THE FORTNIGHT IN REVIEW

The Fortnight in Review

The past fortnight saw Moscow fight to maintain its role as a key player in the latest Persian Gulf crisis, while, at home, Russian President Boris Yeltsin moved at last to shore up the authority of the government’s leading reformers. The fanfare over these issues overshadowed a pair of significant economic developments — one good and one bad — that reflected Russia’s growing integration into the world economy. Some leading Russian officials, meanwhile, continued to dream the unlikely dream of a Russian-CIS military alliance. In Uzbekistan, there was evidence that the government may be relaxing its crackdown on what it has claimed are Islamic militants.

The Iraq Crisis: Strong Words out of Moscow

Russia and the U.S. emerged ever more clearly over the past fortnight as rivals in the international effort to resolve the latest standoff between Iraq and the UN. As it had during a similar crisis last autumn, also precipitated by Iraq’s defiance of UN weapons inspection teams, Russia continued to insist on a diplomatic solution to the impasse. The U.S., in contrast, which had only reluctantly accepted the earlier Russian-brokered settlement, beefed up its military forces in the Persian Gulf and intensified its efforts to win international backing for possible military strikes on Iraq. Washington’s announcement that the time for a diplomatic solution to the Iraqi crisis was running short generated a whirlwind of diplomatic activity around the world. Russian foreign policy makers did their best to stay at its vortex.

The mounting tensions between Moscow and Washington over Iraq were most sharply highlighted on February 4, when Russian President Boris Yeltsin warned that U.S. military strikes on Iraq could cause a world war. During a meeting with government ministers, Yeltsin accused U.S. President Bill Clinton of acting with uncharacteristic heavy-handedness on the Iraq issue. Yeltsin’s alarmist remarks briefly roiled world financial markets. The comments were also quickly clarified by a Kremlin spokesman. He said that the Russian president had been misquoted by U.S. reporters and that any talk of a next world war was "ridiculous and absurd." Nevertheless, one day later, in remarks to reporters on the eve of a trip to Italy, Yeltsin used virtually the same language in addressing the issue of Iraq.

Russian Diplomats on the Move

Yeltsin’s talk of a possible world war capped a period of intense diplomatic activity by Moscow aimed at enhancing Russia’s peacemaker role in the ongoing Iraqi crisis. Those efforts began on January 26 during an inaugural meeting of the Russian-EU Cooperation Council in Brussels. Russian Foreign Minister Yevgeny Primakov attended the meeting as part of a broader tour of the continent, and Iraq figured high on the agenda in his bilateral talks with various European leaders in Brussels and elsewhere. Also on January 26, and amid reports that the United States and Britain had begun planning possible military strikes on Iraq, the Kremlin dispatched its special Middle Eastern envoy, Viktor Posuvalyuk, to Baghdad. That action was accompanied by an official Foreign Ministry statement reiterating Moscow’s opposition to any use of force in dealing with Iraq. Posuvalyuk’s arrival was greeted with considerable enthusiasm in Baghdad. On January 28 he held talks with Iraqi leader Saddam Hussein.

Washington was also busy. On January 30, U.S. Secretary of State Madeleine Albright met in Madrid with Primakov. Those talks were a small part of a larger itinerary for the U.S. diplomat — aimed at winning support for possible U.S. strikes on Iraq — that included visits to several other European countries and to the Middle East. Albright and Primakov found little common ground in Madrid. Albright said that Posuvalyuk’s mission had produced no evidence of a willingness by Saddam Hussein to cooperate with UN inspectors, and she reiterated Washington’s readiness to launch strikes on Iraq. Primakov counseled patience and asserted that Moscow would continue to work for a diplomatic solution to the crisis. He ordered Posuvalyuk back to Baghdad.

Russian diplomats were, however, left red-faced on February 2 when Iraqi authorities flatly denied Russian reports that Posuvalyuk had engineered a breakthrough in the crisis. A spokesman for the Russian Foreign Ministry later made the less than convincing claim that the Iraqi denial had been intended largely for domestic consumption and that negotiations really were bearing fruit. But that clarification was in large part beside the point. Reports indicated that the compromise being discussed in Baghdad provided only limited access for UN inspectors to Iraq’s various "presidential palaces." The U.S., which has been strongly backed by Britain, had made clear repeatedly that anything short of full compliance by Iraq was unacceptable.

Moscow on the World Stage

Saddam Hussein’s increasingly aggressive and open defiance of UN resolutions has left Russian diplomats in something of a quandary. Even some Russian commentators have charged that the Iraqi leader is manipulating Moscow in order to split the UN Security Council and to weaken any international response to Baghdad’s actions. Yet Moscow seems likely to persist. This is in part tied to financial considerations: Iraq is deeply in debt to Moscow and Russian companies have signed a number of lucrative business deals — particular in the energy sector — with Iraqi agencies. These ventures cannot be launched until the lifting of sanctions on Iraq.

But geopolitics and domestic political considerations are also of great importance. Moscow’s friendly relations with Iraq have propelled it to the center of this most recent international crisis, a prominence it has only rarely achieved since the dissolution of the Soviet Union. Of greater long-term import, Moscow perceives its friendly ties with both Iraq and Iran, as well as its backing for Arab aspirations vis-a-vis Israel, as part of a broader nexus of policy choices that will allow it to reclaim some of its former influence in the Middle East as a whole. The Kremlin sees a parallel opportunity to improve Russia’s standing in Europe by exploiting differences between the U.S. and some of its Western allies in these same issue areas. Concurrently, Russia’s aggressive opposition to the U.S. on the issue of Iraq has won virtually universal applause from chronically contentious groups across Russia’s domestic political spectrum. The popularity of the Kremlin’s policies to date in Russia will make it difficult for Kremlin leaders to shift gears on Iraq, even if good diplomatic reasons to do so should arise.

Yeltsin Backs Reformers…

Amid the hubbub over Iraq, Russian President Boris Yeltsin on February 5 affirmed his support for two key government reformers, Anatoly Chubais and Boris Nemtsov, adding that he intended to keep both men in his cabinet until the year 2000. The day before, Yeltsin gave public endorsement to a program of tough fiscal measures drafted by Chubais. Yeltsin’s seal of approval may not, however, be enough to calm market jitters. It was, after all, Yeltsin himself who had whittled away Chubais’ responsibilities ever since Chubais was implicated in last November’s "book scandal." It was the president, too, who blamed the "young reformers" when wage arrears failed to reach some state-sector workers by January 1, even though Yeltsin later conceded that regional governors were most at fault. And it was Yeltsin who approved January’s cabinet reshuffle in which Prime Minister Viktor Chernomyrdin gained responsibility for key areas previously overseen by Chubais and Nemtsov.

Throughout his career, Yeltsin has specialized in playing his aides off against each another. Chernomyrdin, presently on vacation, may live to regret his decision to take a two-week break. So far, however, Yeltsin has made no move to restore Chubais’ lost responsibilities and the possibility cannot be ruled out that the president’s expressions of support were intended chiefly to calm market jitters, especially in the West. The past few weeks have seen renewed loss of Western confidence in the Russian economy, fueled more by gossip about the woes of the "young reformers" than by concern over fundamental economic weaknesses. The waning authority of the reform team was underlined when, at the end of January, the former chief of Russia’s state-controlled electricity monopoly, United Energy Systems (UES), felt confident enough to launch a boardroom coup against Nemtsov’s appointee, Boris Brevnov, and reclaim the post for himself. The mudslinging that ensued saw Brevnov beat off the attack, but he emerged weakened while the restructuring of UES, which produces 83 percent of Russia’s electricity, was frozen.

…as Russia Triples Its Presence in the Global Economy…

The pace of Russia’s integration into the global economy was highlighted when, in January, the Financial Times published its list of the world’s top 500 companies for 1997. The FT 500 ranks companies by market capitalization (share price multiplied by the number of shares in issue). Russia’s growing economic clout was reflected in a threefold increase in the number of Russian companies in the table. Last year, when Gazprom made it into the global 500 for the first time (in relatively lowly 421st place), the world’s largest gas producer was the only Russian company in the list. This year, Gazprom ranked 91st and was joined by two other Russian giants, LUKoil and UES, at 224th and 225th, respectively. LUKoil’s new rival, the oil giant Yuksi, was excluded from consideration because it was set up so recently. Not for long. Yuksi is set to become the world’s third largest private oil company in production terms and the biggest in terms of reserves. And, while only five Russian companies made it into the European 500 last year, this year’s total was fifteen.

…and Catches a Whiff of Asian Flu

That was the good news. The bad news found Russia catching at least a whiff of the instability afflicting other emerging markets. January saw a sharp rise in yields on Russian one-year treasury bills (GKOs), which climbed to 46 percent as buyers tried frantically to protect themselves against a possible devaluation of the ruble. The stock market was also affected, slipping 33 percent since January 1. Russia’s Central Bank responded by halting the sale of federal bonds (the first time it had done so since the bank crisis of August 1995) and raising the refinancing rate from 28 percent to 42 percent with effect from February 2. Although the Central Bank blamed the interest rate hike on panic buying of dollars by Russian commercial banks, this was a punitive increase that could, if sustained, choke off any incipient revival of investment that might have occurred this year. A sustained rise would also make it difficult for the government to finance its budget deficit.

Transparency remains an issue of concern. The Financial Times announced that it was severing its links with Russia’s Izvestia. This meant that their joint publishing venture — the highly regarded Russian-language Finansovye izvestia — would lose its British partner. Insiders said the London-based Financial Times decided to stop financing the joint publication after Oneksimbank, which controls Izvestia, complained about the coverage given to the "book scandal" not only by Finansovye izvestia but even by the Financial Times. Oneksimbank President Vladimir Potanin is a close ally of Anatoly Chubais, the central figure in that scandal.

Kremlin Advocates CIS Military Alliance

In the January 3 issue of Nezavisimaya gazeta, Russian Security Council deputy head Leonid Mayorov and Council department chief Dmitry Afinogenov wrote that NATO’s eastward enlargement, together with other international processes, "pose a very serious challenge to Russia and the CIS countries," requiring them to create their own military alliance. The officials undertook throughout the article to speak on behalf of the CIS countries, and equated the interests of those countries with Russia’s own. The authors urged practical steps to "create a CIS security system; this issue is inseparably linked with Russia’s own national security."

Concerned by "lack of real progress in this most important aspect of CIS integration," Mayorov and Afinogenov insisted that "military integration would interfere neither with CIS countries’ sovereignty nor with their accession to European and international organizations." As part of developing a military alliance, the officials urged CIS countries to "legalize the presence of Russian troops and bases on their territories and to conclude corresponding treaties" with Russia. Publication of this article followed the January 30 session of the CIS countries’ Defense Ministers, where the Russian side unsuccessfully advocated creation of a Russian-led "single defense space" and a "peacekeeping" system in the CIS.

The article restated an official Russian position which long predates NATO’s recent decisions to enlarge. Moscow now cites those decisions as an additional rationalization of its own agenda in the CIS. Moscow also seeks to influence NATO’s debate over the scope and pace of enlargement by suggesting that Russia might create a CIS military bloc in response. However, only Belarus seems willing to join such a bloc, and not without reservations. Armenia’s alliance with Russia is of a limited and purely local nature; Ukraine and three Central Asian countries are beginning to evolve security arrangements with NATO countries; Moldova is Western-oriented politically and firmly neutral militarily (Moldovan Defense Minister Valeriu Passat met with U.S. Defense Secretary William Cohen in the Pentagon on the very date when the CIS Defense Ministers’ Council convened in Moscow); Georgia and Azerbaijan have clearly cast their lot with the West; Turkmenistan bases its entire policy on internationally-approved neutrality; and Tajikistan is slipping out of Russia’s control.

Moscow is in a position to exercise counterpressure through its raw-material leverage, manipulation of local conflicts, and particularly the residual presence of Russian troops in most of these countries. The Mayorov-Afinogenov article in fact suggested that Moscow sees those troops as useful for drawing CIS countries into a Russian-led military alliance. The article would seem to indicate that top-level Russian advisory bodies continue ignoring CIS countries’ national interests, have learned little from the Chisinau summit, and are prone to offering misleading and risky policy prescriptions.

Russian Defense Minister Igor Sergeev for his part openly spoke of using Belarus to counteract NATO’s enlargement. During a January 29 visit to a NATO headquarters in Rendsburg, northern Germany, Sergeev warned that Russia may create a Russia-Belarus joint command and deploy Russian troops in western areas of Belarus if NATO troops move into Poland. The minister was responding to a plan to transfer the Rendsburg headquarters to northern Poland and create a German-Danish-Polish corps there. Complaining that the location is too close to Russia’s borders, Sergeev warned that such plans, and a Russian response in Belarus, "may lead to a confrontation between two military alliances."

On instructions from President Boris Yeltsin, Sergeev had signed on December 19 with the Defense Ministry of Belarus a set of wide-ranging agreements on military cooperation. Russian officials indicated on that occasion that the stationing of Russian troops in Belarus is envisaged, but not intended in the near term. For the time being, Moscow apparently plans to move military units in and out of Belarus in connection with joint exercises. Presumably counting on President Alyaksandr Lukashenka’s cooperation, and without regard to Belarus’ neutrality, Moscow would like to create the impression that it can play a Belarus card against NATO in Central Europe.

Uzbekistan Said to Release "Wahhabi" Suspects

The three-day feast of Id al-Fitr (Bairam) on January 29-31, which ended the Moslem holy month of Ramadan, may have provided the Uzbek authorities with a convenient opportunity to release alleged Islamic radicals arrested last December. According to Amnesty International, most of those arrested — who numbered more than 100 — had been released as of late January. They were said to have been beaten while in custody. With the end of Ramadan, 200 officially authorized Uzbek pilgrims returned after completing the hajj to holy places in Saudi Arabia, according to Uzbekistan’s Moslem Spiritual Department. Saudi Arabia is the presumed source of Wahhabi proselytism, which Uzbekistan’s leadership has recently cited as an added justification for its efforts to contain Islamic influence in general.

Most of the December arrests had been carried out in and around the city of Namangan in the eastern Ferghana Valley, following the murder of four policemen there. While blaming the violence on Wahhabi militants, the authorities cracked down on perceived subversives all around: they rounded up non-Wahhabi Islamic activists, took down loudspeakers from mosques, cut off road and telephone communications to suspected hotbeds of unrest, and broke up a demonstration of veiled women who were said to be the wives and mothers of those detained. State media did not report those measures. The government has yet to substantiate its case that Wahhabis are agitating in Uzbekistan or to produce actual Wahhabi militants. The authorities apparently seek to blame "militant Islam" for the Namagan violence. In fact, there were some indications that the violence may have stemmed from organized crime.

The crackdown in Namangan reflected President Islam Karimov’s perception that Islamic radicalism stands poised to penetrate Central Asia. Compared to the region’s other presidents, Karimov seems more prone to overreacting against those putative designs. He perceives dangers to his country and the region not only from Wahhabism, but also from Afghanistan’s Taliban movement and from the United Opposition in Tajikistan. Accordingly, Karimov has supported the warlord Abdul Rashid Dostum in northern Afghanistan against the Taliban and objected to Tajik President Imomali Rahmonov’s accommodation with the Opposition. During the first years of his rule, Karimov had silenced secular nationalist critics despite their support for independence from Moscow and their pro-Western orientation, views that correspond with Karimov’s own. More recently, Karimov has focused on containing Islam.

The reported release of most of those detained last December may, however, presage a relaxation of the latest tensions. Inflexible handling of these problems risks undermining the internal political base of Karimov’s policies of modernization, national independence, and rapprochement with the West. Those policies — as Zbigniew Brzezinski observed in a commentary reprinted this week in Kyrgyzstan’s capital Bishkek — have made Uzbekistan "a major stumbling block to a restoration of Russian domination in Central Asia."

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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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