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Russia: The Amount Of Change Has Been Extraordinary

Prague, 12 December 1997 (RFE/RL) -- The following is a transcript of the Moscow interview with new U.S. Ambassador to the Russian Federation, James Collins.

Fossato - American cellular engineer Richard Bliss has been released in Rostov-on-Don. However, charges of espionage against him have not been dropped. This seems to sound disturbingly like "the good old days." What is your assessment?

Collins - The first point to be made is that Mr Bliss was engaged in normal and very standard activities, working with an American firm under contract with a Russian firm to install a telecommunication system in Rostov. As part of that, he was using a modern technology, which is not all that well known here, and I think the main point to be emphasized is that there is absolutely no grounds to make charges of espionage. This is an unfortunate case. I think it is based in part on a conflict between what I suspect are existing Russian laws and a man who ended up as a victim, because he was using modern technologies, which those laws never contemplated. But, he is in the middle, and we hope that authorities will very quickly conclude this investigation and he will be able to return home.

Fossato - Do you think that the government in such a case has shown enough oversight of the security organs? The government has enough control on them?

Collins - The fact is that local jurisdictions these days in this country have a great deal of authority. And in that sense there may be problems of coordination. That's quite possible. But, I would not want this to be seen as the first and only case in which foreign citizens, including Americans, have trouble with law enforcement officials here. It is not. This has been going on for the last several years under the new government, and in the post-Soviet period. There are certainly cases where the Russian authorities have legitimate reasons to work on given cases. Indeed, we are cooperating with them on many cases - on law enforcement cases. However, there are cases, like this one, in which there is a mistake. And one hopes we can reconcile these mistakes very quickly.

Fossato- Do you think this case will have a bad influence on investors?

Collins - I think it's not just investors. It is - broadly speaking - the climate for business. And I do believe there is a chance this can have a very negative affect on the investment-and-business climate. Business people cannot feel confident that they can do normal commercial work, (and) have understandable and clear rules that govern it and fair treatment by the authorities.

Fossato- There have been recently other cases of American businesses feeling the treatment they receive by their Russian partners has not been fair. Do you think the government has enough influence on Russian companies to address these issues?

Collins - There is certainly no question that there remains a great deal of work to be done to develop the legal-and-economic infrastructure to make the business climate here attractive to foreign business and for foreign investors. I think we all understand there is a need for greater consistency and regularity in the legal framework and in the legal processes by which disputes are settled. Everyone is well aware that a new tax system, a new tax code is needed. If one is talking specifically about the energy industry, certainly our energy companies are looking to the passage of what is called production-sharing-agreement legislation, and decisions to create the kind of predictability that investors really require and which will make Russia competitive.

Fossato - Do you think there has been improvement since your last posting here? (eds: Until 1993, Collins was Deputy Chief of Mission at the Moscow Embassy. He then was the State Department's top official for relations with the Newly Independent States of the former USSR).

Collins - I think there has been immense improvement. Russia does have a substantial body of new laws and things like a civil code that have gone a long way to laying the foundations for a market economy and a sound civil society. There is now a "geometrically" greater transparency in what is going on from what existed several years ago, when simple, basic, economic information was considered secret. These things are a fact of life. And, of course, there is now a real private economy. This is certainly a very different political and economic structure from what there was here when I last left in 1993.

Fossato - Would you say that this improvement has been rapid?

Collins - I think it has been extremely rapid. Americans, of course, are never satisfied. But, I think the amount of change has been extraordinary. What we encourage, however, is that it keeps going, and that people don't stop or pull back. The fact of the matter is that Russia will take its rightful place within the economies of the industrialized democracies, when it will get the reform process far enough along that you begin to have Russia truly competitive for capital and in the world market.

Fossato - Do you think the stock market crisis is over in Russia, or is going to be over soon?

Collins - I think Russia, first of all, belongs, in the sense of the global economy, to what in the financial world is generally called emerging markets. Russia is not immune any longer to many of the forces that work on emerging markets. I think what has been particularly important in the last few weeks are two new realities. One is that Russia, as, now a member of the global economic system, found that it can be affected by decisions or problems in very distant places. They didn't think this would have so much of an influence, on the Russian economy. And yet, they found that this can have a particularly acute influence at times.

The second point, which I think is particularly important, is that the government here and its financial leaders are getting quite high marks for managing the Russian economy during the global crisis.

Organizations such as the Finance Ministry, the Central Bank and those who have responsibility for managing stability of the ruble, etcetera, have, in fact, managed their way though a potentially very dangerous crisis, and come out of it with a reasonably stable ruble, an economy which has not collapsed or gone into crisis, and, which is not looking at decisions with some new experience. It is my sense that they have received quite high marks for the way they managed it. There are some serious problems. The problems of tax collection are acute, the budget has been passed, but unless there is some restructuring of the basic business of income and expenditures in some directions, there is going to be a substantial deficit. The realities here are that there is a need for effective tax collection - an effective tax code. All of that is part of stabilizing the situation even further. Those things have yet to be addressed.

Fossato - What is the indication you have from US investors?

Collins - In the last period, investment money has either stayed in Russia or is coming back, if it had gone. Maybe not all of that left - but a substantial part. American investment remains the biggest in Russia of all the foreign investment. Our total investment at this point is around $5 billion. It is about 25 percent of the total foreign investment in Russia. I am not satisfied that this is as large as it should be. It is not, but we are going to continue to work on it.

Fossato - And what is the advice you give American investors?

Collins - This is an economy still in transition. It is an emerging market which is not unique, as it shares characteristics of many other economies. And it is certainly not immune from the laws of economics. The reality here is that there is a difficult investment climate. Russia is not attracting investment up to its potential. To correct, or change this situation I think it is clear Russia itself has very important decisions to make, as I said, the creation of a legal, economic and political infrastructure that it needs to be more competitive as a place for investment. The point I think I would make here is that Russian citizens really need to understand that they are in a world that competes for capital and for investment. And people with capital, on any given day, look at opportunities and options on where to put their money. And they make the decisions on economic grounds. Where will they have a safe, profitable, predictable rate of return that is at least as great, if not greater than other opportunities. I have told a number of my Russian colleagues that Russia will know it 'got it right,' because money will flow.

Fossato - How would you assess bilateral relations between the U.S. and Russia? Would you call it a partnership?

Collins - I think the United States and Russia are two great nations with particular responsibilities for the security and the development of the global economic and security system of this coming century. I believe that today the fundamentals of our relations, if you look at the interests of two great nations, who are nuclear superpowers and major economies, are basically sound. It is perfectly normal, as the U.S. does with all its partners or other states -allies, whatever - to have disagreements, as well as confluence of positions. What is important today is that, unlike the past of this century, where for 75 years Moscow and Washington were divided by a fundamental ideological confrontation, that is no longer the case. Today, we basically deal with our national interests and our shared responsibilities and our opportunities in what I would say is a normal way for nations.

Fossato - But on several issues, like the development of energy resources in the Caspian region, problems in the Caucasus and Iran, for instance, Russian and American views seems to be still rather distant.

Collins - About the Caspian and the development of the energy resources, the United States and Russia, along with the other Caucasus states and Kazakhstan, share a basic interest in the development of those resources. We think this is a basically an area where you can have a great deal of benefit for all who can be involved in it. And, I believe, there are many in Russia who see that way as well. Many Russian oil companies are involved in consortia for the developing of these resources. We have many Russian jobs that today exist because those resources are being developed, such as people who are building oil rigs or providing transport. In short, it seems to me that the development of the Caspian basin is in the interest of our political interests, because it will create greater stability and long-term strategic cooperation. It is in the interests of our economies. We want to see the resources of that basin put on world markets. It is an immense resource for the world's economic development and, therefore, we want to see it emerge. We think those are interests that, in fact, are shared with Russia - and are not against Russia. There are those, I think, who continue to see things in the world in negative terms. I believe this is an outdated way of looking at the world, if it ever was a good way of looking at the world. It is simply not the way in which economic activity, and, in some sense I would argue, even security issues are probably going to be effectively affected in the future. I would argue that we share basically a fundamentally coincidental or concurrent strategic interest in this area. And that is to see the region to the South of Russia develop in a way that makes it a stable, open, democratic region.

Fossato - Do you feel political circles in Russia, not only the business ones you mentioned, share your view?

Collins - I find different views in this city on this subject. As I said, when you look at even many of the most contentious issues, such as Iran at the moment, our Presidents have agreed that there isn't any strategic difference between us about the interests we both have in preventing Iran from developing weapons of mass destruction, or getting the technology to deliver them. In a way, that would threaten not just Iran's neighbors in the Gulf, but potentially also the Russian Federation or other neighbors. To the extent we have disagreements. They tend to focus frequently on tactics or how to proceed. Or, we can have a difference of perception about how urgent a matter is. We, of course, pursue our views vigorously, and we work with our Russian colleagues to try to develop a common approach that is going to be effective. I think those issues are inevitably out there. We will always have certain disagreements and certain differences of views. But, again, I would come back to the basic point that what we do now is sit down and talk about them. To a very great extent, I think we have been quite successful at finding ways to manage our issues.

Fossato - Some say that on issues, such as the ratification of the START Two agreement that has been deferred by the State Duma, a Summit of the Presidents may be in the air. What do you think about this issue?

Collins - We hope to see, first of all, the Duma ratifying the START Two agreement as soon as possible. The Presidents already had a Summit in some sense (eds: the Helsinki Summit) on this issue, and they came to a number of agreements that guided negotiations over this last Summer, that culminated in agreements that were signed in New York in September. Those negotiations addressed a number of issues which had been raised by members of the Duma. At this point, we believe the next step is ratification. We believe that we and the Russian government have addressed the issues that were raised, and, frankly, the next Summit we hope to see is a Summit that will focus on a broader agenda for the coming century, and, within that, on the security issues associated with what we do after START Two - not to have another discussion of START Two.

Fossato - In the West and in Russia, there is a growing perception that Western diplomats, including those from the U.S., tend to have an over-simplified approach toward Russia and its leaders. That diplomats tend to identify the "good guys and the bad guys," and to deal just with those that seemingly speak a Western 'language.'

Collins - I have a saying that I use occasionally, which is: "Saying does not make something true." I happen to believe that it is very important that our government and our officials engage very broadly with the people in this country and in the society, who are shaping it and making the decisions for the future, and I believe we do that. And, I am very impressed each week that I see, for instance, a list of visits to Russian regions that takes up about a page. It is dozens of people from our mission, who, in one way or another, are involved with local and regional government. I believe members of the staff of this mission essentially are in contact with every major political player and party and organization in Moscow.

In short, I think the charge that is frequently made - and I agree with you that we continually hear we are not talking to the right people - but, that usually means that we don't agree with them. The fact is that we do talk with almost every element of the spectrum of opinion here. I think we are listening. I think we do understand the complexity of what is going on here. But, I would also say that there are times when citing complexities is simply a means to suggest that people are unable to take action. I think there are very complex conditions in this country, but there are also some truths that are important. It is that the government and the society are faced with rather basic choices that they have to make, such as will they have a tax code, will they develop a new set of legal institutions to the extent they need them ? Those are very complex undertakings, but the objectives are not that complicated.