DATE=8/11/2000 TYPE=ON THE LINE TITLE=ON THE LINE: RUSSIA UNDER PUTIN NUMBER=1-00873 EDITOR=OFFICE OF POLICY - 619-0037 CONTENT= THEME: UP, HOLD UNDER AND FADE Anncr: On the Line - a discussion of United States policy and contemporary issues. This week, "Russia Under Putin." Here is your host, Robert Reilly. Host: Hello and welcome to On the Line. Since winning election in March, Russian President Valdimir Putin has moved quickly to consolidate power and reassert Russian influence abroad. At home, he has reined in Russia's regional leaders and vigorously prosecuted the war in Chechnya. Earlier in the summer, the arrest of Vladimir Gusinsky, the owner of Russia's only independent television network, was taken as further evidence of a crackdown on the press, even though Mr. Gusinsky was subsequently released. Mr. Putin has sought to reinvigorate Russian diplomacy with trips to China and North Korea. Some observers worry that Mr. Putin is showing authoritarian tendencies. Others say that, without a basic reorganization of the Russian government, further reform would be impossible. Joining me today to discuss Russia under President Putin are three experts. Anders Aslund is a senior associate at the Carnegie Endowment for International Peace. Paul Goble is director of Communications and Technology at Radio Free Europe/Radio Liberty and a former State Department specialist on the Soviet Union. And Ariel Cohen is a senior policy analyst at the Heritage Foundation and author of Russian Imperialism: Development and Crisis. Welcome to the program. Anders Aslund, this far into Mr. Putin's presidency, how do you rate him in the area of your specialty, which is Russian economic reform? Aslund: I think it is quite incredible how much he has done. He has shown an extraordinary political ability to get everything through on the tax reform. Host: Everything being? Aslund: In particular, the thirteen percent flat tax, the income tax for next year, cutting the payroll tax quite substantially, and getting the second part of the tax code through the Duma and the Federation Council, which means that the Russian tax system will be cleaned up. This is the big tax reform that we have been waiting for for years that has now been done in no time. Host: Paul Goble, from the political side, how do you assess these changes in terms of the Federation Council, the upper house of parliament, the consolidation of power from the regional governors, and other political changes? Goble: In his first few months, President Putin has certainly achieved a lot on paper. There have been a lot of laws passed. There have been a lot of decrees issued. Some of them point in a good direction, some in a bad. But the problem is that a lot of them have not been implemented yet, and there is an awful lot of resistance. Host: Isn't that the whole point of his reforms, streamlining the government so these things can be implemented? Goble: If he wants to implement everything he talks about, it could be very frightening. Just greater efficiency, just greater order, by themselves are not virtues. It is what purposes you are going to put that greater efficiency and greater order to. People make a very good case that Russia has been in such disorder that some reestablishment of order is a necessary precondition. The question is: is this reestablishment of order under Putin going to lead to the foundation of a more open, civil society, or is it going to be the basis for a return to a more authoritarian political system as Russians have known in the past. Host: And what is the answer to that question? Goble: My view right now is that there are too many disturbing signs that he is prepared to go back to much more authoritarian approaches than we had had in the last few years. Host: Let me take a quote, in which President Putin said, "Russia was founded as a super- centralized state from the very start. This is inherent in its genetic code, traditions, and mentality." Actually that was said before the March elections. Does a statement like that worry you, Ariel Cohen? Cohen: Yes, of course. With what we have seen so far, just building on what Paul Goble mentioned, is a crackdown on the media, the forcing of the sale of the only independent T-V channel [N-T-V] and independently held media company to Gazprom, on the board of which the representatives of the Russian government are a majority. So it will be indirectly state-owned. Host: Do you mean Media Most? Cohen: The Media Most sale. Host: May I ask you, in addition to Mr. Vladimir Gusinsky's arrest, who was then released, President Putin is saying that a free press is essential to the development of democracy. Cohen: A free press is not achieved by apparently forcing the owner to sell to the government. Furthermore, we have news that an environmental activist, Mr. [Alexander] Nikitin, may be retried after the Supreme Court of Russia basically forced his acquittal. We see statements by Putin's close political allies and advisers that Russia is moving to something they call a managed democracy. It will be managed by the Kremlin. So both internally and externally in the area of national security, defense and foreign policy, we see rapprochement with North Korea, a trip to Libya, a visit from Iraqi officials, a visit from Serbian officials who are under sanctions, and Putin's incessant talking up of the navy as basically, of the major military services, for power projection. Host: Let me get Anders Aslund's response to that. Are you disturbed by this recentralization of power? Or do you see it as essential to implement reform? Aslund: Let me put it like this. I do not think that Putin's instincts are very democratic. But I think that Russian society is sufficiently strongly pluralist to take this down. And I think that the Gusinsky affair is a good case. It generated an enormous outrage, and Gusinsky was freed after three days. Gusinsky has financial problems. In any case, this is a man who has invested a lot and has got far too little revenue. So I think that Gusinsky is a person who anyhow would go bankrupt, after seeing his business strategy. Goble: Putting him in jail did not help. Aslund: No, but what we heard then was that he is going after Gusinsky because Gusinsky is against him. And after that Putin has quickly moved against all the oligarchs. And all these people have made money in not very acceptable ways. And Putin has done more against more of them than anybody could have expected. So my sense is the governors need to be reined in. They are being reined in and they are becoming accountable. This is fully democratic. There are quite a few statements, as you say, Ariel, that are not acceptable. Yes, it is unfortunate that the K-G-B people are there. I think that they will be reined in. Host: Paul Goble? Goble: Anders makes a very good point. Putin's intentions, Putin's personal style, is not democratic. This is a man whom we know more about than any Russian leader in a very long time, when he is just entering office. His impulses, his statements, are very disturbing. The question is whether he can implement those things. The question is: where is Russian society? Some people see the events of the last decade as having created a countervailing power that no one can resist. Other people don't. My own guess is that it is sector by sector. I'm very disturbed by what is happening in the electronic media. The moves against the oligarchs who did use the media to promote their own interests but also created some balance within the press, is very frightening because if there is no competitive media, there will not be a competitive politics. The fact that he chose to make a deal with the Communists early on, with the Unity faction and the Communists, who, in effect, froze out competitive fights at the parliamentary level raised real problems with where he is going. I don't think he can control the governors. Host: On the other hand, he now has a Duma that has passed, as Anders Aslund said, this quite extraordinary thirteen percent flat tax. Cohen: Nobody is saying Putin is going back to the Communist model of economy. I agree with Anders Aslund fully that we are not going back to a 1985 economic model. There are these things in Russia that are worrisome. And in terms of the governors that have to be reined in - Anders, among other things, what I do is the rule of law. And unfortunately, the ability of the president through the prosecutor general, whom he controls, in a country that does not really have an independent judiciary, to fire governors on the pretense of either a criminal investigation or one violation of the federal laws - this is not a rule of law. This is vertical control and the Kremlin is talking about reinstating vertical executive power and that power is very quickly becoming pretty much the dominant, the hegemonic political power. There are no checks and balances, or these checks and balances are being dismantled by Mr. Putin. Host: I just want to remind our audience that this is "On the Line." And we are discussing today Russia under president Putin with Anders Aslund from the Carnegie Endowment, Paul Goble from R-F- E/R-L, and Ariel Cohen from the Heritage Foundation. Anders, do want to respond to that remark from Ariel Cohen? Aslund: Yes. What we are seeing in Russia is an enormous reaction, which shows that there are checks and balances. To me, Putin is pretty easy to read. This is a man who looks upon the marginal cost and the marginal utility of each action. And he is very politically skillful. He won't do these stupid things because they cost too much, because you would have too good an argument against him if he really did it. So therefore he won't give you that pleasure. He will stop short of it. Host: Paul Goble? Goble: He is not living within the constitution, not living within democratic principles, but in terms of what one can get away with. Gusinsky was released relatively quickly because there was an international outcry about him. Had some other oligarch gone down, people in the West would have pointed to the corruption that they were involved in. On the Chechen war, which was very popular initially, it is a lot less popular right now. The polls from Russia suggest that more people would like to see negotiations than a continuation of the fighting. Host: On the other hand, President Putin's popularity continues in the stratospheric realm. Goble: I think that is largely, one, name recognition and two, the fact that he has been on the international stage. And I think many Russians like the idea of a leader who looks vigorous and is prepared to stand up for Russia. I think that is a very popular thing in most countries. On the other hand, if you go beyond this generic feeling that here is a strong leader and start asking about specific policies and specific approaches, Putin's support is a whole lot less, not only in Moscow, but elsewhere. Host: But in terms of the rule of law, Ariel Cohen, when you listen to President Putin speak and he says, our strategic policy is the following: Less administration, more free enterprise, more freedom to produce, to trade, to invest. And he recognizes quite clearly that "high taxes, arbitrary actions of functionaries and criminal elements" have been the things that have undermined the Russian economy. So isn't his theoretical grasp of the problem right on the mark? Cohen: Well, maybe theoretically, maybe in the realm of words, but in the realm of deeds, it looks like - actually while moving on all fronts simultaneously, Putin manages to create more mess and more political instability than a managed, a more deliberate, slower reform that played up the strengths of the emerging civil society, played up the strengths of the judiciary -- that would be much more helpful. Host: But what about the economy, when you have seven percent growth, inflation under twenty percent and the tax reform? Cohen: The Russian leadership recognized, starting from Mr. Putin himself, Prime Minister [Mikhail] Kasyanov, Deputy Prime Minister [Alexey] Kudrin, that the so-called prosperity is driven by oil revenues. It is a ripple effect of the 1998 devaluation. The Russians are very concerned that there will be a slowdown. And once there is a slowdown and the revenue to the government declines, it's more difficult to prosecute the war in Chechnya. It's difficult already. It's more difficult to fuel the economy through military orders. I don't think that policy is going to work. So I think the instability in the regions with the regional elite's being alienated, with the media elite being alienated, the ongoing war in Chechnya, this all builds up the potential of a crashing failure for Putin maybe two or three years from now. Host: Is that true in the economy, Anders Aslund? Aslund: I don't agree at all here. What we are seeing is that the economy is really booming ahead. The consensus forecast for this year is that there would be growth of one to two percent. So far, it has been over seven percent this year. Clearly, it won't be less than six percent. Host: What about Ariel Cohen's statement that this is driven by higher oil prices? Aslund: Of course, it helps and the devaluation helps. But that is not all of it. Barter has fallen by almost half. Arrears are totally under control and have fallen in real terms by three- quarters. Bankruptcies have risen. What we are seeing now is a sharp real restructuring. The industries that are moving ahead most - it's light industry; it's metallurgy; it's pharmaceuticals. This is not an oil and gas boom we are seeing in the economy. It is something much more. And we are seeing now that transportation, retail trade and everything is growing at a pace with G-D-P [gross domestic product]. And the government is talking it down so that they don't create big expectations. Cohen: There is news coming out that the tax cut is aimed at getting the economy out of the gray and black sector into the light and then they are going to raise the taxes. I hope this is just the rumor mill in Moscow. Aslund: Deputy Prime Minster [Victor] Christenko said the other day that the thirteen percent flat tax will stay constant for three years for certain. Host: I want to make sure we get to the subject of how President Putin is going about reasserting Russia's role in the world because of his performance at the G-8 summit in Japan, his appearance in North Korea, China, and, as Ariel Cohen mentioned, an upcoming trip to Libya. What does this all mean? Goble: I think you have to look at two different parts of what Putin is trying to do. On the one hand, I think that most of the leaders of the G-7 countries were very impressed that finally we have a Russian leader who does not just bluster, who is well briefed, who is very disciplined, who is able to interact with people at the highest levels and do it quite capably. They may not agree with him, but this is a much more effective leader than Boris Yeltsin was at the end. And I think that the evaluations that we've heard coming after Okinawa is that this is an effective leader. Not that this is necessarily a man who is going to do what we want or what we would like to see. The other half of the picture, which I think is very much more disturbing, involves Putin's effort to make the alliance of the aggrieved. All of the countries that have been sort of on the outs with the West have been the particular object of Mr. Putin's attentions. He has received the Serbian representatives, despite international sanctions against them. The Iraqis have been in Moscow, Tareq Aziz last week. You have a possible Putin visit to Libya. You have Putin going to North Korea. You have all the countries that have been identified as rogue states, or now "states of concern" in Washington, are where Putin is going to. That isn't a very attractive view from the point of view of the Western powers when you see the Russian government not building alliances so much with Germany or France or Britain, but alliances with the people who are angry at the international community. And that raises serious problems. Host: Why is he doing that, Ariel Cohen, when the thing he needs the most is investment from the West? Cohen: I think Putin is trying to alleviate Russian weakness by playing up Russian strengths in the developing countries, especially in "states of concern." We did not mention Iran yet. Russia is building up the Iranian nuclear potential, including the nuclear power stations, the Iranian navy, supplying submarines and, allegedly, according to some reliable publications, is selling nuclear weapons technology to Iran. If this is the case and Iran goes nuclear with Russian help, it changes the prognosis for the oil prices. It changes the ability of Iran to block exports of oil from the Persian Gulf. It may change the global economic situation. And Russia, of course, benefits because Russia is a high price oil exporter. Prices for oil from thirty to forty dollars would benefit Russia. Host: As Russia is also selling a lot of military high technology to China, Anders Aslund, are they doing this just because they need the hard currency, or is there some strategy behind this that they wish to complicate the world for the only remaining superpower, the United States? Aslund: If you are in Putin's position and you want to utilize the cards you have, which are the unused cards, there might be a more benign interpretation of it. But I keep it open for the time being. It looks very much like Putin is going where he does not see any resistance. We can see with regard to the Western countries that it was a clear priority list. Who has said the least about Chechnya - Japan - comes first. Who has made the second least amount of trouble, Britain; third, the U.S. And then, France misbehaved most; it came last. So I think that it is very much going for the least resistance and trying to exploit potentials that have not been utilized, but the question remains: is this malign or just opportunism? Host: And what is the answer to that, Paul Goble? Goble: I think it is both. I think that, on the one hand, Putin wants to use these attachments to put pressure on the major Western countries to be more agreeable. Clearly, there was a signal after the G-7. Host: What would be more agreeable? Goble: For example, that you have something to trade away. If you are doing something that people don't like, you can offer to stop it in exchange for considerations of various kinds. That's what a weaker power has to do. This is the [Foreign Minister Prince Alexander] Gorchakov strategy of late-nineteenth century Russia revived at the beginning of the twenty-first century. The problem is, though, as governments always discover, you find yourself often controlled by your client states. The states that you are reaching out to end up getting you involved in things far beyond what you may want. And your ability to back away from them in a particular case is a lot less than you would like. So I think that, while Putin may or may not have a malign intent - I tend to think he does - the involvement with these kind of countries, at least in the next five years or so, is going to lead to a malign confrontation with Western countries and especially the U.S. Host: I'm afraid that's all the time we have this week. I would like to thank our guests - Anders Aslund from the Carnegie Endowment for International Peace; Paul Goble from Radio Free Europe/Radio Liberty; and Ariel Cohen from the Heritage Foundation -- for joining me to discuss Russia under President Putin. This is Robert Reilly for On the Line. 11-Aug-2000 10:58 AM EDT (11-Aug-2000 1458 UTC) NNNN Source: Voice of America .