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US Department of State
The United States and Russia: the Next Four Years
Alexander Vershbow, U.S. Ambassador to Russia

Princeton University, November 16, 2004
Remarks at the Woodrow Wilson School of Public and International Affairs

I want first to thank Anne-Marie Slaughter, the Dean of the Woodrow Wilson School, for extending the invitation for me to share some thoughts with you today on the U.S.-Russia relationship. As a U.S. Ambassador to Russia, I feel inspired to speak on the same campus where the legendary George Kennan wrote many of his penetrating works about East-West relations, and where a more recent predecessor, Jack Matlock, still thrives. Perhaps it will become required duty for all former U.S. Ambassadors to Moscow to spend some time at Princeton - which I have to say is quite idyllic, even if it lacks some of New Haven's unique charms.

It has been two weeks since our presidential elections, and as the Bush Administration prepares for its second term, it is a good time to take stock of the U.S.-Russia relationship and to suggest where we might want to take it over the next four years. Today, 15 years after the fall of the Berlin Wall and 13 years after the collapse of the Soviet Union, we have built a strong, positive relationship and can look back with satisfaction on many important successes. We are working closely with the Russians on a wide range of geopolitical and strategic issues on which we have common interests, and above all, in the war against terrorism and in the effort to stem the proliferation of weapons of mass destruction (WMD). We've agreed to radically reduce strategic nuclear weapons, forged an historic partnership between Russia and NATO, and begun to expand trade and investment links as Russia has established the foundations of a market economy. Having cut my diplomatic teeth at the U.S. Embassy in Moscow during the dark days of the late Brezhnev era, it is truly inspiring to think of the progress we have made.

Nevertheless, for all the genuine achievements in our bilateral relationship, there remains much untapped potential and many areas in which we can do better. The foundation for a genuine partnership has been laid, but its realization remains thin, and there have been missed opportunities. Although our interests in meeting new threats increasingly coincide, old thinking and old habits of behavior among some members of the Russian elite continue to limit the scope of cooperation. The challenge during the coming four years will be to realize this untapped potential on a broad range of issues, so as to take the relationship to a higher level - one based not only on common interests, but a commitment to common values.

The U.S.-Russia relationship is far too multi-faceted to do full justice in my remarks today. I will therefore focus on four areas where I see the greatest challenges in the years ahead - and the greatest opportunities to realize the unfulfilled potential for greater cooperation: 1) relations with Russia's post-Soviet neighbors; 2) efforts to combat WMD proliferation; 3) the bilateral economic relationship; and 4) Russia's internal political transformation.

Let us look first at what some Russians call the "near abroad," a term that rankles many of Russia's post-Soviet neighbors because of the sense of hegemony that it is perceived to imply. In this region, our challenge over the next few years will be to overcome Moscow's propensity for "zero-sum" thinking - in which any presence or influence of a Western state in the Commonwealth of Independent States (CIS) is felt to come at the expense of Russia's interests - and work together to promote stability and political and economic reform.

Some observers perceive under President Putin, an increasingly assertive approach toward the other former Soviet republics. Critics of Russia's policy point to Moscow's support for separatist regimes in Georgia and Moldova, its constant pressure on the Baltic States over their Russian minorities and transit issues, its systematic efforts to gain control of the energy infrastructures of its CIS partners, and its current efforts to influence the outcome of the Ukrainian elections.

Although there may be a degree of truth in those perceptions, Russia has accepted in several instances a U.S. role in the region, when it considered such a role to be in its interests. Russia acquiesced, for instance, in a U.S. military presence in Central Asia in advance of our campaign to remove the Taliban regime from power in Afghanistan. We also cooperate very productively within a negotiating format called the "Minsk Group," which is attempting to mediate a resolution to the conflict between Armenians and Azerbaijanis over Nagorno-Karabakh. Although the conflict remains unresolved, the reason is the continuing disagreement between the parties, and not any U.S.-Russian rivalry. NATO also extended membership to the Baltic States, and the Russian reaction, while not enthusiastic, was not negative as some had expected.

While we have been able to cooperate on several issues in this region, doing so requires us to overcome entrenched resistance from the Russian political class. A case in point is our efforts to promote political solutions in Moldova and Georgia that would reintegrate the separatist regions of those states - Transnistria, Abkhazia and South Ossetia - on the basis of autonomy within a larger federal structure. Although Moscow declares its support for the territorial integrity of Moldova and Georgia, it seems to prefer preserving the status quo as a means of exerting leverage on its neighbors and countering U.S. influence - notwithstanding the corruption of the separatist regimes and the bad precedent this sets in opposing separatism in Chechnya. The challenge in the coming period is to convince Russia that its longer-term interests lie in resolving these "frozen conflicts" and building relations with its neighbors on the basis of mutual respect at the political level and strong, mutually advantageous economic relations.

In our view, the war on terror has opened up many new possibilities for U.S.-Russian cooperation in the Caucasus and Central Asia. Bringing security to the new states along Russia's southern flank is an obvious win-win opportunity, and the list of possible joint projects is long - not just resolving the "frozen conflicts," but also strengthening border security, halting narcotics trafficking, and promoting economic reform and development. The United States has no interest in crowding Russia out of areas in which it has historic interests, and where there are longstanding economic and political links. However, it is very much in both of our interests to prevent the states in these regions from failing and becoming breeding grounds and exporters of instability and extremism. If we can manage to work together, we can help resolve the intractable problems of the post-Soviet space, enhancing both Russia's and America's security in the process.

Let me turn now to one of the most critical issues of the 21st century, preventing and countering the proliferation of weapons of mass destruction (WMD). Recent attacks in Moscow, on Russian civilian airplanes, and most monstrously at the grade school in Beslan, have reminded us that terrorists can unleash their nihilist wrath in Russia as well as in the United States, Israel, or Iraq. The real nightmare scenario, however, would be for terrorists to conduct the next 9/11, or the next Beslan, with nuclear, chemical or biological weapons.

Our increasingly constructive interaction with Russia on nonproliferation reflects our common understanding that the number of nuclear-weapon states should not grow any further, and that terrorists must not be permitted to obtain WMD or their means of delivery. The Russians showed some ambivalence in the past about the threat posed by Iraq under Saddam Hussein, and about the current regime in Tehran. However, they are increasingly clear-eyed about the danger, and our cooperation is improving - including on the specific challenges posed by Iran and North Korea. Nevertheless, given the terribly high stakes, we must do more to close the loopholes in the existing nonproliferation regime.

For more than a decade, U.S. and Russian officials have worked side by side to reduce and better secure stocks of fissionable material and lessen the risk of diversion. More than 58,000 Russian scientists, engineers and technicians have participated in programs, sponsored by the International Science and Technology Center, since the first grants were made in 1994, and over 17,000 WMD scientists are involved in ongoing U.S.-funded research. In an initiative, known as the "Megatons to Megawatts" program, our joint effort to blend down Russian weapons-grade highly-enriched uranium for use in U.S. nuclear power plants, 225 metric tons of HEU or the equivalent of 9,000 nuclear warheads has already been down-blended and is supplying approximately 10% of America's electricity.

Our own programs now form part of a multilateral initiative launched at the G8 Summit two years ago. The Global Partnership seeks, over the course of a decade, to combine $10 billion from the United States and an additional $10 billion from European and other partners for nonproliferation programs, principally in Russia. Sustaining the momentum of these programs is essential if we are to keep WMD out of the hands of terrorists, and provide civilian employment for former weapons scientists who might otherwise share their expertise with rogue states.

President Bush has laid out an agenda that seeks to go beyond the programs and initiatives of the 1990s. The Proliferation Security Initiative (PSI) is an effort by concerned states to intercept WMD and related technology and materials before they fall into the hands of rogue states or terrorist organizations, using intelligence, law enforcement, diplomatic and other tools, including military forces when necessary. Such cooperation has already proven its worth when, working with Italy and Germany, we halted a shipment of uranium-enrichment equipment to Libya last year. That interdiction was an important step in convincing Colonel Qadhafi to give up his pursuit of weapons of mass destruction. Russia joined the PSI in May of this year, and we look forward to the active engagement of its security and military agencies both in preparing for interdiction operations, and in shutting down proliferation networks once and for all.

In order to correct weaknesses in the existing nonproliferation regime, we are also seeking the support of Russia and other allies to strengthen the hand of the International Atomic Energy Agency (IAEA). We believe that any state wishing to import equipment for avowedly civilian nuclear programs should have signed and implemented the IAEA Additional Protocol, which ensures that the IAEA receives the additional information and access to facilities necessary to verify peaceful intentions.

At this year's G8 Summit, Russia signed on to this proposal, but they have been reluctant to endorse another key Presidential initiative: that nuclear suppliers refuse to sell uranium enrichment or reprocessing equipment or technology to any state that does not already possess that capability. As part of this initiative, the nuclear supplier states would ensure that states that renounce enrichment and reprocessing have reliable access, at reasonable cost, to fuel for their civilian reactors. We believe this is needed to plug a key loophole in the Non-Proliferation Treaty, whereby states have the right to master the technologies needed to produce nuclear weapons under false pretenses - that is, by declaring their peaceful intent, while using civilian nuclear programs as cover for weapons development. Our bitter experience with Iran's and North Korea's covert nuclear programs shows why we can no longer give countries the benefit of the doubt.

Although we may not agree with Russia on all tactical aspects of the non-proliferation agenda, I'm optimistic that our strategic outlooks will increasingly coincide, since our interests are basically the same. One encouraging sign is the recent progress we have made in addressing a relatively new dimension of the proliferation problem: the threat to civilian airliners posed by the spread of shoulder-launched anti-aircraft missiles, known officially as MANPADS (Man-Portable Air Defense Systems). We are now working closely with Russia to accelerate efforts to destroy excess or obsolete MANPADS, to strengthen controls on the transfer of MANPADS production technology, and to improve methods for enhancing MANPADS identification techniques and countermeasures against smuggling. This illustrates that Moscow understands that vital importance of ensuring that dangerous weapons not fall into the hands of terrorists.

The third area of our bilateral relationship that must be high on our agenda for the next four years is our bilateral economic relationship. Perhaps in no other area of our relationship have the expectations been higher, but here, too, much of the potential remains unfulfilled. Let me first lay out for you the positive signs we see in the Russian economy. The macroeconomic picture is impressive. Most countries would be thrilled to enjoy the 6.3 percent GDP growth Russia has averaged over the last five years. The government has shown fiscal responsibility, maintaining a healthy budget surplus, paying down its debt, and increasing the Central Bank's reserves. Inflation is at a manageable level.

All those bright spots point to a potentially dynamic and prosperous future, and there can be no doubt that a stable and prosperous Russia will be in the best interests of the United States. And while the current high world price of oil has certainly contributed to Russia's economic progress, President Putin's economic reforms, most notably tax and land reform, have also played an important role.

Nevertheless, although the macroeconomic situation is bright, missed opportunities loom large. For example, the amount of foreign direct investment in Russia is shockingly low compared to other countries in the region. In absolute terms, Russia attracts only about 2/3 as much foreign direct investment as the Czech Republic. That means, in per capita terms, that the Czechs receive over twenty times more foreign investment than the Russians. Russia certainly has the potential to attract vastly larger amounts of direct investment, but many investors do not yet perceive an investment-friendly environment. Frankly, even Russians are not investing nearly as much as they could in Russia: capital flight, which had slowed considerably in recent years, has jumped again in 2004.

The hard fact is that Russia has not yet created the legal and bureaucratic climate needed to attract and retain foreign investment. Many would-be investors are undoubtedly deterred by the excessive bureaucracy, corruption, doubts about the quality of justice in Russian courts, disregard for property rights and contracts, the unpredictability of the tax system, the lack of protection for intellectual property, and a general lack of transparency. In international surveys of corruption and the ease of doing business, Russia consistently ranks near the bottom. In one regional capital that I recently visited, I was told that it took even the Mayor an entire year to get the bureaucratic clearances needed to build a house on a plot of land that he owned. In another city, entrepreneurs told me they had to complete some 50 bureaucratic steps in order to receive permission to open a small business. These are fundamental problems that will need to be successfully addressed if Russia is to achieve President Putin's stated goal of doubling GDP in ten years.

Russia's integration into the global economic system remains a priority for the United States. We support Russia's bid to join the World Trade Organization and American and Russian experts are currently working to conclude a commercially fair, mutually beneficial package that would promote Russia's integration into the world economy. But concluding an agreement on WTO accession will require Russia to take some hard decisions. It will need to curb strong protectionist forces, which have been an especially evident in the agricultural, aircraft and financial services sectors. And it still needs to do far more to protect intellectual property rights - in particular, cracking down on rampant piracy of CDs, DVDs and computer software. While Russia has enacted stricter IPR legislation, there is still a long way to go in the enforcement of such laws. We are trying to take the opportunity of WTO negotiations to convince Russian officials that intellectual property protection is essential in order to attract more foreign investment and free up the productive capabilities of the Russian people.

Any discussion of our bilateral economic relationship would be incomplete without considering Russia's energy sector, given the strong interest shown by American companies. Greater U.S. investment in this sector would be a win-win outcome for both countries: as American companies have the capital and high technology needed to exploit many of Russia's oil and gas fields; and we have a strategic interest in diversifying our sources of energy supply. However, while there have been many discussions of possible deals in this sector since we launched a high-level Energy Dialogue two years ago, we have seen far fewer agreements concluded than we expected at that time.

Major progress in developing the full potential of our energy relationship will require Russia to take some long-pending decisions concerning the laying of energy pipelines, the construction of liquefied natural gas (LNG) plants, and the improvement of port facilities for tankers. These major capital projects - in which U.S. companies could play a role - are necessary if the United States is to become a major export market for Russian oil and gas.

Recently, we have begun seeing some positive signs. ConocoPhillips has acquired a stake in Lukoil, and ChevronTexaco recently signed a Memorandum of Understanding with Gazprom to explore possible LNG projects. Nevertheless, the deliberate campaign to dismantle Yukos, Gazprom's upcoming merger with state-owned oil company Rosneft, the appointment of senior Kremlin officials to the boards of Gazprom, Rosneft and the state pipeline monopoly Transneft, and other events, all suggest the Kremlin may be moving to assert greater government control over the oil and gas sector - and potentially other "strategic" sectors - at the likely expense of private foreign investment.

More fundamentally, it often seems that there is still a fault line within the Russian government between those policymakers who seek to assert more state control over the economy and those who favor liberal, market-based policies as the surest route to the economic growth that President Putin seeks. Likewise, it is not clear that key policymakers agree over how broad a bilateral economic relationship is desired. It is simply too early to say how these conflicts will play out. The question of Russia's choice between statism and a market economy is not about satisfying some kind of U.S. or Western expectations. It is potentially a choice between a thriving, successful Russia attracting the full measure of possible foreign and domestic investment, technological benefits and management advances in a more broadly diversified economy - dependent not only on oil revenues - or a stagnant, inwardly focused Russia that watches while other countries enjoy the growth it could have had.

The fourth and final complex of issues I will raise today concerns human rights and democratization. From the start of his administration, President Putin sought to end what he saw as the "chaos" of the Yeltsin years, a priority strongly shared by the majority of Russians.

Early on, Putin began to take steps to strengthen what Russians often refer to as the so-called "vertical of power," or what we might call the "chain of command." In the Russian context, it is understood to mean that all state structures must be fully subordinate to the organs above them, and ultimately to the president. To that end, Putin appointed seven Presidential Representatives (PolPreds) to represent him in the regions; he removed governors from the Federation Council, the upper house of the Russian legislature. Federation Council members were henceforth not chosen directly by the people, but indirectly by governors and regional legislatures. Putin also moved to restrict the editorial independence of the major national television networks.

In the years since, he has continued on a path of increasing centralization of power. The arrest of Mikhail Khodorkovskiy and the legal case against the oil company Yukos conveyed the strong impression that the Russian government was selectively using the legal system for political aims. Increasing state control over the broadcast media and the use of government resources in election campaigns, both national and regional, has led international organizations - and observers inside Russia, as well - to declare many of the elections, including this year's presidential elections and last year's Duma elections, as less than fully free or fair. This is not to deny the fact that President Putin continues to enjoy strong genuine support from the Russian people. But the trend has seen a clear, steady weakening of the institutions of society - political, informational, judicial - that had begun to promote greater accountability of the country's leadership before the people. President Putin's recent proposals to eliminate the popular election of governors and do away with single-mandate districts in the Duma - announced in the wake of the Beslan tragedy - are only the lastest examples of this trend. It appears that all branches and levels of government are being made more accountable to the President, but less accountable to the public.

I don't want to overstate what has happened so far. The Russian print media, as opposed to the broadcast media, continue to air a diversity of views. As someone who served in Moscow in the Soviet years, I am still sometimes amazed at the hard-hitting criticism of the government that I see in some newspapers. There is some airing of critical views on the NTV television station, although it has lost the independence it once enjoyed. News coverage on the most influential Moscow-based radio station, Ekho Moskvy, is decidedly feisty. The Internet also remains a source of a broad range of views, including sharp criticism of the Kremlin. NGOs, though under increased pressure, continue to speak out forthrightly for human rights and to promote the growth of a strong civil society. I want to be clear about this: Russia's transformation from its repressive, Soviet past has not stopped or been reversed. But the slowdown in progress that I have described is clearly evident and is widely commented on, with worry and even fear, by many of the most perceptive and concerned observers of Russian affairs both inside the country and out.

Why does the health of democracy in Russia even matter, when we are worried about terrorism, weapons of mass destruction and economic problems? Of course, aside from being important for its own sake, the state of Russian democracy can significantly affect our broader relationship. To the degree Russia aspires to be, and is perceived as, a country committed to the same values as other Western countries, it is much easier - politically, psychologically, and even just operationally - to work with. Shared civic values are an important source of the trust that makes broad cooperation possible.

A slide toward authoritarianism, on the other hand, would chill the relationship across the board and make doing even simple things harder and slower than would otherwise be the case. It would not lessen the importance of cooperation on issues like terrorism and nonproliferation or affect our mutual interest in expanding economic ties. But regression toward more authoritarianism and reduced accountability in Russian governance would, I'm convinced, ultimately undermine Russia's evolution into the strong, confident and responsible partner that we will need at our side to help us overcome the global threats we will face in this century: terrorism, proliferation, and regional instability.

And a strong, responsible Russia is vital not only to help us counter the threats we will face in the decades ahead. There are many other areas where U.S.-Russian cooperation can draw on the strengths and talents of both of our countries to foster innovative global solutions. For example, we have only just begun to work broadly with the Russians on HIV/AIDS. American experts and community organizations are sharing their experience with their Russian counterparts to help avert an AIDS epidemic inside Russia, while U.S. and Russian researchers are joining forces to work on vaccine development and the treatment of HIV.

We are now engaging with Russia on ways to cooperate in the further exploration of space, looking beyond the International Space Station to potential joint missions to the moon and Mars over the next 10-15 years. And we would like to expand cooperation in the development of new energy technologies that can reduce our reliance on hydrocarbons - such as the President's hydrogen fuel initiative and joint work on thermonuclear fusion.

We need to "think outside the box" not only in terms of cutting-edge technologies. We should also apply some new thinking to regional cooperation. I've already mentioned trying to work together, rather than at cross-purposes, in promoting stability and reform in the former Soviet space. We also welcome Russia's willingness to join other G8 partners in our efforts to get at the roots of terrorism by promoting democratization in the Broader Middle East.

In the same vein, we should also seek to develop a common vision for northeast Asia: stability, security, and prosperity. We have a shared interest in a non-nuclear North Korea, and we are already cooperating within the framework of the Six-Party Talks. Now we and Russia need to work with the Chinese, Japanese, Koreans and others to devise a regional energy and investment strategy that would, in particular, bring Russian energy to growing East Asian markets and at the same time stimulate an economic revival in Russia's Far East. Such a strategy could increase prosperity throughout northeast Asia and give everyone a greater stake in maintaining stability. The payoff could be enormous in terms of increased cooperation and heightened security in a region that remains among the most dangerous on earth.

Finally, and in many ways most important of all in strategic terms, we must work to increase contacts between our societies, for example, by expanding the numbers of exchange students going in each direction. In this connection, I am pleased to announce the launch last week of a program called the U.S.-Russia Volunteer Initiative, a presidential initiative that is sending Russian and American volunteers to each other's country to work on AIDS awareness; expanding computer access to rural and disabled users; and preserving cultural sites. In the future, Russian and American volunteers may work together on similar projects in third countries. We believe that bringing Russians and Americans together through projects like these will not only help strengthen mutual understanding, but encourage a greater sense of shared values.

Let me close on that optimistic note. Although there are still many problems to overcome in our relations, and many opportunities still to be seized, we must not forget the distance we've traveled - the many agreements reached, and the many potential crises avoided. Indeed, the U.S.-Russia relationship is sometimes the victim of its own successes. During the Cold War, the USSR was a prism through which we viewed most of our foreign and security policy. Post-Cold-War Russia is no longer the measure of all things. As a result, we increasingly look at Russia through the prism of our other priorities, like Iraq, the global war on terrorism, non-proliferation, global energy security, or any number of other issues.

While that reflects the progress that has been made, I think it's important, as we look to the next four years, to think about the U.S.-Russian relationship in its totality, and to think more ambitiously about what we seek to accomplish. It may take a change of generation to fully overcome Cold War reflexes and differences in values. It will certainly take time for our relationship to achieve the breadth and quality of our relations with traditional allies in Europe and Asia, or of those with neighbors like Canada and Mexico. But we should set our sights that high, since the gains would clearly justify the effort.