THE FORTNIGHT IN REVIEW

The Fortnight in Review

Eyeball to Eyeball on the Budget

Tensions mounted as the lower house of the Russian parliament prepared to debate the government’s draft 1998 federal budget. Communist Party leader Gennady Zyuganov called the government’s spending plans "barbaric" and said his party would propose a vote of no-confidence in the government. President Boris Yeltsin responded with a clear threat to dissolve the Duma if it refused to cooperate with his government. "The Duma," Yeltsin warned, "should reflect on what the president must do in such a situation."

Declaring that he was not going to address the Duma again this year, the president went instead to the upper house. Russia, he told the Federation Council on September 24, needs "a new economic order" with a stronger role for the state. The state should not interfere in legitimate business activities, but must use its powers to establish common rules of the game and a level playing field for all. Yeltsin’s speech was seen as a landmark in the government’s campaign to move from "bandit capitalism" to a transparent system based on the rule of law.

As expected, the Duma rejected the draft federal budget when it received its first reading on October 9. In a gesture of moderation, however, the Duma rejected a proposal that the budget be rejected out of hand and returned to the government. In the same spirit, the Duma rejected a call from the Yabloko faction for an immediate vote of no confidence in the government. Instead, the Duma accepted the Communist faction’s proposal to refer the budget to a trilateral conciliation commission made up of representatives of the government and both houses of parliament. First deputy premier Anatoly Chubais called the decision "a victory for common sense." President Yeltsin said he was confident he would not have "to use the rights given to him by the constitution" to dissolve parliament.

Yeltsin Rules Out Third Term

There was a flurry of speculation that Yeltsin might decide to run for a third term in the presidential election due in 2000. Yeltsin himself was clearly unable to make up his mind. On September 1, he asserted that he would not run. Then, on a visit to Nizhny Novgorod a month later, Yeltsin hinted that he was considering the possibility. The president finally ruled the possibility out on October 9, saying that he must abide by the Russian constitution, which restricts the presidency of one person to two consecutive terms. Out of deference to him, members of Yeltsin’s team have until now held back from announcing their candidacies. Now, the battle for the succession will begin in earnest.

Russia Joins London Club

There was good news on the economic front. On October 6, Russia reached a deal with its western commercial creditors on rescheduling $35 billion of defaulted loans and interest inherited from the former USSR. Chubais hailed the agreement, saying that, along with Russia’s recent entry to the Paris Club of creditor nations, it would open up "vast opportunities" for foreign investors who would now feel more secure about doing business in Russia. The agreement is expected to enable Russia to acquire a higher credit rating, making it cheaper and easier for the country to borrow abroad.

Meanwhile, the consumer-price index fell for the second straight month, registering a drop of 0.3 percent in September compared with a fall of 0.1 percent in August. Inflation is now running at its lowest year-on-year rate since the start of economic reforms. Clear growth was reported, too, in industrial output, and GDP was up slightly over the same period in 1996.

Opposition Seeks to Unite

Leaders of 32 Communist and nationalist parties and movements met in Moscow on September 29 to plan an "autumn offensive" against the Yeltsin leadership. They included the Russian Communist Party, smaller and more radical Communist organizations and nationalist groups, and the new star in the opposition firmament, retired Gen. Lev Rokhlin’s Movement in Support of the Army. The initiative for the meeting came from the Popular Patriotic Union, the umbrella organization that backed Gennady Zyuganov’s failed 1996 presidential bid. Zyuganov said the purpose of the meeting was to work out common tactics, but observers suspected his real concern was to try to coopt Rokhlin’s new organization. Rokhlin’s movement is Russia’s fastest-growing opposition organization, with a strong regional base, and some observers see it as a potential challenger to the Communist Party for leadership of the opposition. Others predict that it could destroy the Communist Party up by attracting moderate Communists away from a radical rump.

Russian Diplomacy: Playing Europe Against Washington

Relations between Russia and the West followed their usual meandering course over the past fortnight, as Russia sought to exploit differences between the U.S. and its NATO allies while simultaneously moving forward with Washington on strategic arms control. Moscow’s interaction with the West under NATO’s aegis was equally ambivalent: both sides appeared satisfied with the initial ministerial-level meeting of the Russia-NATO Permanent Joint Council, but Western officials were said to have been disappointed by Russian defense minister Igor Sergeev’s lackluster presence at a meeting of NATO defense chiefs in Maastricht.

Russia’s participation, along with Malaysia, in a $2 billion French-Iranian gas deal topped the fortnight’s diplomatic developments. The September 28 agreement signified an attack on Washington’s ongoing but increasingly ineffective efforts to isolate Tehran. It also reflected broader resentment in Europe over U.S. trade legislation that seeks to penalize foreign companies for business ventures launched in Iran, Libya, or Cuba. The gas deal was a diplomatic bonanza for Russia, however, insofar as it permits Moscow to strengthen its ties to the Iranian government while simultaneously standing with Europe against the unpopular U.S. trade measures.

Russia’s efforts to splinter the transatlantic alliance were in further evidence on October 3 when President Boris Yeltsin publicly urged European leaders to resist U.S. interference and to unite with Russia in a common effort to solve Europe’s problems. In an obvious swipe at the U.S., Yeltsin told French and Russian television journalists that "we don’t need any ‘uncle’ from outside; we in Europe are ourselves capable of uniting in a serious manner." Yeltsin’s remarks, which came in the run-up to an October 9-10 meeting of the Council of Europe in Strasbourg, reprised a statement he had made on September 18 when he said that he would call at the Council meeting for a diminished U.S. presence on the continent.

Having It Both Ways with NATO

Yeltsin also made mention on October 3 of a Europe "without any dividing lines" — a standard Kremlin formulation indicating its opposition to NATO enlargement — and called for the alliance to transform itself from a military into a political organization. At the same time, however, Yeltsin praised the results of a September 26 meeting of the Russia-NATO Permanent Joint Council at which Moscow and Washington signed several arms control documents and the Council approved an action plan governing cooperation with Moscow through the end of the year. Under the terms of the action plan, Russia will be invited to base military representatives at NATO headquarters in Brussels, and the two sides will consult on a wide range of security issues, including Bosnia, peacekeeping, international terrorism, military strategy, and nuclear doctrine.

Western leaders were disheartened, however, by Russian defense chief Igor Sergeev’s performance at a meeting of NATO defense ministers in Maastricht on October 1-2. Sergeev gave only the most perfunctory support to a September 30 operation in which NATO-led SFOR troops seized four Bosnian Serb television transmitters. More to the point, Sergeev reportedly voiced no new proposals at the Maastricht meeting and failed to name Russia’s new military representative to NATO headquarters. A Russian daily observed that the country’s Defense Ministry now seems less enthusiastic about interacting with NATO than does the Foreign Ministry — a reversal of their earlier roles.

Progress in Arms Control

There were two sets of arms control documents signed by the Russia and U.S. in New York on September 26. The first set involved strategic nuclear arms reductions and was aimed at making it easier for Russia’s reluctant parliament to ratify the 1993 START II treaty. The documents codified decisions taken by Presidents Yeltsin and Clinton at their March summit in Helsinki, and, among other things, give Moscow an extra five years to destroy the missiles they must take out of service. The second set of documents deal with the 1972 Anti-Ballistic Missile (ABM) treaty. Signed also by representatives of Belarus, Ukraine, and Kazakhstan, the most significant of these documents removes restrictions set by the ABM treaty on limits for so-called theater-defense anti-ballistic missile systems. Additional talks on the September 26 agreements were held in Moscow on October 8-9.

Lukashenka Versus the Kremlin: A Family Spat?

On October 7, Belarusan president Alyaksandr Lukashenka’s KGB (still so named) released Pavel Sheremet from prison, but kept him under surveillance pending trial. The Minsk bureau chief of Russia’s state-controlled ORT Television, together with his cameraman, Dmitry Zavadsky, are charged with criminal violation of the Belarusan border and of damaging Belarusan state interests. Their arrest and pretrial detention — 73 days in Sheremet’s case — became a significant irritant in Russia-Belarus relations, despite Moscow’s efforts at first to defuse and later to deescalate the dispute. Lukashenka, true to form and character, showed little inclination to cooperate with Moscow’s efforts.

Ever since the July 22 arrest of the ORT team in Belarus, the Kremlin and Russia’s Foreign Ministry have chosen the path of appeasement. Moscow has pursued two objectives. The first is to induce Lukashenka to release the journalists quietly, without loss of face. The second is to protect the much-advertised Russia-Belarus special relationship — including the Yeltsin-Lukashenka relationship — against a possible political backlash in Moscow and in Russia itself. Yeltsin, Foreign Minister Yevgeny Primakov, and other senior Russian officials repeatedly and publicly rationalized Lukashenka’s behavior in the matter of the ORT team. They have also adhered to their promises not to raise the matter in public, and have offered the Belarusan dictator ample opportunities for a graceful way out. (See "Fortnight in Review", August 29)

Kremlin Aborts Lukashenka’s Visit

It was not until October 2 that the Kremlin at last introduced an element of firmness in its response. On that day, Yeltsin blocked Lukashenka’s visit to the Russian regions of Lipetsk and Yaroslavl, originally scheduled for October 2-4. Yeltsin ordered Russia’s air control system and the Defense Ministry to bar Lukashenka’s plane from Russian airspace and from the two military airports where he was due to land. Yeltsin explained to journalists that Lukashenka had failed to "coordinate" the visit with him, as protocol would have required. However, Yeltsin added in the next breath: "Let him first release Sheremet. So there!" In actual fact, Lukashenka had announced his visit and discussed it with the Russian president back in September, so that Yeltsin’s gesture was in fact a rebuke aimed at Lukashenka for failing to release the journalists. The rebuke was not only overdue, but almost inevitable, given Lukashenka’s extreme provocations of the preceding days.

Stream of Invective

Indeed, even as he prepared for the visit to Russia, Lukashenka had unleashed a furious stream of invective against certain Russian leaders, their policies, and their alleged lack of commitment to the Russia-Belarus Union. Repeatedly warning that he would not yield to "the Kremlin’s foot-stomping," Lukashenka accused Russian officials — implying reformers in the government — of "sabotaging" the Russia-Belarus Union at the behest and in the pay of the West. In a September 30 interview with Yaroslavl television, which was also broadcast in Belarus, Lukashenka attacked Russia’s first deputy prime ministers, Boris Nemtsov and Anatoly Chubais, for pressuring Belarus to yield industrial assets "to Russia’s swindlers" — and "for a pittance." For good measure, Lukashenka accused the deputy head of Russia’s Security Council, Boris Berezovsky, of "earning millions of dollars through contraband via Belarus… I stopped his cargoes more than once. Would he forgive me for this?" Such attacks left the Kremlin little choice but to find some form of retaliation.

But the cancellation of Lukashenka’s visit appeared to make little difference. On October 4 he charged that Yeltsin had been "manipulated" into canceling his visit by "financial magnates" and the "common rogues who control Russian television networks" hostile to him. Adding insult to injury, Lukashenka condescendingly described Yeltsin as "eighty years old." (The Russian president is in fact 66 and sensitive about his age and health)

Overture to Russian and International Communism

Potentially more serious than the verbal abuse was Lukashenka’s overture to Russia’s Communists. The day after Yeltsin’s October 3 threat to dissolve the Duma, Lukashenka recalled in a speech that he had "more than once condemned [Yeltsin’s 1993] shooting of the Duma; I am not being forgiven for such things." And on October 5, Lukashenka received the delegations of Communist parties from most CIS countries and other former Communist countries who were attending the congress of the Belarus Communist Party. Expressing concern that the Kremlin might increase pressure on Belarus to reform its economy, Lukashenka praised state ownership of industry; decried Russia’s "upheaval under the guise of perestroika" and the "democrats’ odious policy;" and vowed "not to talk to the Chubaises and Gaidars." "My policy and yours at this stage coincide," he told the assembled Communists. Observing that "Russia dislikes the policy of the presidents of Ukraine, Kazakhstan, Uzbekistan, and others, because of their independence," Lukashenka complained that Moscow "equally dislikes Belarus even though it pursues an openly pro-Russian policy." Puzzled by such "ordinary stupidity" in Moscow, Lukashenka blamed it on Kremlin foreign policy coordinator Sergei Yastrzhembsky — "a second-rate man" — and other individuals in the Kremlin who are either "brainless" or "wreckers."

Lukashenka has until now steered clear of an open alliance with Communists, notwithstanding his own nostalgia for the USSR, his anti-Western policy, and his resistance to reforms. He has, instead, chosen to work with the Kremlin, hoping for economic and political benefits in return. Concerned that the Kremlin’s unprecedented snub may herald a long-term change of policy, which could also undermine his internal position, Lukashenka seemed to turn to the Communists for support. In Moscow, Gennady Zyuganov, Anatoly Lukyanov, Sergei Baburin, Vladimir Zhirinovsky, and other prominent Communists and ultranationalists obliged to some extent. They criticized the Kremlin’s snub of Lukashenka, but stopped short of making a major issue of it. The Kremlin did not face any serious pressure from the left in its spat with Lukashenka.

Biting the Hand That Feeds

The Belarusan president was due to have signed with the governor of Yaroslavl an agreement creating a joint venture between former flagships of the USSR’s automotive industry: the truck-making MAZ of Minsk and the engine-manufacturing Avtodizel of Yaroslavl, each joined by three additional plants in the venture. The ceremony was aborted, but the operational agreement had already been signed on September 30 by Russian deputy prime minister Valery Serov and his Belarusan counterpart, Ivan Dalhalev. Moreover, Russia granted a credit of 500 billion rubles to finance the initial stage of this project and of another joint venture that will manufacture agricultural machinery.

Indeed, the Belarusan ruler was biting the hand that feeds him. Andrei Illarionov, director of the Institute of Economic Analyses in Moscow, estimates the value of Russia’s economic subsidies to Belarus at between $1.5 billion and $2 billion annually, "paid out of Russian taxpayers’ pockets" in 1996 and 1997. The subsidies take two main forms: writing off Minsk’s arrears for Russian energy supplies, and allowing Belarus to exploit the two countries’ customs union by taxing goods in transit to and from Russia via Belarus. This largesse represents "Russia’s gift to Lukashenka personally," who "cynically milks the ‘elder brother’," Illarionov observed. Noting the economic growth recorded by Belarus in 1996 and 1997, Illarionov credited it entirely to Russian subsidies.

Kremlin Ready to Forgive and Forget

The foregoing suggests, first, that Moscow is propping up Lukashenka for its own reasons of foreign policy, enabling him to avoid economic collapse and social unrest in Belarus. Second, it suggests that Lukashenka has concluded that Moscow will continue this support despite his affronts. The Belarusan dictator’s conclusion seemed to be confirmed by the Kremlin’s statements, made following — and despite — the cancellation of Lukashenka’s visit. Thus on October 4, Yastrzhembsky declared: "No one in the Kremlin doubts the vital need for the Russia-Belarus Union, and not for reasons of ideology or nostalgia, but out of pragmatic understanding of Russia’s national interests."

In a similar spirit, Yeltsin’s foreign policy adviser, Sergei Prikhodko, on October 8 called for "serious joint work to resolve the problems on which our countries’ integration depends." He urged a quick "switch from the recent coolness to constructive cooperation," particularly in the context of the October 22 CIS summit. On October 6, Nemtsov stated that "the Russia-Belarus Union is tremendously important, irrespective of Lukashenka’s personality. Whatever that personality may be, the Union represents an enormous gain for Russia geopolitically, psychologically, and spiritually." Nemtsov faulted Lukashenka on two counts only: "behaving like a young student" in venting "personal bitterness" against Sheremet, and obstructing the plans of Russia’s Gazprom and LUKoil companies to acquire property in the energy sector of Belarus. The previous week, Nemtsov had also listed Russia’s Yukos and Slavneft companies among those whose takeover bids in Belarus were being frustrated, and he had accused Lukashenka merely of feigning "integration" with Russia rather than actually promoting it.

These leading Russian reformers omitted from their statements any reference to the fate of democracy and human rights in Belarus. They signaled that the Kremlin regards the jailing of ORT journalists as a temporary irritant in its relationship with Lukashenka, and that Moscow remains prepared to stake its policy on the incumbent Belarusan president, warts and all, if only for lack of viable alternatives. And although the ORT journalists face criminal trial in Minsk, the Kremlin hinted that it would like to restore cooperation with official Minsk quickly, in time for the October 22 CIS summit. The Russian government knows that it will find itself in the minority on the key issues at that summit and is counting on the support of Lukashenka — the CIS’s "leading integrator."

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"The Fortnight in Review" is prepared by Senior Analysts Elizabeth Teague (Russia), Stephen Foye (Security and Foreign Policy), Vladimir Socor (Non-Russian republics), and Analyst Igor Rotar.

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