TRANSFORMATION WATCH #9:
COUP II — THE UNFOLDING CRISIS IN THE FORMER USSR>

(Washington, D.C.): As the decision
over who will lead the United States for
the next four years approaches its
denouement, an even more dramatic
decision seems about to be made in
Moscow. Within six weeks, the
last vestiges of true democratic
and free market reform may be shunted
aside by a rising phoenix of hardline
communist and nationalist forces.

The Center for Security Policy finds
the absence of serious debate about such
a portentous development to be absolutely
astounding. This is especially true
insofar as the demise of any
prospect for genuine, radical reform in
Russia threatens to derail all the
presidential candidates’ planned
bill-payer for increased domestic
programs — i.e., draconian reductions in
defense spending — if not the
prospects for a more peaceable world upon
which such plans have presumably been
predicated.

In the hope of focussing the
contenders’ and the American people’s
attention on the unfolding crisis in
the former Soviet Union, the Center urges
that the following ominous events be
addressed at once.

• Yeltsin’s December
  Show-down: On 1
  December, the Seventh Russian
  Congress of People’s Deputies
  will convene. Fearing that
  hardliners who dominate the
  parliament will use this meeting
  to move against his government,
  President Boris Yeltsin sought to
  have it postponed until next
  spring. His inability to do so
  was an early test of the
  vestigial reformist faction’s
  relative impotence — and the
  growing assertiveness of an
  opposition led by the
  “National Salvation
  Front.”

The Front was founded by the
likes of General Albert Makashov,
Colonel Viktor Alksnis and
Communist deputy leader Sergei
Baburin with the ostensible aim
of removing the president and his
cabinet through so-called
“constitutional means.”
In fact, Yeltsin has come to feel
so threatened by the growing
power of the Front that on 27
October 1992, he attempted to ban
it on the grounds that an unconstitutional
attempt to overthrow the
government is being organized by
its adherents.

• Coup Talk:
  Yeltsin’s effort to preempt the
  National Salvation Front is but
  the latest sign that a second
  coup may be in the making.
  Another indication may be found
  in the blunt warning issued on 19
  October by State Secretary
  Gennady Burbulis, Information
  Minister Mikhail Poltoranin,
  Foreign Minister Andrei Kozyrev
  and Deputy Prime Minister Anatoly
  Chubais.

On that occasion, these four men
called an extraordinary press
conference to warn that members
in the Parliament were planning a
coup under the direction of
parliamentary speaker Ruslan
Khasbulatov. According
to the 19 October 1992 edition of
the Financial Times,
Poltoranis said, “We are
seeing the ripening of not just
serious opposition but of the
open and strongest preparation of
a coup d’etat.”

The possibility of a Coup II in
the making also emerged on 22
October, when Vice
President Alexander Rutskoi,
another of Russia’s leading
anti-reformers, called on
the government to share power in
a coalition with Civic Union.
The latter is an organization
representing the mainstays of the
communist system: the
military-industrial complex, the nomenklatura,
former Soviet central bankers,
the KGB and other security
services. Indeed, in some
respects Civic Union is
synonymous with a resurrected and
pared-down Soviet Union.

With transparent insincerity, the
Russian Defense Minister, Gen.
Pavel Grachev, issued a statement
on 23 October reaffirming the
military’s support for Yeltsin.
In the wake of its release, three
of his most senior advisers
resigned in protest and urged
that the armed forces adopt a
neutral position in the struggle
between the reformers and the
hardline elements. It goes
without saying that, under the
circumstances, the Red Army’s
“neutrality” would be
tantamount to aiding and abetting
the opponents of reform.

• The Russian Military’s
  Mischief in the Baltics:
  Another ominous development
  occurred on 21 October when the
  Russian Defense Ministry
  announced that it was suspending
  the withdrawal of its troops from
  the Baltic States. In a statement
  entitled, “Troops Must Be
  Withdrawn from Baltic Region Only
  to Places that Have
  Amenities,” the Defense
  Ministry declared that the
  scheduled withdrawal of Russian
  servicemen and their families
  from the Baltics would be halted
  until:

“…All questions connected
with the provision of amenities
for them in the new places of
stationing have been
resolved…What is needed for a
normal life is not only housing
but also social infrastructure
facilities.”

(It is noteworthy that the
absence of these conditions was not
a factor in the introduction of
occupation troops into the
Baltics in the first place!)

This announcement raises serious
questions about Moscow’s
willingness to comply with a
solemn Russian-Lithuanian
agreement requiring all Russian
troops to leave the country by
the end of August 1993. The State
Department estimates that only 40
percent of the 130,000 troops
have been withdrawn to date.

What is more, Moscow has yet to
reach counterpart disengagement
accords with Latvia and Estonia.
To the contrary, Russia has
sounded ever more bellicose with
its parliament threatening, among
other things, to impose economic
sanctions against Estonia —
ostensibly in response to
mistreatment of the newly
independent state’s Russian
minority.

• Moscow’s Arms Bazaar:
  Russia’s fire-sale of advanced
  weaponry is apparently attracting
  a wide array of unsavory buyers.
  The pressing need to meet
  short-term hard currency
  requirements, among other
  considerations, are evidently
  displacing concern over the
  implications for Moscow’s own
  long-term security interests —
  to say nothing of those of other
  states.

Included in the list of active
buyers is Iran, which has
arranged to purchase, for
example, at least three modern
diesel submarines. These vessels
are capable of creating havoc in
the strategic Straits of Hormuz
and Persian Gulf. China has
likewise obtained: front-line
former Soviet anti-aircraft and
anti-missile technology, advanced
fighter aircraft and perhaps even
long-range ballistic missile
systems or technology.

Such sales not only suggest the
folly of past Western refusal to
offer immediate debt relief to
reforming Soviet successor
states; they also demonstrate the
degree to which Yeltsin has
capitulated to the demands of the
former Soviet military-industrial
complex. By permitting
substantial arms purchases from
overseas client, the vast
production base and bloated
workforce of the USSR’s old
defense industry can be
maintained. Half-hearted
demarches that the Stated
Department hoped might dissuade
Moscow from concluding such
transactions — many of which
will prove not only destabilizing
but will likely add substantially
to U.S. defense costs — have
largely gone unheeded by the
former Soviet Union.

• The Hard Currency Crisis:
  The International Monetary Fund
  and senior Russian officials now
  concur that Russia’s hard
  currency debt payments due in the
  year ahead — primarily to the
  G-7 countries — total $22.1
  billion. However, these same
  officials estimate that Russia
  will only be able to pay roughly
  10 percent of their bill, or $2.5
  billion.

Given that in 1993, Russia will
owe the United States alone
almost $2 billion in principal
and interest on Commodity Credit
Corporation guaranteed loans
extended by President Bush to
Soviet President Mikhail
Gorbachev, it is exceedingly
improbable that U.S. taxpayers
will be repaid for loans
ill-advisedly made to a
noncreditworthy borrower. In
particular, as predicted by the
Center, href=”#N_1_”>⁽¹⁾
the Bush Administration’s effort
to stave off rescheduling of debt
incurred after 1 January 1991
will prove unsustainable. This
should come as no surprise; that
date was selected primarily to
deceive U.S. taxpayers concerning
the prospect of multi-billion
dollar CCC losses during the
pre-election period.

• Hyperinflation on the
  Horizon: According to a
  22 October report on the Russian
  economy issued by the European
  Bank for Reconstruction and
  Development, Russia
  “is again on the verge of
  hyperinflation” (defined
  as over 50% inflation per month
  or 12,000% annually). In a CNN
  interview on 15 October,
  economist Jeffrey Sachs reported
  that inflation in Russia is now
  running at 30 percent monthly and
  is approaching an annual rate of
  14,000 percent:

“They’re on an
extraordinarily dangerous course
.. The reforms have really gotten
off-track because of incredible
pressures from the
military-industrial complex in
recent months….This is a
country that is on the brink of
political turmoil if they don’t
get the financial turmoil under
control.”

Another worrisome indicator is Russia’s
ballooning budget deficit which is now
approaching almost 17 percent of GNP — a
far cry from the five percent level
agreed to with IMF officials in July.

The Bottom Line

Since the next administration is sure
to have to grapple with the strategic,
political economic, and financial
consequences of the unfolding crisis in
the former USSR, the Center for Security
Policy believes that the American people
are entitled to know how the three
principal presidential contenders expect
to deal with such a development. In
particular, the candidates should be
required to explain:

• What changes do they
  expect to make in U.S. defense
  spending and overseas military
  commitments if hardline
  elements reestablish themselves
  in Moscow and elsewhere in the
  former Soviet Union?
  Specifically, what corrective
  actions would be in order to put
  the American defense industrial
  base on a footing that is more
  secure and more appropriate to
  such uncertain times?
• How do they expect to pay
  for domestic spending priorities
  that they are promising to
  underwrite if expected savings
  cannot be made in defense
  expenditures?
• What adjustments in
  present U.S. policies and
  programs are necessary to ensure
  that American financial aid,
  economic assistance and sensitive
  technologies do not wind up in
  the hands of potential
  adversaries — much as
  United States technology and
  other resources did in Saddam
  Hussein’s Iraq?
• What alterations are now in order
  to fix unverifiable arms
  control agreements like the START
  and CFE Treaties to prevent their
  myriad loopholes from being
  exploited by hardline elements in
  the former Soviet Union?

No less important than the answers to
such questions concerning what should be
done if democracy and free markets are
defeated — or substantially damaged —
in the former Soviet Union are the steps
that might yet be taken to prevent such
an eventuality. Specific initiatives
toward this end will be the subject of a
separate Decision
Brief to be released by the
Center for Security Policy tomorrow.

– 30 –

1. See the Center’s
Decision Brief entitled “Summit-Scam:
Munich Response on Debt Relief Undercuts
C.I.S. Reformers, Sets Stage for U.S.
‘December Surprise,'” ( href=”index.jsp?section=papers&code=92-D_72″>No. 92-D 72, 7
July 1992.)