proceed. Moreover,
the success of their Russian partners became critical to the progress of
the enterprise as a whole, and gradually the political survival of key
Russian officials, such as privatization czar Anatoly Chubais, became a
substitute for the success of reform as a whole. This ultimately
contributed to a serious misreading of the political situation, which
resulted in Washington's being caught off guard by the financial collapse
of August 17, 1998, and it caused the admin-istration to discount the
growing signs of anti-US sentiment among Russian elites. This same
misreading, in its aftermath, complicated the develop-ment of good, working
relations with Russian governments, once the Clinton administration's
reformist partners had been dismissed. 

In the end, the administration squandered the reservoir of goodwill
Russians had for the United States at the time of the Soviet breakup. To be
sure, it was inevitable that the reservoir would drain as Russians came to
understand that the United States was prepared to deliver much less
assistance to Russia's movement away from its Soviet past than they had
expected. But the close identification with an increasingly feeble Yeltsin,
strong support for a team of radical reformers with a thinning popular
base, and public insistence on reform programs that most Russians believe
led their country to ruin have caused increas-ingly more Russians to
question the wisdom, judgment, and benevolence of the United States. The
polls of the Department of State's Office of Research have traced a steady
decline in favorable opinion of the United States from over 70 percent in
1993 to 65 percent in 1995 to 54 percent in 1999 to 47 percent earlier this

* * * *

The transfer of power in Russia from Boris Yeltsin to Vladimir Putin
presents an opportunity for a new beginning in US-Russian relations. Putin
is clearly more energetic and coherent than the Yeltsin of the last few
years. He appears intent on rebuilding the Russian state, in disciplining
the government bureaucracy, and reasserting Russia's role in the world. At
the same time, an elite consensus, albeit shallow, has slowly emerged on
questions of both domestic and foreign policy. As a result, the United
States could find itself dealing with a coherent Russian government-with a
sense of where it wants to take the country-for the first time since the
early years after the breakup of the Soviet Union. Given the growing
anti-US sentiment in the Russian political elites, however, this is not
going to be an easy relationship to manage. 

Taking advantage of this opportunity and managing this relationship to the
maximum benefit of the United States will require that we reorder our
priorities, change our emphasis, and lower our expec-tations. Logically,
given the realities of American politics, these changes can come only when
a new administration takes office early next year. This is not the place
to delve into details about the full range of policy choices a new
administration will face-much in fact will depend on what happens in Russia
the coming year. But some general propositions and guide-lines to order its
thinking would not be premature. 

First, the next administration should start, as the Clinton administration
did, from the proposition that Russia is no longer a strategic adversary
and that it remains an important country for US interests. But, unlike the
Clinton administration, the new president and his advisers should also
begin with the assumption that Russia can no longer occupy center stage in
our foreign policy, that it will have to compete for our attention with
other states and regions, particularly Europe, China, and Japan. The new
administration should make clear in its public pronouncements 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, it 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 by no means the most important. On still others, such as
security in East Asia, its role will be even less. And, finally, on a range
of global economic matters, it will be a secondary consideration at best. 

It follows that the next administration should not look at the world
through the prism of US-Russian relations. The new administration, however,
should still consider Russia's interests when formulating policy on issues
where Russia is not the key player, and seek policies that advance US
concerns while also benefiting our relations with Russia. That approach is
critical to building the trust and confidence needed to work constructively
with Russia on those matters of great strategic interest to us where Russia
still matters crucially. At times, however, the United States will be
forced to choose between its larger interests and its relations with Russia
and, of necessity, the choice will have to be made against Russia.
Continued NATO expansion might be such a matter. In these cases, the goal
should be to lower the cost to US-Russian relations as much as possible.

Second, like the Clinton administration, its successor should be
predisposed to engaging Russia, but it should approach Russia with fewer
demands. It takes two to interact, and the current weakness of the Russian
state will limit the extent to which we can engage Russia productively. For
this reason, it is imperative that the United States set realistic goals,
which take into account Russia's dwindling resources, and focus on issues
where Russia remains relevant. To do so will produce the best chances for
the success necessary to build both the public support in the United States
for continued construc-tive engagement as well as the trust between the two
countries required for productive cooperation on the top-priority security

Third, in engaging Russia, the new administra-tion should maintain a
respectful distance from the Russian leadership, in sharp contrast to the
Clinton administration's approach. This should not be difficult; Putin and
senior officials in his government are not the type of people the next
administration would likely want to embrace. In fact, the harder part might
be establishing the level of rapport that is critical to improving
relations between the two countries. At the same time, the incoming
administration needs 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
leeched away over the last seven years. 

Fourth, the future administration's domestic priority in Russia should be
rebuilding the goodwill for the United States that the Clinton
administration has squandered. Much of what is done in this area will also
have the added benefit of encouraging movement toward democracy and a
market economy in Russia. To this end, the next administration needs to
pursue a much more vigorous, coordinated public-diplomacy effort in Russia,
aimed at explaining who we are as a nation and what we are up to in Russia,
in particular, and in the world, in general. It should also expand the
network of US information centers-now located in seven Russian cities-which
offer a range of books and materials on the United States, as well as
Internet access, to interested Russians. Finally, the new admin-istration
should expand and improve exchange programs, which, by all accounts, have
been the most effective programs in imparting American values to Russians
and winning goodwill for the United States. 

Fifth, to the extent that the next administration is engaged in assisting
domestic developments in Russia, it should allow the Russians to take the
lead and respond to Russian demands. On economic matters, for example, the
task is to formulate a rational economic program that enjoys sufficient
political support so as to have a reasonable chance of imple-mentation. As
a matter of policy, we should be more agnostic than the Clinton
administration has been on the details of any such program, even if it is
clear in general what issues have to be addressed (for example, tax reform,
microeconomic restructuring, commercial codes, and property rights). The US
should leave the initiative for developing an appropriate program in the
hands of the Russian government, while reassuring it that the United States
is prepared to assist if the program makes sense. A similar approach should
be taken toward democratic reform, although here the initiative should
reside not solely in the Russian government but also with regional
authorities and private organizations. Once again, the United States should
be prepared to assist programs that make sense and appear to have
sufficient local backing for success. 

Sixth, the next administration needs to be less judgmental about
developments in Russia. The point is that, while we know what a democracy
and market economy should look like, we have a considerably less-than-
complete understanding of how Russia can build them, starting from the
current realities. The situation is simply too complex and, in many ways,
too novel for it to be otherwise. Moreover, while setbacks are
inevitable-something everyone is prepared to admit-they are also probably
necessary for further progress in achieving both democracy and free
markets. Failures can galvanize both the elites and the public's support
for taking the appropriate, but tough, measures required to move forward. 

In addition, a new US administration needs to appreciate just how much the
Russian state has collapsed over the past decade. President Putin is right
to focus on rebuilding the state, as a necessary step in Russia's
socioeconomic revival. But doing this will almost certainly look
authoritarian in its initial phases, as the state begins to reassert its
prerogatives in enforcing and interpreting laws. There will necessarily be
excesses of zeal in institutionalizing the rule of law. Of course, there
are red lines, in the observance of human rights, for example, the
violation of which would demand the most forceful protest, but, for the
most part, the administration should remain focused on the long term and
resist exaggerating the importance of single events. 

Last, the next administration should seek to build as benign an
international environment for Russia as possible so that it can devote its
energies primarily to internal reconstruction. This will be exceedingly
diffi-cult to do, in part because the Russian political elite is inclined
at the moment to see almost anything the United States does with or around
Russia as aimed at expanding its influence at the latter's expense. But
some steps will surely help. For example, the next administration should
continue efforts to integrate Russia into the global economy by
facilitating Russia's entry into the World Trade Organization and by
lowering trade barriers to US markets for competitive Russian products,
especially in the high-tech sector. Similarly, the next administration
should step up efforts both to build cooperation between Russia and NATO on
the basis of the Permanent Joint Committee and to reduce provocative
Partnership for Peace military
exercises, especially in Central Asia, a region of much less vital
significance to us but one that the Russians consider vital to their

That said, it is inevitable that we will pursue certain policies in our own
strategic interest that will, at least in the short term, run counter to
Russia's inter-ests, as perceived by Russian elites-for example, NATO
expansion and national missile defense. We should seek to pursue these
goals in ways that do as little damage as possible to relations with
Russia, but in no case should we give Russia a veto over our actions.
Articulating as clearly as possible to the Russian leadership and, just as
important, to the interested public our goals and the reasons for pursuing
a given policy should help diminish the damage. 

* * * *

The last twenty years have witnessed a dramatic change in the way we think
of Russia. From being the other superpower, which commanded our almost
undivided attention, Russia has become one of the many other powers, albeit
still an important one by reason of its nuclear arsenal and know-how,
geographic location, and rich natural and human resources. The hope of
turning a once-implacable enemy into a constructive partner building an
enduring peace in Eurasia has faded, as Russia plunged into a deep
socioeconomic crisis and as it became clear that we shared a common view of
the world only in the abstract. On the practical level, the differences are
significant, and they have grown over the past decade. 

Nevertheless, Russia is still as critical to the United States' security
and well-being as it was a generation ago, albeit for different reasons,
and it will likely remain so for years to come at the very minimum. The
sharp deterioration in relations over the past few years serves the
interest of neither country, as each seeks to deal with the complexity of
international affairs in the twenty-first century. Fortunately, the advent
of new leaderships in Washington and Moscow offers an opportunity to put
relations back on track, even if it hardly guarantees a happy outcome. Much
will depend on how Russia itself develops, and, specifically, on whether it
recovers or continues to decline; on how the Russia elites understand their
interests and role in world affairs; and on whether Russia seriously wants
to rebuild relations with the United States. But none of this is a reason
to hesitate. On the contrary, the next administration should seize the
opportunity, but with a clear understanding of Russia's strategic
interests, the realities shaping and constraining its capacity to
cooperate, and our core interests in Russia. Only in that way can our
country hope to obtain the still-great benefits of getting the relationship


Financial Times (UK)
13 June 2000
[for personal use only]
Tea baron with a taste for battle: PROFILE IGOR LISINENKO, 
MAISKY CHAI: The ex-naval officer conquered Russia's tea industry. Then he 
tackled politics, says John Thornhill

In the summer of 1991, as the Soviet Union was crumbling, a young Russian 
naval officer knocked on the door of the Sri Lankan embassy in Moscow and 
asked the startled diplomats if they would give him a container of tea - on 
credit. Such were Igor Lisinenko's powers of persuasion - and the desperate 
state of the Sri Lankan tea industry- that he soon took delivery of an 
18-tonne container of tea. Mr Lisinenko promptly sold the tea and paid back 
his suppliers. 

So was launched Maisky Chai (May Tea), which has expanded into one of 
Russia's biggest consumer companies, and Mr Lisinenko's crusade against the 
centres of money and power in Russia. 

Mr Lisinenko says he approached the Sri Lankan embassy after reading that the 
country's tea industry had been devastated. Its biggest export market, Iraq, 
had collapsed in the wake of the Gulf war. 

"I saw that on the one hand there was a lot of overproduction of tea in Sri 
Lanka, and at the same time a huge deficit within the Soviet Union. There 
were enormous queues in the shops to buy a single packet of tea," he recalls. 
"So I went to the Sri Lankan embassy and said: 'I am an entrepreneur and it 
is my destiny and challenge to supply the Soviet Union with the best Ceylon 
tea in the world.' " 

Within seven years, the company Mr Lisinenko founded had won 25 per cent of 
the Russian tea market and diversified into other products such as coffee and 
ketchups, and markets such as Ukraine and Kazakhstan.. 

But as Mr Lisinenko succeeded in expanding his business, he found he 
increasingly brushed up against the old Communist party nomenklatura, who 
still preserved their hold on the country's economy. 

At first, Mr Lisinenko negotiated a deal with the owners of the Moscow 
Hippodrome, allowing him to stack his 40ft tea containers in their car park. 
But as the company's containers mounted, Mr Lisinenkoapproached the Moscow 
city administration for some land. After a long delay, the city authorities 
allocated him a seven hectare rubbish tip in the Pechatniki district on the 
edge of town. "It was symbolic in a way," he says. "I only ever inherited 
rubbish from the nomenklatura." 

With typical determination, the decorated Afghanistan war veteran cleared the 
site. He removed the top 3m of soil, unearthing several unidentified corpses 
in the process. He believes the bodies were probably those of "snowdrops" - 
drunks who have frozen to death, been buried in snowdrifts and removed by 
street cleaners, and whose corpses reappear in the spring thaw. 

Mr Lisinenko's skirmishes with the authorities, and the effects of Russia's 
financial crash of August 1998, convinced him that he needed to promote the 
interests of private business in Russia. And that meant moving into politics. 

As the vice-chairman of the committee on property and business affairs in the 
Duma, the national parliament, he has the chance to help shape more 
business-friendly legislation - though it comes at a cost: members of the 
Duma are obliged to relinquish any day-to-day business responsibilities. 

The softly-spoken 38-year-old, who constantly breaks off his conversation to 
whisper into his minute mobile phone, argues that a new generation of young 
entrepreneurs is now beginning to make its influence felt in Russia. Having 
watched the country's "oligarchs" ravage the country's natural resources and 
leech money out of the state, these new private business leaders are pressing 
President Vladimir Putin to establish fair rules of the game for everyone. 

"It is impossible to be a capitalist in a post-communist country," Mr 
Lisinenko asserts. "It is a question of whether I survive and help change the 
political system, or whether the nomenklatura survives. 

"I represent a younger generation of entrepreneurs and politicians who, after 
they have created the country's new economic basis, will change its politics. 
This new generation of entrepreneurs has worked very hard to create their 
economic structures and they will come to power like spring arrives after 
winter," he says. "We cannot just wait for that to happen, we have to do 
something. We have to be elected to the Duma and push our views through 
democratic institutions and the media," he says. 

The tea magnate's competitors, including some of the oligarchs who are now 
moving into consumer businesses, tend to dismiss him as a naive, 
self-publicising crank. 

And, they mutter darkly, that Mr Lisinenko owes much of his business success 
to the contacts he made while working in the Komsomol (Communist Youth 
League) and Afghan veterans' associations, which were granted special import 
privileges by former president Boris Yeltsin in the early 1990s, but were 
quickly taken over by criminals. 

Mr Lisinenko hotly denies these accusations, insisting that he has always 
kept his business and politics separate and has never benefited from any 
budget funds or quotas. 

He says he regrets his involvement with the Komsomol movement in the late 
Soviet era and never profited from his links with the Afghan veterans' 
associations. Indeed, he claims that in Russia's murky business climate there 
are competitive benefits in running a clean company. He has three cardinal 

"My first rule was to try to stay as far away from the nomenklatura as 
possible. That was why I chose tea. They rushed to corrupt the raw material 
businesses and I went in exactly the opposite direction," he says. 

His second rule was to try to overcome all obstacles by open, public means. . 
When the Moscow government refused to allocate him some land, he went to the 
press to complain about the "closed circle" that prevented outsiders from 
breaking into the city's markets. 

The third rule was to pay all his taxes. "Businessmen in Russia have often 
become corrupt after they did not pay money to the government and the 
government used it as a lever to make them dependent," he says. "If you do 
not pay even one single rouble that you owe, you will be suppressed by the 

Early life: Born in 1962 in Poltova in Ukraine, Igor Lisinenko served as an 
interpreter with the spetsnaz (Soviet special forces) during their campaign 
in Afghanistan, earning the Order of the Red Star, one of the Soviet Union's 
highest military decorations. After returning to Russia, he served with the 
Black Sea fleet before joining Komsomol. Maisky Chai: Mr Lisinenko decided to 
name his company after the month in which he was born. "May means spring and 
the reopening of nature and it was clear for me that Russia must reopen too," 
he muses. Personal crusade: Mr Lisinenko has been pressing the Russian 
government to try to recover some of the Tsarist government's gold reserves. 
These were sent to France, Britain, the US and Japan to pay for arms during 
the first world war. The Bolshevik revolution in 1917 meant the arms were 
never delivered. With compound interest over 80 years, Mr Lisinenko estimates 
the gold should be valued at Dollars 400bn. On Putin: Mr Lisinenko is 
undecided about President Vladimir Putin, describing Russia's new ruler as "a 
black box". 

He approves of Mr Putin's action to strengthen the state, but criticises the 
brutality of the Chechen war and attempts to curb press freedoms. 

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