DATE=9/4/1999
TYPE=ON THE LINE
TITLE=ON THE LINE: WHAT NEXT IN RUSSIA
NUMBER=1-00774
EDITOR=OFFICE OF POLICY - 619-0037
CONTENT=
Anncr: On the Line - a discussion of United
States policy and contemporary issues. This week,
"What Next in Russia?" Here is your host, Robert
Reilly.
Host: Hello and welcome to On the Line.
Russian President Boris Yeltsin recently fired his
fourth prime minister in less than a year and a
half. The political disarray has been accompanied
by revelations of massive corruption among
Russia's political and economic elites. Meanwhile,
jockeying has begun for parliamentary elections in
December and presidential elections next June.
Through it all, fundamental reform remains
elusive.
Joining me today to discuss the ongoing turmoil in
Russia are three experts. Jonas Bernstein is a
columnist for The Moscow Times and a Moscow-based
analyst with the Jamestown Foundation. Paul Goble
is communications director of Radio Free
Europe/Radio Liberty and a specialist on former
Soviet republics. And Anders Aslund is senior
associate at the Carnegie Endowment for
International Peace and a former adviser to the
Russian government.
Jonas Bernstein, having recently been in Moscow,
can you describe, much less explain, the political
climate?
Bernstein: The political climate has, needless to
say, heated up in the last few weeks, although the
summers are usually the doldrums there. It was
pretty heated up all summer, but particularly in
the last few weeks because there has been the
formation of a new political bloc. One is
Fatherland headed by Moscow Mayor Yuri Luzhkov,
which has now allied with a group of regional
leaders under the name of All-Russia. And former
prime Minster Yevgeny Primakov has joined them.
So the political battle is now really shaping up
between them and whomever the Kremlin decides they
are going to put forward.
Host: Have they not already decided?
Bernstein: President Yeltsin did name the new
Prime Minister Vladimir Putin as his heir
apparent, but, given the amount of times he has
shifted prime ministers, some people are waiting
to see what is going to happen. This might not be
the last prime minister before next year's
elections.
Host: Paul Goble, with all of these shifts that
have taken place over the past year and a half in
Russia, what are they in reaction to or in
promotion of, or can one discern purposes such as
those?
Goble: I think it is very dangerous to try to
give a single explanation for everything that has
happened. There are a number of actors at work.
Clearly, Yeltsin is looking beyond his own term in
office and trying to make sure that once he leaves
office he does not go to prison, or his family
either. Second, there is obviously grave concern
about where Russia is going. Russia has had
enormous economic and political difficulties, and
Yeltsin has not found any solution that seems to
work, and he keeps looking around. Third, while in
established democracies election times tend to be
a time when things quiet down in terms of decision
making, in emerging democracies, as Russia is,
what we see is the possibility that political
alliances could lead to radical shifts as people
try to position themselves either to advance their
own political goals or to prevent others from the
same thing. So what we are seeing, I believe, is
a certain amount of positioning to try to prevent
or to advance particular goals, because the state
is too weak to have an institutionalized inertia
through an electoral period.
Host: Anders Aslund, what is your view?
Aslund: This is a time when we have a lot of very
different things happening, and it is hard to say
what will be considered important in one year's
time. Is this a time when corruption is getting
out of hand, or is this a time when corruption is
being revealed?
Host: What is your answer, since that is one of
the issues in the headlines with the Bank of New
York and revelations of money laundering, capital
flight, or whatever is taking place?
Aslund: My guess is that we are seeing a cleaning
up, that all this knowledge has been there before,
but now we are seeing it really coming to a
crunch. Clearly some people will be ousted,
probably quite a few people will be put into
prison, at long last, for serous crimes. But that
is only my guess.
Host: One of the discouraging comments about
Russia today is that it has become a kind of
criminal state, that you cannot distinguish
between the Mafia and the government, that
corruption is endemic, that eighty percent of the
businesses, according to the interior ministry,
pay protection, and that there really are no clean
hands left. Is that an exaggeration, Jonas
Bernstein, or is there a real reform party
somewhere in Russia?
Bernstein: I think that is not an exaggeration,
and I would also add that it is not a new story.
I think that it is just that it is coming out now.
There have never been really the slightest
elements of what you would call the rule of law,
of an independent judiciary, of protection of
private property and private businesses, et
cetera. And these features have really been
present from the beginning. As a matter of fact, a
number of the features went back prior to the
collapse of the Soviet Union during the Gorbachev
reform period. And I think that it is true to say
that the corruption is endemic and rampant, but it
has been for quite a long time. I think that just
now we are starting to get more of an idea of what
exactly has gone on.
Host: Paul Goble?
Gobel: I think Anders has it exactly right. I
think that because finally people are talking
about it. For a long time all of this information
was available if you went to look for it, but it
was not focused on by the Russian people or by the
American government, let's be clear. There was a
tendency to say, well these are just part of the
growing pains of a shift from a Communist system
to capitalism and democracy. And I think now there
is a recognition that what has happened in Russia
is not so simple as that. There are some things
that have gone very, very wrong. And I do hope
that the next year will see a winnowing out of
some of the people who are guilty. I fear,
however, that whoever comes to power through the
Duma elections later this year, or the
presidential vote next summer, that the people who
come to power are not going to have completely
clean hands either. And it is going to be
important to us as we go through the next twelve
to eighteen months to try to be very careful in
saying, yes, we have one set of a criminal element
that has now been put behind bars or excluded from
political life, but the reality is going to be
that the who people are going to come are not
going to have clean hands either and we are going
to have to deal with them anyway.
Host: There are estimates in terms of capital
flight of from three hundred and sixty to three
hundred and eighty billion dollars that has moved
out of Russia since 1991. Maybe the figure is even
higher. However, when the Duma passed recently a
law against money laundering - in fact they passed
it twice - Boris Yeltsin on both occasions vetoed
it. What does this tell you about the political
willingness within the political establishment to
do something serious, when money laundering isn't
even illegal?
Aslund: I do not know here exactly why Yeltsin
vetoed it. It might have been good; it might have
been bad. But the fundamental problem is that you
have far too much state intervention in Russia. We
are talking about capital flight. Would you put
your money into a Russian bank? I would not. Would
you hold it at home? Not very pleasant, because if
you have a few thousand dollars lying somewhere
where somebody knows, you will have a burglary and
you will lose the money. The only safe way of
keeping money for ordinary Russians is abroad. And
this is the fundamental situation.
Goble: I think that there are several things
going on. One, individual Russians, that is
certainly a rational calculation, but also a lot
of the capital flight has been the result of value
stripping of assets, of the oligarchs going in and
selling off assets, and then exporting the
capital. The tragedy of Russia is that we do not
have robber baron capitalism where the people are
violating the law but building things. We have
what the World Bank has occasionally called robber
capitalism, where the people who are the new
owners, having acquired ownership by criminal
means or at least corrupt means, are then value
stripping, selling things off, degrading the
country's economy and its prospects for the
future, and shipping the assets in massive amounts
abroad.
Host: But that too is an old story. What, in the
coming parliamentary campaign and perhaps the
upcoming presidential campaign, is going to be
addressed seriously by these coalitions that are
in formation as we speak? For instance, you
mentioned that Mayor Luzhkov of Moscow has aligned
himself with Yevgeny Primakov and regional
governors, and that the Yeltsin camp, whatever
constitutes that today, is shaken up by the fact
that there is a real political opposition. Are
these groups just forming to divide what is left
of a smaller pie, or is there a program for
reform? Is there a program for creating a Russia
where people would want to keep their money in the
bank?
Bernstein: I am afraid that it is the former, that
they are fighting over a dwindling pie. The
problem with the issue of corruption in Russia is
that, while it gets covered in the Russian press
frequently, it is used by the media, which is
increasingly controlled by these oligarchs and
financial and industrial groups, as a weapon
against their foes, the other oligarchs. The
problem is that nothing ever gets done about it.
It is used as a political weapon to attack your
foe, but when it comes to the issue of really
prosecuting people for these crimes, it happens
very, very rarely.
Host: What does a candidate say in Russia today
that will attract voter support in parliamentary
elections? What sort of rhetoric are they using?
Goble: They certainly have to address the problem
of corruption because people are talking about it,
and he has probably been accused of being corrupt
himself. So he is going to lash back and say these
people are even more corrupt than any of my people
are. And while this may produce cynicism at one
level, on the other hand I think it is terribly
important that it is being talked about. I think
we are watching the beginning of the creation of
certain expectations that this behavior is wrong.
While we all knew in the West, and while people
who wanted to pay attention in Moscow knew about
this old story five, six and seven years ago, the
fact is that, when people are talking about it
every day on television, every day in the
newspapers, you are beginning to create
expectations in the population that something will
eventually be done. Will it happen as a result of
this electoral cycle? I doubt very much. Will it
create demands for something to be done in the
next Duma or further afield? I'm almost certain it
will.
Host: Anders Aslund, Paul Goble already referred
to the hope in the early days, in the early 90s,
that even the people who were looting the Russian
state would use the loot in a productive, creative
way, instead of just shipping it out of the
country, which is what they seem to have done.
However, you have pointed out that since the ruble
devaluation a year ago and the Russian default on
their loans, the sky has not fallen and that
actually the Russian economy may even have started
to grow. How could that have happened?
Aslund: If you look at the economic policy of the
last year, it has barely existed. It has been
totally passive. To the extent there has been
economic policy, it has been keeping the budget
under control because otherwise it was obvious
that there would be a full-fledged economic
catastrophe. But this has had, it seems right now,
a positive effect on Russian enterprises. They
have realized that they cannot get money from the
government any longer and they cannot even hope
for it. So they have all of a sudden, on a
significant scale, started working for the market.
And in Moscow today you can find a lot of decent,
cheap restaurants that did not exist before. You
can find decent Russian goods in the shops that
did not get into Moscow before. And this is a
positive sign.
Host: And Russian imports have fallen by almost
fifty percent, and they have a surplus in exports.
Aslund: Russia has a huge trade surplus. It was
thirteen billion dollars during the first half of
this year, and industrial production was actually
up by thirteen percent in July. Part of this is
because there was such a huge fall last year; part
of it is because of a massive devaluation; and
part of it is because of the higher oil price that
benefits Russia. But there is also something more.
We are seeing that the economy is changing
qualitatively. We have all heard about the massive
barter in Russia, that enterprises pay each other
with goods rather than money. They are doing so
ever less now, month by month. We have heard a lot
that Russian enterprises do not pay each other.
Now, all of a sudden, they have started doing so
to a much greater extent. Recently there has been
a petro crisis in agriculture. Why? Because
enterprises refuse to deliver petrol to the farms
because they are notorious for not paying with
money. So these are basically positive things we
are seeing. Enterprises are fighting for money and
they are providing what the market wants.
Host: Jonas Bernstein, do you sense any of that
having an impact on the life of the Russians in
any daily way? What is their view of things? Are
they more or less overcome by the repeated
disappointments?
Bernstein: I certainly think that is true. In
other words, you had the August '98 devaluation.
You also had the October 1994 devaluation. They
had monetary reforms going back into the Soviet
period. They have been repeatedly, the way they
feel it, ripped off by the government. You had the
savings loss during the inflation in 1992-93.
That's on the one hand. So I think the skepticism
in the average Russian is as deep as you can
possibly imagine. On the other hand, there is some
talk by some people of the meritorious effect of
the devaluation having stimulated some domestic
growth and industry. But I would also note that
some observers, like the Fitch I. B. C. credit
agency, said they were not sure that this effect
would not start to wear off, and that, given the
capital flight, given the fact that there is very
little foreign investment and that they estimated
that one hundred and thirty billion dollars is
offshore, it would not make a qualitative
difference, a sort of a breakthrough in the
economy.
Host: Paul Goble, where does this leave the
International Monetary Fund, where does it leave
U.S. policy?
Goble: I think it is going to be very, very
difficult to get much political support for the
United States giving more money to the I.M.F. to
give to Russia. It's simply going to be more
difficult with the charges of corruption that are
now getting so much play.
Host: The American treasury secretary has
recently said there should not be any more loans.
Goble: One Russian official responded that he was
not quite sure what the treasury secretary of the
United States actually was going to be looking for
in what he said, so we will have to see how that
plays out. But politically, charges that the
Russians have misused money in corrupt ways or
siphoned it off to offshore banks is going to make
it very difficult for the American contribution to
go up. It may very well lead to expanded tension
between the United States and Western Europe over
what to do with respect to Russia. And I think you
are going to see, as the electoral process goes on
in Russia, some of the regional splits in Russia
between Moscow, which has been doing relatively
well and where you do see the market taking off,
and much of the rest of the country, where you
cannot describe that at all. And there are going
to be a number of candidates who are going to be
running for the Duma and perhaps a candidate
running for president who will be calling
attention to the fact that it is all very well --
what you see in Moscow -- but what is out in
Vladivostok or Irkutsk is something very, very
different. And there you are talking about people
advocating greater state intervention precisely
because there are so many disasters. That is going
to get played back here too, and that is going to
make it harder for the West to make a contribution
through the I-M-F as well.
Host: Right, but contributions through the I-M-F
do not define the limits of U.S. policy. Looking
back on this, do we conclude that American policy
toward Russia has failed in a fundamental way,
Anders Aslund?
Aslund: Frankly, I do not think that Russia was
there to be lost for the U.S. I think that this is
a massive exaggeration of how much the U.S. could
influence Russia. To my mind, there was one time
that the U.S. could have really made a difference,
that was the first quarter of 1992. If the Bush
administration had made a big support package for
the real reformers in the Russian government, it
could have made a difference. At the time, the
Bush administration did not do a thing for Russia
and that's when it was important. And what we have
seen afterwards is quite a bit of U.S. remorse
that the U.S. did not act when it was possible.
And then the U.S. tried to do a little bit. It has
never been very important, and I do not think it
has been harmful. I do not think it has been very
useful either.
Host: I'm afraid that's all the time we have
this week. I would like to thank our guests --
Jonas Bernstein from the Jamestown Foundation;
Paul Goble from Radio Free Europe/Radio Liberty;
and Anders Aslund from the Carnegie Endowment for
International Peace-- for joining me to discuss
the ongoing turmoil in Russia. This is Robert
Reilly for On the Line.
03-Sep-1999 11:01 AM EDT (03-Sep-1999 1501 UTC)
NNNN
Source: Voice of America
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