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[Fourth Issue of the Day]
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Carnegie Endowment for International Peace
Washington DC
www.ceip.org
Pre-Summit Briefing: The Bush-Putin Summit May 20,
2002
Transcript by Federal News Service
As part of its Path to the Summit series, the Carnegie Endowment hosted a special briefing in advance of the Bush-Putin meeting Carnegie Senior Associates Anders Aslund, Rose Gottemoeller, Andrew Kuchins, Michael McFaul, and Martha Brill Olcott each gave a short briefing on their expectations and analysis of the potential for the upcoming summit in Russia.
MR. ANDREW KUCHINS: Good afternoon everybody. I'd like to get started with our briefing today. We have a lot of people on the panel who will be speaking. I'd like to jump into things as quickly as possible. My name is Andrew Kuchins. I'm the director of the Russian-Eurasian Program here at the Carnegie Endowment, and I'm deleted -- delighted. (Laughter) Let me just warn you: I've just arrived back from Moscow about 30 hours ago, so if I start drooling or something, that will explain it, if there are further slip-ups like that. The rest of you are on your own.
At any rate, I was in Moscow last week, and I know that there was a parade of summit briefings here in Washington over the last week or ten days, and I'm very pleased that so many of you decided to attend ours today, and I presume that it has to do more with the food that we're serving.
We have coming up this week, as everybody knows, the summit. This is the third meeting in less than one year for Presidents Bush and Putin. That's a fairly remarkable frequency or intensity of summitting, and it's quite a contrast to what many of us might have expected in early 2001, or even two or three years ago, when U.S.-Russian relations seemed to be at their nadir.
Clearly, both presidents have made a major political investment in the relationship, both their personal relationship and as well as the state-to-state relationship. And they need results, with a third meeting now in less than a year. And clearly, with the announcements last week of the nuclear arms reduction agreement and the establishment of the new NATO-Russian Council, we are going to have some results to point to, in which I think the summit is virtually assured of success in that respect.
There'll be agreements; there'll be good photo opportunities, and the like. But I think larger questions will remain about how full bodied this partnership is, and I think the most important work will remain, after the summit, in effect, giving more content to the form of partnership to ensure that the partnership is more of a real, a genuine partnership and less of a Potemkin partnership, the phrase I was using in Moscow last week that seemed to resonate.
I might note as well that the president, of course, is going to be going to Germany, France, and Italy as well next week. And as Anders pointed out to me, he'll be spending less than 24 hours in Germany, but about three days in Moscow. I think the president can also likely expect some fairly large anti-American protests in Germany, perhaps elsewhere in Europe when he travels, and I think he's unlikely to see that when he goes to Moscow.
So here we are today. I would argue that US-Russian relations, they are better than they've been at any time since the collapse of the Soviet Union, even the honeymoon period of 1992. We are going to sign this Nuclear Arms Reduction Agreement. We are establishing this month the NATO-Russian Council, which I think is a step forward for the PJC. We see unprecedented cooperation in Afghanistan since September 11th.
The negotiations for Russia's entry into the WTO are moving forward fairly well, there's good progress being made and, indeed, the Office of US Trade Representative is working hard on this. Slowly, there is growing private sector engagement between the two countries. And if I read Mike's op-ed correctly today, then will Russia be named a market economy? Okay. I meant to ask you that beforehand.
But at any rate, this is a pretty remarkable checklist of progress in the relationship. There remain differences, of course -- Iran, Iraq, old ones like that, and some new ones, like the recent dispute, of course, over chicken and steel. But I would argue, the fact that this trade dispute over the spring of 2001 -- that that has been the most significant conflict in the US-Russian relationship, you know, speaks to a very different kind of relationship than we had 10, 15 years ago, obviously.
We have trade disputes, trade wars with our closest partners and allies. Transatlantic relations for the last 50 years have been wrought with trade disputes. US-Japanese relations, of course, have steamed up as well. So this is, in a way, ironically, some kind of progress in the relationship, and I think in the building of this partnership. But when I was in Moscow last week, the principal question on many people's minds that I spoke with was, are we, the United States, the Bush administration, prepared for a real partnership?
And the question went not only to relations with Russia, but in some ways with everybody, one comment made by Andrei Kortunov from a TV show I was on with him. He said that, you know, the United States' idea of partnership or alliance is that if you agree with whatever the United States wants, then that's fine, you can be our partner. And this is a growing sentiment, I think, around the world.
So I just put that out there as a large question for the Russians. Well, let me turn to my distinguished colleagues, with no further ado, so we can get to much of the agenda of the summit. And let me make very brief introductions here to start out with. Speaking on the panel, of course, are my colleagues, senior associates here at the Endowment: Rose Gottemoeller, Martha Brill Olcott, Anders Aslund, and Michael McFaul.
Mike, I'm glad you could join us from Stanford. Mike, of course, is also associate professor of political science at Stanford and a senior fellow at the Hoover Institution as well. So let me turn the floor over to Rose, who will start.
MS. ROSE GOTTEMOELLER: Thank you very much. I'm not going to spend a whole lot of time today talking about the arms control deal, because we did spend a lot of time in both discussions last week, and also in the media, talking about the deal. But I'd be very happy to discuss issues people want to bring up in the Q&A and the discussions section. I'd just like to say once again that I do not agree with the characterization of the agreement as it's appeared in a lot of the media, and I'll just cite vis-a-vis Moya Gazeta, which said that, "It's the most lightweight treaty in the entire history of arms control."
For that, quite frankly, I think one has to reach back to SALT I, signed in 1972, which created the perfect legal environment for the deployment of heavy, highly accurate, multiple warhead ICBMs. I think, frankly, we've come a long way since that time, and our standards in strategic arms reduction are much, much higher. It is good, however, that the debate has zeroed in on eliminating warheads as well as launch vehicles. For many years now, that has been seen as the logical next step for the strategic arms reduction process, and I think it is a step that really now must be emphasized.
We have seen, since I mentioned, for some years now, since the Helsinki Statement in 1997, elimination and transparency associated with elimination of warheads was laid out as a goal for future arms reduction treaties, at that time, START III. And Senator Biden, in the amendment process in the -- I'm sorry, the process of ratifying the START II agreements, laid down a condition, by which the United States would have to focus on strategic arms reduction treaties in the future. That brought warheads into the game.
So I would hope that we will see that as the next item in the strategic arms reduction process, and I think it will, frankly, be a problem if we don't take that next step. We've been hearing some comments over the weekend from senior officials that this is the last arms control agreement of its type. Well, if that is the case, then I think we need some kind of new process and continuing process, blessed and confirmed at a high level, because if we don't, we are going to get into a situation of drift with regard to warhead elimination and warhead reduction.
And I think we would all agree that that is an extremely dangerous situation to be in, given the type of security concerns we have about the Russian strategic nuclear arsenal. And in fact, if we do get into that situation of drift with regard to warheads, we will never finally address the legacy of the Cold War, as President Bush stated last Monday. I think, as I said before publicly, I think that was wishful thinking for the president to say that this agreement deals decisively with the legacy of the Cold War.
But it's a significant step in that direction, and if we continue to work the warhead problem, in a way that is serious and continuing, then we will finally address the legacy of the Cold War. Perhaps we have to begin by addressing this problem as one of physical protection and security, but I think into that process of enhancing physical protection and security for warheads, we can begin to build some bilateral transparency into the storage process, and eventually move to transparency into elimination of warheads, what we call the full chain of custody, following the full chain of custody for warheads.
Now, I'd like to move on, for the second half of my remarks, to other areas in the nonproliferation and security realm that will emerge as a product of this summit. Most of these were actually laid out a couple of weeks ago, when the Minister of Atomic Energy Rumyantsev was in town and met with Secretary Abraham, the secretary of energy. They have essentially begun to layout a new agenda for cooperative threat reduction, for the kind of non-Lugar agenda that we have pursued over the last couple of years.
The two ministers announced, while they were here, that they have already established two new experts groups, the first to accelerate disposition of weapons usable materials, highly enriched uranium and plutonium. This has long been seen as a priority for experts in this field, and you may have seen the reports this morning of a report released out of Harvard by John Holderin and Matt Bonn, and several other authors, laying this out as one agenda item to pursue. And I think that is very important, and it is certainly something that the government already, and the Russian government are already focusing on.
The two ministers also announced that they are establishing a group to build joint priorities for enhancing physical protection of radiological materials. This too is a new area that has caught people's attention in the wake of September 11th, the dirty bomb threat, the threat that radiological materials, of a range of types and dangers to the population, could be launched on U.S. or, indeed, Russian territory, or territory of any other country.
I'd just like to note that I think this is the first time, that I know of, that priorities for a threat reduction effort of this kind are being set from the outset, together, by the United States and Russia. And I think that that will be a very positive change in how we have pursued these kinds of programs historically.
I think also possible out of this summit is a new series of expert discussions on the Iran problem, shutting off Russian assistance to the Iranian nuclear weapons program, which has been a high priority of the U.S. government for the past decade, and continues to be in this administration. I see a very welcome change in the leadership of the ministry of atomic energy. Minister Rumyantsev articulated a view much different from that of his predecessors, who engaged, in my view, in a mixture of denial and excuse-making with regard to Iran and its nuclear program.
Rumyantsev is taking a very pragmatic problem-solving approach to this whole arena and placing an emphasis on what I would call a nothing but Bushehr policy. That is, the Russians will continue to complete the construction project they have to build a light water reactor at Bushehr, but turn it into a complete turnkey black box deal. Rumyantsev clearly stated when he was here that the Russians plan to deliver fresh fuel to that reactor just in time, and take away the spent fuel just in time.
So there will be no opportunity for the Iranians to essentially begin to reprocess and so derive weapons-usable nuclear materials from the fuel coming out of that reactor. I think the United States should be able to work with this kind of approach, and also work in other areas to enhance cooperation on export controls and enforcement, for example, that could help the Russian government stem any flows of technology that are continuing to occur.
Finally, an area where I'm not sure we're going to make progress, but I think the time is right to consider it, and that is test site transparency. We had Curt Weldon here last week at a presentation that the nonproliferation program put together, and he talked about the necessity of essentially establishing a joint program of test site transparency. It is something he has proposed to the administration and to the Russian side. I very much agree with that kind of approach. And I have reason to believe, based on recent conversations in Moscow with the leadership of the nuclear establishment -- they are both people now in government and people outside of government -- that the Russians would be willing to discuss this matter again.
They want to go beyond, however, the focus on test site transparency to consider broader transparency into how each side maintains its nuclear weapons. And this, of course, is a major issue for the U.S. side, because we have been unsure whether we wanted the Russians to have broader visibility into our stockpile stewardship program. These are very difficult policy issues, but I think nevertheless, the time is ripe, given all of our concerns about what is going on at Novaye Zemla for us to consider again talking very seriously to the Russian government about transparency in testing and in related matters associated with maintaining our warhead arsenals.
With that, I'll conclude my remarks and look forward to your questions and comments. Thank you.
MR. KUCHINS: Thank you, Rose.
MS. MARTHA BRILL OLCOTT: Thank you. I'd like to touch on three things in my ten minutes or so to talk about the changing geopolitics in Central Asia and what impact this may or may not have on the summit, to talk a little bit about energy, to be brief, some questions that maybe Anders will be picking up in his comments, or that maybe we'll pick up in the question and answer, and then finally, to say a few things about Russia's broader engagement in the war on terrorism.
Obviously, as we have all noted, in all the myriad meetings on the summit in recent weeks and months, the U.S.-Russia relationship has improved substantially since September 11th. And I would argue this has largely been because of Putin's ability to turn seeming blows into advantages. This is particularly true in Central Asia.
I think, though, we have to be realistic about how big some of the blows have been or not been, and I'll spend just a couple seconds on that. It's really important to remember that the presence of U.S. bases in Central Asia is an enormous change over the geopolitical environment in that region. However, the ouster of the Taliban that occasioned the U.S. putting the bases there was a longstanding Russia goal, and it was one that the Russians could not do on their own, either financially or in terms of the good will of the international community.
So the Russians gave something, but they also really got something enormously. And I would argue that the war on terrorism could become a vehicle for Russia getting a whole host of other goodies that it really wants, including legitimizing Russia's actions in Chechnya, and I'll come back and talk about that. I mean, I think that if Chechnya becomes -- that it's not beyond the realm of possibility, not at this summit meeting, but in the next six month space, that Chechnya could be declared a front in the war on terrorism, and that would be more of a plus from the Russian point of view than many of its negatives.
Even the seemingly less attractive aspects to Russia of the war on terrorism, I would argue that, at least in closed session, could be managed to Russia's own advantage. I think we see this with the difference between what is public statements on the war in Iraq and what I see the shape of private posturings. I mean, I think that Russia will turn out to be more supportive of U.S. policy on Iraq than many of our European allies, which is one reason why he may be spending three days in touring the homesteads in Russia and not bothering to visit the childhood places of the German chancellor.
Similarly, I think the Iranian policy -- and I'll come back a little later on to Iran and the Caspian. I think that there are other reasons for Russia to begin rethinking its policy to Iran. Iran has been an obstacle on the Caspian. In the past year, they were one of the causes of the last Caspian summit collapsing as badly as it did. The Iranians are playing more of an independent hand in Central Asia, not a wholly successful one.
But I see a lot of evidence -- maybe Rose was talking about Iranian policy, Russia's policy to Iran in the nonproliferation area. I see the same kind of movement in other policy arenas. I'd like to spend the bulk of my ten minutes talking about Central Asia, and then a few things about the Caucasus. I would argue that, to date, Russia has managed its geopolitical losses in the Caspian quite well. But I would argue that, in large part, Russia has done this because what you had was a fait accompli in Central Asia. I mean Russia had already had its security relationship, its economic relationship, its political relationships with the Central Asian states redefined. And what the U.S. presence in Central Asia does is give Putin an ability to bargain away, to get chips for things that he has already lost. And I think that's really what he's been doing in Central Asia.
Now, the Caucasus is much more of a mire. I don't think the same situation prevails in the Caucasus, and I'll come back to that. What we've seen in the last six months, and more so in the last three as Russia gets closer to the summit, is a lot of attention on Putin's part and people around him to create what I would call enhanced virtual alliances with the Central Asia states, so to create a glowing illusion of Russian reengagement and the significance of Russian engagement in Central Asia without actually having many deliverables attached to it.
We see this in the discussions on the economic community that just held their summit a week or so ago where Putin did not take control of that organization. It still remains in Nazarbayev's hands, and it shows no signs of becoming a more effective vehicle, but it was a source of a great deal of discussion. The collective security agreement in Central Asia has now become a collective security organization, but its capacity to secure security has not increased one iota.
There's been a lot of discussion of the need for an Eurasian gas OPEC, but again without identifying new sources of investment on the Russian part in these projects. But all this hype really helps meet Putin's own domestic needs by addressing, by quieting the lobbyists in Russia that are arguing that Russia is withdrawing from the area, and it preserves the prospect of future actions for Russia. But I don't see Russia having, and I don't think Putin sees Russia as having, tremendously effective launching points in this region for a new, much more Moscow directed prospect.
I think in this regard the discussions - for the summit, the discussions for Putin will really be, how long will the U.S. remain in Central Asia and can the U.S. military presence in Central Asia become part of a redefined security relationship in Europe? That, I think, is really the Russian goal, and that, I think, would be at least Putin's goal. I think a lot of the Russian military goal is that they leave entirely. But I think this is really what part of the discussions will focus on.
I'll come back to the Caucasus in another second. I just want to hit for another minute the question of bilateral US-Central Asian relations and the way in which this impedes on Russia and themes that may come up. Andy mentioned in the interchange between Andy and Mike about whether Russia will get market status at this summit. If it doesn't, this becomes another tension in the Russian-American relationship vis-à-vis the US-Kazakh relationship.
We have given Kazakhstan market status. The Russian-Kazakh relationship is a critical relationship for the Russians. The relationship has not suffered in recent months. The Caspian delineation between Russia and Kazakhstan and joint Caspian development is moving ahead fairly smoothly. But Kazakh membership in the WTO in the absence of Russian membership in the WTO would really be very difficult for Russia and no great bargain for Kazakhstan.
So in that sense, I think the improved US-Kazakh relationship, which has improved even since September 11th, even though Kazakhstan's not playing any real role in the war on terrorism -- I mean, it's improved because of energy, largely, I would argue. I think this is potentially a difficulty for Russia. The US-Uzbek relationship, I think, hits fewer core issues for Russia, and is unlikely to be the cause of great discussion at this summit.
The US-Turkmen relationship I find potentially more confusing, and I suspect Putin does as well, because it's not so clear what we get from it. But it is clearly helping bolster a very insecure regime and a regime that is not putting out for either Western firms who want to develop their oil and gas or Russian firms that are eager to continue maintaining their gas.
The Caucasus. Here I think this is an area of potential tension. There are lots of rumors that have circulated about bases going into Azerbaijan. This is certainly a fear on the part of the Russians. It may well be a desire on the part of the Azeris. And I think any increase in U.S. military presence in the Caucasus would have to come with a much greater payoff for Russia on Chechnya.
In terms of Central Asia, I'm going to conclude by saying something about energy. In terms of Central Asia, I think that Russia can take its payoffs in the energy sector. And changes in the energy sector, I think, will really go a long way to allow Putin to claim to come out a winner. But I think in the Caucasus, if the U.S. envisions any changes in the structure of bases and the introduction of bases in this region, then I really do think that Putin will push the U.S. for major concessions on Chechnya.
Finally, and this is my concluding remark, I do see, as I've alluded throughout, that energy issues for Putin are a potential major payoff and will likely come up in this meeting. Russia obviously needs more foreign investment in the energy sector, and its largest energy companies need more capital for their own reinvestment in their projects in enhancing the speed and the recovery rate of Russia's own oil assets.
There certainly is opportunity, and I'll be eager to see if there is an agreement on Russia supplying oil for topping up the U.S. strategic reserves, with Russia becoming a long-term supplier for U.S. strategic reserves. This could lead to greater credits on the U.S. part for investment in improving Russia's own extractive capacity. And this would at least be something that Putin could take home as a victory.
But if there is nothing in the energy sector and Russia does not come out with market economy, a designation of market economy status, then I really see it as increasingly more difficult for Putin to have deliverables to show to critics that balance what they have seemingly given up in geopolitical influence in their former territories.
Thank you.
MR. KUCHINS: Anders?
MR. ANDERS ASLUND: I remember an old anecdote when I was learning Russian. Nikita Khrushchev visited the virgin lands in Kazakhstan, and he asked a peasant at the state farm, how will the harvest be this year? And the peasant answered, "Average." "Average. What do you mean?," Nikita Khrushchev asked. "Well, I mean that it will be worse than last year, but better than next year." (Laughter).
Or to put it in another fashion, in the 1980s, the Soviet comedian -- Arkady Reikin said, "If it's better than 1914, then it's already good." Ever since, of course, the old Soviet economic perspective. And if you look up on much of the writing today about Russia, it's amazing how many people who are stuck in that mindset. And the problem with them is that they used to consider statistic lies. You know, Churchill's old statement that three are kinds of lies: lies, damned lives, and statistics.
And therefore, they refuse to see up on statistics. But the point about Russia today is that it's actually become an open society. We have lots of different people who look up on the statistics and criticize them. So there are some reasons to believe in them. And if we look up on these statistics, for the last three years, they say that Russia's had a growth rate of six and a half percent, on average, which is high by any standard, quite decent even by Chinese standards.
So what's wrong with this? Then you have all these people who say, oh, it's only because of the oil prices and because of devaluation. But, sorry, they said that would be one time effect and we said that wouldn't hold, so, therefore, we would have seen much less growth in the recent years. So I think we have to realize that something has really happened here. And the government has predictably for the last few years said that the growth will be about four percent, and then, in fact, the growth rate is quite varied. But somewhere around five percent is likely to be the least we will see.
So we are seeing now a substantial boom. And seeing John Parker from The Economist here in the room, I must praise him and Richard Lacey for their excellent book, "The Coming Russian Boom" that was published in '96. The problem with the book was that it thought that the growth rate would only be four percent or so, while we are now seeing even more growth. Even so, it was maligned for being too optimistic. What we are seeing right now is a best-case scenario, and people refuse to see it.
If we take another track, four years ago, we discussed four major problems in the Russian economy. The first was a budget deficit of pretty steadily eight percent of GDP, which may have led to an excessive external debt. That has now been turned in the last two years to a budget surplus of about three percent of GDP and this has mainly been undertaken not by increasing tax revenues, but by counting enterprise subsidies that the World Bank assessed at 16 percent of GDP in '98. And that was the second big problem.
The third big problem was barter. You have heard always about the virtual economy and that nothing is done in the normal way in Russia. Well, it was enough to realize that there was a virtual economy for it to go away. Then the problem was solved. You know Keynes' old statement that there's nothing in the world that is as strong as ideas. When you understand a thing, you can solve it. And that's exactly what happened in Russia.
The problem behind hard barter was that enterprises could get a tax discount by paying through public procurement orders. They delivered construction work, for example, rather than taxes. That was cheaper. And as soon as the state realized this, the problem was solved. Barter has dwindled to virtually nothing now. So it's no longer a problem, and I think that the major cause for the strong economic growth in Russia is that when people started paying in money, then the market functioned so much better.
The fourth problem was that Russia had an arbitrary tax system, where if you were silly enough to pay taxes, you were prone to be asked to pay more taxes. So there really was no incentive to pay taxes. And a broad consensus in Russia now in the last few years has done exactly what needs to be done. If you have bad taxes, transform them, cut them, simplify them, and all this has been done. We have outstanding piece being a personal income tax of 13 percent which, of course, led to splendid lateral effect, so that state revenues in real terms, as a share of GDP, actually were substantially bolstered. Also, social security taxes and profit taxes have been cut sharply.
So what Russia has done is that it has transformed a rather poorly functioning market economic system to a very good market economic system. We have a lot of other structure reforms that I won't go into also, but this is an extraordinary performance. And if you get that, what would you expect? Growth. And that's exactly what we are seeing, and we are seeing a massive enterprise restructuring being undertaken by private enterprises, which also shows that Russia's splendid large-scale privatization early on has really had the effects that we would expect. The problem was that the other reforms were not in place; it took some time.
So this is the perspective that we should have upon Russia after the summit, a quickly growing economy that is coming together, and such an economy, of course, doesn't need aid; it needs trade. And that's essentially what this should be about, and I'll focus here on five issues briefly: trade, visas, energy, investment, and debt. Martha has touched a little bit on trade and energy.
And of course, it's quite essential that the U.S. declares Russia a market economy, and it would be ludicrous not to do so pretty soon. That would be contrary to the evidence, because the market economy definition is quite a technical matter. And the Congress should not be involved in this, but it's a matter of the Department of Commerce. It's very important for Russia in U.S. anti-dumping actions. And if the U.S. does so, it will be heard over the European Union on a major trade issue. The EU is nowhere near or doing so.
Another trade issue is, of course, the discriminatory Jackson-Vanik Amendment to the Trade Law of 1974. I find it quite incredible that the U.S. Congress has failed to abolish this outdated discrimination directed against a country that no longer exists, to solve a problem that no longer exists. Full stop. This should be done.
And a third trade issue is more generally, but it's important that the U.S. facilitates Russia's early entry into the WTO, and that rather involves many small steps rather than any big issue.
The second issue I want to talk about is visas. I think that this is the most embarrassing issue in US-Russia relations. No country appears to have as negative a visa policy to Russia as the U.S. has. Last year, the U.S. Embassy in Moscow refused 80 percent of all Russian applicants visas, while the EU embassies refused only four percent. These are the contrasts.
In fact, the Shemla (ph) agreement has meant that the European Union has become more liberal while the U.S. has become much less restricted. While about one million Russians received visas to the EU in Moscow, only about 100,000 obtained visas to the U.S. The U.S. is simply a very closed country for Russians while the European Union is more open in this regard than is generally understood. And this, I think, is really a disgrace and, of course, a major source of anti-Americanism in Russia. And I think this should play a much bigger role in our discussion about US-Russia relations.
The third issue, energy. Martha discussed it here. I'll just add a few points. Russia has a huge surplus of oil, and it increases both production and exports at extraordinary speed. Production increased by seven percent in 2000; by 11 percent in 2001. I find it difficult to argue here that it's a problem with investment in the oil system. The Russian oil industry is dominated by competitive private enterprises, and they can raise the funds themselves if they need it. I don't see that there is much of a government issue on that.
The issue for the government instead is to open markets. Domestic Russian oil price fell to as little as five dollars a barrel at some stage here during the winter because there was such a glut of oil on the Russian market. The issue is to get it out, and it's more a matter of the EU opening its markets more toward Russia, and the U.S. can, of course, play a major role here to facilitate closer oil cooperation.
It's very striking that we see Mikhail Khodorkovsky here in Washington every second month now while his main issue is to open European markets for his oil exports. And he thinks that it's better to go to Washington for that purpose than to any European place. Where is the European capital, by the way?
And the fourth issue is foreign investment. And here I am very complacent. I think it's coming. Foreign investment in Russia is still very low, about one and a half percent of GDP. But who would like to take over a big state enterprise? Foreign investors don't and are not very good at it. They repeatedly fail. Russian big businessmen are extremely good at it. Let them do it. And when they have got the enterprises into order, then they can sell or raise funds through IPOs. We have seen three major companies raising capital through IPOs on the New York Stock Exchange, two mobile phone companies and one food processing company. We'll see much more of that, and that can all of the sudden become quite large amounts because normally they raise 25 percent of the capital at a time. And the big event that is bound to happen, but we haven't quite seen it yet, is the sale of big Russian restructured companies.
Big oil companies like Stepe Neft and Tiumen Oil are quite openly on sale. Whenever one of these is being saved in a direct sale, it will be $10 billion. That is currently three percent of Russia's GDP in one foreign direct investment. And there's nothing to stop it. As I said, we've totally changed our view of Russia. And then we're also seeing now that has got going a steady sale of small enterprises that have been turned around by some of Russians. In particular, Alpha Bank has done this. For example, recently, it sold (Russian term) confectionary company in Moscow to French Danone after having it owned it for two years and turned it around. But I see very little state role for this. If there is any worry I have for Russia in this regard, it's too much foreign money too fast so that something of what happened in '97 happens again.
Finally, a word about debt. Germany has just unilaterally written off most of its old East German claim on Russia. This could have been assessed at six or eight billion dollars, and it was written down to half a billion dollars. This has received very little publicity, and this was a very substantial deal done about a month ago. And I think that the U.S. should simply follow this example.
The U.S. claims, current claims on Russia are $3.5 billion. Why not write it off in whatever deal that is considered sensible. It is simply time for the U.S. to catch up with Germany, in this case.
Thank you.
MR. MICHAEL MCFAUL: Thank you, Anders.
It's a pleasure to be here again at Carnegie. I'm going to be brief, which is unusual for me, because I think it's going to be a great summit, just a terrific event. I believe the deliverables, we've heard about quite a few of them already -- I won't go through them -- are substantial. I say this as a veteran of many, many summit briefings at the Carnegie Endowment, where before, I had to read up on the Early Warning Joint Center as the one big deliverable.
Do you remember that summit? You should. And I think comparatively, one has to look at the list of what's going to happen and say these are really big, important things. I think it's too bad, as Anders said, that Jackson-Vanik won't be graduated or terminated, or whatever the correct verb is. I wrote about that last week; I won't go into it here. That's a missed opportunity.
But in general, I think it's going to be great, the statements are going to be great, everybody's going to have a good time, and it's going to be a lot of fun in St. Petersburg; then they're going to Berlin, right? Then Berlin, yes. So that's the good news.
Second point: there's nothing new in the summit at all. A lot has been said about September 11th. A lot has been said about Bush's turning and seeing Putin's soul in Slovenia. A lot has been said about how Putin has astutely handled all this. And when you're close up to it -- I realize now, I'm far away in California, so I have maybe a different perspective -- when you're close up to it, yes, all these little things seem to matter and what Putin thinks about the West and that.
But when you take a bigger picture and you look at where the Soviet Union, and then Russia was going -- and if I had more time, I'd even go back further -- I think you've basically been seeing a gradual process of Russia - Soviet Union and then Russia moving towards the West. Remember that phrase "common European home?" They could use that next week and nobody would blink an eye. Over the last 15 years and it has been continuity on the Soviet and Russia side to move closer to the West. Yes, there's been hiccups -- August '98, Kosovo -- but if you look at the broad trend; I think the trend is going in that direction. And therefore, what I see at the summit is not new, but is the continuation of what I would say Ronald Reagan, Bush 41, Clinton, and now Bush 43 has tried to do on the American side, which is engagement and integration.
And on the Soviet and Russian side, I would say it has been the same, moving towards the West at the same time that domestic regime change, that is, transition away from communism, both on the economic side and political side, has necessitated. And if you ask me what caused all the deliverables, what has caused this new era that we're in, it's that, I would say first and foremost. What's happened internally within the Soviet Union and Russia that caused all those things?
Yes, arms control, their folks had something to do with it, and they managed the situation, but I think that's been the big driver. And therefore, I see continuity, not change, not something fundamentally new. I think Clinton would have loved to have signed all of the agreements that are about to be signed. I don't see any break there whatsoever. (Inaudible.) But everything else are things they didn't get done.
In a way, George W. Bush is cleaning up the agenda of the 1990s, and he should get credit for that. I applaud that. Things like NATO and arms control, I just don't think are going to be issues. I think visas and chicken, and those kind of things will be. But those are not the issues of big, grandiose summits. And that's my third point, with the caveat that -- and I'll get to my third point in a minute -- with the caveat that some of the nagging issues of the 90s are still nagging today.
Now, you heard one of them was Iran; I would add to that Chechnya. My colleagues who were then advisors in the Bush administration when they were advisors to candidate Bush promised me, we're going to do different on Chechnya, and we're going to take it to them hard on Iran; we're not going to do all this lollygagging bribing that the Clinton administration did. And I look at where they're at two years later, and I say, it doesn't look too much different from what my colleagues on the podium here were trying to do.
I'm pleased to hear there will be working groups. And I remember the first working group, what was it, '94 that was setup on Iran? Which is to say that the hard things are still on the table. Some big issues of the 90s have been cleaned up, but I think a couple of the big ones are still there.
Third point: this is the last big summit, I'm sorry to say. I counted; I think I've done 14 pre-summit briefings. I suspect this may be my last one, for precisely the issues that you just heard about here today. I think issues of, you know, visas and chicken, and these things are important, and I don't mean to say they're not unimportant, but the era of big summitry, presidents' meetings, signing arms control agreements, I think, is over. I think it's been kind of over for a long time, but now I think we're finally cleaning up the agenda of the 90s. I think it's over. My fourth point, with one great exception -- in fact, the only issue that I think matters in US-Russian relations, looking forward 10, 20, 30 years down the road, and that's the completion of Russia's domestic regime change.
I see what's happening in foreign policy; I think it's great; Putin is great in terms of what he's doing there. I look at what they're doing on the market economy, I listen to Anders and I say, great, wow, finally getting things done that they wanted to do in the early '90s. The one question mark I have -- the title of my book, by they way, available at Amazon.com -- is Russia's Unfinished Revolution Regarding Democracy.
And to me, that's the only issue that matters. If Russia kind of bumbles along, quasi-democratic electoral democracy, whatever you want to call it, then I don't think we need to ever have a big meeting like this about US-Russian relations again. If, however, Russia goes from gradual erosion of democracy to full blown dictatorship, then everything that's going to be signed this week, and everything we're going to agree to won't mean anything. It will be all done.
And I outlined some of the arguments; I won't go in them, in the interest of time, today, in The New York Times today, why I think that's the case. I would add a couple more that they edited out, as they always do at that newspaper, and I don't mean to offend anybody from The New York Times. But in addition, it won't be what the people want, it won't be good for the economy, and it won't be good for U.S. foreign policy.
I would also say that full-blown dictatorship in Russia would be highly unstable and also very bad for the region. I also don't think it would be permanent. I think it would be a hiccup, not a long-term thing. But that would be the time when we would have to reconvene and have another kind of meeting like this about US-Russia relations, if that were the case.
And the fifth point I'll make -- and this will be the last one -- is that that's my number one worry, is about democracy. And paradoxically, it's the one thing that we in the West are most incapable of dealing with. I have ideas, you know them well, most of you, you've heard them many, many a time. In completing a book on US-Russian relations of the 90s just recently, most of the chapters, the conclusion we come to, despite, you know, the McFaul's of the world saying we need to be focused on it, we need to be doing more.
When it comes right down to it, it's actually we are the weakest. Even though we're a super, super, super power, we're actually not very good at influencing domestic regime change, especially in big countries like Russia. But that's my one big worry, but I want to end with my prediction. Worries and predictions are different things, right? The probability of Russia becoming a dictatorship is not 100 percent, but it is not zero. I don't know if I had to guess, it would be 30 percent.
I would remind you that we spend a great deal of time worrying about nuclear holocaust and nuclear war when the probability of that was probably, I don't know, five, six percent. So, the probability is low, but it's the most important thing, so we need to worry about it. But then, my prediction -- and I'll end on this -- is that I don't think Russia will become a full-blown dictatorship.
I think a decade later; we could all get together and basically have the same discussion. I hope visas will be off, and I hope Jackson-Vanik will be off. I'm not very optimistic about Central Asia being off. I'm not very optimistic about Iran, unless there's domestic regime change there -- and that's another talk. But my prediction is that there will be a period of boom and bust on the democracy and the economic reform side, by the way.
Economic theory, at least where I come from at Stanford, is a theory of equilibrium. They're really good at telling you what is; they're not very good at telling you about what we call exogenous shocks. They don't predict them very well -- no offense to Anders. My guess is there'll be one or two, but there'll be hiccups; they won't be big things. There'll probably be one or two hiccups on the foreign policy side. Like Kosovo was a hiccup. I know people thought it was going to be something different. I think in retrospect now, it looks like a hiccup.
And my guess is, after a boom and bust, Russia will be a kind of quasi-democracy, growing and integrating, not fully a partner, but no longer an enemy, and that's my prediction, and I'll end. Thank you.
MR. KUCHINS: Thanks, Mike, for your very optimistic presentation. Why don't we turn right now to the discussion period? And I'd like to remind you that this is a live at Carnegie event, so before you speak, please wait until the microphone arrives.
Q: Laura Holgate from Nuclear Threat Initiative. Two questions on kind of the European and economic front both, that several people might have thoughts on. First of all, what optimism is there that the new forum in which Russia will be will interact with NATO will have a more interesting and actionable agenda than the PJC? What's going to make this one work, where the last one didn't?
And secondly, on the ten plus ten over ten assistance package that the U.S. is bringing forward at the G7 meeting, that swap is possibly an element of that. And, in fact, I would put the question the reverse of the way that Dr. Aslund did, that the U.S. needs to be part of this, but that Germany ultimately will need to do more, as well as other Europeans, to make it real. So I was just curious, on the European side, what folks might have to say about that?
MR. KUCHINS: Well, I'll make a comment on the NATO question, and others may want to join in. Perhaps, Rose, you can address the ten plus ten question. In Moscow last week, of course, there was a lot of people who were very cynical and expressing a lot of, you know, sort of been there, done that before in response to the announcement about the NATO-Russian Council.
I don't think that is necessarily warranted, at this point. I think that this new format does offer the opportunity for a much more constructive and fruitful interaction between Russia and NATO. I think the most important difference that needs to happen, though, is the people that come to represent, first of all, Russia, and also NATO in the council, and especially Russia, and their commitment to making it work.
If, for example, Russia sends someone like Mr. Kiselik as they did to Brussels, someone who's not committed to making a NATO-Russian relationship work, it's dead on arrival, and it's not going to happen. I think the cadre's aspect of the issue is very important.
Secondly, I think there needs to be considerable leadership on both sides. The PJC could have possibly worked; it wasn't doomed to failure. But the leadership behind it to make it work was not there. I mean, there are, as we know, certain NATO allies, certain potentially new NATO allies that are not particularly enthusiastic about working with the Russians.
And certainly, this agreement for the council is a compromise between what was proposed, I think, in spirit by Lord Robertson and Tony Blair in the fall and what has come to be. And there's the possibility, as I understand it, that issues, each country may decide to pull issues from discussion in the NATO-Russian Council into the NAC, but if that starts to happen on a regular basis, then I think the new mechanism is going to look more like the PJC, and that would be very unfortunate and a missed opportunity.
There are a lot of good reasons, I think, to want Russia to interact more with NATO, especially if it might have some kind of impact on the agenda of military reform in Russia, which is one of the biggest domestic challenges they face.
MR. MCFAUL: Just quickly on NATO, if I may. You know, why did the PJC fail? Partly because it happened on the eve of NATO expansion, and the flunkies -- no, not flunkies, the unseriousness with which the Russians took it. But the big reason that the PJC failed was Kosovo. And we'll have to see whether NATO at 20 will survive, say, a military intervention in Iraq. That will be the big test.
But the other thing to remember is that NATO with Bulgaria and Romania in it is not as big a deal for the Russians, I think. And I think this issue will kind of wither away as an important thing. Yes, they'll meet, they'll coordinate, but we don't need to go to Brussels to talk to the Russians, I don't think. Anders has told me this is the European capital now, so I think that's important to realize, that the importance of NATO to us, as well, is not what it used to be.
MS. GOTTEMOELLER: I'll just comment on this ten plus ten over ten issue. If you don't know what that is, the United States is proposing $10 billion over the next ten years, to finally and decisively deal with the legacy of the Cold War. That is, to address physical protection of nuclear materials that are weapons-usable, and also, then, to dispose of those materials, accelerating what has been done over the past decade in the Nunn-Lugar programs, the Department of Energy programs, and so forth.
But the deal is, the plus $10 billion, which the administration is appealing to the rest of the G7 to provide as a kind of matching fund. And my understanding is that there are all kinds of arguments at play, as there frequently are when the United States appeals for cost sharing in this threat reduction effort. One argument I've heard, for example, is that the Europeans are saying, look, you've dealt with the nuclear problem; we've put our aid behind the other problems related to democratization, healthcare, economic reform, other issues in the foreign assistance arena that you, the United States, have simply not wanted to spend your money on.
So we've had a division of labor; why do you keep harping at trying to get us to spend more money on the nuclear side? I, frankly, think there's a good argument, in that the nuclear problem is a supreme crisis, and we really do need to deal with it, and deal with it on an accelerated basis. So I'm hopeful that they will be able to get more funds from the rest of the G7 for this effort, but I'm rather skeptical they'll get the complete ten plus ten, the matching grant that they're hoping for.
MR. KUCHINS: Yes. Right here.
Q: Thank you. David (inaudible) from Johns Hopkins, SAIS. My question is to Dr. Aslund, and perhaps Ms. Olcott could comment as well. There's been grumblings in the briefings before the summit about potential enhanced cooperation between Russia and OPEC and what that could do for world oil prices and the desire to keep oil prices at a higher level to benefit the Russian economy.
And if you put that into play with a potential increase in exports to the European market, it could seem that Russia might have a longer term interest to want to keep some stability in oil prices if, indeed, it finds a larger captive market outside of Russia, even though it will be receiving far more than the five dollars a barrel it will be getting at home because of the glut. I'm wondering if you could comment about potential Russia-OPEC cooperation, and the U.S. position on that.
MR. ASLUND: You know, a few days ago, Russia revoked its cooperation with OPEC, and it won't limit its effects. And even before that, Russia had increased production very fast, indeed. So what you could expect is an increase in production of something like ten percent a year for the next four or five years. And at the current rate, that would mean 0.8 million barrels per day, and essentially all of that will go for export.
So Russia will, at this speed, reach the Saudi level in about five years of exports, while after that something substantial needs to be done, because there are not all that large reserves available. If you look upon people like Khodarkovsky and also Stepe Neft, they are increasing their production by 20, 27 percent a year, respectively. So they have cheap oil that they want to expand as fast as possible, and they say openly, our main concern is to win the confidence of Europe, so that Europe trusts us more than any other supplier of oil, so that we become the prime supplier in the future.
I mean this should be music to the ears of both the U.S. and Europe, that people are competing on being as reliable, and trustful, and dynamic as possible supplying cheap oil.
Thank you.
MR. KUCHINS: Martha?
MS. OLCOTT: If I could just take up the question of the stable pricing, whether or not Russia cooperates with OPEC, it doesn't change the fact that Russia does need stable and predictable prices of oil. They need them on the high side, but the purpose isn't just to drive them up indefinitely. And the concern of high price oil, the Russians still have some concern about what the highest price of oil will do to their budget. So the high range, but not the highest price of oil, and the question of closing the gap between domestic price and foreign export price is going to remain a challenge for quite a while, and it's going to take a long time to close that gap.
MR. KUCHINS: Thanks. Avis Boland (sp)?
Q: I have a question, I think, for, I guess for Andy or Mike, but really for just about anyone. And that is, how much importance, how much weight do you attach to the constant sort of bellyaching and sourness that you hear from the Russian political class and the military and intelligence establishment, but also all the sort of usual suspects and political commentators, about the US-Russian relationship, about the direction that Putin is taking Russia and the almost universally negative assessment that they give to it?
I mean you can argue this isn't really going to change very much, but it begins to accumulate in a rather surprising manner, so I'd be interested in your assessment on that.
MR. KUCHINS: Mike, why don't you take it out?
MR. MCFAUL: Well, I'll go first, Andy; you can add to that. I went to school at Oxford in the 80s, and I remember a lot of bellyaching about American empire when I was there in the 80s from the British. And the point is to say that Russia is going through the end of empire. I mean Martha said it, right. These are painful processes. This is to be expected. I suspect it will go on for a long, long time.
There's no program, there's no solution out there; if we could only fund this program, it will go away. I suspect it's going to be there for a long time. I do think President Putin has come a lot farther along than I would have predicted, starting with his comments about Portugal when he first became president, and onward. I think unlike the chattering classes, he's much more realistic about the end of empire and understands it, and is dealing pragmatically with its limits.
But secondly, you raise an interesting point, that there's a lot of important constituencies in Russia that are not so enamored with Western integration, they've been around for a long time, they're still there, they're not thrilled with us in Central Asia. We know who they are, the military industrial complex, I would say some of the people in the Kremlin, former KGB, or current whatever, FSB. It seems to me, my colleagues who work there say there's a real battle and struggle every day in the Kremlin between them about this.
That battle and those interest groups don't matter as long as Putin has a 75 percent approval rating, and as long as there is not an articulated alternative to integration with the West. And that's what makes me, in the long haul, optimistic. But we're thinking in static terms here. This whole conversation has been, you know, as if everything we know today continues forward for five to ten years. Well, that's not what we -- looking back a decade, there were lots of hiccups, lots of changes.
And if, you know, there's an economic crisis, if something happens where Putin's ratings fall, then suddenly those constituencies have a lot greater say over foreign policy, and they most certainly do if Russia no longer is an electoral democracy, because then who is the leader I don't think it will be Putin. But who is the leader in the Kremlin, who does he have to rely upon to stay in power? It's the guys with the guns. And what are the foreign policy preferences of the guys with the guns? They're not very pro-Western. So that's the direct relationship, to me, between internal change and foreign policy.
MR. KUCHINS: Let me add a comment to that again; I just want to say something as well. I don't have the sense that anyone thinks that there is any serious opposition or dangerous opposition to Mr. Putin's foreign policy orientation. I mean, it was often referred to last week as sort of a Potemkin opposition, or maybe a sleeping dissent. But there's one major caveat, of course, and the major caveat is that Mr. Putin's foreign policy orientation is not going to be judged, or is not evaluated, in the end, on its own, but if there's serious economic problems, if there's serious socioeconomic problems, then the foreign policy, pro-Western, pro-US foreign policy orientation comes into question.
And I think, you know, if we go back ten years ago to 1992, 1993 when the first, you know, or the initial pro-Western bent was questioned, in my view it wasn't so much because of the foreign policy itself, but it was the fact that the economy went to freefall, and there was tremendous political opposition overall to the Yeltsin, Gaidar, Kozyrev regime then. Then the foreign policy orientation, as a result, suffered.
So, today, it looks like the opposition is -- I mean, there's opposition there, but they're not politically empowered, because Mr. Putin, as Mike said, his overall position is fairly stable.
Anders, do you want to --
MR. ASLUND: Yeah, let me just add here, the labor foreign policy as well, as to the economic reforms are pushed by two groups. The labor reformers, of course, and also the big businessmen. And they are very committed to Russia being part of the West, because that's where they have the market. And this has become much clearer after 11th of September. I was in Moscow just after that, and I was very struck how the big businessmen were out arguing for Putin joining the West before he made his 24th of September statement.
The opposition is the FSB, the state bureaucracy, in general. And what I really had expected this year was that Putin would utilize his strong popularity, his strong support in both chambers of the parliament, and the presidential administration and media to go after the state bureaucracy. And it's repeated in his excellent speech of April 18th, but so far nothing has really come out of it.
I totally agree with the essence of your question. It can't really go on like this for a very long time. And the natural conclusion of this would be that the state bureaucracy has to give, because the other forces are much stronger.
Thank you.
MR. KUCHINS: Avis, you've asked such a provocative question, it seems that everybody wants to comment now. Let me turn to Martha, and then Rose.
MS. OLCOTT: I think the chattering classes haven't yet defined a role for themselves, and that's one of the reasons that I'm not terribly concerned about the criticism of Putin's policy. I don't look at it from the military, which is much more Rose's area, but looking at the criticisms that have been offered of U.S. engagement in Central Asia and this unwillingness, unwillingness on the part of the chattering classes, for loss of a better term, just to grasp the irreversibility of the imperial decline.
They simply don't have deliverables to offer to policymakers. And I think that's one of the reasons why the gripers get attention in the press, but you don't really see policy alternatives around them. But because of that, I'm not sure that this is the last summit. I mean, summits are one of the payoffs that we can give --
MR. KUCHINS: -- will keep it going
MS. OLCOTT: It's one of the payoffs we can give a declining empire.
MR. KUCHINS: Rose?
MS. GOTTEMOELLER: We're not at the last summit, because presidents love summits. They are high "vis" opportunities. It lets them have great photo ops. So I have to say, Mike, I really disagree with you on that, even if there's nothing to accomplish.
But what I wanted to comment on quickly was --
MR. MCFAUL: (Off-mike and inaudible.)
MS. GOTTEMOELLER: Yeah, well, anyway, there were other things going on. It was a little dangerous going to Moscow in those days.
MR. MCFAUL: (Off-mike and inaudible.)
MS. GOTTEMOELLER: One of the things -- (Laughs). Yeah, right before. And they signed an arms control deal too.
Very, very quickly, where I see problems -- and I know, Avis, you've seen this as well -- is an implementation of policy because what is happening is that even those who have now retired from the military service, from the MOD, the general staff, they can have a profound continuing impact on a younger and more inexperienced policy community inside the ministries. And that's where I'd see the problems arising. And quite frankly, I think we have some similar problems here in Washington wherein certain of the political appointees are throwing some wrenches in the works of what Bush may be trying to establish strategically as a new Russia policy. So I think we have related, although not identical, problems in both capitals.
I think, frankly, there are some risk takers emerging in the Russian ministries, and I've, you know, experienced that there's some people who are willing to take new initiative and come up with new ideas, and try to drive them forward. But that is the greatest problem I see, that this overlay of older and experienced policy hands can have a breaking effect on new policy directions.
MR. KUCHINS: Funny comment in Moscow last week on this bureaucracy problem. Someone at a seminar said if Gosplan were reinvented, they would be the ministry of foreign affairs and the ministry of defense today. And the retort to that was, no, actually, Gosplan was better. (Laughter.) Okay, right here.
Q: Francine Keefer. The Christian Science Monitor. Two questions, one looking back and one looking forward. Mike, I was interested to hear your explanation of the new relationship between the United States and Russia as really a function of continuity. Andy, I wondered if you shared that opinion or what you might think the fundamental reason is for the much rosier outlook in our relations now than when the president first took office, so that's the first question.
And the second is, could someone give me a sense as to what they see the importance of this relationship shaping up to be in the future? I mean, where would you rank Washington-Moscow relations in terms of our other important partnerships around the world, as we move forward here? So basically, I'm looking for a sense of the importance of this relationship and why as we go forward in the decades ahead.
MR. MCFAUL: I'll just answer the first one, because I've already said what I wanted. I would just note that you can't -- just remember the Slovenian meeting, and when he looked into his soul, and whatever the quote is. You can't have that happen in a 45 minute meeting. You have to have gone into that meeting with some sense that that's the outcome you wanted. Our bureaucracy just doesn't work any other way.
So I think there's a lot of evidence that this was the plan all along. Slovenia helped and September 11th helped. Toby's shaking her head no, so ask her afterwards for the real deal. But that was my strong sense in the spring of last year.
On the second question, that's part of why I said this may be the last kind of big U.S. summit, because I think moving forward, Russia's very important, it's a big place with a lot of borders, with a lot of places that, in the quote unquote "war on terrorism," will be important to us, has relationships with three of the countries of "the Axis of Evil," right?, so they're right there in the center, in that sense.
But that's the sense in which we're now going to deal with Russia, I believe, and not the bilateral in terms of the US-Russian relationship in an of itself, I think, will be subsumed by the war on terrorism, and that that will be what, you know, in kind of the reverse order of the way containment subsumed everything else in the Cold War, now we have this new thing of which Russia is a component, but is not independent, and separate, and kind off on its own. I see that as a positive; I don't see that as a negative thing, by the way.
MR. KUCHINS: Fran, thanks for your question, and I'll study the whole argument, but I do have a policy brief I've written recently which addresses some of this. First of all, I agree entirely with Mike's assessment that, on the Russian side, going back to Gorbachev, that the principal strategy, where, in effect, you're trading off, you know, geopolitical influence for integration into the world and economic modernization, that there's continuity there in principle. The difference -- there's some differences right now.
The biggest difference right now is that Mr. Putin is in a position to deliver, or he's in a fortunate position to be able to deliver on the economic growth part, and as well on the integration agenda. And there are a lot of reasons for that, but I think that's the biggest difference that we see in his leadership from Mr. Yeltsin, and even Mr. Gorbachev. I mean, you can argue about the sustainability of Russian economic growth, but it's been there; this is the fourth year of economic growth.
You can argue about it. You've got to be concerned about the status of civil society, the Russian democracy and free media, but the atmosphere of chaos in the Russian Federation, as it was in the 1990s, is not there to the degree that it was. And you know, we can be critical, and we absolutely should be critical about the way the war in Chechnya is being prosecuted, but are we fearing the disintegration of the Russian Federation, as some were seven or eight years ago? No.
So there's been a political-economic stabilization, to some degree, in Russia, and Mr. Putin's been able to be more effective. As far as the last part of your question, you know, where is Russia's stand on our foreign policy agenda? Well, I think you could make a plausible argument that the Russians stand pretty darn high. And if you look at -- what are some of the major concerns we have?
Well, the nonproliferation of weapons of mass destruction and their means of delivery. I mean, Russia, by sins of omission or commission can play a greater role in any place in the world. The war on terrorism -- we have a lot of disagreements about where this goes and how we define terrorism, but Russia is located, by virtue of geography and the nature of the relationships it has with many of the areas of concern, can be very useful in addressing these issues.
The energy issue has already been addressed; obviously up, you know, high on the agenda. And finally, thinking longer term, both Russia and the United States share a concern about the assimilation of China into an international system. I'm not talking about China containment or some kind of, you know, US-Russian alliance against China or anything like that, but we share a concern there.
Obviously, there are other big issues on the agenda, but if you look at those four, what other country in the world can play, you know, more of a role than Russia? To me, that's a pretty powerful argument for why Russia should be pretty high on the agenda, and especially in an environment, after September 11th, from the Bush administration's standpoint, weapons of mass destruction in the hands of terrorists is your highest urgency.
MS. OLCOTT: I think Russia will stay high for the next several years on the agenda, without being the most important country for the U.S., for two simple reasons. I think that the Russian-American relationship helps legitimate U.S. policy of unilateral-multilateralism. I mean it really does give a much more multilateral feel.
MR. MCFAUL: Two is better than one.
MS. OLCOTT: Yeah, exactly, no and it puts the Europeans in a different place that they would be in if Russia wasn't alongside the Americans and I think for the Russians the U.S. relationship can be an engine for certain policy changes that Putin needs to continue with his liberalization. We talked about trade, military reform. I mean they can help provide a greater opening in Europe. They don't hinder that opening in Europe and I think because of this Putin for his point, you know, has to let this go a few more years to see if it won't work. If it doesn't work, then in his second term he can become, as all Russians are, (laughter) go from pro-Western to inward looking, pro-Eastern. But he doesn't have to do this until second term. He doesn't lose anything by continuing just where he is up through 2004.
MR. KUCHINS: Okay. Yes. Gentleman here on the aisle.
Q: Thank you. I'm John Parker of The Coming Russian Boom.
I'm not used to having people even remember, let alone praise the book. So thank you, Anders. But I wanted to come back to the comment that you began with, Kortunov's comment that as it were a lot of good things in this summit seemed to be predicated on Russia doing what the U.S. wanted it to do anyway, and to some extent of course that's always true. I mean if there's going to be a bilateral agreement, both sides have to agree. But Kortunov presumably means that the U.S. is taking a kind of very narrow sort of cost-benefit analysis of the U.S.-Russia relationship and that therefore - I mean I know I'm reading things into what he's saying -- but, therefore, one wouldn't necessarily expect any further improvements to the U.S.-Russia relationship.
I wondered if you agree with that analysis of what Kortunov is saying and does it depend - does the achievements of the summit depend to a great extent on Russia sort of simply doing what the U.S. wants it to do?
MR. KUCHINS: That's a hard question to answer quickly. Rose, take a shot.
MS. GOTTEMOELLER: You know, interestingly enough, we've been in the realm with what I've called the unbridled unilateralism of the Bush administration's early arms control approach, that is the handshake type approach. We've been in the realm I think of essentially Russia having to do more just as you say and having to do more because of our relationship and threat reduction, that is that they would have to, you know, continue to give us access to facilities, give us transparency, that type of thing as we help them to eliminate their weapons systems, as we help them to secure their nuclear materials.
The continuation of the arms control relationship and particularly the establishment of the START 1 verification protocol as the implementing mechanism for this new agreement, in fact, extends the cooperative bilateral and reciprocal relationship that has existed throughout the history of our arms control limitation and in latter years reduction efforts. So I frankly think in the narrow -- again in the narrow field of arms control, but we are continuing on a track of reciprocity in this case rather than one of one-sidedness and I see that as actually a great advantage, although people again have criticized the agreement as being nothing much, nevertheless, I see that as a tremendous advantage and one that belies the point you've made, John.
MR. KUCHINS: I think the Russians see themselves more in a similar situation as our larger European allies. The Russian leadership is not happy with what's happening with the national missile defense and the ABM Treaty. They're not happy with NATO expansion still. I don't think they're certainly not fully happy with the U.S. military presence in Central Asia and the Caucasus, but I think there's a recognition that they have to live with it and I think Mr. Putin is a master of making a virtue out of necessity in effect and that if he has decided that economic modernization and recovery is priority number one, in effect, he's making a similar kind of decision I think that post-war Germany and post-war Japan made. To some extent if you can't beat them, join them. And he is bandwagoning with U.S. power and he's relatively reasonably comfortable with, in effect, being a junior partner to some extent with the United States. He understands it's not an equal partnership. It's impossible to have an equal partnership with the global hegemon. But I think also in that decision is, okay, if we're going to be joining with the United States, we see that by joining with him, this might be a more effective means to have influence in restraining or constraining some aspects of what they might perceive to be the excesses of unbridled unilateralism.
Wayne Merry in the back.
Q: Wayne Merry, the American Foreign Policy Council.
Just a note on visas on somebody who used to run that section in the embassy Moscow, although a long time ago. The unfortunate reason we have so many problems there now is that so many of the visas that were issued in the last ten years have resulted in people overstaying their visas and conducting visa fraud, which created a huge backlash in American law enforcement in the Congress, so that the visa officers are now enforcing the law. There is a really excellent post on Johnson's Russia list by the current counsel general in Moscow about ten days ago, followed by a very good one by Kathy Fitzpatrick of Human Rights Watch as to what people who have legitimate business in this country can do to get their visas, but the point remains that 80 percent non-immigrant visa refusal rate in a country with Russia's per capita GDP is not high by international standards.
When I was a visa officer my refusal rate for that kind of people was 95 percent. The comparison with Europe, I think, is just not legitimate. Russia's European country we're not.
I do have a question for Rose Gottemoeller on the question of test site transparency. You mentioned Novaya Zemlya do you think that this might help resolve this lingering issue from a few years back as this very large minatum site in the southern Urals about which there is a great deal of controversy, though it appears to have gone away. Do you think we may actually be able to get access to that?
MS. GOTTEMOELLER: Wayne, I can't say specifically what I think we can get access to at this point because of these discussions them stalled now for several years. I frankly think though that as I said the time is ripe for reexamining the agenda, first of all because it would be good for us to get access to Novaya Zemlya, and we've already given access to Ambassador Ushakov recently to the Nevada test site, so I think it would be wise perhaps to start with that step. Ambassador Vershbow should have a nice invitation to go to Novaya Zemlya and check it out before the winter sets in.
But I would actually hope to move both, you know, faster towards something like a joint verification experiment, which we conducted in the late 1980s and was, I think, very successful in establishing good working relationships between parts of the Ministry of Atomic Energy and the Department of Energy, that could then be used to establish broader dialogue on transparency into weapons security and safety. We already have some ongoing projects in that arena under an agreement called the Nuclear Warhead Safety and Security Exchange Agreement. Very little known document, but one that has been very, I think, successful so far and was recently extended. So there are mechanisms there. There are I think the people who could do it. We now just need to get the policy agenda set and move forward so that we can begin to answer some of these questions about what's going on at NZ. Period.
MR. KUCHINS: Okay. I'm afraid that we're going to have to bring things to a close, as it's just about two o'clock. It seems that perhaps the largest question facing us is whether this is the last summit and in effect whether this is the last summit briefing. We have at least two no's on the panel, at least one yes and two of us are abstaining so far.
If it is the last summit, well, thank you very much. And goodbye, it's been a hell of a ride and we'll see you at the China program where I'm assured they'll be having summits for a long time to come, if not, we'll see you here next time.
Thank you.
("Stormy and prolonged" [DJ] Applause and end of event.)
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