THE FORTNIGHT IN REVIEW

The Fortnight in Review

The fortnight saw two major developments in Russia. One was a mini-government reshuffle in which Prime Minister Viktor Chernomyrdin clipped the wings of his two reformist first deputies, Anatoly Chubais and Boris Nemtsov. Neither lost his post, but both have been assigned unpopular portfolios that could prove their undoing. The other was the merger of two major Russian oil companies to create a new conglomerate expected to turn into the world’s third largest oil producer. Commentators were quick to trace connections between the two events.

In foreign affairs, Russia’s attention was focused in large part upon the Persian Gulf and the CIS. In the first case, Moscow seemed to exploit with some success instability and anti-U.S. sentiment in the region to advance its own diplomatic goals. In the second, the unexpected cancellation by the Kremlin of an extraordinary summit of CIS leaders appeared to reflect a broader setback for Moscow — not to mention some diplomatic bumbling — in its efforts to dominate the territory of the former Soviet Union.

"Young Reformers" Shoved Aside

Chernomyrdin’s decision to downgrade Chubais and Nemtsov, Nezavisimaya gazeta commented on January 21, makes the prime minister for the first time "the full-fledged leader of the government." Until now, Chubais’s proverbial administrative skill and Nemtsov’s almost filial relationship with President Yeltsin often made Chernomyrdin look like the third wheel on a bicycle. The sensitivity of the tasks — tax collection and welfare reform– left to Chubais and Nemtsov has prompted speculation that Chernomyrdin is setting his deputies up as scapegoats. They could then be disposed of handily later in the year should the government fall foul of public opinion. Nemtsov conceded in a January 20 interview with Izvestia that "there’s no smoke without fire," but said he was confident nevertheless of Chernomyrdin’s appreciation for the fact that reshuffling the government is not a solution to Russia’s economic problems. "Even if everyone is reshuffled and a new government is formed, all that will happen is that time will be lost," Nemtsov said. Time, he went on, is of the essence, since "1998 is the last year that it will be possible to work normally." Nemtsov was referring to the fact that parliamentary elections in 1999 will be followed in 2000 by a presidential election. If the government fails to get a new tax code through parliament this year, it will be two years before there is another opportunity.

Gathering of the Clans

Commentators were quick to see political as well as financial implications when, on January 19, Russian oil companies Yukos and Sibneft announced that they were merging to form a new conglomerate, called Yuksi. Yukos president Mikhail Khodorkovsky, who is to head the new alliance, said Yuksi will be the largest oil company in the world as measured by proven reserves and the third largest by output (after Exxon and Shell). The merger, which allies Khodorkovsky with Sibneft’s Boris Berezovsky, was publicly endorsed by Prime Minister Chernomyrdin. Khodorkovsky said Yuksi was in the market for strategic Western partners and that its first priority will be to win control of the state holding company, Rosneft. The largest Russian oil company still to be privatized, Rosneft is to be auctioned later this year.

The battle for Rosneft will be fierce. It has already prompted new alignments between Russia’s political and financial clans, of which the Yuksi merger is the latest. Yuksi’s rivals for Rosneft are a consortium of Gazprom, Shell, and LUKoil on one side, and Oneksimbank and British Petroleum on the other. No one missed the significance of the fact that Chernomyrdin’s mini-reshuffle took Chubais — a close ally of Oneksimbank president Vladimir Potanin — out of the policy loop with regard to the Rosneft auction. The Journal of Commerce on January 21 quoted unidentified Russian government officials as predicting that the rules of the auction will soon be changed to exclude the participation of foreign investors, a provision for which Chubais had fought. They also predicted that the share offer will be manipulated to allow Yuksi and Gazprom to take Rosneft over at a lower cash price than that which Chubais originally envisaged.

Constitutional Reform "by the Back Door"

The demotion of the "young reformers" was also seen as a strategic move by Chernomyrdin to position himself for the presidency in 2000. Russky telegraf predicted on January 20 that Yuksi would bankroll Chernomyrdin’s presidential campaign. Other commentators interpreted the prime minister’s transfer of government oversight of the mass media from Chubais to Chernomyrdin-loyalist Vladimir Bulgak as intended to secure control of the press well ahead the presidential election.

The demotion of the "young reformers" also marks a new stage in the rapprochement between Chernomyrdin and Russia’s parliament. Chubais is an object of particular hatred to the Communist-dominated Duma. Chernomyrdin backed down last fall after the Duma threatened to vote his government out of office. In subsequent negotiations, the government agreed to hike state spending in the 1998 federal budget and to rework its proposed tax code, while President Yeltsin signaled his readiness for compromise over land reform by advocating tough state controls over sale of land. Yeltsin also instituted a regular dialogue with the opposition in the shape of "Big Four" meetings and roundtables with parliamentary leaders. "The president and government are learning to work with the Duma," Speaker Gennady Seleznev noted with satisfaction after the first such meeting.

Seleznev is keeping up pressure for a coalition government — a demand that would require the Russian president to bring several Communist ministers into his cabinet. Yeltsin has so far resisted this demand, but both he and Chernomyrdin have made it clear that they are willing to continue to negotiate with the opposition. The Communists, for their part, would love to see Chubais ousted but do not want to part with Chernomyrdin. They feel that they can do business with the prime minister both now and, should he be elected in 2000, in the future. Yeltsin has repeatedly rejected calls for constitutional reform as "hasty" and "premature." But in reality, the adjustments he and Chernomyrdin are making represent some equalization of the uneven balance struck between president and parliament by the 1993 constitution As such, they are a way of carrying out constitutional reform by the back door.

Moscow Competes for Influence Throughout the Middle East

Events in the Persian Gulf topped Russia’s diplomatic agenda as the latest crisis in Iraq set Moscow and Washington once again at odds. Simultaneously, the U.S. continued to press Moscow for an end to the aid that Russian experts have been providing for an Iranian missile development project. Although the Clinton Administration claimed to have made some small progress on the last issue, the Persian Gulf seems likely to remain a source of friction — and an object of competition — between the two countries. Tension between Russia and the U.S. elsewhere in the Middle East was also evident on January 21 when Moscow announced its backing for Palestinian leader Yassir Arafat. The Russian move came as Washington played host to both Israeli prime minister Benjamin Netanyahu and Arafat in the Clinton Administration’s latest effort to break the Middle East peace deadlock. The continued sparring on Iraq, Iran, and Middle East peace underscored Russia’s efforts to reclaim at least some of the influence once commanded by the Soviet Union in the region.

Replaying the Iraq Crisis

The latest Persian Gulf crisis began earlier this month when Iraqi authorities moved to limit the operations of a UN weapons inspection team dominated by American and British experts. In its focus on the activities of the weapons inspectors, and particularly on the presence of Americans on the weapons inspection teams, the latest standoff between Iraq and the UN replays the one that occurred last autumn. At that time, Moscow moved to head off U.S. threats of military retaliation against Iraq, and Russian foreign minister Yevgeny Primakov negotiated a settlement — a dubious one in the view of many U.S. officials — that brought the UN inspectors back to Iraq. In return for this retreat by the Iraqi authorities, Moscow pledged to deal sympathetically with Baghdad’s various demands on the UN.

This most recent conflict over Iraq has assumed the same diplomatic contours as did the previous one. Russia, like the U.S., has called upon Iraq to meet its obligations to the UN. But, backed by France and China, Moscow has simultaneously ruled out any resort to military force as a means of compelling Iraq’s compliance. Russia has continued to speak instead of ensuring that Baghdad be shown "a light at the end of the tunnel" with regard to a lifting of UN sanctions. The U.S., on the other hand, with diplomatic backing from Britain, has maintained a military presence in the region and has continued to urge that military reprisals remain an option in the UN’s arsenal of possible responses to Baghdad’s defiance.

Russian diplomats have taken several practical steps in fulfillment of their pledges to Baghdad. Moscow’s hand was evident in a statement issued on January 14 by the UN Security Council that deplored Iraq’s move to bar the American-led weapons inspections and that called Baghdad’s actions "unacceptable." But, despite the seemingly strong wording, the statement was in fact a watered-down version of one drafted by the U.S. that called for a far stronger condemnation. Russian diplomatic and military officials have taken two additional steps. First, they have called for a reshuffling of personnel on the UN weapons inspection teams to lessen the proportion of Americans and Britons. In line with this proposal, Russia has submitted a list of 60 experts for consideration by the UN Special Commission (UNSCOM), the agency that oversees the inspectors. Second, Moscow has proposed that reconnaissance aircraft from Russia and other countries join those from the U.S. in conducting overflights of Iraq. Both of these policy changes have been demanded by Baghdad, and their enactment would undoubtedly be interpreted as a victory by Iraqi authorities.

Iranian Missiles

Despite the impasse over Iraq, U.S. officials claimed earlier this month to have at last made some progress in stemming the flow of Russian missile technology to Iran. The issue is at least one year old, and involves repeated accusations by the U.S. and Israel that Russian technicians — without or without the knowledge of the Kremlin — have been involved in a clandestine Iranian program to develop medium- and long-range ballistic missiles. U.S. officials, including President Bill Clinton and Secretary of State Madeleine Albright, have repeatedly raised the issue with their Russian counterparts, but with little to show for their efforts. Following a recent visit to Moscow by U.S. special envoy Frank Wisner, however, Clinton Administration officials suggested that Moscow had at least acknowledged the problem and agreed to take "specific measures within a specific time frame" to deal with it. Administration spokesmen provided few details of Wisner’s talks. More importantly, they characterized the issue as the most serious point of friction in Russian-U.S. relations, and conceded that the two sides are still far from resolving their differences over it.

CIS Extraordinary Summit Canceled Amid Polemics

With a scant two weeks’ notice, the Kremlin canceled the extraordinary CIS summit that had been scheduled to be held in Moscow on January 23. The Kremlin claimed that Ukrainian president Leonid Kuchma had requested a "postponement." But Kuchma kept silent on the matter, and the event was, in any case, not postponed but canceled. The extraordinary summit had been mandated by consensus of the presidents of CIS countries at their regular meeting last October 23 in Chisinau. That meeting, the most agitated in the organization’s history, had been witness to recriminations over Moscow’s attempts to dominate the CIS and its individual member countries. Seemingly stunned, Yeltsin agreed that day to convene an extraordinary summit on January 23, and to instruct his government to draft and submit remedial measures for consideration at that conclave.

Moscow’s proposals preparatory to the extraordinary summit were nevertheless conceived in the old spirit — that is, to expand the prerogatives of CIS multilateral bodies at the expense of individual countries’ sovereignty. Bilaterally, Moscow failed to fulfill, or even breached outright, a series of commitments: promises to Georgia concerning Abkhazia; a pledge to Azerbaijan to investigate massive clandestine arms transfers to Armenia and Karabakh; and promises to several countries to lift trade barriers to the Russian market. In turn, most CIS countries, singly or in groups, continued to defend their national interests against Russia’s "integrationist" proposals. Thus the five Central Asian presidents, meeting in Ashgabat on January 5-6, resolved to boost regional and international efforts directed at the construction of oil and gas export pipelines circumventing Russia. That provoked Russian prime minister Viktor Chernomyrdin into a public outburst: "We know only too well who they are, those forces that advocate the southern pipeline routes; the Russian side knows their faces…Those people seek to fence themselves off from Russia."

Yeltsin’s Questionnaire Fatal to Summit

A form letter from Russian president Boris Yeltsin to the presidents of CIS countries, soliciting their views on the development of the CIS, may have been instrumental in aborting the extraordinary summit. Yeltsin had sent out the questionnaire back in December. But, as late as January 20, only three presidents (out of eleven) had replied positively. According to Russian deputy prime minister Valery Serov, who is responsible for CIS affairs in the Russian government, those three were Presidents Alyaksandr Lukashenka of Belarus, Imomali Rahmonov of Tajikistan, and Islam Karimov of Uzbekistan. Serov claimed in a televised meeting with Yeltsin that the three had supported Yeltsin’s "integration" proposals. The endorsements from Lukashenka and Rahmonov were hardly unexpected. But Karimov — contrary to Serov’s claim — had actually made a vehement case for national independence. In a nationally televised statement, the Uzbek president focused on four of Yeltsin’s questions and said that he had replied as follows:

— "The CIS can not be turned into a subject of international law or into a regional organization. We are categorically against this. It is unfortunate that efforts are being made to force this through by hook or by crook."

— "We are against setting up [CIS] supranational structures," including a CIS Customs Union. The latter, Karimov continued, would interfere with individual countries’ efforts to gain admission to the World Trade Organization.

— Documents adopted in the CIS "meet, more often than not, the interests of a certain country." On the other hand, such documents are sometimes easily adopted "because everyone knows that they will not be implemented." Moreover, "[Kazakh president Nursultan] Nazarbaev is right" that the 2,000-strong CIS central staff in Moscow is overbureaucratized. While "the CIS does not work, its officials nevertheless are receiving their salaries." Uzbekistan proposes a 30 percent reduction of the CIS staff.

— "We are against turning the CIS into a political-military bloc and against discussing in the CIS such matters as NATO’s enlargement. Individual CIS countries have their own view on NATO, let them express that view proceeding from their own interests… Uzbekistan will not be part of any CIS defense space or joint command." (BBC, Summary of World Broadcasts, January 12, reproducing the monitored text of Karimov’s statement on Uzbek TV.)

Plaster on a Cancer

In his televised appearance with Serov, Yeltsin stated that "if we review the results of 1997, we must frankly acknowledge that we have mismanaged the CIS. Some are now even keen to desert it." Yeltsin instructed his government to declare 1998 a "CIS year" and to initiate "a period of very active Russian work on CIS issues." In Minsk, Lukashenka similarly conceded that "the CIS is traversing a serious crisis and its future is in doubt." Unlike Yeltsin, however, Lukashenka anticipated that those national leaders who are critical of the CIS will not opt out, but will prefer to "stay in the CIS and block any initiatives in its framework."

In a significant semantic concession, Serov and CIS Cooperation minister Anatoly Adamishin urged Russians to stop designating the CIS and its member countries as Russia’s "near abroad." Serov called for treating CIS countries as "regular members of the world community, and develop with them the same type of relations as with other countries." Adamishin, who is new to his post, observed that the term "near abroad" is incompatible with the independence of CIS member countries. They are, after all, "countries like all the others," he said. "The sooner we give up the notion of ‘near abroad,’ the better for all concerned." As part of treating CIS countries "normally," both officials also came out against any form of Russian economic subsidies to them.

The term "near abroad" has been commonly used in Russia since the inception of the CIS. It has been widely seen as reflecting a Russian policy — or, at a minimum, an official mindset — that seeks to curtail the independence of CIS and Baltic countries and to dominate the former Soviet space or parts of it. The newly independent countries will undoubtedly welcome the abandonment of the term "near abroad," but will probably react skeptically to Moscow’s proclamation of the "year of the CIS." The aborted extraordinary summit had been intended to demonstrate a change in Moscow’s approach toward the CIS as an organization and toward its individual members. However, Yeltsin’s questionnaire — or at least those parts revealed by Karimov — seems to indicate that Moscow’s policy objectives remain constant. The overall situation suggests that Moscow continues to strive for domination, although, in most cases, it no longer has the power to impose its will.

Regional Counterweights

That last point was stressed by former U.S. national security adviser Zbigniew Brzezinski in a Komsomolskaya pravda interview. Brzezinski spoke of Russia’s decline to the status of a "third-world type regional power," albeit nuclear-armed and still considering itself a superpower, but in fact "too weak and too backward" to qualify for such status or for a partnership with the U.S. Brzezinski noted the "Russian political elite’s illusions that Russia can dominate the neighboring [CIS] countries," but pointed out that those countries are "reacting with growing suspiciousness to Moscow’s proposals for integration." He recommended that U.S. policy in the post-Soviet space should focus on the newly independent countries, with top priority given to Ukraine, Azerbaijan, and Uzbekistan. Ukraine, as distinct from Russia, is inherently a part of Europe and indeed "an important factor in the formation of the new Europe," he said. Azerbaijan, for its part, "provides a corridor for Western access to the Caspian basin," while Uzbekistan is emerging "as a major obstacle to a restoration of Russian control over Central Asia," Brzezinski was quoted as saying.

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"The Fortnight in Review" is prepared by Senior Analysts Elizabeth Teague (Russia), Stephen Foye (Security and Foreign Policy), Vladimir Socor (Non-Russian republics), and Analyst Igor Rotar.

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