By PHK
March 20, 2006 the World Affairs Forum held “A Window on Russia,” a day long conference for Forum members and guests in Santa Fe, New Mexico. The two session event featured one on Russian politics, economics and U.S.-Russian relations and a second on Russian art and architecture. It was held in cooperation with the Santa Fe Institute. CKR, PLS, and I were among those who helped make the conference work – and it did very well.
The presentations were so content rich, well delivered and relevant to helping Americans understand the complexities of today’s Russia that with the speakers’ permission, we would like to share their written remarks with a wider audience. This is why we decided to post them on WhirledView.
Our special thanks to Randall R. Le Cocq, a recently retired State Department Foreign Service Officer with extensive experience working in and on the Russian Federation, the Former Soviet Union and the Soviet Union and Dr. James L. West, Professor of Humanities, Middlebury College, Middlebury, Vermont for their terrific presentations – and willingness to answer numerous questions and respond to a raft of comments. Much appreciation also to the Santa Fe Institute for making it possible for us to hold “A Window on Russia” on its premises – and for its staff's wonderful logistical and tech support.
Here follows the text of Randall Le Cocq’s speech on Russian politics, economics and US-Russian 
relations "Russia under Putin: unwrapping the ‘riddle, wrapped in a mystery, inside an enigma.’" Randall R. LeCocq was U.S. Consul General – Vladivostok, 1991-1994; political officer, Soviet Union 1979-1981; Deputy Chief of Mission and Chargé d’Affaires, Minsk, Belarus, 1998-2000; U.S. Department of State, Office of Legislative Affairs, handling Russia, 1996-1998.
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Introduction
Today, I will examine U.S.-Russia Relations since 2005. Russia over the past year and one half has been changing rapidly. It is no longer the same Russia we dealt with just two years ago. There has been some economic progress but insufficient political progress.
This is why it is time to look at Russia internally as well as at its foreign policy with respect to the United States.
To help us understand this emergent Russia, I will begin with an examination of the political and economic circumstances under Putin. I will then look at Russia’s foreign policy, particularly U.S.-Russian strategic cooperation. Finally, I will examine two potential problem areas looming on the horizon, that of the U.S. and Russia’s responses to Iran, and the Kremlin’s perspective on the former Soviet states.
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II. Let’s begin with the Putin Administration internally, comparing it to the Yeltsin era. Is this a democratic society? The Council on Foreign Relations Task Force (CFR) of March 6, 2006 recently came to the conclusion that there is short term progress on the economic front providing stability, but negative trend lines on the political side that will ultimately destabilize Russia. So let’s examine the situation, incorporating additional information from the State Department, Freedom House and elsewhere.
On the domestic front, the picture is mixed: Putin’s public statements reinforce belief in the market, private sector reform, and international investment. But, he has also consolidated vertical control in the central government and Presidential administration. It’s called the vertical of power. He has moved away from Yeltsin’s liberal political and economic model in favor of bureaucratic control. He has perhaps shifted the outlook towards more statist/nationalist views. This could ultimately threaten liberal reforms and discourage foreign investment. Democratic values could wither in such an environment.
THE ECONOMIC PICTURE
We have to bear in mind that Putin’s professed goal, according to the CFR report, is to create a modern state and not return to the old ways. Russia is taking off, largely due to oil (69 dollars versus 11 dollars per barrel 1991), but not just oil, as exports are increasing in chemicals, machinery, and metals as well. Putin has also made some positive structural reforms that have made it easier for privatization to occur domestically and for foreign investors to come in ($16 billion in 2005). He has legislated a moderate tax code, pushed through currency reform, allowed private land ownership, and gained some control over organized crime. Yeltsin, you recall, couldn’t accomplish economic reforms. There was very little private sector activity due to the Duma’s intransigence. According to the CFR report, under Putin, there is now a large private sector, people can own private land, and, as a result, a middle class is emerging, perhaps amounting to 1/4 of Russia’s population. They own property, consume, develop small businesses, send kids to college, travel, spend, and require shopping centers. Growth is 6 % GDP per year; there are budget surpluses. Western scientific management is used without IMF pressure. Under Yeltsin, poverty was a problem. Now, poverty is down (from 42 to 26 million people below the poverty line). Growth is spreading to smaller cities.
But, Putin, unlike Yeltsin, has inserted the State into the control of the economy. Where Yeltsin had rival oligarchs and the market system running the economy, with lots of corruption and local mafias on the scene, and lots of funds being shipped out of country, Putin has tightened up the Wild West atmosphere, in part by bringing the powerful oligarchs under control. (Jack Kemp commented in the CFR Task Force that Russia was in an unnatural situation, with shock therapy under Yeltsin carried out too rapidly and with almost all resources concentrated in the hands of a very small group under a questionable privatization scheme). Putin has tightened up, rightly or wrongly, by making an example of Russia’s largest businessman, Mikhail Khodorkhovsky and the Yukos oil company. Khodorkhovsky received nine years in prison for tax violations and his company was sold off to the state oil companies. The other oligarchs have been warned not to become too freewheeling and to listen to their Kremlin partners. Even small businesses are watched closely by the Kremlin, knowing they can also be targeted. As a result, key oligarchs are apparently “terrified.”
The new economy is more planned and ‘statist’ than totally free-market driven, without being socialist or communist. The Kremlin authorities now help run (through their board memberships) the major state enterprises - the “commanding heights of the economy.” These enterprises represent only 30 percent of the businesses in Russia, but control 75 percent of the economy. This statist approach, of course, has cleaned up the Yeltsin era “crony capitalism” and corruption. But, corruption and inefficiency still exist in this state-dominated system where there is no transparency. This has bad implications for economic growth, which ultimately relies on free markets and openness.
THE POLITICAL PICTURE
Under Yeltsin, you had political chaos and anarchy. State authority was undermined as oligarchs seemed in control half the time. One never knew who was in control or who owned anything. The state was, as Freedom House put it, wavering between democracy and dictatorship. The communist party was large and controlled the Duma, blocking democratic reforms.
Let me provide a bit of historical perspective, based on my experience in Moscow, Vladivostok, and working in the U.S. Department of State on Russia in the 1990s. I hope this view from the ground will give you a picture of Russia’s transition that is useful.
You have to remember how tough conditions once were. Pensions vanished overnight, there was no margin for error on food, and when I was U.S. Consul General in Vladivostok (1992-1994), citizens there were traveling out to the forests on weekends to grow potatoes anywhere they could find so they would not face possible starvation in the winter. People were selling winter clothes in the fall of 1991 in Moscow’s Manege Square so they could buy food, even knowing that winter was coming. In Vladivostok, factories were not producing, due to the end of unnecessary state orders, only one third of the workers at best were being paid regularly. Not much privatization was taking place, except for hair salons and business service companies. Reform governors were forced out in Sakhalin and Vladivostok. The new governors were more pragmatic and became powerful, especially after they threw their support to President Boris Yeltsin in the September 1993 crisis in Moscow between Yeltsin and Alexander Rutskoi, then Vice President of the Russian Federation. These new governors went slowly on reforms at home.
On the political front, the Russian Far East sat on the fence. Political battles in Vladivostok reflected outcomes of political battles in Moscow. The elites saw how the wind was blowing and acted accordingly. On the one side, you had the hard liners: the Vladivostok newspaper, the Kray Soviet, former party officials, the local security organs; and the seven local defense factories. On the reform side, you had the Mayor, the Governor before he was removed, some Deputy Governors handling foreign trade; the local Ministry of Foreign Affairs Representative, the Presidential Representative, the chairman of the city council (a physicist), and the business services companies, a few large enterprises who had found foreign partners (fishing enterprises and the shipping company), plus surprisingly, the Russian Pacific Fleet and workers at the fishing fleet, who had a long tradition of foreign contacts. And, there appeared to be a general democratic undercurrent among the population at large, which was, however, passive. The democrats were quiet. After I left, Yeltsin was getting weaker nationally and running through a series of Prime Ministers. Hard-liners were increasingly blocking reform and investment. Putin may have come along just in time.
Putin eliminated the anarchy and reasserted state authority, but at what cost to democracy?
Domestically, the picture is mixed. Russia still has a multiparty system, according to the CFR report, and elections where the voting was free and represented the will of the people. But it did not follow the right liberal democratic electoral principles by failing to provide a level playing field. Citizens can demonstrate, and an active free print media exists. Citizens, with some exceptions, can practice religion. There are 250,000 NGOs, and a number of well known critics. Institutions are cowed but resilient. There are no mass jailings or outlawing of groups. People are generally free to criticize, but there are important exceptions. Russia today is no Belarus.
“Form but no content”
There are three main problems: (1) Putin has accumulated power and eliminated separation of powers; (2) He has selectively restricted opposition, using state institutions. And, (3) in centralizing power, he has hurt democratic institutions, leaving trappings of democratic rule, or as the CFR report states, “form but no content.”
The national legislature (Duma) is now under Putin’s control via the United Russia party. The government has neutralized checks and balances provided by key institutions of democracy: the NGOs, the business sector, the governors, the broadcast media, and the judiciary. The last independent television station has disappeared. Governors are now appointed rather than elected. Judges are nominated by the President.
Putin, as Russian minorities specialist Paul Goble puts it, does not use harsh, repressive methods, suppressing dissent or destroying opposition parties, but uses contemporary, peaceful methods via institutions subservient to the Kremlin such as the media and courts to marginalize opponents and assure a legislative majority. (The mass media uses self-censorship). There are no kidnappings or killings. This is a paternalistic regime, not a harsh dictatorship. It is also not “chekist.” There is no evidence that Putin is laying the groundwork for dictatorship. There is no state ideology, Russia is not a secret police state, and he has created no mass party or movement.
The danger is more philosophical, that democracy in the Western sense is being demeaned. And the increased role of the Federal Security Service (FSB) in running the state at all levels can not be ignored. There is concern that state control creates a mentality that allows regional authorities to believe they can get away with anything. Thus, we see some abuses by local police taunting journalists and elections and human rights monitors. More often, state administrative methods--lawsuits, fines, tax police, fines against journalists, loss of jobs, etc. -- are employed.
Under Yeltsin, despite the problems, the liberal democratic model appeared in front of the people, represented by Yeltsin and other visible democrats. They were supported by a strong one third of the population and voted for by most of that middle (deciding) third. There was respect for Western values and idealism. The youth was supportive.
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III. Russian Foreign Policy and the US-Russian Relationship
According to Lilia Shevtsova and also CSIS, Putin is pro-West, or at least non-isolationist, and sees cooperation with the West as crucial for Russia’s development. Therefore, integration with the West is a priority. Putin wants to avoid antagonizing the U.S., if possible, and especially not to become isolated in opposition to the United States. Europe is perhaps more important to Russia overall, since Russia is part of Europe and most of its trade is with Europe, but the U.S. is also quite important in its own right, for Afghanistan and counter-terrorism, for strategic arms talks, and for development. Too, there are areas, like the Middle East, where the U.S. has influence that Europe lacks. Putin appears to favor closer, if not unlimited, cooperation with the U.S., and talks of a new strategic relationship.
On the other hand, Putin, despite friendship with Bush, has made increasingly clear in the past year that Russia has now come of age: That it has achieved development on its own through its own resources as much as from Western aid, and that Russia has to consider its own interests. It is increasingly viewing its own commercial interests, in particular, and appears wanting to expand its sphere of influence. Russia has a new “multi-vector” policy that sees no real alternative to cooperation with Europe and NATO, but nonetheless gives the states of the former Soviet Union somewhat higher priority than during his first term. Russia no longer wants to be considered a junior partner to the West. Economic integration with the West is important, but there is less talk of it. We must remember that a lot of Russians are fed up with what they see as U.S. unilateralism and military solutions to problems. Support for the U.S. has eroded in wake of Bosnia, Iraq, and Kosovo. There is also a strong Russian hard line constituency with nostalgia for the past within the Foreign Ministry, FSB, and the military, that Putin must consider and that has great influence on policy.
The problem is that our cooperation - where it exists - seems to be increasingly based not on shared values, but on mutual geopolitical interests such as counter-terrorism, nuclear safeguards, Afghanistan, Russian economic development. Russia has different views on global democracy, globalization, human rights, and the Middle East than the U.S.does. It even has some different views on non-proliferation.
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IV. Potential Problem Areas in addition to Democracy at home.
This leads to the first area of potential conflict: the former Soviet states surrounding Russia
Russia seems to want its own political and economic sphere of influence in the areas on its periphery in the old Soviet Union. It, therefore, sees the US/EU due increasingly to our global democratization policy, as pushing the envelope by pressuring old Russian allies to leave (in the Kyrgyz Republic, Georgia, and Ukraine) in favor of more pro-West regimes, as well as seeking military base agreements and NATO eastward expansion. Russian dominance in this region would help control oil schemes and routes, create a reserve for Russian economic development, and give impetus to the goal of increased Russian power, at least at a regional if not a great power level. For our part, we have made clear that we do not consider Russia’s periphery an exclusive Russian sphere, that all nations have a right to democracy and that Russia should want free, strong neighbors rather than still thinking in terms of “spheres” of influence over weak neighbors. We point out that the U.S. has significant interests in the region, too, and according to Ambassador Alexander Vershbow, not at the expense of Russia.
But, we see Russia adopting a somewhat more aggressive stance towards its neighbors: pressuring Georgia and Ukraine on oil; encouraging Uzbekistan to remove the U.S. bases; and supporting Lukashenko in Belarus. Putin wants to recreate Russia as a stronger power. Some analysts, like George Friedman in STRATFOR, suggest Russia may be angry over U.S. encroachments. Russia may be angered over U.S. encroachments in the former Soviet states and reacting by pursuing its own interests in Syria and Iran to show it has a traditional role in that region. More likely, Russia wants to advance its own great power interests softly, via integration with the West, while pushing a bit on the periphery of Russia.
Let’s turn to a second area of potential conflict: Iran
To understand where Russia is coming from, let’s use this as a case study of Kremlin (Putin) decision-making. The Center for Strategic International Studies (CSIS) has written some good reports on this. (1) Putin has to balance several groups, the Security Services, which are increasingly important, the technocrats, and the business groups. On the negative side are (1) the existence of old adversarial attitudes about the United States among foreign policy elites, the FSB, Defense Ministry, and Foreign Ministry. Putin can fight them but has to choose his battles, since public opinion is often on the side of the hard-liners. (2) The Russian public and elites are tired of what they see as U.S. unilateralist and militarism. (3) The Defense Industries and Commercial Interests have a major say. They have to support themselves and are doing great arms sales in the region. They fear losing markets, real and potential. The southern tier is Russia’s potential advance to great power status since it has traditional influence here. The Ministry of Atomic Energy Affairs (MINATOM) argues that the U.S. is trying to squeeze Russia out as a competitor in the nuclear energy field. (4) Russia has a different attitude towards nuclear proliferation than the U.S. Russia is not opposed in general unless the particular proliferation is detrimental to Russia. According to CSIS, the FSB probably does not see the same threat as US intelligence analysts.
On the positive side, however, are Russian concerns over (1) becoming isolated from Europe and the U.S., and (2) fear of Iran creating instability in the Middle East. Probably the outcome on Iran depends primarily on European resolve, but Russia may feel – albeit incorrectly - that it can stall and have it both ways.
Meanwhile, U.S. policy towards Russia remains bipartisan, mixing cooperation and engagement on strategic areas (oil, integration with G-8, NATO, etc.; counter-terrorism; strategic arms), but also emphasizing freedom for former Soviet states and democracy in Russia and the other states of the Former Soviet Union. However, both Presidents Bill Clinton and George W. Bush have muted criticism on Khodorkhovsky, Chechnya, and Russian de-democratization to some extent.
That may be gradually changing. The Russia/NIS Office of the State Department has been folded into the Eurasia Bureau; Freedom Support Act (FSA) funds are down to $33 million for Russia from $44.2 million last year. The Bush Administration’s new concept of “Transformational Diplomacy” stresses more democratization programs, not just reports on and acceptance of the status quo.
Some neoconservatives and CFR Task Force members advocate admitting that a “strategic partnership” with Russia doesn’t really exist. They argue that the U.S. needs a policy that recognizes changes in Russia, and that we should take a firmer stance, in coordination with Europe, on Russian democratic backsliding at home and in the former Soviet Union. We should engage Russia where we can, on energy, Iran, strategic arms, counter-terrorism, but admit differences and pursue our own interests where can’t. The areas where we can not cooperate include the former Soviet Union and democracy in Russia. On these issues, we need to talk more with the Russians, explaining that over time authoritarianism will block modernization. We should not hold out false hopes. There is also talk of recreating the G-7 if Russia does not share our values; and Senator John McCain wants us to boycott the St. Petersburg July G-8 Summit.
However, CFR Task Force members Walter Slocombe and Robert Blackwill argue that we can’t do much about Russia’s authoritarian trends, and it is counter-productive to try. We don’t really have much leverage with integration and Russia’s political culture works against us. There is no democratic constituency. Yet, economic reforms and rise of a Russian middle class will create civil society and democracy in ten to twenty years. The U.S. should, therefore, focus instead on counter-terrorism, oil, and continued engagement and economic integration. This will bolster the liberalizing process and the liberalizers.
TRADEOFFS
Ultimately U.S. policy towards Russia will involve tradeoffs. What are our priorities and where do we bend? How should we rank order the following US interests?
1) Democracy in Russia and Freedom in Near Abroad
2) Cooperation on Iran and Non-Proliferation
3) A Strategic Partnership in Dealing with the World’s Problems: Integration with the West and “Partnership” Cooperation with NATO: No Dividing Lines in Europe
4) Strategic Arms Reductions and Controls
5) Counter-Terrorism Cooperation
6) Oil and Gas Cooperation
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V. In Conclusion: tradeoffs are tough
If Russia has no respect for Western style democracy, it will ultimately not be with us on moral issues, which are important to the modern world. The 2004 Ukrainian election, for instance, was a moral issue because of democracy. Kosovo too was a moral issue because of ethnic cleansing. On the other hand, we shouldn’t be too strident since, as CSIS puts it, Russia is also important due to its United Nations Security Council (UNSC) veto, its large continental area (touching on numerous conflict areas), and its strategic arms.
We must also remember the picture when Putin took over: the constant danger that the communists would make gains in Duma and Presidency. The Duma was still blocking reform legislation. Putin may have de-democratized somewhat, but he has not gone back to the old ways. He has also shown positive instincts on the foreign policy front against hard-line advisors. He did not carp about the Baltic countries joining NATO or the U.S. withdrawal from the Anti-Ballistic Missile (ABM) provisions. At the same time, he got rid of Russian bases in Cuba, supported the introduction of U.S. bases in Central Asia, at least initially, and finally did the right thing in Ukraine, as well as ultimately worked with us on Kosovo and Iraq.
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This speech drew on data from “Great Promise Unfulfilled: How Russia Lost Its Way After Independence” by Dmitry Gorenburg (with H.H. Gaffney), February 1, 2006, Center for Strategic and International Studies (CSIS); the Council on Foreign Relations (CFR) Task Force Report “Russia’s Wrong Direction: What the US can and should do” ; the Spring 2004 CSIS report in the Washington Quarterly entitled “Russia’s strategic partnership with Europe,” by Celeste A. Wallande; the Spring 2005 CSIS report in the Washington Quarterly “The great guessing game Russia and the Iranian nuclear issue,” by Vladimir Orlov and Alexander Binnikov; the CSIS Winter 2004 report in the Washington Quarterly “The New Battleground: Central Asia and the Caucasus,” by Ilan Berman; and Lilia Shestova, “Putin’s Russia,” 2003, as well as the speaker’s extensive service in Russia, the Soviet Union and the former Soviet Union.
Photo identification and credits: 1) Dr. Beatrice Schultz opening the "Window on Russia" conference, Randall Le Cocq (right), and members of the World Affairs Forum and guests by Patricia Lee Sharpe; 2) Photo of Randall Le Cocq by Patricia Lee Sharpe; and 3) Map of the Russian Federation from the Perry-Castenada Map Collection, University of Texas.