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Reflections on Russia--Its Politics, Economy, and Foreign Policy

Remarks by Ambassador Thomas Pickering before the Association of American Publishers, Frankfurt, Germany, October 3, 1996. Ambassador Pickering departed Moscow on November 1, 1996, after three-and-a-half years as the U.S. Ambassador to the Russian Federation.

It is a pleasure to be with you to talk about Russia, a country that has absorbed my attention and energy for the past three and a half years. To state the obvious, it has been an eventful time. When I arrived in Moscow in the spring of 1993, President Yeltsin and his rivals in the parliament were locked in a bitter power struggle. It ended only when Yeltsin, in response to Three months later-in December 1993-the Russian people approved the current constitution by a slim margin in a referendum, but gave nearly a quarter of the vote to Zhirinovksiy's ultranationalist protest party in parliamentary elections.

The past twelve months have witnessed Duma elections in which the Communist Party finished a strong first, President Yeltsin's remarkable comeback victory in the presidential elections, and now questions about his ability to lead in light of his serious health problems. This period has also seen Russia and the IMF sign a three-year, $10 billion stabilization loan and continued progress in Russia's financial stabilization effort that has brought monthly inflation down below one percent.

Given this record, it is hardly surprising that, for Russians and Western observers alike, the past three and half years have been an emotional roller coaster of great expectations and disappointments. It has been hard not to succumb to the emotion of the moment. But those that did lost sight of the more fundamental change taking place that will ultimately shape Russia's future. The change has been on balance positive for both Russia and Western interests. I would be the last to play down the formidable challenges still facing Russia, and the inevitable crises that lie ahead. I nevertheless remain an optimist about Russia's possibilities and our relations with it.

With that by way of background, I would like to share with you some reflections on Russia - on its politics, economy, and foreign policy - as my tour of duty comes to an end there.

Unfortunately, you cannot talk about Russia today without talking about President Yeltsin's health. That issue has loomed over all political discussion in Moscow for the past several weeks. Of course, we, like the Russian people, wish President Yeltsin a speedy and full recovery from his illness and a quick return to his Kremlin office.

Still, we cannot avoid the issue of succession, even if we hope it comes at the end of the four-year term to which President Yeltsin was elected. For the ability to transfer power smoothly and peaceably, with a minimum of disruption, is critical to the stability and viability of any democratic government, especially one like Russia's that is in the early stages of formation. In this regard, the developments of the past year have been encouraging. The very fact that presidential elections occurred on schedule, despite widespread calls for postponing or canceling them or negotiating their results in advance, and that they were by and large free and fair, despite numerous predictions to the contrary, bolsters our confidence that any succession will occur according to constitutional norms.

Moreover, as Moscow comes to grips with the implications of Yeltsin's health problems, the prevailing assumption has been that if Yeltsin steps down before the end of his term, elections will decide his successor. Indeed, there is already much pre-election maneuvering in Moscow. However unseemly that might be given our human sympathy for Yeltsin, it is a further indication that any new president is likely to enjoy the democratic legitimacy President Yeltsin now does.

A succession according to constitutional norms, whenever it occurs, would further undergird stability in Russia. Indeed, the country is already more stable than many observers, both in Russia and in the West, imagine. The factors promoting stability are many. Let me focus on just three.

First, there has been a vast devolution of power, both political and economic, over the past decade to regional authorities and autonomous commercial and industrial structures. This devolution will receive a further boost during the regional elections this fall: Governors once appointed by the President will now be popularly elected. As a result, although the President may be the most powerful figure in the country today, his power pales in comparison to that wielded by the Communist Party bosses of the Soviet period or the Tsars before them. Indeed, what happens in Moscow matters less for overall developments in Russia today than it perhaps has at any other time this century.

For most of Russia-Chechnya is the obvious exception-devolution means just that. It is not just motivated by separatism. Chechnya, fortunately, is an exception, and an example that few other regional elites are tempted to follow. My extensive travels over Russia - I have visited two-thirds of the Russian Federation's eighty-nine federal units - have unearthed no strong separatist urges. Rather, the regional leaders I have met all stress one point: the need to develop a durable federal system based on an equitable division of responsibility between central and regional authorities. This will be an uneven process, and disagreements between Moscow and the regions will inevitably arise. But, overall, it provides the best avenue for fostering stability and guaranteeing the country's territorial integrity.

Second, Russian society has witnessed an unprecedented opening up over the past decade. This process has been particularly important for young people, who are best positioned to cope with - and, most important, to take advantage of - the vast changes now underway. As a result, much energy that would have been erupted into political rebellion in a more closed system has been channeled into entrepreneurship. It is not unusual, indeed it is the norm, for leading bankers and businessmen to be in their twenties and thirties.

Of course, some of this energy has found an outlet in crime, manifested in the rapid growth of organized crime. This is a disturbing development. But we must not exaggerate the problem. Crime very often accompanies reform in its early phases, because old social norms are broken down before they can be replaced by new ones. Crime also intervenes to take over roles the government should perform, but cannot in its temporarily weakened condition, for example, the protection of private property and the enforcement of contacts. Some crime was inherited from the Soviet Union. As a result, some of the crime problem will die away naturally as reform consolidates its position in Russian society. At the same time, we are already working closely with the Russian Government on ways to fight organized crime here and now.

Third, Soviet Communism is dead. That was one key verdict of this year's Presidential elections. For the moment, there is no all-encompassing alternative to the path toward democracy and a market economy on which Russia has embarked, and there is none looming on the horizon. Of course, there will continue to be sharp debate over the pace and scope of reform, but no real debate over the fundamentals. Private property and political pluralism are here to stay in Russia. To undo them would require great resources and a willingness to shed vast amounts of blood. No current opposition force appears up to the task.

Stability in Russia has been both a cause and a consequence of the economic progress Russia has made over the past few years. The progress has been impressive, especially given the many predictions of imminent disaster that have been bandied about in both Russia and the West. Prime Minister Chernomyrdin's first government, for example, did a remarkable job in bringing financial stabilization to Russia. Only three years ago, the country was on the brink of hyperinflation. For the past two months, inflation has been below one percent. At the end of August, the IMF announced that the country was back on track - after some excessive election-related spending - in its three-year, $10 billion stabilization program.

For his second government, Chernomyrdin has assembled a strong team to press ahead with needed economic change. The new First Deputy Prime Minister in charge of macroeconomic reform, Vladimir Potanin, is a leading commercial banker familiar with Western business practices. The new Finance Minister, Aleksandr Livshits, formerly an economic advisor to President Yeltsin, has ably articulated economic policy to the public. The Economics Minister, Yevgeniy Yasin, is a strong proponent of creating a fair and predictable environment for business activity, for Russian and foreign investors alike. And Anatoliy Chubays, one of the original members of the Gaydar reform team, has taken the key job of head of the Presidential Administration. He and Chernomyrdin have had good working relations in the past. All of this augurs well for the President and the Government pulling in the same direction in support of economic policy.

The major task facing the second Chernomyrdin Government will be to build on its achievement of financial stabilization to accomplish a thorough restructuring of the Russian economy. Prime Minister Chernomyrdin recognized this as his main challenge in his address to parliament in August.

What is at issue here is much more than the "pump priming" we sometimes associate with boosting economic production in the West. It amounts to nothing less than the wholesale reconstruction of the economy on the industrial rubble of seventy-five years of communism. That will require significant domestic and foreign investment; and it will require time and hard work and further sacrifice by the Russian people. There is no magic wand.

The Chernomyrdin Government, however, has a good base to work from. The Russian economy, for example, has experienced a necessary downsizing in industry, particularly in areas like defense production. Although the shift of resources to new production and economic activity is only just beginning, we already see evidence of growth in the service sector. Much of this is not fully captured in the official statistics, but is evident in the construction and new retail trade outlets that are visible not just in Moscow and St. Petersburg, but out in the provinces.

The number of commercial banks has grown rapidly, perhaps too rapidly. Some banks, particularly the so-called "pocket banks" which have been established by enterprises, face solvency problems. There has been and will continue to be consolidation in the banking sector. I think the press speculation about a banking crisis in Russia this fall is exaggerated. The Russian Central Bank knows well the weak points in its banking system and is actively working to head off crises.

Foreign trade remains a bright spot in the economy. Russian trade has expanded sharply. Russia has registered a trade surplus for the third year in a row, reaching $28 billion in 1995. Energy, minerals and raw materials lead in these exports but the Russians continue to seek markets for their high technology industries. Russia sees its future in free trade and deeper integration in a global economy. The United States has fully supported Russia's efforts to accede to the World Trade Organization (WTO) on appropriate commercial terms and has welcomed the liberalization that has taken place in Russia's foreign trade regime.

Although the situation is slowly improving both politically and economically, Russia remains mired in a prolonged period of strategic weakness. How Russia comes to terms with its reduced capabilities at a time when Russian elites continue to yearn for great power status will also be a key issue to watch in the coming years. For Western leaders, the challenge will be to help consolidate freedom and independence in Central Europe without pushing Russia into an aggressive posture. Although Russia continues to oppose NATO enlargement, I believe its leaders increasingly realize that their ability to prevent it is minimal. Indeed, early on, in mid 1993, Boris Yeltsin made clear that Russia had no right to tell the Poles to which international organization they could belong. Our aim is, however, broader than enlarging NATO. We want to see a peaceful, secure and stable Europe that includes both a revitalized and enlarged NATO and a peaceful and democratic Russia that plays a major constructive role in Euro-Atlantic affairs. One of the keys to this outcome will be a strong NATO-Russia relationship.

In this regard, NATO-Russian cooperation in Bosnia has proven an excellent example of how the U.S. can work closely and cooperatively with our former adversary. Likewise, I see greater room for cooperation along Russia's periphery, where American and Russian interests often coincide on regional conflict resolution, combating narcotics, and blunting terrorist and rogue state influence. By building closer working relationships with Russia, we will also be working together against those in Russia who seek to establish in that part of the world an exclusive Russian sphere of influence. Indeed, we welcome closer relations among the former states of the Soviet Union which are developed on a voluntary basis, where mutual advantage prevails and where the region remains equally open to outside trade and investment.

As this quick review of politics, the economy, and foreign policy suggests, Russia has come a long way in just five years, but major challenges remain.

First, Russia must find a way of defining itself as a nation that is consistent with democratic development. As numerous scholars have pointed out, Russia became an empire long before Russians became a nation. As a result, Russian national consciousness, for many Russians, is infused with imperialist elements. Acting on those imperial impulses, especially in relation to the other former Soviet republics, will, however, sap the resources needed for the revival and flourishing of the Russian nation. The smaller Russia which emerged in 1991 will be a greater Russia than a bigger Russia. And that smaller Russia will still be the world's largest nation in terms of area by a long shot.

Second, Russia's democrats must come to terms with Russian nationalism, which they have tended to see as reactionary, xenophobic, and aggressive. History, however, has demonstrated that nationalism provides the key legitimizing principle of all societies exiting communism. To succeed, Russian democrats must endeavor to present their vision of Russia as an organic outgrowth of what is best in Russia and not as radical break with a thousand years of Russian history, as they did immediately after the Soviet breakup. If they do not make this effort, they will concede the field to extremists and doom Russia's democratic experiment. Indeed, precisely because they realize this point, the so-called honeymoon in our relationship has been short-lived and now is replaced by a partnership in which Russian interests play a key, and not unhealthy role. Third, Russians must close the historically wide gap between society and the state. The Presidential and parliamentary elections of the past twelve months, and the ongoing regional elections, are critical steps in making the government accountable to the people. But more than elections are needed. In particular, Russian society needs to develop that dense network of horizontal and vertical ties - the professional associations and civic and religious organizations, for example - that allow society to act on government policy between elections. These ties are only beginning to emerge in Russia.

Fourth, Russian society must be infused with a democratic spirit. The democratic virtues of tolerance and compromise, as well as the democratic separation of the public and private spheres, have shallow roots in Russia. Advancing democracy will require a thorough overhaul of the educational system, including new history and civic texts to replace the old - and now discarded - communists tracts. So far, however, the government has devoted few resources to educational reform and allowed the entire system to stagnate and begin to decay.

Fifth, Russia must build a genuine federal structure. The country is simply too vast and too diverse to be run efficiently from a single center. The devolution of power away from Moscow over the past several years has created the conditions for the emergence of a new federal system. But the new power arrangements still have to be codified in a stable legal framework.

If nothing else, what the past decade of Russian history has demonstrated is that Russia has embarked irreversibly on a journey away from its totalitarian and communist past. There can be no going back, no going back because Soviet Communism revealed itself as a historical dead-end, no going back because neither the people nor their leaders will sanction it. Where it is headed is an open question. It would be a grave mistake to believe there is anything inevitable about a transition to democratic polity based on a market economy at peace with itself and the rest of the world. History will assuredly continue to surprise.

For the moment, however, we can say that, despite the uncertainties, Russia is moving in a direction that is compatible with the West's long-term interests in global peace and security and an integrated and prosperous global economy. The overwhelming share of the credit goes to the Russian people and their leaders. We in the West have naturally played a lesser, but not insignificant, role by remaining engaged in Russia through the ups and downs of the past decade. It is an approach we must continue, for history has offered us an opportunity we are unlikely to see again: The opportunity to turn an implacable foe into a partner. We have used this opportunity wisely so far. We must continue to do so.

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