#7 - JRL 7059
excerpt
Central Intelligence Agency
Posted testimony of Director of Central Intelligence George J. Tenet
before Senate Select Committee on Intelligence on
The Worldwide Threat 2003: Evolving Dangers in a Complex World
(as prepared for delivery).
11 February 2003

RUSSIA

Moving on to Russia, Mr. Chairman, I noted last year that well before 9/11, President Putin had moved toward deeper engagement with the United States. I also observed that the depth of domestic support for his foreign policy was unclear and that issues such as NATO enlargement and US missile defense policies would test his resolve. Since then, Putin has reacted pragmatically to foreign policy challenges and has shown leadership in seeking common ground with the United States while still asserting Russia's national interests.

This was apparent in Russia's low-key reaction to the decision to invite the Baltics into NATO and in its serious attitude toward the new NATO-Russia Council, and in reconsidering some of it military-technical cooperation with proliferation states of concern. Moscow eventually supported UN Security Council resolution 1441 on Iraq and has been a reliable partner in the war on terrorism. International terrorist groups' presence and activities in and around Russia are influencing Russia's policies, sometimes in ways that complicate Moscow's relations with neighboring states. For example, the presence in Georgia's Pankisi Gorge of Chechen fighters and some of their foreign Mujahideen backers have generated new tensions in Russian-Georgian relations. These tensions were highlighted on the one-year anniversary of the September 11 attacks, when Putin threatened unilateral force against Georgia because he was not satisfied Tbilisi had, in his words, taken action to prevent Georgian-based terrorists from entering Russia.

Similarly, the war in Chechnya is complicated by the continued influence of radical Chechen and foreign Islamists—some of whom have ties to al-Qa‘ida. The takeover of the Moscow theater in October proved counterproductive to the terrorists' aim of forcing Russia to withdraw from Chechnya. Indeed, the Kremlin has turned this to its advantage by tying the Chechen opposition to international terrorism.

Meanwhile, over the past year the war in Chechnya entered a new, brutal phase. Russian security service units have targeted suspected guerrillas and their supporters and punished their families. Chechen guerrillas, for their part, continued to kill pro-Moscow officials and their families. Putin has no clear domestic rivals for power as he enters an election season that culminates in parliamentary elections in December and presidential elections in March 2004.

Putin has sought to recentralize power in Moscow. He exercises considerable influence over both houses of parliament and the national electronic news media.

While Putin has reined in some powerful political figures—a few of the governors and so-called "oligarchs"—in many cases he has negotiated a balance of interests. Putin still hopes to transform Russia over the long term into a power of global prominence, but his comments since late 2001 have contained more emphasis on raising the country's economic competitiveness. To this end, his government has set out a goal of narrowing the huge gap in living standards between Russians and Europeans and seeks to advance an ambitious structural reform program.

Over the past three years, the Russian government has made real progress on reform objectives by cutting tax and tariff rates, legalizing land sales, and strengthening efforts to fight money laundering.

Moscow has used its largely oil-driven revenue growth to pay down the country's external public sector debt to a moderate level of 40 percent of GDP, half the level of only a few years ago. Such reforms are promising, but success ultimately hinges upon the sustained implementation of reform legislation. A risk exists that the government will delay critical reforms of state-owned monopolies and the bloated, corrupt bureaucracy—which Putin himself has highlighted as a major impediment—to avoid clashes with key interest groups before the March 2004 Presidential election. Moreover, Russia's economy remains heavily dependent on commodity exports, which account for 80 percent of all Russian exports and leaves future growth vulnerable to external price shocks.