From: David Johnson <davidjohnson@erols.com>
Johnson's Russia List
20 September 1998
davidjohnson@erols.com

*******
PBS Online Newshour
Questions and Answers
http://www.pbs.org
RUSSIA'S CRISIS
Will Russia survive its economic and political crisis?
September 17, 1998

  Here to answer your questions on the crisis in Russia are Leon Aron and
Professor Michael McFaul. Mr. Aron, a resident scholar at the American
Enterprise Institute, is also the author of an upcoming biography of Boris
Yeltsin. Dr. McFaul, an assistant professor of political science at
Stanford University, is also the author of an upcoming book on Russian
democracy.  Please send in your questions and comments.

Questions asked in this forum:
  Is Primakov the right man for the job?
  What does the appointment of Primakov mean for Russia's relations with the
West ?
  What should the United States and the West do to help Russia get through this
crisis?
  What does the average Russian think about the current crisis?
  Can the appointment of Primakov be interpreted as a defeat for the reformist
policies of Yeltsin?
  Is there any possibility that Yeltsin will dismantle the monopolies?

Richard Williams of Madison, WI, asks:
  Is Primakov the right man for the job? Can he lead Russia out of its current
malaise?

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  Under the very tough political constraints within which Yeltsin was operating,
Primakov was the best choice. In appointing him, Yeltsin avoided the two
extreme scenarios: a) a (quote possibly) violent confrontation with the Duma a
la 1993, if he had submitted the Chernomyrdin candidacy for the third time and
then attempted to dissolve the Duma and schedule a legislative election; b) a
total surrender, if he had asked a Communist leader (Yuri Maslyukov, Gennady
Zyuganov, or Yegor Stroyev) to form a government.
  While Primakov faces enormous challenges in terms of economic rescue, at the
very least he stopped (or interrupted) Russia's slide toward chaos and
disintegration of the entire constitutional edifice erected in 1993.

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  Given the other options available at the time of his appointment, Primakov may
have best choice. Yurii Luzhkov, the mayor of Moscow, was a stronger candidate
who would have formed a stronger government (for better or worse), but the
rumor in Moscow was that Yeltsin's family disapproved of Luzhkov as they
feared for their long-term security should Luzhkov have become prime minister
and then president. (Allegedly, one of Luzhkov's conditions for taking power
was that Yeltsin would resgin sooner rather than later, and then new
presidential elections would be held.)
  I do not believe that Primakov will be able to pull Russia out of its current
economic crisis. Prime minister Primakov and his new team of Gorbachev-era
ministers plan to assign a greater role for the state in managing the economy.
Strapped for cash after defaulting on its debt, the government will print
money and thereby fuel inflation. To control inflation, the new Russian
government will introduce wage and price controls; some governors already have
done so. Eventually, this set of policies will produce shortages, rationing
coupons, and a black market. The question then will be what comes next-- a
genuine attempt to address Russia's economic problems or an even more anti-
market regime?

David Miller of Chicago, IL, asks:
  What does the appointment of Primakov mean for Russia's relations with the
West?

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  Primakov has been a difficult person for the West to deal with over the last
several years. He has promoted the idea of trying to balance the United States
by allying Russia with China. He also has talked about renewing Russia's role
as a major player in the Middle East. In an earlier period, the United States
coulds always check Primakov's influence on foreign policy by getting on the
phone with Yeltsin. This will no longer be the case as Yeltsin will be too
weak to play this role.
  However, remember that Primakov's plate is very full dealing with domestic
problems. Russia cannot afford to devote attention to international issues
now, but must focus on averting anarchy at home.

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  Russian foreign policy will remain the same as it was under Primakov: tough on
rhetoric critical of the U.S., attempting to re-create (at least symbolically)
Russia's status as a superpower (as France has done since the 1950's),
challenging the U.S. (e.g., in the Middle East, or arms trade), but, at the
same time, accepting the status quo and avoiding direct confrontation with the
West and cooperating with the West (and the U.S.) in many vital areas.
  This is what is known as a "non-revisionist" foreign policy -- which is quite
different from the policy of the Soviet Union, which was engaged in a zero-
sum, global and ideologically-motivated competition with the United States in
an effort radically to alter "the correlation of forced". You may read more
about the Primakov foreign policy in Chapter One ("The Foreign Policy Doctrine
of Russia and Its Domestic context"), which I contributed to Michael
Mandelbaum, ed., The New Russian Foreign Policy (New York, Council of Foreign
Relations, 1998)

A. Dillman of Denver, CO, asks:
  What should the United States and the West do to help Russia get through this
crisis?

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  Unfortunately there is very little we can do at the moment except to be
attentive, sympathetic and standing by to help if and when Russia is back on
the path of reforms. We are currently witnessing a Left backlash, which is
quite common in post-communist societies: Poland, Hungary, and Lithuania
brought the Left-of-Center governments (or parliaments) back to power several
years ago.
  As always, the Russian case is worse and more complicated. Its communist
legacy is much heavier because of immense militarization of the economy and
decimation of agriculture. And, second, Russia simply does not have moderate,
reformed, post-communist Socialists.

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  Until the new Russian government has a credible anti-crisis program, Western
assistance programs for macroeconomic stabilization such as I.M.F. loans must
be suspended. At the same time, other kinds of assistance programs aimed at
fostering microeconomic reforms should be expanded. For instance, programs
which provide small business loans, projects which furnish information about
Western markets, and business training and exchange initiatives should all be
expanded. Similarly, technical assistance projects which facilitate the
development of important market institutions such as laws governing property
rights, disclosure, bankruptcy, pension funds, taxes, and the securities
markets also need to increase.
  Since independence in 1991, Russia has yet to attempt genuine market reforms.
If the opportunity arises in the future for a renewed attempt, the people and
knowledge must be in place to make reform work.
  On the democratic front, the U.S. also need not stand by idly. At the highest
levels, U.S. officials must send clear signals to Russian elites about the
negative consequences of circumventing the democratic process. In particular,
the rules for the next presidential election must be followed. As such a
transfer would be a first in Russian history, no single event is more
important for the consolidation of democracy than Russia's upcoming
presidential election.
  At the non-governmental, grassroots level, programs that promote democracy and
democrats in Russia also must be enlarged. For instance, projects that provide
expertise regarding the development of parties, trade unions, federalism, the
rule of law, an independent media, and civil society more generally should be
expanded, not curtailed as is presently planned. Fascism in Russia can only
grow through the grassroots; trade unions, youth groups, parties, and women
organization's are their current targets. Russian democrats who are battling
for the heart and souls of these organizations right now must be supported,
not abandoned.
  Obviously, the kinds of assistance programs outlined here will not "solve"
Russia's current economic crisis. But they may be the long-term investments
that will save Russia from crises in the future.
  More immediately, these kinds of programs also offer Americans a way to remain
involved with Russia during this difficult period. These programs can be
administered without transferring a dime to the Russian state. They also can
be pursued without presidential leadership in either the United States or
Russia which cannot be counted on in the near future.
  Many Americans have grown weary of Russia as achievements have been few and
headaches many. However, now is not the time to give up on Russia. Only seven
years since the Soviet collapse, Russia's revolution has by no means ended.
While Russia's current leaders are still committed to developing a market
economy and a democratic polity, it is in the vital national interests of the
United States to insure that this trajectory continues. The days of
presidential summits may be over, but the work in the trenches has just begun.

  Siva Natarajan of San Jose, CA, asks:
  What does the average Russian think about the current crisis?

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  So far, we have little evidence on this question as few polls have been taken.
(I personally would never try to speak on behalf of the average Russian). In
polls released this week, people fear inflation most. Starvation -- a refrain
heard often in the West -- is a lesser concern. Remember, Russians have
learned to survive with economic hardship well before this latest crisis. In a
survey conducted earlier this year, 71% of respondents reported that their
household has a plot of land where they grow food !
  On a more anectdotal level, I can tell you that my friends in Russia are
disugusted and disheartened by this latest crisis as it means that all of the
gains of the previous fivie years have been wiped out. These friends of mine
are middle-class people in Moscow and St. Petersburg, who in many ways will be
the people hit hardest by this crisis as it is the middle class who had money
in banks, who bought imported goods (in Moscow 60% of all food purchased is
imported), and who worked in new private firms that are now closing. And the
biggest tregedy of all is that it did not have to occur. This crisis could
have been avoided.
  A final lingering legacy of this crisis will be the defamation of the word
"market reform." Little that has happened in Russia in the last several years
should have been called "reform" or "capitalism", yet it was labeled so. Now,
people argue that reform has failed. In reality, reform was never attempted,
but it will be hard to convince people in Russia of this fact after this
latest and ongoing tragedy.

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  Like the "average American", the "average Russian" does not exist. Apart from
the general revulsion and the sense of being betrayed yet again by the
political class, the attitudes toward the crisis likely differ sharply among
the socio-economic and demographic groups.
  The younger, better educated and urban Russians, who have profited very
significantly from the reform and who have been Yeltsin's core constituency
and delivered his victory in the 1996 Presidential election, feel disappointed
and angry at the President but not ready to abandon capitalism and reform. The
communist constituency (rural, elderly and poor) feel vindicated and want a
significant rollback to the Soviet past. What happens next will be determined,
in the end, by how the political forces representing both groups read their
messages and respond to them.

  Matt Roberts of Vienna, VA, asks:
  Can the appointment of Primakov be interpreted as a defeat for the reformist
policies of Yeltsin?

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  To add to my response to Question 1 above: the appointment of Primakov
signifies a major weakening not only of the reform policies of 1992-1998 but,
perhaps even more alarmingly, a de facto constitutional coup d'etat: the
installation of a government responsible to the parliament, rather than the
President. Given very deep ideological divisions in the Duma and its inability
to form a working majority on anything except opposition to the President, a
government controlled by the Duma could lead to a paralysis of power. I
honestly wish this prediction be wrong but the Duma's record until now gives
little ground for optimism.

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  I do not understand why everyone casts the latest government as a "return to
the Communists." Almost every major figure named so far has served previously
in a Yeltsin government, including the prime minister and the two top deputy
prime ministers. Only one of the new deputy prime ministers -- Vladimir
Ryshkov -- is serving for the first time under Yeltsin and he is from
Chernomyrdin's party, Our Home Is Russia.
  There is a very different way of understanding the present government, i.e.
that it represents continuity with the same old strategy of muddling through
without pursuing any policy reform. This reminds me very much of the stagnant
years of the Chernomyrdin years, not the stagnant years of the Brezhnev years.
Why those who have been so critical of the last several years should now be
upbeat at this "change in course" is a bit baffling to me.
  To me, it looks like the same old crowd that began asserting their influence
over economic policy in Russia circa Apri1 1992 and have been in the driver's
seat ever since. The short-lived Gaidar months in power (January 1992-April
1992) and the short-lived Kiryenko government (April 1998-August 1998)
represent the aberrations -- the attempts at changing course. This new
government represents continuity, dating really as far back as 1989-90 through
to the present. After all, didnt Chernomyrdin come to power in December 1992
under very similar political circumstances? The same people in Russia and the
West who hoped for a a centrist alternative in December 1992 celebrated
Chernomyrdin's initial rise to power when he was backed by Civic Union and
other "centrists" of the day. What's the big difference politically this time
around? (The differences in economic terms are much more stark in that
Primakov inherits a situation much worse than Chernomyrdin did in 1992).
  Do not misunderstand me. I see no alternative to this kind of government under
the current conditions and I wish them well. But I personally do not see this
new government as a break with "Yeltsinism." It's the same, a fact that will
disappoint both critics of Yeltsin on both the left and the right.

  Bill Murphy of Harrisburg, PA, asks:
  Is there any possibility that Yeltsin or a designated prime minister would
dismantle the monopolies which are considered to be primarily responsible for
the crisis?

  Michael McFaul, assistant professor of political science at Stanford
University, responds:
  The so-called financial oligarchs already have collapsed, or become severely
weakened, as a result of this laest financial crisis. They will be weak for
some time. In fact, they will have to fight very hard simply to hold the
assets that they seized during the "loans-for-shares" program of 1994-1995.
For instance, the financial-industrial group, Menatep, put up shares in its
oil company, Yukos, to borrow dollars from Western banks. As Menatep has
defaulted on these loans, these Western banks -- at least on paper -- have
control of this oil company, the secodn largest in Russia.
  As this drama plays out, my guess is that there will be a push to
renationalize some of these assets. The present Duma and government are not
about to hand over control of Russia's oil fields to Western banks.
  As for other monopolies, this government will do little to break them up. On
the contrary, I believe that Russian monopolies will be strengthened by the
latest change in government.

  Leon Aron, resident scholar at the American Enterprise Institute, responds:
  In the past, the so-called "natural monopolies" (gas, transportation, energy)
have been vigorously defended by the Duma against the attempt by the President
and the government to dismantle them. In so far as this government is the
Duma's government, I think they are likely to let the monopolies be. Unless,
of course, the "new industrial policy" will become more radical than has been
announced so far and the monopolies (along with banks) are nationalized.