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"The lack of a person to speak to in Washington is a liability and will negatively affect Russia."

By David Hoffman
Washington Post Foreign Service
Friday, September 18, 1998; Page A22

MOSCOW – For Russia, a weakened American presidency comes at a painful and risky moment.

President Clinton had little to offer in terms of concrete assistance on his recent visit here, but the situation is changing rapidly, and Clinton may soon find Russia's economic woes again demanding his attention.

Russia is facing a looming debt crisis that, if ignored, could affect all the major Western powers.

Russia is due to make payments next year of $17 billion on its sovereign debt, money borrowed from overseas by the Russian government and its obligations from the former Soviet Union. The debt is owed to Western countries that make up the Paris and London clubs of creditor nations, and to banks and private funds.

Payments on the debt are expected to consume about half of all Russia's available revenues next year, an extraordinarily heavy load the Russian government probably will want to avoid, especially if it intends to pay back all its wage and pension arrears at home. Russia already has defaulted on short-term domestic treasury bonds. There is also a moratorium on Russian companies paying commercial debt to overseas creditors that expires in mid-November, posing a thorny set of problems for Western banks.

Russia could default on the sovereign debt, although the new prime minister, Yevgeny Primakov, has vowed that will not happen. Russia is already late on one payment due in August to the Paris Club. It is possible Moscow will seek to open talks soon with the creditor nations for restructuring the debt, and some officials speculate that Primakov may need to meet in Washington with Clinton.

But Russian analysts fear that it will be difficult for a preoccupied and weakened president to muster support for Russia. Political analysts here realize that Republicans in Congress mistrust both the Russian leadership and the International Monetary Fund, which had been Russia's chief source of loans and advice until the latest crisis.

Even before the latest crisis, when the reformist government of Sergei Kiriyenko was in power, Clinton did not expend much of his political capital on behalf of Russia. On his recent visit, he delivered a lecture on the virtues of free market democracy but offered little else. His visit produced no progress on bilateral arms control.

If, as expected, Russia spurns Clinton's advice and starts to print more money, unleashing inflation, it will be even more difficult to keep the lines open to Moscow. But Russians say the country cannot live in isolation, and its problems may well be thrust back into the limelight.

"The power vacuum in Washington will definitely be seen as a liability in the longer term by those who still think we can cling to some of our connections in the international financial community," said Konstantin Eggert, a writer and editor at the newspaper Izvestia. "The lack of a person to speak to in Washington is a liability and will negatively affect Russia."

Primakov "is expected to use his international credentials to boost Russia's economic performance," he added. "He will have to go to Washington" and seek help. "He'll have to beg."

But Eggert said the events in Washington have not been captivating many people here, because they are seen as trivial in comparison with Russia's economic implosion. "No one cares that much about what goes on in Washington," he said. "There is no money coming soon." The Russian news media have given only passing attention to the story, which has not made the front pages of newspapers or the top of television broadcasts.

But Sergei Rogov, director of the Institute for the Study of the United States and Canada, said a diminished presidency would be a setback for Russia. "If Clinton is paralyzed, he can't do anything as far as Russian relations with the West are concerned."

"The total collapse of the Russian financial system creates a situation in which non-action by Washington would result in an international financial blockade of Russia," he said, adding that Russia's isolation would deepen, restricting trade and investment. "Russia will not be able to pay its sovereign and commercial foreign debts by the end of this year. . . . Russia needs an arrangement allowing restructuring of the debt."

"Primakov announced that Russia is not going to be in default," Rogov said. "But no miracle can provide the Russian government with the revenue to pay the foreign debts."

© Copyright 1998 The Washington Post Company

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