Insight on the News: Russian reform roulette - problems with implementing social and economic reform

Summary: President Clinton is finding that his pledges to promote reform in Russia may have been easier said than done. He has created a team to tackle the problem, but it will find that its policy options are limited. One thing is clear, though: The stakes are high.

To believe Bill Clinton's campaign rhetoric, George Bush was yesterday's man, behind the curve on the economy, on the concerns of ordinary Americans, on just about everything - including Bush's strong suit, foreign policy.

Take the former Soviet Union. Though acting from the best of motives, the line went, Bush had been hopelessly slow to recognize the importance of changes there, clinging to Mikhail Gorbachev long after it became plain that the goals pursued by Boris Yeltsin and his reformers were more in tune with the interests of the United States. And even after Yeltsin's triumph, the administration's approach remained fainthearted and piecemeal.

Clinton, declaring that "no national security issue is more urgent" than promoting democracy in the former Soviet Union, promised that his administration would vigorously implement policies to help reform in Russia. The Cold War had been won. Time to win the peace.

But as is true in so many other areas, it is clear now that criticism of the Bush administration came more easily to candidate Clinton than do new policies to replace the old. As president, Clinton is finding out just how difficult and limited are his options for furthering Russian reform.

The stakes are high indeed. A return to tyranny in Russia, everyone agrees, would be a tragedy, and the possibility can't be ruled out. Playing elder statesman, Richard Nixon has emphasized in his well-publicized pleas for helping Russia that it will remain a great power no matter what the U.S. does. The only thing in doubt is whether the new Russia will be friend or foe. An autocratic Russia might not be as dangerous as the Soviet Union of old, lacking global ideological attraction, but it would pose a serious enough nuclear threat to force the United States to think twice about the defense cuts now under way.

Europe is already a much less stable place than during the Cold War. A resurgent, undemocratic Russia would further disrupt the Continent, especially in the event of a wider Balkan war. "Russia under some kind of nationalist dictatorship would certainly be an unpleasant ingredient in the stew," says Joshua Muravchik of the American Enterprise Institute, who helped draft some of Clinton's campaign speeches on foreign policy

As a first step, Clinton has created a new office under Secretary of State Warren Christopher that will be charged with coordinating economic, military and political strategy toward Russia and the 14 other former Soviet republics. At its helm will be Strobe Talbott, a former columnist and Moscow bureau chief for Time and, more importantly, a pal from Clinton's Oxford days. Talbott may rank below Christopher, but he will enjoy access to the president.

What will bedevil Clinton and his team most is the lack of policy tools at their disposal. Foreign aid (assuming it would be helpful) is wildly unpopular at the moment, just as foreign policy is about the lowest priority of the American people, if one believes the opinion polls. The United States is facing another record budget deficit - not the most propitious moment for any strategies involving cash.

Even if the money were there, it's doubtful, given the current state of the Russian economy, that it would be used productively. William Hyland, former editor-in-chief of Foreign Affairs, puts the problem bluntly: "There is a limit to how much outside powers can do."

Inflation in Russia is approaching 50 percent a month, the hyperinflation mark. The reason is not hard to find. To prop up failing state enterprises, Russia's Central Bank has printed money with merry abandon, in defiance of reformers such as former Prime Minister Yegor Gaidar and the current minister of privatization, Anatoly Chubais. The bank defies government ministers not because it's independent but because the bank chairman is appointed by Russia's Parliament, the stronghold of opposition to democratic, capitalist reform.

In a devastating reflection of economic and political uncertainty - and of the lack of investment opportunities as promising as the risks are high - capital is flowing out of the country at an estimated rate of several billion dollars a year. The ruble - play money to begin with - has fallen from low to even lower - from 142 to the dollar in June to almost 600.

And it is a severely weakened Yeltsin that the Clinton administration will have to deal with. In December, Yeltsin was forced by hard-line legislators to throw Gaidar overboard and replace him with an old-time apparatchik, Viktor Chernomyrdin, a former energy minister whose constituency is state-run industry.

Chernomyrdin was seen as the stalking-horse for the bureaucrat bosses of the state economy in their revolt against reform. He came into office on a program of slowing down privatization and continuing subsidies to the money-losing, government-owned industries. But when new subsidies quickly caused inflation to shoot up, Chernomyrdin got some hard lessons in economics and almost as quickly revised his views. He remains an unlikely reformer.

On another front, Yeltsin is locked in battle with Ruslan Khasbulatov, the ambitious speaker of the Congress of People's Deputies. At stake is nothing less than who will govern Russia, the president or the legislators. The body that Khasbulatov presides over and fitfully controls, through a coalition of old-time Communists and new nationalist groups, is an anachronism, but one unwilling to wither away. It was elected in 1990 when the Communist Party still dominated Russian politics, and old party members routinely block legislation they don't like.

Khasbulatov is not beyond flaunting his power. At one point he had assembled his own praetorian guard of 5,000 soldiers, a force Yeltsin managed to disband before it caused trouble. Khasbulatov has lately stepped up his attacks on Yeltsin, harshly criticizing him in meetings with foreign visitors - telling Swedish Prime Minister Carl Bildt, for example, that Yeltsin was "failing to cope with his duties."

Under pressure from his enemies, Yeltsin has had to postpone a constitutional referendum, originally scheduled for April 11, to replace the country's old communist constitution. He had hoped a popular vote would end the power struggle.

He has suffered similar setbacks on foreign policy. For months, nationalists and former Communists have been accusing the Yeltsin government of slavishly following the U.S. lead. In December, the liberal foreign minister, Andrei Kozyrev, stunned an international audience in Stockholm with a hard-line foreign policy speech proposing to revive the policies of the former Soviet Union.

To everyone's relief, the speech turned out to be political theater, meant as a shocking warning of what may come if Moscow's democrats do not prevail.

The pressures on Yeltsin are beginning to show. He has started echoing his opponents, accusing the United States of "dictating terms" around the globe. The new stance was clear in the decision by Moscow to criticize the January U.S. missile attacks on Iraq. And increasingly, in the case of the former Yugoslavia, Russian officials are speaking out on behalf of their fellow Slavs, the Serbs.

Lately, Yeltsin has even started raising questions about defense conversion, asking if the country can do without such a good "hard currency earner." After a recent trip to India, traditionally a big purchaser of Soviet military equipment, he complained: "We still reduce the production of arms and India is forced to reorient to the West, although it is ready not - only to pay us hard currency for armaments, military hardware and spare parts, but also to create joint production with us."

According to Yeltsin biographer Leon Aron, the finesse of a master politician that Yeltsin used to display seems to be gone. Some Moscow commentators have speculated that Yeltsin, in giving in to Parliament's demands to appoint Chernomyrdin, hoped to saddle Parliament with responsibility for the results. Aron believes it's more likely that Yeltsin is simply exhausted. On a political roller coaster ride since 1987, when he was removed by Gorbachev from the Politburo and the party, Yeltsin would appear to have been through more stress than the average person can endure.

To help Yeltsin through his troubles, the industrial democracies of the world this past spring granted the Commonwealth of Independent States a $24 billion aid package. Of this, the United States pledged to contribute $4.5 billion, half of which has yet to be disbursed. Much of the money is earmarked and limited to technical aid, food distribution, energy conservation and defense conversion. The Bush administration's rationale for holding back on aid (beyond the budget deficit) was that further government-to-government aid would do more harm than good. Money would simply disappear into a sinkhole of industrial subsidies and payments on loans from Western banks.

Further economic aid, in the Bush scheme, would depend on evidence of Russia making economic reforms and on guarantees to ensure that money would be spent fruitfully. The Clinton administration's plans are still sketchy. While immediate increases in U.S. aid look unlikely, some analysts are concerned that they will depart from the principle of strict conditions designed to force reform.

Citing administration sources, the New York Times recently reported that the Clinton team is planning to pressure the International Monetary Fund to loosen its conditions for releasing loans to Russia. IMF officials recently warned Russia that its fiscal irresponsibility jeopardizes the release of the rest of loan money already approved. Russia's Central Bank chairman, Victor Gerashchenko, defiantly shot back that the proposed budget deficit of 3.5 billion rubles was a fiction cooked up by the government for the benefit of the IMF Six billion rubles is more like it, he told a parliamentary commission.

The exchange illustrates the difficulty of promoting internal reforms in Russia. Just as difficult will be the promotion of good relations between Russia and its, neighbors. "The central objective," says former national security adviser Zbigniew Brzezinski, "has to be to make certain that the Russian empire is not re-created."

On this point, most analysts agree, fear of chaos in the former Soviet Union led to some serious policy blunders by the Bush administration. On the one hand, says Michael Beschloss, coauthor with Talbott of a new book on the Bush-Gorbachev years, At the Highest Levels, Bush deserves praise "for giving Gorbachev the self-confidence to give up previously cardinal aspects of Soviet foreign policy - such as dominion over Eastern Europe and the division of Germany - without feeling that the United States would instantly exploit them and make him sorry." The problem is that that same desire for stability and quiet evolution led him to disregard the aspirations of peoples who had lived under communist tyranny for most of the century, plus overlook the fact that it was scarcely in the U.S interest to prop up the Soviet empire.

The low point of the Bush approach in this regard was Bush's socalled Chicken Kiev speech - delivered in the Ukrainian capital in July 1991, just before the Soviet Union collapsed - in which he urged Ukrainians to preserve the union and warned them of the "dangers of suicidal nationalism." Though perhaps more understandable in the light of later events in Yugoslavia, the speech and the policy it represented were both inadequate and unrealistic in a period of revolutionary change.

What Clinton's team appears to hope to do instead is to have the United States function as intermediary between Russia and the other republics. The most significant conflict in strategic terms, and therefore the one likely to command the most attention from the U.S., is that between Russia and Ukraine, the most populous of the former Soviet republics after Russia. Many analysts see it as crucial that Ukraine stabilize itself as a secure state. The reason: Ukraine, which is roughly the size of France, could form a vital buffer between the rest of Europe and Russia if things turn sour and the foes of democracy triumph.

It follows from this view, according to Brzezinski, that any steps by Russia to intimidate the Ukrainians should be viewed as obstacles to Western assistance. Among these steps would be attempts to control the Crimea, where people have resisted Ukrainian independence. Russian Vice President Alexander Rutskoi has been among those talking about reclaiming the Crimea.

Complicating matters for the Clinton administration is the fate of nuclear weapons outside Russia. The new arms pact, START II, calls for retiring all land-based, multiplewarhead missiles, vastly reducing the chances for nuclear first strikes. That means the U.S. and Russia will each scrap two-thirds of their strategic nuclear missiles - reducing to between 3,000 and 3,500 on each side by 2003. But Ukraine, which has 176 strategic missiles from the old Soviet arsenal (making it the world's third biggest nuclear power) has been dragging its feet, demanding that it receive international and American security guarantees plus money to pay for destroying the weapons.

These missiles cannot now be fired by the Ukrainians, as the encoding device to launch them requires joint Russian-Ukrainian action. But there have been reports that a factory in Kiev is working on an encoding device that would bypass the original one. So there is a direct conflict between Washington's sense of urgency about START II and the dangers of nuclear proliferation and Ukraine's fears for its sovereignty.

While containing nuclear proliferation is of paramount importance to the United States, Ukrainian fears cannot just be dismissed out of hand, says Russian analyst Semyon Reznik. "They do not want to keep these weapons just out of stupidity. Ukrainians see these weapons as a guarantee of their survival."