NIXON CENTER PERSPECTIVES
Volume 3, Number 4
Russia under the Primakov Government
by Dmitriy B. Ryurikov
(Dmitriy Ryurikov is Advisor to the Chairman of the Federation Council, the upper house of Russia’s parliament. [Orel Governor Yegor Stroyev is the current Chairman.] He served from 1991 to 1997 as Assistant to the President of the Russian Federation for Foreign Affairs. In that post, he was the principal foreign policy advisor to Boris Yeltsin. A career diplomat, Ambassador Ryurikov served in the Treaty and Legal Department and the Middle East Department of the Ministry of Foreign Affairs. His posts abroad included Iran and Afghanistan. He is a graduate of Moscow’s prestigious Institute for International Affairs.)
Russian Reform and Reformers
To evaluate the new Russian government’s approach to continued economic and political reform, it is first necessary define what is meant by "reform," a concept which has been widely misunderstood both within Russia and in the West. Were the things that happened in Russia during in recent years real reform or not? The Russian people do not believe so – they strongly rejected the policies of 1991-98 because they felt that those policies were basically non-market and undemocratic by any known standard. The massive demonstrations throughout Russia on October 7 illustrate this.
The Russian people also believed that the effects of the radical reformers’ policies were far from what the effects of reform really should have been. After seven years of so-called reforms – and much assistance from abroad – Russia’s gross national product fell nine percent from August 1997 to August 1998. Industrial production fell almost twelve percent and agriculture some thirty percent during the same period. Russians’ average real income dropped eleven percent, the ruble has fallen 50%, and imports have fallen 75%. It is not a democracy when people can be cheated out of their life’s savings twice in seven years by a so-called reformist government. Wage arrears amounting to six months or even one year of workers’ salaries do not promote reform or democracy either. There is still a debate whether Russia’s economic decline was pre-planned or whether it was simply an unintentional consequence of policies genuinely intended to help the country.
Faced with these terrible challenges to their daily survival, the Russian people were appalled by the blatant defiance of any rules of decency and morality by those who proclaim themselves reformers. Reformers and their friends and relatives openly became fantastically wealthy by privatizing Russia’s state property at pennies on the dollar and then allowing the shares to be sold at almost normal market prices. The contrast between their words and deeds has almost completely compromised the idea of reform. I would strongly advise foreign leaders and politicians who visit Russia not to urge Russians to go on with that kind of reform. They will find no support for it.
As a result of the devastating policies pursued by previous governments, reform and reformers now have a bad name in Russia. In the West, there is concern that Russia is moving away from reform. It is important to recognize that the overwhelming majority of Russians support democracy, the market, and human rights. They do not support reform the way it was pushed on Russia.
The Primakov Government
Despite evident concern in the West, Prime Minister Yevgeny Primakov’s policies do not reflect a return to the past. Instead, they are an effort to return to normal standards of statehood, to bring the country’s finances and economy under control and, most difficult, to regain the people’s confidence in the government. Analogies between today’s situation and Russia’s past are inevitable; many politicians compare Russia’s condition to that of the Soviet Union after World War II, when a large part of the country was destroyed, or even to the devastation of the Mongol invasion in the 13th century. Russians are also looking for analogies to lead the way out of the present crisis; the most popular among analysts and in the media may be Franklin Delano Roosevelt’s New Deal. No one is discussing the Stalin, Khrushchev or Gorbachev models. No one wants a totalitarian comeback.
Importantly, the Russian people believe that the Primakov government is on their side. For the first time in many months, government ministers are talking about the people, not about margins, percents, taxes, and so on. The new cabinet is not a government of technocrats, but a government that is thinking and talking about the people and their suffering. This is a marked contrast with Russia’s previous governments.
Nevertheless, while the Primakov cabinet has won the benefit of the doubt from the Russian people, its position remains extremely precarious because of underlying economic and social conditions. However, if the government is able to compensate citizens for their losses to inflation, at least to some extent, it may be able to maintain popular support. Mr. Primakov, his ministers, and the governors of the Central Bank understand that every possible measure should be taken to avoid aggravating the people’s situation. It remains to be seen how this can be done in practice.
Prime Minister Primakov’s first priority is to prevent the collapse of Russia’s state and society. To do this, he must cool down passions by finding money to pay months of back wages to increasingly desperate people. To break the logjam in Russia’s financial and banking systems, the government and the Central Bank may resort to a controlled expansion of the money supply. The Central Bank is also attempting to address the paralysis of the private banking system by providing credits to banks to resume normal operations. The government has declared a monopoly on the production and sale of alcohol and will implement other short-term measures to boost revenues as well. For example, the government will likely work to improve the management of neglected and poorly-run enterprises in which the state owns a major share.
The prime minister considers it vitally important to continue negotiating with International Monetary Fund, with other international financial institutions, and with Russia’s other creditors, such as the Paris and London Clubs. He has at his disposal many experienced negotiators beyond Aleksandr Shokhin, who resigned from the government to return to his position as leader of the pro-Chernomyrdin Our Home Is Russia faction in the Duma. The Primakov government will pursue all of those negotiations very seriously.
Many commentators assert that Mr. Primakov is an intellectual and a diplomat but not an economist. One must remember, however, that he has a degree in economics and that he directed Moscow’s very prestigious Institute for the World Economy and International Relations. Based on my personal encounters with him, I can confirm that he understands the market economy and is committed to private property and free enterprise. He is equally firm that Russia’s economy must be freed from fraud, embezzlement, and corruption, that it must be strongly and effectively regulated to ensure that it is managed for the benefit, not to the detriment, of the Russian people.
Finally, it is important to recognize that many people are interested in spoiling everything Mr. Primakov does. The young reformers and the oligarchs are especially hostile because it will be difficult for them "to fish in muddy waters" – to profit from the chaos of Russia’s crisis – under Mr. Primakov’s leadership. These groups hope for major disturbances and social disorder this fall or winter which may bring down the government and discredit its approach. Unfortunately, even some of the media – I mean the key central television channels, which are controlled by the oligarchs – are working not to cool but rather to incite passions in order to achieve this goal.
Yeltsin and Primakov
President Yeltsin’s role remains crucial. The president’s attitude toward Yevgeny Primakov will have a decisive impact on the effectiveness of his government. This situation is different from any Russia has faced in the past; the severity of Russia’s current crisis should discourage Yeltsin from undermining the government or its policies. Primakov has a clear mission and he deserves to be allowed to act within the broad outlines of his mission, that is, to save the state and to lead the country out of crisis. If he is not given a free hand, the country will not recover.
President Yeltsin has said several times recently that he will not run for reelection; it seems definite that he will step down at the end of his current term. At the same time, however, it is unlikely that he will resign before that – at his own initiative – so long as he can keep up his current schedule. In any event, it will be necessary to prepare and adopt legal measures to redistribute power more equally between the president, the prime minister, and parliament before the next president takes the oath of office after the 2000 elections. The specific nature of these measures have already been discussed extensively among experts and in the media.
Mr. Primakov may provide Yeltsin a real opportunity to conclude his presidency in an orderly manner and on a positive note. If Primakov has enough presidential support, Russia may pass through the current crisis and reemerge visibly stronger and more confident in 2000 than it is today. Of course, this is the best-case scenario – there are many less attractive possibilities.
Russia’s Parliament and Regions
At present, the Duma, the Federation Council, and the governors are prepared to offer the prime minister their conditional support. The first signs of cooperation between Mr. Primakov and the parliament and regional leaders seem to be encouraging. By appointing several governors to the new Presidium of the government, he has ensured their regular participation in its work and encouraged them to engage in pragmatic, no-nonsense discussion of concrete problems before decisions are made. This has also brought "down to earth" a number of unrealistic projects and ideas. Primakov is likely to continue and develop this approach because it is useful in determining whether his policy ideas will work and how they will be received in the regions, "in the field."
Of course, a number of governors have declared that they will not pay taxes, cut imports or exports by their regions, or made other such bold statements. This is not new to Russia; the governors have simply taken emergency measures because of the financial situation. As soon as the situation is normalized, this talk will stop. Discussion of new divisions or combinations of Russia’s regions is also a response to the crisis, but there are many problems more pressing – and less contentious – than regional boundaries; accordingly, it is unlikely that anything will materialize. Once the crisis passes, this debate will likely also come to an end.
Foreign Policy and Foreign Assistance
Russia’s foreign policy has not changed and is unlikely to change as a result of Yevgeny Primakov’s appointment as prime minister. Relations with the East, the West, and the rest of the world should remain as they have been. Russia’s position in the world has become much more complicated, but this is no reason for Russia to become weaker or to disassociate itself from world affairs. It is even less a justification for Russia to yield to pressure from creditors or foreign governments. Mr. Primakov will see that Russia’s cabinet will do no such thing.
It is important to remember also that international law protects the independence of sovereign nations. This respect for state sovereignty is one of the most important human rights. So it is not true that when a country faces a bad economic and financial situation and is borrowing, it is appropriate to force it into something against its own will. Russia will be very much against this line of thinking in every area. One example is the clear effort to impose a currency board on Russia which Russia will oppose. Russia is not Argentina, Bulgaria, or Estonia – it is quite different. Moreover, Russia may argue very simply that the imposition of a currency board is not democratic.
In this regard, the IMF’s conduct in Russia has been very surprising. The IMF came to Russia and secretly discussed measures with a very large impact on Russia’s revenues and expenditures with former governments without any consultation with the Russian parliament, which has constitutional oversight over the budget. Influential members of parliament and even the Duma itself requested the details of the government’s agreement with IMF, or even just the text, but no information was provided by either the previous government or the IMF.
The point of this is that it is necessary to be democratic in every area – not only in human rights, but in issuing credits as well. The IMF should respect nations, their people, and the democratically-elected representatives of the people who sit in parliament. The parliament and the people must be informed about the impact of credits on the country receiving them, especially when the impact is likely to be so disastrous.
Seeing the consequences, Russians ask why the IMF has given so many new credits to Russia. Why has the IMF taken the role of a dope pusher giving more and more drugs to an addict? Didn’t the IMF know what kind of people had been appointed to negotiate with it? Was its conduct really appropriate towards a country by a responsible financial institution? And who benefited? Many Russian experts wonder whether this is not a means to implement Zbigniew Brzezinski’s plan to weaken Russia, to split it into several parts and eliminate it as a unified state. They see that this can be done not only by force, as was attempted by the Bolsheviks at the beginning of the century, but also by financial means. These are only a few of the very uneasy questions asked by Russians when they study their country’s relationship with the IMF.
Despite these concerns, there is no anti-Western or anti-U.S. sentiment in Russia. Russians are smart enough to realize that they can survive and improve their conditions only as members of the world community linked closely with the rest of the world. Russians have learned much from the West and are doing business with the West; they have no phobia toward any nation or country. This is true at all levels: Russia’s governors, mayors, skilled or manual workers, and farmers are professionals and understand the importance of foreign investment and expertise, technical cooperation, and other forms of partnership. There are many examples of partnership with every Western country.
But Russians have become increasingly realistic in their dealings with the West. They see that there are some people and institutions in the West and United States which are friendly, sincere, and cooperative, and that there others which think and act in terms of imposing conditions on Russia as if it were a loser in the Cold War. Some of those conditions would make Russia disappear from the map and put its resources into the hands of new owners who would be even more cruel to the Russian people than the infamous young reformers.
Russians also see that some Western bureaucracies and Western leaders are largely deaf and blind to the real Russia. They come to Russia and talk about supporting Russian reform but give generous multi-billion dollar loans to an extremely unpopular government. Russians see that this money from the West is practically destroying their country, and increasing poverty and instability, while making a few richer and richer. They see that Western food products of dubious quality are subsidized heavily to kill Russia’s domestic food production, making Russia dangerously dependent on foreign food, especially in moments of crisis. And they see that Russian radical reformers – openly following Western prescriptions – have practically liquidated Russian industry, technology, science, health care, and social services through privatization and an increasingly tight budget. The association between Russian reformers and the West has not helped the people.
Still, the Russian people have no antagonistic feelings toward the West. They travel to the West frequently and receive many guests, including very important guests exploring the possibilities for investment. But they are aware that someone in the West wants to do them harm. It is not the people they meet when they travel or where they live, who are there to discuss business. It is someone like the IMF, which is prescribing things to its Russian followers which are very bad for the lives of ordinary Russians. In the same way, few Russians have bad feelings toward President Bill Clinton – they are not particularly concerned about him, his private life, or his legal troubles – but they feel that there is a kind of force in his administration which is not happy until Russia is somehow yielding to the scenario which Washington desires for Russia. This makes Russians concerned and, while it is a very vague feeling, it is still definite.
Kosovo
American policy regarding the conflict in Kosovo has been similarly disturbing for Russians. Russia’s views on Kosovo have been openly disregarded by NATO officials and senior officials of NATO member countries. They have said publicly and with evident satisfaction – appearing to go back to the days of the former USSR – that Russia is not important.
While it is certainly not pleasant for Russians to hear this, the matter is much more important than Russian national pride or humiliation. The handling of the Kosovo problem is of vital significance for Russia. Does NATO’s Kosovo policy mean the end of the United Nations? Is international law to be buried? Can outside powers intervene in other states’ internal conflicts and start wars at will based only on their own unilateral judgment of who is right and who is wrong? Can states freely support separatist movements within other states and hope for support from the West, such as the U.S. support for Kosovo’s Albanians? Will NATO’s conduct in Kosovo set a precedent for its actions in future crises in other regions?
If NATO launches air strikes, Russians will interpret the strikes as a "yes" answer to all of these questions. Such an eventuality would force Russia to do a great deal of hard thinking about its foreign and domestic policies and about steps to increase its security.
Russia, the United States, and the Commonwealth of Independent States
Despite Russia’s tremendous economic difficulties, it has maintained close ties to the other countries of the Commonwealth of Independent States to the benefit of tens of thousands of people engaged in bilateral and multilateral projects. There is strong support for closer relations with the CIS among the Russian people: if one were to ask Russians if they would like to see all the bilateral relationships in the CIS look like those between Russia and the Ukraine – with customs duties, frontier guards, inspections, and red tape complicating business – they would answer definitely no. Attempts to prevent further integration among the CIS countries will not succeed.
Prime Minister Primakov has already restored the CIS Ministry, which was liquidated by the former Russian government. He has also restored hope that marketable projects can be resumed, that business can be done, that millions of people can come back to their jobs, and that it is possible to produce and sell products within CIS instead looking abroad. Of course, Russia alone cannot drag the CIS out of crisis, the effort will require cooperation from all.
It is imperialistic and arrogant to expect that Russia should not have a sphere of influence in the CIS. Russia has a sphere of influence as any other major power in the world, including certainly the United States. It has influence over other states, as they have on Russia, whether we want it or not. The fact that twenty-five million Russians live outside Russia’s borders in the CIS states heavily influences Russian domestic policy, the Russian political life, and Russian finances. Russia’s ties to its neighbors are so intensive and interrelated that Russia cannot but influence the CIS countries and that its contacts with them will be broader, deeper, and more frequent than those with many major states of the world.
Despite Russia’s own interests in the region, Russians do not view American influence in the CIS as inherently negative. After all, there are many different kinds of influence. For example, American participation in the Caspian Pipeline Consortium, which has pipeline routes through several Russian provinces, is very constructive. There are many other good projects in which America is playing an important role.
At the same time, there is an official U.S. policy against Russian imperialism. Many see this as a groundless policy intended only to distance the countries in the region from Russia. American interests in the Caspian region should be respected, just as Russia’s interests in other parts of the world should be respected. There is tough competition in the Caspian area, of course, and Russia would like to see its interests secured. However, this is not a reason to be upset at Americans if a U.S. company wins this or that contract – that should be normal business competition. Polemical statements by politicians or by ambassadors on such matters should be avoided.
