JOHNSON: How would you describe the current state of relations between Russia and the United States? Is this controversy over the Iraq bombing a hiccup, are there other danger points which are there?

ARBATOV: It's very difficult to explain in one formula, because on the one hand, the interaction is as close as ever, although not necessarily in a benign sense of the word. What I mean is that Russia is heavily dependent on the United States and Western financial institutions like IMF for its economic situation. After the August 17 crisis, one of our principal problems is the payment of the foreign debt, which is very closely connected with Russian efforts to get out of this crisis. This implies very close relationship. However, that is not the case, and this heavy financial dependence of Russia is rather a matter of growing disenchantment in Russia and in the United States. So that is one part of the relationship which at this particular moment and for this particular year, may account for the major part of our relationship. I would go as far as to say 80, 90% of our relationship, in one or another way, are connected with this crucial issue and dilemma.

As for more traditional political and security calculation, then certainly we are on a divergent course. Russia feels very vulnerable, humiliated, not treated in a fair way, ignored when major decisions are taken either in Washington or in NATO headquarters in Brussels. The agenda for national security policy as seen from Moscow and from Washington, looks very very different. And we have lost many years, and are not doing enough now, to close this gap in our security perceptions. Which to a very large degree reflect different positions in which Russia and United States find themselves ten years after the end of Cold War.

So to summarize, I am extremely concerned about the way the relationship between Russia and the United States is going forward. And on top of that, both inside the United States and inside Russia, there is a quickly shrinking constituency for our cooperation and improvement of our relationship. And the political groups which are very hostile to another country are gaining momentum.

JOHNSON: The main elements of the Russian security agenda would be what? What are the top concerns of the government these days?

ARBATOV: When talking purely about external security, I would say the main issue would be the unfair treatment of Russia by the West as it is interpreted in Moscow. The most important imaginable decisions--like NATO extension, like on threats to bomb Serbs in Kosovo, like actual bombing of Iraq-are taken not only without an attempt to reach consensus with Russia, but very often even against Russia's clear objections, and sometimes without even bothering to inform Russia about what is going to happen.

JOHNSON: The Primakov government is trying to have a more centrist policy working with the Duma, seems to have a little more support, looking across the broad spectrum of public opinion. And yet it does not seem to have a lot of support in Washington. How do you assess the American attitude toward this government?

ARBATOV: Well, I think the American attitude towards the government of Primakov is quite-is tinted with a lot of suspicions. Primakov is suspected as a friend of Saddam Hussein, Primakov is suspected as a friend of Russian communists, Primakov is suspected as somebody who is not totally loyal to Western values and somebody who is not totally devoted to the ideal of cooperation between Russia and the West. That's how I see it. On the other hand, it is understood, as far as I can see, it's understood in Washington that Primakov is a figure which may insure at least some degree of political stability in Russia. And so he is taken as political reality, but without any sympathy, more like realized necessity.

JOHNSON: There have been some improvements in the pay of the military. And recently announced that cuts had been implemented. We all know that the state of the Russian military is quite bad these days. What's your reading of where the military reform process is now, and what the future may bring in terms of the state of the Russian military and morale?

ARBATOV: That's one of the questions which is a very clear illustration to what I said, claiming that 90% of Russian-American relations may be connected or associated in one or the other way with this huge problem of Russian financial dependence on the West. Situations like that… conditions for restructuring Russia's foreign debt for this year, which are supported by IMF, determine very stringent budgets, in which expenditures are cut, even compared to the previous budgets, in order to bring revenues and expenditures closer together. That is the most important condition which is connected with the potential agreement of the West to restructure Russian foreign debt.

What it does to the military? The military budget, according to the draft law on the budget that was introduced into the Duma for 1999 amounts to 92 billion rubles. It is about 15% of the expenditure part of the federal budget. Which is quite a lot if you take into account other areas like education, health care, science, and many others are funded at a much lower level. This is one largest section of the budget.

But on the other hand, if you convert it into dollars by the present commercial exchange rate, you come up with a military budget of $5 billion dollars. Which is 1.5 times smaller than the defense budget of Turkey, and which is more or less equal to the defense budget of India. Of course, commercial exchange rate is not quite an adequate measure, but as an illustration of a catastrophic situation with funding of the Russian military and Russian military reform, and those two are inseparable, this is a good point to mention.

During the last year and a half after Sergeyev was appointed minister of defense, the top leadership of the ministry of defense turned into the main partisans of military reform, after many years when the top leadership was enemies and subversive factor in the military reform. However, tragically, that was exactly the moment when the financial situation, financial system of Russia started to collapse. And that is why, in spite of huge breakthroughs that were made on the road of military reform in the last year and a half, now it has virtually stopped because of lack of funding. Coming back to my example, you may understand very eailsy that it's very difficult to maintain a 1.2 million (man) army, with 10,000 nuclear weapons and 40,000 tons of chemical weapons, and space systems, and infrastructure, and military bases and everything, for a budget of India, or for a budget of $5 billion dollars, and at the same time trying to continue to reform it, to further reduce it, to reform and to restructure and to redeploy, which doesn't come free either. That is the gist of the situation we are now facing.

So what is the way out of that? To increase military expenditures, including the expenditures for military reform within the presented federal budget, would mean leaving other items like health care and education, which are no less important for the society, virtually at zero funding. This is unacceptable and immoral. So the only conclusion is that, if you do not find additional sources of revenue to add at least 30 or 40 billion rubles to the 92 that we already have in the draft law on the budget, you have to print this money. There's no other way. I am sure that adding 30 or 40 billion rubles to the money mass in Russia, which is about 400 billion rubles, would make no difference whatsoever. Maybe inflation during the year would be 10% higher for the year. Nobody would even notice that in our present economic and financial mess.

Without that, without that money, the military form certainly will collapse, and the maintenance of the armed forces would also encounter enormous difficulties, if not to use words like collapse and disintegrate and so on. Why cannot we do that? Because IMF doesn't agree to additional emission and to higher inflation. If we go for it, then IMF would demand paying the whole debt, which is $17.5 billion for this year, the whole debt is of course $167 billion, including the Soviet debt. But the payment for this year, the dues to be paid this year, are $17.5 billion. That amounts to almost all the revenues of the federal budget which is planned for this year, which are 400 billion rubles.

JOHNSON: No way out… IMF says this, reality says this, what to do?

ARBATOV: That is the dilemma. Well, if you ask me what to do, I think IMF has to change its position. The United States government, American elite, both business and political elite, and IMF have to recognize that the collapse of Russian economic reforms that culminated in August of last year was a collapse of our joint venture. The reform was implemented since 1992 with unprecedented involvement of Western advisors, observers, these massive credits to support and sustain the reform for six years. It's very bad that it failed. I'm not, I don't want to go into reasons or to speculate on whether it could happen in different way, but that's the fact of life. It collapsed.

Part of the legacy of that reform is huge foreign debt, which Russia created, or which it accumulated during the previous years. Of course, still the larger, relatively larger part of responsibility for failed reforms and for the debt are with Russia. But it doesn't mean that nobody else is responsible. And since our joint venture collapsed, we have to jointly resolve this question. And I think that, if not providing Russia additional credits, IMF and the united States owe us at least the benefit of the doubt, that is flexible, forthcoming, and sympathetic position on payment of the debt for at least a couple of years, and letting Russia find its own way of getting out of this economic and financial mess-including printing money, and having higher inflation, but saving things which are important for Russia, the economic are, the security area, and not only for Russia.

I think if our nuclear power stations, nuclear weapons, are terribly underfunded, it will be as dangerous for Russia as the rest of the world. And if we are lacking revenues because of huge economic crisis, then at least let us deal with it through emission and through higher inflation. If managed properly, this policy may even trigger economic growth and finally getting out of this crisis. That was what the New Deal was about in the United States in 1933. However the United States were lucky enough to have this huge foreign debt. We are not that lucky.

So we would like to count on US understanding at the very least. If we fail to get out of the crisis, we will be ourselves to blame for it. And the United States and IMF will say, 'we did whatever we could; they failed.' But if we fail while having those stringent conditions of IMF and having this new budget which will destroy everything that is not yet destroyed, then the failure will be both on Russia and on the West.

JOHNSON: Any sign from Washington of willingness to accept this advice.

ARBATOV: You know there are a lot of signs when you talk to people, including officials, influential people in business community, academic community, strategic community, I have met with great sympathy and understanding. And I was not inventing a bicycle to them. They already, many of them already keep to that view. However, this somehow does not translate into official policy either of Washington, or of IMF.

JOHNSON: Some argue that ratification of the START II treaty would create greater sympathy here. That's been at least temporarily set back. Is it coming, and if it does, what should come next on the nuclear agenda between the two countries.

ARBATOV: Well, maybe ratification of START II might create greater sympathy toward Russia and would positively affect the ability of Washington to take a flexible position on the Russian foreign debt, but that was a very bad argument to use in Russia, because it implied that Russia doesn't need START II other than to induce Washington and IMF to render more flexibility on foreign debt, which is irrelevant to strategic stability, security, or nuclear arms reductions.

However, we were ready to put the treaty on vote. A lot of work was done during the preceding year. When Americans look at how Russians deal with START II treaty, they very often feel frustration and fatigue, but I am absolutely certain that if we changed places, and the US Senate had to ratify this treaty, the chances are very small that US Senate would ever ratify it. So Russia still continues a process, there is already some achievement. But moreover, much more than that, during the previous year a lot of work was done through hearings and informing members of Parliament and really working for coalitions, really promoting the treaty in the State Duma, and we were ready to put it on vote, it was on the schedule of the proceedings of the Duma on December 18^th and that was friday-we ratify treaties on fridays. However, this action happened in Iraq which in Russia is commonly called 'Desert Monica', and it certainly produced a very negative effect. Immediately the treaty was removed from the agenda, and it strengthened the view, which may seem paranoiac here, but which has become quite strong in Russia, and that is that United States do not want Russia to ratify START II.

Whenever we come out after the next series or sequence of hearings, to a vote, something happens. Either March crisis of last year with threats to bomb Iraq, or June crisis with threats to bomb Kosovo. Now this actual bombing. And the people who would promote that are nationalists or idiots or radical communists. Quite moderate people. They would say, 'look, now it's all clear.' It's very convenient for them to criticize Russia for failing to ratify START II. It leaves them a free hand to withdraw from the ABM treaty. It provides them anyway with a large margin of superiority because they know that Russian forces, for lack of funding, would be on decline during the next 10 years, and would be under the START II ceilings anyway. And finally, they would say they really do not want to reduce their own forces, and they don't want START III because then Russia would suggest much lower ceiling and that might create serious problems of transferring from triad to dyad, of going to much lower deployed warheads and so on and so forth.

So, those are all the reasons why they really don't want Russians to do that. And they certainly don't want to get into all the mess of ratifying the New York protocol of 1997 on delineation between strategic and tactical ballistic missile defense. So that's why whenever we come up with, after great effort, to coming close to the vote, they arrange something that takes our communists off the hook.

The Communists were really on the hook. They were really panicked. Some of the explanations, or this part of the explanations of those anti-semitic declarations by prominent members of the Communist Party are because they were in total confusion. They were losing their position stance because their people were in the government. They felt they had to support Primakov. On the other hand they had to vote for a treaty which for them is a symbol of all the evil which is there in Russian foreign policy. And they were facing a very deep split and losing their position in the next Parliamentary elections. They were really panicked. And so I think that in spite of all those stern faces that they made, in fact they were exhilarated when this operation started. Because it really took them completely off the hook. They are happy now. Very satisfied, and so on.

JOHNSON: Is ratification coming, though, after people get over this?

ARBATOV: I don't think so. I think that it may stay on the agenda, but politically the treaty is dead. Not in the sense that we can jump over it. But in the sense that just incrementally waiting for Russia finally to come to its senses and ratify it, will not work any longer. We have a year, maybe a year and a half left for taking some very serious initiative to fix this business. And one of the possibilities might be to address the, to put away all of these political considerations which revolve around this issue, but to concentrate on the real interests which are connected to the treaty.

Russia doesn't want START II. The Russians don't have the money to deploy that many single-warhead missiles. And Russia cannot do that. But Russia wants compliance with ABM treaty and Russia wants START III. The United States are not very enthusiastic about either compliance with the ABM treaty or with START III, but they want Russia to ratify START II. There is an obvious compromise: negotiate very quickly START III. Make it as simple as possible, maybe one article only-reduce ceiling. Then Russia ratifies simultaneously START II and START III and US Senate ratifies at the same time, and simultaneously, START III and New York protocol on delineation between tactical and strategic missile defenses.

That's as much as can be done, and I am sure that such a scheme would work perfectly well, provided we have strong political leadership on both sides. Unfortunately, that is a great deficiency now. Top leaders of Russia and the United States are distracted by many other problems which even remotely are not connected with strategic arms control.

JOHNSON: The NATO summit is coming in April, and of course the three new countries are being added, the Baltics are still kind of looming there. Are there still dangers lurking in the further evolution of this NATO expansion problem?

ARBATOV: Yeah, sure. That's something which makes me be very skeptical that we can wait and finally have the Russian Duma ratify START II like you pick up a plum that falls from the tree. That's not going to happen because the previous record shows that all the time something pops up that makes it easy for communists to get off the hook and postpone it. So the two next candidates for that role-one is the NATO decision, the NATO summit that may extend proposal of enlargement to other countries which certainly would not be accepted in Russia, and the other is renewed threat of bombing in Kosovo because the crisis is not resolved there, it's on the back burner, but may erupt any day.

So, that's why I think that to wait until things cool off, and the Russian Duma would once again come back to ratification, I think is no longer a valid or a good strategy. It's important to take initiative in your hand, and to make a breakthrough with some new package that would make it very hard to resist both for Russia and the United States.

JOHNSON: An arms control/nuclear package?

ARBATOV: Yes, which I mentioned: START II plus START III plus New York protocol.

JOHNSON: OK, thank you.