Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 2 - Evidence
OTTAWA, Wednesday, March 21, 2001
The Standing Senate Committee on Foreign Affairs met this day at 3:40 p.m. to examine and report on emerging political, social, economic and security developments in Russia and Ukraine; Canada's policy and interests in the region; and other related matters.
Senator Peter A. Stollery (Chair) in the Chair.
[English]
The Chairman: I call the meeting to order.
I would welcome Professor Black, Director of the Centre for Research on Canadian-Russian Relations at Carleton University.
Professor Black, this is our second week and our fourth meeting of the committee on our project, Russia-Ukraine. Russia-Ukraine is sequential on the committee's well-received report of 80 or 90 pages on European defence, NATO, peacekeeping and other matters. The committee does have an extensive background in Western European affairs, but this is our first project on what we might call Central or Eastern European affairs.
We are delighted you could take the time to speak to us. You may wish to say a few words and then the committee members will ask questions.
Professor Larry Black, Institute of European and Russian Studies, Carleton University: As a university professor, I am not accustomed to saying only a few words, but I will try.
I must say I felt a little nostalgia when coming into this room because I was here in 1944. Both my great grandfather and my grandfather were senators of Canada. We lived here in Ottawa for a while, from New Brunswick. I was here before you, but I was a lot younger then.
My research centre has just completed the first draft of a 65-page analysis of the debate in Russia over defence and security during Putin's first year in office. That report will be ready in about 10 days. If any of you would like to have a copy, please call the centre and we will have one sent to you.
We have just finished a major study on Russia and NATO, on which I wrote the report. That report is also available.
If one wants to find out what is happening in Russia, one must go to Russia and talk to the people. I do that reasonably often, and I work with researchers who do it more often. Recently, we put together a short summary of what we think is good news about Russia, what we think are things that qualify as good news, and what we think could be, but may not be, very bad news for Russia.
The good news is quite straightforward. Perhaps the most important thing is that the new president, Putin, who has been in power for a little over a year, has stabilized the political arena in Russia for the first time in 11 years. The lower house of the state Duma, Russia's Parliament, is now a centrist body and it is relatively cooperative with the executive. The Communist Party still represents the largest party in that Duma but it now has no major influence in it. The extreme nationalists, for example, Zhirinovsky, have pretty well faded away. For the first time in a decade, the Russian executive is in more or less a cooperative mode with the Russian legislature.
The governors in Russia, the people who direct the 89 components of the Russian federation -- one really cannot call these components the equivalent of our provinces or territories, but for lack of a better word one can use that term -- have had their influence curbed in the last year by constitutional change. A number of these governors had been for a long time running what could be considered medieval fiefdoms. Now they have lost their domination over the upper house and, since January, the upper house has been run by a state council. Only 20 of those formerly 89 components are represented directly in that council.
That is an important change, at least in terms of political stability in Russia.
Regarding the economy, you had Vladimir Popov as a witness here last week. I am sure he was able to tell you much more about the Russian economy than I could. Generally, it is fair to say that the year 2000 was Russia's best year economically for a long time. Of course, "best" is relative. The GDP began to increase last year. The predictions say it will go up between 4 and 5 per cent this year. Inflation was curbed, relatively speaking. The government says it will only go up by about 7 per cent this year. Russian economists say it is likely to be 15 per cent.
Foreign investment and domestic investment increased but, as I hope I will have time to tell you later, it increased in a rather skewed way. Some seriously different types of investment need to be undertaken.
Tax reform came into law early this year. Already the Minister of Finance is saying that revenues are higher than expected. Some Russians predict that there will be enough revenue this year to cover the allocations made in the budget for 2001. Quite frankly, I doubt it, but it is a more encouraging sign than what was happening previously.
In the economic, social and political worlds, Putin has begun to take some action against the so-called oligarchs -- the 25 men who have wealth beyond our imagination and have their fingers in every pie in Russia. Putin has curbed them in some ways by instituting criminal charges against some of them. Two of their number have left the country, as you know, although they have not lost their holdings. More importantly, Putin is trying to solve the problems by having monthly meetings with the 20 or 25 top wealth possessors in Russia. Whether they will be useful or not, we do not know, but at least the confrontational situation has been toned down a little bit.
In the international arena, which is the area I know most, Putin has established Russia as an international presence that can be taken seriously, perhaps for the first time since 1992. Putin at the G8 at Okinawa was treated with some respect and listened to fairly attentively, particularly regarding his views of Asia. He made some interesting contributions to the APEC meetings at Brunei. He made an interesting contribution to the UN Millennium Summit. What is important is that Russia is now listened to, particularly in Europe, where it had not been for quite some time.
Putin has also signed off on Russia's first detailed security doctrine, military doctrine, and foreign policy doctrine. All three major blueprints, under discussion for five, six, and in one case seven years, are now signed off and exist as at least guidelines for the various Russian ministries to follow.
In Russia's recent foreign policy guideline, there is a remarkable change from earlier years. The CIS -- Russia's nearest neighbours -- are now given number one priority in Russian foreign policy, by far. Its number two priority is Europe, and the United States is a pretty distant third, tied with China. That policy, of course, is a complete turnaround from the early 1990s.
Perhaps more important in the long run is that Putin's announced policies are greeted favourably by the Russian citizenry. There are still about 66 or 67 per cent of Russia's citizens who say they approve of virtually everything Putin does. That is a pretty unusual situation. It is particularly unusual for Russia. In Yeltsin's last year, his popularity and confidence ratings were very, very low, less than 2 digits.
It may be that the Russian people do not give a damn, are apathetic, and just want Putin to go ahead and govern and leave them alone. Nevertheless, there is very little unrest, even in light of the fact that 40 per cent of the population lives below the poverty line.
We do not have time to go into the social statistics of what is happening in Russia. Nevertheless, the level of popularity and the lack of unrest are, I think, important. In fact, there was only one instance in the last two years when the public opinion polls in Russia showed disapproval of Putin's policy. That is when Putin made the strange suggestion last March that perhaps Russia should join NATO. That is the only thing the populace disapproved of.
If I can add a footnote to that, it is interesting that nearly 70 per cent of the Russian population has come full circle in the decade. Now they look at the United States as a potential threat. In 1992-93, the same people polled looked upon the United States as potentially their best friend in the world. There are many reasons for that having happened, but we may think that is not very healthy.
There is some qualifying news. Do I have more time?
The Chairman: Yes.
Mr. Black: We should perhaps take the qualifying news more seriously. This new stable government, both the executive and the legislature, has a very centralizing tone to it. The state Duma, the Parliament, cannot really serve as a very effective opposition in Russia, even if it wanted to do so. The president does not want it to be particularly effective, and it is not a very effective body.
Human rights practices are still a problem with the government. That is not just a matter of what is happening in Chechnya. The judicial system still has a long way to go before Russia can truly be regarded as a rule-by-law state. I hate to say such a thing -- perhaps it is okay to say it here -- but one of the things Russia does not have enough of per capita is lawyers. The people who are learning law now are becoming Russia's first litigation lawyers. That is, perhaps, not a particularly healthy direction for them to go in.
You have heard more about the economy from someone else. The reforms may be too little, too late. We will just have to wait and see. The attacks on the wealthy oligarchy and on their control of the media may have one consequence and that is a retraction -- not stifling, by any means -- to a certain extent of the freedom of the press.
Organized crime is still a major problem. Official corruption is still a major problem. The Ministry of Finance in Russia recently suggested that up to $60 billion to $70 billion-- they do not know the exact figure -- has been siphoned out of the Russian economy and is located in Swiss banks or elsewhere. We know that capital is fleeing the country in huge amounts. The Russian government is trying to do something about it, but it is a difficult problem to overcome.
Russia is doing better in its place in the world but it still remains outside an expanding EU. It still remains outside the World Trade Organization, although Russia's chief financial person, German Gref, says it will be in there by the year 2002. Russia will have to make many changes before that is possible. Canada has approved Russia's "aspirations" -- I believe that is our term -- to be a member of the WTO. We certainly have not approved it yet.
Naturally enough, Russia is also outside NATO, which will be expanding in 2002. Incidentally, whether one agrees with my opinion or not, we do have to accept that the expansion of NATO further eastward will be a major crisis for Russia. Whether it should be or not is up to you, but it will be.
Russia is only a bit player in the PFP, NATO's Partnership for Peace program whereas all the other East European countries are major players. Ukraine is a major player. To a certain extent now, Ukraine's economy is based on the over 200 PFP operations it is part of. Russia has not done anything in the PFP in the last two years. This year, Russia said it will participate in a limited way, but only in those manoeuvres or training exercises that are close to Russia's borders. The kind of gains it can get from that remains a political question.
Russia is not a full participating member in the G8. It is a member but it does not take part in major economic discussions. Perhaps it should not. I am not qualified to judge that. Russia is not as much of a participant as its own rhetoric would suggest in attempting to persuade its population it is.
The danger of Russia being isolated from Europe's growing security and economic integrative mechanism is felt acutely in Moscow all the time. Its complaints about the national missile defence, about NATO expansion, are to a certain extent rhetoric. It is a card it can play. They are important considerations for Russia.
The conflict in Chechnya goes on unabated. There have been some major changes there. Putin has turned the operation of cleanup, as he likes to call it, in Chechnya over to special forces. The military is being withdrawn. The 80,000 troops there last year will be reduced to about 20,000 this spring, but the special forces will have different ways of handling the Chechen problem. This may backfire in Russia, but I am not certain.
The Chechen crisis does harm Russia's credibility in PACE -- the Parliament Assembly of the Council of Europe. It also mixes up Russia's self-styled position as the bastion for Europe against organized international terrorism.
You have perhaps read about the outcry yesterday or the day before in the Ministry of Foreign Affairs in Moscow, when they were informed that middle level American officials are carrying on discussions with Chechen rebels. Frankly, I think under no circumstances should they be doing that, but that is another question. From the Russian perspective, it is just another sign that no one is going to bother listening to it. The importance of that is something I do not have to explain to you.
The final aspect qualifying the good news in international affairs is that the military and security doctrines approved about a year ago in Russia rely exclusively on nuclear deterrence. They have even built into them -- it got a lot of attention at the time -- the possibility of using first strike, that is, nuclear weapons, if Russia is deemed to be unable to defend itself, not just against nuclear attack but against even conventional forces.
Russia, quite frankly, does not have the military to defend itself against anybody. Its defence budget is less than 6 per cent of that of the Americans. By next August, Russia probably will have cut its 1.2 million Armed Forces personnel down to 850,000. Russia is dropping about 1,000 generals. That may seem all very well but, quite frankly, those generals will have to find something to do. The danger is that they might hire themselves out. There are just so many things going on. For Russia, the only means it has to defend itself now, considering its obsolete equipment, is nuclear deterrence.
Military reform has been discussed for about seven years. It was upgraded in terms of rescheduling last fall, but the NMD discussion has pretty well stifled the military reform process. It has led to a crisis within the Ministry of Defence, which may lead within the next month to the dismissal of the Minister of Defence. I do not know, but he may be replaced by Sergei Ivanov, whom some of you know as the Secretary of the Security Council. He has been getting much press lately. He is in Paris now. He has been speaking internationally for Russia as if he were a foreign minister. Of course, he is not. Russia has a foreign minister. Sergei Ivanov chairs the Security Council, an institution not located in Russia's Constitution. This has led to a complaint from Russia's Parliament that too many things are happening behind closed doors. The power ministers are on the Security Council as well. Russia has regressed a little bit to being a country run by a small group. The division in the Ministry of Defence is going to be very much a fact of that.
There is some bad news as well. The bad news is conjectural. The ministers of finance, economics, social welfare and so on began preparing reports last spring and summer to which they gave an overarching title, "The Catastrophe of 2003." I do not know if Mr. Popov spoke of this last week. It has become a bit of a buzzword. Russian demographers, economists and planners -- not all of them, of course, but those who believe the worst-case scenario -- say many things could happen in the year 2003. The annual payment on Russia's foreign debt might double by then and could reach $17 billion. That is owed, payments on debt. Russia has set up a committee to deal with that matter. It has rescheduled its London Club debts. It is beginning to reschedule Paris Club debts. It did pay $25 million to the IMF several weeks ago. Nevertheless, the payments on its foreign debt are going to be astronomical by 2003, if some rescheduling is not done. That will be the choice of the IMF. It is a scary thing.
In January of this year, there was considerable discussion in Russia about simply not paying the debt and working out what the consequences would be. Of course, the consequences are potentially terrible.
There are other kinds of looming crises. One of them is the demographic crisis. There will be in Russia, as there will be in Canada, a huge increase in pensioners. At the same time, there will be a major drop-off in the number of people entering the workforce. Russia loses about half a million people in population annually. You know that the life expectancy of the average Russian male is 58. If I were born and brought up in Russia, I would have been dead long ago.
The worst-case scenario is that by the year 2003, for every single pensioner, there may be only two people working full-time in Russia. Think about that for a little while. The demographic situation is terrible. The alcoholism, the lack of production by ordinary labouring persons, is astronomical. Russia ranks something like 220 in the world, behind most developed countries.
Another catastrophe that Russians foresee and are preparing for, along with EBRD and the World Bank, is that investment, while it has increased, has increased in the wrong area. The Russian reports that I have read indicate that investment in what they call power engineering -- what we would call infrastructure -- has led to some serious gaps. Russia has not invested in roads, bridges or housing. It has not invested in the electrical power grid, which is where Russia gets a lot of its foreign currency: It sells electrical power to Georgia, Armenia and Ukraine. Russia would like to be able to sell it to Europe. It has not even invested in its oil and gas pipelines. High world oil prices, which are now dropping, is what is keeping Russia alive now and has kept it in the game in the last few years.
There are discussions about building new pipelines, taking oil and gas to Europe. The EU has nearly doubled its purchases of energy from Russia. This is a very important thing for Russia, but someone else will have to build those pipelines. Russia cannot. The only potential builder of pipelines in Russia now is its big monopoly, Gazprom, but Gazprom does not have the capital. It cannot possibly build new pipelines. One of the reasons it cannot build new pipelines is that, by law, gas is sold in Russia in every capacity at much lower prices than world prices, so Gazprom cannot accumulate capital. It is kind of a Catch-22 type of situation.
However, those pipelines eventually will be the pipelines that once again feed Europe. I am speaking as if I am lurking behind the walls of the Kremlin right now. That is Russia's ticket to association with the EU, and especially the EU's northern dimension.
Russia also has not invested in its water supply, in health care or in agricultural equipment. For those of us who grew up on farms -- and quite literally I grew up in back country New Brunswick -- to visit a farm in Russia is nostalgia personified. Truly, some of those collective farms, and there are still many of them, are not even as good as some of those we grew up on. They have barns full of equipment that has not been repaired in 15 years.
It is virtually impossible to move goods in Russia by road. They do not have trucks everywhere, as we do, bumping us off the roads. Russia must upgrade the railroads. Putin made an interesting suggestion when he was at Brunei for the APEC meetings last September. He said that Eurasia -- which to all intents and purposes is Russia -- could be the major integrative mechanism to link the Pacific and Europe. "Rebuild our railroads," he said. He meant the Trans-Siberian Railroad. "We can move goods across Eurasia a great deal faster than you can move them by ship." I think any Canadian knows that.
As a matter of fact, in February of 1917, a date we all know, the vice-president of the Canadian Pacific Railroad was in St. Petersburg negotiating link-ups between the Trans-Siberian Railroad and the CPR. Our railroad and all of our steamship lines and telegraph systems would be linked up. We forget what an extraordinary entity the CPR was. We could have circumnavigated the world by rail and by ship. Now the Russians are suggesting that we try that again. These are the kinds of things that could work for Russia and could work for us. Moving goods that way would be very important. It would also help reduce Russia's reliance on China.
There is another aspect to this catastrophe mode of thinking. I have had many discussions about it. It is what Russians and sociologists like to call "disaster expectation." You remember, of course, that terrible tragedy last year involving the submarine. That is just one of their major catastrophes. There was a big explosion on Pushkin Square. There were bombs, crashes, all over the place. One of the consequences of these catastrophes is that the old Russian fatalism has been regenerated -- precisely what the new perestroika'd Russia was trying to eliminate. The new Russia tried to get Russians, or everyone who lives in Russia, to contribute to rebuilding its society. Get everyone's production up; get investment; get some faith; get some small-p patriotism going; rebuild ourselves and fix up the damage that the communists forced on us for decades and decades.
There is a small middle class. There are many young people in Russia who are so smart it is frightening, and they are doing some wonderful things in Russia, but this fatalism lurks in the background. It scares off investors. It curbs initiative. Russia has a Minister of Emergencies who, last December, said that Russia is likely to face a series of technological disasters. Only somewhere between 5 and 8 per cent of Russian enterprises have what you could conceivably call modern technology. Every Canadian knows what that means. The Russians know that eventually, if repairs are not done, there will be a point beyond which there is no return. They know that, and they are worried about it.
Russia is facing the exhaustion of its fixed capital, gold supply. You do not manufacture that, although for centuries we have been trying. Its hard currency supply is threatened. Russia has taken an important initiative -- and Canadians' hackles might go up when I say this -- and that is tax reform. It is now in place. It is a 13 per cent flat tax. Some of us equate a flat tax with a flat world. I do not know enough about it to know whether it really works, but the tax is on all personal income. The point is that so many people, so many institutions and so many organizations in Russia have just simply not bothered paying taxes. Gazprom owes the Russian state something like $180 million. It says, "If you want to collect, try it." I have never tried that approach. I do not think I will.
Russia believes that if taxes are lowered considerably, maybe people will pay them. As I said earlier, reports suggest that revenue has picked up. Russia has reduced payroll taxes and pension fund taxes. The payroll tax reduction seems to be fine; Russia is a little worried about the pension fund taxes.
Most important, Russia has reduced what is called in business the turnover tax. Until January of this year, every single income that every business made was taxed, even if that business was millions in the red. Every tiny little profit was taxed, even if the business at large was losing a lot of money. That turnover tax has now disappeared. I gather that initiative has worked.
Russia is paying its debt to the IMF and that is very important. It has reduced its debt to about $10 million. It has rescheduled its debts with the London Club and so on. It is working out arrangements with Germany. The country to which Russia owes the most money by far is Germany, something in the order of $26 billion. The next highest is Italy with $6 billion owing, then France with $4 billion. United States is only owed about $3 billion.
Russia has had very detailed discussions with Germany. They are working things out.
Russia has begun to put pressure on its neighbours in the CIS -- this can be looked at as a good thing or a bad thing -- to pay their debts to Russia. Russia has finally made an arrangement with Ukraine to handle a huge gas debt that Ukraine owed Russia. The president of Ukraine has admitted that Ukraine illegally siphoned off and marketed gas from Russian pipelines. It looks as if that financial sore point has been worked out.
Therefore, some attempts have been made to solve such problems.
I will not say anything about Ukraine. I have some recommendations that we can leave to later as they are very speculative.
I have certainly gone over my 15 minutes.
The Chairman: Your presentation has been most interesting. I have several questions.
As a matter of observation, some members who met with President Putin in December. It was a private meeting, but he did talk about the debt. He made some interesting observations about it, including the comment that Russia would pay it.
In 1975, I crossed from east to west on the railway you mentioned. I recognized the enormous power of that railway. I do not know how many kilometres separated the trains that were taking Japanese goods from Vladivostok to Europe, but I must have seen hundreds of trains. I had not realized that something had gone wrong. Is the railroad not operating as it had been?
The roads were mud tracks, but as to the railway, although the train only travelled at about 40 miles an hour, it was the most powerful railway I ever saw.
Mr. Black: I think it is fair to say it still is powerful, but some would say it could be doing 50 times more than it is doing. Russia does not have updated rolling stock. The railroad's switching systems need to be totally repaired. I do not know enough about railroads, but I have read about general things. As an example, just about all of Uzbekistan's cotton sold in the west is carried there by Russian trains. The Russian trains and rolling stock carry goods for central Asian countries. The load on that railroad line is huge and cannot be managed .
The trains themselves get there. There is a problem of consistent access to fuel.
The Chairman: Before I call on Senator Andreychuk, I have my main question. You mentioned Russian fatalism. I am not unfamiliar with that term.
That leads me to another common question that people ask: Are Russians Europeans or Asians? We are the inheritors of the western Roman empire, and the Russians are the inheritors -- the more I read about Russia, the more this is clear -- of the eastern Roman empire, of Byzantium. The records for the portages on the rapids are amazingly detailed from Constantinople. What is it that makes the inheritors of the eastern Roman empire different in the sense of fatalism from people like us who are the inheritor of the western Roman empire?
Mr. Black: Do you have another week? It is a very interesting question. In the first place, the Russians, Poles and Ukrainians are all part of ethnic east Slavs, who are Europeans. Ethnically, they are Europeans. Culturally, the difference between the two forms of Christianity were really much more important than many westerners believed, although of course that happened 1,000 years ago. The fact is that, from Roman Catholicism we got the concept of Roman contract law, which was not part of Byzantium. Contract law was a simple thing. It was one of the basic props of our kind of society.
The eastern church also was never, ever a competitor to the secular forces for political power. The Orthodox Church never had the same hierarchy as western Christianity. It never challenged the czars and their predecessors for political power. Traditionally, they were both part of and supported and strengthened the czars. The Russian State now, as its state symbol, still has the old Byzantium two-headed eagle.
If culture evolves over 1,000 years and leaves scars or things like that, those are two very significant differences in the way people are governed over those many centuries.
The dilemma that Russians face as a people, though, that Ukrainians do not, is that they are the caretakers, in a sense, of that huge Eurasian territory that goes from the Pacific Coast to the west coast. The territory of Eurasia and the Russian state is about 80 per cent Russian now, which the old Soviet Union was not. It is a vast territory. Russia has a population of 145 million, which makes it a very under-populated state for its size. Even though it lost 27 per cent of its territory when the Soviet Union disappeared, it still is about one-seventh of the land mass of the world. Canada is the second largest, but we are a distant second largest state.
Their political life, their economy and their views of the world are shaped, as are ours, to a certain extent, by the tremendous space they inhabit. The fact is that they are a northern people, as we are. They are multicultural, whether they wish it or not. Over 80 other nationals share that territory with them, although they are much smaller in numbers than they used to be. Their state is divided into 89 components which are not as autonomous as a province but nevertheless are territorial administrative bodies, many of them with their own elected president, several with their own constitutions, and in some cases still a supreme Soviet or a Duma. They function autonomously.
When a Russian looks out at his or her world, they see it crumbling around them. I do not want to go on at length, but this is 2001. The Soviet Union still existed 10 years ago. Unless you are 10 or 20 years old, you are a person who grew up in the USSR. Even if you grew up in Ukraine or in a Baltic republic or Kazakhstan, if you are in your 20s, you had your training about what the world was all about and your work habits and so on in the USSR. If I may say, that is not a good step up in the world.
The population of Russia now and the other countries around it has a huge cross to bear. I do not mean that in the religious sense. They are carrying baggage with them that is nothing that Europeans or North Americans have to carry.
Perhaps that does not answer your question.
The Chairman: The first part of your answer was about what they got from Constantinople. They got something we did not get -- a more authoritarian form of government. Is that right?
Mr. Black: Yes. Eventually they got the CPSU.
Senator Andreychuk: You indicated the fact that they are not in the PFP to the extent that Ukraine and others are may be a detriment. As I understand, they were very enthusiastic about that. The difficulty was that the military were sceptical of joining what was their enemy at one point. However, to a certain extent it was their salvation because they did not have the resources and did not know where the country was going, so at least they had the continuance of a military through that process. It really came to a halt because of Kosovo. Now they have come back into NATO and the parliamentary association and to all the linkages that they had.
Mr. Black: Russia joined the PFP late in 1984, later than any of the other former Warsaw treaty organizations or Soviet republics. They were very strongly opposed to it.
The Chairman: What is PFP?
Mr. Black: Partnership for Peace. Two years ago I happened to be very fortunate to meet with some of the people who actually blueprinted the Partnership for Peace. It came into being in 1994, and it was open to anyone who was not a NATO member to conduct training sessions, military manoeuvres, emergency measures and many other important things. Russia was very strongly opposed at first because they saw this as part of another way of NATO absorbing former Warsaw Pact countries and Soviet Republics. They came in at the end because they had no choice. They did not want to be the only one not in it. They could not afford that.
For a few years, they did actively participate, but not as much as some of the other republics, and not as much as NATO wished, but nevertheless they did generally participate. In 1997, when Russia and NATO signed this agreement between them and set up the joint council between them, Russia participated in a very general way, and then they dropped out because of the bombing in Yugoslavia. Now they have re-established themselves in all of those positions, but in a very limited way. They select which of the political councils they attend. They do not attend all of them.
They will join the PFP in a very limited way. They have made it absolutely clear -- and how they will stick to this I do not know -- that they are only becoming reassociated with NATO because they feel they have to, and they feel NATO wants them to, but they are only going to stay in it as long as they feel that Russia's interests are at least being listened to. That is political rhetoric to a certain extent. but they are very cautious. In fact, they also now use the term "cooperation with NATO," whereas in 1997 it was "partnership with NATO." In the semantics of international diplomacy, that is an important difference.
The Chairman: Senator Andreychuk, if you recall, we were told in Brussels that the membership of NATO were not particularly happy with the PFP and they operated in different parts of town. It was not a popular program.
Senator Andreychuk: I think it was quite the opposite. They wanted to make a distinction. They operated in a different place to distinguish the NATO operations. Partnership for Peace was a confidence building exercise and a totally separate unit that would be, in some ways, an interim step. I think we wanted to make a difference. I do not think there was fear, but there was distrust in the personnel. Once you start working together in a manoeuvre, you begin to see the likeness of military to military. There was common ground.
Mr. Black: Many military operations have worked very well. Wesley Clark and others say that NATO should be reinventing the PFP and not worrying so much about further expansion. The PFP had tremendously important potential consequences but it became a matter of doing what we used to do as cadets, namely, take our weapons out and then put them back. It could be something much better, however.
Senator Andreychuk: I wanted to follow up on what you were saying about the good news and the bad news, and your thoughts on the fear of some of Russia's neighbours. Are there still imperialistic tendencies?
I also would like your view on the reaching out using, for example, the debt in Ukraine. The new deal that has been forced on to Ukraine in many ways is a way of reasserting spheres of influence down into the stands. Is this a realistic fear? Is it something that we should be aware of, or is it a natural rebuilding of a relationship with neighbours that needs to take place?
In terms of the activity of the drug trade and illicit arms moving through there, I have been told that it was the back door into Europe and that Russia has found itself rather defenceless in this situation. Some of their assertion down into the stands is to preclude some of that negative activity. We also heard the opposite, namely, that they continue to exercise that as part of their sphere of influence.
Is Russia back to looking after Russia under Putin, or are there aspirations to develop spheres of influence?
Mr. Black: Both, I am sure you are aware. Russia's foreign policy priority now is the CIS. Within the CIS, the Commonwealth of Independent States, there are other types of priorities. One of them has taken shape already. The so-called Shanghai Five, which began in 1997 and includes China, was reincorporated last summer so that it is now a more serious body. It holds regular meetings and has a permanent economic body that sits relatively informally and negotiates. The five members of the CIS that are closest to Russia have now moved from being the union of four and the union of five to becoming a seriously incorporated Eurasian economic community. They like to pretend that it is an eastern foil to the EU, but it is not.
The CIS collective security pact has now been re-signed by six countries. There is an integrating movement with some of the states. Belarus is the one that is no longer part of Russia, but it is awfully close in many ways. Their economies are one and the same, and their military is now pretty well one and the same.
Russia's relationship with Ukraine is obviously the most interesting one of all. Ukraine is the largest -- not in territory but in population -- of the 15 republics that are now independent, except Russia. Over 20 per cent of its population is ethnic Russian. That is a dilemma for the Ukraine that Russia does not have. It has not caused a lot of problems yet, but it could. Their attitudes towards Russia are aligning.
Except for the horrible problems that Kouchma has found himself in right now, there was a movement towards closer economic association with Russia -- and Russia certainly would use this in its negotiation -- because of the danger of that new pipeline going through Poland and bypassing Ukraine. That was part of the threat that Russia yielded over its head in that debate about Gazpram and the gas siphoning. It now looks like Poland, Russia and Ukraine will come to terms on that gas pipeline and Ukraine will become involved.
There are large vocal groups both in Russia and in Ukraine that are saying, "We have to come to terms with each other because we are each other's most logical economic partners and we have to struggle together." There are smaller groups on both sides that believe in much more than a sphere of influence. They want to resurrect a Slavic empire that would include Ukraine, Belarus and Armenia, which makes no sense whatsoever. However, logic is not their strong point. Groups in Ukraine are divided on their levels of nationalism too.
Generally, the renewed relationship between them with the new foreign minister, who apparently will be here, has been accomplished for practical reasons and not because there are threats out there. There are threats lurking in the background that Russia will apply when they feel the need to do so.
Senator Andreychuk: I had another question that I will leave to the end. There was an intriguing point about recommendations. Hopefully, we will have some recommendations of Canada's foreign policy towards that area. If that is where those recommendations are, I hope we will get an opportunity to hear them. I will wait for the next round.
The Chairman: I thought you said you had some proposed recommendations.
Mr. Black: I do.
The Chairman: Make sure we do not forget that before we adjourn.
Senator Austin: Mr. Black, thank you for your presentation. It is such a tempting menu that I almost feel like starving because I hate to make a choice. However, I will dip in.
I would like to pursue with you your speculation about the political evolution of Russia. It seems to me that the choice they are adopting is a familiar one to them, namely, the authoritarian system. You said today that the Duma is much reduced in its role as a force in Russian politics. You said that the oligarchs are more under control than they were previously. You did not say what the instruments of authority are that are being used by president Putin. You are as aware as anyone can be of the style which the president is using to get this more stabilized political relationship, to use your phrase, in place. Probably your view and the view of the majority is that it was necessary to get on with the economic and other agendas that you mentioned.
You are equally familiar with the role of checks and balances in a pluralistic political system -- that is, the one we use or the one the Americans use, the parliamentary system -- where we are familiar with the vertical column but we also have a relatively effective horizontal system as well, in spite of all the discussions.
Will the future of Russian governance rely for some time yet on a hoped for benevolence of an authoritarian system? Do you see any groups in Russian society that could act as a legitimate power balance in the system?
Mr. Black: To answer the last part of your question first, my immediate reaction would be, no, at least not for a while.
The Duma is cooperative because of the election late last year. The election produced a very different looking body. It included for the first time a so-called Unity Party, which was the number two party in size. That is the party of Mr. Putin. The makeup of the Duma itself, and its deputies, is very different from its predecessors.
The oligarchs are a bit of a tricky question because they control as much of the economy as they did before. The difference now is that Mr. Putin is holding discussions with them. He puts two pressures on them. One is that he urges them to behave in the interests of the country. Oddly enough, for some of them, that works a little bit. Perhaps if you are already a triple billionaire, it does not matter quite so much whether you work for the good of your country. Mr. Putin is able to wield a clout that, maybe, in the long run will not be effective, but it is scary even to the oligarchs, and that is a regular mechanisms of picking some of them up and having them charged through the prosecutor's office with fraud and embezzlement.
Such charges have been levelled dozens of times. Wealthy people have been picked up and taken into wherever it is they take them. Their papers have been seized and examined and so on. Within a matter of three or four days they are let go, and nothing more happens. Nevertheless, the process of having these threats of being charged with fraud works. The trouble is that they cannot catch the rascals, but they do wield this threat.
As I mentioned before, the Russian population approves of this centralization. That is useful to a large percentage of them. Many of them actually call for more of it. The only real change in public opinion is that, for the first time in many years, less than 50 per cent of the population supports the Russian military actions in Chechnya. That is quite a change. The media is free enough to get a lot of these stories of atrocity out, although the majority of Russians often do not believe that their boys would do such things. The war is no longer popular.
In one other piece of legislation that Mr. Putin had passed last year, he divided all of the Russian federation into 14 super regions. There is a name for them; and he appointed a governor to each of them. In some of those there might be six components or two components. Theoretically, that governor has the right to represent the president there and to report to the president. Of those 14 governors, 11 are retired generals or from the special forces. If your governor were a former deputy director of the KGB, history would tell you that you would have to bear that in mind.
We have seen no particular results from that yet. The centralization is still going on. It will never be what it was under the USSR. It is something of which the majority of the population approves now, but obviously down the road it could have different manifestations.
Senator Austin: Let me ask you about the next presidential election and the forces that will be in play. I am still pursuing this idea of some pluralistic power base that is horizontal.
Mr. Putin must recruit funds. He must have media. He must have representation on the ground through the country, and presumably he must have a program.
What compromises must he make, if any, with respect to the oligarchs? What role does the KGB or its successor organization, or the retirees of said organization, play? What opportunity would his opponents have to use the mechanisms of the media and funding when we are seeing signs of, as you have said, shots across the bow, political intimidation?
Underlying all of this is there an inarticulate major premise in Russian society that authoritarianism is good and should not be destabilized if it is working?
Mr. Black: I do not know. I think it is fair to say that there is a feeling that an authoritative government works because Russians see the results of the previous eight or nine years of chaos and economic anarchy. I suspect that almost any kind of order and stability would be generally approved.
There will be, in three and a half years, a presidential election. If things go on as they are now, Mr. Putin would have no competition. His major competitors in the last election, except for Mr. Zuganov, the head of the Communist Party, are now supporting him, although who wants support from people like some of these people. They were relatively secondary anyway.
The communist party will never get larger, it is likely to get smaller unless they get a new leadership. Mr. Zuganov is being pecked away at in the communist party. In many ways, their day is done. They will need to become something else and get new leadership.
There is nobody out there at all now that would have a chance to defeat or even challenge Mr. Putin in a presidential election. They would have access to the press and to free TV time but, of course, the incumbent has access every day, all the time. He is always in the news. The government has its own television stations and its own newspapers, and he is in them all the time. Nobody would ever come even close to having the kind of visibility that he would have. In addition, he has a political party that strongly supports him now, which Mr.Yeltsin did not have.
I cannot remember what the other part of your question was, but it looks to me that, unless something major happens in 2003, Russia will maintain the status quo for a while.
The main power ministers are all Yeltsin's guys. Igor Ivanov who was the Foreign Minister, was Primakov's creation, so he has come up through the system. He does not say so now, but he is very anti-NATO expansion. The people who are right behind him, who are the spokesmen for the foreign ministry are, I would say, "out of date" people. They must be moved, and I suspect that they will be. Minister of Defence Sergeyev could fit right into 1965. He could be speaking and no one would know that it was 30 years later. There will need to be some major personnel changes.
However, the Ministry of Finance and the Ministry of Economy have young, smart people, and they are plugging away.
Mr. Putin would tell anybody that he cannot do anything until the economy is fixed.
Senator Bolduc: There was a time when some American economists went to Russia, either as requested by the Russians or as sent by the United States. Two or three of the most famous economists went there. I read a few articles by some of them and it appears that they were quite discouraged. Of course, this was during Yeltsin's time. Is this type of thing still going on, or do they now use their own people to look at the ways of increasing economic growth?
Mr. Black: That is an interesting point. You are referring to Anders Aslund and Geoffrey Sacks who pushed the "shock therapy" approach, but not only did it not work, it was extraordinarily destructive in the long run for all of the republics. Oddly, it worked in Poland but for many different reasons.
The Russians pretty well do it themselves now, and they rightly say, and Ukraine rightly says, that they have certain circumstances that do not exist in North America. They must do things differently and they will try to do it wisely, but it is extremely difficult. They take advice but they follow their own path.
Senator Bolduc: What puzzles me is that they did not know much about the market economy. That is so culturally ingrained in our own minds that we do not realize what is happening in other countries.
Mr. Black: They do not know what cost accounting means. Any 14-year-old Canadian could tell them how to keep books.
The Chairman: The criticism of Sacks that many Canadians make is that from 1939 until 1950, in much of Western Europe, they certainly did not use the market economy. They did exactly what they advised the Russians not to do in their crisis. I remember, and I am sure Senator Bolduc remembers, the wartime price control board which was instituted because of the all the corruption that took place as a result of World War I.
Senator Andreychuk: They did know about a certain type of market economy. The barter economy was certainly part of the communist regimes. The grey or black economy, or whatever you wish to call it, was there. Certainly a modern market economy was not there.
The Chairman: The point is that the Harvard boys went to Russia and put a program in place that they themselves did not use in the United States between 1939 and 1946.
Senator Bolduc: That was for a different reason. May I go on?
The Chairman: Yes.
Senator Bolduc: My question is about the fact that the number of military personnel is being decreased. How do they deal with the problem of employment for those thousands of people who are leaving the army and trying to find work somewhere? How do they provide pensions for most of the senior generals and others?
Mr. Black: That is precisely one of the reasons the cuts that were announced last November have not started yet. If they cut out 350,000 personnel -- some of them are civilian personnel but most of them would be troops -- the money they save from maintaining those 350,000 is precisely the money that will be used to pay for pensions and retraining. The military will need to become much smaller and much more mobile, much better trained and better equipped, and with the increased military budget this year, they will be better able to do that. However, I believe common sense tells us they will not. I suppose it is fair to say that they have taken this approach because there is not much else they can do.
The black market was a big part of the economy in the past. The black marketeers were using all of the assets of the state, but the state was getting no return. At this time the biggest black marketeers are the NCOs in the army. They are marketing arms, food, uniforms, bullets, and labour. The NCOs, or junior officers, are out there selling their infantrymen as labour. They have been caught doing that a few times. They think they will save money and use that money for the purposes you suggest, but they will be awfully lucky if that is what happens.
The Chairman: I am taken with this business of the Russian character because it comes up in all of our conversations. Why is the Russian character something that people all talk about?
Senator Andreychuk: Every country has its own.
The Chairman: The huge difference is the authoritarian tradition that comes out of the orthodox tradition. Would you care to expand on that? Senator Austin talks about checks and balances and you reply that Russians are basically more in favour of an authoritarian regime, depending on degrees of course. Is this not part of a thousand years of religious tradition?
Senator Austin: May I say something on your topic? I believe that Peter the Great chose the path because up until his time the boyars had a great deal of power, or up until the time of Ivan the Terrible, after which the power of the state became more and more vested in the czar and the boyar's authority was destroyed.
I am turning to Professor Black. I just wanted to add that to your perplexity.
Mr. Black: The cross I must bear is that, along with too many other things, I am a historian. I am one who believes that history never repeats itself or that it always teaches us the wrong and not the right lessons.
As to what people believe about themselves in Russia today, the slate was wiped clean in 1917 and now virtually everything, as an intuitive preference, is believed by the people of Russia to be a by-product of 70 years of being governed by the political bureau of the Communist Party of the Soviet Union. They lost their history.
The Chairman: Even though there has been a rebirth of the Orthodox Church?
Mr. Black: Yes. They lost their history though, and the Russians are trying to recover their history, as are those other 14 republics. In a way, they are starting afresh. They are looking for historical traditions, and they could certainly trace the ones you mentioned.
By the way, I am not even convinced that there is any such thing as a national culture for anyone. When you ask anyone to define their national culture that is boasted about all the time, they will tell you that they cannot define it. The Russians do speak about this. I think the Russians are starting afresh.
The Chairman: I reread Archie R.G. Collingwood's famous 1940 essay in which he wrote about the importance of religion in one's self-conscious.
Senator Andreychuk: I want to correct one thing. Obviously, the Orthodox Church was regained because it was the church with the structures. It was supported even in communist times. However, the burgeoning church groups now are all fundamentalist groups. Russians represent many different churches of which I have never heard. Some stem from the United States. Even they seem to have a place there now.
Mr. Black: Religion is more prominent now in Russia.
Senator Andreychuk: They are looking for something.
Mr. Black: I will make one further comment about authoritarianism. The Russian population support order and stability as opposed to anarchy, which is different from saying that they automatically approve of having central authority, et cetera. Their only option right now seems to be economic, political, and social anarchy.
The Chairman: Was it George Gerald Brennan in his classic writing on Spain who stated that fascism is the response of the middle classes to disorder? It seems to have a slight application here.
Senator Corbin: I appreciated your comments on culture. I have been going through that very exercise of asking myself after all these years and spending so much time in Parliament, "Is there such a thing as Canadian culture? " The deeper I dig, the darker it gets.
You stated initially that to appreciate or understand the situation in Russia, you have to go there and talk to the people. This committee intends to go to Russia, and I suppose we will be required to talk to some officials. From your experiences in Russia, to whom should we talk to obtain a real appreciation of the economic situation and the misery of the people?
Mr. Black: I could certainly give you names, although I do not have them here. I would suggest that you talk to some of the young researchers who study on a daily basis. They are not really by-products of that old hierarchical system or they are young enough not to have been damaged too much by it. The young people know what we are all about, and recognize what their problems are.
Senator Corbin: What about university students?
Mr. Black: There are some new young business people in the universities and in the think tanks. Some of the hangers-on are retired in Russia, but they are so locked into the old-times that they cannot explain their problems without blaming them on us. There were many situations where we did not help them as much as we should have, but the Russians are the architects of their own dilemma, and to blame us is silly.
Senator Corbin: Do you know how many young Russians have the opportunity to study abroad?
Mr. Black: There is not a great flux, but the number is greater than it used to be. We have some Russian students at Carleton University and the University of Ottawa. They come here as undergraduates and pay their way. It may be that their fathers are oligarchs, but I do not know. We have many programs that interest Russian military people, government people and NGOs in coming here to study. I am referring to studying what we regard as democracy, which includes subjects such as market reforms and pension systems.
We do not send Canadian students over there, and I think that is a terrible mistake. Canada used to have the best exchange programs anywhere. We would send students abroad for six to eight months. There was a mutual learning experience. Now, many Russians, Ukrainians, Poles -- usually officials, but not all -- come here to learn what we are all about. I am not terribly convinced that such programs are truly effective. I believe they would be more effective if some of us went there, as was the case with the old exchange program.
Senator Corbin: I am as eager as you are to know about these things. Could you say a word about circumpolar cooperation? Aboriginal peoples are cooperating amongst themselves, in that general area. What, if anything, can you tell us about opportunities in that respect?
Mr. Black: I would be bluffing if I tried to say that I know a lot about it. As it happens, as you did, too, I had a long chat with the Secretary of State for Foreign Affairs from Norway late last week. The Norwegians are also very enthusiastic about better northern cooperative programs. I was to recommend that Canada be active in involving Russia in the EU's Northern Initiative and that the northern states themselves begin to work collectively, as we do, in circumpolar communication. There are people that you could ask who probably know a great deal about joint Russia-Canada northern information and northern peoples. I know some of those people, because of what I do, but not all of them.
Senator Corbin: Our researchers are taking notes.
Mr. Black: Much could be done, but I am not sure that the Arctic Council is the body that should be doing it.
The Chairman: We would be delighted if you would give us your recommendations.
Mr. Black: I would be delighted to do that.
The first recommendation is to send Canadians over there; go back to what we used to have. At one time, every ministry of our government sent someone there. You met two of them last week. At External Affairs, you will meet the people we send over there. They learned a great deal. The learning process is mutual during these visits, so it is still important to bring Russians to Canada.
However, we must be careful about who we bring here in that they do not see it merely as a perk of their education process. Some students and others who come here will learn a lot. Canada can be a model for Russia in more areas than any other country. Canada is large, northern, underpopulated, et cetera. We grow, dig up, and cut down the same things. We fish and we market the same goods. Good old Massey Harris opened up farming in Russia as long ago as the 1890s. They can learn from us; and we can learn from them.
We can learn from them by the way they have built in the North. We can learn what not to do. My first recommendation is that we somehow alter the way our exchange programs are working. Three years ago, almost overnight, the ability of young Canadians to go there disappeared.
The Canadian government must do something about re-establishing its research capacity in DND and in Foreign Affairs. The research capacity of DFAIT is pretty well gone. Only 10 years ago, we had some of the best researchers in North America right here in this city. When those researchers retired, they were not replaced. The ministers or agencies have disappeared.
It is interesting to note that CSIS has begun to hire people who know something about Russia. We have gone full circle on this. We have to come back to doing what we do better than anyone else. We did it better than the Americans and almost in the same number as the Europeans, but we stopped doing it.
As to the economy, Canadians must find some way to help facilitate the rescheduling of Russia's debt. Economists could tell you much more about that. Russia must be in a position not to use up all its resources to pay its debt and make everything else impossible. I have no answer to that, but something needs to be done to make it possible for Russia to join the concert of European states. We must start thinking seriously about that.
I have talked to many well-placed Americans about these subjects in different kinds of meetings. There are far too many people -- not just in the new administration but in the last administration -- who are not very helpful. A senior general told me last week, "We will do what we want. The Russians can get stuffed." That is stupid and counterproductive. I know that we do not take that approach, and I know that most Americans do not, but we must take care that that attitude does not prevail. Everything happening in Russia will affect Canada, whether or not we like it. We must keep that in mind.
We should try to persuade the EU and the U.S. ,as well as ourselves, to hesitate before legislating anti-dumping legislation against the Russians. The EU and the U.S. have lots of anti-dumping legislation, tariffs and sanctions against Russia. We have them too. These things must be worked out at different levels. However, there has not been a lot of discussion about a number of these issues.
Canada should play a role in helping Russia rebuild its infrastructure, its roads and its railroads. We should be part of it so that we can benefit from it sometime ourselves. Our agricultural sectors have wasted extraordinary opportunities. We almost do not deal with each other. The Russians no longer buy wheat from us. Maybe that is bad for us, but it is good for them. We can provide them with the technology and other things pertaining to agriculture that other countries cannot. That is why the old Massey Harris reapers and tractors were more suitable to Russia than those from anywhere else. Others were in competition with us, but Canadian agricultural equipment beat out every other country as the equipment most suitable for Russia. We did it before, and we can do it again.
We should help facilitate Russia's admission to the WTO, but they will have to go by the rules. It is a great mistake to change your own rules in order to facilitate someone else getting into the club. That may happen with NATO. That would also be counterproductive. We should give them an opportunity to join the WTO.
We should try to work much more closely with the Russians in the North. Above all, we must do something about cleaning up the radioactive materials in the North. I recognize that this will cost lots of money, but we must have some serious international discussions about it. What I hear about is contained in the water in the North, it boggles the mind. It is like finding out what is in a hot dog.
I have a radical recommendation that everyone will say is hilarious, but it is something worthy of thought. There are 20 to 25 million ethnic Russians living outside of Russia in those 14 new republics. Russia needs labour. It needs skilled labour. An unusual percentage of that Russian population in the stands -- less so in Ukraine, where many are coal miners and that is not what Russia needs -- that is, in those republics in central Asia and other places, have skills that they either took with them or learned there. I do not think it would be a bad idea for the IMF to consider subsidizing the removal of ethnic Russians back to Russia. It would ease the burden in those countries and would provide new labour for Russia and new skills. The money that provides them with housing -- not a cheap thing -- would benefit Russia generally and benefit the Russian population specifically. It might have some real advantages to the countries from which they came. I think it is worth thinking about.
That idea was posed to me in Russia after seven vodkas. The next morning, I thought it was not such a bad idea. I can understand everything that one would say about why it is a ridiculous suggestion, but it has not been discussed and it should not be discarded as being out of hand.
In foreign affairs, I think further expansion of NATO is a mistake. I realize that most do not agree with that. If it expands at all, though, Slovenia, Romania, Slovakia, Bulgaria would be considered, but the Baltic states need to be reconsidered. The Baltic states have a right to be there, but a different kind of northern security apparatus to include the Scandinavian countries, the Baltic states, Poland and Russia might have a different consequence and would help bring a security umbrella to all of Europe and eliminate this rhetorical dispute. I understand the passion for being part of NATO, but there are alternatives that need to be considered.
Canada, more than anyone else, should be the first country to guarantee the UN Security Council's mandate to be the peacemaker in the world and not NATO, and not anything else.
The Chairman: Thank you. That was very interesting.
Senator Andreychuk: You said that Russia is absolutely essential to Canada. I have been finding out that people understand China. They say, "It has a quarter of the population of the world. We have to pay attention to China." In Canada, certainly in the United States and sometimes even in Europe, I hear "Russia is not that important." As you get closer, you find out that it is more important to Germany than to France and more important to France than to Canada. What is Russia's importance to Canada?
Mr. Black: It is our northern neighbour. We share the North with Russia. We do not really share it with anyone else to any great extent.
Since Russia and Canada are so similar in so many ways -- for example, flora, fauna and geographically -- yet so different in many ways, including how we use our resources, we can do things with them that we cannot do with other countries, and they can do things with us that they cannot do with other countries. We can do things jointly and learn from each other. Our "northernness" is the thing we have most in common with them and it is something we should use jointly.
If Russia becomes any more polluted than it is now, land and sea, that will impact on us.
The Chairman: On behalf of the committee, I would like to thank you, Professor Black. This committee has already considered and studied NATO. I do not know that we officially said we were opposed to NATO expansion but we came as close to it as we could in our report on NATO and peacekeeping.
Senator Corbin: Some of us were against it.
The Chairman: I will take it no further than that. We have thought about some of those issues and that is why we are conducting this study on Russia. When we met president Putin we made the observation to him that Canada has had an interest in European security for generations.
We have a significant interest in this area, apart from the proximity of Russia. However, Russia is part of the European security area that this committee has been studying. We have had some thoughts along the lines of your recommendations.
The committee adjourned.