Russian reform roulette - problems with implementing social and economic reforms in Russia

0 Comments | Insight on the News, March 8, 1993 | by Henrik Bering-Jensen

Summary: President Clinton is finding that his pledges to promote reform in Russia may have been easier said than done. He has created a team to tackle the problem, but it will find that its policy options are limited. One thing is clear, though: The stakes are high.

To believe Bill Clinton's campaign rhetoric, George Bush was yesterday's man, behind the curve on the economy, on the concerns of ordinary Americans, on just about everything - including Bush's strong suit, foreign policy.

Take the former Soviet Union. Though acting from the best of motives, the line went, Bush had been hopelessly slow to recognize the importance of changes there, clinging to Mikhail Gorbachev long after it became plain that the goals pursued by Boris Yeltsin and his reformers were more in tune with the interests of the United States. And even after Yeltsin's triumph, the administration's approach remained fainthearted and piecemeal.

Clinton, declaring that "no national security issue is more urgent" than promoting democracy in the former Soviet Union, promised that his administration would vigorously implement policies to help reform in Russia. The Cold War had been won. Time to win the peace.

But as is true in so many other areas, it is clear now that criticism of the Bush administration came more easily to candidate Clinton than do new policies to replace the old. As president, Clinton is finding out just how difficult and limited are his options for furthering Russian reform.

The stakes are high indeed. A return to tyranny in Russia, everyone agrees, would be a tragedy, and the possibility can't be ruled out. Playing elder statesman, Richard Nixon has emphasized in his well-publicized pleas for helping Russia that it will remain a great power no matter what the U.S. does. The only thing in doubt is whether the new Russia will be friend or foe. An autocratic Russia might not be as dangerous as the Soviet Union of old, lacking global ideological attraction, but it would pose a serious enough nuclear threat to force the United States to think twice about the defense cuts now under way.

Europe is already a much less stable place than during the Cold War. A resurgent, undemocratic Russia would further disrupt the Continent, especially in the event of a wider Balkan war. "Russia under some kind of nationalist dictatorship would certainly be an unpleasant ingredient in the stew," says Joshua Muravchik of the American Enterprise Institute, who helped draft some of Clinton's campaign speeches on foreign policy

As a first step, Clinton has created a new office under Secretary of State Warren Christopher that will be charged with coordinating economic, military and political strategy toward Russia and the 14 other former Soviet republics. At its helm will be Strobe Talbott, a former columnist and Moscow bureau chief for Time and, more importantly, a pal from Clinton's Oxford days. Talbott may rank below Christopher, but he will enjoy access to the president.

What will bedevil Clinton and his team most is the lack of policy tools at their disposal. Foreign aid (assuming it would be helpful) is wildly unpopular at the moment, just as foreign policy is about the lowest priority of the American people, if one believes the opinion polls. The United States is facing another record budget deficit - not the most propitious moment for any strategies involving cash.

Even if the money were there, it's doubtful, given the current state of the Russian economy, that it would be used productively. William Hyland, former editor-in-chief of Foreign Affairs, puts the problem bluntly: "There is a limit to how much outside powers can do."

Inflation in Russia is approaching 50 percent a month, the hyperinflation mark. The reason is not hard to find. To prop up failing state enterprises, Russia's Central Bank has printed money with merry abandon, in defiance of reformers such as former Prime Minister Yegor Gaidar and the current minister of privatization, Anatoly Chubais. The bank defies government ministers not because it's independent but because the bank chairman is appointed by Russia's Parliament, the stronghold of opposition to democratic, capitalist reform.

In a devastating reflection of economic and political uncertainty - and of the lack of investment opportunities as promising as the risks are high - capital is flowing out of the country at an estimated rate of several billion dollars a year. The ruble - play money to begin with - has fallen from low to even lower - from 142 to the dollar in June to almost 600.

And it is a severely weakened Yeltsin that the Clinton administration will have to deal with. In December, Yeltsin was forced by hard-line legislators to throw Gaidar overboard and replace him with an old-time apparatchik, Viktor Chernomyrdin, a former energy minister whose constituency is state-run industry.

Chernomyrdin was seen as the stalking-horse for the bureaucrat bosses of the state economy in their revolt against reform. He came into office on a program of slowing down privatization and continuing subsidies to the money-losing, government-owned industries. But when new subsidies quickly caused inflation to shoot up, Chernomyrdin got some hard lessons in economics and almost as quickly revised his views. He remains an unlikely reformer.