Russian Debt Relief Train Leaving The Station; Will The Bush Administration Get On Board?

By Garry Kasparov
The Wall Street Journal

02/04/92

As was to be expected, the disappearance from the world political arena of the Soviet Union has not solved all the problems engendered by the existence of this monster-state. Time, first and foremost, is required to overcome the chaos inevitably arising from the disintegration of an empire suffering from a fatal disease.

The multi-stage reform process will be protracted, although certain constitutional reforms should come as quickly as possible. But in principle, it can already be confidently asserted that the new Russian leadership will shift the state juggernaut, which during the years of Mikhail Gorbachev’s perestroika merely imitated movement. Unfortunately, the Western media, which were so responsive to the promises and plans of the last general secretary, are reacting very cautiously to the structural transformations carried out by the democratically elected president of Russia, Boris Yeltsin, and the radically inclined economists in his government.

It is not difficult to understand the disillusionment of those who, after falling victim to Gorbomania, do not wish any further to associate their political or journalistic careers with the new Russian leader. But the pessimism openly expressed in the Western press also creates a distorted picture of events — just as the excessive optimism that everywhere accompanied Mr. Gorbachev once did.

The price of Mr. Gorbachev’s legacy is well known, and therefore, at the very least, it is unreasonable to demand of Boris Yeltsin and the other CIS presidents an immediate miracle.

It does no harm to review what happened in the former U.S.S.R. last year. Rumors about an imminent military coup caused panic both within the U.S.S.R. and abroad, and although in the end nothing happened, the alarm was hardly false. Consider the facts of last summer: The central government was trying to inflame the territorial dispute between Russia and the Ukraine; Mr. Gorbachev convened a meeting of generals; Russian Vice President Alexander Rutskoi was fiercely attacking President Yeltsin’s government with appeals to military-industrial institutions; so-called "pro-state democrats" were preparing demonstrations in support of maintaining the Soviet Union.

It is also not hard to imagine what the reaction of the West would have been to the creation of a new "State Emergency Committee" with a human face. The Gorbachev-Rutskoi axis, supported by the authority of other "democrats," would have satisfied the West’s need for "stability." It was Mr. Yeltsin’s decisive action — concluding the agreement about the CIS on Dec. 8, 1991, and finally finishing off the scheming imperial center — that saved us from impending catastrophe.

But Mr. Yeltsin is finding it much harder to carry out economic reforms. An understanding of this requires a precise analysis of the balance of power.

The tanks that appeared in the early morning of Aug. 19 on the streets of Moscow provoked almost unanimous hostility from all of society — the people did not want to return to slavery, while the state machinery basically regarded the path to capitalism as the surest means of becoming rich. (The rapid downfall of Mr. Gorbachev has the same underlying cause — having outmaneuvered himself, the architect of perestroika turned out to be not required by anyone — within his own country, of course — and was forced to leave the political stage.) But as soon as the implementation of global economic programs begins, unanimity disappears and the balance of forces changes sharply.

Whereas productive forces in society and rapidly growing private business need the constitutional securing of the right of private ownership, state organs are aiming to prolong the period of economic confusion. What the officials want is perfectly obvious — to exploit their current position for a smooth transition to newly formed private structures or simply to guarantee their future. The numerous criticisms of the team of the Russian vice premier, Yegor Gaidar, rightly indicate the need for a rapid beginning of the privatization program. But for some reason these criticisms ignore obstacles this government faces, for example the powerful opposition by the state apparatus to constitutional amendments by the Russian Parliament.

The so-called patriotic forces in Russia hope to exploit this split. This red-brown coalition (left-leaners and heirs to fascists) nevertheless intends to keep ideology to a minimum. Most probably we will be dealing with an ultra-right nationalistic party, like that of Jean-Marie Le Pen in France.

Today, Mr. Yeltsin faces an exceptionally complex situation. In making decisions he must take into account the growing irritation of the population; the dissatisfaction of the private sector; the pressure of the state apparatus; the sinister shadow of the red-browns.

The West can have a serious influence on what happens. It must develop a program of cooperation with the Russian government that would allow Mr. Yeltsin to create a long-term base of support for his reform program. For example, the start of Russian-American military cooperation, or the investment of high-technology Western firms in demilitarized enterprises, would force the military-industrial institutions to form a coalition with the Russian government. But the main trump card in the government’s struggle with anti-reformers may be the foreign-debt problem.

The mention of this problem may in itself raise in many a skeptical smile. Parallels with Latin America are quite inappropriate here: The debt of Russia and the other states has not yet reached the point where even repaying the interest becomes an intolerable financial burden. Indeed, even to give an exact evaluation of the debt liabilities of the former Soviet Union is extremely difficult. The information given by different authoritative sources varies in the fantastic range of $55 billion to $80 billion.

Whatever the overall sum of foreign debt, one thing is clear. Debt relief and to some extent debt forgiveness are the most effective way for the West to influence development of events in the CIS. It is highly unlikely that debt relief or even debt forgiveness for Russia, as the principal successor of the Soviet Union’s financial obligations, would be a serious blow to the world credit system.

Recall that President Bush’s decision to write off Egypt’s $7 billion debt at the time of the Gulf War was accepted calmly. The agreement of Hosni Mubarak to participate in the anti-Iraq coalition was deemed a sufficient political argument. By this logic, it would be interesting to see what weight would be given to the neutralization of 30,000 nuclear warheads. But the main argument in favor of debt relief is that it would pave the way to the New World Order — an order in which, in contrast to the past’s "Realpolitik," morals and politics cease to be incompatible.

Let us imagine for an instant that the Castro regime in Cuba should fall — an event likely to occur this year. Without doubt, the new Cuban government would refuse to pay Fidel Castro’s debts to Moscow. It would be impossible to dispute the logic of this decision — after all, the money poured into the communist regime in Cuba by the Kremlin has in the end brought endless repression and poverty to the Cuban people. Now let us remember the last two years of Mr. Gorbachev’s rule, when the Soviet foreign debt made a truly cosmic leap. These were years when the republics grew in power.

To make communism stronger, using Western credit — this was Mr. Gorbachev’s ultimate goal. What we encountered in this case was not the dismal tradition of Realpolitik, by which the West offered credit to totalitarian regimes, but a conscious preference of the imperial communist center to rapidly strengthening democratic forces. The West was ready to give billions to save Mr. Gorbachev from the "terrible conservatives." All attempts by prominent officials of the democratic movement to appeal for common sense (here we should mention Andrei Sakharov) encountered a dense wall of incomprehension, and even hostility.

The outcome is well known: Communism in Russia has been overthrown, and the victors have inherited not only a broken economy and interethnic enmity, but also an enormous foreign debt. It is a debt with which none of the new leaders has any connection; a debt that was used for it is not known what purposes, but most probably for the struggle against themselves. And it is a debt that now has to be paid at the expense of the good of the economy.

Among Mr. Gorbachev’s creditors, a special place is occupied by Germany. Germany granted the former Soviet Union the greater part of its Western credit, whether it was $30 billion or $40 billion. But in contrast to its Western partners, who essentially paid for their own fear and lack of vision, Germany lent money for a concrete purpose: German unification.

The dream of the German people, which had seemed unrealizable, became a reality in literally a few months, and one can understand the determination of Chancellor Helmut Kohl not to spare means for achieving the sacred goal. In the eyes of Mr. Kohl, the removal of Soviet troops from the territory of East Germany was a big enough prize to allow him to close his eyes to the use of the Soviet army against peaceful demonstrators. And the price paid for this "very nice piece of real estate" was much lower than its real worth.

Why then today, after being ravaged by communists, should Russia essentially pay for the reunification of Germany?

Western diplomats are now facing certain difficulties in establishing working relations with the states of the CIS. This is not surprising, since radical changes on the geopolitical map demand new conceptions and, most importantly, an unequivocal rejection of stereotypes. It will be remembered how tense and uncomfortable President Bush was over the weekend with President Yeltsin. After all, even mentioning Mr. Yeltsin’s name in the corridors of the White House was until recently considered bad form. Mr. Bush’s pragmatism nevertheless played a positive role.

Let us hope that this approach reflects the readiness of the West to offer Russia a new and balanced cooperation program. Cooperation, which in the New World Order should gradually become union, is necessary so that together we can meet the challenges ahead with confidence.

Mr. Kasparov, the world chess champion and head of the Moscow region branch of the Democratic Party of Russia, is a contributing editor of the Journal.