Bad for (the nation’s) business

By: Frank Gaffney Jr.
The Washington Times, 26 November 1996

Ominous international trends suggest that what is now called
the “post-Cold War” period by politicians, academics
and pundits may soon be known as the “interwar years.”
And if a new cataclysmic war does erupt in the years ahead,
America’s adversaries are likely to be more formidable, thanks to
the shortsighted attitude the Clinton administration and allied
governments are taking to advance short-term business interests
without regard for the ultimate cost to Western security
interests.

Consider three worrisome cases in point:

• Last week, Russia issued its first
  international bonds since 1917. This $500 million Eurodollar
  offering was oversubscribed by 100 percent to $1 billion – and
  reportedly received some $2 billion in offers – despite the fact
  that the interest offered was a modest 3.45 percent over the
  five-year U.S. Treasury rate. Such an extraordinary showing is,
  in part, attributable to the undeservedly strong credit rating
  Moscow received from the cognizant European and U.S. rating
  organizations – higher than that of Brazil, Turkey, Argentina or
  Venezuela and on a par with Mexico and India. In light of the
  success of this offering, the Kremlin and other Russian borrowers
  are expected to issue a plethora of such bonds on the world
  market next year.

In this manner, Russia is achieving a two-fer:

1. The Kremlin is poised to secure a “financial
   breakout” – a source of potentially vast, undisciplined,
   unconditioned and largely non-transparent revenues. It seems
   reasonable to expect that at least some of these funds will wind
   up being used for purposes inimical to U.S. and Western security
   interests. These may well include the underwriting of: Russian
   nuclear reactors being built in Iran and Cuba, strategic force
   modernization, intelligence operations against the West and
   Moscow’s campaign to control the oil resources of the Caspian
   Sea.
2. The large number of likely holders of Russian paper and
   the secondary markets for these instruments make it virtually
   impossible to reschedule bonds and notes. This, in turn, can be
   expected to give rise to a potentially large number of
   constituencies – including American securities firms, mutual and
   pension funds, insurance companies, corporations, and individual
   investors – that will almost certainly demand U.S. government or
   multilateral bailouts in the event of liquidity crises that
   impede Moscow’s ability to redeem its bonds on the respective
   maturity dates. (Remember the circumstances that led to the
   misuse of the Exchange Stabilization Fund of the U.S. Treasury to
   redeem Mexico’s tesobonos!)

Worse yet, these constituencies can be predicted to produce
powerful political advocacy groups that could come to rival the
China Lobby. These New China Hands-in-the-till have successfully
emasculated many U.S. foreign, economic and security policies
toward Beijing, lest American financial and commercial interests
be adversely affected. Ever since the days of the notorious
“Trust,” the Kremlin has eagerly sought to cultivate
such influential friends.

• Rarely has the power of the China Lobby
  been more evident than in last weekend’s Asian-Pacific Economic
  Council (APEC) meetings.

In APEC’s wake, legitimate U.S. concerns about China’s
strategic buildup, proliferation of weapons of mass destruction,
hostile intelligence activities, aggressive behavior toward
Taiwan and Hong Kong and repressive domestic policies have been
effectively jettisoned. To be sure, the Clinton administration
continues to pay lip service to such issues, but its actions
speak far louder than its words. And its actions are going to
ensure that there is no diminution in Beijing’s access to Western
technical and capital resources and therefore no slowing in its
ambition to establish itself as a regional superpower, if not the
United States’ pre-eminent global rival.

• Finally, the spectacle of the Italian
  government, the press and the anti-communist papacy behaving like
  starstruck groupies for Fidel Castro during his visit to Rome
  last week is evidence of the mounting international campaign to
  eviscerate the Helms-Burton bill. This legislation, which
  President Clinton chose to sign in the runup to the 1996
  election, codifies and tightens the U.S. embargo on Cuba.

Even though Mr. Clinton acted to postpone implementation of
key Helms-Burton provisions, Canadian, European and other
businesses and governments who have found it profitable to help
prop up Mr. Castro’s totalitarian regime are indignant that the
United States is attempting to jeopardize their gravy train.

The trouble with the theory that the post-Cold War world
would be transformed into one secure for Western interests by the
global growth of free markets – whether accompanied by democracy
or not – is that all too many capitalists in the United States
and elsewhere are quite content doing business with authoritarian
regimes. The latter typically promise stability, low wage rates
and relaxed attitudes toward the exploitation of workers and the
local environment.

Of still greater concern from a strategic point of view,
however, is the indifference of such capitalists to the
contribution their investments are making to perpetuating and
strengthening the authoritarians with whom they are
collaborating. It is telling that Alexander Lebed – the former
general whose promises of restored discipline in Russia have a
totalitarian ring – emphasized in Washington last week that his
interest in not “scaring” the West has a lot to do with
his desire, and that of his backers, to continue to secure
Western investment. In considering this line and that of Jiang
Zemin and Fidel Castro, Americans should bear in mind the fabled,
contemptuous Lenin assertion that the West’s capitalists would
sell the rope with which they will be hung.

Frank J. Gaffney Jr. is the director of the Center for
Security Policy and a columnist for The Washington Times.