TRANSFORMATION WATCH #9:
COUP II — THE UNFOLDING CRISIS IN THE FORMER USSR>

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(Washington, D.C.): As the decision
over who will lead the United States for
the next four years approaches its
denouement, an even more dramatic
decision seems about to be made in
Moscow. Within six weeks, the
last vestiges of true democratic
and free market reform may be shunted
aside by a rising phoenix of hardline
communist and nationalist forces.

The Center for Security Policy finds
the absence of serious debate about such
a portentous development to be absolutely
astounding. This is especially true
insofar as the demise of any
prospect for genuine, radical reform in
Russia threatens to derail all the
presidential candidates’ planned
bill-payer for increased domestic
programs — i.e., draconian reductions in
defense spending
— if not the
prospects for a more peaceable world upon
which such plans have presumably been
predicated.

In the hope of focussing the
contenders’ and the American people’s
attention
on the unfolding crisis in
the former Soviet Union, the Center urges
that the following ominous events be
addressed at once.

  • Yeltsin’s December
    Show-down
    : On 1
    December, the Seventh Russian
    Congress of People’s Deputies
    will convene. Fearing that
    hardliners who dominate the
    parliament will use this meeting
    to move against his government,
    President Boris Yeltsin sought to
    have it postponed until next
    spring. His inability to do so
    was an early test of the
    vestigial reformist faction’s
    relative impotence — and the
    growing assertiveness of an
    opposition led by the
    “National Salvation
    Front.”
  • The Front was founded by the
    likes of General Albert Makashov,
    Colonel Viktor Alksnis and
    Communist deputy leader Sergei
    Baburin with the ostensible aim
    of removing the president and his
    cabinet through so-called
    “constitutional means.”
    In fact, Yeltsin has come to feel
    so threatened by the growing
    power of the Front that on 27
    October 1992, he attempted to ban
    it on the grounds that an unconstitutional
    attempt to overthrow the
    government is being organized by
    its adherents.

  • Coup Talk:
    Yeltsin’s effort to preempt the
    National Salvation Front is but
    the latest sign that a second
    coup may be in the making.
    Another indication may be found
    in the blunt warning issued on 19
    October by State Secretary
    Gennady Burbulis, Information
    Minister Mikhail Poltoranin,
    Foreign Minister Andrei Kozyrev
    and Deputy Prime Minister Anatoly
    Chubais.
  • On that occasion, these four men
    called an extraordinary press
    conference to warn that members
    in the Parliament were planning a
    coup under the direction of
    parliamentary speaker Ruslan
    Khasbulatov.
    According
    to the 19 October 1992 edition of
    the Financial Times,
    Poltoranis said, “We are
    seeing the ripening of not just
    serious opposition but of the
    open and strongest preparation of
    a coup d’etat.”

    The possibility of a Coup II in
    the making also emerged on 22
    October, when Vice
    President Alexander Rutskoi
    ,
    another of Russia’s leading
    anti-reformers, called on
    the government to share power in
    a coalition with Civic Union.

    The latter is an organization
    representing the mainstays of the
    communist system: the
    military-industrial complex, the nomenklatura,
    former Soviet central bankers,
    the KGB and other security
    services. Indeed, in some
    respects Civic Union is
    synonymous with a resurrected and
    pared-down Soviet Union.

    With transparent insincerity, the
    Russian Defense Minister, Gen.
    Pavel Grachev, issued a statement
    on 23 October reaffirming the
    military’s support for Yeltsin.
    In the wake of its release, three
    of his most senior advisers
    resigned in protest and urged
    that the armed forces adopt a
    neutral position in the struggle
    between the reformers and the
    hardline elements. It goes
    without saying that, under the
    circumstances, the Red Army’s
    “neutrality” would be
    tantamount to aiding and abetting
    the opponents of reform.

  • The Russian Military’s
    Mischief in the Baltics
    :
    Another ominous development
    occurred on 21 October when the
    Russian Defense Ministry
    announced that it was suspending
    the withdrawal of its troops from
    the Baltic States. In a statement
    entitled, “Troops Must Be
    Withdrawn from Baltic Region Only
    to Places that Have
    Amenities,” the Defense
    Ministry declared that the
    scheduled withdrawal of Russian
    servicemen and their families
    from the Baltics would be halted
    until:
  • “…All questions connected
    with the provision of amenities
    for them in the new places of
    stationing have been
    resolved…What is needed for a
    normal life is not only housing
    but also social infrastructure
    facilities.”

    (It is noteworthy that the
    absence of these conditions was not
    a factor in the introduction of
    occupation troops into the
    Baltics in the first place!)

    This announcement raises serious
    questions about Moscow’s
    willingness to comply with a
    solemn Russian-Lithuanian
    agreement requiring all Russian
    troops to leave the country by
    the end of August 1993. The State
    Department estimates that only 40
    percent of the 130,000 troops
    have been withdrawn to date.

    What is more, Moscow has yet to
    reach counterpart disengagement
    accords with Latvia and Estonia.
    To the contrary, Russia has
    sounded ever more bellicose with
    its parliament threatening, among
    other things, to impose economic
    sanctions against Estonia —
    ostensibly in response to
    mistreatment of the newly
    independent state’s Russian
    minority.

  • Moscow’s Arms Bazaar:
    Russia’s fire-sale of advanced
    weaponry is apparently attracting
    a wide array of unsavory buyers.
    The pressing need to meet
    short-term hard currency
    requirements, among other
    considerations, are evidently
    displacing concern over the
    implications for Moscow’s own
    long-term security interests —
    to say nothing of those of other
    states.
  • Included in the list of active
    buyers is Iran, which has
    arranged to purchase, for
    example, at least three modern
    diesel submarines. These vessels
    are capable of creating havoc in
    the strategic Straits of Hormuz
    and Persian Gulf. China has
    likewise obtained: front-line
    former Soviet anti-aircraft and
    anti-missile technology, advanced
    fighter aircraft and perhaps even
    long-range ballistic missile
    systems or technology.

    Such sales not only suggest the
    folly of past Western refusal to
    offer immediate debt relief to
    reforming Soviet successor
    states; they also demonstrate the
    degree to which Yeltsin has
    capitulated to the demands of the
    former Soviet military-industrial
    complex. By permitting
    substantial arms purchases from
    overseas client, the vast
    production base and bloated
    workforce of the USSR’s old
    defense industry can be
    maintained.
    Half-hearted
    demarches that the Stated
    Department hoped might dissuade
    Moscow from concluding such
    transactions — many of which
    will prove not only destabilizing
    but will likely add substantially
    to U.S. defense costs — have
    largely gone unheeded by the
    former Soviet Union.

  • The Hard Currency Crisis:
    The International Monetary Fund
    and senior Russian officials now
    concur that Russia’s hard
    currency debt payments due in the
    year ahead — primarily to the
    G-7 countries — total $22.1
    billion. However, these same
    officials estimate that Russia
    will only be able to pay roughly
    10 percent of their bill, or $2.5
    billion.
  • Given that in 1993, Russia will
    owe the United States alone
    almost $2 billion in principal
    and interest on Commodity Credit
    Corporation guaranteed loans
    extended by President Bush to
    Soviet President Mikhail
    Gorbachev, it is exceedingly
    improbable that U.S. taxpayers
    will be repaid for loans
    ill-advisedly made to a
    noncreditworthy borrower. In
    particular, as predicted by the
    Center, href=”#N_1_”>(1)
    the Bush Administration’s effort
    to stave off rescheduling of debt
    incurred after 1 January 1991
    will prove unsustainable. This
    should come as no surprise; that
    date was selected primarily to
    deceive U.S. taxpayers concerning
    the prospect of multi-billion
    dollar CCC losses during the
    pre-election period.

  • Hyperinflation on the
    Horizon
    : According to a
    22 October report on the Russian
    economy issued by the European
    Bank for Reconstruction and
    Development, Russia
    “is again on the verge of
    hyperinflation”
    (defined
    as over 50% inflation per month
    or 12,000% annually). In a CNN
    interview on 15 October,
    economist Jeffrey Sachs reported
    that inflation in Russia is now
    running at 30 percent monthly and
    is approaching an annual rate of
    14,000 percent:
  • “They’re on an
    extraordinarily dangerous course
    .. The reforms have really gotten
    off-track because of incredible
    pressures from the
    military-industrial complex in
    recent months….This is a
    country that is on the brink of
    political turmoil if they don’t
    get the financial turmoil under
    control.”

    Another worrisome indicator is Russia’s
    ballooning budget deficit which is now
    approaching almost 17 percent of GNP — a
    far cry from the five percent level
    agreed to with IMF officials in July.

The Bottom Line

Since the next administration is sure
to have to grapple with the strategic,
political economic, and financial
consequences of the unfolding crisis in
the former USSR, the Center for Security
Policy believes that the American people
are entitled to know how the three
principal presidential contenders expect
to deal with such a development. In
particular, the candidates should be
required to explain:

  • What changes do they
    expect to make in U.S. defense
    spending and overseas military
    commitments
    if hardline
    elements reestablish themselves
    in Moscow and elsewhere in the
    former Soviet Union?
    Specifically, what corrective
    actions would be in order to put
    the American defense industrial
    base on a footing that is more
    secure and more appropriate to
    such uncertain times?
  • How do they expect to pay
    for domestic spending priorities
    that they are promising to
    underwrite if expected savings
    cannot be made in defense
    expenditures?
  • What adjustments in
    present U.S. policies and
    programs are necessary to ensure
    that American financial aid,
    economic assistance and sensitive
    technologies do not wind up in
    the hands of potential
    adversaries
    — much as
    United States technology and
    other resources did in Saddam
    Hussein’s Iraq?
  • What alterations are now in order
    to fix unverifiable arms
    control agreements like the START
    and CFE Treaties to prevent their
    myriad loopholes from being
    exploited by hardline elements in
    the former Soviet Union?

No less important than the answers to
such questions concerning what should be
done if democracy and free markets are
defeated — or substantially damaged —
in the former Soviet Union are the steps
that might yet be taken to prevent such
an eventuality. Specific initiatives
toward this end will be the subject of a
separate Decision
Brief
to be released by the
Center for Security Policy tomorrow.

– 30 –

1. See the Center’s
Decision Brief entitled “Summit-Scam:
Munich Response on Debt Relief Undercuts
C.I.S. Reformers, Sets Stage for U.S.
‘December Surprise,'”
( href=”index.jsp?section=papers&code=92-D_72″>No. 92-D 72, 7
July 1992.)

Center for Security Policy

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