The debate over who lost Russia is now under way. It is perhaps premature to frame the issue in this way: Russia certainly is not yet lost entirely, but the country is in dire straits. There is plenty of blame to go around for Russia's troubles, and most of it, in my opinion, lies with Russia. As The New York Times columnist A. M. Rosenthal wrote recently: "Russia did this to Russia."

True, Russia has faced many unique challenges since the collapse of the Soviet Union--challenges unlike those faced by former communist countries in East and Central Europe such as Poland. A comparison with Poland is instructive in this regard. After the collapse of communism, Poland found freedom and renewal; Russia felt the loss of empire and ideology. Russia lost its identity; Poland rediscovered its identity. Poland could remember what the market was like and rebuild it when free to do so; Russia, after 70 years of communism, had forgotten. Poland had not collectivized its agriculture; decades of collectivization in Russia made introducing market reforms into that crucial sector of the economy, much as China had done, extremely difficult. And throughout the communist era, Poland had the Catholic Church to provide spiritual direction. Officially atheist, Russia had no such spiritual direction and sank instead into cynicism, selfishness, and even criminality.

But I do not want to suggest that, because of these difficulties, Russia's current troubles are inevitable. To draw this conclusion is tantamount to giving up, to concluding that nothing can be done to save Russia in the future. We cannot afford this kind of defeatism. Russia simply is too important to us.

Rather than rehash the debate over what the Russians should have done or should not have done, I think it is important that we Americans take a hard look at our own role in Russia's current troubles. Although the United States, and in particular the Clinton Administration, may not be mainly to blame for Russia's troubles, we cannot say that we are without blame. I think it is appropriate to ask ourselves what we should have done differently: We should learn from our mistakes so that we can chart a more fruitful course in the future.

To help us to accomplish these goals, we have with us distinguished representatives from both sides of the partisan aisle: Caspar Weinberger, who served as Secretary of Defense during the Reagan Administration; and James Woolsey, who was Director of Central Intelligence in the Clinton Administration. Also with us is The Heritage Foundation's top Russia specialist, Ariel Cohen.

I am particular happy that Caspar Weinberger is with us today. A keen observer of Russia, and a key player in devising the strategy that eventually brought down the Soviet Union and won the Cold War, Secretary Weinberger possesses a credibility that is much-needed in today's debate over the future of the U.S. strategy toward Russia. I am pleased that we will be hearing from Jim Woolsey as well. He is, of course, also an astute observer of Russia. As a one-time insider in the Clinton Administration, moreover, he can offer us some valuable insights into how the President's current policy toward Russia evolved. Perhaps more important for our purposes here, Director Woolsey, since leaving office, has raised some very serious questions about President Bill Clinton's Russia policy.

Kim R. Holmes, Ph.D., is Vice President, The Kathryn and Shelby Cullom Davis International Studies Center at The Heritage Foundation.

HISTORICAL SOLUTIONS WOULD HAVE WORKED BETTER
By Hon. Caspar W. Weinberger

The Heritage Foundation has done an enormous amount of good in the years since its founding, and continues to do so. It has presented a broad range of policy opinions--as diverse as my own. I am happy to have the opportunity to acknowledge this. Jim Woolsey's contribution to this discussion is sure to be worthwhile, and Ariel Cohen has provided some extraordinarily important insights into this very difficult situation.

After Russia lost the Cold War, no one was really willing to acknowledge its defeat. That was the real problem. Everyone went out of his way not to wound Russian pride. The United States recognized, of course, what a traumatic experience it is for a nation to lose a war. But we operated on the theory that Russia had to be given anything it wanted. Furthermore, we felt we could not wound the Russians' pride further, and that it would have been bad form to try to monitor any of the funds given to them. It was unfortunate that they objected to the admission of three new members into the North Atlantic Treaty Organization (NATO), but because they did, we had to delay NATO expansion for three years while we pleaded with Russia. Vain efforts to appease Russia (which, of course, could not be done) weakened NATO substantially.

This is not to say that it was not important to encourage Russia to try to follow a democratic path, develop market policies, and restore democracy to a country that had been denied it for almost all its history. Anything that we could have done to accomplish that properly would have been very welcome.

Although the parallel is not exact, if you look at the way in which Japan and Germany were treated and behaved after they lost wars of major magnitude, you certainly see examples of what we might have done differently with respect to Russia.

Japan and Germany did not use urgently needed Western aid to build weapons. Nor did they waste their time throwing tantrums when NATO was formed. Instead, both countries attempted a major effort to rebuild their governments and their economies, and to turn toward the West in foreign policy and in a number of other areas. As a result, we have two very strong allies. We may differ with them from time to time on individual matters, but both allies have moved completely away from the dictatorial, aggressive types of governments that took them to war. Strong ties with these countries is an extraordinarily important achievement and one that did not come about by accident. Rather, defeat was recognized as defeat. The policies that we wanted were imposed or at least brought to bear in such a way that the leaders of the democratic movements in those countries took charge and changed their course and their direction ultimately on their own. We provided assistance, guidance, leadership, and financial aid that was closely monitored to ensure it was used to help rebuild their economies into a democratic form. That was not done in Russia, and it is one of the great unfortunate factors of history.

Our major policy failure was refusing to recognize Russia for what it was--a defeated former great power. Russia needed to spend all its time and energy to help its economy recover and to move from tyranny and oppression of the worst kind to democracy, market-oriented policies, and some basic association with the ideals of the West. None of that was done. As a result, billions of dollars in aid were misused--and some of it disappeared entirely, as Dr. Cohen has pointed out.

The aid vanished right off the radar screen--aid that was supposed to go for industrial recovery but instead went in large part to support an extremely large program of regaining sophisticated military capabilities. What would have cost the United States about $38 billion went to the acquisition of a whole menu of sophisticated weapon systems, including an underground bunker command-and-control system that is useful only in a nuclear war, a new intercontinental ballistic missile, a nuclear-powered aircraft carrier, and nuclear-powered cruisers. These are not the things that a country needs to defend itself. These are the weapons of an offensive-minded country that is continuing in defeat along a path it started and maintained during the Cold War. Russia also fought and lost an expensive war in Chechnya.

Those are some examples of the things that have gone extraordinarily wrong. Boris Yeltsin displayed great courage when he first took over as President of an independent Russia. Unlike Mikhail Gorbachev, the last leader of the Soviet Union, Yeltsin was willing to repudiate communism. He tried his best to get market policies in place and seemed basically friendly to the West. Now he is ill and erratic and has appointed, from the Western point of view, the worst possible man as Prime Minister. Someone once said that, wherever Yevgenii Primakov went, there seemed to be trouble. It does not seem to me odd at all. That was his job; that is what he was paid for as the head of the KGB. He is personally close and exceptionally friendly with Saddam Hussein. He helps Iran. He supports Slobodan Milosevic in Yugoslavia with the threat of Russian military force (which I do not think is very credible) in the event NATO should strike Yugoslavia. (The chances of NATO striking are about zero, making this topic irrelevant.) And Primakov has a visceral hatred of the United States. In short, there could be no one worse than Primakov as Russian Prime Minister now.

With the money being fungible, what is the possibility of Russia's gaining any kind of economic strength if its leaders are going to squander all of the resources that they have been given? A great deal of the money from the International Monetary Fund (IMF) went directly into the acquisition of arms or the programs for acquiring them. It is no surprise that foreign investors have fled Russia. There is no real basis for them to come back. Even George Soros is reported to have lost $2 billion. I have a great deal of difficulty feeling too much sympathy for him, but it does indicate why foreign investors are probably not likely to go back.

A great country like Russia should have been moved toward democracy and not allowed to have elections in which people who represent the previously defeated regime were allowed to prevail. In Germany and Japan, members of the Nazi Party or supporters of the old imperial policies did not run for office and acquire majorities. Everything in the world was done to move those countries toward democracy. It worked. And their own leaders who favored democracy are the people who have taken over and succeeded. So, it does seem to me that the Clinton Administration has made very serious policy errors. And this certainly is one of the major factors in the unhappy condition that we see today.

Russia is a country with a very large military--a military with terrible morale. The disastrous war against Chechnya cost a great deal and resulted in even worse morale. Furthermore, military personnel have not been paid for months. All these problems, in a country in which 23,000 nuclear warheads are lying around, darken the future of the Russian military and the world's security. From the beginning, we should have dealt with Russia as we have dealt with other defeated powers and not encouraged the Russians to follow their old ways.

Hon. Caspar W. Weinberger served as Secretary of Defense from 1981 to 1987. Currently, he is Chairman of Forbes magazine.

U.S. FAILURE TO SUPPORT DEMOCRACY HAS BEEN DECISIVE
By Kim R. Holmes, Ph.D.

We at Heritage have been concerned for some time about the course of U.S. policy toward Russia. It has been the subject of much internal discussion and debate here. My personal opinion is that the central flaw of the Clinton Administration's Russia policy has been in assuming that backing President Yeltsin personally was the same thing as backing reform and democracy in principle and in practice. This policy has not consolidated democracy and reform, as President Clinton hoped. Even worse, it has unleashed a wave of anti-Americanism as a kind of domestic backlash against the entire reform process.

Whatever President Yeltsin may have done in Russia--and he did do some positive things--he did not introduce a workable free market and democratic system. It is nothing short of ludicrous to suggest that capitalism and democracy were tried in Russia--and that they failed. Russia does not have a free-market system as we know it, and its democratic processes are weak and tainted by corruption and criminality. And, as a result, Russians equate reform and democracy not only with President Yeltsin personally, but with failure and misery. It will not do to argue that they are wrong or lack perspective; certainly, many of them do. And it is true that not all Russians are disillusioned with reform. But it is equally true that democracy, the free market, and "reform" have been given a bad name in Russia by leaders and politicians who were incompetent and unprincipled.

Most troublesome for the United States is that many Russians associate "failed reforms" with Americans and U.S. policy. The result has been that President Yeltsin, with President Clinton's backing, has discredited democracy and free-market ideas as we understand them in the West. By underestimating the level of corruption and by assuming that the United States had no alternative to backing President Yeltsin, President Clinton and his advisers continued to endorse President Yeltsin's policies even when they clearly were not working.

I suppose we can ask ourselves in hindsight whether we should have backed President Yeltsin at all. Early on, most Americans hoped that Boris Yeltsin would turn out to be a different sort of Russian leader. He was, after all, at one time the leader of the democratic opposition against the old communist regime. For that, history will judge him well.

But history will not be so kind in assessing his tenure as the first elected President of Russia. He has not been successful in institutionalizing a fully functioning democratic and market system. It may be that Russia will not return to a carbon-copy version of the Soviet Union, but who knows what new tyrannies could emerge out of the present chaos?

Perhaps the Clinton Administration foreign policy team got off to a bad start by asking the wrong question. It framed the U.S. policy toward Russia as the choice of supporting or opposing Boris Yeltsin. Instead, the question should have been: What should the United States be doing to advance freedom and democracy in Russia, and a pro-Western orientation in Russia's foreign policy, regardless of who is in charge? By mistakenly assuming that backing Boris Yeltsin was the only choice, the Administration left itself with no alternative but to support most of what he did and, in the process, to let the United States be associated in the minds of the Russian people with his failures.

We did not support democracy when we tolerated and implicitly backed President Yeltsin's crackdown in Chechnya, or when we looked the other way when we heard reports of human rights abuses inside Russia. Nor did we support the creation of democratic institutions when we refused to condemn openly and clearly the crime and corruption that was eating away at the very fabric of Russian life. By tolerating these problems, or by pretending that any criticism of President Yeltsin would cause the immediate return of the communists, we devalued the moral authority of our own ideas. By doing so, we not only undermined those inside Russia who wanted the real thing, we also tarnished the image of the United States inside Russia.

We should not assume that democracy has taken root in Russia. Most Russians, frankly, consider their rulers corrupt and criminal. Just because they were elected through a democratic process does not mean that they have legitimacy in the eyes of most Russians. Democracy rests on thin ice in Russia, and facing further economic turmoil will only strain Russia's embryonic democratic institutions like never before. The fact is that the risk of a return to a dictatorship of some kind in Russia is higher than at any time since the fall of the Soviet Union. We should stop thinking in black-white contrasts of what existed before and what must exist in the future. We must be more subtle in our analysis.

Allow me now to turn to the question of free-market reforms. I don't think we advanced the cause of free markets when we pretended that President Yeltsin's economic policies were the real thing. Yes, some economic reforms were successfully made, particularly in the first six months after the collapse of the Soviet Union, but a serious restructuring of the Russian economy never occurred. There was mass privatization of some parts of the economy, but the oligarchs and other owners of these enterprises never severed their cozy ties with the Russian government. Some sectors of the economy, like agriculture, were barely touched. President Yeltsin eliminated price and wage controls, but he never adequately tackled the monopolies, never tackled the military-industrial complex, and did not stop the huge deficit spending that ran up the debt and ultimately caused the economic collapse.

It is ironic that the infusion of foreign aid from the IMF, the World Bank, and other Western sources enabled the Russians to avoid the very structural reforms these organizations say were needed. In the end, foreign aid became a sort of fuel that kept Russia's hybrid economic system running. President Clinton pretended to support reform by backing Boris Yeltsin and the IMF, and all the while Russia used this backing to avoid making any further structural reforms or fundamental changes in the economy. President Clinton essentially substituted the IMF's policy for his own. Eventually, of course, the Russian economy collapsed because no amount of foreign aid could cover and compensate for its deficiencies and contradictions.

Finally, there is the question of Russian foreign policy. A goal of President Clinton's pro-Yeltsin policy has always been to create a more Western and pro-American orientation in Russia's foreign policy. But I don't think that we advanced U.S. interests by backing President Yeltsin so uncritically in his foreign policy. When Yevgenii Primakov took over as Foreign Minister, the possibility for advancing U.S. interests in any significant way pretty much ended. Although Russia has not returned to open confrontation with the United States, its foreign policy has been increasingly anti-American under Primakov, and is likely to continue to worsen now that Primakov is Prime Minister.

We did not buy a pro-American foreign policy from Russia when Yevgenii Primakov undermined U.S. policy toward Iran and Iraq, or when he continued to tolerate--or perhaps even to encourage--the proliferation of missiles and nuclear materials, or when he made such an issue of NATO enlargement. This policy of accepting anti-American policies quietly and uncritically led to almost surreal results. For example, President Yeltsin condemned the U.S. attacks on Osama bin Laden's camps in Afghanistan as an act of terrorism. One heard hardly a peep from the Clinton Administration about this outrageous statement. Some may want to tolerate such rhetoric because they think that President Yeltsin is ill and does not know what he is saying. But such statements are harmful because they stir up anti-Americanism in the State Duma (the lower house of Russia's parliament) and among the Russian people.

Is the Clinton Administration learning from its mistakes? Maybe. Before, Administration officials could not bring themselves even to imagine an alternative to backing Yeltsin. Now that he is extremely ill and probably not long for this world, President Clinton's foreign policy team seems to be realizing that a reassessment of U.S. policy toward Russia is needed. The other day, Secretary of State Madeleine Albright hinted that the Administration may be moving away from its personality-driven policy: "We should be interested in politics, not personalities." It's about time. Let's hope that this is a beginning of a new policy toward Russia.

What should we be doing? First, we should stop pretending that the IMF is the key to reforming Russia's economy. We should stop funneling foreign aid into Russia. That aid will make matters only worse. Second, we should make it clear to Russians and the world what we really stand for when we talk about democracy and free markets. When the Russian government does not measure up, we should say so clearly and openly. We should not be shy about criticizing the Russian government. Third, we should link our support, and our foreign aid, not only to Russia's internal behavior, but also to its external behavior. When Russia takes a foreign policy position contrary to our interests, we should say so clearly and openly. We should not be afraid that criticism of Russia will produce more hostility. I think we have been quite friendly already, and the hostility has only grown.

Finally, we should move beyond Cold War-era strategic assumptions in our relations with Russia, particularly in the area of arms control. It is fine to try to reduce strategic arms, but we should not do so at the expense of defending our own people against missile attack. It's time to begin serious talks with the Russians to explore ways of ending the defunct Anti-Ballistic Missile Treaty and America's vulnerability to missile attack.

NO RESPECT FOR A RULE OF LAW
By Hon. R. James Woolsey

Far too little attention has been paid to the establishment of the rule of law in Russia, and far too much belief has been placed in the assumption that economic reform or political chumminess would lead to the fundamental changes that need to be made in Russia. Russian history itself is responsible for much of this, but I think the U.S. government is as well. The reasons for a rule of law's not having been established in Russia date back to the fact that the Czar's property and the nation's property were regarded as pretty much the same thing. The regime of thugs that ran the country for three-quarters of a century certainly did nothing from 1917 to 1992 to establish a rule of law. Nevertheless, whether one believed in the primacy of economic privatization, as some did, or in the primacy of the personal relationship between an American president and Boris Yeltsin (or before him, the personal relationship with Mikhail Gorbachev), far too little attention has been paid to the substantial importance of the fact that without a rule of law, democracy is a mob and capitalism is Chicago's wholesale liquor market in the 1920s.

Second, the power of the military-industrial complex in Russia--particularly the industrial part --goes back well into the communist era. It was the most important part of the economy and the only part that sometimes functioned very well. It had preeminence in both high technology and extremely able people. It had to be curtailed and redirected from the beginning of reforms. There were some efforts to use the influence of the U.S. government to re-channel Soviet work on fissionable material. The Nunn-Lugar legislation, for example, as a whole, was a well-conceived policy. The military-industrial complex remains the fundamental center of gravity for much of what is important about power in Russia. It is not just the KGB, the military, or the Interior Ministry troops; it is this extraordinary military-industrial complex that was one of the pillars of power in Russia. As someone once said, the United States has a military-industrial complex but the Soviet Union was a military-industrial complex. And that center of gravity exerted and still exerts a huge draw on Russian efforts. In order to get some appreciation for the resilience and the stubbornness of that part of the Russian economy, look at the fact that the military-industrial complex still manages to function.

Third, the failure of leadership during the Gorbachev era and at the end of the Yeltsin era, the sporadic nature of economic reform, the tolerance for allowing privatization efforts to be hijacked by a few people, and the extraordinary degree of tolerance of criminalization have contributed heavily to the current situation in which we find ourselves. Similar to the lack of a rule of law and similar to the predominance of the military-industrial complex, the failure of leadership is primarily Russia's fault, not America's.

It is hard to conceive of a parallel between Russia and other important modern countries. Up until the time of the ascendancy of Adolf Hitler, there was a substantially greater respect for a rule of law in Weimar Germany than there is in Russia during the Yeltsin era. Let's say that you meet a 40-year-old Russian wearing a $2,000 suit and Guccis at the bar of one of the nice hotels on the shores of Lake Geneva. He speaks good English and says that he wants to work with you on a joint venture for the export of raw materials from Russia. There is some chance that he works for an international trading company and that he is who he says he is. There is some chance, however, that he is a Russian intelligence officer operating under commercial cover or a member of a senior Russian organized crime family. And there is a reasonable chance that he is all three--and none of those three institutions has a great problem with that.

Fourth, Russia's politics have been established to incline toward instability. The only party that is national and organized is the Communist Party. In a recent Jamestown Foundation publication, Novgorod Governor Mikhail Prusak proposes a three-part change for the Russian Constitution. He suggests that the President be chosen through a system of electors; the senior house of the legislature should be moved to direct election; and the Duma should be formed only on the basis of elections to single-member majoritarian districts. It seems to me that I have heard of a system like that before. A wholesale copy of James Madison's Constitution probably was not in the cards, and some of the ways in which Russia's political structure departs from it have contributed to the current instability.

The role of the United States has been mixed at best; this goes back to the Bush Administration. One should remember that Mikhail Gorbachev's days, even before his performance as Louis XVI or Nicholas II (whichever parallel you prefer), were more or less numbered. Everyone here, I am sure, recalls the "Chicken Kiev" speech.¹ So, Russia policy is something that has not been beautifully handled either by the Bush Administration toward the end or by the Clinton Administration. The low point, however, was President Clinton's indirect but clear comparison of Boris Yeltsin's role at the beginning of the Chechen War to that of Abraham Lincoln in the American Civil War. There have been some bad decisions in government commentary over the course of the nearly nine years since the Berlin Wall went down, but that one is near the top.

The personal closeness between the U.S. government and President Yeltsin has come to tar us with his own unpopularity. Yevgenii Primakov has come to exploit that, as well as Russia's historic interest in bitterness toward the West, and he has done so cleverly. What he is doing seems to be popular among Russian elites. Its popularity among ordinary Russians is difficult to determine, but some of this cozying up to Serbia and Saddam is reaching quite remarkable proportions. For example, there has been serious discussion at recent Commonwealth of Independent States meetings about Iran's joining that group. This is promoting close relationships with rogue states to a degree that shocks even those of us who have been watching the Russian government closely over the course of the past number of years. We have to consider the even darker possibility of Russia's moving toward a red-brown government or, worse, toward some degree of disintegration.

Russia's national income over the course of the past six years has fallen about 50 percent. In the six years during the depths of the Depression in the United States from 1929 to 1935, American national income fell by about a third. Therefore, Russia currently is more than undergoing the equivalent of the U.S. experience in the early 1930s. Industrial production in 1998 probably will be about 20 percent below 1997's. The tax base is completely disappearing. The government recently sent the Duma a draft budget, but it will probably be the end of the year before the Duma acts on it. This budget proposes two rubles to be spent for each ruble of income. The only idea that anyone had--outside of wishful thinking about more borrowing from the West and crackdowns on moonshine and some of the other really brilliant ideas that have come out of the new Russian government for raising funds--was Finance Minister Mikhail Zadornov's proposal for a crackdown on the finances coming from oil and gas export, particularly now after the devaluation. But that has been turned around by First Deputy Premier Yurii Maslyukov and others, and it is no longer a part of the package.

We are playing now with a weak hand in a bad game. Nevertheless, in the context of our dealings with Russia, we must try primarily to avoid the disintegration of the country. No matter how bad it is to deal with one red-brown nuclear power, it would be considerably worse to deal with several. We now have the result of the financial breakdown. Moscow no longer has the financial hold and the incentives it once used to control the provinces, the krais, the oblasts, and the independent regions. Now, local price controls are coming into effect in a number of parts of Russia, and local governments are interfering to slow or block payments to out-of-region creditors. In Stavropolye and Vologda, food may not be sold to out-of-region buyers. Local government monopolies of alcohol production in several regions withhold federal tax payments. General Alexander Lebed had some interesting comments about holding onto nuclear weapons in Krasnoyarsk as well. We need to focus the entire effort of the U.S. government and the West to do what we can to avoid a complete disintegration and a Time of Trouble in Russia. However bad it is now, it could get worse.

Hon. R. James Woolsey, a Washington, D.C., attorney, served as Director of Central Intelligence from 1993 to 1995.

RUSSIA'S COLLAPSE: A POLITICAL AND ECONOMIC FAILURE
By Ariel Cohen, Ph.D.

President Clinton and his close advisers maintain that Russia, although in the grip of "temporary" economic difficulties, is a great power and that the U.S.-Russia relationship overall constitutes a success for his Administration. They point to the series of elections: to parliament in 1995, to the presidency in 1996, and local in 1996-1997; to the reasonably free media; and to the program that put over 70 percent of Russia's productive assets in private hands. These are important milestones indeed for Russia. The larger picture, however, is more complex--even bleak--and the Clinton Administration refuses to face this reality.

Russia is a fundamentally weak state and has yet to recover--either economically or socially--from the collapse of the Soviet empire. It lacks consensus on the most basic aspects of its character and structure: Should the society be ethnic Russian or multi-ethnic? Is Russia part of the West, or does it have a unique Eurasian character? Should it be a strong presidential republic, or should the Duma and the Council of the Federation play a greater role? What should be the nature of federalism and power arrangements between the center and the provinces? What should be the role of the Russian Orthodox Church?

Moreover, Russia is in the midst of a severe financial crisis that threatens its social and political stability and may cause fundamental changes in the political system. Russia's gross domestic product (GDP) of $400 billion is only about 5 percent of the U.S. GDP of $8 trillion. The current U.S. annual military budget alone is about half of Russia's total GDP. The severity of the crisis led to a political backlash against Prime Minister Sergei Kirienko's reformist government in Moscow and its ties to the West, and has also turned Russia's political elite against the United States and its allies.

It is painfully clear by now that the $22.6 billion bailout, which the Clinton Administration initiated together with the IMF, failed to rescue Russia. Investor confidence was not bolstered, the stock market continued its freefall, and interest rates on government bonds again climbed above 200 percent.

If the goal of the bailout was to support economic reform in Russia, nothing could have been further off-target than a new infusion of funds to prolong the systemic disorder afflicting the Russian economy. Although it is one of the IMF's largest borrowers, Russia remains economically weak because it refuses to implement the fundamental reforms that are the only cure for its economic ills. Prior to the decision to go ahead with the $22.6 billion bailout, both the IMF and the Group of Seven (G-7) governments were aware of the problems and had repeatedly demanded the implementation of reforms--to no avail. There was no basis to assume that providing additional loans would have proved any more effective than it had in the past.

The restoration of a communist-dominated government in Moscow, led by the anti-Western former intelligence official Yevgenii Primakov, is a historic shift in Russian and world politics, comparable to Boris Yeltsin's victory against the communist putsch in 1991--but in the opposite direction. This is a triple policy fiasco, the result of strategic errors on the part of the Russian government and President Yeltsin personally, the U.S. government led by President Clinton, and the international financial organizations, especially the IMF and its "Russia team": Managing Director Michel Camdessus, First Deputy Managing Director Stanley Fischer, and the Director of the European II Department, John Odling-Smee, who is the IMF executive with line responsibility for Russia.

Russia's economic collapse and the return to power of communists were not inevitable. In fact, Members of the U.S. Congress, officials of former U.S. presidential administrations, and numerous experts--both Russian and Western--had sounded klaxons, but they went unheard. The Clinton Administration was preoccupied with championing its own slogans about "support of Russian democracy" and "reformers" while some of these same "reformers" were busy conning Western investors, embezzling from the Russian population and government, and going on a borrowing spree that crashed the Russian economy in one year.

After his victory over the hard-line communists in 1991, Boris Yeltsin enjoyed a vast reservoir of trust and support among the Russian people. His administration had a unique opportunity to dismantle communism, to examine its evil nature and the historic price that Russia and the world were forced to pay for the Leninist experiment. This was the time for considered, deliberate, and sweeping action. No serious "de-communization" was attempted, however, nor was there a serious effort to think through and repent of the violence, the violations of human rights, and the empire-building that had accompanied the Soviet experience. Many former communist apparatchiki remained at the core of the Yeltsin regime. No serious reforms of the military or the security services were undertaken.

The causes for pessimism about Russia run deep. The country's economic woes are the result of 74 years of communist mismanagement and almost 8 years of half-hearted reforms under the post-communist regime. There are interconnected problems that together generated the current systemic failure of the Russian economy.

If a reaction to the painful transition to capitalism proves strong, Russia may once again pursue isolation, self sufficiency, and an anti-Western foreign policy. It is important for the United States to prevent this from happening.

The ascendancy of Yevgenii Primakov as Prime Minister exacerbated the anti-Western tilt of Moscow's foreign policy. Russia has repeatedly flouted important U.S. security concerns. At previous U.S.-Russian summits, President Yeltsin, former Prime Minister Viktor Chernomyrdin, and other Russian officials repeatedly promised to stop the nuclear and ballistic missile technology transfer to Iran--a process that endangers U.S. allies in the Middle East, such as Saudi Arabia and Israel, and eventually may allow Tehran to build an intercontinental ballistic missile system that could threaten cities in the United States. Yet, despite the promises, the flow of technology to Iran has continued.

President Yeltsin also promised to ensure the passage of the Strategic Arms Reduction Treaty II (START II) in the Duma, but so far the Duma has failed to deliver. Meanwhile, Russia has strongly opposed U.S. efforts to build up its ballistic missile defense capability to protect itself from missile launches by hostile states or terrorists and from accidental launches.

Yevgenii Primakov vouched for Saddam Hussein's good behavior in November 1997 and negotiated a deal to allow the United Nations (U.N.) weapons inspectors unrestricted access to Iraq's arms facilities. Baghdad, however, rejected cooperation with the U.N. in August 1998--with Moscow's acquiescence. On August 21, President Yeltsin lashed out against the U.S. attacks on terrorist targets in Afghanistan and Sudan, calling them "acts of terrorism"--hardly a friendly gesture a week before a summit meeting with President Clinton and only one month after receiving crucial U.S. support for the $22.6 billion IMF bailout package for Russia.

By supporting President Yeltsin through thick and through thin, President Clinton believes that the United States can ensure a successful transition to democracy in Russia, prevent hard-liners from coming back to power, and facilitate the integration of Russia into the Western community of nations. Unfortunately, however, this policy seems to be meeting with little success: Russia is pursuing an anti-Western foreign policy, Yeltsin is attacked by the opposition for being too pro-American, and the anti-American sentiments in the Russian body politic are growing.

Russia is playing a tremendously important role as the main test case for the transition from communism to democracy and a market economy. If it fails, many other societies may turn away from a rule of law, participatory government, and competitive, private sector-based economics. If it becomes either unstable or authoritarian, it may emerge as a destabilizing force in Eurasia and threaten its neighbors in the former Soviet Union and in Eastern and Central Europe. This will be the ultimate fiasco of the Clinton Administration's Russia policy. The United States should continue to be engaged in trying to turn Russia around. But it should rely on realistic economic and political analysis and creative solutionsænot the failed policy of supporting unpopular leaders or throwing money down Russia's economic black hole.

Ariel Cohen is Senior Policy Analyst for Russian and Eurasian Studies in The Kathryn and Shelby Cullom Davis International Studies Center at The Heritage Foundation.