#6
strana.ru
January 31, 2002
Viktor Supyan: "The U.S. Could Set a Serious Precedent in Solving the Problem of Russia's debts"
The abrogation of the Jackson-Vanick amendment would be a major step forward: Supyan
By Viktor Sokolov

In a Strana.Ru interview, the Deputy Director of the Institute of USA and Canada Studies, Viktor Supyan, analyzes problems in Russian-American economic relations in connection with Prime Minister Mikhail Kasyanov's current visit to the United States.

Q: The media today are singling out several main economic subjects that are likely to be brought up during the visit of Prime Minister Mikhail Kasyanov to the United States. Obviously, this includes participation in the World Economic Forum, as well as bilateral relations. The Russian prime minister will also raise the question concerning the notorious Jackson-Vanick amendment, and the matter of granting Russia the status of a country with a market economy. Do you anticipate any problems arising during discussions of these subjects? For instance, do you think any progress will be made in the matter of lifting the Jackson-Vanick amendment?

A: First, I think it would be proper to specify Kasyanov's intentions on his visit to the USA. At the top of his agenda, we can see two main subjects: bilateral relations, and participation in the Davos Forum that this time is being held in New York. These are the two main components of his visit.

I think Kasyanov intends to convince the representatives of the American administration and business circles, especially at the World Economic Forum, that Russia's economy is in better shape than before, and that it is possible to consider it a market economy. Consequently, this will make it possible to attract investments to Russia's economy on a good, sound basis. This is the traditional set of approaches.

This time, I believe such approaches are more well-founded than previously, since Russia's economy is now in better condition than before. In fact, Russia is counting on economic growth, even though the situation on the world oil market is not changing in its favor.

At the same time, we must concede that Russia is importing more commodities than it did in the past, and this, of course, has a negative impact on domestic production. All these are quite negative factors influencing the present state of our economy. But even so, one has to admit that Russia's economy today is in better condition than previously.

The federal budget indicates a surplus. We are paying our debts on time. Our "risk" ratings have improved. That is why there are all grounds to say the situation is improving. I believe the prime minister will refer to approximately the same types of arguments during his meetings with U.S. officials.

As for the Jackson-Vanick amendment, last fall the U.S. administration really did announce its intention to petition Congress to have it lifted. I consider there are grounds to believe that the amendment will be abandoned, since it no longer makes any practical sense. The set of circumstances that prompted the amendment no longer exists. If you remember, it was adopted due to limited emigration from the Soviet Union. Today, there are no such restrictions, and the amendment does not actually function, since the U.S. administration suspends it on an annual basis. But so far, the amendment has not been abrogated. I would say there are grounds to hope that this will be done.

Q: In this case, will Russia be able to receive "most favored nation" treatment in trade with the U.S.?

A: That's exactly what it means - we will receive most favored nation treatment in trade. What does "most favored nation" treatment mean? This does not at all imply any kind of privileges in trade relations. It simply means that the two sides agree upon mutually equitable conditions of trading. It has nothing to do with privileges. It implies the absence of discrimination - nothing more. To make it quite clear, this status does not imply any special preferences.

Q: Can the abrogation of the amendment be seen as a step forward?

A: Of course, it would be a big step forward. This is very import for Russia's exports, since they were restricted by that amendment, especially in regards to dual-purpose technologies that could be used for military applications. Granting Russia the status of a country with a market economy is another important question. There is a specific technical procedure for adopting a decision on this matter. Such a decision is made by the U.S. Department of Commerce. This procedure has also been started, but it usually takes several months - half a year or more.

Q: What does this really mean for us?

A: This means that if Russia acquires the status of a country with a market economy, no anti-dumping procedures can be taken against it. This too is very important for us, first of all, for the steel industry since such procedures were instituted precisely against this branch.

Q: To what extent does this question dovetail with the problem of Russia joining the WTO?

A: The connection here is direct. Russia's accession to the WTO implies a special range of problems that Russia must hammer out directly with that organization, although, of course, America has a very large say in the WTO. That is why a great deal depends on America's stance. But what we are talking about here is not so much about that, since there seems to be a consensus to adopt Russia into the WTO. The question stands this way: on what terms and conditions are we ourselves prepared to acquire WTO membership? Because if we proceed according to the formal rules, then we must give up the policy of protectionism in respect to many branches of our processing industries.

What does this mean? It means that we will have to sharply reduce customs duties on the import of many commodities, and this will simply spell finis to many branches of our industries. Our domestic producers and manufacturers have not taken a unanimous stand on this matter. The essence of the question is not whether or not to join the WTO.

As I see it, the Economic Development and Trade Ministry that is negotiating this question is adhering to what I would call a "classification" approach to the problem. What I mean by this is the following: it is necessary within the framework of the WTO to hold special, separate talks on each group of commodities, on each branch of industry. And, as a matter of fact, there are precisely such provisions in WTO procedures.

Here too, of course, a great deal depends on what stand America takes. In this sense, Kasyanov's talks in America could be very important.

Q: Do you anticipate a tough stance on the problem of Russia's debts?

A: This is a problem not so much of Russia's debt to the United States. It is a much broader problem. According to various estimates, our overall debt to America stands at around $8 billion, which, against the background of all our debts is not such a big sum after all.

This question may be brought up in a much broader context: the possible need to reschedule our debt, first of all, to the Paris Club of creditor states to whom we owe a great deal more - tens of billions of dollars. And the stand of the U.S. in this Club is very important.

Even now, the burden on our budget for servicing these debts is extremely heavy. It amounts to practically a third of our budget. The crucial year for payments - 2003 - will be very indicative in the sense of proving our ability to honor all our debts. This question may be discussed from the following angle: if Russia, due to its internal economic situation, is unable to successfully service its debts as it has been during the past two years, then Russia may ask for support from the world community and the U.S. to restructure that debt in some way.

There is yet one other circumstance: in the U.S. Senator Biden has tabled an initiative to write off part of Russia's debt (the matter here, of course, concerns the debt to the U.S.) in exchange for scrapping mass destruction weapons. Not all the weapons, of course, but only that part that is to be reduced on the basis of bilateral treaties and agreements. What is meant here is that Russia would not be paying off the debt, but rather using these sums instead for utilizing chemical, bacteriological and other weapons. In fact, the corresponding proposals for the coming two years have already been placed on the table: the sum of the debt to be written off in this manner is not very large - something around $150 million. However, if this proposal materializes, this may set a serious precedent that could be used in respect to Russia's other debts. And this too, in my opinion, is a very important aspect of solving Russia's debt problem.

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