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Nuclear News - 09/13/99
RANSAC Nuclear News, 13 September 1999

A. Loose Nukes

  1. Report: Russian Nuclear Submarine Disabled by Thieves,AssociatedPress (09/10/99)
B. Nuclear Power Industry
  1. Russia: Security Tightened At Nuclear Plants After Bombing.RFE/RL (09/10/99)
  2. Russia Says Nuclear Power Plants Safe, Reuters(09/10/99)
C. Minatom
  1. Deeper Cooperation with US in Nuclear Industry Favoured, ItarTass (09/10/99)
D.   Russian Nuclear Forces
  1. U.S. Intelligence Projects Dramatic Decline In Russia StrategicArsenal, Agence France Presse (09/10/99)
E.   Nuclear Waste
  1. Nuke Dump Opened in Northern Russia, Itar Tass(09/10/99)
 F. Y2K
  1. U.S., Russia Agree to Establish Y2K Center: Team Will WatchFor False Alarms, Washington Post (09/10/99)
  1. Focus-Talbott "Satisfied" after Moscow Arms Talks, Reuters(09/09/99)
  2. A deal with Russia on arms control? Boston Globe(09/13/99)
H. U.S. – Russia General
  1. U.S.-Russian relations will survive scandal-Talbott,Reuters(09/09/99)
  2. Lost Illusions About Russia: U.S. Backers of Ill-Fated ReformsNow Portrayed as Naïve, Washington Post (09/12/99)
  3. Long Climb Out of a Black Hole, Washington Post(09/13/99)

A. Loose Nukes

Report: Russian Nuclear Submarine Disabled by Thieves
        Associated Press
        September 10, 1999
        (for personal use only)

MOSCOW (AP) -- Thieves disabled a nuclear submarine in Russia's NorthernFleet by pilfering vital equipment, a newspaper reported Friday.

The Pantera nuclear-powered submarine, based near the city of Murmanskon the Kola Peninsula, was stripped of a filtration powder needed to cleanair inside its hull, said the business daily Kommersant.

The sub's crew would have suffocated if the theft hadn't been discovered,the newspaper reported. "The crew was really lucky," it said.

One of the submarine's officers and an accomplice allegedly emptied59 filtration cartridges of the powder, which contains the precious metalpalladium, and replaced it with ordinary coal.

The suspects allegedly sold the powder for $9,000, and the damage tothe submarine was estimated at $85,600, Kommersant said.

The swap was accidentally discovered by a newly-appointed officer, andthe suspected thief, who had already been transferred to another sub, wasarrested, Kommersant said.

According to the report, the accomplice was still on the run. Neithersuspect was identified in the report.

Thefts of weapons and valuable equipment have become common in thedemoralizedand underfunded Russian military.

Last year, a naval officer stole and sold 58 gauges containing preciousmetals from a nuclear submarine of the Northern Fleet, and earlier thisyear a sailor stole crucial equipment controlling the nuclear reactor aboardanother of the fleet's submarines.

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B. Nuclear Power Industry

        Russia: Security TightenedAt Nuclear Plants After Bombing
        September 10, 1999
        (for personal use only)

Moscow, 10 September 1999 (RFE/RL) - Russia says security is being tightenedat its nuclear power stations due to the growing threat of terrorism. Theannouncement follows a blast at a Moscow apartment building yesterday thatkilled at least 84 people. The cause of the explosion is still beinginvestigated.Russia's Deputy Atomic Energy Minister, Yevgeny Fyodorov, told Echo Moscowradio that security around nuclear installations is being strengthened.Prime Minister Vladimir Putin earlier approved a plan to bolster securityacross the country -- notably in Moscow -- during a meeting with securitychief Nikolai
Patrushev. Moscow Police Chief Nikolai Kulikov says an additional 4,000officers have been deployed throughout the city following the blast.

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Russia Says Nuclear Power Plants Safe
        September 10, 1999
        (for personal use only)

LONDON, Sept 10 (Reuters) - Russian Atomic Energy Minister Yevgeny Adamovsaid on Friday that Russia's nuclear power plants were as safe as thosein Western Europe and unlikely to suffer millennium computer glitches.

"I think we have the same level of safety in all our units as Westernunits of the same vintage," Adamov told reporters in London.

An explosion at the Chernobyl plant in Ukraine in April 1986 speweda cloud of radioactive dust over parts of Russia and Europe and raisedfears among Western officials of repeat disasters at similar Soviet reactors.

Adamov said that since the collapse of the Soviet Union and a thawingin relations with the West, joint teams of Russian and Western expertshad cooperated to improve safety through training and upgrading equipment.

"Many people think that it (safety) is only a Russian problem, it'snot true," said Adamov, in London for the annual Symposium of the UraniumInstitute.

He said he did not envisage any problems with the millennium computerbug, which may scramble systems that have not been programmed to recognisethe date change to 2000.

He said the rate of unplanned shutdowns at Russian reactors was equalto that of Germany, and lower than France or the United States.

The G7 group of leading industrial nations launched a nuclear safetyinitiative at its Munich summit in 1992 for Soviet-built reactors basedon the same technology that caused the Chernobyl disaster.

Gennady Nefedov, a deputy head of department at the Russian Atomic EnergyMinistry, said spending on safety had been increased with internationalhelp.

"The implemented upgrading efforts have resulted in a significant upgradingin the safety and reliability of Russian nuclear power plants," he said.

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C. Minatom

Deeper Cooperation with US in Nuclear Industry Favoured
        Itar Tass
        September 10, 1999
        (for personal use only)

London, 10th September: Russian Nuclear Energy Minister Yevgeniy Adamovdescribed cooperation between Russia and the United States in the nuclearpower industry as "very advanced and positive" . Speaking in an interviewwith ITAR-TASS, he also favoured further expansion of the present cooperationbetween  Russia and the USA in this key sphere.

Adamov is now in London where he is taking part in an internationalsymposium of  the Uranium Institute.

According to the minister, the combination of scientific and technicalpotential  of Russian and US economic possibilities will serve theinterests of the two countries, since it is impossible to resolve global questions of power supply to the world economy, while preservingthe environment, without the nuclear power industry.

In Adamov's words, the US has a clear understanding that Russian scienceenjoys a clear edge in some spheres of the nuclear power industry.

"We conducted several in-depth consultations with the United Stateslast March and agreed virtually on all the issues," the minister stated.He reported that the US paid all its debts to the Russian side.

"We have a good enough understanding on the programme of nuclear cities,and work is well in progress on the physical protection of nuclear facilitieswhere it is necessary," Adamov continued.

According to the minister, cooperation between Russia and Iran remainsthe only topic where the sides have some differences. However, this casehas "a serious politic aspect" , Adamov stressed.

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D. Russian Nuclear Forces

U.S. Intelligence Projects Dramatic Decline In Russia StrategicArsenal
        Agence France Presse
        September 10, 1999
        (for personal use only)

WASHINGTON, Sep 10, 1999 -- (Agence France Presse) Russia will maintaina formidable strategic nuclear arsenal beyond 2015, but the force's sizewill fall well below arms control limits because of budget shortfalls,a US intelligence estimate released Thursday concludes.

The estimate said Russia currently has about 1,000 strategic ballisticmissiles with 4,500 warheads, already well below the 6,000 warheads allowedunder the START I treaty with the United States.

The START II agreement, which Russia has signed but not ratified, wouldrequire it to reduce the number of warheads to 3,000 to 3,500 by 2007.

Russia's strategic force "will remain formidable through and beyond2015," an unclassified summary of the National Intelligence Estimate said.

"But the size of this force will decrease dramatically -- well belowarms control limits -- primarily because of budget constraints," the reportsaid.

"Russia will maintain as many strategic missiles and associated nuclearwarheads as it believes it can afford, but well short of START I or IIlimitations."

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E. Nuclear Waste

Nuke Dump Opened in Northern Russia
        Itar Tass
        September 10, 1999
        (for personal use only)

SEVERODVINSK, northern Russia, September 10 (Itar-Tass) - A dump forstoring fluid radioactive waste was opened in northern Russia on Fridayat the expense of the Norwegian government.

The dump is situated in Zvyozdochka, a shipyard in the northern townof Severodvinsk, which repairs and cuts to pieces atomic submarines, aZvyozdochka spokesman told Itar-Tass.

The storage place was constructed as early and the 1960s, and Russianand Norwegian builders updated it with modern equipment and technologieswith a high level of protection against environmental contamination, AlexanderBobretsov said.

According to Alexander Dementyev, project director of the Norwegiancompany Kvaerner maritime, the dump can now keep about 2,000 cubic metresof fluid waste every year and thereby ensure the scrapping of six atomicsubmarines.

All processes at Zvyozdochka are automated and only three operatorsare employed there.

"The modernisation of the fluid-waste storage place is but only oneelement in creating a comprehensive system for dumping nuclear waste atZvyozdochka," Dementyev said.

"U.S. and Norwegian companies are trying to set in motion a line forrecycling fluid waste into solid mater which is less dangerous and moresuitable for dumping and recycling," according to him.

"A dump for the storage of solid waste has been built. Simultaneously,work is under way to build a complex for unloading nuclear fuel off atomicsubmarines, special railway containers are being built to carry nuclearwaster to recycling and storage places," he said.

Norway has spent 33 million crowns (about five million dollars) on therestoration of the storage place, he said.

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F. Y2K

U.S., Russia Agree to Establish Y2K Center: Team Will Watch ForFalse Alarms
        Stephen Barr
        Washington Post
        September 11, 1999
        (for personal use only)

U.S. and Russian defense officials have agreed to set up a joint centerin Colorado to watch for any false alarms of missile attacks caused byYear 2000 computer problems, the Defense Department said yesterday.

Defense Secretary William S. Cohen and his Russian counterpart, DefenseMinister Igor Sergeyev, will sign an agreement establishing the centerduring Cohen's visit to Moscow next week, a senior defense official toldreporters.

For the last year, U.S. officials have said the Year 2000 computer glitch,known as Y2K, will not cause nuclear missiles to launch. They have portrayedthe joint center as a prudent step to avoid confusion in the event early-warningsystems or launch detection equipment malfunctioned.

Yesterday, the official, who spoke on condition that he not be identified,said the Pentagon wanted to be clear that neither side was "teetering onthe edge of a potential false launch or anything of the sort. We just thinkit is a very useful thing to extend our cooperation in areas of this nature.. . .

"And at this time of Y2K transition, were there to be some sort of roblem,it would certainly be useful to have our people in direct contact and directcommunications with one another," the official said.

The official said up to 20 Russian military officers would be assignedto the Center for Strategic Stability and Y2K, at the U.S. Space Commandheadquarters in Colorado Springs, during late December and early January.

Discussions to set up the center began last year but broke off afterNATO bombed Serbia, a Russian ally. The Pentagon official said the talksresumed last month.

Cohen and Sergeyev also will discuss creating a permanent missile earlywarning system center in Moscow--an idea supported by Presidents Clintonand Boris Yeltsin.

The Year 2000 problem stems from the use in many computer systems oftwo-digit date fields, which may cause some software and microchip systemsto interpret "00" as 1900, not 2000. The confusion could cause the computersto malfunction or stop.

Shortly before the Pentagon announcement, members of Congress who havestudied the Y2K problem held a news conference urging the federal government,states and localities to step up the pace of computer fixes and tests.

They also suggested that international air travel could face disruptionsbecause of Y2K problems. "I have no fear of flying on January 1 withinthe United States. But I think the safety of air travel abroad has yetto be determined," Rep. Jim Turner (D-Tex.) said. Rep. Constance A. Morella(R-Md.) said she has "grave concerns about what's happening outside ofthe United States."

At the urging of Rep. Stephen Horn (R-Calif.), the Transportation Departmentreleased a list of 35 nations who had not responded as of Thursday to asurvey by the International Civil Aviation Organization (ICAO). Theinternationalaviation group had requested nations to submit Year 2000 computer assessmentsby July 1.

The nations not responding to the ICAO survey were: Albania, Angola,Bhutan, Bosnia and Herzegovina, Brunei, Burundi, Cambodia, Comoros, CookIslands, Democratic Republic of Congo, Fiji, Guinea, Iraq, Kiribati, Kyrgyzstan,Lesotho, Libya, Micronesia, Mozambique, Myanmar, Nauru, Nicaragua, Palau,Papua New Guinea, Qatar, Russia, Samoa, San Marino, Sao Tome and Principe,Sierra Leone, Slovenia, Solomon Islands, Tajikistan, Tonga and Vanuatu.

Dave Smallen, the U.S. Transportation Department Y2K spokesman, said:"This is simply a list of countries that did not respond to the ICAO survey.I don't think that you can read anything specific into the fact that anycountry didn't respond."

Smallen said the Transportation Department and the Defense Departmentwere conducting a review of Y2K readiness and would post information onTransportation's Web site ( by the end of this month.

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Focus-Talbott "Satisfied" after Moscow Arms Talks
        September 9, 1999
        (for personal use only)

MOSCOW, Sept 9 (Reuters) - U.S. Deputy Secretary of State Strobe Talbottleft Moscow on Thursday after arms talks with Russian officials, sayinghe was satisfied with the outcome.

Diplomats said the talks were mainly about the prospects for a START-3nuclear arms reduction pact and Washington's desire to change the 1972Anti-Ballistic Missile treaty to allow it to deploy a limited shield
against potential rogue missiles.

A U.S. embassy source quoted Talbott as saying he and Russian DeputyForeign Minister Georgy Mamedov had been laying the groundwork for a meetingbetween President Bill Clinton and Prime Minister Vladimir Putin in Auckland,New Zealand.

It was not clear whether Talbott and Mamedov had reached a compromiseABM deal in time for the Asia-Pacific regional summit. Russia is opposedto changes in the ABM treaty, saying it could unravel the entire nucleardisarmament process.

The U.S. envoy sounded optimistic in comments to Russian reporters beforeheading back to the United States and the embassy source said Talbott feltbilateral ties were sound.

"I'm satisfied with the results of the consultations I have held," Talbotttold Itar-Tass news agency. Interfax news agency said he described hisday and a half of talks as positive.

"These were consultations aimed at laying the groundwork for more seniorofficials in Auckland, focused on arms reduction and missile defence,"the U.S. embassy source quoted Talbott as saying. "Talks will continueand the basic relationship between the two countries is sound and in place."

The Russian Foreign Ministry said Talbott and Mamedov discussed a rangeof questions but concentrated on disarmament.

"The Russian side stressed the need for strict observance of basic agreementsin this area," it said in a statement. This was a reference to Russianmisgivings about altering the ABM treaty.

Russian diplomatic bluster has in the past been a prelude to concessions,but there is no doubting Moscow's concern about the planned U.S. Star Wars-stylescheme.

Interfax quoted informed sources as saying the first round of theTalbott-Mamedovtalks had proved "quite difficult." There was no indication whether themood improved, although Talbott at least left Thursday's
session smiling broadly.

President Boris Yeltsin and Clinton spoke by telephone on Wednesday.The Kremlin said they discussed arms control issues but did not give details.

Russia regards the ABM treaty as a cornerstone of international disarmamentand opposes major changes. Officials have raised the stakes this week bysaying Moscow had the technology to develop a missile to breach any U.S.defences.

"No anti-missile defence will be able to stop our new missiles," RomanPopkovich, chairman of the parliamentary defence committee, told a newsconference on Wednesday.

The Cold War-era ABM treaty limited defence systems designed to shootdown enemy missiles, under the logic that such shields would only temptthe United States and the Soviet Union to build more missiles in the hopeone might pierce the enemy's umbrella.

The White House wants to review the treaty to allow it to develop ashield to protect its troops and Asian allies from possible attack by roguestates. Republicans in the U.S. Congress have said they want to ditch thetreaty altogether.

Talbott sounded upbeat when he arrived in Moscow on Wednesday but asenior Russian military official sounded decidedly less enthusiastic incomments to Interfax.

"The Americans are trying to drag us into negotiating on ABM to secureRussian agreement for the United States to deploy its own limited nationalanti-ballistic missile defence," the official said. "The Russian side willnot go along with this."

The sides also discussed START-3, a new treaty aimed at adding to cutsin nuclear arsenals agreed under the 1993 START-2 treaty, which has yetto be ratified by Moscow.

The military official said Russia was ready to discuss START-3 becauseit would cut the U.S. arsenal and make it easier for cashapped Moscowto maintain rough parity.

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A deal with Russia on arms control?
        Sam Nunn, Brent Scowcroft,and Arnold Kanter
        Boston Globe
        September 13, 1999
        (for personal use only)

The United States is poised to launch a new round of high-level talkswith Russia on two related subjects. One is a START III agreement to reducefurther the strategic nuclear arsenals on both sides. The other is
amendments to the ABM Treaty to permit the deployment of missile defenses.

In some respects, it is hard to imagine a worse time to reengage onthese complicated and politically explosive issues. First, US-Russian relationsarguably may be on the mend, but still have a long way to go to overcomethe profound estrangement and distrust that exist between the two sides.Second, both countries will be mired in domestic politics for the next15 to 18 months as they embark on a series of national campaigns and electionsthat will produce new leaders and legislatures in Washington and Moscow.Third and related, the political situation in Moscow is, to be charitable,very fluid.

But if this is hardly a propitious time to try to achieve a meetingof the minds, simply waiting until circumstances improve could be evenless attractive. For a combination of political and technical reasons,the Clinton administration is poised to make a decision next summer todeploy national missile defenses.

None of the deployments currently under consideration, however, is consistentwith the ABM treaty. This means that going ahead with missile defenseswill necessitate amending the ABM treaty or will require the United Statesto abrogate it. Although the latter course would have serious consequences,not only for US-Russian relations but potentially also for strategic stability,the Russians have steadfastly refused even to consider changes to the ABMtreaty. The two sides thus have little choice but to confront dauntingchallenges at a lousy time.

To make the best of this long-odds situation, Washington and Moscowneed to be both hard-headed about their respective objectives, and flexible– even bold - in how they pursue them. Their joint goal should be to avoida looming train wreck by harnessing the incentives which each side alreadyhas and put them to work to fashion an agreed approach by next summer thatembraces new limits on strategic offenses and defenses.

Incentives to deal
The Russians face three major incentives to make a deal.

First, they know that with or without new START agreements, their strategicnuclear forces, which they see as one of their last claims on great powerstatus, will continue to shrink as a result of their dire economic straits.They have an interest in using arms control to bring the US nuclear arsenaldown to their new level rather than live in a world in which the UnitedStates has overwhelming nuclear superiority.

Second, although they are loath to admit it, the Russians increasinglyrealize that the United States is going to deploy missile defenses in someform. If they have to choose, they surely would prefer reaching agreementon new limits that protect their interests, rather than have to live ina world in which
US missile defenses are unconstrained.

Third, they have a strong political interest in reaching an agreementwith the United States, not only because they have a stake in good relationswith us, but also because they are far better off if they are seen to beplayers rather than isolated and ignored.

A variety of US interests also are at stake.

First, although we can afford it far better than the Russians, we toohave an interest in being freed from the increasingly anachronistic andexpensive strategic nuclear forces dictated by the START I agreement (andrelated congressional requirements that these higher levels be maintained).

Second, we want to do what we can to avoid Russia - which still hasa vast nuclear arsenal, but one that is plagued by growing problems –overreactingto our missile defenses in ways that undermine strategic stability andincrease the risks of nuclear accident and miscalculation.

Third, although it no longer seems quite so self-evident as it did atthe end of the Cold War, we have both a near-term and a longer-term stakein our relationship with Russia. As we have seen on current issues, rangingfrom the war in Kosovo to the proliferation of weapons of mass destructionto countries like Iran, even a Russia that is vastly diminished from theSoviet superpower that preoccupied us for a generation can still measurablyhurt or help our interests.

Strategically, US foreign policy ought to proceed on the premise thatwhile Russia may be down, it is not out: Sooner or later, Russia will againbe a great power. We should not yield to the temptation to exploit itsshort-term weakness at the expense of reaping its enduring enmity, forif we do, then history indicates that our children will pay the price.

Long-term thinking

These calculations do not argue for sacrificing US interests merelyto indulge Russian sensitivities or otherwise to humor them. They do arguefor not taking the seemingly easy way out of simply ignoring Moscow onissues like missile defenses, however irritating and troublesome it maybe, in the mistaken belief that Russia no longer matters. On the contrary,and without any guarantees of success, it is worth the time and effortto try to fashion a deal that advances our interests while responding tolegitimate Russian

A necessary first step is to make a serious, sustained effort to persuadethe Russians of three interrelated realities about our plans for missiledefenses.

First, the strategic arguments against the kind of missile defensesenvisaged by the ABM treaty may still be valid, but they are not particularlyrelevant to the missile defenses under consideration. Missile defensesagainst the weapons of mass destruction threat posed by rogue states canbe made perfectly consistent with the spirit and purposes of the ABM treaty.

Second and related, whatever the problems and differences between Russiaand the United States, we no longer should be each other's major securityproblem and preoccupation. Put differently, our missiles defenses not onlywould not be aimed at Russia, they are not even about Russia.

Third, for the foreseeable future, any national missile defense deploymentswill be limited not merely as a matter of policy, but as an inescapableconsequence of available technology. Even if we wanted to, we could notnow deploy the kind of highly effective missile defenses that actuallycould render the Russian deterrent impotent.

At the same time, and as important and valid as these arguments are,we should not depend on them to successfully persuade Moscow. They willneed to be supplemented with proposals on both START and missile defensesthat appeal to Russian incentives while advancing our interests. The coreelements of a possible bargain are additional cuts in strategic forces,ABM treaty amendments to permit deployment of limited missile defenses,and real rather than merely rhetorical offers of technology cooperation.

The process of fleshing out these elements must start from the recognitionthat the already long odds against making what amounts to a de facto dealby next summer become almost insurmountable unless there is a willingnesson both sides to entertain ideas which depart from the prevailing armscontrol orthodoxy. For the Russians, this means negotiating amendmentsto the ABM treaty to allow some missile defenses to be deployed. For theUnited States, the place to begin is by removing Russian ratification ofthe
START II treaty as a precondition to a deal on strategic offenses anddefenses.


It is time to move forward, whether or not the Duma ratifies START II.This treaty, signed more than seven years ago, has much more to do withits Cold War heritage than with current strategic realities. In any event,our insistence that the Duma ratify START II leaves Russians with the mistakenimpression that this is an important source of Russian leverage over usor among one another in their domestic political struggles, which theythen futilely (if not counterproductively) try to exercise. Put simply,taking START II ratification off the table would help us achieve our objectives,if only by eliminating it as a pawn in the political maneuvering amongRussian factions.

Our approach to further reductions in strategic offensive forces shouldbe informed by the twin goals of simplifying the negotiations in orderto expedite agreement and maintaining forces that constitute a stable,effective deterrent. To achieve these objectives, the post-reduction forcesshould be large enough so that foreseeable missile defenses would not havea measurable effect on a retaliatory secondike and the effects of thirdcountry forces do not become a major consideration (so that third countrieswould not need
to be part of the negotiations and the deal).

More broadly, the post-reduction forces also must remain sufficientto support our nonproliferation objectives, both by maintaining the confidenceour nonnuclear allies who rely on our nuclear guarantee and by maintainingthe nuclear bar sufficiently high to discourage nuclear wannabes from beingtempted.

While careful (although not necessarily lengthy) analysis would be requiredin order to determine the appropriate new limit, it would not be surprisingif that number were somewhere in the range of 1,000 to 2,000 weapons. Numbersin this range also would go a long way toward responding to the pressureRussia feels to move down to much smaller and more affordable force levels.

Finally, they would take account of the limited capabilities on bothsides to dismantle nuclear warheads in a safe and secure manner and thenstore or otherwise dispose of the weapons grade material in a way whichdoes not aggravate the proliferation problem.

Rethinking treaty issues

In another departure from the prevailing arms control orthodoxy, weshould be prepared to reconsider the START II ban on land-based missileswith multiple warheads in order to address Russia's affordability concerns,and to increase their confidence that they could penetrate any missiledefenses we would deploy. One possibility might be to permit them to deploya two warhead version of their new SS-27 missile, a capability which wouldnot have much impact on our own deterrent or on strategic stability.

The original 1972 ABM Treaty permitted each side to have 100 interceptorsat each of two sites. Ironically, virtually any kind of missile defenseswe could deploy over the next 10 or so years would fit comfortably withinthose parameters (although probably not the 1974 treaty protocol whichlimited each side to 100 interceptors at a single site). But due touncertaintiesboth about missile defense technologies and future threats, the UnitedStates probably will, and surely should, require additional treaty changes.

These changes include relaxing treaty constraints on sensors (especiallyspace-based sensors) and on research and development so that sea-based,space-based, and mobile missile defenses can be thoroughly assessed. Wealso should reject any de facto ABM treaty limits on theater missile defenses.Finally, the duration of the ABM treaty needs to be set for a fixed periodof time rather than remain in force indefinitely.

How much current ABM treaty limits on such things as sensors and R&Dare relaxed depends in important measure on how long the newly amendedtreaty would remain in force: The longer the term, the more latitude wewould require.

The Russians may well have a great deal of difficulty in accepting thesekinds of changes because, depending on the details, they could significantlyenhance our breakout potential: i.e., our ability to rapidly expand ourmissile defenses beyond the agreed numerical limits. The calculation theywould have to make, however, is whether or not an amended ABM treaty alongthese lines would be better than what is likely to be their only otheralternative - no missile defense limits at all.

Defenses for Russia, too

Finally, we need to recognize that even if all of these problems canbe solved, a combination of politics and pride probably will preclude Russianagreement unless they can deploy missile defenses of their own. Bilateralcooperation will be key, and cooperation to enhance Russia's early warningsystem, which would directly serve US interests by strengthening strategicstability, is the place to start. But offers of technology cooperation,even if they transition from the rhetorical to the real, will not be sufficientbecause Russian missile deployments will take money they do not have.

Obviously, we are not about to fund the modernization of Russia's strategicdefenses ourselves, but we should try to be as imaginative as possibleabout finding ways for them to do so. One possibility, provided it madegood technical sense, would be to buy Russian rocket motors to power ourown missile defense interceptors. Another might be to fashion a programof cooperation to make our respective theater missile defense systemsinteroperableso that they could be made available for sale to third countries whichface their own missile and weapons of mass destruction threats.

Any clear-eyed analysis would have to conclude that the odds are againstreaching a meeting of the minds with the Russians by next summer on a newapproach to managing the offense-defense equation. In that event, we willneed to balance the risks of leaving ourselves open to the prospect ofthreats by rogue states armed with intercontinental ballistic missiles,against the risks of lasting damage to our relations with Russia.

A similarly clear-eyed analysis would conclude that the former concernswill likely prevail, but with substantial foreign policy and, quite possibly,security costs. US national security interests would be far better served,and the nuclear risks would be lower, if we could find a way to avoid havingto make that choice. Given the stakes, we owe to ourselves to make everyeffort to defy the odds.

Sam Nunn, a former US senator from Georgia, is senior partner in thelaw firm of King & Spaulding. Brent Scowcroft, former national securityadviser to presidents Ford and Bush, is president of The Forum for InternationalPolicy. Arnold Kanter is a senior fellow at The Forum for InternationalPolicy. He was undersecretary of state from 1991-93.

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H. U.S. – Russia General

U.S.-Russian relations will survive scandal-Talbott
        September 9, 1999
        (for personal use only)
MOSCOW, Sept 9 (Reuters) - U.S. Deputy Secretary of State Strobe Talbottsaid on Thursday he did not believe U.S.-Russian relations would be affectedby an investigation into a suspected Russian money laundering scheme throughthe Bank of New York.

``The foundations of our relations have been laid and are rather solid,''Itar-Tass news agency quoted Talbott as saying of the scandal after talkswith Russian officials in Moscow.

``Our relations have survived several tests of their strength,'' headded.

Senior Russian security officials are due to visit the United Statesnext week to discuss the alleged money-laundering, being investigated byU.S. and British law enforcement agencies.

U.S. newspapers have alleged that Russian businessmen, mobsters andofficials may have funnelled up to $15 billion through the Bank of NewYork, possibly including aid from the International Monetary Fund.

The Bank of New York is cooperating with the investigation and has notbeen accused of any wrongdoing. The IMF says it has no evidence of itsloans to Russia being diverted.

Talbott said he had discussed the fight against crime with Deputy RussianForeign Minister Georgy Mamedov. ``We have to fight crime together...However,the main thing needed now is to establish all of the facts,'' he said.

``Many countries face such problems in the transitional stage to a marketeconomy. In principle this problem can be an obstacle, and the task ofthe international community is to resolve it,'' he said.

``It is possible this work will speed up next week when the Russiandelegation heads for Washington,'' he added.

The money-laundering allegations have coincided with separate mediareports about investigations by Swiss prosecutors into possible corruptioncases involving Russian officials, businessmen and various firms in Switzerland.

The reports have prompted vehement denials of wrongdoing by the Kremlinand by businessmen named in the reports.

The scandals come ahead of elections for a new Russian parliament inDecember and presidential polls due next year in both Russia and the UnitedStates.

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Lost Illusions About Russia: U.S. Backers of Ill-Fated Reforms NowPortrayed as Naive
        Michael Dobbs and Paul Blustein
        Washington Post
        September 12, 1999
        (for personal use only)

It was the fall of 1996, Boris Yeltsin had just trounced the Communistsin a landmark presidential election, and the U.S. ambassador to Russiawas in an ebullient mood. After 3 1/2 turbulent years, Thomas R. Pickeringwas going home. But before he left, he wanted to share his vision of Russia'sfuture with American businessmen lining up to invest billions of dollarsin what was already being called the "Wild, Wild East."

"Within three years," the ambassador predicted, Americans could travelto towns like Sochi and Samara as easily "as they now travel to Chicagoand Cleveland." They would be able to stay in "more than three-star hotels"and rent American cars. The "fabulous Russian Far East" would be as economicallyvibrant as the rest of the Pacific Rim, including Singapore, Japan andCalifornia's Silicon Valley. Russian tax laws and accounting standardswould "approach Western norms." Overall, doing business in Russia wouldbecome "more structured, more predictable and less risky."

A highly respected diplomat who continues to shape U.S.-Russia policyas undersecretary of state for political affairs, the State Department'sNo. 3 position, Pickering concluded his predictions by forecasting thatRussia would be "one of America's top trading partners" by the fall of1999.

Three years after the ambassador's farewell address to the AmericanChamber of Commerce in Moscow, Russia ranks 30th in the list of Americantrading partners, sandwiched between Colombia and the Dominican Republic.Hertz and Avis have yet to penetrate the (practically nonexistent) carrental market in the Russian provinces. Russia's gross national producthas plummeted by nearly 50 percent over the last decade. More than 60 millionRussians -- nearly half the population -- live below a very low officialpoverty line.

The Russian economy's collapse has been accompanied by a collapse ofmany American illusions about Russia, and by an increasingly sharp debateabout U.S. policy toward the former Communist superpower. Clinton administrationofficials who used to point to economic reform in Russia as a foreign policysuccess are busily defending themselves against charges of naivete andboosterism. Reports of massive Russian money laundering through the Bankof New York have raised new questions about the logic of pouring internationalloans into a country that is hemorrhaging an estimated $10 billion to $15billion a year in capital flight.

The finger-pointing over "Who lost Russia?" threatens to spill overinto next year's U.S. presidential election campaign. Foreign policy advisersto George W. Bush, the leading Republican presidential candidate, are attemptingto link Vice President Gore to the failure of economic reform in Russiabecause of his much ballyhooed relationship with former prime ministerViktor Chernomyrdin. For their part, the Democrats accuse the Republicansof throwing away the best chance of influencing future events in Russiaduring the period of 1991-92, in the immediate aftermath of the collapseof communism.

In recent months, what used to be known as the "Washington consensus"on how to deal with Russia has burst wide open. The World Bank, in particular,has emerged as a hotbed of dissent on Russia policy, with its chief economistsuggesting that the early emphasis should have been placed on buildinginstitutions -- a working court system, for example – rather than thetraditionalset of monetary guidelines favored by the International Monetary Fund.

What is most noticeable in this debate is a dramatic reduction of Americanexpectations about Russia and a growing realization that the establishmentof free-market democracy may require decades to accomplish. U.S. officialsno longer talk very much about the benefits ordinary Russians have derivedfrom moving toward Western-style capitalism. Instead, they stress thegeopoliticalrewards reaped by the United States from engaging Russia.

"Our working relationships with Russian leaders from President Yeltsindown have paid off in terms of the safety and security of the United States,"maintains Deputy Secretary of State Strobe Talbott, the architect of theClinton administration's Russia policy. He ticks off a long list of achievementsin the "nuclearategic field," including the dismantling of the Communiststate, Russian troop withdrawals from the Baltic nations, cooperation onBosnia and Kosovo, the denuclearization of Ukraine in exchange for Russiansecurity guarantees and work on nuclear nonproliferation.

A Joke on Moscow Streets

From the Russian point of view, the balance sheet seems much less favorable.Many experts fear a backlash that will undermine Russia's integration withthe West.

"We kept on giving them money and advice even though there were concernsabout corruption," said Don Jensen, a former U.S. diplomat in Moscow. "Asa result, the U.S. is associated in the minds of many Russians with a failedreform, a discredited leader and criminality. The U.S. is not associatedwith the rule of law and the building of democracy."

A joke on the streets of Moscow these days, according to World Bankstaffer John Nellis, goes this way: "Everything the Communists told usabout communism was a complete and utter lie. Unfortunately, everythingthe Communists told us about capitalism turned out to be true."

The present gloom in Washington over Russia's economic prospects contrastsdramatically with the determined mood in January 1993 when President Clintontook office. The administration had a clear idea of what it thought neededto be done in Russia. Talbott, whose friendship with Clinton goes backto their experience as Rhodes scholars at Oxford, had made his journalisticreputation as a Russia expert. Other administration officials had actedas informal advisers to Russian market reformers led by Yegor Gaidar andAnatoly Chubais.

Two key assumptions underpinned the administration's approach to Russia.The first was that "President Yeltsin is the personification of reformin Russia," in Talbott's phrase. "It is impossible to support reform andreformers without putting a name to reform in the current context, andthat is President Yeltsin's name." Yeltsin was viewed as the man who hadvanquished the Communist dragon during the hard-line coup attempt of August1991 -- and the leader best placed to introduce democratic, market-orientedreforms.

The second assumption, almost an article of faith for Russian reformersand their Western supporters, was that Russia's salvation lay in tightmonetary discipline, rapid economic liberalization and a massive privatizationprogram. While the reformers were well aware of the risks of "shock therapy"-- unemployment, social discontent, opportunities for corruption -- itwas believed that these problems would resolve themselves if the economicmedicine were applied with sufficient vigor.

Over the next few years, both assumptions would come under increasingattack, not only by outside critics, but also within the U.S. governmentand institutions such as the IMF and the World Bank.

The earliest signs of dissent came from Soviet experts in the StateDepartment and the U.S. Embassy in Moscow who were skeptical about Yeltsin'sreformist intentions and Russia's ability to endure shock therapy. Misgivingsabout the "Russia First" policy championed by Talbott surfaced initiallyamong the Russia experts on the State Department's policy planning staff,according to several former staff members. During the fall of 1993, thepolicy planning staff produced a stream of memorandums arguing for a
less Yeltsin-centered policy.

"It is one thing for an ambassador to suffer from 'clientitis,' butit is the job of the White House and the State Department to put it incontext," said Charles Gati, a former member of the planning staff. "Theyallowed clientitis to spread from our embassy in Moscow, where it is expected,to become official policy."

In the U.S. Embassy in Moscow, what one former diplomat described as"open warfare" was underway between the economic section, which was responsiblefor implementing U.S. aid policies to Russia, and the political section,which prided itself on its hard-headed analysis of Russian reality. Inits cables to Washington, the political section consistently painted amuch less rosy picture of events in Russia than that described by Clintonadministration spokesmen.

E. Wayne Merry, who was head of the political section from 1991 to 1994,recalls a long, dissenting telegram he sent in early 1994 that criticizedAmerica's "evangelical attempt" to remold Russian society in its own image.He argued that such efforts would almost certainly fail because Russia-- unlike Eastern European countries such as Poland and the Czech Republic-- had little tradition of free markets or the rule of law. The UnitedStates, in Merry's view, would end up getting blamed for the failure ofshock therapy.

Some IMF and World Bank officials also had misgivings about the policiesthey were charged with implementing. Jean Foglizzo, the IMF's first Moscowrepresentative, said that the fund's tight-credit approach failed to takeinto account the fact that Russia is a country where "normal relationshipsbetween borrowers and banks do not exist."

"What happened in Russia was that as soon as you started to try to applytight monetary policies, people stopped paying their bills," and the economyreverted to a primitive form of barter, Foglizzo said.

Central to the efforts of the Russian reformers, and the present debateover what went wrong in Russia, was the decision to embark on a programto privatize state-owned enterprises, the largest of its kind ever attempted.There were political as well as economic reasons for proceeding as rapidlyas possible. The creation of a large property-owning class was seen asthe best guarantee against a revival of communism.

Selling to the Oligarchs

Such details as who acquired control over former state assets, and forwhat price, seemed less important than the speed at which the socialistsuperstructure could be torn down. Chubais, who was leading the privatizationcharge, was quoted as saying, "I try to act as if I only have two weeksleft in office, and I try to think what I can do in 14 days to make surethe Communists never come back."

It quickly became apparent that such words as privatization and economicreform -- even democracy -- meant entirely different things in the Russiancontext than in the American context. Russian privatization has come tomean the wholesale transfer of valuable state assets to a small group oftycoons known as oligarchs who are more interested in shipping anythingof value out of the country than in investing their profits in domesticproduction. Moreover, inefficient factories were handed over to their Soviet-eramanagers, who bitterly resisted the necessary downsizing and restructuring.

"We were too willing to accept the Russian reformers' view that it didn'tmake any difference who ended up with the assets initially," said CharlesBlitzer, who was chief economist in the World Bank's Moscow office from1992 to 1996. He added that the West "bought into the idea" that the newowners would push for a law-based society "because no one wants their sonsto grow up to be the crooks they are."

Clinton administration officials defend the early stages of the privatizationprogram as a significant contribution to dismantling the old totalitarianstate. But they distance themselves from the more controversial secondstage of the program, which began at the end of 1995. Under what was knownas the "loans for shares" deal, oligarchs were permitted to gain controlof the crown jewels of the Russian economy, including oil companies, inreturn for ludicrously low cash payments to the government.

Although U.S. and IMF officials say they voiced opposition to the "loansfor shares" scheme at the time, they did practically nothing to stop it.The IMF came through with a $10 billion, three-year loan to Russia – thesecond biggest loan in the fund's history -- in early 1996 at the heightof the scandal, just as Yeltsin was gearing up for a presidential reelectioncampaign against Communist challenger Gennady Zyuganov.

No attempt was made to link the loan to an honest privatization program.IMF officials, who note that overseeing microeconomic issues such asprivatizationis the job of the World Bank, say the loan was justified because Russiahad met the fund's targets on indicators such as inflation and the budgetdeficit.

Clouds of Corruption

At the end of 1996 -- at about the same time that Ambassador Pickeringwas making his optimistic predictions about Russia's economic prospects-- U.S. intelligence agencies undertook a detailed study of corruptionin Russia. The eight-page analysis was titled "Corruption Clouds Russia'sFuture" and distributed around the government at the assistant secretarylevel. The study concluded that corruption was virtually endemic to Russia,reaching the highest levels of President Yeltsin's administration.

The study noted that the halting nature of economic reform in Russia,far from creating a level playing field, had spawned opportunities forgovernment officials to enrich themselves. The analysts warned that nationalistand anti-reform politicians were likely to seize on the corruption issuein future campaigns. They also challenged the notion -- favored by Americansupporters of reform -- that corruption would fade away with economicmodernization.

Stung by accusations that the administration ignored such warnings,the White House has compiled a list of statements by Clinton and othersenior U.S. officials since 1995 drawing attention to the corruption issue.For the most part, however, officials tended to describe corruption asa blemish on an otherwise successful record, rather than as a phenomenonthat went to the heart of Russia's post-Communist transition.

For the Clinton administration and the IMF, Russia was "too big andtoo nuclear to fail," in the phrase of Anders Aslund, a Washington-basedeconomist close to Chubais and the other Russian reformers.

IMF loans did come with conditions aimed at addressing potential malfeasance.IMF officials point to changes the Russians made at their insistence, suchas creating a central budget that forced powerful ministries to reporttheir spending. IMF Managing Director Michel Camdessus recently said hetold Yeltsin that Russia would not be given special treatment. Instead,it would be treated "exactly like Burkina Faso."

But financial markets didn't take such claims seriously, IMF economistsconcede. The widespread belief that the West would bail out Russia encouragedforeign investors to pour billions of dollars into the country's riskyshort-term government bond market in 1997 and early 1998 -- setting thestage for a catastrophic reversal.

U.S. officials make no apologies for the priority they put on Russianstability. Talbott noted that some critics, comparing the relative importanceto the United States of Russia and Brazil, argue that "the only salientdifference is nuclear weapons. Well, it's a mighty salient difference."

U.S. Backs a Bailout

One of the clearest illustrations of outside pressure affecting IMFdecisions came in late spring last year, as Russian stock and bond marketswent into a tailspin and investors stampeded to cash in rubles for dollars.Markets suddenly paid attention to Moscow's burgeoning budget deficit,thanks partly to the spread of jitters from crisisicken Asia.

An IMF official who worked on Russia recalls the deluge of phone callshe received from investment bankers and portfolio managers, lobbying fora new IMF bailout. Many foreign investors had been earning sky-high ratesof return -- upwards of 50 percent -- from Russian treasury bills, knownas GKOs. Now they wanted the fund to use taxpayer-backed resources to ensurethat Russia could pay interest and principal on the bills.

"They were saying, 'It's got to be a big package, or everything willblow up,' " the official recalled. "One guy got to the point he was callingme three, four times a day."

IMF staffers were skeptical that a bailout would provide more than ashort-term fix. But U.S. officials, while acknowledging that risk, believedthe new prime minister, Sergei Kiriyenko, ought to be given a chance todeliver on his promises of radical reform. Moreover, they reasoned, someof Russia's problems were beyond its control, and a big IMF loan couldhelp restore calm by assuring the markets that the government would beable to pay its debts and avoid a devaluation of the ruble.

The last weekend in May, Chubais flew to Washington and went to thehomes of Talbott and Lawrence H. Summers, then deputy treasury secretary.Chubais warned his hosts that a devaluation would deal a crushing blowto the cause of reform. The upshot was an unusual Sunday statement by Clinton,saying the United States "endorses additional conditional financial support"from the IMF and World Bank.

"Once that announcement was out there, it was the end of the debate,"an IMF official recalled. "It affected expectations in financial markets,"where investors and analysts concluded that a giant bailout was almostas good as done.

On July 14, the IMF agreed with Russia on a package of loans totaling$22.6 billion. Summers defends the move as a gamble worth taking – butit failed within days, as the Russian parliament fought to block the promisedreforms. The flight from rubles to dollars continued, exhausting Russia'sforeign currency reserves. On Aug. 17, the Russian government announcedthat it was both devaluing the ruble and suspending repayment of GKOs.This time, there would be no bailout from the West.

Salvaging a Policy

A year after the ruble's collapse, U.S. officials and their counterpartsat the IMF are trying to salvage what they can from their Russia policy.The IMF has made clear that it will not provide any new loans to Moscow for the foreseeable future, although it will extend the existingdebt. Both the rhetoric of reform -- and expectations about the introductionof Western-style democracy in Russia -- have been sharply scaled back.

In the end, says Stanley Fischer, deputy managing director of the IMF,the ability of outsiders to influence events in Russia was probably verylimited. "You can move things in one direction or another, and that's whatwe tried to do with the leverage we had," he said. "On balance, I thinkwe tilted things in a better direction than they would have been otherwise."

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Long Climb Out of a Black Hole
        Michel Camdessus
        Washington Post
        September 13, 1999
        (for personal use only)

In recent weeks, Russia's difficult road to economic reform has becomea deeply emotive issue in world capitals. Allegations of money launderinghave set in train angry recriminations about the strategy chosen by theinternational community to help Russia emerge from the nightmare of theSoviet system.

But before political passions get the better of us, it is crucial thatcooler heads prevail. The International Monetary Fund, as the agent ofpolicy decisions made by its 182 member countries, has been at the centerof the effort to assist the Russian people. From that vantage point, theIMF has witnessed, and learned from, the mistakes and the successes ofthe past decade.

And there have been successes. Russia has achieved a certain level ofeconomic stability -- including overcoming the threat of hyperinflationand putting in place reforms that are the foundation of a modern marketeconomy. These are significant achievements.

There also have been setbacks. Growth has been disappointing, the paceof institutional reform has left much to be desired and living standardsfor most Russians have fallen since Communist times. But these shortcomingsrepresent not so much the failure of reform as the effects of 70 yearsof central planning and the incomplete implementation of reform policies-- itself a result of a lack of domestic political consensus on reform.

These problems also have been exaggerated at times. For example, somenews reports in recent weeks have alleged that substantial sums of IMFaid have been siphoned out of Russia through a money-laundering schemeat the Bank of New York. The IMF takes these claims seriously and is tryingboth to ascertain their basis and to strengthen even further the safeguardson the use of its funds. However, we should note that so far no evidencehas been found to support the allegation that IMF funds have been divertedfrom their intended purpose.

For the future, even stronger safeguards have been in place for sometime to ensure that IMF funds cannot be misused. Under the 17-month, $4.5billion lending program approved on July 28, all IMF money disbursed toRussia will be held at the IMF. Repayments to the fund from earlier loansto Russia will be made from that account.

Those arrangements are a response to the FIMACO episode, in which theRussian central bank hid from the IMF its use of an offshore subsidiaryto handle some of its foreign reserves. That affair, which did not involvemoney laundering, has been extensively examined at the IMF's insistenceby the accounting firm of PricewaterhouseCoopers. The Russian authoritiesnow understand that any future efforts to hide the true level of foreignreserves from creditors can result in loan suspension.

The IMF, through the routine process of monitoring its lending programs,is scrutinizing the Russian authorities' policy implementation. If thefund's executive board concludes that Russia is failing to meet programcommitments, it will consider suspending further disbursements, as it hasdone on several occasions in the past.

At the same time, we must address two overriding issues: whether engagementis better than isolation, and whether there is reason to hope that economicreform will succeed in Russia and other countries facing the same painfultransition.
On the question of engagement, there can be no doubt that the worldis better served by constructive dialogue between former enemies. The mostimpressive outcome of our engagement with Russia is that despite all thedifficulties, Russia has tried to stay engaged with the international communityand to become part of the global economy. If the international communityhad walked away from Russia in the past year, Moscow would not have takensteps to repair its damaged relations with creditors. The government probablywould not have rejected calls for greater intervention in the economy.It would have had a much harder time maintaining open markets, and Russialikely would not have stayed at the negotiating table to hammer out newagreements with the IMF and the World Bank.

As for progress in reforms, it is clear that Russia's economic situationis not a lost cause, as some critics would suggest. There is evidence ofeconomic revival and reason to believe that output this year will be abovelast year's level.

Certainly the situation is improved from a year ago, when Moscow's defaulton its foreign debts sent the ruble into a tailspin, unnerved global financialmarkets and caused the Russian economy nearly to grind to a halt.

Despite the political instability in Moscow, the authorities have putin place economic policies that have mitigated the downturn. Budget andmonetary policies have been restrained and have kept inflation in check.Factory production is rebounding, and many domestic manufacturers are takingadvantage of last year's devaluation to replace imports. Cash paymentsagain are replacing barter.

These are not insignificant achievements, and one hopes they are a harbingerof further progress as Russia continues to assimilate the lessons of itspolicy errors. Foremost among these is the blow to the country's credibilityfrom the debt default. In recent months, important steps have been takento repair that damage as the authorities engage in constructive talks withtheir creditors.

There is no question that there have been lessons to learn on all sidesas the IMF and its member countries have tried to assist Russia throughthe transition to a market economy. Politicians and economists alike haveunderestimated the enormous obstacles, and some of those obstacles unfortunatelyreveal the worst failings, especially the staggering corruption that drainsoff so many resources.

The transition from the black hole of the Soviet command economy willtake years, and progress will not be linear. Our -- the outside world's-- assistance must be determined by improvements that can realisticallybe achieved, not by too-distant goals. But any potential achievements willfade into impossibilities if we walk away from Russia. The loss of confidenceand turning inward that would result from abandoning the Russian peopleare in the interests of neither Russia nor the rest of the world.

The writer is managing director of the International Monetary Fund.

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