Remarks by The Honorable Alexander Vershbow, Ambassador of the United States to the Russian Federation

Moderator: Anders Åslund, Director, Russian and Eurasian Program, Carnegie Endowment for International Peace.

Transcipt by:
Federal News Service
Washington, D.C.

AMB. VERSHBOW: Thank you very much, Anders, and thanks for the opportunity to speak once again here at the Carnegie Endowment. I very much enjoy meeting with your colleagues at the Carnegie Center in Moscow. And it's fair to say that both in Washington and in Moscow, Carnegie does enrich and enliven the debate on issues that I've been following all my professional life.

It's good to see such a huge turnout and to see so many friends and colleagues -- past, present and future. I thought that this town was totally focused on Iraq. I'm glad to see that Russia is getting a little bit of attention as well, because it is a serious issue, and you raised a number of big questions which I'll try to address in my remarks, and then try to leave some time for questions.

As Anders mentioned, I was here exactly a year ago to give my reflections on the state of the U.S.-Russia partnership. Then I remarked on the significant internal changes that had taken place in Russia, and the even more remarkable transformation in the U.S.-Russian relationship following September 11th. And since that time, there has been further progress, but also some discordant notes. We successfully navigated the crisis in our relationship over Iraq. Our presidents held a very productive summit at Camp David. We held a second commercial energy summit in St. Petersburg. And we continue to cooperate on a wide range of political and strategic issues.

On the other hand, the last independent national television network in Russia has disappeared. The war in Chechnya continues. Yukos founder Mikhail Khodorkovsky was arrested under controversial circumstances. And we had the recent Duma elections, which fell short of OSCE standards.

Now, while all of these developments are important, I'd like to focus particularly on Russia's political landscape and the future of the U.S.-Russian relationship in the wake of the recent elections.

As you all know, December's Duma elections represented a triumph for the political forces allied with President Putin, as well as nationalists such as Vladimir Zhironovsky's inappropriately named Liberal Democratic Party and the leftist nationalists Rodina, or Homeland bloc, that the Kremlin sponsored to siphon off votes from the Communists.

In fact, the election dealt a serious blow to the Communists, whose support dropped by roughly one-half, much of it lost to Rodina. Support for the two main reformist parties -- Yabloko and the Union of Right Forces, SPS, dropped by roughly one-third and one-half respectively, leaving scant reformist presence in the incoming Duma. The elections changed Russia's political landscape dramatically, leaving President Putin and his supporters with unassailable control of the Duma.

While most of the headlines have focused on the big win for the United Russia, that wasn't the only story. Personally, I think a longer perspective is needed before anyone can judge whether any particular party has, quote, "completed its historical mission," unquote, as one Kremlin official asserted. However, what does seem certain is that the reformist parties and the Communists were unable, for a number of reasons, to deliver a message that resonated with many voters.

In the case of the reformists, an atmosphere of hostility to and distrust of business that was fomented during the run-up to the election certainly played a role. In the case of the Communist Party, it appears that the Homeland bloc provided a more appealing option for disaffected voters who had previously always voted Communist.

What did connect with voters and what did surprise many analysts were redistributionist and nationalist themes. Both Russian and Western observers speculate that voters angry about poor living standards and crumbling social services were attracted to messages that blamed the rich for their problems. Others may have been attracted by candidates who tapped into the sense that Russia isn't being accorded the respect that's due a great nation.

As you know, the OSCE and the Parliamentary Assembly of the Council of Europe conducted an extensive election observer mission, in which the United States participated. Election Day itself took place with relatively few observable irregularities.

However, the observer mission judged, in its preliminary statement, that the elections failed to meet many OSCE and Council of Europe standards. In particular, the observer mission highlighted a flawed pre-election process, a charge that was brusquely rejected by the Kremlin. The OSCE found extensive use of administrative resources, as they describe it, the media favoritism, to the benefit of pro-Kremlin parties.

The pro-United Russia and the antic-Communist media bias was really quite overwhelming. One reputable firm that measured the quantity and the tone of references to parties during the campaign on a scale that went from plus-300 to minus-300 had United Russia at plus-226 and the Communists at minus-262, in terms of their treatment on the TV stations. The two reformist parties attracted about a third as much coverage, and it was only modestly positive.

Therefore, it's impossible to know what the result would have been without these influences, but still they surely made for an uneven playing field.

I have to say that when I began my Foreign Service career some 25 years ago, I never expected to hear myself lament an anti-Communist bias in the Russian media. (Laughter.)

(Chuckles.) But it's a fact that the party of Lenin, Stalin and Beria seems to have been the victim of some outrageous active measures, now known as black PR, including some phony pamphlets depicting its leader, Gennadi Zyuganov, addressing an SS reunion, and things of that kind. (Laughter.)

But having said all this, and despite the concerns about the process by which the campaign was conducted, the results of the election weren't surprising. United Russia's sweeping victory was clearly a vote for President Putin and for the continuation of the politics of stability that he has been pursuing. The party stayed relentlessly on message, and the message, "We are with Putin, and Putin is for us," had enormous resonance with a public that's still very weary of the tumultuousness of the Yeltsin era. Putin does remain incredibly popular with approval ratings hovering around 75 percent, even if some of his specific policies and the performance of his government are less popular.

So, what will the next session of the Duma bring? Assuming President Putin is reelected, as -- it's a pretty safe assumption -- he will be able to count on a United Russia that holds an outright majority in the Duma. Indeed, with some re-labeling of some independent candidates, they have the more than two-thirds majority needed for constitutional change. No previous leader in Russia's short history as a constitutional democracy has held such a strong mandate.

In broad terms, I think most observers tend to foresee two possible scenarios as to how this unprecedented mandate will be used, one optimistic, one pessimistic. An optimist would expect a newly reelected President Putin to use his commanding majority to accelerate the pace of reform, completing the economic, banking and administrative reforms that ran aground in the outgoing Duma. According to this view, a second Putin administration might close tax loopholes while reducing the fiscal burden on average Russians. A reorganized banking system could make money available for smaller enterprises and help increase access to mortgages. Reforms aimed at increasing investment in the housing stock and improving educational opportunities are other obvious possibilities and would address some key public concerns. Public dissatisfaction over the bloated bureaucracy, about the opaque judicial system and about widespread corruption could also prompt reforms.

And having an acquiescent legislature would obviously ease passage of even the most ambitious and controversial reform program, although one has to say that the absence of opposition does have hidden costs. The mere presence of a principled opposition can force a majority to justify its legislative program in ways that help identify its flaws. The absence of strong opposition could lead to even more opaque decision-making than we see now.

In any event, even among those who are most optimistic about a new reformist push on the economic side, there is little hope for a reversal of the recent trends toward limiting civil society and media independence or for an end to the conflict in Chechnya, where serious human rights violations continue.

So if that's the best case, what would a pessimist argue? The pessimistic view is that as a result of President Putin's commanding mandate, reform itself is in danger. Although the United Russia Party has been defined more as a party of power than as an ideological movement, the center of gravity in the incoming Duma has shifted to the left, or, perhaps more precisely, towards those with a more nationalistic and statist outlook.

This has been accompanied by the obviously growing influence of the so-called "siloviki," those associated with the security services and law enforcement agencies, who also seek to elevate the state's role in Russia's economic and political life. To the extent that nationalist and statist thinking becomes more acceptable, liberal reforms could be subject to delay or dilution. Free debate and democratic values could wither in this kind of environment.

A pessimist also would argue that many members of the new Duma, and their like-minded allies in the Kremlin, favor state control of the economy, even at the expense of economic growth. Although some incoming Duma members may accept that trade-off, such policies would make it far more difficult to achieve President Putin's goal of doubling GDP in 10 years. In fact, if some of the more extreme campaign rhetoric were translated into legislation, the progress of the past decade could be under threat. In particular, such steps could threaten the security of private property, which now provides a stake in the system for many, and which has given rise to a new generation of entrepreneurs in Russia.

Well, speaking personally, of course I'm going to hedge my bets. My view does fall somewhere between the optimistic and pessimistic scenarios. I do believe Putin will use his broad authority to pursue at least some of the economic and administrative reforms that he has long advocated. He has been making reassuring statements about pursuing a reform agenda, encouraging international investment, and continuing U.S.-Russian cooperation. But recent events do reinforce the impression that he favors the values of order and control over freedom and growth, or at least that he doesn't see a trade-off between them, as do many here in the West. And certainly, he will not face fewer constraints in pursuing increased control, should he so desire.

So there's my take on the current political landscape in Russia. Let me turn now to the state of U.S.-Russian relations and how the new political landscape may affect those relations.

Although the 1993 constitution does place the primary responsibility for conducting foreign affairs with the Russian president -- and President Putin himself appears to favor closer, if not unlimited, cooperation with the United States -- the composition of the incoming Duma could have some impact, perhaps a significant impact, on our relationship nevertheless. The actions of the Duma and Putin's second term administration, particularly in the area of economic and administrative reforms, will shape the environment for foreign investment and for integration with the West as well as other aspects of our relationship.

Unlike 20 years ago, when security issues defined our relationship almost entirely, today the United States and Russia cooperate on many issues on which both sides see their interests as clearly coinciding. At the Camp David summit, President Bush and President Putin reaffirmed their commitment to a new strategic relationship and to broadening even further the agenda of our cooperation. The presidents stressed, first and foremost, that they would continue our joint efforts in the fight against terrorism. They agreed to move ahead with implementation of the Moscow Treaty's radical cuts in nuclear warheads. And they committed to step up work on the new security agenda -- issues like nonproliferation, missile defense, military-to-military cooperation -- and on global challenges such as HIV/AIDS.

The strains that the Iraq crisis put on our relationship have largely been overcome. President Putin has made clear Russia wants to see stability and democratic change in Iraq, as well as in the wider Middle East. We're working to engage Russia in Iraq's economic reconstruction and in the transition to a new Iraqi government. After the visit of former Secretary Baker last month, Russia's come out in favor of providing debt relief for Iraq through the Paris Club.

We consult closely on Afghanistan. We're working together with other countries to deal with the two main challengers to the global nonproliferation regime, Iran and North Korea.

Our expanding commercial ties are an increasingly important dimension of the relationship. Russia's potential to become a major supplier of oil and liquefied natural gas to the American market is of particular interest. But our economic links do transcend the energy sector. We have a strong interest in seeing Russia develop a balanced and diversified economy, fully integrated into the global trading system. This would make Russia a stronger and more stable partner on the international stage, and it would benefit U.S. businesses as well.

Expanding trade and investment and cooperating on such issues as terrorism and proliferation should be relatively straightforward, as our common interests in those areas are readily apparent. The more difficult challenge we now face is to move beyond these areas of cooperation to other, more sensitive and complex issues where cooperation could benefit both countries but would also require a less rigid worldview and the expenditure of more political capital. A good example of such an issue can be found in our efforts to cooperate to resolve crises in several of the former Soviet republics, where cooperative efforts easily fall prey to distrust in Moscow about U.S. motives.

We believe that, working together, our two countries could contribute to stability along Russia's periphery, such as in Moldova, the Caucasus and Central Asia. We recognize that Russia has significant interests in the region and that good relations between Russia and her neighbors serve everyone's interests.

The United States has significant interests in the region too, and they come not at Russia's expense but to the benefit, we hope, of all parties. However, many in Russia appear to continue to believe that increased contacts and cooperation between the United States and Russia's neighbors are a zero sum game and that American influence comes at Russia's expense and is even a threat to Russia's security.

In fact, we recently have seen Russia adopt a more assertive stance towards its neighbors. This new policy is reflected in Russia's unilateral diplomacy in Moldova, where a cooperative framework to help resolve the Trans-Dniestrian dispute already exists. We've seen it Russia's highly visible meetings with the leaders of Georgia's three separatist regions and in Russia's dispute with Ukraine over Tuzla Island.

Many in Russia clearly remain unhappy with NATO's expansion eastwards even as Moscow voices satisfaction with its cooperation with NATO through the NATO - Russia Council. And a more strident tone in foreign policy debates in the new Duma could cast doubt on Russia's openness to integration with the West and could, in the worst case, chill Russia's relations with its neighbors. So, our efforts to cooperate on the resolution of some of these long-simmering conflicts around Russia's periphery may provide an early test of just how far we can go to deepen our bilateral relationship.

From the American viewpoint, there are several other priority areas where we also believe we should try to deepen cooperation and overcome lingering Cold War thinking: broader military-to-military relations, joint industrial projects on missile defense, moving from information exchange to operational cooperation against terrorism, and shoring up the increasingly leaky nonproliferation regimes. Progress on all of these fronts would contribute to both nations' security.

Certainly both sides need to see more tangible benefits from the relationship before we can speak of a longer term and more enduring strategic partnership. Expanding trade and investment would help generate such benefits and give average Russians and Americans a direct stake in the success of our relationship and thereby create more domestic political support in both countries for the relationship. Investor confidence would certainly be bolstered by further Russian progress in such areas as administrative, legal and judicial reforms. In this connection, the concerns raised by the Yukos affair about the independence of the Procuracy, and the selective application of the law for political purposes, do need to be laid to rest. We hope to see Russia continue to progress toward accession to the World Trade Organization, with all of the reform that that implies, and we'd like to capitalize on opportunities for further U.S. investments in the oil and gas sectors, including the construction of new export pipelines. There are many potential areas for economic cooperation in high tech fields, from aerospace and telecoms to bio-technology as well as vast opportunities in the burgeoning consumer and retail sector if Russia continues to foster a favorable and predictable investment climate. So, whether that will be the case is one of the questions we still can't fully answer, and in the wake of the Duma elections and other developments over the past year.

Finally, if our cooperation is to develop to its fullest, Russia must demonstrate a deeper commitment to democratic values and human rights. In cold economic terms, the acceleration of anti-democratic trends could threaten Russia's continued economic growth. Multinational corporations and investors tend to avoid risking their capital in countries where the rules of the game are constantly being rewritten, and where property rights are not fully secure. And Russian entrepreneurs and foreign companies alike will hesitate to invest as long as they must contend with a corrupt and intrusive bureaucracy, as well as a rising sense that law enforcement agencies and prosecutors can act arbitrarily or selectively without any effective check.

While economic growth and political control aren't totally incompatible, the full modernization and integration that Russia seeks are, in our view, only achievable in a free and open society, a society based on the rule of law and governed by truly independent branches of government with independent media that together hold business and political leaders accountable for their actions.

So these are some of the economic reasons why democracy matters.

On the political level, I always tell my Russian interlocutors that support in the United States for cooperation with Russia will decline if there's a sense that democratic values are at risk in Russia or that political debate is too heavily influenced by those whose worldviews are narrow and exclusive, instead of open and inclusive. The Duma election results and the widespread perception that the state is tightening its control over civil society have, needless to say, heightened these concerns.

So although we remain eager to develop a true partnership with Russia, to do so, both sides will need to work hard -- or even harder -- to develop a stronger sense that we're acting on the basis of shared values. America's relations with such traditional allies as Britain, Germany and Japan are anchored by common civic values that enable the relationship to weather the occasion sharp differences of opinion. And many observers believe that the U.S.-Russian relationship still lacks that kind of anchor, and I think it would be unfortunate for both countries if our relationship evolved from one once defined by the missile gap to one that's constrained by a values gap.

Now in order to develop these common values, the United States is continuing to support the development of Russia's civil society at the grass-roots level, even if we have somewhat fewer resources at our disposal than we did in the past. I and members of my staff frequently meet with human rights activists, religious leaders, members of think tanks, independent journalists and others. We supportive effective NGOs, train promising young jurists on issues relating to the rule of law, and we speak out on issues of concern, from corruption to the persistent problem of ethnic discrimination.

We continue to support a range of exchange programs to expose the post-Soviet generation of Russians -- high school and college students, young professionals from the public and private sector -- to how our country works, and to how our society confronts problems that do arise in any democratic society. Sadly, funding for exchanges has been seriously cut just at the moment we need them more. Of course we recognize that at the end of the day, the Russians themselves must choose their own future and will decide whether they want to develop their society on the basis of the same civic values that we cherish. But our engagement can make a difference in shaping that choice.

So, to conclude, following the Duma elections and President Putin's likely reelection, I don't foresee the United States and Russia veering sharply from the path of cooperation and partnership they found themselves on after September 11th. Based on the many common interests that we share in the post-Cold War, post-9/11 world, we will certainly continue to pursue the same open and collaborative policy toward Russia, as there are so many issues on which we surely need to work together.

Nevertheless, the new domestic political situation in Russia does raise questions about how much further the relationship will progress and whether it can advance to a higher level -- whether it can evolve into the kind of relationship we enjoy with our traditional allies. This is, I think, the goal we should continue to set; we shouldn't lower the bar. And we'll be watching very closely for clues as to where Russia wants to go during the early months of Russia's new -- or President Putin's second administration.

Thanks very much. (Applause.)

MR. ÅSLUND: Thank you very much. I think that this was a presentation both candid and judicious. Please, the floor is open for questions.

Q Mr. Ambassador, what -- in your view, what specifically did Khodorkovsky do? Was it a set of actions on his part that the Kremlin decided at a certain point to crack down on and arrest him? What -- what specifically happened? Can I follow up to that?


Q Okay.

AMB. VERSHBOW: Well, there's still no definitive analysis. A lot of factors were involved. I think that clearly, President Putin and the leadership viewed Khodorkovsky as posing both a political challenge and becoming too much of an independent actor in the economic sphere. One hears a lot about his efforts, not just to finance political parties, which is done by lots of Russian businessmen, but to try to build a strong blocking opposition in the new Duma to the financing of candidates and placing Yukos-connected people on different party lists. One also hears a lot about his efforts to sort of usurp authority over the construction of export pipelines, working directly with the Chinese, for example, to build a pipeline from Angarsk to Dajing, challenging the state's monopoly over export pipelines, also promoting a private pipeline from western Siberia to Murmansk.

So a number of different factors, I think, were involved, as well as the fact that there may well indeed be some questionable activities, if one digs deep enough into the past of Khodorkovsky and the Yukos Company, that at least provided a basis for the criminal charges. So I don't know which of the factors, political or economic, were the predominant ones, but I think we tend to see the political ones as perhaps more important, the political challenge that Khodorkovsky was posing to the authority of the state and to Putin's leadership.

Q But was he setting himself up?

AMB. VERSHBOW: Well, I think that certainly with hindsight I'm sure Mr. Khodorkovsky, as he sits in his cell, is wondering whether he could have made some different choices at different stages of the process. But he made no secret of his political ambitions, but, I think, also felt he was operating within the rules of the game that had been established. But clearly, that he read the rules a little differently than did the political leadership.

MR. ÅSLUND: Johannes Linn.

Q Johannes Linn from Brookings. You talked about the possibility of a growing value gap, and defined it pretty much in terms of what would need to be done by the Russians to not let that gap grow and what are the expectations of the U.S. in this regard. Can you tell us a little bit about what are the expectations, a reasonable Russian side, in terms of how the U.S. needs to behave so as not to let this value gap grow? I think it takes two to tango, and it would be important for us to know what are the Russian's expectations of the U.S.

AMB. VERSHBOW: Well, I certainly agree that the body of common values that should be the foundation of any true strategic partnership need to be not just words but reflected in deeds on both sides.

I'm not sure the Russians have articulated how -- you know, their concept of this, vis-a-vis the U.S. They tend to prefer to view these issues as internal affairs and that we should separate the international agenda and the economic agenda from these values issues. And as I said earlier, we believe that that's, you know, ultimately not good for Russia's own interests in terms of developing a truly vibrant political and economic system that can help achieve the greatness that Putin and other Russian leaders aspire to. But it also tends to undermine the political confidence that's needed for a long-term partnership of the kind that we would like to have. It offends key constituencies in this country that are very much interested in Russian -- in partnership with the Russians but believe that it can't go forward in some areas without greater respect for civil liberties, independence of the media and the like.

So I'm not sure what the Russians would say as to what they -- what their expectations are on the values side for the U.S. I think the problem is that they don't see it as important an issue as we do, and that itself is a problem.

MR. ÅSLUND: Thank you very much. I can't register all of the hands, partly because of the light here. So -- I've seen you, yes, thank you. Thank you. Now I've got you. Ambassador Hartman.

Q Yeah. Sandy, hi. What's your sense of the attitudes in the military toward cooperation with the United States? For a while it looked as though some of the younger officers saw real opportunities, from the point of view of their previous feeling of a lack of modernization.

AMB. VERSHBOW: I think that there are different views within the Russian military. And this is not just a generational issue; I think even at senior levels there are some generals we encounter that are much more interested in expanding cooperation than others.

I think that those who favor more cooperation recognize that achieving a higher level of interoperability through more exercises and training would enable Russia to be more of a central player in future peacekeeping missions or other kinds of missions, counter-terrorist missions; that without going through that process, Russia will always be kind of more on the margins. I think some Russians also see more cooperation as beneficial for Russian military reform, which is still not moving very far in the right direction. Learning more from the American experience, or from other Western countries who may solve problems differently, can only benefit Russian military reform.

But I think the still prevalent view is much more wary of this, seeing this as some kind of trap that's going to undermine national resolve. They still view the U.S. as an adversary or potential adversary and believe that cooperation is going to somehow degrade Russian military effectiveness and reduce Russia's freedom of action in the world.

So, hopefully, this debate, as it rages on, will be ultimately won by those who favor more cooperation, because we do need a stronger and more effective Russian military. We need a more reformed Russian military in order to strengthen Russia's role as a partner in dealing with the common threats. Again, this is something I wouldn't have said when I started my career, that I want a stronger Russian military! (Laughter.) But I think the world needs this. Whether through NATO or through bilateral cooperation, we hope we can achieve it.

MR. ÅSLUND: Please? And if you can introduce yourself by name and institution.

Q I'm Al Millikan, affiliated with Washington Independent Writers. What is your sense of how ordinary Russians view the U.S.-Russian relationship in fighting terror? Do you think many Russians see a double standard or hypocrisy on the part of the United States? Is there a sense that Russians perceive the United States caring more -- or caring just as much about Russian lives as being valuable and sacred as they do American lives?

AMB. VERSHBOW: I think the Russians have come to see us as more and more helpful in dealing with the terrorist threats that Russia faces. We have done a lot of things in a concrete way to help cut off the external support for Chechen terrorists from Al Qaeda and from other networks; working with Georgia, working through multilateral mechanisms, law enforcement mechanisms, to deal with arms flows, financial flows to these groups; helping the Georgians take better control of their own borders to prevent the Pankisi Gorge from being used as a sanctuary for Chechen terrorists. And through the information-sharing that's going on between our intelligence agencies, we have, I believe, helped in concrete ways in enabling the Russians to track down some of the terrorists who have been carrying out attacks such as the seizure of the Moscow theater. We've put these groups -- or some of these groups on our terrorist watch list.

So I believe perceptions have evolved. We sometimes hear the language of double standard whenever we criticize other aspects of the Chechnya policy, which we continue to do and we should do, because the way they're trying to deal with the problem in Chechnya, in our view, is leading to needless suffering of the civilian population, human rights abuses; they are not holding enough of their own troops accountable when they commit excesses. And so, our message is yes, there's terrorism in Chechnya, we're going to help you deal with that, but not all Chechens are terrorists and you need a political strategy that's more effective for solving the Chechen conflict. And so that's when we start hearing about double standards, but we are quite convinced that we are doing the right thing.

MR. ÅSLUND: Keith Bush, U.S.-Russia Business Council.

Q Mr. Ambassador, on the subject of Russia's accession to the WTO, what concessions is the American side demanding besides greater access to insurance, banking, civil aircraft and greater implementation of intellectual property rights safeguarding?

AMB. VERSHBOW: Well, you've got most of the list there.

Q (Laughs.)

AMB. VERSHBOW: (Laughs.) Stronger protection of intellectual property rights is one of the biggest issues that is holding up completion of WTO accession negotiations. And we've made this a very big issue on the part of our Embassy, because the piracy of CDs and DVDs is absolutely rampant. Something like 90 percent of the DVDs on the market are bootlegs, and close to that number for compact discs. And the Russians have finally begun to pay attention to this. They've passed some legislation, but enforcement of the law, shutting down of illegal plants, has barely begun. So that's a big issue.

We do want more openness in the banking and insurance, as you mentioned, also in telecoms, where they've actually got on the table a position that would close the market compared to where it is now, which doesn't seem to us is a good basis for a solution. There are tariff issues relating to aircraft, civil aircraft and automobiles. There are a range of agricultural issues, particularly on the issue of -- what are they called -- SPS, Phytosanitary standards.

So there's a range of issues, but we've been working very hard in almost monthly bilateral talks, a lot of work in the Geneva multilateral framework to try to get this process finished. I think it's possible this year, if the Russians are prepared to show a bit more flexibility on these issues. You know, reasonable compromises are out there, if the Russians really want this. That's another one of the questions, though, that we won't perhaps know the answer to for a while: Will there be a diminution in Russia's desire to join WTO in the wake of the trends I described earlier, or will that still be a high priority for President Putin?

MR. ÅSLUND: Thank you. I have a hand in the back there. It's Ira Straus, I think. Please.

Q Thank you. Mr. Ambassador, we all share the concerns you mentioned about the election. And the main complaint in the West about the election is that the two parties that did share our values -- SPS and Yabloko -- didn't make the 5 percent level. And yet there's been a major independent recount covering a huge number districts, which shows that Yabloko did pass the 5 percent mark, and SPS was teetering right on the edge of it.

I'm wondering, in the Embassy among our analysts, how seriously is this recount taken? Is it viewed as probably valid or probably nonsense? And if it is viewed as possibly valid, do we have an interest in it, since presumably we would have a great interest in having those two parties in the Duma. And can we find a way to express that, as we expressed a great interest in the recounts in Georgia and other places with very considerable effect in recent times?

AMB. VERSHBOW: Well, I'm not familiar with the recount you just described, whether those kinds of findings have already been reached. But certainly, we have expressed our concerns about many aspects of the process and have lined up, as I indicated, with the assessment of the OSCE and the Council of Europe. And there were indeed questions not only about the pre-election process and the media slant, et cetera, that I described, but certainly, at least in some localities, questions raised about the vote counting.

So, certainly we're interested in these recounts. We need to assess the methodology before we decide whether to agree with the conclusions. The Communists did their own mini-parallel vote count on election day or the day after the elections; exactly how credible that is remains to be seen. But it was of interest to us in that it didn't show any greater votes for the Communists, but did show a higher result for Yabloko. So, all these things I think should be looked at carefully. I think the Russian Central Election Commission needs to deal with the formal complaints that have been lodged by several of the parties in a transparent way, and that's what we've urged from the very start of the process.

MR. ÅSLUND: Edward Burger, the Institute for Health Policy Analysis.

Q Mr. Ambassador, I have two questions. President Putin in 2000, in his first speech to the Duma, said that a severe security issue for Russia was the falling population. He repeated the message in 2003 with more elaboration. It isn't clear that the government has put anything in the way of a shoulder behind that. And as a follow-up then, I wonder what you think they might do about that?

The second question is a different one. China is hungry for energy; Siberia has a surplus of natural gas. What do you see as new economic and perhaps strategic relationships in that part of the world that may make us think about those matters, and how do you think we should think about them?

AMB. VERSHBOW: As for the falling population, the demographic crisis, clearly Russians are quite alarmed about it. But I think the main thing they're hoping for is that economic growth will sooner or later translate into a rising birth rate, and that they'll begin to come to grips with the crumbling health care system as they generate new funds and start some new programs.

But there's no real strategic plan that I've seen to deal with the demographic decline, and they're very ambivalent about a more open immigration policy, which could be one approach. They -- you know, they do have a reasonably open-door policy for people from the former Soviet republics, but -- and there has been some offset to the increasing mortality rates by immigration in the last decade, but not enough to stem the general trend. So the short answer is, they're not doing all that much.

I think that part of the problem is -- that's led to this precipitous decline in male life expectancy to 58 is, you know, a whole array of unhealthy lifestyle choices and alcohol abuse, now rising drug abuse, 70 percent of the men are smokers, et cetera.

And we are supporting a new initiative with -- the Russians are launching, called Healthy Russia 2020, which is centered on a public information campaign to try to encourage people to be more aware of the consequences of these bad lifestyle choices and to adopt habits that could prolong their lives. And we have high hopes for this process.

China certainly is going to become, I think, a big -- much bigger importer of Russian energy, and that's a natural relationship which I think we should view with equanimity. I think to the extent that they become more interdependent in this fashion, it can be a factor for stability in the region and promote broader economic cooperation in Asia.

Now, exactly how the Russians view it, it's not entirely clear since they seem to be leaning more towards the more grandiose pipeline from Angarsk to Nakhodka on the Pacific Ocean, which would enable them to service many different markets beyond China. But I think they do see the imperative of expanding their export capacity in order to serve the rising demand in China and other Asia-Pacific markets.

MR. ÅSLUND: Thomas Dine, Radio Free Europe, Radio Liberty.

Q Thank you. Mr. Ambassador, I know you're concerned about the problems facing the media in this particular climate. Have we hit rock bottom for independent media: newspapers, television, radio, magazines? And what about Internet? And where is rock bottom?

MR. ÅSLUND: Since you didn't say it: I wonder if there's anything more that you see that the U.S. could do in order to support media pluralism and independence in Russia.

AMB. VERSHBOW: I don't know how you're defining rock bottom. I think, as I said, as everybody knows, the national TV networks now are all state controlled, although there's some variety and still some degree of free speech, more so on NTV, which -- than on, say, Channel 1, Rossiya somewhere in between. So we certainly want to encourage them to move towards a sort of a BBC approach to their state-owned channel, but also to allow the return to the airwaves on an economically viable basis of some independent channels.

The print media remain much more robust, although the readership of most newspapers is pretty small. And there's continuing proliferation of websites. And I've seen no effort to shut any of these down.

So the situation is mixed. I think that one does hear sometimes that the more outspoken editorial writers are sometimes receiving phone calls from people in high places complaining on a continuing basis -- and this may have a kind of an effect of wearing people down a bit -- encouraging a little more restraint or self-censorship. But I think it's too soon to describe any trends in this regard.

But as far as what can we do to support independent media, well, we continue to sponsor a lot of different programs for training, to help raise professional standards, and speak out -- and we speak out on the issue. And I make a regular habit of meeting with the students at the Moscow Journalism School, the journalism faculty of Moscow University, to encourage them to see their role as not just careerists but people who can help re-shape their society. And I get a pretty good response, so I'm hopeful that the spark is still burning for free press.

MR. ÅSLUND: Thank you. Svetlana Savranskaya, National Security Archive.

Q You mentioned that Putin supported Rodina to siphon votes off the communist bloc. I'm wondering how you see Rodina and the group of people who support Rodina and their actions in the Duma. Do you see it as a tool that Putin is simply using, or is it some new tendency that potentially might constrain Putin's actions?

And the second question directly related to your previous response but unrelated to my question, since Moscow University is my Alma Mater, what is your view of the student body of Moscow State University? What feeling do you have, if anything? Do you think people changed? How would you describe your audience there? Thank you.

AMB. VERSHBOW: That one's a tougher question. I don't know if I have acquaintance with enough of the students to give a definitive answer. But I would say that my impression of college-age people that I meet in different parts of the country is generally encouraging, that this is a generation that has grown up in the post-Soviet environment and does, I think, take as the natural order of things that people can speak freely and choose their careers freely, and that definitely don't have the same kind of sense of being sort of at the mercy of higher authorities, more determined to make the best of their lives. And I think that gives me long-term hope, despite some of my worries about recent political trends.

As far as Rodina is concerned, I think that it was -- the creation of this bloc was indeed encouraged by folks in the political leadership to draw votes away from the Communists, but it may have become sort of more successful than they anticipated, which led to the party suddenly losing its access to the state TV media in the final week and a half of the campaign.

Exactly how effective a bloc it will be in the new Duma is open to question, given that they do only have about 36 seats up against the over 300 of United Russia. I don't know if they're going to have any committee chairmanships. But nevertheless, they will probably be a fairly loud voice in political debates. But at the moment, I don't see them as a major political challenge, and indeed, I think on most issues they're likely to line up with the Kremlin and with United Russia; and indeed, they're not portraying themselves as an opposition force, at least not at this stage.

MR. ÅSLUND: Yes, please, here. Sorry you have been waiting for long here.

Q Thank you. Harvey Sloane with the Eurasian Medical Education Program. I know you've been particularly interested in HIV/AIDS control, and you mentioned it in your talk as an area of agreement between the United States and Russia. I wonder if you could elaborate on that.

AMB. VERSHBOW: Well, it's an area that President Bush and President Putin did indeed agree should be an area for greater cooperation. And we are deeply concerned about the potential for an explosion in HIV infection in Russia over the next few years.

The official statistics say that about a quarter of a million people have registered as being HIV-positive, but most people estimate that the real number is anywhere from four to six times higher, and some of these people may not even know that they're infected. It's clearly begun to move beyond particular groups, high-risk groups, intravenous drug users and homosexuals, to the general population. And there's still a lot of ignorance on the part of the general population as to the nature of the disease and how to prevent getting it.

I think we're beginning to see the political leadership move out of the stage of denial that there is a crisis to acknowledging that there is a looming AIDS crisis in Russia. President Putin did mention it for the first time in his "poslanie," his State of the Federation speech. And there seems to be more engagement on the part of the Ministry of Health and the health establishment. But it still is an issue that, as in our own country, makes people uncomfortable, and they'd rather not talk about it.

But we are encouraged by the fact that the Speaker of the Upper House of the Parliament, Sergey Mironov, has -- who is an ally of Putin, has stepped up to this, agreed to be the co-chairman of a new transatlantic NGO called Transatlantic Partners Against AIDS, has been speaking out about this. We together appeared at an AIDS commemorative -- or International AIDS Day concert and political meeting in December.

So I'm hopeful that in 2004 the Russian political leadership, in a broader sense, will begin to speak out on this and that more effective action will be taken. There are a lot of dedicated NGOs working on this issue, some of whom we've been supporting through USAID. They've just received a big grant from the global fund, which could help the Russians tackle this. But until the political leadership fully confronts the issue and speaks out and makes clear that people at the regional level need to focus on this, I fear that the high rate of growth of infection is going to continue for a couple of years. And in the worst case, of course people see 10 million infected in 10 years, and several points knocked off of GDP, as well as tremendous human suffering if they don't act in the next year or two.

MR. ÅSLUND: Sarah Mendelson, CSIS.

Q Happy New Year, Ambassador.

AMB. VERSHBOW: Thank you. Hi, Sarah.

Q Speaking of USAID, can you tell us, is there any discussion inside the administration of reversing the decision to graduate or phase out aid by -- the years I've heard are '06 or '07? And can you tell us, is there any effort -- I know, I think that FY '04 money hasn't been completely set yet, and I'm sure that FY '05 budgets are in the process of being written. Is there any possibility that we'll see an increase for support for democracy, rule of law, human rights, health care issues in the coming years?

AMB. VERSHBOW: Well, this is a subject that is always one of -- the focus of lively debate within the administration. (Laughter.) We have to make a lot of choices. We have huge requirements connected with Iraq and with other issues relating to our efforts to promote democracy and reform in the greater Middle East. Other countries in the former Soviet Union still cry out for resources, and resources are always more limited than you would wish.

You know, I think we are still of the view that we can begin to phase down the overall programs, but that we need to do it in a fairly carefully calibrated and selective way with perhaps the most rapid drawdown of funding for programs relating to business and entrepreneurship where things are -- have achieved critical mass and our assistance may be less crucial, but to take it more gradually in the area of democracy and civil society, and also in the areas of HIV/AIDS, drug-resistant TB and other things where our health programs are making a difference.

But I think this is a continuing -- subject to continuing review. The last I heard was that the Congress has, in its wisdom, chosen to restore some of the funds that were cut in the administration's request and to earmark a specific sum for Russia higher than the administration requested. I think we can make good use of that. (Laughs.)

MR. ÅSLUND: Thank you. Stuart Goldman, Congressional Research Service.

Q Thank you very much. Mr. Ambassador, in your opinion, are President Putin and the key political elites around him, in their heart of hearts, reconciled to the sovereignty and independence of Ukraine, Belarus, Kazakhstan and other key parts of the former Soviet Union, or do they, particularly in view of the demographic crisis that Russia faces, do they view that at a transitory phenomenon, you know, like the Brest-Litovsk Treaty, that may be redressed when Russia is strong enough to bring its weight to bear?

AMB. VERSHBOW: I think that for many Russians, you know, the man on the street as well as the man in the elite, there are those who feel that the breakup of the Soviet Union was sort of a historical accident that should not have occurred and that some of these republics have been integral parts of Russia for centuries. I think there -- I think most have generally reconciled themselves to the fact that independence is now a reality and that these countries are determined to hang onto it, but that nevertheless, they may feel that good old fashioned "sphere of influence" politics are needed to at least bring these countries under more of Moscow's influence.

I don't think the demographic crisis in Russia is sort of a factor that drives people's view of what should be the relationship between Russia and the former Soviet Republics. I've never heard that as an argument in the debate. I think it's more an issue of national power, national greatness having been lost, and that reestablishing some greater community, whether it's through revivifying the CIS or some of the other integration initiatives that have been launched in the last few years, as well as through creating greater economic links to these countries. All these things are the main manifestations.

MR. ÅSLUND: Thank you. Rolf Nikel, Embassy of Germany.

Q Thank you, Mr. Ambassador. Just one personal question about President Putin, or actually two. Does he have a vision of where Russia is going to be in, let's say, 5 to 10 years from now?

AMB. VERSHBOW: I'm sure he does. (Laughs.)

Q (Laughs.) And secondly, is he strong enough to implement whatever he thinks is necessary for Russia? Is he a real leader or just somebody that is driven by some sort of -- people around him, groups, institutions? Thank you.

AMB. VERSHBOW: Well, I could say he has a vision. Maybe it would be harder to describe what it is, and to be sure about it. I think, you know, he has been consistently determined to create Russia -- to recreate Russia as a stronger power, as a stronger state, and to that end, I think, has seen political and economic reforms of various kinds as means to an end. But exactly what his overall vision is as to the balance of power between the state and the individual, that's still something we can't be sure of even 4 years after we first asked the question of who is Mr. Putin.

Q Indeed.

AMB. VERSHBOW: As I said, there are certainly trends of seeing an elevation of the role of the state vis-a-vis business, vis-a-vis civil society which are disturbing to us and we also think are probably think are not good for Russia's long-term strength and success. But we'll have to see what course he charts in his second term.

I think he is a very strong leader. He is in charge, but he does also have to balance off a variety of different groups who represent different interests in the Russian establishment: the security services, who are becoming more prominent; business groups; the technocrats, who are the architects of a lot of the economic reforms, are still very influential, people like Kudrin, the Deputy Prime Minister, and German Gref. But of course we're all dying to know who's going to be up, who's going to be down in the cabinet of the second administration.

MR. ÅSLUND: Yes, please.

Q Thank you. Mr. Ambassador, Jeffrey Winograd. I'm the editor of an independent newsletter called Focus Israel. I have a typical journalist question, a two-parter.

The first part is, what do you see as Russian expectations for the Middle East road map at this point? And when you were talking earlier, I think, about foreign policy, and you mentioned -- used the phrase "strident debate in the Duma," if that occurs, how do you think that might influence Russian foreign policy regarding the Middle East?

AMB. VERSHBOW: I think the Russians probably share the fairly limited expectations for the -- on the part of people in the United States and Europe and the other members of the Quartet regarding implementation of the road map. But I think they may blame the Israelis more than they blame the Palestinians. I think there they may be more in tune with the Europeans.

The Russians have disagreed with our view on the need to write off Mr. Arafat and to break off contacts with him, and I think that unfortunately the mixed messages sent by the Quartet on that have made it more difficult to get the Palestinians to take responsibility for the security issues that they're supposed to be taking responsibility for under the road map, and that that has to be a prerequisite to any progress. So we hope that we can convince the Russians to be tougher on the Palestinians on the need to come to grips with the terrorist groups and with the security requirements of the road map.

Will a more strident debate on foreign policy in the Duma affect Middle East policy? I don't think so. I think to the extent that the Duma does stir up passions on foreign policy issues, they will tend to be ones relating to the former Soviet space and perhaps some issues relating to the side effect of EU enlargement, where the Russians are very concerned about being shut out of the European market. That could become a political issue just as the Kaliningrad issue was last year.

MR. ÅSLUND: Toby Gati, Akin Gump, far in the back.

Q Thank you. Hi, Sandy. If the Russians are watching the debate in the U.S., such that it is, about Russia, it would be hard for them not to note that the harshest criticism of the administration's policy has come from with the Republican Party from Senator McCain. As the Russians are watching our own debates, do you have some sense about how they believe decision-making or what the crucial issues are about Russia in the U.S.? And as our own election comes closer, do they express a concern, and if so, what kind, that it will be an issue in our own presidential election?

AMB. VERSHBOW: The Russians certainly are watching the debate, and Senator McCain's proposals and other resolutions do get reported in the Russian press, especially the Russian print media. I tend to hear these concerns dismissed as pre-electoral politics based on misconceptions of what's going on in Russia. And I try to tell them that while we may not endorse some of the proposals that are being made, they would be unwise to write this off as just pre-election rhetoric, but rather, I say that it does reflect a very deep concern across the political spectrum in the United States about the future of democracy in Russia and what that could mean for our future partnership, and that the values agenda is important to all Americans and that it's not something that's just being done for political effect.

But whether they are taking that all in, I'm not so sure. (Chuckles.) So, I think it's important that they continue to hear this and understand that it goes deeper than the concerns of an election year.

MR. ÅSLUND: Down there. The lady down there.

Q Thank you. (Name inaudible) -- Korben International Industrial and Financial Corporation. Mr. Ambassador, you spoke about grassroot cooperation. And my question is, how does the U.S. government support cooperation between U.S. and Russia's private sectors? In particular, are there any specific programs that the U.S. Embassy in Moscow carry out about the investment and increase of flow of private capital to Russian corporation? Thank you very much.

AMB. VERSHBOW: That begs a very long answer. We have a whole range of programs and our Embassy puts great emphasis on steps to expand the commercial relationship. We do a lot of things, such as the business program. We have training programs for entrepreneurs sponsoring internships with U.S. corporations, in order to help develop entrepreneurial skills in Russia. We have various finance programs through the U.S Russia Investment Fund. We have the Exim Bank. We have our contribution to the EBRD Small Business Fund. We have OPIC, TDA, all these all these instruments designed to promote trade and investment in various ways.

We've taken a very aggressive approach as an Embassy to advocacy for American businesses seeking to develop relationships with Russian companies and to try to help them overcome the bureaucratic or political obstacles that are sometimes thrown up in their way, and sometimes pushing some particular deals that we think are promising at very high levels. We've had the energy summits, we have a whole -- and, of course, there's the Russian-American Business Dialogue, which has been a mechanism to try to enable the private sector itself to come forward with the proposals for overcoming obstacles for getting rid of harmful regulations and legislation that gets in the way of expanding business. I see Gene Lawson here, who is one of the four co-chairs of the RABD along with Andy Sommers, of the American Chamber of Commerce, and the two Russian counterpart business organizations. That's been an effective mechanism for trying to create a more favorable climate for business and for trade and investment between our two countries. So that's just sort of a random survey.

But it's one of the highest priorities of the Embassy. I'm personally very much involved. Probably about a quarter of my time is involved with commercial issues. And, you know, the business of America is business.

MR. ÅSLUND: Last question, down there.

Q Lukasz Mielsarek, Polish Embassy. I have a question concerning Ukrainian-Russian relations. Taking into account the election results, would you say that Russians would support Kuchma's third term, which is, under current law, unconstitutional, but under the current activities of the Ukrainian Parliament, et cetera, it is very probable?

AMB. VERSHBOW: Well, it's hard to say, first of all. As far as I know, President Kuchma has not indicated he will seek a third term, even though this latest court ruling suggests that he could.

I think one can say that there does seem to be a close personal relationship between President Putin and President Kuchma and between their immediate staffs. But there have also been a lot of frictions between the two of them on specific issues, such as this Tuzla Island dispute, over the joint economic space that President Putin has been pushing between Russia, Ukraine, Belarus and Kazakhstan.

So it's hard to be sure where Russia would come down, or whether it would take a neutral stance. I think it's really hard to predict.

MR. ÅSLUND: Thank you very much, Ambassador. You have really given us a grand tour de force here today. And I hope that you think that it's appropriate if I try to summarize your message. So far, everything is going surprisingly well, but we have some worries that it won't go so well in the future. But we hope that that won't happen.

Thank you very much indeed.

AMB. VERSHBOW: Very good. (Applause.)