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Johnson's Russia List
 

 

November 3, 2000   

This Date's Issues:   4617  4618  4619

 

Johnson's Russia List
#4619
3 November 2000
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: Most Russians Trust Army, Secret Service.
2. Izvestia: RUSSIANS ARE WORRIED ABOUT PRICES, A STRONG ROUBLE, THEIR COUNTRY'S DEFENSE CAPACITY AND CORRUPTION.
3. Stanislav Menshikov: HOW IMPORTANT ARE REFORMS FOR GROWTH? Fresh Look at "Virtual Economy" Needed.
4. Masha Gessen: Re: 4618-Stratfor.
5. Regina Faranda: 4617-response to Rachmaninov.
6. Nicolai N. Petro: Lesin interview.
7. Moscow Times: Peter Ekman, Passports Are the Root of All Evil.
8. BBC Monitoring: Dissident Russian journalist comments on environmental time bomb in. (Pasko)
9. Andrew Miller: comment re JRL #4617/Rachmaninov.
10. UPI: Ariel Cohen, Russia, EU moving toward energy deals.
11. Jamestown Foundation Monitor: RUSSIA RANKS AMONG THE LOWEST ON ECONOMIC FREEDOM LIST.
12. Thomas Graham: U.S.-Russian Relations: Risks and Prospects.]

******

#1
Most Russians Trust Army, Secret Service

MOSCOW, Nov 3, 2000 -- (Agence France Presse) Most Russians trust their
army and the domestic intelligence agency but are less trusting of their
police force, according to an opinion poll published Thursday.

Seventy-eight percent of Russians were confident or fully confident in the
army according to the ROMIR institute, a member of Gallup International.

Meanwhile, 56 percent of respondents said they either trusted or fully
trusted the Federal Security Service, against 29 percent who viewed the
main successor to the Soviet-era KGB with suspicion.

Policemen came in at the bottom of the poll, with only 47 percent of
respondents saying they more or less trusted the interior ministry's
finest, while 37 percent expressed little or no trust in the force.
Some 2,000 people were contacted for the poll, ROMIR said.

******

#2
Izvestia
November 3, 2000
[translation from RIA Novosti for personal use only]
RUSSIANS ARE WORRIED ABOUT PRICES, A STRONG ROUBLE, THEIR
COUNTRY'S DEFENSE CAPACITY AND CORRUPTION
By Andrei STEPANOV

Today, ten years since the market reforms begun, a third
of Russians say that one of the government's main tasks is to
exercise state control over prices and almost a half demand
that Cabinet members should reduce prices.

Sociologists from the All-Russian Central Public Opinion
Research Center, or VTsIOM, asked Russians to draw the
government's opinion to the most important problems and
compared the answers received in opinion polls conducted in
October with those a year and six months ago (in September 1999
and March 2000). It turned out that, just like a year ago,
Russians regard the reduction of prices as nearly the main task
of the government. (Whereas last year it was the second most
important problem next to wage arrears, this year it is Problem
No. One.) The number of Russians who said so was the same in
October and six months earlier - 46% of respondents. The second
most important task is the strengthening of the rouble and
raising its exchange rate. As many as 37% of respondents think
so today, compared with 40% in 1999.
The above results show that Russians are mostly worried
about their living standards. At the same time, they believe
that it is the government that should, first and foremost, work
to improve them. (Among the other priority tasks a third of
respondents named government control over prices and 35% - what
should at least alarm the government - mentioned indexation of
wages, pensions and bank accounts.)
There were other surprises. Thus, the task to struggle
against corruption and embezzlement of public assets raised to
second place (37%) from its sixth place last year (22%). The
number of Russians concerned about the urgent need to
strengthen law, order and legality and combat crime increased
by 9%. The problem of financing agriculture raised from eighth
to fifth place and it now worries 10% more Russians than last
year.
By and large, the absolute leader of opinion polls
conducted in autumn 1999 - the demand to pay wage, pension and
stipend arrears (55%) has yielded this autumn to the desire to
get more money, regardless of the financial results of the
enterprises at which respondents work. The number of
respondents demanding financial support for state-run
enterprises (9th place) rose by 5%, of those who want
re-nationalization of privatized assets in the key economic
sectors (10th place) by 4% and those in favor of strengthening
the defense industry complex and the country's defense capacity
(11th place) by 7%.
There has been a tangible decrease of people's interest in
such "government tasks" as filling shop shelves with food and
commodities (only 3% of respondents mentioned this task this
year, compared with 12% a year ago). The last on the scale of
Russians' concerns are support for the banking sphere and
guarantees for bank accounts (5% this year, compared with 7% a
year ago) and tax collection (7%, compared with 10%).

******

#3
From: "stanislav menshikov" <menschivok@globalxs.nl>
Subject: HOW IMPORTANT ARE REFORMS FOR GROWTH?
Date: Fri, 3 Nov 2000

"MOSCOW TRIBUNE", 3 November, 2000
HOW IMPORTANT ARE REFORMS FOR GROWTH?
Fresh Look at "Virtual Economy" Needed
By Stanislav Menshikov

There is a new magic formula that is faithfully repeated today by some
economic analysts. It runs somewhat like this: "Sustainable growth is
impossible without serious structural reforms". The formula is handy for
those who wish to somehow explain the fact of the unexpected boom-like
growth this year or to speculate about any new statistics that might look
like a signal of impending (and inevitable) slowdown. All such analysts
have to do is to continue "blaming" current record growth on high oil
prices and keep predicting that their eventual fall will bury growth unless
"reforms" are implemented soon. Seen in this light, the current cabinet is
"good" because it has a big (1,000 pages long) programme of reforms and
very unlike one of its "bad" predecessors which could never even formulate
in clear Russian language what it was up to economic policy. The formula
looks convenient but is it true?

The words "sustainable growth" have only one meaning in professional
economic parlance: it is growth generated by the economy itself rather than
being pushed ahead by the government or other exogenous forces. If the
economy cannot grow unless it is being stimulated by government spending or
export price bonanza, then there is something wrong with it, i.e. the
normal market mechanism is presumably absent or does not work. When in the
1990s the Russian economy collapsed and later stagnated it was explained
that for various reasons market reforms were not completed. It was a
"virtual" (i.e. unreal) economy in which barter ruled instead of market
prices grinding it to inefficiency and standstill. Barter was presumably
inevitable because most Russian industry (except oil, gas, and some others)
was non-competitive and could not sell its products for cash. Such an
economy could not grow by definition. Some authors became famous by
inventing the very term "virtual economy".

That scientific discovery occurred in mid-1998, just before the August
financial crash. Soon after, the Russian economy started growing and never
stopped for a month or quarter. The new cabinets (Primakov, Putin,
Kasyanov) that replaced the "brilliant young reformers" (Chubais and
Kiriyenko) did very little to promote that growth. Their main contribution
was shrewd non-interference. Where the "young reformers" smothered growth
by reducing government expenditure, the new authorities permitted money
demand to grow at a steady pace.

Oil had nothing to do with it. Growth started when world prices were at a
record low. Devaluation helped but was spontaneous, not government induced.
The rouble, set free from the cage of the reformers' exchange rate
"corridor", eventually found its equilibrium market value. This helped
Russian industry, that had suffered from an artificially overvalued
currency, regain its natural competitive power in the domestic market.
Initially fuelled by import substitution, growth soon found its principal
locomotives in booming consumer and investment demand. Government
expenditure was a helpful but secondary factor. Not a single economic
reform was implemented in this period. The tax reform came after the boom
was nearly two years old and will not take effect until next year. This is
a classical self-induced, sustainable boom which can well continue until it
hits physical constraints like energy shortages and production capacity
limits, or is sabotaged by unwise reforms and policy decisions.

Very symbolic is the continuous shrinking in this boom of barter, the
godfather of the "virtual economy". From anywhere between 50 and 70 percent
of inter-company settlements at its peak two years ago, it has now fallen
to a quarter. Still large, but progress is obvious. The "virtual economy"
is disappearing before our eyes without any single government measure to
help it go. Why? Because buyers pay cash when their financial conditions
improve, and these improve when the economy grows at 7 to 10 percent a
year. The leaders in this growth are NOT OIL OR GAS but light (consumer)
industries (29 percent in June-September, 2000 over 1999) and machinery (16
percent).

One of the worst non-payers was and still is the government. This year it
is reaping 260 billion roubles in extra revenues due partly to larger
export oil duties (50 billion or so), but mainly to record general tax
collection. The government could have easily paid its debts in full to the
military and other agencies but is choosing to satisfy the IMF and other
international creditors, first. The wisdom of such an approach is
debatable. But given further economic growth and satisfactory fiscal
discipline the federal budget is doomed to enjoy a surplus which means a
further annihilation of the "virtual economy".

Of course, some reforms are undoubtedly needed. For instance, the banking
reform is an indisputable priority. The wisdom of reforming the natural
monopolies at this juncture is debatable because today more, not less
government control is necessary to steer the energy and transportation
complexes away from stagnation. It is yet to be seen that the tax reform
indeed serves to stimulate growth rather than conspicuous consumption of
the rich and capital flight. But no reform works better than spontaneous
growth itself. Growth seems to be the best reformer".

Stanislav Menshikov
Visit my homepages at: http://www.fast.ane.ru/smenshikov
http://www.globalxs.nl/home/m/menschivok
Also visit ECAAR-Russia web site at http://www.ecaar-russia.org

******

#4
From: "masha gessen" <gessen@ru.ru>
Subject: Re: 4618-Stratfor
Date: Fri, 3 Nov 2000

Regarding the Stratfor analysis of draft law on the prosecutor general's
office: Someone is very confused.
1. The bill has been around since June, doesn't seem to have acquired any
supporters during this period, and is probably doomed;
2. More important, taking away from the prosecutor's office its monitoring
function (funktsii obshego nadzora), which, incidentally, has been tried
before in better times and never stuck, would in no way change the
prosecutor's power over investigations: the procurature (which is to say,
for high-profile cases, the Kremlin) would still decide whether or not to
open a case, whether or not to close it and on what grounds (e.g.,
"non-rehabilitating circumstances," which leaves the door forever open),
whether to detain the suspect, and whether to open a case for the sole
purpose of detaining someone while gathering evidence for a different case
(a common practice that was apparently applied to Gusinsky).
These are not trivial things. We are talking about one of Russia's most
powerful agencies, which is getting ever stronger, and I think it's very
important not to misreport its story.
Masha Gessen
Moscow Bureau Chief
U.S. News and World Report

******

#5
From: "Regina Faranda" <RFaranda@pd.state.gov>
Subject: 4617-response to Rachmaninov
Date: Fri, 3 Nov 2000

I'd like to reply to Sergei Rachmaninov's comment about the Mass. man
detained in Russia on JRL 4617.

Although I'm not privy to many details of this case, I do wish to comment
that even if it's very, very easy for Russians to cross CIS borders without
obstruction it's not so for anyone seeming remotely American.

I traveled between Russia, Finland and Estonia on a number of occasions.
Every time I traveled on Russian trains, with Russians, but somehow we
always seemed to be stopped for document checks. I had a valid visa, so
there were no problems other than the usually brief delay. I'm sure had I
no papers it would have been much trickier. When there's a border official
(and they're usually very sweet) in your cabin in the middle of the night on
a sleeper train there isn't much you can do to pretend you are not there.
Most of my American friends who've lived in Russia have had similar
experiences.

There is a double standard in Russia. At ticket kiosks there is one line
for Russians and one for tourists in which you can expect to pay much more
for everything. The justification for this is that many Americans and
Europeans have more disposable income than Russians. Also, American, German
and British tourists sometimes seem to go out of their way to be obnoxious,
doing nothing overt to become even for a moment part of the culture they're
visiting. We are easy to spot...

Whether or not we "ask for" or deserve separate treatment is moot. And we
can do without the "police state" histrionics. The fact of the matter is
that Americans who do not try to appear Russian do encounter more than the
usual attention from Russian officials.

******

#6
Date: Fri, 03 Nov 2000
From: "Nicolai N. Petro" <kolya@uri.edu>
Subject: Lesin interview

Ariel Cohen's account of Press Minister Lesin bears little resemblance to
the policies Lesin articulated in a rather lengthy interview published in
Vremya Novostei on November 2, available on-line at
http://www.vremya.ru/2000/160/3/2739.html

In this interview Lesin says, among other things, that his ministry
expects to finish work on the new press law by the end of November and will
then proceed to a lengthy public discussion of it through seminars and
round tables. He invites journalists to take an active part in amending
the final document.

Further, while he hopes that a press ministry will someday be unnecessary,
with the government still such a major player in the media market, the
Press Ministry's function he says is to create "rules of the game that give
a chance for mass media to operate legally, and allow free speech to
correspond to its constitutional meaning . . ." The government should
gradually decrease its involvement as a media owner and focus instead on
being a fair arbiter of these rules. To this end, the government intends
to sell off state media assets that it cannot afford and that are not
effective. The criteria of effectiveness, as he says, is the credibility
and professionalism of the government media.

At this stage, Lesin says, an inventory of state media assets is nearly
complete and in the very near future strategic decisions will be made about
which assets have the potential to become profitable and therefore are to
be retained and developed, and which should be abandoned to "the best
regulator--the market."

With best wishes,
Prof. Nicolai N. Petro
Department of Political Science
Washburn Hall
University of Rhode Island
Kingston, RI 02881 (USA)

******

#7
Moscow Times
November 3, 2000
Two Kopeks' Worth: Passports Are the Root of All Evil
By Peter Ekman

Part of the Civil Code recently passed by the State Duma will require
Russians to carry internal passports at all times f presumably including time
spent at the beach f and to show the passport to any policeman who asks to
see it. This law is nothing new. It's been the practice here as long as
anyone can remember. The code will almost certainly soon be passed by the
Federation Council and signed into law by President Vladimir Putin with
barely any protest.

Passports represent the main difference between the Russian and American
forms of government. Most Americans don't have a passport. All Russians aged
16 or over must have one and many people have two f the second being for
foreign travel.

The Russian government wouldn't know how to govern without internal
passports. Government here is about filling out multitudinous documents,
which are all based on other documents, which are all, sooner or later, based
on a person's passport. After all the documents are filled out, if a
bureaucrat is sufficiently motivated, he may give you another document. If
you have enough documents, the government may leave you at peace for a while.
When all is said and done, all these documents mean is that bureaucrats can
do whatever they damn well please f the essence of Russian government. And it
all starts with the internal passport.

The bureaucrats' love of documents leads to many of this country's most
pressing problems: corruption, poorly defined property rights, low investment
in the economy and low labor mobility.

Americans would never put up with internal passports. If one of the major
presidential candidates were to suggest that internal passports were needed,
there would be a record voter turnout with 100 percent of the votes being
cast for the other candidate.

The essence of American political thought is that government is a necessary
evil that should be given just enough power to accomplish a few well-defined
tasks. Let them give you an internal passport, and the next minute they'll be
telling you where to live, work, go to school or even what to read.

Russians don't really believe that Americans can survive without some form of
internal passport. Many suspect that the driver's license is really a
substitute. Not so. If a policeman asked to see my driver's license for no
apparent reason when I was walking down the street, I'd tell him to mind his
own business. The driver's license is a convenient form of identification,
but mostly I've used mine when writing checks. With the growth in the use of
plastic cards and ATMs, even this use has fallen off.

The worst abuse of the internal passport is the propiska f the Moscow
registration that should be stamped inside of it if you live in Moscow.
Moscow's propiska law blatantly violates the Constitution, but the
bureaucrats wouldn't know how to live without it. When a major crime occurs
and the police don't know what to do, they check people's propiski. It never
catches any criminals, but it gives the police an excuse to exist.

Russians usually state their political goals in one simple sentence: "I just
want to live in a normal country." Get rid of the internal passport and
Russia will have taken a huge step in that direction.

Peter Ekman is a financial educator based in Moscow. He welcomes e-mail at
pdek@co.ru

******

#8
BBC Monitoring
Dissident Russian journalist comments on environmental time bomb in
Vladivostok
Text of report by Russian Public TV on 3rd November

[Presenter ] Vladivostok finds itself facing an environmental disaster.
Within the city boundary there is a military depot where a large quantity of
highly toxic substances is stored. The local authorities have decided to ask
the president to intervene in the situation. Here is a report by our
correspondents.

[Correspondent reporting from Vladivostok] This small base at Vladivostok is
guarded almost as though it were the state border. According to official
statements by the Pacific Fleet, there is an ordinary depot for fuel and
lubricants here. According to other reports, 300 t of blend and heptyl are
kept in enormous tanks at the base. Any attempt even to approach the
installation is immediately prevented by guards.

[Guard] Clear off.

[Reporter] Are you authorised to turn us away?

[Guard] Clear off. Clear off.

[Correspondent] The heptyl and blend, which are extremely dangerous
substances, are kept in old tanks which could disintegrate at any moment
because of corrosion by toxic fumes.

[Journalist Grigoriy Pasko, captioned] [Pasko is a military journalist who
was sentenced to three years' imprisonment for passing on sensitive
information about the Pacific Fleet, but released under an amnesty. Russia's
Supreme Court is to hear an appeal against the conviction.] They showed us
these tanks. They showed us lids made of solid metal, several centimetres
thick, which were completely corroded by fumes from this blend and heptyl.
The holes were probably the size of a coin. They were corroded right through.

[Correspondent] Anna Pavlova spent 10 years working as a guard here. She now
lives nearby and her house is only 500 metres from the base. The pensioner
says she is very uneasy about living so close, because she knows what is
stored beyond the barbed wire.

[Woman] Of course it is dangerous. If it explodes, it will of course be very
dangerous.

[Correspondent] If heptyl escapes from the corroded tanks, it would be
impossible to predict the number of deaths, even approximately. The city
authorities have been corresponding with the Defence Ministry for almost a
year now. Kilograms of paper have been used up, but no progress has been
made. Military bureaucrats say everything is going according to plan.

[Head of Vladivostok administration, Yuriy Kopylov, captioned] The navy's
ecological service says it has no information that toxic products are being
stored in an unsatisfactory way at Vladivostok. But we are not insisting that
it is unsatisfactory. We are saying the situation there is close to critical.
Furthermore, the depot lies within the city of Vladivostok.

[Correspondent] To illustrate how dangerous heptyl and blend are, let me
mention just one fact. If drips make contact with the ground, the soil in
that place can never recover. Last July a rocket split open at a naval base
and just two tonnes of heptyl escaped into the atmosphere. A huge, acrid
cloud spread over a bay round which there are over 50,000 people living.
Miraculously there were no deaths. At this very base 2,500 tonnes of heptyl
are stored in old tanks. This is enough to poison the whole of Maritime
Territory.

This is Sergey Kosarev and Yan Savitskiy of ORT's Far Eastern bureau.

Source: Russian Public TV, Moscow, in Russian 0900 gmt 3 Nov 00

******

#9
From: "Andrew Miller" <andcarmil@hotmail.com>
Subject: comment re JRL #4617
Date: Fri, 03 Nov 2000

I must correct the record concerning the comment of Sergei Rachmaninov in
JRL #4617. He says that the American trapped in Siberia because his visa
has been taken (which was written up in a prior JRL) can simply cross a
border into a CIS or Baltic country and then return to America from there,
and he can travel about freely in Russia. Russia is not a police state,
Rachmaninov insisted.

There are a few flaws with this logic:

1. Most train station ticket windows would check for the visa, I’ve been
refused tickets several times when my visa was in OVIR processing. The
train conductor also might check for the visa and could evict the American
or contact the authorities. Any hotel the American tried to stay in would
demand the visa. Currency exchange points would demand it - in European
countries, not even a passport is required to exchange currency but . . .

2. Russia IS, in fact, a police state. It is still one of the only
countries in the world that requires its own citizens, much less foreigners,
to have permission to leave and often denies this permission, and what's
more . . .

3. An American traveling in Russia without a visa risks arrest at any
moment. A police officer can stop such a person for any reason or no reason
and demand documents. If there is no visa, the American can be arrested and
held indefinitely without charges. If you did manage to get from Siberia to
a CIS border, however, your problems would be far from solved because . . .

4. The two CIS states mentioned by Rachmaninov, Belarus and Ukraine, both
require THEIR OWN ENTRY visas for Americans. You can’t get an Ukrainian or
Belarussian entry visa inside Russia without first showing a Russian visa,
and you can’t leave either country at the international airport without an
entry visa. Whereas Canada respects US entry visas, neither Ukraine nor
Belarus offer Russia a similar courtesy. One might be able to “sneak” into
Ukraine or Belarus aboard a local commuter train, but one could not “sneak”
out. Belarus and Ukraine are capable of being even more oppressive police
states than Russia is, and could easily arrest an American with no visa and
hold him indefinitely without charges, and the situation would not improve
in the Balitic countries because . . .

5. There are no commuter trains for entry to the Baltics, the American would
have to pass through Russian customs to exit the country, and he would not
be allowed out without a visa.

Still, this comment was wonderfully educational. How should the American
solve his dilemma? Contact his Congressman and lobby for the return of the
visa? Sue in court? Make application to the proper authorities? No, no,
no says the Russian. That's just plain silly foreigner talk. CIRCUMVENT THE
LAW, you ninny, and have done with it. It's so very simple. We do it all
the time, there’s nothing to it.

Well I remember once making the following analogy an argument with a
Russian friend: if a woman isn't pretty, I said, she can either sit at home
and wait for the phone to ring, and be lonely, or she can learn new ways of
attracting suitors. By this I meant that Russia was a homely lass and
needed to start getting creative. But my Russian correspondent corrected
me: No, no, he said. That's two-dimensional thinking. There is a third
alternative! Her friends get together, collect a sum of money, find an
eligible young man, a conversation ensues, some vodka, and lo and behold,
wedded bliss.

C'est la vie dans la Russie! And we readers must thank the JRL for nowhere
else in the world can we gain access to these insights on the real life of
the real Russia.

Andrew Miller
St. Petersburg, Russia

******

#10
Analysis: Russia, EU moving toward energy deals
By ARIEL COHEN

WASHINGTON, Nov. 3 (UPI) -- Russia and the 15-member European Union have
embarked on an unprecedented cooperative effort to boost energy imports from
Russia.

The wide-ranging, long-term projects will diversify Europe's sources of
electricity, oil and gas, decrease its dependence on the unstable Middle
East and render Western Europe more sensitive to Moscow's security
priorities than ever since the end of the Cold War.

In the early 1980s, President Reagan strongly opposed plans to build oil
and natural gas pipelines from the Soviet Union to Europe because of the
Soviet invasion of Afghanistan. The United States imposed sanctions on
American companies and their European subsidiaries that lined up to sell oil
and gas equipment, such as pipeline compressor turbines, to the Soviets.

Russian Foreign Minister Igor Ivanov told Russian state-owned RTR
Television that "The EU-Russian summit yielded...specific results regarding
further development of our cooperation....Specific fields of cooperation
have been outlined. This is first and foremost in the fuel and energy
complex, an extremely important field of cooperation which has strategic
prospects."

Russia is suggesting that two additional pipelines be built from the
natural gas-rich Yamal peninsula near the Arctic Ocean, to Europe. It
further proposes to divert the existing gas pipelines around Ukraine, which
Moscow accuses of siphoning off billions of cubic meters of gas.

Thus, President Vladimir Putin will weaken Ukraine as an important transit
route for Russian oil and gas and increase Paris, Berlin and London's
responsiveness to Moscow's security priorities.

This policy seems to be bearing fruit already: the joint Russian-EU
statement on Chechnya was considerably toned down from the denunciation of
Russia's brutalities led by Paris in the fall of 1999.

Russia and the EU jointly called for a "political solution" in Chechnya,
the goal Kremlin says it is following by nominating former Chechen Mufti
Ahmad Kadyrov to head Chechnya's civilian administration.

Putin also said at a Paris news conference that he would not negotiate
with those "whose hands are covered with blood up to elbows....Russia will
pursue terrorists who kidnap, behead, and maim their victims. Are we being
denied the right to self defense?"

The distance between energy and security cooperation is quite short.
Ivanov announced that Russia and the EU are beginning consultations on the
EU's Common European Security and Defense Policy.

"We discussed for the first time issues relating to defense and security
too," he said. "You know that the European Union is currently shaping its
own common approach to defense and security....Russia is prepared to
actively cooperate with the European Union...This is fundamentally
important. Now we shall put this into practice."

Ivanov said the areas of cooperation would include weapons proliferation
and missile defense.

Both Russia and France are opposed to U.S. plans to deploy a National
Missile Defense. Russia, China and France are planning to co-sponsor a joint
United Nations General Assembly resolution supporting the 1972
Anti-Ballistic Missile Treaty which blocks deployment of any NMD.

Putin is also aware that currency and economic issues will play a key role
in security issues for the new century, and he is willing to take part in
strategic currency games between the euro and the dollar.

According to a report in Moscow's Nezavsimaya Gazeta, Putin said in Paris
that Russia would do everything possible to strengthen the euro. For
example, Russia may show what a good European it is by adopting the euro for
energy sales. The Moscow newspaper, which is often used for leaks by
Russia's intelligence agencies, speculated that other countries, such as
China and Iran, may take similar steps which would cause the dollar to
decline.

Putin is the second world leader, after Iraq's Saddam Hussein, to advocate
shunning the U.S. dollar.

The Organization for Economic Cooperation and Development, a club of 29
developed countries headquartered in Paris (and dominated by the Europeans),
hosted Putin for the Russian leader's first visit with OECD
Secretary-General, Donald Johnston.

The OECD heaped praise on Putin's planned economic reforms, declaring that
the Russian government was committed to speed up the process of "ambitious"
reform. And the EU boosted Russia's long-term credit rating despite the
August 1998 financial crisis, in which Russian and Western investors lost
over $200 billion.

But the Russian president did not suggest that cheerleading for the euro,
expanding energy sales to Western Europe, and starting security talks with
the EU were policies aimed against the United States.

However, French and Russian observers who followed Putin's Paris visit
noted that by pulling the Europeans closer to Moscow, he was also pushing
them away from Washington. They agreed that while history dealt Putin a weak
hand at the beginning of his tenure, he is already playing quite a
sophisticated game.

Ariel Cohen, Ph.D., is a Research Fellow at the Heritage Foundation.

*******

#11
Jamestown Foundation Monitor
November 3, 2000

RUSSIA RANKS AMONG THE LOWEST ON ECONOMIC FREEDOM LIST. The
Washington-based Heritage Foundation has released its index of economic
freedom for the year 2001. Russia came in 127th out of the 155 countries
ranked--less free than Rwanda, Ethiopia, Kyrgyzstan and Romania, tied with
the Republic of Congo and Mauritania, and more free than Kazakhstan, Togo,
Bangladesh and India. While Russia's raw score--3.70 out of a possible 5 (1
being the freest, 5 being the least free)--was the same as in last year's
index. It in fact dropped down five places on the list, due to improvements
in the ratings of other countries.

Russia's score, which put it in the "Mostly Unfree" category, has been
moving downward over the last five years. (It stood at 3.40 for 1995, 3.50
for 1996, 3.55 for 1997, 3.35 for 1998, 3.50 for 1999 and 3.70 for 2000).
In the opinion of the authors of the report, Russia has a high level of
protectionism, a very high level of government expenditure, a high cost of
government, a very high level of inflation, a high level of restrictions in
banking and finance, a high level of bureaucratic regulation of the economy
and a high level of black market activity. According to the report,
President Vladimir Putin "advocates a strong state and market economy, but
his conflicts with regional governors and the oligarchs, as well as the
ongoing war in Chechnya, continue to undermine Russia's political
stability." The Russian president's "attempts to re-examine privatization
outcomes," the report added, "also cause Western investors to question the
extent of Russia's commitment to open and transparent markets based on the
rule of law."

The Heritage Foundation 2001 economic freedom index ranked Hong Kong as the
world's freest state, with the United States coming in fifth. Taiwan was in
20th place, the Czech Republic in 27th, Poland in 54th, Armenia in 68th
(tied with Colombia and Mexico, among others), Mongolia in 75th and the
People's Republic of China in 114th place (tied with Georgia, Indonesia,
Malawi, Papua New Guinea and Venezuela).

******

#12
Date: Fri, 03 Nov 2000
From: Tom Graham <tgraham@ceip.org>
Subject: U.S.-Russian relations

David,

As promised, attached is the text I used as the basis for my remarks at
a conference on Russia held at Wilton Park, September 21, 2000. If I am
not mistaken, this text is also the origin of the remarks on "Forget
Russia" quoted in a Reuters item recently posted on your list.

Regards,
Tom Graham

U.S.-Russian Relations: Risks and Prospects
Wilton Park, UK
September 21, 2000
Thomas E. Graham, Jr.
Senior Associate
Carnegie Endowment for International Peace
Washington, DC

Troubled Relations

I accepted the invitation to speak at this conference with great pleasure
in January of this year, and I was pleased to be asked to address the
issues of U.S.-Russian relations. Had I delivered my remarks at that time,
I would have begun by saying that the relationship was not in great shape,
to put in mildly. Indeed, the relationship had reached its lowest point
since the breakup of the Soviet Union, and perhaps even earlier.

In Russia, senior government officials were talking about the United States
using rhetoric that had not been heard since the end of the Cold War.
Russian national security documents clearly portrayed the United States as
a threat, as seeking to build a unipolar world where force, not law, would
be the preferred instrument for resolving international disputes. U.S.
Department of State polling tracked a steady decline in the Russian
people's favorable attitude toward the United States from nearly 75% in
1993 to under 50% in the first part of 2000.

Meanwhile, in the United States, the image of Russia as an aspiring
democracy had given way to an image of a hapless land mired in deep,
pervasive corruption, where organized crime operated unrestrained. The
American political establishment suffered from a severe case of Russia
fatigue, and the "Forget Russia" school gained increasing numbers of
adherents in the Congress. This school would not gratuitously harm Russia,
but it was not prepared to spend much time, energy, or money to nurture
good relations with Russia. It simply believed that Russia did not matter
much any longer in the world. Even the Clinton Administration, which had
come to office with Russia as its top foreign-policy issue and spoke
enthusiastically of building "strategic partnership with Russian reform,"
had disengaged and degraded Russia within its overall priorities.

Three events were critical to this sharp deterioration in relations: The
Russian financial crisis of August 1998, Kosovo, and Chechnya.

The financial crisis marked the failure of the grand project of quickly
building a vibrant democracy and robust market economy in Russia along
Western lines and with substantial Western assistance. For many Russians,
it confirmed suspicions that the West was not trying to help their country
rebuild but rather to turn it into a third-rate power. 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. This moralistic
streak is also the reason many Americans seized upon the Bank of New York
scandal last year as evidence of the endemic corruption in Russia that,
they thought, doomed our effort to help them rebuild.

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 little Russia's voice
mattered in the world, even in Europe, a region of vital significance to
Russia. At the same time, Russia's failure to condemn Milosevic and to
admit what we saw as clear evidence of massive, inhumane ethnic cleansing
in Kosovo reinforced American convictions that Russians were indeed morally
deficient.

Finally, Chechnya dramatically underscored the gap between Russians and
Americans. While we were appalled by the brutality of Moscow's military
operation, Russians cheered it as necessity to putting an end to the
alleged 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 took Western criticism of their Chechnya
operation as 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 confronts, problems, moreover, that many Russians believe arose out
of their following Western advice.

Earlier this year, there was a hope - certainly in Washington and, perhaps
to a lesser extent, in Moscow - that Putin's assumption of power would halt
the deterioration and begin to put the relationship back on track. And
indeed there was a certain thaw, as President Clinton declared Putin a man
we could do business with. But the hopes quickly faded as it become clear
that the two countries were deeply divided over the issue of national
missile defense and concern grew in Washington about Putin's commitment to
democratic principles. Moreover, Washington was disturbed by Putin's
efforts to sow discord between the United States and its European allies on
the issue of national missile defense, as well as by Putin's reaching out
to countries we once called "rogue states," such as Iran, Iraq, Libya, and
the former Yugoslavia.

In fairness, we should admit that U.S.-Russian relations had not been in
great shape for many years, despite official rhetoric on both sides to the
contrary. The past two years only mark an acceleration in a basis trend
that dates back to the mid-nineties. Indeed, the high point of the
relationship was probably the late Gorbachev and early Yeltsin period, when
the barriers that had divided the two countries since the end of the Second
World War came down with astonishing rapidity. That was a time of great
expectations, when it seemed possible that Russia could be swiftly
integrated into the West and that the United States and Russia could
together take the lead in building a new world order around democratic
values and market principles.

By 1994, however, after Zhirinovskiy's shocking victory in the Duma
elections, grave doubts had emerged about the short-term potential of
U.S.-Russian relations. In Washington, Russia was increasingly seen as a
country intent on destabilizing Transcaucasia, suspicions grew concerning
the nature of its contacts with Iran on nuclear matters, and differences
over how to deal with the former Yugoslavia deepened. At the same time,
the Russian political elite was disturbed that the West was tardy in
delivering the assistance it had promised to Russia's transition and
niggardly in the amounts it was prepared to offer. And it viewed with
concern an increasingly activist U.S policy toward the states of the former
Soviet Union, an area it saw as one of vital interest and where some
Russians thought Russia still had exclusive rights.

The Clinton Administration did not address this change in mood directly.
Instead, it largely ignored it, because it decided that it could work with
Yeltsin and a small group of so-called "radical reformers" around him to
get what it wanted on security matters (no matter what the Russian
political elite thought). In crude terms, it assuaged Yeltsin's amour
propre to persuade him to agree to the substance of U.S. initiatives, be it
NATO expansion, Balkan policy, or nonproliferation issues. The
Administration traded symbolism for substance.

No Agenda

Now, as I said, these were the remarks I would have made if I had spoken
here at the beginning of this year. But it is mid-September, and the
question I would raise now is whether there is any real substance left to
U.S.-Russian relations. What is striking is how little we have to talk
about. President Clinton and President Putin have met face to face three
times since March, but they have accomplished little. The meetings have
been remarkable for the thinness of the agenda. Part of the reason, of
course, lies in the fact that Clinton is a lame duck, and the Russian side
rightly judges that there is little to be accomplished with this outgoing
president. But neither is the American side particularly eager to engage.

One does not have to look far for the reason. The Administration has lost
confidence in its earlier Russia policy. From the time it entered office
until the Russian financial crisis of 1998, the Clinton Administration had
devoted great energy to transforming Russia into a democracy and a market
economy. To be sure, considerable time was also spent on traditional
security concerns, and not without some success - for example, the
withdrawal of Russian troops from Central Europe and the Baltics on
schedule and the withdrawal of Soviet weapons from Ukraine, Belarus, and
Kazakhstan to Russia for dismantling. But the Administration's real
enthusiasm, and particularly that of Deputy Secretary of State Strobe
Talbott, the chief architect of the Administration's Russia policy, was for
transforming Russia domestically in the belief that a prosperous,
democratic Russia would be a key support for U.S. security and a key
partner in maintaining global peace and stability over the long term.

In August 1998, that policy failed. The Administration watched in anguish
as the officials it had staked its hopes on, Anatoliy Chubays and other
so-called "radical reformers," were dismissed from key positions and
distanced from the halls of power. The Administration made a lame effort
to defend its policy in the fall of 1998, pointing largely to the successes
on the traditional security agenda. It also pointed to some limited
progress on democratization and marketization, while expressing concern
that much of it could be undone by Mr. Primakov's government. Most
tellingly, it rediscovered the truism it has so long ignored while it
appeared its policy was succeeding, namely, that Russians themselves will
ultimately decide what type of Russia is to be built. In other words, it
laid blame for the failure of the Administration's policy squarely on the
Russians themselves.

Surely, the Administration shares the blame, but just as surely it is right
that our ability to influence domestic outcomes in Russia was always on the
margins. That has been the great lesson of the 1990's, which should have
been obvious at the very beginning. Russia is simply too large and complex
and our understanding of the processes underway there too limited for it to
be otherwise. Moreover, in sharp contrast to the situation just a decade
ago, the Russians are not particularly eager for our assistance in their
domestic transformation. As a result, many of the items that had animated
U.S.-Russian relations during the better part of the Clinton Administration
disappeared from the agenda some two years ago.

Asymmetry

Beefing up the agenda today is not going to be an easy task for either
side, for the two countries have followed radically different paths over
the past decade, something that has lead to a gaping and growing asymmetry
in power, attitudes, and fortunes.

The United States is enjoying the longest period of economic expansion in
its history. During the past decade, Russia has suffered a socio-economic
collapse unprecedented for a great power not defeated in a major war.
During the 1990's, the U.S. GDP grew by over 30 percent, while Russia's
plunged by over 40 percent. Today, Russia's economy is a tenth the size of
the United States', and Russia lags years behind the United States in
mastering the possibilities of the information-technological revolution.

The United States exudes self-confidence and optimism about its future;
Russia is mired in self-doubt and an identity crisis. The United States
talks of itself as the indispensable nation. It is indeed the paramount
power in the world with no threat to its security looming on the horizon.
Russia, meanwhile, uses the rhetoric of a great power and demands to be
treated like one, but such behavior masks profound disquiet about Russia's
standing in the world. As the national security concept approved earlier
this year demonstrates, Russia sees multiple threats to its security both
at home and abroad. The United States enjoys a surfeit of power and
possibilities; the challenge before it is how to use that power wisely.
Russia's power is eroding and its choices narrowing; the challenge before
it is how to stop the rot, begin to rebuild, and eventually close the gap
with the world's leading powers.

The United States welcomes globalization; Russia sees it more as a threat
than an opportunity. The United States wants to ride the wave of
globalization to build an international order that will perpetuate its
preeminent position and prosperity well into the future. Russia wants to
postpone the consolidation of any new world order to a time when it will
hopefully have regained its power and therefore be in a better position to
shape that order.

In short, the United States and Russia live in radically different worlds,
and their leaders are intent on taking radically different paths, at least
in the short run.

The Post-Cold War World

Moreover, not only have the United States and Russia changed dramatically,
but so has the rest of the world. Although the Cold War ended a decade
ago, we are now only beginning to break out of the frameworks inherited
from it. During the Cold War, U.S. relations with Russia (in the guise of
the Soviet Union) determined the very nature of the international system.
During the early years of the Clinton Administration, Russia was given a
priority that indicated that the Administration was having difficulty
breaking out of the bipolar framework of the Cold War. At the same time,
Yeltsin's Russia saw the United States as its chief international partner
and point of reference.

Much has changed. Today, the United States no longer looks at the world
through the prism of its relations with Russia. On the contrary, Russia is
viewed through the prism of other problems, be it European security
architecture, nonproliferation, Caspian energy resources, or China. For
this reason, the United States no longer has an integrated Russia policy.
Rather, it has a Russian section to its policies on other matters, and
often these sections are not smoothly related one to another.

And, indeed, the solutions to many of the problems that bedevil
U.S.-Russian relations are to be found elsewhere than in Moscow, or better,
we cannot solve these problems by talking only or even primarily to Moscow.
Normalizing relations with Iran is the key to easing our concerns about
Russia's nuclear relationship with Iran. Getting our China policy right is
the key to easing our concerns about growing Russian-Chinese military
cooperation. The solution to the former Yugoslavia lies with our European
allies and the Balkan states themselves, not with Russia. Moreover, I
would stress, even the one relationship that looks bipolar at this point -
the strategic nuclear balance - will become increasingly less so as Russia
builds down its forces, China builds up, and other countries gain the
capacity to build nuclear weapons.

Russia too is slowly realizing that the United States can no longer be its
primary interlocutor in international affairs. We are simply in different
weight categories. And so the task for Russia in dealing with the United
States is to build coalitions on specific matters to influence U.S.
behavior. Russia can no longer resolve its problems bilaterally with the
United States. Hence, the growing focus on Europe and China, not simply as
counterweights to the United States, but as countries in a league to which
Russia can reasonably aspire.

The Future of the Relationship

So where do all these considerations leave U.S.-Russian relations? Russia
will remain a key country for the United States: its nuclear arsenal,
location in the heart of Eurasia, veto on the UN Security Council, and its
vast resources guarantee that. But Russia no longer occupies central stage
in our concerns. It competes for attention with other countries and
regions, notably Europe, Japan, and China. No matter who wins the
presidential election - Vice President Gore or Governor Bush - this is not
going to change.

Moreover, the next administration will continue current U.S. policy toward
Russia in many areas with only slight modification in the light of the
experience of the past decade and current Russian realities. Both Bush and
Gore share common goals toward Russia, after all, and they are the ones
that shaped the Clinton Administration's Russia policy: Russia's
democratization, marketization, and integration into the Western world. We
can expect less interference in genuinely domestic Russian matters; an
increased emphasis on democracy-building and rule of law in U.S. assistance
programs; more exchange programs, especially for younger people; a greater
role for private organizations in the conduct of assistance programs; and
enhanced funding for Nunn-Lugar programs aimed at securing and dismantling
Russian nuclear weapons. Both candidates will work to bring Russia into
the World Trade Organization. Each candidate is committed to Nato
expansion, as well as to deepening relations between Nato and Russia.

The differences - and they are significant - are likely to come in two
areas: tone and national missile defense.

A Bush Administration would not be tempted to use the same grandiose
rhetoric of strategic partnership that the Clinton Administration has or of
the broad partnership that Gore talks about. Bush sees Russia as neither a
friend nor a foe, but as a country in transition with an uncertain future,
with which our relations will be marked by both cooperation and
competition. A Bush Administration would put greater emphasis on the
corruption issue in Russia than a Gore Administration. As a result, Bush's
relations with Russia would be proper, but hardly warm, while Gore would be
tempted to speak of warmer relations even in the face of widespread
difficulties, in part as a way of justifying the policies of the last eight
years and his role in formulating and implementing them.

On national missile defense, Bush advocates a more robust system and does
not hold sacrosanct the treaty structure that has developed over the past
thirty years, unlike Gore. Bush would be prepared to act unilaterally on
national missile defense as well as on cuts in the strategic arsenal, even
while he would be prepared to explore thoroughly possible cooperation with
Russia on missile defense. Gore, on the other hand, supports a missile
defense system that would at best protect the United States; there is
little room for Russian cooperation on this matter. At the same time, Gore
would deploy a system only if he could modify the ABM Treaty to allow for
such a deployment. Likewise, Gore would draw down our nuclear forces only
in line with commitments assumed through negotiations with Moscow.

The relations I have described are far from the hopes that animated
U.S.-Russian relations a decade ago. But they have the advantage of being
grounded in reality. It will, of course, take time to adjust to the new
realities of the post-Cold war period, to the asymmetries between Russia
and the United States, and to the very different roles they can aspire to
in world affairs. But the good news is that the adjustment is finally
underway. And that lays the groundwork for halting the deterioration in
U.S.-Russian relations and for improving them in ways that will benefit
both countries.

******

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