Mr. Chairman, thank you for convening this hearing today on a very important subject. The title of the hearing, “Russia’s Transition to Democracy and U.S.-Russia Relations: Unfinished Business,” aptly links together two subjects that are often treated as separate issues – the condition of Russian democracy and the status of U.S.-Russian relations. By providing this title for our hearing today, you and your staff suggest rightly the two subjects are closely intertwined. In fact, I would argue that the future of Russia democracy is the most important issue in US-Russian relations today. If Russia consolidates a liberal democracy at home, then I have no doubt that Russia will develop into a reliable and lasting ally of the United States in world affairs. If Russia fails to consolidate liberal democracy at home, then Russia may still be a cooperative partner of the United States occasionally and sporadically, but always with conflicts. If Russia lapses back into dictatorship, U.S.-Russian relations will become strained, competitive, and possibly even confrontational again as they were for most of the twentieth century.


Russia’s Successes at Home and Abroad

One of the reasons why the fate of Russian democracy remains a critical issue for American foreign policy is that many previous potentially worrisome issues are no longer concerns. Many of the issues that this Committee would have discussed in a hearing on Russia a decade ago are simply no longer agenda items in Russia politics or U.S.-Russian relations.

The Empire. A decade ago, this Committee would have been worried about the reemergence of a Russian empire. In fact, one of our country’s most astute students of Russian affairs, Dimitri Simes, warned with good reason a decade ago that “The collapse of the Communist establishment does not mean that the imperial, autocratic Russian tradition has come to an end. It only implies that, next time, it may have to reappear in a different form, with different slogans and different leaders.”[i]

Today, however, the probability of a resurgence of a new Russian empire is low. To be sure, Russian President Putin seeks to expand Russian influence throughout the territory of the former Soviet Union. Just last week in a meeting of heads of state from the region, he called for the creation of an economic union between the major states that emerged after the collapse of the Soviet Union. As the largest economy and most powerful military power in the region, there should be no doubt that Russia will continue to exercise influence in its neighborhood. A democratic Russia, though, will not seek to acquire new territory through the exercise of military force. This threat only becomes real if a dictator returns to the Kremlin.

The Economy. A decade ago, this Committee would have been worried about whether or not capitalism in Russian could take hold. In 1993, inflation was skyrocketing, state subsidies to Russian enterprises were busting the budget, the Central Bank recklessly printed money, and private property did not really exist. Russia’s economic crisis was so bad that many important politicians and political forces rejected capitalism altogether as the right way to organize an economy.

Today in Russia, the debate about capitalism and communism is over. Even the Communist Party of the Russian Federation (CPRF) now accepts the legitimacy of private property and markets. Just as Republicans and Democrats in this chamber debate about how best stimulate and regulate the American economy, communists and liberal continue to debate what kind of capitalism Russian should develop. And what has taken shape so far in Russia is still not what most in the West would recognize as a market economy. Nonetheless, the trajectory is in the right direction.

Moreover, since becoming president, Putin has done much to accelerate Russian economic reform. His first major economic reform was the introduction of a flat income tax of 13 percent, a new code, which has raised revenues. Putin’s government and the new pro-Putin Duma passed into law a series of fundamental reforms, including a new land code (making it possible to own commercial and residential land), a new legal code, a new regime to prevent money laundering, new legislation on currency liberalization, and a reduced profits tax (from 35 percent to 24 percent). Under Putin, the Russian government also has balanced the budget and sharply reduced international lending. Throughout most of the 1990s, a major issues of every Russian-American summit was how much Yeltsin was going to ask from the I.M.F. this time around. During Putin’s visit to Camp David last week, I.M.F. loans, requests for debt relief, or pleas for other forms of financial assistance were not on the agenda.

It is still unclear whether these economic reforms have helped the Russian economy, or whether other factors – such as the devaluation of the ruble in 1998 or rising oil prices since 1999 – are the real causes of economy growth. No one, however, debates that the Russian economy is growing. Russian GDP grew by 3.2 percent in 1999, and an amazing 7.7 percent in 2000.[ii] In 2001 and 2002, growth remained positive but tapered off, though many predict that the economy may grow again by as much as seven percent this year. Russian industrial growth increased by 8.1 percent in 1999 and has continued at a positive rate since, with the biggest gains in food production and textiles. Inflation also remained under control – dropping from 84.4 percent in 1998 to 36.5 percent in 1999, while the currency has stayed relatively stable. Real per capita incomes have risen 32 percent raise under Putin, hard currency reserves now exceeds $ 60 billion, the stock market is up fifty percent from this time last year, and Foreign Direct Investment is expected to be way up this year, around $ 12 billion, thanks largely to the BP- TNK joint venture (worth $6.75 billion).

Real problems remain. The Russian economy is still too reliance on volatile oil and gas prices, too many monopolies have not been reformed, the state sector is still large for an emerging economy, no real banking system exists, corruption still plays too huge of a role in business transactions, and hard structural reforms such as pension and housing have yet to tackled comprehensively. But there is little doubt about the general pro-market direction of Russia’s economy today.

Foreign Policy. A decade ago, this Committee would have been alarmed by the cantankerous debate underway in Moscow concerning Russia’s place in the world. Back then, communist and neo-fascist forces with real popular backing were advocating that Russia seek to balance against American power. These voices called for grand alliances with China and India to repel American hegemony. These same forces were suspicious of Western institutions such as NATO, the IMF, and even the European Union. In their view, the central objective of American foreign policy was to weaken Russia.

This perspective still exists in Russia today. But it is not the dominant view among foreign policy elites and is most certainly not the orientation of Putin and his government. Putin and his foreign policy team are still suspicious of American intentions and worried about American hegemonic power. Rather than build alliances to try to balance this power, however, Putin has decided to move Russia closer to the West and closer to the United States in particular, since he sees Russia’s national interests as best served through partnership, not rivalry, with the West. On some issues areas, such as the war on terrorism, Putin has even called the United States an “ally” of Russia. As Putin stated on September 27, 2003, in his remarks after the summit at Camp David held last weekend, the “fight against terrorism continues to be among priorities of our cooperation. I agree with the assessment that the President of the United States has just given. In this sphere, we act not only as strategic partners, but as allies.”

Putin’s understanding of the strategic interests shared between the United States and Russia and his apparent warm personal feelings to President Bush have not yet translated into real breakthroughs in U.S.-Russia relations in the last year. Putin and his government provided real assistance to the United States during the war against the Taliban in Afghanistan. The Russian government trained and armed the Northern Alliance, shared intelligence with their American counterparts, opened Russian airspace for flights providing humanitarian assistance, and did little to impede the creation of American military bases in Central Asia. Beyond Afghanistan, Russia has done little to assist the American war and reconstruction effort in Iraq. Nor, despite the claim of being allies in the war on terrorism, has Putin changed Russia’s policy toward Iran. Russia could play a pivotal role in slowing down Iran’s acquisition of nuclear weapons, but has not yet (at least publicly) taken serious steps in the direction, but instead continues to fulfill its contractual obligations to complete the construction of the nuclear power facility at Bushehr.

Nonetheless, even if tangible “deliverables” cannot be seen yet from today’s Russian-American partnership, the general orientation of Russian foreign policy is not in doubt. Putin looks to the West, not the East or South, when thinking about Russia’s long term strategic interests in the world.

The Big Unfinished Agenda Item: Russian Democracy

Of the big agenda items from the 1990s in Russian reform and Russian foreign policy, only one remains – the future of the Russian political system. The empire is gone and will never come back. Russia is a market economy and will never return to a command economy. The future of Russian democracy, however, is much more uncertain. If Russia fails to consolidate a democratic regime, the current pro-Western orientation in Russian foreign policy could also change over time.

Russia is not a dictatorship. The regime in place in Russia today is radically different from the one-party autocracy that ruled the Soviet Union for seven decades. During the late 1980s and 1990s, democratic practices did take hold in Russia. Although non-elected officials from the Federal Security Service or FSB (formerly known at the KGB) have assumed an increasingly large role in governing the federal government in recent years, elected officials do still control the highest levels of the Russian state. Formally, the way these elected officials rule is guided by a constitution that was ratified by the people in 1993. Generally, Russian individuals and political parties that adhere to the constitution are allowed to participate in elections, although some parties were not allowed to participate in the 1993 parliamentary elections, one group was denied access to the ballot in the 1999 parliamentary vote, and others have been scratched from the ballot in regional contests. (Those Chechen groups labeled terrorists, including the last elected president of Chechnya, also do not have this right). The Russian political system also exhibits some aspects of liberal democracy; most religious, ethnic, and cultural groups can express their views openly and organize to promote their interests (although again the one place of exception to this standard is Chechnya). Likewise, most citizens are equal under the law and most individuals can express their beliefs, assemble, demonstrate and petition

Russia, however, is moving in an autocratic direction. The regime in Russia never met all the criteria of liberal democracy. After his election as president in the spriong of 200, Vladimir Putin inherited a political system with weak democratic institutions – the balance of power between the president and legislative branch was skewed too far in favor of the president, rule of law had only begun to take root, and the political party system as well as civil society was underdeveloped. Since coming to power, Putin has done little to strengthen democratic institutions. Instead, most of Putin’s political reforms have served to strengthen his political power without undermining formally the democratic rules of the game. Putin’s advisors have a term for this transformation -- “managed democracy.”

The evidence of democratic erosion in Russia under Putin is now overwhelming and will only be summarized here (See the attached Appendix for greater details).

Chechnya. Putin’s armed forces continue to abuse the human rights of innocents on a massive scale in Chechnya. Russia may have had the right to use force to defend its borders. But the means deployed to fight this war – torture, including summary executions, bombings of villages, the rape of Chechen women, and the inhumane treatment of prisoners of war – cannot be defended. Putin’s pledge to close all refugee camps in Ingushetiya means that as many as 12,000 internally displaced persons could be forced into unsafe conditions this winter. During the 2000 presidential campaign, Bush remarked, “We want to cooperate with [the] Russian [government] on its concern with terrorism, but that is impossible unless Moscow operates with civilized restraint.” Al Qaeda has supported terrorists in the region, who continue to attack innocent Russians. But the gross violation of international norms by the Russian government in combating the problem has left a trail of devastation that will take years to overcome and has brought Russia no closer to ending this tragic conflict. This kind of war has not made Russia more secure or helped the United States battle terrorism. On the contrary, the war has inspired more fanaticism among enemies of both Russia and the United States.

Media. Since coming to power, Putin and his government have seized control of Russia’s last independent national television networks and silenced or changed the editorial teams at several national newspapers and weeklies. Freedom House recently downgraded Russia’s freedom of the press ranking to “not free.” IREX, which recently published its second annual Media Sustainability Index for Europe and Eurasia, reported that Russia had witnessed serious backsliding in freedom of speech, the ability of its citizens to receive a variety of independent news sources, and the quality of news and information its citizens receive. Reporters Without Borders, which just published their first worldwide freedom of the press index, ranked Russia 121st out of 139 countries assessed, one of the worst performers in the post-communist world even below Uzbekistan and Kazakhstan. When asked at Columbia University last week about recent state suppression of independent media, Putin cynically responded that his government could not repress independent media in Russia because Russia has never had any independent media to repress.

The Federation Council and the Regions. Putin also has put into place a new system for constituting the Federation Council, Russia’s upper house of parliament. Under earlier formulas, the members of Federation Council were elected. Now they are appointed, making the body much less legitimate and much less of a check on presidential power. Putin also has launched an aggressive campaign to increase the reach of the federal government in the affairs of regional government. The results of these so-called reforms are still uncertain, but the intention is clear – greater control of Moscow over sub-national units of the Federation.

Economic and Civil Society. On Putin’s watch, state intrusion in Russian society has increased dramatically, from the arrest and harassment of human rights activists to the creation of state-sponsored “civil society” organizations whose mission is to crowd out independent actors. The current Kremlin campaign against the oil giant Yukos suggests that even Russia’s business class must submit to the arbitrary rule of a resurgent state – a state run increasingly by former KGB officers rather than civilians.

Keeping out “the West.” Putin also seems determined to limit Western contacts with Russian society. His government has tossed out the Peace Corps, closed down the office in Chechnya of the Organization for Security and Cooperation in Europe, declared persona non grata the AFL-CIO’s representative in Moscow, and denied visas to American academics. In his remarks at Columbia University last week, President Putin called on American scholars to bury once and for all Sovietology, yet the actions of his government are contributing directly to the resurgence of this form of imperfect analysis from afar, without access to information about how decisions are made in the Kremlin.

Elections. Most ominously, the Kremlin has intervened egregiously to influence the electoral process, removing without just cause candidates in regional elections, including the upcoming election for governor in Chechnya (in which there is now, thanks to the Kremlin, only one real candidate), and limiting the flow of information about the next parliamentary vote in December. Putin’s new rules make it illegal for analysts to comment on the campaign. Putin’s government also has taken actions to limit the independence of Russia’s oldest and respected polling firm, the All-Russian Center for the Study of Public Opinion, since most opinion polls show that a solid majority of Russian citizens support democracy, a growing portion does not support the military campaign in Chechnya, and only a minority is prepared to back the government’s party in the upcoming parliamentary election.

Putin of course did not personally orchestrate all of these democratic rollbacks. But he also has done nothing to reverse them.

The campaign to erect managed democracy has had serious negatives consequences for the quality of democracy in Russia. The destabilizing consequences of this campaign, however, are less apparent. Above all else, there is no demand from society for a more liberal, democratic order.[iii] While some pockets of civil society have tried to resist authoritarian creep, the vast majority in Russian society has demonstrated little interest or capacity to withstand Putin’s anti-liberal reforms. This form of government could be in place for a long time in Russia.

The Relationship between Russian Democracy and U.S. National Security

Why should this Committee or anyone else in American care about the future of Russian democracy? It is their problem right? And even if we did want to help, do we have the means to do so? Do the Russian people even want us to help?

At the most general level of analysis, there should be no question that the United States has a strategic interest in fostering democratic regimes abroad, and especially in large, powerful countries like Russia. Democracies do not attack each other. This hope about the relationship between domestic regime type and international behavior centuries ago has become an empirical reality in the twentieth century. No country’s national security has benefited more from the spread of democracy than the United States. Today, every democracy in the world has cordial relations with the United States. No democracies are enemies of the United States. Not all dictatorships in the world are foes of the United States, but every foe of the United States – Iran, Libya, North Korea, Cuba, and possibly in the future, China – is a dictatorship. With few exceptions, the countries that provide safe haven to non-state enemies of the United States are also autocratic regimes. With rare exceptions, the median voter in consolidated democracies pushes extreme elements to the sidelines of political arena. Democracies also are more transparent, which makes them more predictable and less able to hide hostile activities, such as the production of weapons of mass destruction for non-state actors. Logically, then, the expansion of liberty and democracy around the world is a U.S. national security interest.

The deductive logic of this argument about the “democratic peace” is complemented by empirical evidence from the twentieth century. In the first half of the last century, imperial Japan and fascist Germany constituted the greatest threats to American national security. The destruction of these tyrannical regimes followed by the imposition of democratic regimes in Germany and Japan helped make these two countries American allies. In the second half of the last century, Soviet communism and its supporters represented the greatest threat to American national security. The collapse of communism in Eastern Europe and then the Soviet Union has greatly enhanced American national security. The emergence of democracies in East Central Europe a decade ago and the fall of dictators in South Eastern Europe more recently have radically improved the European security climate, and therefore U.S. national security interests. Without question, however, liberty’s expansion produced the greatest payoff for American national security when democratic ideas and practices began to take hold within the USSR and then Russia. So long as unreconstructed communists ruled there, the USSR represented a unique threat to American security. When the communist regime disintegrated and a new democratically oriented regime began to take hold in Russia, this threat to the United States diminished almost overnight.

Regime change insider Russia was not the sole cause of the sea change in Russian behavior internationally. Russia today is much weaker, militarily and economically, than the Soviet Union was at the time of its collapse. Even if Russia wanted to underwrite anti-American movements in third countries or construct anti-NATO alliances, it may not have the means to do so. And yet, power capabilities are not the only variable explaining the absence of balancing against the West, any more than the military equation was the only reason for Soviet-American enmity during the Cold War. Russian foreign-policy intentions have changed more substantially than Russian capabilities. Russian weakness was part of the diminishing threat, but only a small part. After all, Russia still has thousands of nuclear weapons capable of reaching American territory. A new fascist regime in Russia would make this arsenal threatening once again.

The chances of Putin or his successor restore full-blown autocracy in Russia are remote. Yet, well before the reinstallation of Russian dictatorship, the negative effects on American national interests of partial democratic reform in Russia can already be observed. In Kosovo just a few years, a renegade Russian military operation to occupy Pristina nearly precipitated the first direct combat between NATO and Russian troops. Had Russia in place at the time a fully consolidated democracy, complete with civilian control over the military, this dangerous fiasco would not have occurred. Today, it is no coincidence that the most Soviet-like, unreformed elements of the Russian state are the same actors threatening American security interests, be they the Russian armed forces fighting in Chechnya and threatening Georgia, the Ministry of Atomic Energy working with Iran, or the remnants of the KGB operating to counter American influence in Ukraine.

Today Putin enjoys high approval ratings, giving him the capacity to rule without the support of anti-democratic elements and unreformed units of the Russian state if he chose to do so. Nonetheless, even with victory certain in the 2004 presidential election, Putin appears at times to be beholden to these forces now. Many Kremlin watchers already ascribe incredible power to the former FSB officers now serving in Putin’s government both in the ministries and in the presidential administration. If Putin’s popularity were to fall, then he would have to rely even more heavily on these FSB officers, as well as on the so-called power ministries such the Ministry of the Interior and the Ministry of Defense (both now headed by former FSB officers). In the worst case scenario, if democracy were suspended completely, Putin or his successor would become completely dependent on these forces. In this scenario, the guys with guns who would be needed to maintain autocratic rule are also the same domestic constituencies in Russia, which are most hostile to the West, and the United States in particular. It was democratic regime change in the Soviet Union and then Russia that put an end to a cold war. Russian regime change in the opposite direction will rekindle competition between the U.S. and Russia.

If Putin or some other leader does eventually erect a new dictatorship, then the other achievements of the last decade mentioned above could also become less secure. In dictatorships, the military is the most important constituent. In Russia, the military is the most pro-imperial interest group in the country.

In contemporary dictatorships, capitalism rarely thrives. China is the exception; Angola is the rule. After a decade of postcommunist transition, one of the striking outcomes across the board is the correlation between democracy and economic growth.[iv] Recent studies of transitional economies suggest that an independent media and a strong party system are more important for fighting corruption than a bloated police force. The best watchdogs for bad policy and corrupt government are hungry politicians who want to get back into power through the ballot box or investigative journalists who want to make their name by exposing company fraud. Moreover, dictatorships are best at guiding economic growth when the task is to move from an agrarian-based to an industrial society. Russia’s task today, however, is to make the shift from an industrial to a post-industrial economy. The Soviet state could build Uralmash, but the new Russian state cannot pick the next Bill Gates. In addition, a Russian state that takes away the license of an independent television network or uses the law to weaken Yukos as an economic and political power can also seize the assets of American oil companies or portfolio investors.

More generally, the Yukos affair suggests that there are two economic models being advanced by different factions within the presidential administration and Russian government. Russia’s liberal reformers want see a form of capitalism in Russia in which the line between the state and the private sector grows increasingly clear. Their opponents favor a closer relationship between the state and economic entities in which the state retains partial ownership (and complete control) of Russia’s major companies. For the first group, Yukos is a model company. For the second group, Gazprom or Rosneft are preferred models. Over the long run, economies based on the latter model do not produce as much growth as those based on firms controlled by private owners.

Finally, the United States should want to see the consolidation of democracy in Russia because the people of Russian want democracy. In poll after poll, Russian report that they value democratic ideals and practices, even if they are not ready at this time to fight for the protection or promotion of these practices.[v]

Steps to Help the Cause of Russian Democracy

The battle for democracy within Russia will largely be won or lost by internal forces. In the margins, however, the United States can help to tilt the balance in favor of those who support freedom. The U.S. Congress has an important, independent role to play, especially today when the Bush administration is distracted with other foreign policy issues. While many issues in U.S.-Russian relations should be tackled principally and primarily by the executive branch, democracy promotion is one issue in which the U.S. Congress should take an active role.

Maintain Support for the Freedom Support Act (FSA). Paradoxically, at a time when Russian democracy is eroding, some Bush administration officials have begun to discuss the timetable for Russia’s “graduation” from American-funded democracy programs. Perhaps reflecting this idea, the Bush administration originally requested to cut funds for Russia under the Freedom Support Act from $148 million in 2003 to $73 million in 2004. The job of democracy building in Russia is not only incomplete, but becoming more difficult. This is no time for “graduation.” And if the United States abandons democratic activists in Russia now – well before democracy has taken root – what signal will this send about American staying power to those democratic leaders in Iraq and Afghanistan? Congressional leaders, including some on this Committee, demonstrated real leadership in adding funds.

Michael McFaul is the Peter and Helen Bing Senior Fellow at the Hoover Institution. He is also an associate professor of political science at Stanford University and a nonresident Senior Associate at the Carnegie Endowment for International Peace. His books include, with James Goldgeier Power and Purpose: American Policy towards Russia after the Cold War (Brookings, 2003); with Timothy Colton, Popular Choice and Managed Democracy: The Russian Elections of 1999 and 2000 (Brookings, 2003); and Russia's Unfinished Revolution: Political Change from Gorbachev to Putin (Cornell University Press, 2001).