American-Russian Economic Relations in the Post-Cold War Era

[Deb Palmieri on Russia Table of Contents]

The following article was published in the Russian Commerce News, Fall-Early Winter, 1994. The Russian Commerce News is the offical newsletter of The Russian-American Chamber of Commerce®.

Legacy of the Yeltsin-Clinton Summit

As Presidents' Clinton and Yeltsin met for the fifth time in 18 months, it was a clear contrast to the Cold War era of rivalry and confrontation from 1945 through the late eighties. The high politics of economics had unquestionably replaced those of the earlier defense-centered quest to spiral the U.S.-Soviet arms race. "In so many areas, our interests no longer conflict, they coincide," said Clinton as the summit began. Yeltsin in one address reminded the audience that Russia and the U.S. had never fought each other and said adamantly, "I am absolutely confident we will never fight each other; instead, we will focus on building a world of decency and economic well-being." The fact that the personal chemistry was good between Clinton and Yeltsin helped matters. "These are two men who like each other;" said Secretary of State Warren Christopher. "They speak quickly, in an animated way. They've learned to communicate very effectively, and they get right down to business."

What specifically did the summit accomplish? Primarily, it stressed private investment over aid. Of interest to the business community are the agreements normalizing trade, opening the way for more than two billion dollars in trade and aid. One document pledging "partnership for economic progress" was concluded to normalize trade as soon as possible and guarantee each side open access to each other's goods and services. Just prior to the summit, Clinton signed a declaration freeing Russia from the restrictions of the Jackson-Vanik Amendment that imposed high tariffs on the former Soviet Union as punishment for barring free emigration of Jews and other minorities. Since 1990 Russia received annual waivers from the law, but now it is permanent. The Export- Import Bank signed two agreements totalling $689mn in loan guarantees for Permneft and Nizhnyvartovskneftegaz oil producers, and others for airline, computer and communications projects. Russia and the World Bank concluded a $500mn loan to beef up declining Siberian oil productivity. This package from the World Bank also provided $200mn in loans for enterprise privatization projects.

Other economic agreements signed at the summit provided for U.S. assistance in helping Russia rewrite and formulate a consistent tax code, in addition to proposals to combat crime, nuclear smuggling and narcotics trafficking. Ruth Harkin, President and CEO of OPIC, took the summit occasion to announce that her organization had backed $2.3 billion in projects already in 1994, and planned to substantially increase that number in 1995.

Clinton also responded to recent protectionist measures instituted by the Russian side. He privately complained to Yeltsin about new tariffs his government has imposed on American automobiles, aircraft parts and candy. Firms such as Mars Corporation of Cincinnati, producer of Snickers, the largest-selling candy bar in Russia, have been put off by the high tariffs. Many firms are hard hit by such measures. When they raise prices to compensate, they are often priced out of the market.

Significant arms control agreements were reached. Both presidents agreed to speed the destruction of nuclear warheads under the 1992 Strategic Arms Reduction Treaty (START II) and to minimize stockpiles to 3,000-3,500 by the year 2003 following Senate and Russian Parliament ratification of the treaty.

Although meaningful discussions took place, agreements were not concluded on the sale of weapons to Iran. Although Yeltsin said he had to fulfill the terms of a 1988 contract, he did agree not to sign any new deals. The issue of the arms embargo on Bosnia remained a point of contention. Yeltsin does not want the embargo lifted. Clinton is expected to ask the United Nations to lift the embargo if the Bosnian Serbs refuse to agree to a peace plan by mid-October. Whether Russia will attempt to veto to block the issue in the UN Security Council is undetermined at this time.

Aside from the specific agreements generated at the summit, there is symbolic significance to the event. It made evident to the American public the fact of a commitment to a growing partnership by both sides. It unquestionably strengthened the long-term future of the U.S.-Russian economic relationship. It represented acknowledgment from the American side that Russians are striving hard to implement market changes and that the U.S. will respond with trade and investment incentives.

Yeltsin performed a magnificent public relations coup by showing himself to be a strong, capable and confident leader. He appeared witty, humorous, forceful and intelligent. This important display of personality sent a signal to Americans that he represents a stable future for Russia. Yeltsin's message to the business community was clear: Trust me and support me and I won't disappoint you.

In sum, the September 1994 Yeltsin-Clinton summit is a landmark event in the history of American-Russian economic relations. It has consolidated a commitment from both sides to make the relationship grow and work. Our business community will benefit by taking heed of this calling.

Deborah Anne Palmieri
Russian Commerce News, Fall-Early Winter, 1994