August 17, 1992

August 17, 1992 | Lecture on Russia

Key Issues in U.S. -Post Soviet Relations

(Archived document, may contain errors)

Key Issues in U.S.-Post Soviet Relations By Jeffrey& Gayner The visit to washington by President Boris Yeltsin of the Russian Republic in June 1992, repre- sented an historic transformation in the character of the relations b etween the United States and what formerly had been the Soviet Union. With the agreement to reduce drastically the number of long-range, missiles that our countries once had aimed directly at each other, we move from an era of superpower confrontation to p otential democratic We have witnessed in Russia the advent of real reform in both strategic and economic affairs, and not the quasi-refbim that character- ized the Gorbachev em In my brief remarks, I will outline some of the key issues that have emerged t h at must be dealt with effectively if we are to avoid any possibility of the re-emergence of superpower rivalry that has burdened both of our countries for the past fifty years. The four key is- sues raised by the collapse of the Soviet Union are: the mald ng of a market place in the pDst-Marx economic environment; the disposition of military assets; the character of the new political order, and finally the broader, global implications.

MOVING TOWARD THE FREE MARKET Concentration of most discussion of the po st-Soviet period understandably begins with the war- like economic destruction wrought by 75 years of H we had a great academic failing in the West, it is that we studied everything too pessimistically and thus totally ignored the question of how to get f r om mumsm to capitalism. We have learned some good side lessons on this topic, such as a thriving Chile emerging from the Marxist regime of Salvador Allende. But we never had experience, or much study, concerning a transformation of the heart (or even the a rms and logs) of the Evil Empire. In the waning days of the communist regime in Poland, a short study was done on transformation by one of our first Bradley Scholars at The Heritage Foundation, Rafal KrawczyL He subsequently has returned to Poland and has tried to implement his ideas. Today we have a degree of fierce competition in managing this transition as many different coun- tries, with genuinely independent , strive to emerge from the communist morass. Possibly most instructive in this process has be e n the necessity to develop various institutio 'nal ele- ments of a free economy, without which legislative calls for the free market ring hollow. These elements were highlighted in a study by Willigm Eggers forThe Heritage Foundation earlier this year. In his "Report Cud on Eastern Europe" he cited the priority needs for price liberalization, re sponsible monetary policy, convertible currency, privatization, and reforms to establish laws on banidng, bankruptcy, foreign investment, and private property. Unf ortunately these elements gener-

Jeffrey B. Gayner is Caunselor for International Affairs at 7U Heritage Foundationi. In Im 1992, he will head a new Heritage Foundatiort oflice in Moscow. 7bis lecture was delivered originally at the antallal meeting of the Philadelphia Society in Chicago noi,,, on April 26, IM. Revised versions war, given in June 1992 to 9111Wipants in the People to People High OWHSa nt Arnhissador Program prior to their dqmture hun Waddigton to Russia. ISSN 0272-1155. 01M by The Heritage Foundation.

-1 Rafal it Krawczyl@ "The Communist Bk= Tkansfirmation in ProgreW Heritage Lecwe No. 183, March 1. 1989. 2 William D Eggam "Report Cud on Eastern Europe," Heritage Foundation Backgrounder No. 893, April 22, IM.

ally are adopted only haphazardly, if at all, and this has made economic progress uncertain at best, and impossible at wont. .-Pliem Priority must be -given to price so that prices re&ct the real value of an item. The chief economic advisor to Yeltsin pointed out how crazy their present price system is when a ton of o il costs the same as nine pounds of men-meaning one,pound of meat equals 222 pounds of oil. Needless to say they consume lots of cheap oil and little expensive meat. Similarly the price of vodka, despite, increases, remains low by Westem standards at 50 r u bles (about 35 cents) for a half liter. Efforts to increase vodka prices in the past have led to deep-seated dissent; it has often been said that only in a vodka stupor could one endure the kind of state the country has been in the last 75 years. Coimverf i ble Currency. Similar to price reform is the need for a convertible currency, meaning that the market would set the rate of exchange between the ruble and foreign currencies. Because the ruble traditionally has been held at an artificially high level, the goverment had to control its exchange. Most recently they simply have been printing rubles to pay for things, which has meant inflation at a rate of 100 percent per month. When I first went to Russia, the exchange rate was fixed at about $1.65 to the rubl e , which made no sense, so no one exchanged dollars unless they had to. The government admitted the farce by having hard currency stores just for foreigners and Communist Party members who had access to Western currencies. The ruble now exchanges more real i stically, at around 120 to die dollar depend- ing on the latest currency rumors. Hard currency shops are everywhere and most Russians generally prefer dollars for purchases than their own currency. July I st was supposed to begin a real convert- ibility p r ocess. Trade. The other economic element of special importance concerns a-ado and access to markets. Neither massive investments nor productive enterprises can be sustained without the rapid integra- tion of the Eastern and Central European economies into theWestern economic system or, more particularly, into the huge neighboring market, the European Community. The recent Maastricht Treaty either can be viewed as the high water mark of Western European integration or, as the vote in Denmark indicated, it m a y all be downhill from here, for the original twelve members of the EC.3 The continued "deepening" of the existing EC may only create an ever widening chasm between Western and Central Europe. The Iron Curtain has gone down, but may be replaced by a comme r - cial curtain that prevents the, flow of goods and services as effectively as the Iron Curtain prevented the flow of people--and with nearly as disastrous consequences. The changing of ihstitutional e within Central and Eastern Europe and accessibility o f Western European markets for emerging producers in the Ent remain much more important that the incessantly discussed aid programs for post-Soviet governments. But when it comes to actual aid flows and loans to Central and Eastern Europe, the U.S. role in most of this has been mercifully minimal. During his trip toWashington President Yeltsin visited Capitol Hill to lobby for U.S. con- tribution to the $24 billion Western assistance program, including an additional $12 billion for the Interrinional Monetar y Fund (DM. Thanks to President Reagan we largely resisted propping up die decaying communist regimes in Eastern Europe and even exercised a surprising degree of caution in aiding Mikhail Gorbachev. This is why the EuropeAms, who squandered so much money s ustaining communist regimes, hold most of the estimated $70 billion owed by the constituent elements of the former Soviet Union, and

3 Anthwy Hardey, "no Indevance of Maostrkbt: Reddining Mw Role Of Tbe Adandc Commumty,- Institate for Ewopean Defam and Suawgic Studies Occadonal Paper No. 53, M=h 1992.


even larger amounts by the other successor states. But the Europeans now want to ensure that the U.S. shares in repaying themselves. The Germans, in particular, seem to have become "born again -burden s harers"when it comes to loans to.cover previous German loans. Something the United States may want to consider is the suggestion of Dr. Judy Shelton of the Hoover Institu- tion: debt forgiveness for Russia. This could be an ingenious America n za of generosity largely at the expense of the Europeans, who made most of the unwise loans. The Germans have clearly and conspicuously dominated financial flows to the East, especially to Russia. But this has been a political and not an economic policy; i t was- determined by the Soviet agreement to German reunification with NATO and the Bonn goverment's desire to secure one- way travel arran e for all of the 370,000 Soviet troops in the former German Democratic Republic. In 1991 only 35,000 of them left, a nd by this process dragging out to 1994 the Germans will be obligated to continue a payment schedule totaling $4 billion in pledges for transportation, housing, and job training for die departure oi ehe rest of the Red Army.- One may ask what has become o f the substantial German assistance? Allegedly more than 70 per- cent of all the aid to the Commonwealth of Independent States from the West, and more than 90 percent of the aid to Russia, has come from Germany. But according to one of the providers of the aid, the German relief organization Cap Anamur, much of the aid vanished without a trace. For ex- ample, they sent 80,000 food and medical packages to Russia over a two-month period, and only 10,000 reached their destinations. Similarly, a member of the G e rman Parliament, frorn a state in the former GDR, related to me the tale of a German delegation that had the audacity to try to trace the route of aid they provided to leaders from Sverdlovsk, Russia, Who- had come to Germany des- perately plwftg for aid. The only significant change on the Sverdlovsk landscape that their aid contributed to, however, was a splendid now dacha for the local political boss. In the end, the debate over aid to Russia will pivot around the political and not economic impact; and f f the INIF gets increasingly engaged in the process then Russia may take the long African and Latin American detours on the road to economic prosperity. The aid package may not be "the Lin- coln S&L of the now world order" as one prominent conservative des cribed it, but it offers no great hopes to solve the endemic problems that afflictithe region. Only drastic internal structural reforms and openness to trade and investment can achieve rapid and durable changes.

THE DEMILITARIZATION OF THE RED ARMY Hangin g ommously over the economic debate is the problem of the military. The most unn" element of the dissolution of the Soviet Empire is how to dispose of the enormous military assets. Fighting over those assets can, and has already, proved especially deadly. Given the secrecy of the of the old Red Army we are learning only ncrementally of the magnitude of the problem. To take but the most conspicuous example, nuclear warheads: How many are there? Often one read about the 27,000 nuclear warheads of die Red Arm y , and then other reports referred to 30,000 of them. Then a few months ago some Pentagon officials who visited Russia were told by some Soviet mili- tary officials that we had been deceived and that they actually had 34,000 nuclear warheads. These figures represent large and potentially devastating discrepancies. For this reason priority attention in our relations with Russia and the other new nuclear republics must rest upon effectively tracking and demobilizing these weapons.

4 For a study of various dimensiom of dds, see Jay P. Kosininsky and Leon Aron. nTransfanning Russia Erom EMMY to Any,- Huitap Foundation Backgrowder No. 987. Mmh 23. IM.


This is why the recent arms control agreement between do U.S. and Russia makes great strides to achieve meani ngful nuclear disarmament. By eliminating first-strike weapons, particularly the SS- 18s, President Yeltsin has courageously agreed to take a quantum step in the direction of a more stable nuclear order for the world. At the same time- we must remain caut i ous about military devel- opments in Russia. We should seek to avoid any attempt to restructure the old Red Army into a CIS Army, but at the same time we should attempt to ensure Russian control of all nuclear warheads. Centralization of control certainly has merits over proliferation and the entrepreneurial marketing of nuclear military equipment to the highest bidder, who ofken has the lowest threshold for resmaint. This does lead to other dilemmas. Ukraine understandably seeks assurances that nuclear we a pons transferred to Russia will be destroyed and not eventually threaten them. This case provides a com- polling reason for the constructive engagement of the United States in this area. We can only convincingly press Ukraine or Khazakstan to surrender th e former Soviet nuclear monopoly to Rus- sia if they have some assurance their own security can be guaranteed through other credible means. Ukraine, and even more so Poland, Hungary, and Czechoslovakia, all have growing aspirations to join NATO, just as ou r traditional NATO partners and some in Washington lose their interest in that quietly successful organization. While such an integration into NATO may not be appropriate, other less formal Western commitments need to be made. The United States needs to es t ablish closer relations with all the republics that have emerged out of the old U.S.S.R. This is necessary for three critical reasons. First, in our enthusiasm about our own defense do-mobilization we must not eliminate our defensive capabilities more rap i dly that the corresponding remains of former Soviet offensive capabilities diminish. Secondly, the prospect of prosperous democracies emerging on the periphery of Russia can proceed only with assurances that Russified remnants of die Soviet Red Army will n ot threaten their security in the future. Thirdly, within Russia itself the transformation of defense industries to civilian use and demobilization of military forces can both engender citizen support for the democratic government and also diminish the pr ospects of any military coup.

THE NEW POLITICAL ORDER If military problems can be coped with, it will be done in the context, of the proliferation of new countries and conflicts. In the past we were concerned about the proliferation of nuclear weapons, bu t with the disintegration of the U.S.S.R. we had countries proliferating among the nuclear weap- ons, with three of them now holding large stockpiles. The new countries in the former Soviet Empire represent old realities, going back to periods in which th e Russian Empire grew. In fact the history of Russia itself grew from Kievan Rus', or what is now the capital of Ukraine. But the divi- sion between Ukrainians and Russians have long grown as deep as the divisions between the other nationalities that sough t to extricate themselves from the double historical burden of Russian and then Soviet domination. The disintegration of the Soviet Union transpired extraordinarily peace- fully, given the brutal manner in which much of the old Evil Empire was constructed a nd maintained over the decades or even centuries. The formula of moving from the Soviet Union to the Commonwealth of Independent States provided, as one commentator put it, the largest fig leaf in history, which discreetly covered up the total disintegrat i on of the old U.S.S.R. About the only po- tentially salvageable feature of the U.S.S.R. is the hope that it can remain a free trading zone among the fiften new republics. It has always been such a zone, but they had little to trade. With the pros- pect of market economics emerging, a commercially borderless smicture could prove useful when they finally do have products to a-ado. This would dwarf in size, if not value, the present European Community.


THE FUTURE OF THE COMMUNISTS Two remarkable lessons of the disintegration of the U.S.S.R. are the superficial character of the seventy-year Soviet regime and renewed lessons of federalism. Communism, as conservatives per- sistently have poin.@d out, was only an effective system of twalitariaii control and military prowess. It never established philosophical roots in the allegedly soil of the Russian Empire. In- stead, the people of both the U.S.S.R. and Eastern Europe always recognized Marxism as a cancerous t ransplant that would long ago have died without the fiequent artificial resuscitation it got from the West. The few adherents to communism remain a problem throughout the region, some in a Luddite role thwarting reform and others reaping benefits f1rom ac c umulated resources plun- dered in the corrupt system -that previously existed. Although those who clearly committed crimes, even under Soviet law, should be prosecuted, the vast majority of the Communist Party members will have to be allowed to try to fun c tion under the new order. The privatization program in Russia has becoine a potential source of real people's democracy with small, shop managers being allowed to bid and become owners. This is an empowerment pro- gram that can create the kind of bourgeoi s ie the communists deplored. Yet many of the nouveau riche under the system ironically may have been communists themselves. Many of them may be, like Milli Vanil% only lip-synching to new economic and political lyrics. Nonetheless, one can ex- pect that a competitive system will reveal soon enough who simply mouths the words but fails to understand the meaning of the lyrics.

FEDERALISM AND THE FIFTEEN REPUBLICS The other new reality concerns the fifteen now republics emerging f1rom the old U.S.SJL and the yet to be determined number of countries emerging ftom the other great post-World War H artificial political configuration, Yugoslavia. Karl Marx once described the Russian Empire as "the prison of nations." Well, it's time to call Karl and tell him there ' s been a massive prison break with nearly all the nations escaping-not from the Tsar's prison, but from the commissars' prison instead. Unfortunately the U.S. government has often acted with embarrassing reluctance to assist the es- capees from the prison ; it instead seems intent on finding a new warden to deal with. Thus the Bush Administration lagged badly behind other countries in formally recognizing the legitimate aspira- tions of subject peoples. Instead, the dissolution of the Soviet Empire, and wit h it much of the Russian Empire, should be welcomed. Not only should it be welcomed as liberation of people, but also the dissolution of a potential great power threat to us in the future. The disintegration of die U.S.S.R. has been costly to the United St a tes in one respect: the eleven new embassies being opened this year (after the Baltic States embassies last year) are expected to in- crease State Department spending by $28 mPlion. Given the large number of new jobs, many of them in senior positions such as the eleven new ambassadorships, it seems strange that the State De- partment has been so reluctant to support the breakup of the U.S.S.R. After all, it could be seen as a jobs program for the Foreign Service. The more serious political question has bee n the slow and dis- proportionate staffing of the embassies once we finally recognized the now political reality. We should have welcomed these changes as representing a kind of new Federalism for the former Soviet Union in winch varying degrees of genume a utonomy come to the fifteen former national re- publics (now nations) and other degrees of real autonomy need to be granted to what were actually called twenty autonomous republics, eight autonomous regions, and ten autonomous areas. Many of these areas w i thin republics aspire to achieve . Tatarstan -voted by 61.7 percent for sep- arate sovereignty within the Russian Republic. President Yeltsin somewhat reluctantly recognized these divisive realities within Russia and reached an accomm with them. Last spri ng the Rus- sian Parliament passed a law ceding some local autonomy. But the large lesson here is the one of


of authentic federalism and the granting of real political authority to the most localized governmen- tal mechanism possible. This could do m ore to preclude ethnic strife than any armies or treaties. In die -long run; Yeltsin.- not-Gorbachev, may-become the pivotal figure in 20th century Russian history that brought representative government back to Russia, but clearly it must be as the leader of Russia and not a successor to Gorbachev as leader of either the U.S.S.R. or a new Russian Empire. It is hoped that Yeltsin and his reform-minded ministers will, in effect, continue a reform process begun by Peter Stolypin in 1906 that vas, abruptly cut short by the Bolshevik Revolution just when fragile democratic institutions seemed to be emerging. However, we must not become overly endiu- siastic about die prospects of democracy, but should settle realistically for new institutional en that are ground e d in Russian realities. And for this we can indeed look backward to the turn the last century when viable reform process and intellectual ferment Russia. After nearly an eighty-yen hiatus, traditional Russian institutions and Weals may be able to bring or der and decency to a people who suffered from the greatest political plague of the 20th century.

THE GLOBAL SOVIET EMPIRE Finally, we need to obnsider the global consequences of the demise of the Soviet Empire. We must remember that the Soviet Empire was global in scope, expanding;from Afghanistan to Angola to Nicaragua and Ethiopia with close allied states in places like Vietnam, Cambodia, and Cuba. This global expansion of the Soviet Empire was effectively confronted by the Reagan Doctrine during the 19 8 0s. American assistance,. even if haphazard at times, nonetheless became a major contribut- ing factor, along with SDI, the general military buildup, and economic pressures, that eventually caused the empire to implode. But tolay we still need to realize t he consummation of the goal of the Reagan Doctrine by continuing to aid allies in Angola, Afghanistan, Cambodia, Vietnam, and Cuba. Simply because our principal adversary in the Kremlin, it seems, has been destroyed does not mean we abandon our allies who actually suffered. most of die casualties in die global war against Soviet expansionism for the past fifteen years. This is not a quixotic quest to impose democracy, but only to give to UNITA, the mujahideen, the non-communist Cambodians, and others the r i ght to self-determination which Soviet client states systematically denied diem-die same rights which we now herald in Central and Eastern Europe. We have an important residual obligation to these people who fought by our side. Moreover, only a dangerousl y short-sighted policy would counsel the abandonment of allies on the eve of victory. Taking the particular case in the headlines recently, we celebrate the final collapse of the communist regime in Kabul. Having driven Soviet forces from Afghanistan and t h en finding the man they installed, President Najibullah, in flight, we should not now stand aside and allow hmian-allied forces of Gulbuddin Hekmatyar to benefit from the power vacuum left by the departing Marxist regime. Other forces we have assisted in t he past among the muJahideen deserve sufficient on-going support so that a viable representative government can be established and not simply a new radical Islamic tyranny that can have- destabilizing consequences in the entire region. In this region, as o thers, peoples seeking independence from the Soviet colonial empire need continued American support. Through such support we not only remain faithful to al- Res and sustain our credibility as consistent friends of freedom, we also contribute to a more sta ble world order that serves our long-term national interests.



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