INTRODUCTION

The window of opportunity for the U.S. to develop a closer relationship with Russia has not closed, at least not yet. There are, however, warning signs that the lack of concrete, visible economic and geopolitical benefits for Moscow, or at least the perception of the absence of these benefits -could derail the strategic foreign policy cooperation between the two countries envisaged by Presidents Bush and Putin in their latest summit meetings. Combined with the anti-Americanism of many of Russia's politicians and top bureaucrats, the lack of visible advantages to Russia poses a threat to the relationship.

The signs of Russia's discontent include Moscow's threats that it would veto a potential U.N. Security Council resolution authorizing the use of force to disarm Saddam Hussein of Iraq and its alliance with France and Germany. Today, the question is whether the U.S. will offer Russia sufficient political and economic incentives to bolster the strategic partnership between the two countries in the war on terrorism and against rogue regimes. Otherwise, Putin's foreign policy will tilt towards the E.U. core (France an Germany); Russia's oil companies with large production contracts in Iraq; and by the Soviet-era anti-American elite which includes the top brass in the nuclear-industrial complex and weapons manufacturers, who dream of huge sales to the Middle East.

In September 2002, Moscow declared that it would sign a forty billion-dollar, 10-year trade agreement with Iraq, and sell five more nuclear reactors to the ayatollahs in Tehran. Russia also reportedly signed a multi-billion dollar weapons deal with China; and in August 2002, North Korea's "Dear Leader," Kim Jong Il, visited Russia and met with President Putin.[1] To some observers, it may appear as though Russia is returning to a position that the Soviet Union occupied in the past-that of patron saint of the Axis of Evil. This is not the case, however, at least not yet.

RUSSIA-IRAQ: THE LONG GOODBYE?

The Russian elite is split on Iraq. In private interviews in Moscow conducted in the fall of 2001 and spring 2002, many of Russia's pro-Putin parliamentary leaders and presidential policy advisers indicated that protecting Russia's multibillion-dollar interests in Iraq remains a priority, regardless of who is in power in Baghdad. Nevertheless, when faced with the choice between Saddam's friendship and America's good will, they indicated they would support, or at least not oppose, the U.S. policy to remove Saddam from power. This major policy shift would entail breaking the friendly ties Moscow has maintained with Baghdad since the 1960s, especially under former Prime Minister Evgeny Primakov. Primakov was Russia's top Arab affairs expert in the late 1960s through the 1980s. In the late 1980s, he served as Chairman of the upper house of the USSR's Supreme Soviet.

Moscow has important economic assets in Iraq:

• A Soviet-era debt of $7 billion to $8 billion, generated by arms sales to Iraq during the 1980-1988 Iran-Iraq war. Adjusted for inflation, that debt is worth from $10 billion to $12 billion today.
• Lucrative contracts to develop giant oil fields and wells in Iraq, signed by Russia's major oil company, LUKoil, and the government-owned Zarubezhneft and other companies. These contracts, worth as much as $30 billion over 20 years, include the Western Qurna oil field and wells already developed by the Russian oil companies Slavneft and Tatneft.
• Trade in Russian goods under the U.N.-sponsored oil-for-food program, worth between $530 million and $1 billion for the six months ending in December 2001 (the volume of illegal trade between Russia and Iraq is not known).

Economic interests on this scale clearly pose significant impediments to the severance of ties between Moscow and Iraq. As these issues were not fully addressed, the U.S. Administration found it difficult to bring Russia into a coalition to remove Saddam from power. U.S.-led coalition to change the political landscape in Iraq would have benefited from Russia's support. Russian participation in such an effort would provide President Putin an avenue to disengage from Saddam, which would be in line with his policy towards Cuba, Vietnam and other former Soviet imperial assets. However, as Russian oil interests are involved, it should have been anticipated that Putin would have needed and expected a quid pro quo for his policy of cooperation with the U.S.

Breaking with Baghdad
Since 9/11, Moscow has supported the U.S.-led war on terrorism. Moscow, long Baghdad's main arms supplier and business partner, began supporting United States policies against Saddam at the time of the U.S.-led coalition in the Gulf War. Soviet President Mikhail Gorbachev and his Foreign Minister Eduard Shevardnadze cooperated with the U.S. despite Primakov's efforts to protect Saddam. Still, the Iraqi dictator was able to curry diplomatic and economic favor in Moscow throughout the 1990s by providing preferential treatment for Russian companies in oil drilling and refining and by promising billion-dollar contracts to the influential Russian military industrial complex.

Moreover, according to Vyacheslav Kostikov, one of former president Boris Yeltsin's aides, Saddam bought the support of politicians such as Vladimir Zhirinovsky and his anti-American Liberal Democratic Party outright. The Iraqi dictator also paid for the lobbying efforts of Russian business tycoons and former senior officials, who make millions of dollars reselling Iraqi oil in the gray market and who supply Iraq with legal and illicit goods, including military equipment banned under U.N. resolutions. Representative Curt Weldon (R-PA) is among those who have accused Russia, Belarus, and Ukraine of supplying Baghdad with ballistic missile gyroscopes, biological warfare manufacturing equipment, and sophisticated surface-to-air missiles, a business connection that will require deep determination to break. Others report that Ukraine sold Baghdad an anti-stealth aircraft radar system called Kolchuga.

Iraq is trying to take advantage of Russia's economic ties with Saddam's regime and the desire of the post-Soviet military-industrial complex to boost sales to the Middle Eastern weapons markets. At one point, Saddam floated the idea of buying 4,000 Russian battle tanks upon the termination of the U.N. sanctions regime. On August 19, 2002, Iraq's ambassador to Moscow, Abbas Khalaf, announced in Moscow that Russia would sign a $40 billion, 10-year economic cooperation pact with Saddam.[2] Since then, no contract has been signed. Does this mean President Vladimir Putin supports Iraq against a possible U.S. military operation? Not necessarily.

The Russian-Iraqi agreement had been in the works for two years. It was announced as the clouds over Baghdad were getting darker - and the life expectancy of Saddam's regime growing shorter. The Iraqi leader, realizing that he is about to be sunk by a U.S. attack, is grasping at straws in the hope of finding shelter and support through his former patron. However, the Iraqi-Russia economic pact is largely a fantasy. The figures certainly do not add up. If Russian-Iraqi trade now stands at about $1 billion per year, it would need to quadruple in order to meet $40 billion over the 10 year period. This is simply not about to happen.

However, the astronomical figure may well be a signal to Washington that Russia wants to be compensated if Saddam is removed. At the recent G-8 summit, Putin reportedly told Bush that Moscow will shed no tears over Saddam, provided Iraq repays the Soviet era $7 billion debt formerly owed the USSR. In addition, if oil prices go down as Iraq starts to pump more oil to pay for post-war reconstruction, Moscow will lose some of its oil-export revenues, perhaps as much as $4 billion a year. Over 10 years, that's $40 billion - the magic figure. 

The Russia-Iraq trade agreement was rammed through the Russian bureaucracy by one of Russia's oil giants, LUKoil. The company, owned by an Azeri billionaire, Vagit (Wahid) Alekperov, has signed promising agreements with the Ba'ath regime in Baghdad, including one to develop the giant West Qurna field, which has up to 1 billion barrels worth of resources. LUKoil, which recently purchased close to 1,300 Getty gas stations in the U.S., is also hoping to preserve its strategic investment in Iraq. However, Lukoil's oil holdings were temporarily annulled by Saddam's regime, when the Russia U.N. veto began to look doubtful.

Slavneft was another company with interests in Iraq, and active on Saddam's behalf in Moscow. Until its recent acquisition by Sibneft in December 2002, the company had close ties to the fiercely anti-American ultra-nationalist politician Vladimir Zhirinovsky. As noted earlier, Duma and government sources in Moscow have repeatedly alleged that Zhirinovsky and his Liberal Democratic Party (which in reality is neither liberal nor democratic) is supported by Saddam.

Pavel Felgengauer, a well-known Russian security analyst, said recently in a BBC broadcast that it is not clear which Russian foreign policy is served by the recently announced agreement-that of President Putin, or that of LUKoil. "We have several foreign policies," Felgengauer said. Other Moscow-based analysts, who requested not to be identified, said that LUKoil has exercised undue influence over the Russian Foreign Ministry. Some observers were almost proud that private interests now influence Russian foreign policy, "just like in any other state...It is safer that companies influence our decision making. In the past it was all done behind the closed doors of the Politburo," one observer said.

However, the problem in articulating the new Russian foreign and defense policy still worries Putin's advisers in Moscow and Russia-watchers in Washington. Foreign Minister Igor Ivanov, ex-Prime Minister Evgeny Primakov's appointee, reflects the moderately anti-American, pro-Arab opinions of Soviet-era diplomats like himself as well as his own pro-EU views. Ivanov is not trusted by Putin's inner circle, but he has not been replaced, as he provides Putin with an alibi vis-à-vis the EU core, while Putin is delaying a purge of the foreign ministry.

The Ministry of Defense is controlled by a Putin confidante, ex-KGB general Sergey Ivanov. Ivanov is Russia's first "civilian" Defense Minister, but reforms are slow in coming and the old-style anti-Americanism still lingers. While Bush and Putin seemto have hit it off, the bureaucrats are not thrilled.

RUSSIA-IRAN: SEEING THE RUBLE SIGNS

For U.S. policy planners, the geopolitical dimension of Russian-Iranian rapprochement and nuclear and missile connections may actually be more worrisome than Moscow's ties with Saddam.

Washington and Moscow must prevent a future crisis over Moscow's assistance to the Iranian nuclear weapons program. Russian nuclear exports, which, if left unaddressed, could surpass the current U.S.-North Korean nuclear weapons disagreement, derail U.S.-Russian relations, and destabilize the uneasy geopolitical equilibrium in Eurasia.

The White House and the Kremlin should cooperatively develop a package of transparent and verifiable measures to stop Iranian attempts to acquire nuclear weapon technology. They should also find private sector-driven economic substitutes for Russia's exports of nuclear technology to terrorist-supporting states-of equal or greater monetary value than Russian nuclear exports to Iran. Simultaneously, the U.S. and Russia should agree on a list of countries to which Russia will not export nuclear technology.

Damning Evidence
Secretary of Energy Spencer Abraham stated in Moscow on August 1, 2002 that Iran is aggressively pursuing nuclear weapons as well as other weapons of mass destruction. "We have consistently urged Russia to cease all nuclear cooperation with Iran, including its assistance to the civilian nuclear power reactor in the (Southern Iranian port of) Bushehr," Abraham told CNN.

On February 9, 2003 Iranian President Mohammad Khatami announced that Iran is mining its own uranium and will process its own spent fuel, raising concerns of a robust Iranian nuclear weapons program.Last December 13, CNN published commercially available satellite imagery of two Iranian installations involved in uranium enrichment in Arak and Natanz. State Department spokesman Richard Boucher stated that that "Iran is actively working to develop nuclear weapons capability" and declared, in the CNN interview December 13, that Iran's energy needs do not justify these nuclear facilities Moreover, Boucher said that Iran flares more natural gas annually than the equivalent energy its future reactor could produce. Thus, the alleged power-generation applications of the Bushehr nuclear plant and two follow-up nuclear reactors at $800 million each do not seem either economically justified or truthful According to U.S. intelligence and defense officials quoted in the New York Times on December 16, Iran is actively working on a nuclear weapons program - with Russian help. Like North Korea, officials said, Iran seems to be pursuing both enriched uranium and plutonium options for its nuclear weapons.

In an interview with CNN's Christian Amanpour, International Atomic Energy Agency Chairman Mohammed ElBaradei said on December 13, that the alleged uranium enrichment plant could produce highly enriched uranium for nuclear bombs and the heavy water plant could to be used in the production of weapons-grade plutonium. Since then, only the uranium enrichment plant has been open to IAEA inspections February 22, during ElBaradei's visit to Iran

Denials, Denials
After visiting Iran in December 2002, MINATOM Minister Alexander Rumyantsev elaborated on Iranian peaceful intentions to the media: "Iran is using nuclear energy exclusively for peaceful purposes. There are no programs to create nuclear weapons or develop sensitive nuclear technologies." Rumyantsev, however, failed to explain why Iran is refusing to sign an agreement to return all spent fuel to Russia for reprocessing. Moscow, in the meantime, is going ahead with construction.

IAEA safeguards may not be sufficient in preventing Iran from acquiring nuclear bomb. Iran refused to sign the 1997 IAEA Model Protocol Additional for the Application of Safeguards (sometimes referred to as the "93+2" protocol on enhanced safeguards), which would allow intrusive inspections by the international agency.

Henry Sokolski, the former Deputy Assistant Secretary for non-proliferation in the first Bush Administration has suggested at the American Enterprise Institute panel February 20 that IAEA nuclear safeguards are not sufficient to prevent Iran from (coming within in weeks of having a large arsenal of nuclear weapons") building nuclear weapons and that the Bushehr light water reactor, designs for a heavy water reactor which Moscow has sold to Tehran, and uranium enrichment technology, all have military applications.     

Today, Russia's credibility as a U.S. strategic partner in the war on terrorism is on the line. Presidents George W. Bush and Vladimir Putin have worked diligently to improve bilateral relations between Russia and the U.S Now they must work even harder to prevent this strategic relationship from derailing over the Iranian nuclear weapons program, which is a threat to both countries.

The U.S. should not stand idle while the mullahs in Tehran build their nuclear arsenals, just as Washington has not acquiesced to Saddam Hussein's build up of weapons of mass destruction. Today, Russia's credibility as a U.S. strategic partner in the war on terrorism is on the line. Presidents George W. Bush and Vladimir Putin have worked diligently to improve bilateral relations between Russia and the U.S Now they must work even harder to prevent this strategic relationship from derailing over the Iranian nuclear weapons program, which is a threat to both countries.

Missile Cooperation
Moscow helped Iran develop its Shahab-3 IRBM, which is based on North Korean No Dong and Soviet SCUD technology, has a range of 1,200 kilometers, and is capable of hitting targets throughout the Middle East, including Saudi Arabia and Israel.[3] Russia also facilitated the sale of technology to Iran that is used in the manufacture of Soviet-era SS-4 intermediate range ballistic missiles (IRBMs). An Iranian Shahab-4 will be able to reach most of Western Europe and Russia.

In early 1997, then-Foreign Minister   Evgeny Primakov and his Iranian counterpart, Ali Akbar Velayati, issued a joint statement calling the U.S. presence in the Persian Gulf "totally unacceptable." Primakov sought to build a Eurasian counterbalance to the Euro-Atlantic alliance, to be based on a coalition including Russia, China, India, and Iran.[4] These efforts made it likely that the United States and its allies would eventually become the target of Russian-Iranian military cooperation.

While the Iraqi dimension of Russian foreign policy is primarily about oil and Saddam's generous lobbying in Moscow, the connection between the Russian Federation and the Islamic Republic is broader and deeper. They cooperate over a broad range of policy issues, with military and nuclear industry ties being an important aspect in relations between the two countries.

Since the collapse of the Soviet Union, Russia has been attempting to stem the export of radical Islam to the former Soviet Union, especially to the Caucasus and Central Asia. Iran has indeed refrained from actively promoting its brand of Islamic radicalism in the former Soviet republics. Despite having granted itself the title of "defender of all Muslims," Tehran kept silent when the Russian military slaughtered tens of thousands of primarily Muslim civilians in the first Chechen war (1994-1996). The Iranians only lodged weak protests about Moscow's excessive use of force in the second Chechen war (1999-2001). Moscow and Tehran cooperated against Afghanistan's radical Taliban regime, Tehran having supported the anti-Taliban Northern Alliance opposition coalition. Moscow and Tehran also support Armenia rather than pro-Turkish, pro-Western Azerbaijan, and they managed to delay, if not to completely block, a "western" route for exporting oil from the Caspian Sea basin through Georgia to Turkey.

Some Russian officials recognize that cooperation with Iran, however, has its limits. As Alexei Arbatov, Deputy Chairman of the Duma Defense Committee, representative of the reformist Yabloko party, and arms control expert has warned, Russia's technology transfers to Iran may backfire. He predicts that within 10 to 15 years, Russian technology could be used by radical Islamic terrorists or in Iranian, Algerian, Saudi, Egyptian, and Libyan missiles and other weapons aimed at Russia.[5]

Concerns over Russia's increasing military ties with Iran, especially in the area of weapons proliferation, have grown since 1994, when senior Iranian officials first took steps to establish relations with Russian bureaucrats in charge of nuclear and missile programs in the post-Soviet military-industrial complex. Up to $25 million allegedly changed hands to facilitate Tehran's access to advanced Russian technology.[6]

 The U.S. quickly communicated its concerns to the Yeltsin government. After intensive consultations, Vice President Al Gore and Russian Prime Minister Viktor Chernomyrdin signed a confidential agreement on June 30, 1995, in which Moscow agreed to limit sales of arms to Iran. Russia agreed to supply only weapons specified under the 1989 Soviet-Iranian military agreements and promised not to deliver advanced conventional or "destabilizing" weapons to Iran. Finally, Russia agreed not to sell any weapons to Iran beyond December 31, 1999.[7] The terms of the agreement were not met. With sales exceeding $4 billion between 1992 and 2000, Iran is now Russia's third largest weapons customer. The weapons systems Russia supplied to Iran in the 1990s include three Kilo-class attack submarines, which could be used to disrupt shipping in the Gulf; eight MiG-29 fighter bombers; 10 Su-24 fighter bombers; and hundreds of tanks and armored personnel carriers.[8]

Cooperation between Moscow and Tehran increased after the election of President Vladimir Putin in the spring of 2000, and culminated in November 2000, when Moscow renounced the 1995 Gore-Chernomyrdin Agreement.[9] Anticipating lucrative arms sales, a large number of Russian hard-line politicians and generals have endorsed Russia's rapprochement with the Islamic Republic.[10]

A Boost from Khatami's Visit
Russia's then-Defense Minister Marshal Igor Sergeev's visit to Tehran in December 2000, was a major breakthrough in the military relationship between the two governments. It was the first visit by a Russian defense minister to the Islamic Republic since Ayatollah Ruhollah Khomeini seized power in 1979.

During his visit to Iran, Sergeev, former commander of the Russian Strategic Rocket Forces, toured Iranian aerospace, electronics, and missile facilities, and consulted with top Iranian leaders on strategic cooperation in the Middle East and Central Asia.[11] He and his Iranian counterpart discussed a 10-year arms and military technology program worth over $3 billion that would include training for Iranian military officers and engineers at Russian military academies. The representatives agreed that their governments would consult each other on "military doctrines, common challenges and threats," effectively bringing their status closer to that of an informal alliance.[12] Sergeev bluntly rejected U.S. concerns about the relationship, telling the Iranian media upon his arrival that "Russia…intends to pursue its own ends."[13]

PresidentKhatami reciprocated with a state visit to Moscow in March 2001. During President Khatami's stay, Putin reiterated that Russia has the right to defend itself. Iranian officials toured a Russian missile factory and agreed to buy Osa and TOR-M1 surface-to-air missiles, which have missile defense capabilities.

Khatami also toured a nuclear reactor plant in St. Petersburg and signaled that his country would buy another reactor from Russia. Since Iran already controls some of the world's largest natural gas reserves, the need for the additional Busheh nuclear reactors-at a total cost of $1.8 billion-is questionable at best.

Moscow is about to conclude a deal to prevent military technology transfer to Tehran, Russia continues to sell its most sensitive and destabilizing technology to the Islamic Republic despite U.S. concerns.

Why Russia is Dealing with Iran
The Iranian nuclear contract, announced in August 2002, was lobbied for by MinAtom, the Soviet-era nuclear ministry, which is trying to keep its many factories, involving tens of thousands of jobs, afloat. MinAtom's bureaucrats were raised on a diet of anti-Americanism, but view themselves, first and foremost, as industrial competitors of Western nuclear technology and products. The main motivation behind the transaction is the nuclear ministry's desire to keep the Iranian market and preserve jobs. True, in the long term, a nuclear armed Iran on Russia's borders would make it a difficult neighbor. Tehran could stir up unrest in the Muslim areas of the Caucasus and Central Asia, immune from Russian retaliation behind its Moscow-supplied nuclear missile shield. But it is short term greed - and millions of dollars in bribes - that have kept the Iranian contract on track despite America's loud protestations.

Russia has found in Iran a large, oil-rich customer for its military industrial complex, on which over 2 million jobs depend. Russian leaders hope that export revenues will help them sustain the research and development capabilities and technology base they inherited from the Soviet Union, which can then be used to develop new major weapons systems for the Russian armed forces and foreign customers. To achieve economies of scale, however, Russia needs access to large arms markets, such as China, India, and Iran.

The state-owned arms exporter, Rosoboronexport, is pursuing such former Soviet clients in the Middle East as Algeria, Libya, and Syria, as well as the conservative Gulf States, and is developing markets for arms in Latin America and East Asia, from Malaysia to Vietnam. Senior Russian officials reportedly have taken bribes from foreign customers anxious to gain access to Russia's sensitive technologies.[14] Moreover, direct payments from foreign customers are often put in offshore bank accounts, from which some funds then find their way into private pockets.

Before 9/11, Moscow had two strategic goals in pursuing a military relationship with Iran: (1) keeping its own military-industrial complex solvent, and (2) building a coalition in Eurasia to counterbalance U.S. military superiority. By failing to effectively oppose Al Qaeda in Afghanistan and allowing U.S. military deployment in Central Asia, President Putin had, for a time, effectively abandoned this geopolitical confrontation. His current attempt to revive a European-Russian cooperation to oppose the U.S. action against Iraq may signal a return to a more geopolitical view of the world-absent a clear deal with the U.S.

The Threat to U.S. Interests

Iran's military build-up poses direct threats to U.S. interests in the Middle East. Iran has long aspired to play a dominant role in the Middle East and the Islamic world. Under the late Shah as well as the current leadership, Iran has sought to build up its military capabilities and its ability to defend itself from Iraq. However, today its aspirations go beyond legitimate self-defense. Iran's robust medium and long range missile program, growing naval warfare capabilities, and likely nuclear weapons program is a testimony to the ayatollahs' intentions. Militant Islamic leaders in Iran make no effort to hide the fact that they want to destroy the United States and its ally, Israel.

For example, senior Iranian officials, including the Supreme Leader Ayatollah Ali Khamenei, have repeatedly denied Israel's right to exist and described the tiny state as a "cancerous tumor." In the 1998 parade in Teheran , the Shahab-3 missile carrierprominently displayed an inscription that read, "Israel should be wiped off the map."[15] By opposing Arab-Israeli peace negotiations and maintaining a militant anti-Israeli posture, Tehran hopes to build support for its leadership role in the Arab and Muslim world.

According to the U.S. Department of State Patterns of Global Terrorism report, "Iran remained the most active state sponsor of terrorism in 2001."[16]

Iran backs the Hizbollah (Party of God) terrorist organization, which is based in Lebanon. Iran has supplied Hizbollah with thousands of short range rockets, and has shipped anti-tank missiles, mortars and plastic explosives to Yassir Arafat's Palestinian Authority. It also funds Palestinian Islamic Jihad (PIJ), Hamas, and the Popular Front for the Liberation of Palestine - General Command, all organizations on the U.S. Department of State terrorism list.

A more aggressive, nuclear Iran would cause further political instability which, in turn, is likely to lead to high oil prices thatwould benefit both Russia and Iran as producers. Moreover, a nuclear- and missile-armed Iran could directly intimidate America's allies and major oil exporters in the Gulf. Iran could use its missile capabilities, and eventually its nuclear potential, to blackmail the West, deter the United States and its allies from deploying forces to defend oil shipping routes, or deny the U.S. Navy access to the Gulf itself.

According to Admiral Thomas R. Wilson, Director of the Defense Intelligence Agency, Tehran is likely to re-export the sensitive Russian technology for weapons of mass destruction it obtains to militant Muslim regimes or terrorist groups in other countries, from Algeria to Sudan.[17] If America's diplomatic efforts to limit the proliferation of weapons and weapons technologies from China, Russia, and other countries to Iran fail, then the United States will have little recourse but to impose sanctions on the violators. The U.S. must be prepared to take other measures to punish countries that proliferate weapons of mass destruction, in order to prevent the most dangerous weapons from falling into the hands of the most dangerous regimes.

The Bush Administration faces many challenges in dealing with the issue of strategic military cooperation between Russia and Iran. It inherited an ineffective policy from the Clinton Administration, which attempted to reason with Russia to limit arms proliferation to Iran. The United States spent $5 billion to secure Russia's nuclear arsenal, however, Moscow still sold its sensitive nuclear and ballistic technology to China and Iran, as well as some parts and components to Iraq and other rogue states. In addition, American companies paid Russia $2 billion for commercial satellite launches authorized by the Clinton White House as compensation for Moscow's agreement to give up its arms trade with Tehran.[18] Finally, President Clinton waived congressionally mandated sanctions against the suppliers of weapons and military technology to countries that support terrorism.

Congress attempted to limit the damage from these ill-advised Clinton Administration policies by imposing sanctions on companies that do business in Iran. In 1998, Congress overwhelmingly passed the Iran Missile Proliferation Sanctions Act (H.R. 2709) sponsored by Representative Benjamin Gilman (R-NY), chairman of the House International Relations Committee.[19] The act mandates that the President report to Congress when there is credible information that a foreign entity transferred any technology controlled by the Missile Technology Control Regime (MTCR). All licensed exports, sales of defense items, and U.S. government financial assistance to that entity would then be terminated. However, President Clinton vetoed that legislation in June 1998. Instead, he issued Executive Order 12938 to assign penalties to companies that provided assistance to nuclear, chemical, and biological weapons programs.[20] Unfortunately, this Clinton Administration counter-proliferation policy was simply too little, too late.

NORTH KOREA

Only six months ago the take on North Korea in Moscow was that the former satellite is finally coming to its economic senses, and might provide an opportunity for Russian companies. A trans-Korean railroad, to be connected to the Trans-Siberian railroad, was generating great hopes in Moscow. Japan's Prime Minister Junichiro Koizumi's visit to Pyongyang in September 2002 was interpreted to mean that Kim wanted to keep his options open and was considering economic liberalization. The Russians believed that Comrade Kim could preside over a North Korean version of perestroyka, bringing elements of a market economy and foreign investment to Pyongyang. Russia did not want to lose out to China, Japan, South Korea - or to the U.S. - when the latest business frontier opened up. With the current nuclear and missile crisis raging, the Russian view of the Korean communist leader has become more jaundiced. Russia may cooperate with China, South Korea and the U.S. in attempting to diffuse the Korean crisis. Moreover, the possibility of a U.S. military withdrawal from the Korean peninsula and a consequent Japanese nuclear and military build-up is viewed in Moscow with a great concern.

POLICY RECOMMENDATIONS:WHAT THE ADMINISTRATION SHOULD PROPOSE

Russia today is close to Germany and France on issues of Iran and Iraq, despite Moscow's rejection of EU-style multilateralism, and recognition of the value of national sovereignty and the concept of national interests that some of the Europeans seem to lack.. At the same time, U.S. and Russian policymakers clearly recognize the growing threat that militant political Islam and its engagement in terrorism poses to global security. However, at least some Russians have bought into the concept of the multi-polar world and are concerned about U.S. "unilateralism" and alleged hegemonic ambitions.

What is needed is a strategy for coordinating U.S. and Russian policies which would include removing Saddam Hussein from power and ushering in a pro-democracy government in Iraq. Putin must confront the lingering pro-Iraqi sentiment in the Russian Foreign Ministry, military-industrial complex, and oil lobby. He must demonstrate to his eilites how Russian cooperation in the anti-Saddam coalition would benefit Russia. The U.S. and Russia should also tackle the dangers of uncontrolled MinAtom and Russian missile manufacturers' activities in Iran. At the same time, Russian interests in Iraq should be recognized.

To secure Putin's support in ousting Saddam, the Administration should:

• Assign a senior Administration official to negotiate U.S.-Russian understandings on a post-Saddam Iraq. This person should be well versed in Middle East geopolitics, energy economics, and finance issues.
• Discuss with Russia how it could supply diplomatic, military, and intelligence support to oust Saddam. For example, Russia should share export licensing data on military and dual-use technology transfers from its military-industrial complex, as well as from Ukraine and Belarus, to Iraq. And it should share intelligence on illegal transfers that have no export licensing track record.
• Press Moscow to shut down Iraq's black-market oil sales and illegal WMD procurement through Russian companies, and to share intelligence on bank accounts connected with such activities.
• Offer to support the repayment of Iraq's Soviet-era debt and recognition of Russian companies' rights to the Western Qurna oil field. . These interests of Moscow will not be met as long as Saddam remains in power. Washington could also consider brokering a deal in which Russia's Soviet-era debt to the Paris Club would be reduced by the amount of Iraq's debt to Russia.

Establishing a New U.S. policy on Russia-Iran cooperation.

The current North Korean crisis demonstrates how quickly a country can pull out of NPT and expel international inspectors, leaving the great powers grasping for a solution. Intelligence experts have suggested that Iran may choose to follow this path. Iranian leaders have repeatedly said that they are "entitled" to nuclear weapons. They flaunt their hostility toward the U.S. and their support of international terrorism. While President Putin declares his support for the United States in the war on terrorism, MINATOM is receiving hundreds of millions of dollars from supplying nuclear dual-use technology to Iran. Senior Russian policy makers, however, agree that it is in Russia's long-term strategic interest to cooperate with the U.S. to prevent nuclear proliferation. To check the transfer of Russian nuclear dual use, weapons-related, and missile technology to Iran, the United States should develop a policy that is deliberate, vigilant, and aggressive. The U.S. should not stand idle while the mullahs in Tehran build their nuclear arsenals, just as Washington has not acquiesced to Saddam Hussein's build up of weapons of mass destruction. The U.S. should:

• Develop consultations between the senior levels of the U.S. and Russian governments to prevent a grave confrontation over Russian proliferation policies toward Iran. The U.S. side should include the National Security Council, the Defense and Energy Departments, and the State Department's Bureau of Non-Proliferation, Office of Arms Control and International Security, and Bureau of European and Eurasian Affairs.
• Offer Russia an economic quid-pro-quo in exchange for full disclosure of past nuclear assistance and ending the technology transfer to Iran - if such cut-off will derail the Iranian nuclear weapons program. In return, the U.S. could authorize approval of storing spent fuel from U.S.-built reactors around the world in Russia under American technical supervision by private companies; financing of expanded nuclear security programs including nuclear submarine dismantlement and chemical weapons destruction under the Nunn-Lugar Cooperative Threat Reduction Program; contract buying Russian oil for the U.S. strategic petroleum reserve, and authorize other private sector high tech non-nuclear projects, such as civilian satellite launches. All these activities should be predicated on Russian compliance with U.S. non-proliferation demands.
• Sanction companies that supply nuclear material or technology to Iran, using legislation similar to the Iran Missile Proliferation Sanctions Act of 1997 and the Iran Non-Proliferation Act of 2000. Any entity that supplies technology or materials to such states or contributes to their development of nuclear weapons should be severely sanctioned, including denial of all U.S. funds, visas, and licenses to proliferating companies, officials and executives.

Conclusion

In the twenty-first century, foreign and security policy is as much about geo-economics as it is about geopolitics. Russia's support of France and Germany in the U.N. Security Council over Iraq and agreements with Iran, Iraq and China are all about the Russian view of the world power distribution and economic interests.

Moscow still possesses a world class military industrial complex, inherited from the Soviet Union, and wants to sustain it by selling arms to China, India, Iran and other countries. Russia's military-security elite will try to keep it afloat at all costs regardless of Washington's protests, as long as alternative markets, such as the Central and Eastern European countries or even NATO members, remain out of Moscow's reach. It sold to both sides during the Iran-Iraq war in the 1980s, and will supply the Vietnamese and North Koreans with modern aircraft and tanks, while selling the same to China and South Korea. Thus, if left unchecked, Russia is likely to continue to sell weapons to its neighbors, sowing the seeds of regional instability in the process.

Russia apparently has not received guarantees that ensure, from its point of view, its place at the table in the post-Saddam Iraq. Still, the option to bring Russia in on the U.S. side is still there. Russia is more concerned today about the threat of Islamist terrorism than most Western European governments. Both the Kremlin and the White House should continue exploring the window of opportunity to forge a strategic relationship. To achieve this, the Bush Administration should give Russia's economic interests a fair hearing, without compromising U.S. defense concerns. Until recently, Putin was seeking ways to demonstrate that the U.S.-Russian partnership is working. U.S.-Russian cooperation on a regime change in and post-war administration of Iraq can be mutually beneficial. Developing a Russian-American business partnership, especially in the energy sector, and securing some Russian economic interests in Iraq, would weaken domestic criticism of Putin's policy of rapprochement with Washington. U.S.-Russian strategic cooperation would also lessen criticisms of the Bush Administration's Iraq policy in Western Europe and the Arab world. This cooperation would lay the foundation for a fruitful partnership in the war against terrorism and efforts to reduce the threat posed by proliferating weapons of mass destruction. And if a precedent of successful cooperation is established, Iran may be the next area on which Russia and the U.S. can reach an agreement.

Ariel Cohen is Research Fellow in Russian and Eurasian Studies, Kathryn and Shelby Cullom Davis Institute for International Studies, The Heritage Foundation, Washington, D.C., the co-author of "The Road to Prosperity for Post-Saddam Iraq" (The Heritage Foundation, 2001) and the author of Russian Imperialism: Development and Crisis (Greenwood-Praeger, 1998).

Appendix 1

Russia-China: Arms Sales and Military Cooperation

The relationship between China and Russia usually is not put in the same category as the ties to the Axis of Evil. However, it is significant as far as proliferation is concerned. The ties are highly symbiotic. China is acquiring the capability to counter U.S. naval and air power in the Far East and intimidate neighbors like Taiwan. Russia is seeking to maintain its defense industrial base and use money from arms sales to China and others to spend on modernizing its own armed forces. Cooperation between the two countries is not limited to military technology and production.

Since the early 1990s, Russia has become a virtual Arms-R-Us supermarket for the People's Liberation Army (PLA). The voracious appetite that the Chinese military demonstrates for the "crown jewels" of the Russian military-industrial complex has finally started to worry even the civilian and military leaders of Russia.

China has made it clear that it is interested in creating "pockets of excellence"-local weapons development programs based on foreign technologies; but to do so it must first obtain that foreign technology. The large number of Russian weapons scientists who have moved to China over the past decade may be the most dangerous aspect of the Sino-Russian strategic relationship. China was the leading customer of the Russian military-industrial complex in the 1990s. The Chinese leaders turned to Russia for weapons systems that were designed to counter the U.S. military in the Cold War. In particular, they have focused on boosting China's missile forces and related space systems as well as air and naval force capabilities.

Between 1991 and 1996, Russia sold China weapons worth an estimated $1 billion per year. Between 1996 and 2001, the rate of sales doubled, to $2 billion per year. Reportedly the two countries signed a military sales package in 1999 that between 2000 and 2004 would be worth $20 billion. To be fair, China also obtained important know-how through the theft of U.S. warhead designs and guidance systems technology. In 1999, China tested the JL-2 submarine launched ballistic missile (SLBM) and the DF-31 intercontinental ballistic missile (ICBM), and announced its acquisition of the neutron bomb. It has been suggested that Russian scientists and blueprints were used in developing these and other armaments.

China is building a modern air force to operate over the East China and South China Seas. In 1993-1997, it acquired 74 SU-27 Flankers and the rights to produce 200 more under a Russian license. These planes are similar to American F-14s and F-15s. Earlier this year, China acquired 40 SU-30 MKK multipurpose fourth generation fighter-bombers (a modernized version of the SU-27) as well as the in-flight refueling capability needed to extend the Flanker's range. The Chinese military also purchased a license to produce 250 SU-30 fighters domestically. Altogether, China has bought or is planning to manufacture up to 525 of these combat aircraft. Its air force already has acquired over-the-horizon targeting capability, which could prove crucial in future conflicts. It is also seeking airborne early warning capabilities for wide-area air and naval battle management, most probably by purchasing the Russian A-50 Beriev.

China has clearly achieved breakthroughs in missile technology by importing systems and prototypes from Russia. It is deploying S-300 surface-to-air missiles (SAMs) to protect ballistic missile bases that could target Taiwan. It is also developing indigenous SAMs based on Russian designs, such as the S-300, SA-12 and SA-17 Grizzly.

Beijing is emphasizing the modernization of the People's Liberation Navy . It has acquired four Kilo-class diesel submarines and is negotiating the purchase of four more. Most importantly, Russia has sold Beijing two Type 956E Sovremenny class destroyers armed with supersonic, nuclear-capable, Moskit missiles (SS-N-22). This destroyer/missile system was designed specifically to hit U.S. aircraft carriers. Some destroyers to be produced in China are based on Russian know-how. Russia also has sold China its Kamov Ka-28 (Helix) anti-submarine, destroyer-based helicopters.

This kind of transfer of knowledge is the key to China being successful in upgrading its military potential. Russia and China have established mechanisms for military technology transfer and intelligence sharing. Russia even allowed China to use its space-based global positioning system, known as GLONASS. A real-time satellite imagery download system may also be in operation.

Most worrisome, however, is a broad program already in place to train military students, scientists, and engineers. According to Chinese military sources quoted by the Hong Kong media, up to 1,500 Russian scientists work in China's design and production facilities. China is clearly on track to comprehensively upgrade its defense research, development, and production programs.

Russian Prime Minister Mikhail Kasyanov concluded his visit to China in late August 2002 with unusual declarations concerning key strategic areas. Once again, Moscow and Beijing are trying to keep American security initiatives in check. Kasyanov's responsibilities normally include the economy, not defense, which is President Vladimir Putin's purview. It is high symbolic that during this particular visit, Kasyanov voiced full support of China's positions on Taiwan and Tibet, positions that the U.S. does not share. The Russian premier and his Chinese counterpart, Zhu Rongji, also signed a declaration opposing the militarization of space and supporting a key role for the U.N. Security Council in the fight against terrorism.

Col. Larry Wortzel (U.S. Army, Ret.), Vice President for Foreign Policy and Defense Studies at The Heritage Foundation and former U.S. military attache in Beijing said that the declaration is a follow-up to the June 27 joint proposal before the U.N. Conference on Disarmament in Geneva for a new international treaty to ban weapons in outer space. Wortzel points out that this treaty, if approved, will deny the Bush Administration a key component for ballistic missile defense: space-based interceptors, similar to the Reagan-era Brilliant Pebbles system. However, Wortzel also points out that it is certain that the U. S. would veto the treaty.

Thus, China and Russia are challenging U.S. predominance by highlighting the role of the U.N. - and their own veto power at the Security Council - in the war against terrorism. Moscow and Beijing also oppose space-based missile defense, which, from their point of view, would give Washington policy makers a great advantage.

Unlike the old Sino-Soviet friendship of the early 1950s, when Moscow led and Beijing followed, today China is playing the first fiddle. And arms sales are the lifeblood of the relationship. After all, cash infusions from China (and Iran) are crucial to the ailing Russian military-industrial complex.

Sources in Moscow report that Kasyanov has signed arms sales agreements with Beijing worth billions of dollars. But as of June 2002, President Putin classified all arms transfer statistics with China at the request of Beijing, so no official announcements were made during Kasyanov's visit to China.

According to Dr. Wortzel, "The good news is that China is incapable of developing these military technologies and production on its own… Their own defense industry is incapable of sustaining a modern war… It is essentially a one time use military, which may be extremely dangerous at the start of a war, but will be unable to continue to fight."

Most of the systems that China buys extend her power projection capability, enhancing the range and deadliness of her air force and navy, and protecting her military from American retaliation. For example, the AWACs planes Beijing wanted to buy from a Russian-Israeli joint venture would have given it command-and-control superiority against Taiwan, while Russian destroyers and subs armed with supersonic anti-ship missiles can threaten U.S. naval battle groups in the South China Sea.

A Russian military analyst who requested anonymity indicated that the Russian General Staff ran war games and concluded that China would win in any conventional war with Russia. Moscow is not willing to contemplate nuclear annihilation. As a result, Russia will sell China almost anything to appease Beijing.

However, this is a marriage of convenience, not a romantic love affair. Russia and China have their share of disagreements. Moscow is concerned about the great numbers of Chinese migrants in the sparsely populated Russian Far East. It is also worried that China is aggressively linking its support of Russian membership in the WTO with the free entrance of Chinese labor for Russian employers and access to Chinese goods and services in Russian markets. In addition, Beijing insists that Russia tie its Siberian oil exports exclusively to China by building a pipeline into Manchuria. Russia wants to build the pipeline to the Pacific port of Nakhodka, allowing it to diversify its customer base and export to Japan, Korea and the U.S.

SINO-RUSSIAN COOPERATION IN CENTRAL ASIA

Opposition to the United States' status as the sole superpower is not the only driver behind the developing strategic partnership between Moscow and Beijing. Both Russia and China are concerned about Moslem radical movements in their territories and around their borders. Since the 1970s, the Turkic Moslem Uighurs in the Western Chinese province of Xinkiang, 7 million strong, have been conducting a violent struggle for independence. They have killed police and soldiers, planted bombs and robbed banks. In 1997, they exploded a bomb in Beijing, wounding 30 people. They have also developed connections to radical Islamic movements and were training in religious schools (medrese) and camps in the Taliban-controlled Afghanistan and Pakistan.

Stability in Xinjiang is important to China. It is seen as a test case of central control, relevant to Beijing's grip over Tibet and Inner Mongolia. Xinjiang is also viewed as a traditional buffer against Turkic Moslem invasions, which came in the past from the North-West. And it contains three major oil basins: the Turpan, Jungar and Tarim, with up to 150 billion barrels of reserves, according to some optimistic estimates. The People's Liberation Army maintains numerous bases and nuclear weapons testing grounds in the region, which could be threatened if the Uighurs gain control.

Russia is in a similar position as it enters the ninth year of conflict in Chechnya. Radical Moslem penetration of other North Caucasus autonomous republics, such as Daghestan, is increasing, as evidenced by non-Chechen participation in terrorist activities in Russia. The Russian leaders fear a chain reaction among the country's 20 million Moslems.

In the long term, the threat of increased radical Moslem influence, and even insurrection in Central Asia looms ever larger. The ruling regimes, allied with Russia, suffer from a lack of legitimacy, poor economic track records, and a democratic deficit. With economic reforms in the Central Asian countries sputtering or stalling, corruption runs rampant, GDPs are flat, and living standards are abysmally low. Before the victorious fall 2001 U.S. campaign in Afghanistan, Islamic radicals were busily recruiting and training the next generation of Jihad warriors. The radical drug-pushing Taliban regime across the Amu Darya river was menacing. A flood of drugs and weapons nearly overwhelmed the Russian expeditionary force (the 201st Infantry Division) on the Tajik-Afghan border, while indigenous support, corruption, and political maneuvering by Moscow and Dushanbe prevented Russia and Tajikistan from wiping out the Islamic rebels. By the fall of 2001, Russia found its options limited: to face instability in Central Asia on its own, or to bring in China as a partner.

Beijing views Central Asia, with its weak governments and rich natural resources-especially oil and gas-as a future natural sphere of influence and a source of Islamic threat to Eastern China. The 2001 institutionalization of the SCO demonstrated that Moscow and Beijing had hopes of becoming the decisionmakers in Central Asia. However, unlike the U.S., the two powers proved not to be effective against the Taliban, the Islamic Front of Uzbekistan (IMU), and Al Qaeda.

ECONOMIC DEVELOPMENT

Economic cooperation is another important leg of the Sino-Russian partnership. If China seeks to maintain its impressive economic growth rate of 1985-2000, it will face a major raw materials shortage-China imported 30 million tons of oil in 1999; by 2010, it may import 100 million tons per year. By 2010, China will face a water deficit of 10 percent of its total consumption. By 2020, it will not be able to supply itself with oil, iron, steel, aluminum, sulfur, and other minerals.

Sino-Russian trade was at $5.5 billion in 1999, accounting for 1.6 percent of China's foreign trade and 5.7 percent of Russia's. While the trade primarily involves Russian raw materials and Chinese low-quality consumer goods and food, the potential for growth in trade and investment is very high. 

Chinese experts predict that Russia will be able to export 25 billion to 30 billion cubic meters of natural gas to China annually; 15 billion to 18 billion kilowatts of electricity from the hydropower stations in Siberia, and 25 million to 30 million tons of oil from the Kovykta oil field in Eastern Siberia. In addition, Russia can pump oil produced in Kazakhstan to Irkutsk and then supply it to China. Furthermore, Russia is willing to build six nuclear reactors in China to generate up to 1.5 trillion kilowatts.

Russia and China are also seeking high-tech civilian cooperation. Chinese officials have invited Russian high-tech experts and engineers to build high-tech incubators in the northern city of Harbin.

The two countries are also considering building a bridge over the Amur river to connect Heihe city in Heilongjiang province with Blagoveshchensk. And there are numerous projects for developing free economic zones along the Chinese-Russian border, and an international port in the mouth of the Tumannaya river (Tumangan), where the Russian, Chinese, and Korean borders meet. That port has been on the drawing boards for 15 years.

Russia and China also could cooperate in developing a network of railroads and pipelines in Central Asia, building a pan-Asian transportation corridor (the Silk Road) from the Far East to Europe and the Middle East. However, ambitious Chinese plans to build the longest pipeline in the world from Western Kazakhstan to China, at a cost of $10 billion, are running into financing difficulties. Thus far, the target of $20 billion in trade established by Presidents Jiang and Yeltsin in 1997 has not been reached. The West remains China's leading trade partner-a fact that has become a major impediment to a deeper Sino-Russian alliance.