Soviet Union 1945-1985

[Excerpted from The Soviet Union-- A Country Study, Raymond E. Zickel, ed. (Washington, D. C.: Federal Research Division of the Library of Congress, 1989).]

RECONSTRUCTION AND COLD WAR

Reconstruction Years

Although the Soviet Union was victorious in World War II, its economy had been devastated in the struggle. Roughly a quarter of the country's capital resources had been destroyed, and industrial and agricultural output in 1945 fell far short of prewar levels. To help rebuild the country, the Soviet government obtained limited credits from Britain and Sweden but refused economic assistance proposed by the United States under the Marshall Plan. Instead, the Soviet Union compelled Soviet-occupied Eastern Europe to supply machinery and raw materials. Germany and former Nazi satellites (including Finland) made reparations to the Soviet Union. The Soviet people bore much of the cost of rebuilding because the reconstruction program emphasized heavy industry while neglecting agriculture and consumer goods. By the time of Stalin's death in 1953, steel production was twice its 1940 level, but the production of many consumer goods and foodstuffs was lower than it had been in the late 1920s.

During the postwar reconstruction period, Stalin tightened domestic controls, justifying the repression by playing up the threat of war with the West. Many repatriated Soviet citizens who had lived abroad during the war, whether as prisoners of war, forced laborers, or defectors, were executed or sent to prison camps. The limited freedoms granted in wartime to the church and to collective farmers were revoked. The party tightened its admission standards and purged many who had become party members during the war.

In 1946 Andrei Zhdanov, a close associate of Stalin, helped launch an ideological campaign designed to demonstrate the superiority of socialism over capitalism in all fields. This campaign, colloquially known as the Zhdanovshchina ("era of Zhdanov"), attacked writers, composers, economists, historians, and scientists whose work allegedly manifested Western influence. Although Zhdanov died in 1948, the cultural purge continued for several years afterward, stifling Soviet intellectual development. Another campaign, related to the Zhdanovshchina, lauded the real or purported achievements of past and present Russian inventors and scientists. In this intellectual climate, the genetic theories of biologist Trofim D. Lysenko, which were supposedly derived from Marxist principles but lacked scientific bases, were imposed upon Soviet science to the detriment of research and agricultural development. The anticosmopolitan trends of these years adversely affected Jewish cultural and scientific figures in particular. In general, a pronounced sense of Russian nationalism, as opposed to socialist consciousness, pervaded Soviet society.

The Cold War

After World War II, the Soviet Union and its Western allies soon parted ways as mutual suspicions of the other's intentions and actions flourished. Eager to consolidate influence over a number of countries near the Soviet Union, Stalin pursued aggressive policies after World War II that provoked strong Western reaction. The United States worked to contain Soviet expansion in this period of international relations that has come to be known as the Cold War.

Mindful of the numerous invasions of Russia and the Soviet Union from the West throughout history, Stalin sought to create a buffer zone of subservient East European countries, most of which the Red Army (known as the Soviet army after 1946) had occupied in the course of the war. Taking advantage of its military occupation of these countries, the Soviet Union actively assisted local communist parties in coming to power. By 1948 seven East European countries had communist governments. The Soviet Union initially maintained control behind the "iron curtain" (to use Churchill's phrase) through troops, security police, and its diplomatic service. Unequal trade agreements with the East European countries permitted the Soviet Union access to valued resources.

Soviet actions in Eastern Europe helped produce Western hostility toward their former ally, but the Western powers could do nothing to halt consolidation of Soviet authority in that region short of going to war. However, the United States and its allies had greater success in halting Soviet expansion in areas where Soviet influence was more tenuous. British and American diplomatic support for Iran forced the Soviet Union to withdraw its troops from the northeastern part of that country in 1946. Soviet efforts to acquire territory from Turkey and establish a communist government in Greece were stymied when the United States extended military and economic support to those countries under the Truman Doctrine in 1947. Later that year, the United States introduced the Marshall Plan for the economic recovery of other countries of Europe. The Soviet Union forbade the countries it dominated from taking part in the program, and the Marshall Plan contributed to reducing Soviet influence in the participating West European nations.

Tensions between the United States and the Soviet Union became especially strained over the issue of Germany. At the Potsdam Conference of July-August 1945, the Allied Powers confirmed their decision to divide Germany and the city of Berlin into zones of occupation (with the eastern sectors placed under Soviet administration) until such time as the Allies would permit Germany to establish a central government. Disagreements between the Soviet Union and the Western Allies soon arose over their respective occupation policies and the matter of reparations. In June 1948, the Soviet Union cut off the West's land access to the American, British, and French sectors of Berlin in retaliation for steps taken by the United States and Britain to unite Germany. Britain and the United States thereupon sponsored an airlift to keep the beleaguered sectors provisioned until the Soviet Union lifted the blockade in May 1949. Following the Berlin blockade, the West and the Soviet Union divided Germany into two countries, one oriented to the West, the other to the East. The crisis also provided the catalyst for the Western countries in 1949 to form the North Atlantic Treaty Organization (NATO), a collective security system designed to use conventional armies and nuclear weapons to offset Soviet forces.

While the Soviet Union gained a new satellite nation in the German Democratic Republic (East Germany), it lost its influence in Yugoslavia. The local communists in Yugoslavia had come into power without Soviet assistance, and their leader, Josip Broz Tito, refused to subordinate the country to Stalin's control. Tito's defiance led the Communist Information Bureau (Cominform--founded in 1947 to partially replace the Comintern, which had been abolished in 1943) to expel the Yugoslav party from the international communist movement in 1948. To guard against the rise of other independent leaders, Stalin purged many of the chief communists in other East European states.

In Asia, the Chinese Communists, headed by Mao Zedong and assisted by the Soviet Union, achieved victory over the Nationalists in 1949. Several months afterward, in 1950, China and the Soviet Union concluded a mutual defense treaty against Japan and the United States. Hard negotiations over concessions and aid between the two communist countries served as an indication that China, with its independent party and enormous population, would not become a Soviet satellite, although for a time their relations appeared particularly close. Elsewhere in Asia, the Soviet Union pursued a vigorous policy of support for national liberation movements, especially in Malaya and Indochina, which were still colonies of Britain and France, respectively. Thinking that the West would not defend the Republic of Korea (South Korea), Stalin allowed or encouraged the Soviet-equipped forces of the Democratic People's Republic of Korea (North Korea) to invade South Korea in 1950. But forces from the United States and other members of the United Nations came to the aid of South Korea, leading China to intervene militarily on behalf of North Korea, probably on Soviet instigation. Although the Soviet Union avoided direct participation in the conflict (which would end in 1953), the Korean War inspired the United States to strengthen its military capability and to conclude a peace treaty and security pact with Japan. Chinese participation in the war also strengthened China's independent position in relation to the Soviet Union.

 

Death of Stalin

In the early 1950s, Stalin, now an old man, apparently permitted his subordinates in the Politburo (enlarged and called the Presidium by the Nineteenth Party Congress in October 1952) greater powers of action within their spheres. (Also at the Nineteenth Party Congress, the name of the party was changed from the All-Union Communist Party [Bolshevik] to the Communist Party of the Soviet Union.) Indicative of the Soviet leader's waning strength, Secretary Georgii M. Malenkov delivered the political report to the Nineteenth Party Congress in place of Stalin. Although the general secretary took a smaller part in the day-to-day administration of party affairs, he maintained his animosity toward potential enemies. In January 1953, the party newspaper announced that a group of predominantly Jewish doctors had murdered high Soviet officials, including Zhdanov. Western historians speculate that the disclosure of this "doctors' plot" may have been a prelude to an intended purge directed against Malenkov, Molotov, and secret police chief Lavrenty Beria. In any case, when Stalin died on March 5, 1953 (under circumstances that are still unclear), his inner circle, which had feared him for years, secretly rejoiced.

During his quarter-century of dictatorial control, Stalin had overseen impressive development in the Soviet Union. From a comparatively backward agricultural society, the country had been transformed into a powerful industrial state. But in the course of that transformation, millions of people had been killed, and Stalin's use of repressive controls had become an integral function of his regime. How Stalin's system would be maintained or altered would be a question of vital concern to Soviet leaders for years after him.

THE KHRUSHCHEV ERA

Collective Leadership and the Rise of Khrushchev

Stalin died without naming an heir, and none of his associates had the power to immediately claim supreme leadership. The deceased dictator's colleagues initially tried to rule jointly through a collective leadership, with Malenkov holding the top positions of prime minister (chairman of the Council of Ministers; the name changed from Council of People's Commissars in 1946) and general secretary (the latter office for only two weeks). The arrangement was first challenged in 1953 when Beria, the powerful head of the security forces, plotted a coup. Beria's associates in the Presidium, however, ordered Marshal Zhukov to arrest him, and he was secretly executed. With Beria's death came the end of the inordinate power of the secret police; the party has maintained strict control over the state security organs ever since.

After the elimination of Beria, the succession struggle became more subtle. Malenkov found a formidable rival in Nikita S. Khrushchev, whom the Presidium elected first secretary (Stalin's title of general secretary was abolished) in September. Of peasant background, Khrushchev had served as head of the Ukrainian party organization during and after World War II and was a member of the Soviet political elite during the Stalin period. The rivalry between Malenkov and Khrushchev surfaced publicly through Malenkov's support for increased production of consumer goods, while Khrushchev conservatively stood for development of heavy industry. After a poor showing by light industry and agriculture, Malenkov resigned as prime minister in February 1955. The new prime minister, Nikolai A. Bulganin, had little influence or real power; Khrushchev was now the most important figure within the collective leadership.

At the Twentieth Party Congress, held in February 1956, Khrushchev further advanced his position within the party by denouncing Stalin's crimes in a dramatic "secret speech." Khrushchev revealed that Stalin had arbitrarily liquidated thousands of party members and military leaders (thereby contributing to the initial Soviet defeats in World War II) and had established a pernicious cult of personality. With this speech Khrushchev not only distanced himself from Stalin and from Stalin's close associates, Molotov, Malenkov, and Lazar M. Kaganovich, but also abjured the dictator's policies of terror. As a direct result of the "de-Stalinization" campaign launched by the speech, the release of political prisoners, which had begun in 1953, was stepped up, and some of Stalin's victims were posthumously rehabilitated. Khrushchev later intensified his campaign against Stalin at the Twenty-Second Party Congress in 1961, winning approval to remove Stalin's body from the Lenin Mausoleum, where it had originally been interred. De-Stalinization encouraged many in artistic and intellectual circles to speak out against the abuses of the former regime. Although Khrushchev's tolerance of critical creative works vacillated during his years of leadership, the new cultural period- -known as the "thaw"--represented a clear break with the repression of the arts under Stalin.

After the Twentieth Party Congress, Khrushchev continued to expand his influence, although he still faced opposition. Khrushchev's rivals in the Presidium, spurred by reversals in Soviet foreign policy in Eastern Europe in 1956, potentially threatening economic reforms, and the de-Stalinization campaign, united to vote him out of office in June 1957. Khrushchev, however, demanded that the question be put to the Central Committee of the CPSU, where he enjoyed strong support. The Central Committee overturned the Presidium's decision and expelled Khrushchev's opponents (Malenkov, Molotov, and Kaganovich), whom Khrushchev labeled the "anti-party group." In a departure from Stalinist procedure, Khrushchev did not order the imprisonment or execution of his defeated rivals but instead placed them in relatively minor offices. Khrushchev moved to consolidate his power further in the ensuring months. In October he removed Marshal Zhukov (who had helped Khrushchev squelch the "anti-party group") from the office of defense minister, presumably because he feared Zhukov's influence in the armed forces. Khrushchev became prime minister in March 1958 when Bulganin resigned, thus formally confirming his predominant position in the state as well as in the party.

Despite his rank, Khrushchev never exercised the dictatorial authority of Stalin, nor did he ever completely control the party even at the peak of his power. His attacks on members of the "anti-party group" at the Twenty-First Party Congress in 1959 and the Twenty-Second Party Congress in 1961 suggest that his opponents still retained support within the party. Khrushchev's relative political insecurity probably accounted for some of his grandiose pronouncements (for example, his 1961 promise that the Soviet Union would attain communism by 1980). His desire to undermine opposition and mollify critics explained the nature of many of his domestic reforms and the vacillations in his foreign policy toward the West.

Foreign Policy under Khrushchev

Almost immediately after Stalin died, the collective leadership began altering the conduct of Soviet foreign policy to permit better relations with the West and new approaches to the nonaligned countries. Malenkov introduced a change in tone by speaking out against nuclear war as a threat to civilization. Khrushchev initially contradicted this position, saying capitalism alone would be destroyed in a nuclear war, but he adopted Malenkov's view after securing his preeminent position. In 1955, to ease tensions between East and West, Khrushchev recognized permanent neutrality for Austria. Meeting President Dwight D. Eisenhower in Geneva, Switzerland, later that year, Khrushchev confirmed Soviet commitment to "peaceful coexistence" with capitalism. Regarding the developing nations, Khrushchev tried to win the goodwill of their national leaders, instead of following the established Soviet policy of shunning the governments while supporting local communist parties. Soviet influence in the international alignments of India and Egypt, as well as of other Third World countries, began in the middle of the 1950s. Cuba's entry into the socialist camp in 1961 was a coup for the Soviet Union.

With the gains of the new diplomacy came reversals as well. By conceding the independence of Yugoslavia in 1955 as well as by his de-Stalinization campaign, Khrushchev provoked unrest in Eastern Europe, where the policies of the Stalin era weighed heavily. In Poland, riots brought about a change in communist party leadership, which the Soviet Union reluctantly recognized in October 1956. A popular uprising against Soviet control then broke out in Hungary, where the local communist leaders, headed by Imre Nagy, called for a multiparty political system and withdrawal from the Warsaw Pact, the defensive alliance founded by the Soviet Union and its East European satellites in 1955. The Soviet army crushed the revolt early in November 1956, causing numerous casualities. Although the Hungarian Revolution hurt Soviet standing in world opinion, it demonstrated that the Soviet Union would use force if necessary to maintain control over its satellite states in Eastern Europe.

Outside the Soviet sphere of control, China grew increasingly restive under Chinese Communist Party chairman Mao Zedong. Chinese discontent with the new Soviet leadership stemmed from low levels of Soviet aid, feeble Soviet support for China in its disputes with Taiwan and India, and the new Soviet doctrine of peaceful coexistence with the West (which Mao viewed as a betrayal of Marxism-Leninism). Against Khrushchev's wishes, China embarked on a nuclear arms program, declaring in 1960 that nuclear war could defeat imperialism. The dispute between militant China and the more moderate Soviet Union escalated into a schism in the world communist movement after 1960. Albania left the Soviet camp and became an ally of China, Romania distanced itself from the Soviet Union in international affairs, and communist parties around the world split over orientation to Moscow or Beijing. The monolithic bloc of world communism had shattered.

Soviet relations with the West, especially the United States, seesawed between moments of relative relaxation and periods of tension and crisis. For his part, Khrushchev wanted peaceful coexistence with the West, not only to avoid nuclear war but also to permit the Soviet Union to develop its economy. Khrushchev's meetings with President Eisenhower in 1955 and President John F. Kennedy in 1961 and his tour of the United States in 1959 demonstrated the Soviet leader's desire for fundamentally smooth relations between the West and the Soviet Union and its allies. Yet Khrushchev also needed to demonstrate to Soviet conservatives and militant Chinese that the Soviet Union was a firm defender of the socialist camp. Thus in 1958 Khrushchev challenged the status of Berlin; when the West would not yield to his demands that the western sectors be incorporated into East Germany, he approved the erection of the Berlin Wall around those sectors in 1961. To maintain national prestige, Khrushchev canceled a summit meeting with Eisenhower in 1960 after Soviet air defense troops shot down a United States U-2 reconnaissance aircraft over Soviet territory. Finally, mistrust over military intentions hobbled East-West relations during this time. The West feared the Soviet lead in space technology and saw in the buildup of the Soviet military an emerging "missile gap" in the Soviet Union's favor. By contrast, the Soviet Union felt threatened by a rearmed Federal Republic of Germany (West Germany), by the United States alliance system encircling the Soviet Union, and by the West's superior strategic and economic strength. To offset the United States military advantage and thereby improve the Soviet negotiating position, Khrushchev in 1962 tried to install nuclear missiles in Cuba, but he agreed to withdraw them after Kennedy ordered a blockade around the island nation. After coming close to war in the Cuban missile crisis, the Soviet Union and the United States took steps to reduce the nuclear threat. In 1963 the two countries established the "hot line" between Washington and Moscow to reduce the likelihood of accidental nuclear war. In the same year, the United States, Britain, and the Soviet Union signed the Limited Test Ban Treaty, which forbade testing nuclear weapons in the atmosphere.

Khrushchev's Reforms and Fall

Throughout his years of leadership, Khrushchev attempted to carry out reform in a range of fields. The problems of Soviet agriculture, a major concern of Khrushchev's, had earlier attracted the attention of the collective leadership, which introduced important innovations in this area of the Soviet economy. The state encouraged peasants to grow more on their private plots, increased payments for crops grown on the collective farms, and invested more heavily in agriculture. In his dramatic virgin land campaign in the mid-1950s, Khrushchev opened to farming vast tracts of land in the northern part of the Kazakh Republic and neighboring areas of the Russian Republic. These new farmlands turned out to be susceptible to droughts, but in some years they produced excellent harvests. Later innovations by Khrushchev, however, proved counterproductive. His plans for growing maize and increasing meat and dairy production failed miserably, and his reorganization of collective farms into larger units produced confusion in the countryside.

Khrushchev's reforms in industry and administrative organization created even greater problems. In a politically motivated move to weaken the central state bureaucracy, in 1957 Khrushchev did away with the industrial ministries in Moscow and replaced them with regional economic councils. Although Khrushchev intended these economic councils to be more responsive to local needs, the decentralization of industry led to disruption and inefficiency. Connected with this decentralization was Khrushchev's decision in 1962 to reorganize party organizations along economic, rather than administrative, lines. The resulting bifurcation of the party apparatus into industrial and agricultural sectors at the oblast level and below contributed to the disarray and alienated many party officials at all levels. Symptomatic of the country's economic difficulties was the abandonment in 1963 of Khrushchev's special seven-year economic plan (1959-65) two years short of its completion.

By 1964 Khrushchev's prestige had been injured in a number of areas. Industrial growth slowed, while agriculture showed no new progress. Abroad, the split with China, the Berlin crisis, and the Cuban fiasco hurt the Soviet Union's international stature, and Khrushchev's efforts to improve relations with the West antagonized many in the military. Lastly, the 1962 party reorganization caused turmoil throughout the Soviet political chain of command. In October 1964, while Khrushchev was vacationing in Crimea, the Presidium voted him out of office and refused to permit him to take his case to the Central Committee. Khrushchev retired as a private citizen after his successors denounced him for his "hare-brained schemes, half-baked conclusions, and hasty decisions." Yet along with his failed policies, Khrushchev must also be remembered for his public disavowal of Stalinism and the cult of personality.

THE BREZHNEV ERA

Collective Leadership and the Rise of Brezhnev

After removing Khrushchev from power, the leaders of the Politburo (as the Presidium was renamed in 1966 by the Twenty-Third Party Congress) and Secretariat again established a collective leadership. As was the case following Stalin's death, several individuals, including Aleksei N. Kosygin, Nikolai V. Podgornyi, and Leonid I. Brezhnev, contended for power behind a facade of unity. Kosygin accepted the position of prime minister, which he held until his retirement in 1980. Brezhnev, who took the post of first secretary, may have originally been viewed as an interim appointment by his fellows.

Born to a Russian worker's family in 1906, Brezhnev became a protege of Khrushchev early in his career and through his influence rose to membership in the Presidium. As his own power grew, Brezhnev built up a coterie of followers whom he, as first secretary (the title reverted to general secretary after April 1966), gradually maneuvered into powerful positions. At the same time, Brezhnev slowly demoted or isolated possible contenders for his office. He succeeded in elevating Podgornyi to the ceremonial position of chairman of the Presidium of the Supreme Soviet, the highest legislative organization in the government, in December 1965, thus eliminating him as a rival. But Brezhnev's rise was very gradual; only in 1971, when Brezhnev succeeded in appointing four close associates to the Politburo, did it become clear that his was the most influential voice in the collective leadership. After several more personnel changes, Brezhnev assumed the chairmanship of the Presidium of the Supreme Soviet in 1977, confirming his primacy in both party and state.

The years after Khrushchev were notable for the stability of cadres in the party and state apparatus. By introducing the slogan "Trust in Cadres" in 1965, Brezhnev won the support of many bureaucrats wary of the constant reorganizations of the Khrushchev era and eager for security in established hierarchies. As an example of the new stability, nearly half of the Central Committee members in 1981 were holdovers from fifteen years earlier. The corollary to this stability was the aging of Soviet leaders; the average age of Politburo members rose from fifty-five in 1966 to sixty-eight in 1982. The Soviet leadership (or the "gerontocracy," as it was referred to in the West) became increasingly conservative and ossified.

Conservative policies characterized the regime's agenda in the years after Khrushchev. Upon assuming power, the collective leadership not only reversed such policies of Khrushchev's as the bifurcation of the party but also halted de-Stalinization, and positive references to the dead dictator began to appear. The Soviet Constitution of 1977, although differing in certain respects from the 1936 Stalin document, retains the general thrust of the latter). In contrast to the relative cultural freedom tolerated during the early Khrushchev years, Brezhnev and his colleagues continued the more restrictive line of the later Khrushchev era. The leadership was unwilling or unable to employ Stalinist means to control Soviet society; instead, it opted to exert repressive tactics against political dissidents even after the Soviet Union acceded to the Helsinki Accords in 1975. Dissidents persecuted during this time included writers and activists in outlawed religious, nationalist, and human rights movements. In the latter part of the Brezhnev era, the regime tolerated popular expressions of anti-Semitism. Under conditions of "developed socialism" (the historical stage that the Soviet Union attained in 1977 according to the CPSU), the study of Marxism-Leninism served as a means to bolster the authority of the regime rather than as a tool for revolutionary action.

Foreign Policy of a Superpower

A major concern of Khrushchev's successors was to reestablish Soviet primacy in the community of communist states by undermining the influence of China. Although the new leaders originally approached China without hostility, Mao's condemnation of Soviet foreign policy as "revisionist" and his competition for influence in the Third World soon led to a worsening of relations between the two countries. Sino-Soviet relations reached a low point in 1969 when clashes broke out along the disputed Ussuri River in the Far East. Later the Chinese, intimidated by Soviet military strength, agreed not to patrol the border area claimed by the Soviet Union; but strained relations between the two countries continued into the early 1980s.

Under the collective leadership, the Soviet Union again used force in Eastern Europe, this time in Czechoslovakia. In 1968 reform-minded elements of the Communist Party of Czechoslovakia rapidly began to liberalize their rule, loosen censorship, and strengthen Western ties. In response, Soviet and other Warsaw Pact troops entered Czechoslovakia and installed a new regime. Out of these events arose the so-called Brezhnev Doctrine, which warned that the Soviet Union would act to maintain its hegemony in Eastern Europe. Soviet suppression of the reform movement reduced blatant gestures of defiance on the part of Romania and served as a threatening example to the Polish Solidarity trade union movement in 1980. But it also helped disillusion communist parties in Western Europe to the extent that by 1977 most of the leading parties embraced Eurocommunism, which freed them to pursue political programs independent of Moscow's dictates.

Soviet influence in the developing world expanded somewhat during this period. New communist or Marxist governments having close relations with the Soviet Union rose to power in several countries, including Vietnam, Ethiopia, and Nicaragua. In the Middle East, the Soviet Union vied for influence by backing the Arabs in their dispute with Israel. After the June 1967 War, the Soviet Union rebuilt the defeated Syrian and Egyptian armies, but it suffered a setback when Egypt expelled Soviet advisers from the country in 1972 and subsequently entered a closer relationship with the United States. The Soviet Union retained ties with Syria and supported Palestinian claims for their right to an independent state. But Soviet prestige among moderate Muslim states suffered in the 1980s as a result of Soviet military activities in Afghanistan. Attempting to shore up a communist government in that country, Brezhnev sent in Soviet armed forces in December 1979, but a large part of the Afghan population resisted both the occupiers and the Marxist Afghan regime. The resulting war in Afghanistan continued to be an unresolved problem for the Soviet Union at the time of Brezhnev's death in 1982.

Soviet relations with the West first improved, then deteriorated in the years after Khrushchev. The gradual winding down of the United States commitment to the war in Vietnam after 1968 opened the way for negotiations between the United States and the Soviet Union on the subject of nuclear arms. After the Treaty on the Nonproliferation of Nuclear Weapons was signed in July 1968, the two countries began the Strategic Arms Limitation Talks (SALT) in 1969. At the Moscow Summit of May 1972, Brezhnev and President Richard M. Nixon signed Anti-Ballistic Missile Treaty and the Interim Agreement on the limitation of Strategic Offensive Arms. Both agreements essentially froze the deployment of strategic defensive andd offensive weapons. A period of dÈtente, or relaxation of tensions, between the two superpowers emerged, with a further agreement concluded to establish ceilings on the number of offensive weapons on both sides in 1974. The crowning achievement of the era of dÈtente was the signing in 1975 of the Helsinki Accords, which ratified the postwar status quo in Europe and bound the signatories to respect basic principles of human rights. But even during the period of dÈtente, the Soviet Union increased weapons deployments, with the result that by the end of the 1970s it achieved parity or even superiority in strength compared with the United States. The Soviet Union also heightened its condemnation of the NATO alliance in an attempt to weaken Western unity. Although SALT a second agreement was signed by Brezhnev and President Jimmy Carter in Vienna in 1979, after the Soviet invasion of Afghanistan the Carter administration withdrew the agreement from consideration by the United States Senate, and dÈtente effectively came to an end. In reaction to the Soviet involvement in Afghanistan, the United States imposed a grain embargo on the Soviet Union and boycotted the Summer Olympics in Moscow in 1980. Tensions between the United States and the Soviet Union continued up to Brezhnev's death.

The Economy

Despite Khrushchev's tinkerings with economic planning, the economic system remained dependent on central plans drawn up with no reference to market mechanisms. Reformers, of whom the economist Evsei Liberman was most noteworthy, advocated greater freedom for individual enterprises from outside controls and sought to turn the enterprises' economic objectives toward making a profit. Prime Minister Kosygin championed Liberman's proposals and succeeded in incorporating them into a general economic reform program approved in September 1965. This reform included scrapping Khrushchev's regional economic councils in favor of resurrecting the central industrial ministries of the Stalin era. Opposition from party conservatives and cautious managers, however, soon stalled the Liberman reforms, forcing the state to abandon them.

After this short-lived attempt at revamping the economic system, planners reverted to drafting comprehensive centralized plans of the type first developed under Stalin. In industry, plans stressed the heavy and defense-related branches, with the light consumer-goods branches slighted. As a developed industrial country, the Soviet Union by the 1970s found it increasingly difficult to maintain the high rates of growth in the industrial sector that it had sustained in earlier years. Increasingly large investment and labor inputs were required for growth, but these inputs were becoming more difficult to obtain. Although the planned goals of the five-year plans of the 1970s had been scaled down from previous plans, the targets remained largely unmet. The industrial shortfalls were felt most sharply in the sphere of consumer goods, where the public steadily demanded improved quality and increased quantity. Agricultural development continued to lag in the Brezhnev years. Despite steadily higher investments in agriculture, growth under Brezhnev fell below that attained under Khrushchev. Droughts occurring irregularly throughout the 1970s forced the Soviet Union to import large quantities of grain from the West, including the United States. In the countryside, Brezhnev continued the trend toward converting collective farms into state farms and raised the incomes of all farm workers. Despite the wage raises, peasants still devoted much time and effort to their private plots, which provided the Soviet Union with an inordinate share of its agricultural goods.

The standard of living in the Soviet Union presented a problem to the Brezhnev leadership after improvements made in the late 1960s gradually leveled off at a position well below that of many Western industrial (and some East European) countries. Although certain goods and appliances became more accessible during the 1960s and 1970s, improvements in housing and food supply were slight. Shortages of consumer goods abetted pilferage of government property and growth of the black market. Vodka, however, remained readily available, and alcoholism was an important factor in both the declining life expectancy and the rising infant mortality that the Soviet Union experienced in the later Brezhnev years.

Culture and the Arts

Progress in developing the education system was mixed during the Brezhnev years. In the 1960s and 1970s, the percentage of working-age people with secondary and higher education steadily increased. Yet at the same time, access to higher education grew more difficult. By 1980 the percentage of secondary school graduates admitted to universities had dropped to only two-thirds of the 1960 figure. Students accepted into the universities increasingly came from professional families rather than from worker or peasant households. This trend toward the perpetuation of the educated elite was not only a function of the superior cultural background of elite families but was also, in many cases, a result of their power to influence the admissions procedures.

Progress in science also enjoyed varied success under Brezhnev. In the most visible test of its ability--the race with the United States to put a man on the moon--the Soviet Union failed, but through persistence the Soviet space program continued to make headway in other areas. In general, despite leads in such fields as metallurgy and thermonuclear fusion, Soviet science lagged behind that of the West, hampered in part by the slow development of computer technology.

In literature and the arts, a greater variety of creative works became accessible to the public than had previously been available. True, the state continued to determine what could be legally published or performed, punishing persistent offenders with exile or prison. Nonetheless, greater experimentation in art forms became permissible in the 1970s, with the result that more sophisticated and subtly critical work began to be produced. The regime loosened the strictures of socialist realism; thus, for instance, many protagonists of the novels of author Iurii Trifonov concerned themselves with problems of daily life rather than with building socialism. In music, although the state continued to frown on such Western phenomena as jazz and rock, it began to permit Western musical ensembles specializing in these genres to make limited appearances. But the native balladeer Vladimir Vysotskii, widely popular in the Soviet Union, was denied official recognition because of his iconoclastic lyrics.

In the religious life of the Soviet Union, a resurgence in popular devotion to the major faiths became apparent in the late 1970s despite continued de facto disapproval on the part of the authorities. This revival may have been connected with the generally growing interest of Soviet citizens in their respective national traditions.

Death of Brezhnev

Shortly after his cult of personality began to take root in the mid-1970s, Brezhnev began to experience periods of ill health. After Brezhnev's first stroke in 1975, Politburo members Mikhail A. Suslov and Andrei P. Kirilenko assumed some of Brezhnev's functions for a time. Then, after another bout of poor health in 1978, Brezhnev delegated more of his responsibilities to Konstantin U. Chernenko, a long-time associate who soon began to be regarded as the heir apparent. His prospects of succeeding Brezhnev, however, were hurt by problems plaguing the general secretary in the early 1980s. Not only had economic failures hurt Brezhnev's prestige, but scandals involving his family and political allies also damaged his stature. Meanwhile, Iurii V. Andropov, chief of the secret police, the Committee for State Security (Komitet gosudarstvennoi bezopasnosti--KGB), apparently also began a campaign to discredit Brezhnev. Andropov took over Suslov's functions after Suslov died in 1982, and he used his position to advance himself as the next CPSU general secretary. Brezhnev himself, despite ill health following another stroke in March, would not relinquish his office. Soon after reviewing the traditional Bolshevik Revolution parade in November 1982, Brezhnev died.

Ultimately, the Soviet Union paid a high price for the stability that prevailed during the years of the Brezhnev regime. By avoiding necessary political and economic change, the Brezhnev leadership ensured the economic and political decline that the country experienced during the 1980s. This deterioration of power and prestige stood in sharp contrast to the dynamism that marked the Soviet Union's revolutionary beginnings.


State Department Background Notes on Russia in 1991-1995

 

PEOPLE

Russia's area is about 17 million sq. km. (6.5 million sq. mi.). It remains the largest country in the world by more than 2.5 million sq. mi. Its population density is about 23 persons per square mile (9 per sq. km.), making it one of the most sparsely populated countries in the world. Its population is predominantly urban.

Most of the roughly 150 million Russians derive from the Eastern Slavic family of peoples, whose original homeland was probably present-day Poland. Russian is the official language of Russia, and an official language in the United Nations. As the language of writers such as Tolstoy, Dostoevsky, Chekov, Pushkin, and Solzhenitsyn, it has great importance in world literature.

Russia's educational system has produced nearly 100% literacy. About 3 million students attend Russia's 519 institutions of higher education and 48 universities. As a result of great emphasis on science and technology in education, Russian medical, mathematical, scientific, and space and aviation research is generally of a high order. The number of doctors in relation to the population is high by American standards, although medical care in Russia, even in major cities, is far below Western standards.

The Russian labor force is undergoing tremendous changes. Although well-educated and skilled, it is mismatched to the rapidly changing needs of the Russian economy. Millions of Russian workers are underemployed. Unemployment is highest among women and young people. As many as six million workers were temporarily furloughed in 1996. Many Russian workers compensate by working other part-time jobs. Following the collapse of the Soviet Union and the economic dislocation it engendered, the standard of living fell dramatically, but it has begun to recover.

Moscow is the largest city (population 9 million) and is the capital of the Federation. Moscow continues to be the center of Russian Government and is increasingly important as an economic and business center. Its cultural tradition is rich, and visitors will find many museums devoted to art, literature, music, dance, history, and science. It has hundreds of churches and dozens of notable cathedrals; it has become Russia's principal magnet for foreign investment and business presence.

St. Petersburg, established in 1703 by Peter the Great as the capital of the Russian Empire, was called Petrograd during World War I, and Leningrad after 1924. In 1991, as the result of a city referendum, it was renamed St. Petersburg. Under the Tsars, the city was Russia's cultural, intellectual, commercial, financial, and industrial center. After the capital was moved back to Moscow in 1918, the city's political significance declined, but it remained a cultural, scientific, and military-industrial center. The Hermitage is one of the world's great fine arts museums. Finally, Vladivostok, located in the Russian Far East, is becoming an important center for trade with the Pacific Rim countries.

HISTORY

Human experience on the territory of present-day Russia dates back to Paleolithic times. Greek traders conducted extensive commerce with Scythian tribes around the shores of the Black Sea and the Crimean region. In the third century B.C., Scythians were displaced by Sarmatians, who in turn were overrun by waves of Germanic Goths. In the third century A.D., Asiatic Huns replaced the Goths and were in turn conquered by Turkic Avars in the sixth century. By the ninth century, Eastern Slavs began to settle in what is now Ukraine, Belarus, and the Novgorod and Smolensk regions.

In 862, the political entity known as Kievan Rus was established in what is now Ukraine and lasted until the 12th century. In the 10th century, Christianity became the state religion under Vladimir, who adopted Greek Orthodox rites. Consequently, Byzantine culture predominated, as is evident in much of Russia's architectural, musical, and artistic heritage. Over the next centuries, various invaders assaulted the Kievan state, and finally, Mongols under Batu Khan destroyed the main population centers except for Novgorod and Pskov and prevailed over the region until 1480.

In the post-Mongol period, Muscovy gradually became the dominant principality and was able, through diplomacy and conquest, to establish suzerainty over European Russia. Ivan III (1462-1505) was able to refer to his empire as "the Third Rome" and heir to the Byzantine tradition, and a century later the Romanov dynasty was established under Tsar Mikhail in 1613.

During Peter the Great's reign (1689-1725), Russia began modernizing, and European influences spread in Russia. Peter created Western-style military forces, subordinated the Russian Orthodox Church hierarchy to the Tsar, reformed the entire governmental structure, and established the beginnings of a Western-style education system. His introduction of European customs generated nationalistic resentments in society and spawned the philosophical rivalry between "Westernizers" and nationalistic "Slavophiles" that remains a key dynamic of current Russian social and political thought.

Peter's expansionist policies were continued by Catherine the Great, who established Russia as a continental power. During her reign (1762-96), power was centralized in the monarchy and administrative reforms concentrated great wealth and privilege in the hands of the Russian nobility.

Napoleon failed in his attempt in 1812 to conquer Russia after occupying Moscow; his defeat and the continental order that emerged following the Congress of Vienna (1814-15) set the stage for Russia and Austria-Hungary to dominate the affairs of eastern Europe for the next century.

During the 19th century, the Russian Government sought to suppress repeated attempts at reform from within. Its economy failed to compete with those of Western countries. Russian cities were growing without an industrial base to generate employment, although emancipation of the serfs in 1861 foreshadowed urbanization and rapid industrialization late in the century. At the same time, Russia expanded across Siberia until the port of Vladivostok was opened on the Pacific coast in 1860. The Trans-Siberian Railroad opened vast frontiers to development late in the century. In the 19th century, Russian culture flourished as Russian artists made significant contributions to world literature, visual arts, dance, and music.

Imperial decline was evident in Russia's defeat in the unpopular Russo-Japanese war in 1905. Subsequent civic disturbances forced Tsar Nicholas II to grant a constitution and introduce limited democratic reforms. The government suppressed opposition and manipulated popular anger into anti-Semitic pogroms. Attempts at economic reform, such as land reform, were incomplete.

1917 Revolution and the U.S.S.R.

The ruinous effects of World War I, combined with internal pressures, sparked the March 1917 uprising, which led Tsar Nicholas II to abdicate the throne. A provisional government came to power, headed by Aleksandr Kerenskiy. On November 7, 1917, the Bolshevik Party, led by Vladimir Lenin, seized control and established the Russian Soviet Federated Socialist Republic. Civil war broke out in 1918 between Lenin's "Red" army and various "White" forces and lasted until 1920, when, despite foreign interventions, the Bolsheviks triumphed. After the Red army conquered Ukraine, Belorussia, Azerbaijan, Georgia, and Armenia, a new nation was formed in 1922, the Union of Soviet Socialist Republics.

The U.S.S.R. lasted 69 years. In the 1930s, tens of millions of its citizens were collectivized under state agricultural and industrial enterprises. Millions died in political purges, the vast penal and labor system, or in state-created famines. During World War II, as many as 20 million Soviet citizens died. In 1949, the U.S.S.R. developed its own nuclear arsenal.

First among its political figures was Lenin, leader of the Bolshevik Party and head of the first Soviet Government, who died in 1924. In the late 1920s, Josif Stalin emerged as General Secretary of the Communist Party of the Soviet Union (CPSU) amidst intraparty rivalries; he maintained complete control over Soviet domestic and international policy until his death in 1953. His successor, Nikita Khrushchev, served as Communist Party leader until he was ousted in 1964. Aleksey Kosygin became Chairman of the Council of Ministers, and Leonid Brezhnev was made First Secretary of the CPSU Central Committee in 1964, but in 1971, Brezhnev rose to become "first among equals" in a collective leadership. Brezhnev died in 1982 and was succeeded by Yuriy Andropov (1982-84), Konstantin Chernenko (1984-85), and Mikhail Gorbachev, who resigned as Soviet President on December 25, 1991. On December 26, 1991, the U.S.S.R. was formally dissolved.

The Russian Federation

After the December 1991 dissolution of the Soviet Union, the Russian Federation became its largest successor state, inheriting its permanent seat on the United Nations Security Council, as well as the bulk of its foreign assets and debt.

Boris Yeltsin was elected President of Russia by popular vote in June 1991. By the fall of 1993, politics in Russia reached a stalemate between President Yeltsin and the parliament. The parliament had succeeded in blocking, overturning, or ignoring the President's initiatives on drafting a new constitution, conducting new elections, and making further progress on democratic and economic reforms.

In a dramatic speech in September 1993, President Yeltsin dissolved the Russian parliament and called for new national elections and a new constitution. The standoff between the executive branch and opponents in the legislature turned violent in October after supporters of the parliament tried to instigate an armed insurrection. Yeltsin ordered the army to respond with force to capture the parliament building (known as the White House).

In December 1993, voters elected a new parliament and approved a new constitution that had been drafted by the Yeltsin government. Yeltsin has remained the dominant political figure, although a broad array of parties, including ultra-nationalists, liberals, agrarians, and communists, have substantial representation in the parliament and compete actively in elections at all levels of government.

In late 1994, the Russian security forces launched a brutal operation in the Republic of Chechnya against rebels who were intent on separation from Russia. Along with their opponents, Russian forces committed numerous violations of human rights. The Russian Army used heavy weapons against civilians. Tens of thousands of them were killed and more than 500,000 displaced during the course of the war. The protracted conflict, which received close scrutiny in the Russian media, raised serious human rights and humanitarian concerns abroad as well as within Russia.

After numerous unsuccessful attempts to institute a cease-fire, in August 1996 the Russian and Chechen authorities negotiated a settlement that resulted in a complete withdrawal of Russian troops and the holding of elections in January 1997. The Organization for Security and Cooperation in Europe (OSCE) played a major role in facilitating the negotiation. A peace treaty was concluded in May 1997, and the two sides agreed to conclude a final settlement by 2001.

GOVERNMENT AND POLITICAL CONDITIONS

In the political system established by the 1993 constitution, the president wields considerable executive power. There is no vice president, and the legislative is far weaker than the executive. The president nominates the highest state officials, including the prime minister, who must be approved by the Duma. The president can pass decrees without consent from the Duma. He also is head of the armed forces and of the national security council.

Duma elections were in December 1995 and presidential elections June 1996. The Communist Party won a plurality of seats in the Duma; the pro-government party ("Our Home is Russia"), the liberal "Yabloko" bloc, and the nationalists also won substantial numbers of seats in the legislature. In the presidential election, Boris Yeltsin was reelected in the second round following a spirited campaign. Both the presidential and parliamentary elections were judged generally free and fair by international observers.

Russia is a federation, but the precise distribution of powers between the central government and the regional and local authorities is still evolving. The Russian Federation consists of 89 components, including two federal cities, Moscow and St. Petersburg. The constitution explicitly defines the federal government's exclusive powers, but it also describes most key regional issues as the joint responsibility of the federal government and the Federation components.

Judicial System

Russia's judiciary and justice system are weak. Numerous matters which are dealt with by administrative authority in European countries remain subject to political influence in Russia. The Constitutional Court was reconvened in March 1995 following its suspension by President Yeltsin in October 1993. The 1993 constitution empowers the court to arbitrate disputes between the executive and legislative branches and between Moscow and the regional and local governments. The court is also authorized to rule on violations of constitutional rights, to examine appeals from various bodies, and to participate in impeachment proceedings against the president. The July 1994 Law on the Constitutional Court prohibits the court from examining cases on its own initiative and limits the scope of issues the court can hear.

In the past 3 years, the Russian Government has begun to reform the criminal justice system and judicial institutions, including the reintroduction of jury trials in certain criminal cases. Despite these efforts, judges are only beginning to assert their constitutionally mandated independence from other branches of government.

Human Rights

Russia's human rights record remains uneven. Despite significant improvements in conditions following the end of the Soviet Union, some problem areas remain. Although the government has made progress in recognizing the legitimacy of international human rights standards, the institutionalization of procedures to safeguard these rights has lagged. Implementation of the constitutional provisions for due process and timely trials, for example, has made little progress. In addition, the judiciary is often subject to manipulation by political authorities and is plagued by large case backlogs and trial delays. Lengthy pretrial detention remains a serious problem. There are credible reports of beating and torturing of inmates and detainees by law enforcement and correctional officials. Prison conditions fall well below international standards and, according to human rights groups, in 1996 between 10,000 and 20,000 prisoners and detainees died, most because of overcrowding, disease, and lack of medical care.

Efforts to institutionalize official human rights bodies have been mixed. In 1996, human rights activist Sergey Kovalev resigned as chairman of the Presidential Human Rights Commission to protest the government's record, particularly the war in Chechnya. Parliament in 1997 passed a law establishing a "human rights ombudsman," a position that is provided for in Russia's constitution and is required of members of the Council of Europe, to which Russia was admitted in February 1996. The Duma, however, has been unable to agree on a candidate to fill this position. International human rights groups operate freely in Russia, although the government did hinder the movements and access to information of some individuals investigating the war in Chechnya.

The Russian Constitution provides for freedom of religion and the equality of all religions before the law as well as the separation of church and state. Although Jews and Muslims continue to encounter prejudice and societal discrimination, they have not been inhibited by the government in the free practice of their religion. High-ranking federal officials have condemned anti-Semitic hate crimes, but law enforcement bodies have not effectively prosecuted those responsible. The influx of missionaries over the past several years has led to pressure by groups in Russia, specifically nationalists and the Russian Orthodox Church, to limit the activities of these "nontraditional" religious groups. In response, the Duma passed a new, restrictive, and potentially discriminatory law in October 1997. The law is very complex, with many ambiguous and contradictory provisions. The law's most controversial provisions separates religious "groups" and "organizations" and introduce a 15-year rule, which allows groups that have been in existence for 15 years or longer to obtain accredited status.

The constitution guarantees citizens the right to choose their place of residence and to travel abroad. Some big-city governments, however, have restricted this right through residential registration rules that closely resemble the Soviet-era "propiska" regulations. Although the rules were touted as a notification device rather than a control system, their implementation has produced many of the same results as the propiska system. The freedom to travel abroad and emigrate is respected although restrictions may apply to those who have had access to state secrets. Recognizing this progress, since 1994, President Clinton has found Russia to be in full compliance with the provisions of the Jackson-Vanik amendment.

ECONOMY

The Russian economy has undergone tremendous stress as it has moved from a centrally planned economy toward a free market system. Russia accounts for more than one-half of the population of the New Independent States (NIS) of the former Soviet Union and 60% of their total gross domestic product.

Russia was the hottest emerging securities market in the world before financial instability hit world markets in October 1997. After the crisis, investors became more critical of cases of shareholders' rights abuses and other policies that they had tolerated in the bull market.

For the first time since 1989, GDP in 1997 was officially positive, registering 0.4 % growth. GDP fell approximately 53% between 1990 and 1997, according to official statistics. Unemployment (by ILO definition) remains relatively stable at 9% of the work force, although this figure omits many who work reduced hours or are on involuntary or voluntary leave.

Monetary Policy

Inflation continued its downward trend in 1997, totaling just 11% for the year. The Central Bank has announced that it will halt its crawling band mechanism used in 1997, in favor of a more flexible medium-term regime. The average target ruble exchange rate for 1998-2000 is 6.2 rubles/dollar. The ruble is allowed to float 15% in either direction from that target peg, giving the government increased flexibility to deal with short-term pressures.

Government Spending/Taxation

The federal budget deficit for 1997 was 6.1% of GDP. The general budget deficit, including deficits run by regional and local governments, was more than 6.5%. A revenue shortage continues to plague the government. This shortage is attributed to a combination of factors: weak tax administration practices; a cumbersome tax system with high rates that provoke evasion; the fall in output and an increase in the size of the gray economy. Russia suffers from a mix of confiscatory tax rates and general non-payment. Work toward resolving this dilemma gained momentum in mid-summer 1998.

The domestic government securities (GKO) market: Stock of government debt grew to nearly $65 billion in 1997, with total turnover of about $146 billion for the year. My mid 1996, foreign investors had increased their holdings to about 30% of total outstanding federal government debt. These foreign investors helped push interest rates lower until the Asian crisis, when they reassessed their exposure to Russia and other emerging markets.

Law

Lack of legislation in many areas of economic activity is a pressing issue. Taxation and business regulation are unpredictable, and legal enforcement of private business agreements is very weak. The passage of an improved bankruptcy code in January 1998 should facilitate economic restructuring, although it should be some time before the entire normative framework for the code is in place.

Government decisions affecting business have been inconsistent, and crime has increased costs for both local and foreign businesses.

Natural Resources

With the mineral-packed Ural mountains and the vast oil, gas, coal, and timber reserves of Siberia and the Russian Far East, Russia is rich in natural resources. Most are located in remote and climatically unfavorable areas that are difficult to develop and are far from Russian ports. Oil and gas exports continue to be the main sources of hard currency. Russia is a leading producer and exporter of minerals, gold, and all major fuels.

The Russian fishing industry is the world's fourth-largest, behind Japan, the U.S., and China. Russia accounts for one-quarter of the world's production of fresh and frozen fish and about one-third of world output of canned fish.

Industry

Russia is one of the most industrialized of the former Soviet republics. Besides its resource-based industries, it has developed large manufacturing capacities, notably in machinery. Russia inherited most of the defense industrial base of the Soviet Union; converting it to civilian use is a major goal of the present government.

Agriculture

Russia comprises roughly three-quarters of the territory of the NIS but has relatively little area suited for agriculture because of the arid climate and inconsistent rainfall. Northern areas concentrate mainly on livestock, and the southern parts and western Siberia produce grain. Restructuring of former state farms has been an extremely slow process, partially due to the absence of a Land Code that allows for the free sale, purchase, and mortgage of agricultural land. Private farms and private garden plots of the population account for over one-half of all agricultural production.

Investment
The Russian Government estimated that cumulative foreign investment in Russia increased 60% in 1997 to U.S.$10.7 billion. Foreign direct investment equaled $3.9 billion of the total. The United States was Russia's top source of foreign investment, accounting for 27% of total flows and 54% of new foreign direct investment. Accumulated U.S. investment (1991-97) and U.S. direct investment in Russia stood at $6.2 billion and $4.2 billion, respectively. Major areas of interest for U.S. investors continue to be in energy, food processing, telecommunications, and automobiles. Joint ventures between Russian and foreign firms account for an increasing share of Russian output and trade and are concentrated in the services sector.

Foreign investment in Russia pales in comparison with investment in other transition economies, however, such as Poland, Hungary, and China. Russian domestic investment also continues to lag, dropping 7% in the first quarter of 1998. Low levels of domestic investment continue to be one of the greatest obstacles to renewed economic growth.

Trade

Russia has liberalized domestic trade and dismantled most non-tariff restrictions on foreign trade. To bolster future foreign trade, Russia applied in June 1993 to the GATT (predecessor to the World Trade Organization or WTO). Russia's average weighted tariff is 13%-14%.

State-subsidized imports were phased out in 1994, as was the system of quotas and licensing for exports. The combination of import duties, a 20% value-added tax and excise taxes on imported goods (especially automobiles, alcoholic beverages, and aircraft) and an import licensing regime for alcohol depress Russian demand for imports. Frequent changes in customs regulations also have created problems for foreign and domestic traders and investors.

Russia has been running a trade surplus since 1993, but the level of surplus is declining sharply, due in significant part to declining oil prices. Russia's trade is dominated by Europe, with Germany last year surpassing Ukraine as Russia's largest trading partner. The U.S. is Russia's third-largest trading partner, while China and Japan are Russia's largest Asian trading partners. Trade with the other NIS states is overwhelmingly in energy and industrial products; Ukraine and Kazakhstan are by far the most important trade partner in the NIS. Russia continues to supply large amounts of energy to the NIS states at a discount, although it has tied government credits to debt repayment.

Highlights From Russian Infrastructure Projects. Sakhalin Island Development. The Marathon, McDermott, Mitsui, Mitsubishi, and Shell Sakhalin II consortium plan to develop large oil and gas fields offshore at Sakhalin Island in a $10 billion project. This project was grandfathered in when the Production Sharing Agreement law was passed in 1995, and is going forward. A second Sakhalin I project, with the participation of Exxon, also is in the works, although the legal status of the project is still under discussion with the Russian Government.

U.S. firms have made commitments to 17 other priority energy development projects-- representing potential investments U.S. companies are prepared to make if obstacles to full commercial realization are minimized. Five of these projects, totaling more than $70 billion in investment, currently are under consideration at the Russian Ministry of Fuel and Energy.

The Caspian Pipeline Consortium (CPC) is a $2 billion project consisting of a pipeline network from the Tengiz oil field in western Kazakhstan to Novorossisysk, Russia. U.S. participants include Chevron and Oryx.

The U.S. Federal Highway Administration is working with the Russian Ministry of Transportation and Federal highway Service on an estimated $1.2 billion "China Bump Project" that will complete the last leg of the trans-Siberian highway from Chita to Vladivostok. Parsons International is expected to receive this contract, which will contain about one-third U.S. content.

FOREIGN RELATIONS

Russia has taken important steps to become a full partner in the world's principal political groupings. On December 27, 1991, Russia assumed the seat formerly held by the Soviet Union in the UN Security Council. Russia also is a member of the Organization for Security and Cooperation in Europe (OSCE) and the North Atlantic Cooperation Council (NACC). It signed the NATO Partnership for Peace initiative on June 22, 1994. On May 27, 1997, NATO and Russia signed the NATO-Russia Founding Act, which provides the basis for an enduring and robust partnership between the Alliance and Russia--one that can make an important contribution to European security architecture in the 21st century. On June 24, 1994, Russia and the European Union (EU) signed a partnership and cooperation agreement.

Russia has played an important role in helping mediate international conflicts through its co-sponsorship of the Middle East peace process and its support of UN and multilateral initiatives in the Persian Gulf, Cambodia, Angola, the former Yugoslavia, and Haiti. Russia is a member of the Contact Group; it has contributed troops to the NATO-led stabilization force in Bosnia. Russia has affirmed its respect for international law and OSCE principles. It has accepted UN and/or OSCE involvement in instances of regional conflict in neighboring countries, including the dispatch of observers to Georgia, Moldova, Tajikistan, and Nagorno-Karabakh.

DEFENSE

Since the breakup of the U.S.S.R., the Russians have discussed rebuilding a viable, cohesive fighting force out of the remaining parts of the former Soviet armed forces. A new Russian military doctrine, promulgated in November 1993, implicitly acknowledges the contraction of the old Soviet military into a regional military power without global imperial ambitions. In keeping with its emphasis on the threat of regional conflicts, the doctrine calls for a Russian military that is smaller, lighter, and more mobile, with a higher degree of professionalism and with greater rapid deployment capability. Such a transformation has proven difficult.

The challenge of this task has been magnified by difficult economic conditions in Russia, which have resulted in reduced defense spending. This has led to training cutbacks, wage arrears, and severe shortages of housing and other social amenities for military personnel, with a consequent lowering of morale, cohesion, and fighting effectiveness. The poor combat performance of the Russian armed forces in the Chechen conflict in part reflects these breakdowns.

The actual strength of the Russian armed forces probably falls between 1.4 and 1.6 million and is scheduled to fall to 1.2 million by the end of 1999. Weapons production in Russia has fallen dramatically over the past few years; between 1988 and 1993, it fell by at least 50% for virtually every major weapons system. Weapons spending in 1992 was approximately 75% less than in 1988. Almost all of Russia's arms production is for sales to foreign governments, and procurement of major end items by the Russian military has all but stopped.

About 70% of the former Soviet Union's defense industries is located in the Russian Federation. A large number of state-owned defense enterprises are on the brink of collapse as a result of cuts in weapons orders and insufficient funding to shift to production of civilian goods, while at the same time trying to meet payrolls. Many defense firms have been privatized; some have developed significant partnerships with U.S. firms.

U.S.- RUSSIA RELATIONS

The United States remains committed to maintaining a constructive relationship with Russia in which we seek to expand areas of cooperation and effectively work through differences. The United States continues to support Russia's political and economic transformation and its integration into major international organizations. These steps, in conjunction with achievements in considerably reducing nuclear weapons, have greatly enhanced the security of the United States.

The intensity and frequency of contacts between President Yeltsin and President Clinton in 1997--in Helsinki, in Paris, and in Denver and in Birmingham in 1998--are indicative of the strong commitment to working together on a broad range of issues. These include European security, reducing the threat to our countries posed by weapons of mass destruction, and economic cooperation, especially American investment in Russia.

Economic Relations

U.S.- Russia Joint Commission on Economic and Technological Cooperation. Under the leadership of Vice President Gore and the Russian Prime Minister, the U.S. and Russia are working to advance bilateral cooperation through nine working committees and several working groups known collectively as the U.S.-Russian Joint Commission on Economic and Technological Cooperation. Committees address issues in the fields of science and technology, business development, space, energy policy, environmental protection, health, defense conversion, capital markets, and agriculture. In addition, the commission provides a forum for high-level discussions of priority security and economic issues. The commission held its 10th session in Washington in March 1998, and an executive session in Moscow in May 1998.

Trade and Investment. At the March 1997 summit in Helsinki, Finland, Presidents Clinton and Yeltsin emphasized the need to expand trade and investment. They signed a joint "Economic Initiative" aimed at stimulating Russian economic growth, deepening bilateral economic ties, and accelerating Russian integration into the global economy and its primary multilateral organizations. Both governments announced a special "Regional Investment Initiative" to create a climate for private investment in Russia's regions and attract foreign and domestic capital. As part of this initiative, several progressive regions with investment potential will be selected where the U.S. will focus its assistance activities to foster a better business and investment climate. These regions will, in turn, serve as models of what can be achieved by an intensive effort to improve the investment climate. As of spring 1998, Novgorod Oblast, Samara Oblast and the Russian Far East, with a focus on Khabarovsk Kray and Sakhalin Oblast, have been chosen as initiative sites.

In 1997, the U.S. trade deficit with Russia was $1 billion, an increase of $780 million from the U.S. trade deficit of $221 million in 1996. U.S. merchandise exports to Russia were nearly $3.3 billion in 1997. Russia was the United States' 35th- largest export market in 1997. U.S. imports from Russia were nearly $4.3 billion in 1997. The 1992 U.S.-Russia trade agreement provides mutual most-favored-nation status and includes commitments on intellectual property rights protection. In 1992, the two countries also signed treaties on the avoidance of double taxation and on bilateral investment. As of spring 1998, however, the Russian parliament has not ratified the bilateral investment treaty. It has been ratified by the U.S. Senate.

The U.S. actively supports Russia's efforts to join the World Trade Organization on commercially viable terms. Consultations to review Russia's tariff offer on goods have already begun. As of spring 1998, Russia must still submit market access offers on services. The U.S. actively supported Russian membership in the Asian Pacific Economic Cooperation (APEC) forum. Russia will become a member of APEC in November 1998.

Security Cooperation

NATO/Russia Founding Act. Russia signed the NATO Partnership for Peace initiative in June 1994. U.S. and Russian troops are serving together in the Implementation Force in Bosnia and its successor, the Stabilization Force. Building on these steps, NATO and Russia signed the NATO-Russia Founding Act on May 27, 1997, in Paris. The act defines the terms of a fundamentally new and sustained relationship in which NATO and Russia will consult and coordinate regularly, and where appropriate, act jointly. Cooperation between NATO and Russia exists in scientific and technical fields.

Agreements/Cooperation/Nuclear Arms. The U.S. and Russia signed a memorandum of understanding on defense cooperation in September 1993 that institutionalized and expanded relations between defense ministries, including establishing a broad range of military-to-military contacts. The U.S. and Russia carried out a joint peacekeeping training exercise in Totskoye, Russia, in September 1994. Based on the January 14, 1994, agreement between Presidents Clinton and Yeltsin, the two nations stopped targeting their strategic nuclear missiles at each other as of May 30, 1994. U.S. and Russian security cooperation emphasizes strategic stability, nuclear safety, dismantling nuclear weapons, preventing proliferation of weapons of mass destruction and their delivery systems, and enhancing military-to-military contacts. At the Lisbon OSCE summit in 1992, the United States signed a protocol to the START I Treaty with Russia, Belarus, Kazakhstan, and Ukraine--where the strategic nuclear weapons of the former Soviet Union were located--making the four countries party to the treaty and committing all signatories to reductions in strategic nuclear weapons within the 7-year period provided by the treaty. The treaty entered into force December 5, 1994.

START II. On January 3, 1993, the U.S. and Russia signed the Treaty between the United States of America and the Russian Federation on Further Reduction and Limitation of Strategic Offensive Arms (START II). This treaty would reduce overall deployments of strategic nuclear weapons on each side by more than two-thirds from current levels and will eliminate the most destabilizing strategic weapons --heavy intercontinental ballistic missiles (ICBMs) and all other deployed multiple-warhead ICBMs. At the September 1994 summit, the two nations agreed to begin removing nuclear warheads due to be scrapped under START II immediately, once START I takes effect and the START II Treaty is ratified by both countries, instead of taking the 9 years allowed. At their May 1995 summit, Presidents Clinton and Yeltsin agreed on a set of principles that would guide further discussion in the field of demarcation between anti-ballistic missile systems and theater missile defenses. They also agreed on steps to increase the transparency and irreversibility of nuclear arms reduction and committed not to use newly produced fissile materials or to reuse the fissile materials removed from nuclear weapons being eliminated and excess to national security requirements in nuclear weapons. The Russian Duma has not yet ratified START II.

CFE. Following ratification by Russia and the other NIS, the Conventional Armed Forces in Europe Treaty entered into force on November 9, 1992. This treaty establishes comprehensive limits on key categories of military equipment--tanks, artillery, armored combat vehicles, combat aircraft, and combat helicopters--and provides for the destruction of weaponry in excess of these limits.

Cooperative Threat Reduction (CTR). Often called Nunn-Lugar assistance, this type of assistance is provided to Russia (as well as Belarus, Kazakhstan, and Ukraine) to aid in the dismantling of weapons of mass destruction and to prevent the proliferation of such weapons. More than $600 million has been allocated for assistance to Russia during fiscal years 1996 and 1997 under this program, and 13 implementing agreements have been signed. Key projects have included assistance in the elimination of strategic offensive arms ($162 million), design and construction of a fissile material storage facility ($90 million), provision of fissile material containers ($50 million), material control and accounting and physical protection of nuclear materials ($45 million), and development of a chemical weapons destruction plan and provision of equipment for a pilot laboratory for the safe and secure destruction of chemical weapons ($55 million).

Under the CTR program, the U.S. also is assisting Russia in the development of export controls, providing emergency response equipment and training to enhance Russia's ability to respond to accidents involving nuclear weapons, providing increased military-to-military contacts, and encouraging the conversion of Russian defense firms through the formation of joint ventures to produce products, including housing, for the civilian market. As part of the CTR program, the U.S. has awarded $20 million to a joint venture project involving an American housing firm and three Russian aerospace firms to construct housing for demobilized military officers. Portions of the Russian defense firms will be converted to the production of prefabricated housing systems and related products.

In a multilateral effort (the European Union, Japan, and Canada also are involved), the U.S. also has provided $50 million to establish the International Science and Technology Center (ISTC), which provides alternative peaceful civilian employment opportunities to scientists and engineers of the former Soviet Union involved with weapons of mass destruction and their delivery systems.

U.S. Assistance to Russia

U.S. assistance to Russia has funded a variety of programs in the following key areas: private sector development, privatization and enterprise restructuring, trade and investment, democracy initiatives, energy, health care, housing, and environment. Humanitarian assistance represented a major portion of U.S. aid during the initial transition phase in Russia, when there was a pressing need for food, medicine, and other essential commodities. U.S. efforts now concentrate on limited technical assistance, citizen exchanges and partnerships, and direct support for trade and investment.

To date, the U.S. Government has provided a total of $4.8 billion in grant assistance to Russia ($2.1 billion in economic and technical assistance, $1.7 billion in humanitarian and food assistance, and $1 billion in security and weapons dismantlement assistance) and is supporting more than $7.3 billion worth of financing and insurance. The annual level of economic and technical assistance for Russia has declined from a peak of $1.6 billion in 1994 to $130 million in 1998.

U.S. Support for Russian Democracy and Development

U.S. Agency for International Development (USAID). The U.S. Government has been in the forefront of delivering privatization assistance to Russia since October 1992. USAID has the principal responsibility for implementing technical assistance to Russia and the other New Independent States. USAID has devoted its assistance efforts to helping Russia develop democratic institutions and transform its state-controlled economy to one based on market principles. Programs are active in the areas of privatization and private sector development, agriculture, energy, housing reform, health, environmental protection, economic restructuring, independent media, elections, and the rule of law. The U.S. recently pledged $30 million to help Russia in its fight against crime and to support a new legal infrastructure.

U.S. Export-Import Bank (Eximbank). Eximbank approved about $2.8 billion in loans, loan guarantees, and insurance for transactions in Russia from 1991 through September 1997. Of this total, more than $1 billion was approved under its Oil and Gas Framework Agreement.

U.S. Overseas Private Investment Corporation (OPIC). OPIC provides loans, loan guarantees, and commercial and political investment insurance to American companies investing in Russia. As of the end of FY 1997, OPIC had approved more than $3.2 billion in investment financing and insurance for 125 ventures.

Trade and Development Agency (TDA). The TDA has approved approximately $50 million in funding for feasibility studies on over 130 investment projects.

Commerce Department. American Business Centers are operating in St. Petersburg, Novosibirsk, Volgograd, Nizhny Novgorod, Yekaterinburg, Khaborovsk, Vladivostok, YuzhnoSakhalinsk, and Chelyabinsk to help U.S. companies do business in Russia. The Commerce Department also has established a Special American Business Internship Program (SABIT) in Russia, which places Russian managers for short-term internships with U.S. companies. The Commerce Department also operates the Business Information Service for the New Independent States (BISNIS), which provides market information, trade leads, and partnering services to U.S. companies interested in the Russian market.

Agricultural Credit. For 1997, the U.S. has authorized $120 million in export credit guarantees in connection with sales of U.S. agricultural commodities under a private banking sector program in Russia as part of the Commodity Credit Corporation's Export Credit Guarantee Program (GSM - 102).

U.S. Information Agency (USIA). USIA public diplomacy is active in the areas of promoting the growth of democracy and civil society, encouraging economic reform and growth of a market economy, explaining and building support for U.S. foreign policy objectives, and building understanding of U.S. society and culture. Professional and educational exchanges cover such diverse fields as journalism, public administration, local government, business management, education, political science, and civics education. More than 20,000 Russians have participated in USIA-funded exchanges over the past 5 years.

U.S. Department of Agriculture. USDA coordinates a variety of technical assistance and exchange activities under its "Emerging Markets" program. These projects are aimed at increasing U.S. agricultural exports to Russia, while helping the Russian agricultural sector learn about Western-style agribusiness management, marketing, and other issues.

Eurasia Foundation. The foundation, a private, non-profit, grant-making organization supported by U.S. funds, has disbursed more than $24 million in small grants to U.S. and indigenous organizations promoting reform in Russia and the other NIS.