Vladimir Putin, who was catapulted into the Kremlin following Boris Yeltsin's surprise New Years Eve resignation, was elected President on March 26, 2000 by a solid majority that embraced his tough policy toward Chechnya. Parties backing Putin did well in the Duma election last December, giving Putin a stable parliamentary majority as well. Federal forces have suppressed large-scale military resistance in Chechnya, inflicting heavy casualties on rebels and civilians alike, but face the prospect of prolonged guerilla warfare.

In 1998, shortfalls in tax collection led to heavy borrowing and salary and pension arrearages. The growing mountain of debt became unsustainable in August, triggering a financial crisis, ruble devaluation, suspension of debt repayment, dismissal of the pro-reform Kiriyenko government, and political turmoil. But in 1999, the economy began to improve; production increased and inflation was contained. In July, a new IMF loan helped Russia avert default on sovereign debt. Crime, corruption, and capital flight remain high.

Russian foreign policy has become more assertive and anti-American, fueled in part by frustration over the gap between Russia's self-image as a world power and its greatly diminished capabilities. Its top priority, to reassert Russian dominance in and integration of the former Soviet states, is most successful with Belarus and Armenia but arouses opposition in Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova. The unification of Russia and Belarus is accelerating, but the CIS, as an institution, appears to be failing. Washington and Moscow clash over Chechnya, Kosovo, and Iraq, NATO enlargement, and Russian missile technology and nuclear reactor transfers to Iran, among others. The Duma's approval of START II in April highlights the very contentious issues of national missile defense, ABM Treaty modification, and a possible START III Treaty.

The military is in turmoil after years of severe force reductions and budget cuts. The armed forces now number some 1.2 million, down from 4.3 million Soviet troops in 1986. Weapons procurement is down sharply. Readiness, training, morale, and discipline have suffered. With a war in Chechnya and strained relations with the U.S. and NATO after the Kosovo conflict, the government says it will increase spending for new weapons by 50% this year, though it is unclear whether this is financially feasible.

Since the collapse of the Soviet Union, the United States has sought a cooperative relationship with Moscow and has supplied over $3.9 billion in grant aid to encourage democracy, market reform, and strategic threat reduction in Russia. Early hopes for a close partnership waned in the past few years, in part because Russians grew disillusioned with perceived U.S. disregard for Russian interests, while Washington grew impatient with Russia's increasingly assertive stance on issues in which their interests clash. Direct U.S. foreign aid to Russia, under congressional pressure, fell sharply through most of the 1900s. It rose by 29% in 1999, but was cut again in FY2000. Indirect U.S. assistance, however, through institutions such as the IMF, is very substantial. Three times since mid-1998, the Administration has imposed economic sanctions on Russian organizations for exporting military technology and equipment to Iran and Syria.

MOST RECENT DEVELOPMENTS

On April 14, The Russian Duma approved the START II Treaty, signed by Presidents Bush and Yeltsin in January 1993 and approved by the U.S. Senate in January 1996.

On April 26, Sen. Helms declared that he would block any new strategic arms control treaty that the President might send to the Senate Foreign Relations Committee this year.

On June 3-5, Presidents Clinton and Putin held a summit meting in Moscow. Little or no progress was achieved on the key issues of missile defense and ABM Treaty modification.

On June 13, media mogul Vladimir Gusinsky was arrested in Moscow. Gusinsky's independent television network had been critical of Putin for months and his arrest was widely seen as political retaliation and a blow against press freedom.

BACKGROUND AND ANALYSIS

Post-Soviet Russia and Its Significance for the United States

Russia was by far the largest of the former Soviet republics. Its population of 146 million (down from 149 million in 1991) is about half the old Soviet total. Its 6.6 million square miles comprised 76.2% of the territory of the U.S.S.R. and it is nearly twice the size of the United States, stretching across Eurasia to the Pacific, across 11 time zones. Russia also has the lion's share of the natural resources, industrial base, and military assets of the former Soviet Union.

Russia is a multinational, multi-ethnic state with over 100 nationalities and a complex federal structure inherited from the Soviet period. Within the Russian Federation are 21 republics (including Chechnya) and many other ethnic enclaves. Ethnic Russians, comprising 81.5% of the population, are a dominant majority. The next largest nationality groups are Tatars (3.8%), Ukrainians (3%), and Chuvash (1.2%). Furthermore, in most of the republics and autonomous regions of the Russian Federation that are the national homelands of ethnic minorities, the titular nationality constitutes a minority of the population. Russians are a majority in many of these enclaves. Nevertheless, political confrontations between the executive and legislative branches weakened the central government, allowing many of the republics and regions to demand greater autonomy, and in some cases independence. Only the Chechen Republic, however, has tried to assert complete independence. Some have seen this as a threat to the cohesion of the Russian state. In February 1994, Moscow and Tatarstan signed a treaty delineating the rights of Tatarstan within the Federation. Since then, similar agreements were signed with many other ethnic republics within the Federation as well as many ethnic Russian oblasts, which have pushed for similar treaties to delegate powers, especially in economic questions, to them.

The structure of the Russian government has been radically transformed four times since 1990, most recently by the Constitution adopted after a national referendum in December 1993. This Constitution, designed by and for President Yeltsin, combines elements of the U.S., French, and German systems, but with an even stronger presidency. Among its more controversial features are the ease with which the president can dissolve the parliament and call for new elections and the obstacles erected to prevent parliament from dismissing the government in a vote of no confidence. The Constitution provides a four-year term for the president and no more than two consecutive terms. The president, with parliament's approval, appoints a premier who heads the government. The president and premier appoint government ministers and other officials. The premier and government are accountable to the president rather than the legislature. (See CRS Report 94-844, Russia's New Parliament.)

The bicameral legislature is called the Federal Assembly. The lower (and more powerful) chamber, the Duma, has 450 seats, half chosen from single-member constituencies and half from national party lists, with proportional representation and a minimum 5% threshold for party representation. The upper chamber, the Federation Council, has 178 seats, two from each of the 89 regions and republics of the Russian Federation. Deputies are the regional chief executive and the head of the regional legislature. This body does not meet on a continuous or full-time basis (since Deputies are the top regional leaders) and is more like the French or German upper chamber than the U.S. Senate. Deputies in both chambers serve four-year terms. The most recent parliamentary election was in December 1999.

The judiciary is the least developed of the three branches. Reform has begun but some of the old structure and personnel are still in place. Trial by jury is being introduced experimentally. Federal judges, who serve lifetime terms, are appointed by the President and must be approved by the Federation Council. The Constitutional Court rules on the legality and constitutionality of governmental acts and on disputes between branches of government or federative entities. The Supreme Court is the highest appellate body.

Russia is not as central to U.S. interests as was the Soviet Union. With the dissolution of the U.S.S.R. and a weaker, diminished Russia taking uncertain steps toward democratization and market reform and limited cooperation with the West, much of the Soviet military threat, especially to western Europe, has disappeared. Yet developments in Russia are still important to the United States. Russia remains a nuclear superpower. It will play a major role in determining the national security environment in Europe, the Middle East, and Asia. Russia could be cooperative, passive, or disruptive, depending on internal developments. Russia is a key player in implementing the START I and II strategic arms reduction treaties, the Conventional Forces in Europe (CFE) Treaty, and in dealing with nuclear proliferation. Such issues as the U.S. budget deficit, the future of NATO, and the U.S. role in the world will all be affected by developments in Russia. Also, although Russia's economy is still distressed, it is potentially an important market and trading partner. Russia is the only country in the world that has more natural resources than the United States, including vast oil and gas reserves. It has a large, well-educated labor force and a huge scientific establishment. Furthermore, many of Russia's needs -- food and food processing, oil and gas extraction, computers, communications, and transportation -- are in areas in which the United States is highly competitive.

Political Developments

The ongoing political struggle in Russia has many aspects. These are generally said to include: contests over political ideology, the character of government, and the pace and character of economic reform; an institutional clash between the executive and legislative branches; and personal rivalries among would-be leaders. The political landscape is fluid, with parties and alliances forming, shifting, and dissolving. Some argue that what appears on the surface to be "normal" competition among politicians and parties of varying ideological hues masks a deeper underlying contest -- a venal competition among rapacious elites to seize ownership of vast, previously state-owned assets.

In August and September 1999, Islamic radicals based in Russia's break-away republic of Chechnya launched armed incursions into Dagestan, a neighboring, predominantly Muslim Republic, vowing to drive the Russians out and build a new Islamic state. In September, a series of bombing attacks against apartment buildings in Moscow and other Russian cities killed some 300 people. The Russian government claims, and most Russians believe, that these bombings were the work of Chechen-based terrorists. The newly appointed government of then-Premier Vladimir Putin responded to these perceived security threats with a large-scale military campaign. After repelling the incursions into Dagestan, Russian forces launched air and rocket attacks and then a gradual invasion of Chechnya. Russian security forces may have seen this as an opportunity to reverse the humiliating defeat they suffered in Chechnya in 1994-1996. Defense Minister Sergeev and other senior military leaders declared that Russian forces would never leave Chechnya and warned politicians not to "betray" the Army by negotiating a political compromise with Chechnya. With Moscow keeping its (reported) military casualties low and domestic media ignoring the suffering of the Chechen population, the conflict enjoyed strong Russian public support, encouraging military and political leaders to escalate the offensive, despite growing international criticism. By December, Russian forces had occupied northern and central Chechnya and surrounded the capital. After a grinding siege, Russian forces took the Chechen capital in February and in the following weeks took the major rebel strongholds in the mountains to the south. Although Moscow appears to have suppressed large-scale Chechen military resistance, it now faces the prospect of prolonged and bloody guerilla warfare. Russian forces are believed to have killed thousands of civilians and driven hundreds of thousands of Chechen refugees from their homes. Many foreign governments and the UN and OSCE, while acknowledging Russia's right to combat separatist and terrorist threats on its territory, criticize Moscow's use of "disproportionate" and "indiscriminate" military force and the human cost to innocent civilians. Moscow denies that there is a "humanitarian catastrophe" in the North Caucasus and strongly rejects foreign "interference" in its internal affairs.

In the December 19, 1999 Duma election, the two parties associated with Premier Putin, Unity and the Union of Rightist Forces, fared very well. The Fatherland-All Russia bloc, led by former Premier Yevgenni Primakov and Moscow Mayor Yuri Luzhkov, did not do well, as had earlier been predicted. The Communist Party, which lost about one quarter of the seats it previously held and most of its parliamentary allies, remains the largest faction in the Duma, but no longer controls a majority. Vladimir Zhirinovsky's right-wing party and Grigory Yavlinsky's democratic, pro-market, Yabloko Party both lost over half the seats they previously held.

Twelve days later, President Yeltsin's surprise New Year's Eve resignation was probably the result of a calculation by Yeltsin and his advisors that it was impossible to extend his rule beyond June 2000, when his second term was due to end, and that their best chance for a "soft landing" (i.e., avoiding prison and keeping their privileges and wealth) after leaving the Kremlin was if Putin succeeded Yeltsin. By resigning a half year before the end of his term, Yeltsin advanced the presidential election date from June 4 to March 26 and increased Putin's already strong election prospects by: making Putin Acting President; detaching Putin from the thoroughly discredited Yeltsin regime; reducing the period in which the Putin government might suffer political damage from military reverses in Chechnya or other political or economic setbacks; and reducing the time for Putin's rivals to recover from their setbacks in the Duma election and organize presidential campaigns. (See CRS Report RS20525, Russian Presidential Election, 2000, March 24, 2000.)

Putin's meteoric rise in popularity was due to a number of factors: his tough policy toward Chechnya; his image as a youthful, vigorous, and plain-talking leader; and massive support from state-owned TV and other mass media. Putin's political strength and popularity reached such levels that three of his four chief rivals, Primakov, Luzhkov, and Lebed, decided not to run in the presidential election. On March 26, Putin was elected president with about 52.5% of the vote in an 11-person field. His closest rival, Communist Party leader Gennady Zyuganov, got just under 30%. All other candidates were in single digits.

The Yeltsin regime had lurched periodically from one crisis to the next. During the 1996 election campaign, Yeltsin fired many of his loyal hardliners and made an alliance with Aleksandr Lebed. Yeltsin's strong reelection victory in July 1996 was followed by his prolonged illness and an open succession struggle. In October 1996, Yeltsin fired Lebed. In March 1997, Yeltsin appointed the Chubais-Nemstov "young reformer" team that seemed to eclipse Premier Chernomyrdin. A few months later, Yeltsin backed Chernomyrdin's demotion of Chubais and Nemstov. In March 1998, Yeltsin amazed observers by dismissing Chernomyrdin and nominating a little-known 35-year-old technocrat, Sergei Kiriyenko, as premier. Five months later, amid deepening financial and economic crises, Yeltsin fired Kiriyenko and reappointed Chernomyrdin. After the Duma twice rejected Chernomyrdin's candidacy, Yeltsin appointed Foreign Minister Yevgeny Primakov as a compromise premier. Primakov, who came to be viewed as intelligent, competent, pragmatic, and honest, rose to the top of public opinion polls as Russia's most respected and popular leader, which is widely viewed as the main reason why Yeltsin fired him. In May 1999, after several embarrassing political defeats and mounting corruption scandals, as the Duma was poised to vote on articles of impeachment against him, Yeltsin dismissed Primakov and replaced him with a Kremlin loyalist, Sergei Stepashin, as premier. Less than 3 months later, on August 9, Yeltsin fired Stepashin with no real explanation and nominated Vladimir Putin (another Kremlin insider and former head of the Federal Security Service) for the premiership and as his choice to succeed him as president. Some see this lurching from crisis to crisis as evidence not only of Yeltsin's failing health, but of his undisciplined and increasingly chaotic leadership style, motivated above all by his personal will-to-power. The Yeltsin drama, however, ended abruptly with a final Yeltsin surprise. His resignation on December 31, 1999 was a cynical manipulation of the political system for personal benefit. Putin's first official act as Acting President was to grant Yeltsin immunity from criminal prosecution. (See CRS Reports 98-725, Russian Political Turmoil, August 1998, August 28, 1998; and RS20525, Russian Presidential Election: 2000, March 24, 2000.

Economic Developments

Since the collapse of the Soviet Union, Russia has experienced widespread economic dislocation and a drop of about 50% in GDP. Conditions worse than the Great Depression of the 1930s in the United Sates have impoverished much of the population. Persistent government shortfalls in tax collection exacerbate the chronic problem of arrearages in salary and pension payments, which intensifies social instability. Russia is also plagued by environmental degradation and ecological catastrophes of staggering proportions; the near-collapse of the health system; sharp declines in life expectancy and the birth rate; and widespread organized crime and corruption. The population has fallen by 3 million in the 1990s despite net in-migration from other former Soviet republics. The following table shows the government's success in curbing inflation (until mid-1998), but also its failure to revive economic output.

Source: PlanEcon, Inc.

In mid-1998, panic selling hit Russian securities markets, triggered by government revenue shortages, falling oil prices, and the Duma's rejection of Kiriyenko's "anti-crisis" program. Interest rates on 90-day Russian government T-bills shot up to 150%. Over 40% of August's budget expenditures were earmarked for debt service. This was unsustainable. On August 17, the government announced a de facto 30% ruble devaluation and a 90-day suspension of payments on (and a rescheduling of) government and commercial debt payments -- a technical default. By mid-October, the Russian stock market was down 88% from its January 1, 1998 level, and the ruble had lost two-thirds of its value, wiping out many peoples' savings. The emerging middle class was hard-hit. By years's end, inflation had risen to 84%. The GDP contracted by 5% in 1998 and the number of Russians living below the official poverty line increased 25%. Some analysts warned of the danger of a total Russian economic collapse. Russia's 1998 grain harvest was the worst in 40 years, raising the specter of food shortages. The most dire predictions, however, proved exaggerated. In 1999, the economy achieved some modest successes. Inflation was held to about 30% and the ruble was stabilized at about 25-28 to the dollar. Economic output increased and the GDP grew by some 2-3%, its best performance of the decade, due partly to the sharp increase in the price of imports and increased price competitiveness of Russian exports caused by the 74% ruble devaluation in 1998. The recent surge in the world price of oil and gas has also buoyed the Russian economy. The economic upturn accelerated in 2000, led by a 4%-5% increase in GDP, relatively low inflation, and a balanced budget. Economists disagree as to whether this is a turning point marking the start of real economic recovery, or a cyclical up-tick that will not be sustainable without further, politically costly, systemic reform.

By December 1999, Russia was scheduled to repay $17 billion in loans to foreign creditors (including the IMF), a sum that exceeded Russia's expected tax revenues for the year. Thus, Moscow either had to get foreign agreement to major debt-rescheduling, or default on its sovereign foreign debt -- and risk being cut off from future foreign investment for years. The IMF is the lead agency in this situation. In July 1999, the Primakov government and the IMF signed an agreement for a new IMF loan of $4.5 billion dollars to help Russia meet its near-term debt obligations to the IMF itself. The first tranche of $640 million was released immediately, but the IMF suspended further disbursements, citing shortcomings in Russian economic performance. Western disapproval of the Chechnya campaign may also have been a factor. In August 1999, (before fighting in Chechnya flared) the Paris Club of official government creditors provided a "framework agreement" reducing Russian interest payments on its Soviet-era debt and deferring payment of principal until after 2001. In February 2000 Russia reached an agreement with the London Club of commercial creditors, writing off 36.5% of Russia's $32.8 billion Soviet-era commercial debt outright, with the remainder to be converted into 30-year eurobonds with lower interest rates and an 8-year grace period. This amounts to a total of 52% debt forgiveness in present net value terms. "Comprehensive" Paris Club negotiations have begun to determine whether western government creditors will grant Russia more large-scale debt forgiveness, or offer debt rescheduling without forgiveness. Germany, which holds 48% of that debt, is calling for full repayment. Some of Moscow's critics contend that the Putin government's pledge to increase spending on weapons procurement by 50% should be taken into account by western governments considering further debt forgiveness for Russia.

Economic Reform. In January 1992, Yeltsin launched a sweeping economic reform program developed by First Deputy Premier Yegor Gaidar. The Yeltsin-Gaidar program wrought fundamental changes in the economy. Although the reforms suffered many setbacks and disappointments, most observers believe they carried Russia beyond the point of no return as far as restoring the old Soviet economic system is concerned. The Russian Government removed controls on the vast majority of producer and consumer prices in 1992. Many prices have reached world market levels. The government also launched a major program of privatization of state property, headed by Anatoly Chubais. By 1994, more than 70% of industry, representing 50% of the workforce and over 62% of production, had been privatized, although workers and managers owned 75% of these enterprises, most of which have not still been restructured to compete in market conditions. Critics charged that enterprises were sold far below their true value to "insiders" with political connections. Land privatization, backed by the Yeltsin regime, was stalled by the strong collective farm lobby in the Duma. Land privatization will be critical if the Russian agricultural sector, which is a major burden on the federal budget, is to revive. Saratov, a region in southern Russia, adopted a pioneering law legalizing the sale of farm land in December 1997, a move strongly backed by Yeltsin. Some other reform-minded regions have followed this example. The Putin government says that it favors marketization and land reform. Putin has declared reviving the economy his top priority. He has appointed a liberal economic reform team that appears to be fashioning policies that will win G-7 and IMF approval. Skeptics charge that this may be more to impress western creditors than to implement real economic reform.

Foreign Policy

In 1992 and early 1993, Yeltsin's Russia gave the West more than would have seemed possible even 2 or 3 years earlier under Gorbachev. Moscow cut off military aid to the Communist regime in Afghanistan; ordered its combat troops out of Cuba; committed Russia to a reform program and won IMF membership; signed the START II Treaty that would eliminate all MIRVed ICBMs (the core of the Soviet Strategic Rocket Forces); and radically reduced Russian force levels in many other categories. The national security policies of Yeltsin and Foreign Minister Andrei Kozyrev came to be strongly criticized at home, not only by hardline communists and ultranationalists but also by many centrists and prominent democrats, who came to agree that the Yeltsin/Kozyrev foreign policy lacked a fundamental sense of national interest and was too accommodating to the West -- at Russia's expense. This criticism contributed to the erosion of Yeltsin's support in the legislature. Since 1993, Russian foreign policy has become increasingly more assertive and nationalistic in many areas, while maintaining cooperation with the West in others. This shift may have had a number of causes: a) a policy adjustment to "responsible" criticism; b) an attempt to woo some of the hardline nationalists' supporters; c) a reaction to the success of nationalists and communists in the 1993 and 1995 parliamentary elections; and d) resentment over the West's "inadequate" response to Russia's earlier conciliatory approach, western "responsibility" for Russia's economic distress, and western indifference to Russian security concerns.

The victory of leftist and nationalist forces in the 1995 legislative elections pushed Yeltsin to replace Kozyrev as Foreign Minister with Yevgenni Primakov, who was less pro-Western but still pragmatic. Primakov opposed NATO enlargement, promoted integrating former Soviet republics under Russian leadership, and favored closer links with Islamic countries and with China. (See CRS Report 97-185, Russian-Chinese Cooperation: Prospects and Implications.) When Primakov became Premier in September 1998, he chose Igor Ivanov to succeed him as Foreign Minister. Ivanov has kept that position.

Increasing nationalism in Moscow is tempered by a desire not to be isolated from the West, especially since the August 1998 economic crisis heightened Russia's need for western-led economic assistance and debt relief. The Kosovo crisis and the NATO air strikes against Yugoslavia posed a serious dilemma for Moscow: how to oppose NATO's military action without provoking a confrontation with the U.S. and NATO Europe. The response was a combination of vehement rhetoric and limited action. Russia suspended military cooperation with NATO and individual NATO members, again put off ratification of the START II Treaty, sent an electronic intelligence ship to the Adriatic Sea, and sent humanitarian aid (and tried to send fuel) to Yugoslavia. Russian officials warned that if NATO "aggression" continued, they would be forced to take stronger measures, but made it clear that they did not intend to be drawn directly into the military conflict. Moscow relied on vigorous diplomacy to help defuse the conflict and demonstrate its status as a world power. During much of the conflict, Russia opposed NATO's terms for peace as too severe, but in the end Russia joined U.S., NATO, and EU representatives in persuading Yugoslavia to accept a cease fire on NATO's terms. On June 12, 200 Russian paratroopers from the Bosnia SFOR surprised NATO by seizing the Pristina airport in Kosovo before NATO forces reached the city. They blocked access to the airport to exert pressure on NATO to agree to Russian terms for participation in KFOR, which were resolved on June 17, although disagreements on the ground in Kosovo continued. Cooperation between U.S. and Russian troops is reported by both sides to be satisfactory, although Russian officials continue to criticize NATO and UN policies in Kosovo in connection with the status of the KLA and protection of the Serb minority. On February 16, 2000, the Putin government agreed to restore normal relations with NATO (suspended by Russia in March 1999) and in March revived normal meetings of the NATO-Russia Permanent Joint Council.

The intensity of Russia's opposition to the NATO air strikes had many causes. Besides emotional and domestic political factors, some Russian leaders see a growing NATO military threat approaching their borders while Russian conventional armed forces are in ruins. Particularly alarming is NATO's decision to use military force without UN or OSCE approval (where Russia would have veto power), to address a situation in Kosovo that reminds many Russians of their own recent conflict in Chechnya. "Russia could be next," warn the hardliners. Russia's warnings to the West about Kosovo, however, were blunted by its military weakness and its continuing pleas for economic assistance and debt relief.

Moscow strenuously opposes NATO enlargement in Eastern Europe. Virtually the entire Russian political spectrum supports this position. Nevertheless, Moscow grudgingly accepted an agreement on Russia- NATO relations and NATO enlargement in May 1997. The Russia-NATO Founding Act gives Russia a consultative voice in NATO deliberations but is not a formal treaty. It repeats NATO's assurances that it has no intention to deploy nuclear weapons or substantial additional military forces on the territory of new members, but contains no legally binding prohibitions against such moves. (See CRS Report 95-594, NATO Enlargement and Russia: From Cold War to Cold Peace?) Moscow has declared a "red line" for NATO enlargement, however, warning that any attempt to bring former Soviet republics such as the Baltic states or Ukraine into NATO would be an intolerable security threat leading to a rupture relations with the alliance and strong Russian counter measures.

Russia has also toughened its policy (some see it as imperialism or expansionism) toward neighboring former Soviet republics. A consensus emerged in Moscow that reestablishing Russian dominance in this region is its highest foreign policy priority. A September 1995 Yeltsin decree outlining Russian policy toward other CIS countries set the goal of further economic integration under Russian leadership, including a customs union and a payments union, with the Russian ruble as a reserve currency. The decree also says Russia should strive for a CIS defense alliance and Russian military bases in the territory of other CIS states. Another Russian goal is to get agreement to joint efforts to secure the CIS's "external borders." The decree also says Russia will provide financial and other assistance to ethnic Russians in other CIS states, and warns of retaliation if their rights are abused.

There has been little progress toward overall CIS integration. Russia and other CIS states impose tariffs on each others' goods in order to protect domestic suppliers and raise revenue, in contravention of an economic integration treaty. Recent CIS summit meetings have ended in failure, with many of the presidents sharply criticizing lack of progress on common concerns and Russian attempts at domination. The CIC appears to be foundering.

Russia and Belarus, however, have taken real steps toward integration. Belarusan President Aleksandr Lukashenko is widely believed to covet a leading role in a unified state. But he unconstitutionally removed the parliamentary opposition in 1996 and strongly opposes market reform in Belarus, making economic integration difficult and potentially very costly for Russia. In April 1997, the two presidents signed documents calling for a "union" between states that are to remain "independent and sovereign." On May 23, 1997, they signed a Union Charter. Lukashenko minimized his and his country's political subordination to Moscow. Yeltsin avoided onerous economic commitments to Belarus. Decision making was to be on the basis of one-side- one-vote, valid only if approved by both sides. On December 25, 1998, Yeltsin and Lukashenko signed an agreement to "unify" the two countries. Premier Stepashin announced that unification would be achieved by the autumn of 1999. After protracted negotiations, Yeltsin and Lukashenko signed a treaty on December 8, 1999, committing Russia and Belarus to form a confederal state. Although Moscow and Minsk continue to differ over the scope and terms of union, the general idea of reunification appears to enjoy broad public support in both countries. Most Russian political leaders, however, do not want to see Lukashenko emerge as a rival on the Russian political stage, leaving the future of the "union" uncertain.

Russian forces remain in Moldova against the wishes of the Moldovan government (and the signature of a bilateral troop withdrawal treaty in 1994), in effect bolstering a neo-Communist, pro-Russian separatist regime in the Transdniester region of eastern Moldova. Russian forces intervened in Georgia's multi-faceted civil strife, finally backing the Shevardnadze Government in November 1993 -- but only after it agreed to join the CIS and allow Russia military bases in Georgia. (See CRS Report 93-1039, Georgia in Transition.) Moscow has used the Armenian-Azerbaijani conflict over Nagorno-Karabakh to pressure both sides and win Armenia as an ally. Citing instability and the threatened spread of Islamic extremism on its southern flank as a threat to its security, Moscow intervened in Tajikistan's civil war in 1992-93 against Tajik rebels based across the border in Afghanistan. At the OSCE summit in Istanbul, November 18-19, 1999, Russia agreed to accelerate the withdrawal of its forces from Moldova and Georgia.

A major focus of Russian policy in Central Asia and the Caucasus is to gain more control of natural resources, especially oil and natural gas, in these areas. Russia seeks a stake for its firms in key oil and gas projects in the region and puts pressure on its neighbors to use only pipelines running through Russia. This has become a contentious issue as U.S. and other western oil firms have entered the Caspian and Central Asian markets and seek alternative pipeline routes. (For more on Russian policy in these regions, see CRS Issue Brief IB93108, Central Asia's New States: Political Developments and Implications for U.S. Interests, and CRS Issue Brief IB95024, Armenia, Azerbaijan, and Georgia: Political Developments and Implications for U.S. Interests.)

Of all the Soviet successor states, however, Ukraine is the most important, and most difficult, for Russia. The Crimean Peninsula has been especially contentious. Many Russians view it as historically part of Russia, and say it was illegally "given" to Ukraine by Khrushchev in 1954. Crimea's population is 67% Russian and 26% Ukrainian. In April 1992, the Russian legislature declared the 1954 transfer of Crimea illegal. Later that year Russian and Ukrainian negotiators agreed that Crimea was "an integral part of Ukraine" but would have economic autonomy and the right to enter into social, economic and cultural relations with other states. In January 1994, Yuri Meshkov, an advocate of Crimean union with Russia, was elected President of Crimea. Moscow and Kiev sought to avoid open conflict over Crimea. Moscow distanced itself from Meshkov, allowing Kiev successfully to use economic and political pressure against Crimean separatism. However, relations between Kiev and Moscow were set back by presidential politics in Russia. Throughout 1996, Yeltsin postponed a visit to Kiev to sign a friendship treaty, citing Kiev's refusal to cede full control of Sevastopol naval base in Crimea to Russia. Moscow also stalled on the division of the Black Sea Fleet. In response, Ukraine pointedly increased its cooperation with NATO. Finally, on May 31, 1997, Yeltsin and Ukrainian President Leonid Kuchma signed a Treaty that resolves the long dispute over Sevastopol and the Black Sea Fleet and declares that Russian-Ukrainian borders can not be called into question. This agreement is widely viewed as a major victory for Ukrainian diplomacy. After heated debate, the Russian Duma ratified the treaty in December 1998, as did the Federation Council (parliament's upper chamber), in February 1999. Instruments of ratification were exchanged on April 1.

Moscow grudgingly treats the three Baltic states, which never joined the CIS, as exceptions among the former Soviet states. Russian troops were withdrawn from Lithuania in 1993 and from Estonia and Latvia in August 1994. In October 1997, Russia and Lithuania signed a border delimitation treaty, Russia's first such treaty with a former Soviet state. However, Russia frequently and strongly states its objection to what it calls human rights violations against the Russian-speaking population in Estonia and Latvia, particularly concerning citizenship and language laws. In 1998, Moscow launched a sharp campaign against Latvia, using propaganda, threats, and de facto economic sanctions to try to force a change in Riga's citizenship and language laws. Many believe that Russia fosters tension with the Baltic states as a way of blocking their accession to NATO.

Defense Policy

Fundamental Shakeup of the Military

The Russian armed forces and defense industries are in turmoil. Their previously privileged position in the allocation of resources has been broken, as has their almost sacrosanct status in official ideology and propaganda. Hundreds of thousands of troops have been withdrawn from Eastern Europe, the former Soviet Union, and the Third World. Massive budget cuts and troop reductions forced hundreds of thousands of officers out of the ranks into a depressed economy and probable unemployment. Present troop strength is about 1.2 million men. (The Soviet military in 1986 numbered 4.3 million.) Weapons procurement is at historic lows. Readiness and morale are very low, and draft evasion and desertion are widespread. Many of these negative trends were reflected in, and aggravated by, the 1994-1996 conflict in Chechnya. In mid-1997, Yeltsin named General Igor Sergeyev, previously Commander of the Strategic Rocket Forces, as Russia's Defense Minister, declared military reform a top priority, and signed a number of decrees that reorganize, consolidate, and further downsize the armed forces. But fundamental reform of the armed forces and the defense industries -- which Russia urgently needs if it is to solve its economic problems -- is a very difficult, controversial, and costly undertaking and was further set back by the economic and political crises of 1998-1999. The Chechen conflict will further delay military reform. (See CRS Report 97-820, Russian Conventional Armed Forces: On the Verge of Collapse?)

The conflicts in Kosovo and Chechnya, and the generally more hawkish, anti-western atmosphere in Russia, led the government under Yeltsin and Putin in 1999-2000 to make some military changes. A new military doctrine and draft national security and foreign policy "concepts" were adopted. These documents retain the previous judgement that Russia's main security threats are internal rather than external, but assert that external military threats, particularly from NATO, are growing, and call for greater military readiness and capability. This is the context for the Putin government's pledge to increase spending on weapons procurement by 50%. It is not clear whether this is financially feasible.

Despite its difficulties, the Russian military remains formidable in some respects and is by far the largest in the region. Because of the deterioration of its conventional forces, however, Russia relies increasingly on nuclear forces to maintain its status as a major military power. Even if Russia increases defense spending in 2000 by 50%, that would still be far below the levels of support of the 1970s or 1980s. There is very sharp debate within the armed forces about priorities between conventional vs. strategic forces and among operations, readiness, and procurement. Russia is trying to increase security cooperation with the other CIS countries. Russia has military bases on the territory of all the CIS states except Azerbaijan and is seeking to take over or at least share in responsibility for protecting the "outer borders" of the CIS. In the early 1990s, Russia, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Turkmenistan, Tajikistan, and Uzbekistan signed a collective security treaty and/or an agreement on creating a common "military-strategic space." Implementation of these agreements, however, has been limited, although in the proposed Russia-Belarus union, President Lukashenko pointedly emphasizes the military dimension. On the other hand, the "GUAM states" (Georgia, Ukraine, Azerbaijan, and Moldova) are shifting their security policies toward a more western, pro-NATO orientation.

Control of Nuclear Weapons

When the U.S.S.R. collapsed in 1991, over 80% of its strategic nuclear weapons were in Russia. The remainder were deployed in Ukraine, Belarus, and Kazakhstan. Those three states completed transfer of all nuclear weapons to Russia and ratified the Nuclear Non-Proliferation Treaty as non-nuclear-weapon states by 1995-1996. All Soviet tactical nuclear weapons, which had been more widely dispersed, reportedly were moved to Russia by 1992 to be dismantled. The command and control system for strategic nuclear weapons is believed to be tightly and centrally controlled, with the Russian President and defense minister responsible for authorizing their use. The system of accounting and control of nuclear (including weapons grade) material, however, is much more problematic, raising widespread concerns about the danger of nuclear proliferation. There are growing concerns about threats to Russian command and control of its strategic nuclear weapons resulting from the degradation of its system of early warning radars and satellites and from year-2000 (Y2K) computer problems. A recent U.S.-Russian agreement to share early warning missile launch data at a U.S. center was renounced by Moscow in response to NATO's air strikes against Yugoslavia. (See CRS Issue Brief IB91144, Nuclear Weapons in the Former Soviet Union: Location, Command, and Control.)

CFE Treaty: Flanks, Adaptation of CFE, and NATO Enlargement

In November 1990, the Conventional Forces in Europe (CFE) Treaty was signed, requiring a phased reduction of tanks, armored fighting vehicles (AFVs), heavy artillery, and combat aircraft and helicopters. Russia is well below those ceilings. The treaty also limits how forces may be deployed in "flank zones" of the area covered by the treaty. Russian officials admitted that Russia was in violation of the flank limits when the treaty came into force in November 1995, because of the large forces it had deployed in Chechnya. In June 1996, Russia and NATO reached a compromise which froze the existing level of Russian forces in the flank zone, but committed Russia to comply with CFE flank limits by May 1999. In addition, the flank zones were redrawn, removing several Russian regions from the zones. In return, Russia agreed to additional verification inspections and to provide more information in the flank areas. In October 1999, Moscow notified the OSCE that it had exceeded the (expanded) CFE flank limits on the southern flank in connection with its military campaign in Chechnya and has pledged to reduce its forces there below the flank ceiling as soon as the Chechen operation is over. (See CRS Report 95-908, Conventional Forces in Europe Treaty: Russian Attitudes and Implications for U.S. Interests.)

Moscow asserted that CFE was fundamentally flawed because its underlying goal was to balance NATO and Warsaw Pact forces. But with the demise of the Warsaw Pact and the U.S.S.R., while NATO remains and expands, Moscow says CFE ceilings put it at an unfair disadvantage. On July 22, 1997, representatives of the United States, Russia, and the 28 other CFE states reached a framework agreement to modify CFE by replacing the old bloc-to-bloc ceilings with national and territorial limits. This satisfied a basic Russian demand. The specific limits required over two more years of negotiation and were signed at the OSCE summit in Istanbul on November 19, 1999. Modification of the CFE Treaty will require Senate approval. (See CRS Report 97-252, Conventional Armed Forces in Europe (CFE): Treaty Review and Adaptation.)

U.S. Policy

U.S.-Russian Relations

Although Washington and Moscow maintain areas of mutually beneficial cooperation, the spirit of "strategic partnership" of the early 1990s has been replaced by increasing tensions and, during NATO's air strikes against Yugoslavia, by a sense of crisis. Besides Kosovo, there are many other difficult security issues in U.S.-Russian relations.

A key set of issues are Russia's construction of nuclear reactors in Iran and its role in missile technology transfers to Iran. Despite repeated pleas by President Clinton and other U.S. officials, who believe Iran will use the civilian reactor program as a cover for a covert nuclear weapons program, Russia has adamantly refused to cancel the project. (For more information see CRS Report 95-641, Russian Nuclear Reactor and Conventional Arms Transfers to Iran.) In 1997, Israeli and U.S. critics charged that Russian enterprises were actively assisting Iran's missile development program. The Clinton Administration and the Congress made this a high-priority issue in bilateral relations. In January 1998, Russia tightened export controls on missile technology. On June 9, 1998, Congress passed H.R. 2709 (Title I of which was the "Iran Missile Proliferation Sanctions Act"), that would have imposed economic sanctions on foreign entities that contribute to Iran's efforts to develop ballistic missiles. The President vetoed this bill. Before the expected veto override attempt, Moscow brought criminal charges against seven entities, alleging illegal exports to Iran. The Clinton Administration promptly imposed economic sanctions against them. Congress took no further action on H.R. 2709. But in December 1998, press reports and Administration statements asserted that some Russian entities continued to transfer missile technology to Iran. On January 10, 1999, the Administration announced economic sanctions against three more Russian institutions. It further threatened to curtail contracts worth hundreds of millions of dollars for Russian launch of U.S. commercial satellites. Moscow denies these allegations and protests the sanctions. Dissatisfied with Russia's response and Clinton Administration actions, the House unanimously passed the Iran Nonproliferation Act (H.R. 1883) on September 14, which would require the president to impose economic sanctions on any entity or government that contributed to Iran's development of weapons of mass destruction or of ballistic missiles. The bill also targets U.S. payments to the Russian Space Agency, in connection with the international space station, worth over $500 million. On February 22, 2000, the Senate unanimously passed the bill. President Clinton signed it into law (P.L. 106-178) on March 14. (See CRS Report 97-474, Iran: Arms and Technology Acquisitions, updated September 1, 1999.)

Since late-1997, U.S. and Russian interests have clashed over Iraq. Russia strongly opposes military action against Iraq in connection with the UN inspection regime. Yeltsin, Primakov, and virtually all segments of the Russian political spectrum protested vehemently against the U.S.-led missile and air strikes against Iraq in December 1998. Russia supports Iraq's call for an end to economic sanctions and seeks to replace UNSCOM, the UN weapons inspection regime in Iraq, with a less intrusive arrangement. Moscow seeks to increase its influence in the region at U.S. expense. It also wants to expand economic relations with Iraq and secure repayment of $7 billion of loans owed from the Soviet period.

In February 1999, the Clinton Administration threatened to cut $50 million of bilateral aid to Russia if the latter went ahead with a reported sale of anti-tank missiles to Syria. On April 2, the Administration imposed economic sanctions against three Russian entities it said were involved in the sale to Syria, but did not act against aid to Russia in general.

There are sensitive security issues concerning the ratification of START II (which had been stalled in the previous communist- and nationalist-dominated Duma for years) and the future of the ABM Treaty. The U.S.-Russian agreement (signed September 26, 1997) to extend by five years the period during which the states are to destroy nuclear missiles eliminated by START II was meant to facilitate Russian ratification of the Treaty. Another agreement signed that day, setting ABM Treaty criteria for theater anti-ballistic missile systems, is opposed by some in Congress who want to deploy a national missile defense. The Primakov government made some progress in persuading the Duma that Russia really needs START II more than does the United States. But in an angry response to U.S. air strikes against Iraq in December, the Duma postponed action on the treaty. The Clinton Administration's announcement in January 1999 of plans for limited nationwide ballistic missile defense (NMD) and modification of the ABM Treaty was strongly criticized in Moscow and denounced by all factions in the Duma as yet another obstacle to ratification of START II. In March, Yeltsin complied with a Duma resolution calling for withdrawal of the Treaty from consideration in response to NATO's air strikes against Yugoslavia. On June 20, 1999, the last day of the G8 summit in Cologne, Presidents Clinton and Yeltsin announced several surprise agreements on these issues. In an apparent concession to Washington, Yeltsin agreed to begin talks on possible modification of the ABM Treaty. In a reciprocal concession, Clinton agreed to new talks on a possible START III Treaty. Yeltsin also pledged to do everything possible to get START II ratified quickly. A series of talks on START III and the ABM Treaty began in Moscow in August. After a number rounds of talks, however, the Russians appeared strongly opposed to even the incremental modification of the ABM Treaty reportedly sought by the Administration. Senior Russian officials warned that any unilateral U.S. act to modify, withdraw from, or violate the ABM Treaty would jeopardize and/or overthrow the entire system of existing arms control agreements and would be met by "appropriate" Russian responses.

The dynamics changed, however, with a strong new president and a new Duma with a pro-government majority. On April 14, the Duma approved the START II Treaty, with the 5-year extension agreed to by Clinton and Yeltsin in September 1997. Approval by Russia's upper chamber is considered certain. The Duma attached a non-binding resolution stating Russia's intention to withdraw from the treaty if the United States violates or abandons the ABM Treaty, which was reiterated by Putin. At the same time, Putin noted that the 1997 agreement delimiting strategic and theater missile defenses left room for possible agreement on modifying the ABM Treaty. The Russian calculation seems to be that by (finally) ratifying START II, they have gained leverage on the ABM Treaty/NMD issue. "The ball is now in the U.S. court," said Russian officials. Three days after the Duma approved START II, formal START III negotiations opened in Geneva and a Clinton-Putin summit meeting was announced for early June. Many in Congress oppose the 1997 agreement delimiting theater and national missile defenses and the notion of circumscribing NMD on behalf of the START Treaties. On April 26, 2000, Sen. Helms declared that he would block approval of any new arms control treaty that the President might send to the Senate Foreign Relations Committee this year. The Clinton-Putin Moscow summit (June 3-5) produced little if any progress on these issues. Immediately afterward, Putin traveled to western Europe and announced vague proposals for Russian-European-U.S. cooperation on a boost-phase anti-missile system to protect Europe. This is viewed skeptically by many in the United States, who see it as a ploy to split NATO and/or delay U.S. NMD plans.

Moscow and Washington are cooperating on issues of nuclear weapons reduction and security. Since 1992, the United States has spent some $2 billion in Cooperative Threat Reduction program (CTR or "Nunn-Lugar") funds to help Russia dismantle nuclear weapons and ensure the security of its nuclear weapons, weapons grade nuclear material, and other weapons of mass destruction. During the September 1998 summit, both countries agreed to share information when either detects a ballistic missile launch anywhere in the world, and to reduce each country's stockpile of weapons-grade plutonium by fifty metric tons. In June 1999, U.S. and Russian officials extended the CTR program for another seven years. Russia accepted a U.S. proposal to establish a joint center to monitor ballistic early warning systems during December 1999-January 2000, to address concerns about Y2K computer failures and strategic stability. For several weeks over the new year, Russian officers were based at the facility in Colorado. At the recent Clinton-Putin summit, the two sides agreed to set up a permanent center in Moscow to share near real-time information on missile launches to reduce the danger (especially in Russia, whose early warning system is increasingly unreliable) of erroneously interpreting a benign missile launch as an attack. The two sides also agreed to each dispose of an additional 34 tons of weapons-grade plutonium, with the U.S. to seek international funding to help finance the $1.7 billion Russian effort.

An important focus of U.S.-Russian cooperation is trade and investment. U.S. firms and individuals have provided about one-third of the approximately $9 billion that foreigners have committed to Russia in both direct and portfolio investment. Russia received Most-Favored-Nation status in 1992 and Generalized System of Preferences (GSP) status in October 1993. A double taxation treaty entered into force in 1994 and a bilateral investment treaty in 1996. Russian parliamentary action on amending the production-sharing law and streamlining the tax system would go far toward clearing the way for substantially more foreign, including U.S., investment. A Joint Commission for Economic and Technological Cooperation (headed by Vice President Gore and former Premier Chernomyrdin) has worked to increase cooperation in science and technology, business development, space, energy policy, environmental protection, health, defense diversification, and agriculture. Under an Oil and Gas Framework Agreement which supports U.S. capital equipment exports to renovate Russia's energy sector, the Export-Import Bank has approved over $2 billion in loans. One important initiative in this area is the Sakhalin II project, under which U.S., Russian, and other oil companies will develop oil and gas fields off Sakhalin Island. Total investment in the project is expected to be about $10 billion.

U.S. Assistance

From FY1992 through FY1997, the U.S. government obligated $4.5 billion in grant assistance to Russia, including $2.1 billion in Freedom Support Act aid for democratization and market reform and $857 million for Cooperative Threat Reduction (Nunn-Lugar assistance). But Russia's share of the (shrinking) NIS foreign aid account fell from about 60% in FY1993-FY1994 to 17% in FY1998. The Administration's 1997 Partnership for Freedom (PFF) initiative sought to reverse these downward trends, but Congress rejected the proposed increases in Russian and NIS aid. PFF did effect a shift away from technical assistance to Russia, with greater emphasis on exchanges, trade and investment activities, and a variety of grassroots cooperative and volunteer activities. Attempting again to obtain more funding for Russia programs, the Administration requested a 69% increase to $225 million for Russia in FY1999. In the end, Russia was allocated $172 million for FY1999, a 29% increase over the previous year and 20% of the FY1999 NIS account. The FY2000 request of $295 million, a 72% increase over FY1999 levels, is somewhat deceptive. Of this amount, $122 million is intended for the expanded threat reduction program, leaving $173 million for programs equivalent to those currently implemented under the NIS account, roughly the same level as this year. Under the Senate bill, S. 1234, and H.R. 2606, the House version, Russia programs would likely decline from the FY1999 level, because of the overall decrease in the NIS account and increased earmarks for other countries.

Both the FREEDOM Support Act and annual foreign operations appropriations bills contain conditions that Russia is expected to meet in order to receive assistance.

A major restriction on aid to Russia was approved in the FY1998 appropriations. This prohibited any aid to the government of the Russian Federation (i.e. central government; it does not affect local and regional governments) if, by May 26, 1998, the President does not certify that Russia has not implemented a law discriminating against religious minorities. On May 26, 1998, the President made such a determination. A similar restriction appears in the FY1999 appropriations, and, on April 15, 1999, a determination affirming that Russia had not implemented a discriminatory law was made. The restriction appears this year in both S. 1234 and H.R. 2606.

Another restriction, introduced for the first time in the FY1999 appropriations bill, withholds all assistance from the federal government of Russia after April unless an agreement has been reached or legislation enacted to ensure that aid is not subject to customs duties. This provision was subject to a presidential waiver if the President found that substantial progress had been made toward meeting the objective of the condition. Such a finding was made on April 15, 1999. It is not in either House or Senate bills for FY2000.

Two key conditions are included on aid to Russia. The House bill would withhold half of all aid to the Russian government unless the President certifies that Russia has terminated the sale of nuclear reactor and missile technology to Iran. A presidential waiver on national security grounds is provided. The Senate bill would eliminate all aid to Russia with no possibility of a waiver, if the President determines that Russia is continuing its nuclear and missile cooperation with Iran. A second condition would halt all aid to Russia if the President determines that Russia's 1997 law restricting religious minorities is being implemented systematically. No waiver is provided for this restriction. Nunn-Lugar Cooperative Threat Reduction funds are not subject to these restrictions. (See CRS Issue Brief IB95077, The Former Soviet Union and U.S. Foreign Assistance.)

In response to growing concern about food shortages in Russia last winter (and, some say, to the problem of large U.S. agricultural surpluses), the U.S. and Russian governments agreed, on November 5, 1998, to a large food aid program. As finalized on December 23, the program provided 1.5 million metric tons (MMT) of wheat and 100,000 MT of other foods to Russia as a grant. An additional 1.5 MMT of various grains was to be sold to Russia on the basis of a long-term low-interest loan. On February 1, 2000, U.S. and Russian officials signed agreements whereby Russia will receive free of charge 20,000 tons of seeds and 200,000 tons of food commodities this year. Agreements for an additional 300,000 tons of wheat reportedly are still being negotiated.

Return to CONTENTS section of this Issue Brief.