U.S. Strategy for Responding To Russia's Transformation

US Department of State Dispatch, Oct, 1998

Above all, Russia needs to project a preference for cooperation to its partners in trade and investment around the world. The confrontational policies that did Russia no lasting good even in the nuclear age are certainly not going to advance its interests in the information age.

Fortunately, in the last few weeks, we have welcomed signs that the Russian leadership continues to see, as do we, that there is a basis in mutual benefit for cooperative U.S.-Russian relations. Just last week, for example, Russia joined us in the UN Security Council to support a resolution under the peace enforcement provisions of the UN Charter demanding an end to the Serbian offensive in Kosovo. We have a lot of hard work to do in the coming days to see that Milosevic gets the message.

I spoke to Foreign Minister Ivanov this morning about the atrocities of recent days, about the need to see that Milosevic understands our determination. We're continuing to work with Russia throughout this crisis, but let me be clear: If at the end of the day we disagree about whether force has to be used, the United States and its allies must be prepared to act.

Russian ratification of the START II Treaty would further confirm this positive trend. Prime Minister Primakov has said this will be a priority. His government has, by recent standards, unprecedented support in the Duma and therefore an unprecedented opportunity to get this done.

At the same time, we need to recognize that the cash-strapped Russian Government is already hard pressed to slice apart missiles, destroy chemical weapons stocks, and meet the costs of other obligations. Over the long haul, arms control saves Russia money, but in the short run, it carries costs we and our partners must be ready to help Russia bear--not out of charity but because our national interests demand it. That's why it's so important that Congress voted to increase this year's Nunn-Lugar funding to $440 million.

The second principle guiding our policy is that we also have an interest in standing by those Russians who are struggling to build a more open and prosperous society. As President Clinton made clear at the Moscow Summit, we will continue to do that in every way we can. At the same time, we should acknowledge that helping Russia will probably be harder for some time. And the best way to help Russia now is not necessarily to send more money.

Much of the progress Russia has made in the last 7 years has come with the support of international institutions such as the IMF and the World Bank. These institutions helped Russia to conquer hyperinflation, to liberalize prices, and to make the ruble convertible. They pressed policies designed to encourage competition and discourage corruption.

At the same time, more big bailouts are not by themselves going to restore investor confidence in Russia. Nor will they help the Russian economy unless the Russian Government is committed to sound fiscal and monetary policies.

Foreign funds should continue to be used to help Russia pursue credible reforms but not to help delay them. They should be used to support a policy of tax reform, not to make up for tax revenues the government is unable or unwilling to collect. They should be used to support a program that strengthens banks lending money to entrepreneurs, not banks set up to bet on currency fluctuations. They should be used to support policies that help the neediest Russians, not that enrich off-shore bank accounts.