Why West Is Bailing Out Russia
For the United States and others, a teetering giant with 30,000 nuclear warheads appears well worth steadying.
WASHINGTON — Russia's desperate plea for financial help - with President Boris Yeltsin literally dialing for dollars from world leaders last week - brought the United States and other countries running. And not just to shore up the struggling state as a safe place to invest capital.
For the Clinton administration and other governments, at stake is the stability of Russia and its relations with the rest of the world.
Though no longer the superpower it was, Russia's nuclear might, vast size, and global influence still profoundly impact the course of international affairs from arms control, energy, and the environment to the security of Asia, Europe, and the Persian Gulf.
How Moscow acts on these issues will depend to a great extent on whether it can overcome obstacles hampering its trudge to a free-market democracy. In addition to corruption, these include political obstructions to reforms Mr. Yeltsin needs the opposition-controlled parliament to pass by tomorrow in return for the $22.6 billion bailout won from the International Monetary Fund Monday.
Russia's successful transition, experts say, will help bolster its struggling democratic institutions and the well-being of its 150 million people living on two continents.
A failure, however, could be ruinous.
At a minimum, a Russian economic collapse could fuel internal unrest and trigger a political upheaval in which reformers could be dumped for hard-liners whose hankering for the bygone days of Soviet power make them averse to international cooperation, experts say.
"President Yeltsin may be the worst possible president Russia could have, except for the alternatives," says Keith Bush of the Center for Strategic and International Studies in Washington.
At worst, Russia's collapse could shatter neighboring economies that depend on trade with it, force a default on its more than $90 billion in international loans, threaten the security of Russia's 30,000 nuclear warheads, and revive serious tensions with the West and former East-bloc states.
"The current financial crisis ... could set Russia back in terms of the gains of the past six years and severely damage Russia's fledgling market institutions and emerging democratic system of governance," warns a Clinton administration official, who asked not to be named.
For the United States, the implications are profound. The state of US-Russian relations affects a wide range of issues, from defense spending and nuclear-weapons policy to relations with dozens of countries, major and minor, and efforts to curb international crime and arms proliferation.
"Russia remains a major global player and significant military power," says the administration official. As such, he continues, it is "a potent force for good or bad in areas of vital American interests, including the Middle East, Europe, and Asia."
Yet in pushing for the IMF bailout, the US runs the risk of seeing Russia renege once again on vows to implement fiscal reforms, setting up an even worse crisis within the next two years. Some experts say that Russia's problems are so dire that an economic meltdown is inevitable, with or without the bailout or reforms.
"Not a ruble of this [IMF package] is going into investment," says Cliff Gaddy of the Brookings Institution, a Washington-based research institute. "This is plugging leaks, plugging holes."
Mr. Gaddy's major concern is what he calls the vastly inflated worth of Russia's biggest firms. Because much of their commerce is barter, the companies' cash value is wildly overstated, creating a "virtual economy" in which wages and taxes cannot be drawn.
"Our money is going to maintain this pretense," he warns.
But faced with looming disaster, the administration saw no choice, its deep dread of a Russian economic collapse reflected in its intense behind-the-scenes role in shaping the IMF bailout agreement.
President Clinton personally pressed for a swift conclusion of talks between the IMF and Russia. US officials also reportedly pushed the IMF to agree to lend $17 billion, including funds from the World Bank and Japan, to Moscow to halt a tumble in the ruble that threatened a potentially explosive devaluation of the Russian currency.
The rest of the $22.6 billion package, which is to be spread out over the next 18 months, consists of previously approved loans.
US concerns over a Russian economic collapse are being fueled by the influence Moscow's financial problems are already having on its foreign policies, producing decisions at odds with American interests.
For example, Russia's dire need for hard cash is driving its $1 billion sale of two nuclear reactors - and, according to US and Israeli officials, missile technology - to Iran, deals the US has tried in vain to stop because of worries they will help Tehran's alleged nuclear-weapons program.
Similarly, the lure of multibillion-dollar contracts with Iraq - and repayment of billions of dollars in outstanding loans - is behind Russian opposition to American efforts to maintain sanctions against Saddam Hussein. Russia is also refusing to abandon the sale of antiaircraft missiles to the Greek Cypriot government, raising the potential for a dangerous surge in tensions between Turkey and Greece.
But of greatest concern are Russia's nuclear weapons.
Some experts say that for want of funds, Russia's nuclear command-and-control systems are deteriorating. At the same time, the Russian military has boosted its reliance on atomic weapons because of the decay in its money-starved conventional forces. This combination, these experts assert, increases the chances of an inadvertent nuclear missile launch.
Russia's financial crisis is also hampering its destruction of warheads, missiles, and aircraft, as required by nuclear-arms-control accords, and the storage of atomic-bomb-grade materials in theft-proof facilities.
Since 1991, American taxpayers have provided Moscow with more than $3 billion to help it meet those requirements. The funds are also helping pay for the destruction of Russia's vast chemical-warfare stocks and to provide alternative jobs for Russian scientists who might otherwise be tempted to work for states bent on developing nuclear weapons.
US officials and other experts worry about a worst-case scenario in which a total economic collapse compels desperate Russian military officers or scientists to sell nuclear know-how, weapons components, or even warheads to Iran or other "rogue" states.