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WASHINGTON — American economic and security interests in the former Soviet Union are fundamentally linked. An economically stable Russia, integrated into the Western economy, would be far less likely to want to damage Western interests or dominate its neighbors, like Georgia, Ukraine and Moldova. Stable and prosperous neighbors would in turn support Russia's new generation of political and business leaders who seek success in the global market through domestic economic reform. How could we help build such improved relationships? There is one way the West could help Russia, and at the same time reduce Russian pressure on its neighbors: debt relief. Russia owes $48 billion of former Soviet debt to the Paris Club, the association of creditor nations that includes Germany and the United States. In recent weeks, Moscow has threatened to default on this year's payments and has demanded forgiveness or renegotiation. As the Western creditors have pointed out, Russia's complaints about its 2001 payments are unreasonable. Given the robust state of the Russian economy, the $3.4 billion due this year is well within Russia's budget. By 2003, however, Russia will owe $17.5 billion. Since its entire state budget in 2001 is only $42 billion, it will indeed be quite impossible for Russia to pay at that time. If we insist on the full sum, Russia will default. Since the West will be forced to renegotiate Russia's debt sooner or later, we should try to get something in return. The most obvious goal should be to reduce Russia's ability to control its neighbors. Over the past five years, economic pressure, not military dominance or internal subversion, has become the most important source of Russian regional power. Russia is too weak to exert the kind of military pressure it exercised against Georgia in 1993. Furthermore, any direct military intervention would cause Russia terrible damage internationally. But Russia exerts influence over its neighbors through other means. Georgia, Ukraine and Moldova, in particular, have run up enormous unpaid debts to Russia, mostly for gas supplies. Ukraine owes at least $1.4 billion for gas; Gazprom, the state-controlled Russian natural-gas monopoly, claims that the actual amount is more than $2 billion. Moldova owes $861 million for gas, and Georgia owes $179 million. None of these countries can afford to pay these sums. Indeed, their debt burdens are strikingly comparable to the debt burden on Russia: last year, the annual Georgian state budget was barely $400 million. In recent months, Georgia's inability to pay its loans has led to repeated shut-offs of gas, considerably worsening Georgia's already severe electricity crisis. This pressure contributed to the recent declaration by Eduard Shevardnadze, Georgia's president, that his country may drop its (vain) hope of becoming a NATO member and instead aim at neutral status. In the case of Ukraine, Moscow has sought to swap its neighbor's debt for equity in Ukrainian state- owned industries, which is likely to leave Russian businesses in control of much of the Ukrainian economy. Already, the debt burden has forced the Ukrainian government to agree to unify the Russian and Ukrainian electricity grids. By international standards, Russian pressure seems fair enough. Why should Russia provide its neighbors with what is in effect heavily subsidized gas and get nothing in return? After all, the West has also told Russia that failing to pay its debts violates international financial rules, and that default would bring Western economic retaliation. On the other hand, Russia has no right to expect generosity from the West while taking a ruthless line toward its own debtors. The United States and its European partners should therefore offer to forgive Russia all or part of its debt, while demanding that in return Russia act similarly toward the debts of its neighbors. We could then use this window of opportunity to help these countries develop alternative energy sources — assuming, of course, that the elites of these countries can summon up enough honesty and competence to move seriously in this direction. Too much of the American approach toward the former Soviet Union has consisted of rhetorical declarations without real content. By contrast, linking Russia's debt to that of its neighbors would be both very effective and entirely legitimate. It is precisely this kind of practical, sober policy — rather than empty geopolitical obsessions — that should characterize our policy toward Russia and, indeed, the rest of the world.
Anatol Lieven is a senior associate at the Carnegie Endowment for International Peace. Celeste Wallander is a senior fellow at the Council on Foreign Relations.
See the original at http://www.nytimes.com/2001/03/14/opinion/14LIEV.html
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