THE FORTNIGHT IN REVIEW

The Fortnight in Review

Yeltsin Delivers State-of-the-Nation Address

President Boris Yeltsin delivered his annual state-of-the-nation address to parliament on February 17. Yeltsin used the occasion to express guarded support for the continuation of market reforms. However, he offered only a qualified endorsement of the embattled reform wing of his government and specifically threatened that, "If the government is unable to meet [our] strategic goals, we’ll have a new government." This was not the ringing endorsement market-enthusiasts had been hoping for, but it was slightly more encouraging than Yeltsin’s mood at the end of last year, when he seemed at the point of sacking the reformers in the government altogether.

Analysts were concerned by the stress Yeltsin placed on the need to achieve economic growth in 1998. In recent weeks, a growing chorus of economists has warned that 1998 is unlikely to produce the long-awaited spurt. On February 7, for example, Russia’s Economics Ministry announced that, following the Asian financial crisis, it was lowering its forecast of likely GDP growth in 1988 from 2 percent to 1.2 percent. But Yeltsin insisted on February 17 that "We have every right to say that the conditions for growth have been created." Failure to foster economic growth, he threatened, could prompt government changes. Observers wondered how well informed Yeltsin was about the realities of the situation.

Government on Another Collision Path with Parliament?

Yeltsin’s speech was short on specifics. Perhaps his most concrete prescription was his recognition that the 1998 draft federal budget had been rendered unrealizable by the impact of the turmoil on world markets, a reality which forced Russia’s Central Bank to protect the ruble by repeatedly hiking interest rates. The president also faulted the horse-trading that took place at the end of last year, when a joint government/parliament conciliation committee worked out a compromise budget. The committee gave in to several of the demands for higher spending voiced by the Communists and their opposition allies; now the government says these must be canceled.

Yeltsin said on February 17 that the already much-revised draft budget must be amended yet again to make it "realistic." It turned out that the government already had a list of twelve amendments up its sleeve which it was able to present to parliament almost immediately, but Yeltsin’s pronouncement derailed the Duma’s plan to give the budget its fourth and final reading on February 18. Instead, parliament decided to postpone its debate until February 20. Communist faction leader Gennady Zyuganov predicted that the Duma would reject most of the twelve amendments.

The chief bone of contention was the government’s determination to ax 27.9 billion rubles of planned expenditure added last year by the conciliation committee. In the words of Prime Minister Viktor Chernomyrdin, some of the deputies became "very emotional." Grigory Yavlinsky’s Yabloko was the only faction that supported this particular cut. But Yabloko said it intended to vote against the budget as a whole on the grounds that what should be cut was not 27.9 billion but 60 billion rubles. The Kremlin was leaving nothing to chance. Kremlin officials were said to be roaming the corridors, warning parliamentarians that, if they refused to approve the government’s amendments, Yeltsin might resuscitate his threat to dissolve parliament.

IMF Agrees to Extend Loan to Russia

In a gesture of confidence that Russia’s reforms remained on track, IMF Managing Director Michel Camdessus announced on February 19 that the IMF and the Russian government had agreed to extend the Fund’s existing three-year $10 billion budget support loan to Russia for a further year. It was clear that Camdessus, who had been on a three-day visit to Moscow, liked what he had seen and heard.

Tax Code in the Balance

Also hanging fire was the government’s tax code. On February 10, Finance Minister Mikhail Zadornov unveiled the government’s latest draft code, which it hopes will fare better than the original variant. The original was debated by parliament for nearly a year, only to be withdrawn by the government in the fall as part of a compromise under which the Duma agreed instead to approve the budget. The new tax code aims to stimulate investment by cutting punitive profits taxes and reducing the total number of taxes from over fifty to fewer than thirty. Finance Ministry experts claim the new Code will reduce the total tax burden on taxpayers by between six and eight percent. Zadornov said he hoped parliament would pass the new draft by June of this year. If not, he warned, Russia will be stuck with the old tax system for the next two and a half years, that is, until after both the 1989 parliamentary elections and the 2000 presidential election are out of the way.

Russian Diplomacy: Playing the Iraq Crisis

As the crisis in the Persian Gulf entered its second month over the past fortnight, efforts to resolve the impasse between Iraq and the UN dominated diplomatic agendas around the world. For Russia, largely unused to the diplomatic spotlight since the dissolution of the Soviet Union, the crisis has proved to be something of a bonanza. Moscow had close ties to Baghdad during the Soviet era, and Foreign Minister Yevgeny Primakov, an Arabist by training, has used those ties to maneuver Russia to the center of the current storm. By defying Washington’s calls for a military solution to the standoff, Moscow has strengthened itself not only in Baghdad, but throughout the Arab world. This last achievement has been abetted by the breakdown of the broader Middle East peace process and by the perception in Arab capitals that the U.S. is overly sympathetic toward Israel.

Simultaneously, Moscow’s defiance of the U.S. has exploited ambivalence in Europe over the wisdom of military strikes while exacerbating tensions on unrelated issues that have emerged between the U.S. and its European allies since the end of the Cold War. Close cooperation between France and Russia on the issue of Iraq is particularly noteworthy in this regard. Like Russia, France has traditional ties to Iraq and a significant financial stake in the lifting of UN sanctions on Baghdad. Yet the willingness of French leaders to break with the U.S. on Iraq has also been strengthened by disagreements between Paris and Washington on such issues as NATO’s restructuring and U.S. efforts to isolate Iran.

Russia has also been backed by China — another permanent member of the UN Security Council — in its efforts to block UN sanction for U.S. military strikes on Iraq. Although the proclamation several years ago of a Russian-Chinese "strategic partnership" probably means less than the term would suggest, it too is a result of post-Cold War realities and the efforts of Moscow and Beijing to come to grips with them. Chinese Prime Minister Li Peng on February 18 completed a two-day visit to Moscow during which the two countries declared their joint opposition to U.S. military actions in the Persian Gulf. It is no accident that Russian and Chinese leaders expressed their solidarity largely in terms of support for the building of a "multi-polar world." That formulation, now used regularly by Russian political leaders in all diplomatic contexts, signifies Moscow’s effort to counter the still dominant international influence of the U.S., the world’s last remaining super-power.

Post Cold War Realities

The impact of such developments should not be exaggerated. Moscow is not in a position to reclaim the influence of the former Soviet Union on the international scene. It lacks the political, military, and, especially, the economic wherewithal to do so. Nor do the tensions generated thus far by the Iraq crisis mark any sort of watershed for the Western alliance. The crisis in the Persian Gulf may, however, prove to be one small catalyst in a more general restructuring of international relations that reflects the transition to a post Cold War world. In such an environment, even a weakened Moscow is capable in certain instances of exerting significant influence on international developments. Given the enormous popularity of the Kremlin’s current stance on Iraq within Russia itself, Kremlin leaders seem unlikely to relinquish willingly the high profile diplomatic role that they are playing in efforts to settle the crisis.

Moscow Implicated in Iraq’s Germ Warfare Program?

On February 12, the Washington Post reported that UN weapons inspectors in Iraq had last fall discovered a document implicating Russia in a deal to sell to Iraq equipment, including a large capacity fermentation vessel, that could be used in the manufacture of biological weapons. The report also suggested that Russian officials had colluded with their Iraqi counterparts in a clandestine campaign to undermine the operations of UN weapons inspection teams. That campaign also included efforts to manipulate and pressure UN personnel connected to the weapons inspection operations, the newspaper said. Not surprisingly, a Russian Foreign Ministry spokesman immediately dismissed the allegations in the report, and demanded that UNSCOM, the UN commission which oversees the arms inspection efforts, issue its own official denial.

On February 18, however, the Post reported that the Russian government had in fact admitted that Russian firms did engage in the negotiation alleged in the original newspaper report. That admission reportedly came in the form of a letter to the UN from Russia’s UN ambassador. The letter reportedly also failed to clarify whether Russian firms had actually shipped any of the fermentation equipment to Iraq. While the issue remains very much unresolved, proof of secret collusion between Russia and Iraq would undermine Russia’s role as a credible mediator of the current Iraq-UN crisis. It would also undoubtedly provoke a hailstorm of criticism in the U.S. directed at Moscow’s actions.

Deepening Impasse in Moldova

On February 17, Moldovan President Petru Lucinschi and Transdniester leader Igor Smirnov held a tense, day-long round of talks in Tiraspol. The long-overdue session was part of internationally-mediated negotiations to settle the conflict in Moldova. The meeting revealed a deepening impasse in the negotiations. Instead of focusing on the political terms of a settlement, the discussions were diverted into dealing mainly with economic and political measures leveled throughout the month of February by Transdniester authorities against the rest of Moldova.

These unprovoked measures, which amounted in practice to economic and political sanctions, included:

— excise duties on commercial cargoes bound for Moldova via Transdniester from Ukraine and other CIS countries;

— a 25 percent cut in the electricity deliveries to the right bank from the Moldovan Hydropower Plant, which supplies most of Moldova’s electrical power and is situated on the left bank on the Dniester;

— an obligation on "outside visitors" to Transdniester — in practice visitors from right-bank Moldova — to register themselves with local police within three hours of arrival, to list their local contacts, and to pay a prohibitive $10 charge;

— restrictions on the entry of cars with Moldovan license plates, a move aimed at forcing Chisinau to recognize Transdniester’s own license plates and one which would suggest that Transdniester is a separate country;

— successful lobbying in Russia’s Duma against ratification of the Russian-Moldovan interstate treaty because it theoretically recognizes Moldova’s territorial integrity;

— and a conclusive refusal to allow Moldova’s parliamentary elections to be held in Transdniester, while at the same time broadcasting electoral propaganda in favor of Moldova’s red-brown "Socialist Unity Bloc."

In addition, Tiraspol continues to default on its 1997 commitment to allow the reconstruction of bridges across the Dniester, which were damaged in the 1992 fighting.

Chisinau responded feebly to these actions by lifting the customs exemptions which were until now enjoyed de facto by Transdniester cargoes transiting Moldova. In response, Tiraspol described this as an unacceptable provocation requiring counter retaliation.

Transdniester’s measures appeared designed to change the agenda of the talks, force Chisinau to deal with these issues instead of focusing on the terms of a political settlement of the conflict, and thus to freeze the status quo.

On the political issues, which were supposed to be the main topic of these talks, Smirnov reaffirmed the familiar demand for recognition of Transdniester as a subject of international law on a par with Moldova, in a "confederation" of two coequal states. This constitutes Tiraspol’s interpretation of the Russian-conceived Memorandum of May 8, 1997 on the principles of settling the Transdniester conflict. The Memorandum commits the two sides — and Russia — to settling the conflict on the basis of a "common state" of Moldova.

Tiraspol professes that this formula allows for a common state composed of two different, fully-fledged states in a contractual relationship with each other. Chisinau, however, holds to the letter of a "common state," albeit a federal one; and is able to point out — as Lucinschi did in Tiraspol — that the international mediators uphold Chisinau’s position. Indeed, a statement attached to the Memorandum, and signed by Russia, Ukraine and the OSCE Chairmanship as mediators, interpret the Memorandum as sanctifying Moldova’s territorial integrity.

Despite its signature on that document, the Russian side condones Tiraspol’s interpretation of the Memorandum in the negotiations. As a result, the talks have not only failed to advanced, but have perceptibly regressed since the signing of the Memorandum. Tiraspol felt able repeatedly to cancel rounds of negotiation on the grounds that its demands based on the Memorandum formula were being ignored by Chisinau. Some of the diplomats involved in this process will describe the mere holding of a round of talks on February 17 as a sign of progress. The Moldovan government, which faces elections next month, will also probably choose to play down the situation, at least for the time being.

Shevardnadze Targeted in Assassination Attempt

On February 9 in Tbilisi, Georgian President Eduard Shevardnadze escaped unharmed from an assassination attempt which killed two of his bodyguards, wounded others, and disabled his armored limousine. The attackers had ambushed Shevardnadze’s motorcade, firing from grenade throwers and submachine guns. Appearing within hours on national television, Shevardnadze pointed out that the attack had been aimed "to blow up not just me but Georgia as a country." The ensuing investigation uncovered evidence of a professionally organized operation, initiated and controlled from outside Georgia.

Russian Involvement Suspected

This was not the first assassination attempt against Shevardnadze. In August 1995, the Georgian president had been injured in a time-bomb attack which was blamed on pro-Moscow conspirators. The then-head of the State Security Service, Igor Giorgadze, and several of his associates were chief suspects in that plot. They promptly fled to a Russian military base and were spirited from there to Russia. As it later turned out, they had used in that operation some individuals from a Georgian paramilitary group — Mkhedrioni (Knights)–which for its own reasons had turned against Shevardnadze. Two years earlier, in an incident now almost forgotten, artillery from what Moscow described as Abkhaz gunboats fired at Shevardnadze while he was overflying the Black Sea in his airplane. At that time, the Russian military had intervened to support the Abkhaz war of secession against Georgia. In all these cases, whoever sponsored or inspired the attacks operated through local elements.

Shevardnadze has quite a few ill-wishers. This group includes: diehard supporters of the late nationalist president Zviad Gamsakhurdia; accomplices of Giorgadze still at large; and remnants of the Mkhedrioni and of the related Rescue Corps. These last groups were disbanded by Shevardnadze in 1995, and some of their leaders and members have since been sentenced in criminal trials (Mkhedrioni leader Jaba Ioseliani and associates are currently in the dock). Georgian Stalinists; Abkhaz secessionists; a few marginal Chechens; and Russian circles which underwrote the Abkhaz war and protected the Giorgadze group might also be counted among those wishing Shevardnadze ill.

Russian military and intelligence circles are also known to feel vindictive toward Shevardnadze because of his role, as USSR Foreign Minister, in ending the Cold War on the West’s terms. Shevardnadze himself has tactfully maintained — most recently in an interview with The Washington Post on February 1 — that it is "dangerous" to view the outcome of the Cold War in terms of winners and losers, as both sides ultimately "won."

Be that as it may, Shevardnadze recently received two prestigious international awards which recognized his role during those decisive years and his effort to consolidate Georgia’s independence. Moreover, immediately after the February 9 assassination attempt, the German government gave Shevardnadze an armored car to replace the one disabled in the assault. In a statement from Bonn, made public in Tbilisi, German Foreign Minister Klaus Kinkel noted that "Germany has been shaken by the attempt, as we Germans owe Shevardnadze a large debt of gratitude." Bonn has often noted Shevardnadze’s contribution, as Foreign Minister of the USSR, to facilitating the peaceful reunification of Germany.

Shevardnadze for his part commented after February 9, with reference to unnamed Russian circles: "They can not forgive me [the Soviet withdrawal from] Afghanistan, the [fall of the] Berlin Wall, the [Soviet] troop withdrawal from Europe, the [planned] oil pipelines and Central Asia-Europe transit corridor. That’s why they are trying to destroy me…I can not rule out further attempts. Behind such attempts stand very powerful forces, which our small country currently lacks the means to confront."

Pipeline and Transit Projects Seen as Target

Not only Shevardnadze, but Georgia’s government and parliamentary leaders and law enforcement chiefs are voicing in unison the suspicion that the February 9 assassination attempt originated in Russia. They stop short of blaming the Russian government itself, let alone the Kremlin for sponsoring the attempt. However, they directly accuse Russia’s "force" ministries of encouraging "international terrorism" through the protection extended to the Giorgadze group. And they openly criticize the Kremlin and the Russian government as such for seeming to collude in that protection, demonstrating hostility to Georgia and disregarding international law.

Tbilisi links the assassination attempt not just to recent history but even more to plans for the future, plans which would make Georgia a crucial transit route for world trade. Moscow opposes those plans, which include major pipelines and transport routes. In the wake of the assassination attempt, Shevardnadze pointedly told the country and the world that such actions can hardly stop the projected pipelines and transit corridor from being carried out. He and others in Tbilisi suggest that opposition to Georgia’s role as a key transit country was behind the February 9 operation. Top Georgian officials and diplomats stationed in Tbilisi were cited (by The New York Times on February 11) as being in consensus that "forces in Russia" were behind the attempt on Shevardnadze’s life. They described Russian government circles as splintered, with "a hawkish group not associated with president Boris Yeltsin dominating policy toward the Caucasus." "Independence in the Caucasus has become a fact. They can’t reconcile themselves to that fact," one top Shevardnadze aide commented. Shevardnadze himself said that he "does not have in mind the Russian leadership. But there are other circles who have their own interests and use that kind of methods."

Tbilisi has redoubled efforts to obtain the extradition of the Giorgadze group from Russia for trial on charges of terrorism. On February 10, Georgia’s Chief Prosecutor expressed the hope that, this time around, Russian authorities would not again give the "cynical answer" that they do not know Giorgadze’s whereabouts. The next day, Russia’s Internal Affairs Ministry officially responded that it does not know Giorgadze’s whereabouts. Undaunted, Tbilisi published a list of its repeated requests for extradition which Moscow failed to honor; had its ambassador declare on Russian television that Tbilisi knew only too well the places in and around Moscow which Giorgadze had openly frequented; and publicized the Georgian Internal Affairs Minister’s handover of that information to Russia’s Internal Affairs Minister Anatoly Kulikov, who is deemed one of Giorgadze’s main protectors; and Shevardnadze telephoned Yeltsin on the issue. At long last the deputy head of Yeltsin’s administration, Yevgeny Savostyanov, conceded that the Giorgadze group "may have enjoyed the protection of certain Russian security structures." It was the first semi-admission of this fact by official Moscow in two and a half years.

Under the circumstances, it was hardly surprising that Tbilisi turned down Russian security agencies’ offers to participate in the investigation on Georgian territory. By contrast, Georgia welcomed a U.S. team in that role. As of this writing, the investigation seems to be headed toward uncovering an operation organized outside Georgia and employing mainly local gunmen.

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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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