Russia, the Caucasus, Central Asia, and Ukraine

Report of a Meeting Held November 4–5, 1997

By Karen Ballentine

Table of Contents

The Evolution of Successor State Relations and the Fate of the CIS

Geography Displacing Hegemony | Does Multilateralism Matter? | Fifteen Nations in Search of an Interest | Russia and the "Near Abroad" | Transition or Transformation

Ideas, Democratization, and the Development of the Russian State

The End of Ideology? | Democracy by Design or Default? | A Parallel to Weimar Germany? | The Rise of Russian Regionalism | Education and Research: Demise or Resurrection?

Russia's Imperfect Market

Economic Progress | Corruption and Criminalization

Russian Security and Foreign Policy

Impact of NATO Expansion | Prospects for Nuclear Disarmament | The Military: Militant or Impotent?

Part II: The Caucasus, Central Asia, and Ukraine

The Caucasus

The Recovery of Economics, and the Economics of Recovery | Caspian Oil: The New "Great Game"

Central Asia

The Price of Stability: Conflict Deferred? | Kleptocracy without Constraint | Whither Islam? | Dilemmas of Western Engagement

Ukraine

Crimea: The Weakest Link? | Economy: Stagnation and Decline | Between Russia and NATO

Appendices

Agenda | Participation List

On November 4–5, 1997, Carnegie Corporation of New York convened a meeting of twenty American and international scholars, practitioners, and policy experts, together with Corporation staff members, to discuss critical issues in the post–Soviet region and identify areas where the Corporation's programs might become active. Participants included members of the State Duma — the Parliament of Russia — and independent research institutes in Russia, Georgia, and Kyrgyzstan. Over the past twelve years, the foundation has been engaged in issues of domestic reform, security, foreign policy, and conflict prevention and resolution in the Soviet Union and its successor states. The seminar provided an occasion for the foundation to step back and evaluate its achievements and consider new directions. The first day's discussion was devoted to developments in Russia since the fall of the Soviet Union, Russia's imperfect market, and Russian security and foreign policy. The second day's discussion followed a roughly similar agenda concerning the Caucasus, Central Asia, and Ukraine.

Part I: Russia and the Successor States of the Soviet Union

The Evolution of Successor State Relations and the Fate of the CIS

The meeting began with a presentation on emerging patterns of interstate relations in the former Soviet Union, centering on several discrete but mutually related issues: the relevance of formal Commonwealth of Independent States (CIS) structures, the emergence of cooperative or integrative dynamics among the successor states, and Russian policy behavior toward the "near abroad" generally and toward the individual states that comprise it.

A persuasive case was made that formal CIS structures are largely irrelevant to the mutual relations of the successor states. Since 1991 only six CIS-wide agreements have been ratified by all twelve member states, and even fewer have been meaningfully implemented. The one major exception is the CIS transportation agreement, which effectively governs transport links among CIS members as well as the Baltic states. While the leadership of some states, such as Kazakstan and Armenia, as well as members of some significant elites in Moscow, are eager for a more integrated set of CIS-wide institutional ties, most states seek to maximize their autonomy. This group includes not only those non–Russian states distrustful of Moscow's intentions, but also the current government of the Russian Federation, which views the current amorphous nature of the CIS as providing ample room for foreign policy maneuver.

With the CIS largely irrelevant, interstate relations are still in flux. The early expectations of maximal autonomy for these states have given way to a new pattern of rational "integration" among them. Rather than a "reintegration" of a Russian–dominated entity, the emergent pattern is one of selective, bilateral, horizontal, and decentralized ties, the driving force of which appears to be mutual state interests in discrete policy areas.

Geography Displacing Hegemony. Another major trend is the emergence of new regional subgroupings. There are an increasing number of — largely economic — treaties among regionally clustered states (the Central Asian Economic Area, the Baltic Council) and along functional lines that crosscut regions (the Georgian initiative to establish an oil and gas distribution corridor from Central Asia, through Azerbaijan and Georgia, to Ukraine). This new pattern could be read as a positive development for long-term regional stability. Rather than replicate an artificial and Moscow-imposed uniformity, emerging relations suggest flexible ties based on the national interests of the fifteen successor states.

In one assessment, the new regional groupings imply two things: first, they further undermine the chances for a meaningful CIS-wide regime and militate against the emergence of a unitary, overarching, supra-state framework; and second, they render the borders of the former Soviet Union superfluous. Both points drew agreement in the meeting. As many of these regional clusters now encompass states outside the former Soviet space (Scandinavia, Turkey, China, Korea, and Iran), it no longer makes sense to speak of the "Former Soviet Union," or even to conceive of it as a coherent entity bound by geopolitical or any other all-embracing affinities.

There was relatively strong consensus among the discussants that the United States policy frameworks have not kept up with this reality. Even though Soviet borders no longer dominate the external relations of these states, they continue to shape our policy thinking and approaches. The U.S. needs a new policy framework and terminology that takes into account the emergent regions as the significant units of analysis, in order to keep abreast of unfolding events and contribute to the positive transformation of the post-Soviet states.

Does Multilateralism Matter? Some participants were less sanguine about the implications of these developments for stable and cooperative relations in the area. As two cautioned, while it is true the CIS is largely irrelevant and there is little to justify scenarios of a resurgent Moscow-dominated entity, the fact is these nascent regional groupings are just that: nascent. Alternative multilateral and comprehensive integrative structures have not appeared, even among those states that appear to enjoy a commonality of security, economic, or other interests. Moreover, while other external states are becoming involved — for example, Turkey in the Caucasus or Iran in Central Asia — most of the successor states remain too isolated from broader global organizations and are still poorly integrated into the emerging global economy. Here, too, the trend is one of selective bilateralism rather than comprehensive multilateralism. In short, both the ties among the successor states and those between them and the wider world remain very underdeveloped.

Fifteen Nations in Search of an Interest. A second point of divergence was the extent to which it is possible to speak meaningfully of interstate relations based on stable national interests. While one participant was generally optimistic in his assessment of the turn to stable national interests, he also cautioned that the process of state formation remains incomplete. Some of these countries still have unresolved ethnic and regional separatist struggles and may yet experience further fragmentation. Where this is the case, the priority of securing state borders and a coherent nation-state identity makes the consolidation of stable national interests problematic.

As three discussants further stressed, it is necessary to distinguish between nationalistic notions of organic and inclusive national self-images and "liberal" notions of a deliberated consensus between elites and citizenries that underpins stable "national interests." In their view, national identities have become more or less coherent but have proven to be inadequate as guides to foreign policy conduct. As a result, nationalistically driven foreign policies appear to be waning. However, "national interests" — as conventionally understood — are still "up for grabs" at the substate level in each of these countries.

The especially amorphous character of these states' respective national interests is due in part to the very novelty of this model of interstate relations in the region and in part to poorly consolidated domestic institutions and political processes that could help overcome the persistent distance between ruling elites and nascent citizenries. Far from being driven by a broad consensus about what is vital to the well-being of their respective societies, the foreign policy orientations of these states are still highly dependent on the partisan short-term interests of the current power holders and their immediate constituencies. As these partisan alignments may shift, intrastate relations remain highly volatile. One should be wary of presuming that current trends of cooperation will continue without reversals in the medium and longer term. There is still high potential for a spillover of domestic rivalries that may intensify competitive and conflictive interstate relations.

Russia and the "Near Abroad." Russian policy toward the other successor states reflects these trends in several ways. First, the continued flux means that Russia does not have a uniform and coherent policy toward the "near abroad" but is pursuing bilateral and selective ties on a case-by-case basis. Second, the irrelevance of the CIS means that Russian policymakers, like many others, are bypassing its formal and informal structures. Third, Russian policy is increasingly concerned with the challenges posed by the entrance of Iran, Turkey, and China in regions considered still to be vital to Russian security and economic interests. Russia, it was stressed, cannot remain complacent about these challenges. While there is no immediate likelihood of a revanchist Russia, neither is there any prospect that Russia will abandon its security and economic interests in the other successor states.

Russia is very concerned about the potential of Islamic fundamentalism to spread from Afghanistan, Iran, and Turkey to Central Asia and also, possibly, to the Muslim populations inside the Russian Federation. This concern, together with the absence of clear border demarcations within Central Asia, was cited as one reason that Russia remains intent on defending the outermost border of Central Asia, an objective that has been used to justify the continued presence of Russian guards on Tajik borders. Securing a competitive, if not decisive, position in the Central Asian and Caucasian oil and gas market is another powerful impetus for continued Russian involvement in these regions.

With regard to the Baltic and other states of the European part of the former Soviet Union, Russia's relations appear to have normalized. Despite occasionally tense rhetoric, economic ties with the Baltic states are proceeding apace, and longstanding disputes with Ukraine over the disposition of the Black Sea fleet and the status of Sebastopol appear to have ended, although there remains a significant degree of Russian resentment over the loss of Crimea.

While there was a modicum of consensus regarding the improved nature of Russian policy towards the other successor states, there was significant disagreement about which factors drive and will continue to shape relations between Russia and the rest. Several possible factors were raised in an effort to predict the future shape of interstate relations in the area, including relative state strength, the character and intensity of exclusionist nationalism, non-Russian perceptions of Russia, the relative size of the ethnic Russian presence in the other successor states, the extent of market and democratic reforms, and conventional security needs. One point of disagreement was which of these factors should be viewed as decisive. Some participants emphasized economics, others security imperatives, while still others saw ethnic and national dynamics as decisive. Another source of contention was how each of these discrete variables should be interpreted. To some, relatively "weak" states are more likely to seek close relations with Moscow. Others argued the reverse — that it is the stronger states that have the closest ties to Moscow. Overall, the conclusion was that, as interstate relations remain in flux, any effort to predict future patterns remains fraught with uncertainty.

Transition or Transformation? At several points, questions were raised about the applicability of the conceptual framework of "transition" to the manifold changes taking place within and between the successor states. Most participants agreed that the term should be abandoned because of its poor descriptive power and because of its implication that all of these states are necessarily moving toward democratic market systems. Some preferred the alternative "transformation," arguing that this provides a better analytic framework, one that is more flexible and more adequate in capturing the complex and contingent character of the ongoing political, economic, and societal changes in the post-Soviet states. The apparent lesson here is the continuing need to distinguish between the normative and analytical dimensions of these changes. While the successful transition of these states to stable and cooperative market democracies cannot but remain the preeminent normative goal of Western engagement in the region, it should not muddy analyses of the dynamics actually taking place on the ground.

Ideas, Democratization, and the Development of the Russian State

The discussion of developments within the Russian Federation highlighted several positive trends, among which are the turn from ideology to pragmatism; the ongoing consolidation of a "normal" state, with significant progress toward a predictable, democratic polity; the new salience of the regions; and the irreversibility of economic reforms. But a number of abiding problems continue to dog Russia's development: gross socioeconomic inequalities, low levels of responsiveness of representative bodies, slow progress toward the rule of law, high levels of corruption that penetrate the state and undermine the creation of a functioning market economy; a deteriorating but still bloated military apparatus; and the crisis of educational institutions. As is typical of any discussion of Russia, there was often sharp disagreement among the participants over whether, at this still early stage of democratic and capitalist development, the glass is half full or half empty.

The End of Ideology? Virtually everyone at the meeting agreed that ideology in all its variants is in retreat and that pragmatism is becoming the dominant feature of Russian political and social life. One indication of this trend is the appearance in Duma voting and coalition behavior of alliances that crosscut the formerly impenetrable partisan lines between pro-democracy and communist factions. There was little agreement, however, about whether this new pragmatism works for or against the consolidation of a stable democratic order.

On the "optimist's" side of the ledger, it can be argued that a politics based on pragmatic self-interest provides the necessary lubricant for further moderation, toleration, and compromise and is the mark of a maturing democratic system in Russia. Where politicians are self-interested opportunists, political parties are more capable of self-regulation, and extremist tendencies get selected out. In this way, pragmatism represents an effective guard against any revival of a neo-Soviet or authoritarian regime and a critical step toward more tractable policymaking. In addition, this pragmatic orientation facilitates a reconciliation of Russian identity with social and political realities through deliberation and consensus building rather than by the conventional route of ideological fiat and elite charisma.

Without challenging the general validity of this hypothesis, a few participants doubted whether the current behavior of Russian political elites can be interpreted as "pragmatic." What one may be witnessing is "ad hoc-ism run amok" — an excess of cynical opportunism, unmediated either by well-assimilated norms of "moderation for its own sake" or by predictable regulatory institutions. If what passes as new "pragmatism" is really just cynical opportunism, then it is not clear why this trend should be viewed as an asset for democratic stability. Instead, it may work to increase social alienation and disillusionment, reinforcing the fragility — rather than the strength — of democratic institutions.

Democracy by Design or Default? On the larger question of Russia's democratic development, there was solid consensus that the progress made thus far cannot be gainsaid. Russia has experienced dramatic improvements since 1993 and has survived a number of critical tests, including profound economic decline, the storming of parliament, and the war in Chechnya. Again, however, divergent views were expressed as to the prospects for the future.

For the optimists, the 1993 constitution — however unorthodox its origins and imperfect its implementation — has established recognized parameters to the emerging system. The Union Treaty likewise has helped to decentralize authority to the regions and to establish some institutional mechanisms for resolving disputes, thereby stabilizing relations between Moscow and most of the regions and demonstrating that democracy need not portend state collapse. Although these processes are yet incomplete, they have arguably strengthened the legitimacy of the Russian state and the predictability of Russian democracy, such that routine political disputes no longer need threaten the entire political order.

More skeptical observers pointed to the continuing fragility of Russia's democratic institutions. Without discounting the stabilizing effects of regular elections, an increasingly independent media, and a more effective judiciary, they noted that democratic institutions were still weakly consolidated. Russian democracy has yet to pass the ultimate test of democratic stability: the peaceful and rule-governed turnover of executive power.

Concerning the continued weakness of Russian democratic institutions, there were two distinct lines of interpretation. The first spoke to the relative fit between the new democratic institutions and Russian society. As even the optimists conceded, there remains a pronounced lack of connection between new political institutions and the daily lives, practical concerns, and cultural traditions of average citizens. On this account, the good news is that these institutions are strengthening. The bad news is that they are still "alien" and "externally imposed," rather than a fully integrated part of Russian society. Still, the optimists believed that, especially with the new opportunities for meaningful participation opened up by the 1996 municipal elections, the momentum favors continued consolidation.

The second, again more skeptical, interpretation questioned not only the lack of social fit of these new institutions, but also the capacities of the new institutions themselves. It is too early to tell if the strong executive enshrined in the 1993 constitution is conducive to democracy. Until there is an executive turnover, there is no proof that another leader would not abuse these powers for illiberal ends. Likewise, the party system has been slow to consolidate, largely because of the absence of mediating mechanisms that could link party behavior to electoral preferences and constitutional rules. The fact that the executive continues to operate outside the party framework is a powerful disincentive to the creation of normal party competition. Given these concerns, it would be premature to conclude that Russia's democratic institutions have become self-perpetuating.

The debate turned to the role played by traditional Russian institutions: the Russian Orthodox Church and the military. As one participant argued, both institutions have been seriously neglected in social science research. In his assessment, both have played a pivotal role as "transitional" institutions, providing a modicum of stability and legitimacy in an otherwise confusing landscape. In particular, the Russian Orthodox Church has provided an important participatory and community-building forum and is thus an asset for the strengthening of civil society.

This proposition was hotly contended by several other conferees. In their view, the Russian Orthodox Church is not a fit ally of civil society or democracy. Like other autocephalous churches of the Byzantine tradition, it has always been subservient to the state, if not actually an integrated component of the state apparatus. Traditionally, its role has been to champion the nation and the state ideology of the day. Both by inclination and capacity, the Orthodox Church has not been a progressive force, an advocate of civil society, or a steady champion of the values of ecclesiastical toleration or social pluralism. Moreover, it remains one of the most unreformed of all Russian institutions, as many of its high officials are Soviet-era appointees. Current economic practices are actually reinforcing the old authoritarian affinity between church and state. Because the Russian church enjoys a tax-exempt status, it has become a ready conduit for economic transactions, especially the tariff-free import and export of oil and gas.

A Parallel to Weimar Germany? An issue that the group was asked to consider was why Russia, against so many predictions, has not fallen into a Weimar-like situation. To one participant, Russia has avoided the fate of Weimar for many of the reasons discussed above: the growth of vested interest in Russian democracy; the selective and partial nature of political reforms; the emerging capacity of the courts and an independent media, and the pivotal role of transitional institutions, which have acted as a social safety valve. Others, however, were less sanguine. As one person put it, the question may not be felicitously posed, since it assumes that the "Weimar moment" has already passed. The proper historical referent for Russia today is Weimar in 1925, not in 1933. Recalling that German democracy in 1925 looked comparatively stable, he cautioned that Russia has not encountered the definitive test of its democracy. Given that the traditions of rule of law and competitive pluralism are even weaker in Russia today than in inter-war Germany, it would be premature to discount the "Weimarization" of Russia as a possible future.

The Rise of Russian Regionalism. Among the more positive trends identified in the meeting is the growing influence of the regions in Russian political life. The conclusion of the Federation Treaty in 1992 extended formal — if still limited — powers to the regions, allowing them wider discretion in their own affairs while increasing their access to and influence in central decision-making bodies. By giving Russian federalism real content, the rash of separatist movements that proliferated in the first years of post-communism has been effectively undercut. Chechnya is the exception, not the rule. Momentum to this decentralizing dynamic was added with the municipal elections of 1996, which provided an electoral and participatory linkage of local and regional constituencies to the reform process begun at the center.

The regionalization of Russia is, however, still in its infancy, and although the immediate signs are positive, there is still a likelihood that regional and ethno-territorial disputes will reappear. On one point the discussants agreed: the fate of Russian democracy is closely bound to the course of regional politics. The precise character of regional politics is not well understood, however: why, for example, some regions seem to be faring better than others or what the prospects are for interregional and statewide democratic and economic integration. To help cultivate integrative and mutually beneficial ties both among the regions and between them and Moscow, enhanced expertise and more systematic basic research are greatly needed.

Education and Research: Demise or Resurrection? One of the more animated debates concerned the fate of Russia's educational and research institutions and Russia's capacity to produce a new generation of capable scholars, social scientists, and policymakers. On the downside, in Russia, as elsewhere in the former Soviet Union (and in the former communist states of East-Central Europe for that matter), academic and research institutions have not recovered from the crisis engendered by the dual loss of state subsidies and orienting intellectual paradigms. Hampered by a lack of resources, and in some cases by the persistence of communist-era administrators, traditional academic institutions have been slow to reform managerial practices, pedagogical methods, or curriculum content. Similarly, beyond a short-lived and discredited flirtation with a crude version of Western liberalism, the Russian social sciences have yet to produce a viable paradigm to replace Marxism-Leninism.

If this view is correct, the negative implications are serious. Because education and research are low-paying pursuits, the best and the brightest are opting for more lucrative careers in business and commerce. This trend represents an internal "brain drain" of sorts. Research institutes have been particularly hard hit by the financial crisis. The disintegration of the Soviet Union has also meant the destruction of the scholarly community within the successor states. There is a dearth of well-trained scholars and analysts, of methodological and disciplinary sophistication, and of basic educational resources such as high-quality textbooks. Despite the recent revival of university enrollments, the status of intellectuals and the importance of ideas and learning in Russian society continue to decline. These trends are particularly corrosive because of the traditional role of the intelligentsia as the locomotive of democracy and justice. Until now, intellectual capital has constituted one of Russia's comparative strengths.

For some participants, however, the prospects for Russian education and research are not altogether so bleak. The social sciences may not be so critically endangered. In any case, one should avoid an overly romanticized view of the "intelligentsia"; as a platonic elite, Russian intellectuals have periodically subverted the development of liberal-democratic ideas. Accordingly, if the current trend means the abandonment of the traditional exaltation of the intellectual for the creation of professional expertise in discrete areas of knowledge, so much the better for Russia. It was also argued that the diagnosis of an absolute decline in the social sciences is misguided. What is really at risk is the old social science establishment. Given the pseudoscientific nature of Soviet social sciences, the demise of this establishment is in fact a positive development. While the quantity of scholarly output has fallen precipitously, the quality of new social science publications has already dramatically improved. Moreover, the migration of research from separate institutes to universities can be viewed in a more positive light, as this trend may improve both the quality of teaching and the prestige of the universities. Finally, the suggestion was made that Russian scholars and analysts are not altogether bereft of community, as increased contacts with colleagues elsewhere in the world have widened the opportunities available for their participation in broader "epistemic communities," defined by shared disciplinary and intellectual interests rather than by national borders. In sum, far from declining, Russian social sciences are finally coming into their own.

Virtually all participants agreed that higher education and advanced research are still highly dependent on external funding and that continued international support is vital, at least until the successor states can recover from their current financial crises. They noted, however, that past and current funding priorities have been problematic in a number of respects. First, there has been too great an emphasis on advocacy or politically relevant scholarship at the expense of scholarship for its own sake. While political science and economics have benefited, other disciplines such as the pure sciences and historical research have been neglected. Although the discussion focused on the social sciences, the same neglect holds true for the liberal arts, which traditionally have been weak throughout the region but which, in the West, are identified as a mainstay of civic competence in a liberal-democratic order. By emphasizing advocacy over knowledge, current funding strategies can be criticized for undermining these societies' ability to create nonpartisan communities of scholars united by shared intellectual concerns.

A second shortcoming in external assistance is that too much emphasis has been placed on training individuals to the continuing neglect of wider social and institutional context. The chief vehicle of academic and scholarly support remains the individual exchange program — what one participant described as "abduction by aliens." Much less has been done to promote the development of a fertile environment that could help individual skills and knowledge filter outward and downward. In this regard, discussants advocated programs that would stimulate institutional reforms in university management and administration as well as collaborative interactions among scholars at the local, regional, and global levels.

A third source of complaint was that external funding tends to favor new educational and research institutions at the expense of established institutions, including the universities, thereby creating parallel structures that inhibit the wider flow of ideas and resources. One factor may be that outside funders have preferred new institutions as a way of bypassing entrenched academic elites, who for a variety of political, intellectual, and personal reasons are ill-disposed toward administrative, pedagogical, and curriculum innovations. For funders interested in achieving quick results, directing resources to newer, more flexible, and smaller research centers is attractive. Still, there have been negative consequences: even though the traditional universities have the largest enrollments, their students benefit the least from external assistance. Yet, until the administrative and pedagogical barriers to reform are surmounted, all efforts to assist established universities will likely fail to create a self-sustaining and vibrant academic community.

Finally, it was suggested that external support continues to favor Moscow disproportionately over the regions and Russia over the rest of the successor states. As one participant maintained, Central Asia is far worse off than Russia, insofar as educational enrollments are declining not just at the top but even at the more elementary levels, a trend that threatens a broad developmental regression.

Russia's Imperfect Market

In two presentations, Russia's economic policy was said to be on the right track, with a number of positive economic trends are emerging. Opinion diverged, however, over the meaning of these trends. The main source of Russia's economic woes is not an "imperfect market" but rather the lack of state capacity to provide a suitable regulatory environment, inadequate incentives for productive investment, and ineffective policies to combat endemic corruption and criminality. While a number of other participants disputed the positive reading given to standard economic indicators, they agreed that Russia's future economic well-being depends on whether the state can develop the infrastructural and regulatory capacity of a functioning market economy.

Economic Progress. Evidence of Russia's improved market can be found in falling inflation, a stable exchange rate, lower unemployment, fewer people under the poverty line, shrinking wage differentials and an increase in real wages, solid currency reserves, and a stable — if not increasing — growth rate, which is now extending to the regions. The renewed dynamism that Nemtsov and Chubais brought to economic policy in 1997 has also helped to reduce the state burden on the economy, in terms of both reduced state expenditures and more effective tax collection.

But several of the participants disputed these findings — illustrating once again the difficulty of determining which indicators provide the most accurate reading of actual trends. The huge government deficit of 95 billion rubles is a telling sign of continued shortcomings, and, while deficit spending is in current circumstances unavoidable, the actual budget allocations are not conducive to optimizing future productive capacity and efficiency. It was also noted that the Russian state is spending more on its own self-maintenance than on socially necessary goods such as health care and education. Finally, the fact that some 70 percent of all business transactions are conducted on the basis of barter shows just how much of Russian economic life takes place beyond the fringes of "the market." Other problems that were highlighted included hidden inflation and unemployment; continuing high levels of credit indebtedness (estimated to be 40 percent of GNP); an epidemic of wage arrears; the inability of the state to collect tax revenues to meet its budget targets; a still high degree of government intervention in the economy and economically inefficient subsidies; high barriers of entry to small- and medium-sized businesses; and continuing low rates of domestic investment, especially of foreign direct investment — itself a function of insecure property rights and an unpredictable tax structure. According to this, more pessimistic account, official statistics hide as much as they reveal. Russia's current economic stability is largely artificial and cannot be sustained indefinitely.

Corruption and Criminality. Whatever the particular readings of current economic indicators, there was marked consensus in the meeting that the imperfections of the Russian market are due largely to the imperfections of the Russian state. The most serious problem is corruption — both the corruption of state bodies and the wider criminalization of the economy. Here the main problem is not the proliferation of mafias but the degree to which corruption has penetrated the state. In one participant's words, Russia today is a "semi-criminal, monopolistic, corporatist state" that boasts the outward trappings of democracy to deflect attention from the rise of a new rent-seeking class. While not all assessments were this bleak, others expressed grave concern with the endemic nature of corruption. In one view, the problem is that the state has suffered from excessive liberalization and in the process has freed itself from accountability and responsibility. As a result, there is no proper demarcation between the state and the market: just as the state continues to interfere with the proper functioning of the market, so has the state administration become unduly privatized. To illustrate this point, the highest levels of corruption are found in those sectors with the highest levels of government intervention — namely, oil and gas and banking. They have been the main culprits in the nonpayment of taxes and the chief beneficiaries of state subsidies.

One participant argued that the positive gains made since 1992 may be undermined by a government that routinely reneges on its contracts and has generally failed to build a predictable and just regulatory framework. As she stressed, a functioning market presupposes a viable institutional infrastructure. While the experience of other post-communist countries indicates that this infrastructure need not predate market reforms and that the right institutions may emerge in the process of marketization, the process is not automatic or spontaneous. Proper institutions can only emerge with determined and well-designed policies. In Russia's case, such policies have not been pursued with much vigor.

While endemic corruption is doubtless a fact of post-communist life, little is yet understood of the nature of the corruption involved, what impact it will have on Russia's economic, political, and social development, or what steps are necessary to combat it. Will corrupt practices work to cancel each other out, simulating a kind of self-regulating mechanism that over time will generate a proper legal framework and a secure and competitive open economy? Is this, as was suggested, merely a transitory phase of early marketization that will pass with continued gains in real economic growth? Or will this corruption lead to a vicious cycle of monopoly, capital flight, and declining growth? Will it lead to increased impoverish-ment, social protest, and political instability? Here, the experience of developing countries may help to sort out the discrete effects of corruption and identify appropriate remedies. In the view of many at the table, the corruption that engulfs all of the former communist states — albeit in varying degrees — points up the desperate need for strengthened law enforcement, greater effectiveness of the courts, and the development of an appropriate legal culture.

Russian Security and Foreign Policy

Despite an extended period of confusion and uncertainty, there is growing recognition among Russian policy elites of the need for realism and restraint in Russian security and foreign policy. This recognition includes a new evaluation of Russia's security priorities to meet the following objectives: ensuring stability in the near abroad, avoiding international isolation, and, above all, redressing Russia's internal malaise. The specter of extreme nationalism aside, most discussants agreed that Russia's main security threats are internal, with the economic collapse of the Russian military a chief source of worry. For the moment, immediate economic concerns have trumped longer-term security concerns, even in the realm of nonproliferation — as witnessed by the massive increase in Russian arms exports to China.

While most of Russia's political elites have — at least for the time being — relinquished any aspiration to recapture a "superpower status," they also reject any demotion of Russia to a regional power. Instead, as one participant maintained, they are seeking to redefine Russia as a "trans-regional power," reflecting its enduring interests and influence in Europe, the Caspian Sea region, Central Asia, and the Far East. Notwithstanding Russia's entry into the G-8, there is little likelihood that Russia will be a full and equal partner of the West anytime soon. The guiding principle of Russia's current international relations, therefore, is to avoid isolation; hence, its preference for a multilateral order and its search for strategic alliances with Iraq, China, and Europe as well as America. One corollary is that Russia will retain an open, pragmatic, and flexible policy, concluding agreements whenever they may serve Russia's economic and/or security interests.

Russia's foreign policy pragmatism is reflected and reinforced by the Duma's recent ratification of the Chemical Weapons Convention — even in the absence of funds to implement it — and the passage of military budget reforms that enhance the transparency and accountability of defense spending.

Impact of NATO Expansion

Whatever their other views on the matter, virtually all conferees agreed that the eastward expansion of NATO has undesirable consequences as far as Russia's political development and its future relations with the West are concerned. The decision to expand NATO has vindicated nationalist critics of President Yeltsin's government, who have steadfastly opposed NATO expansion as an inherent and intolerable threat to Russia's vital interests.

Worse still, the NATO decision has seriously undermined the position of Russian democratic parties. Having thrown in their lot behind an "equal partnership with the West," Russia's democrats now appear utterly discredited by an expansion that has demonstrably failed to treat Russia as an equal. In the words of one participant, echoing others, NATO expansion has "done more than any other single U.S. policy move to undermine democratic forces in Russia." Even given the incoherent rationale for expansion provided by Washington, Russia's democrats have had a difficult time trying to redeem the situation. On the one hand, if NATO is a security alliance, then the enemy can only be Russia, and any partnership becomes illusory. On the other hand, if NATO is truly the democratic club it now pretends to be, then excluding Russia from full membership is tantamount to excluding it from the democratic community. Thus, even those democratic elites who are not in principle opposed to an expanded NATO cannot but have serious objections to the way that expansion has been undertaken.

Expressing the general view, one participant asserted that the greatest desire of Russian democrats is not to undermine NATO but to join it. The gravest mistake is not that NATO is expanding, or even that it is doing so in haste and confusion, but that Russia has been categorically excluded. Not only has this process left those who are most supportive of good relations with the West demoralized and bitter, it has made them highly vulnerable to nationalist charges that they "sold out" the defense of Russia. With democratic forces in Russia undermined, the foreign policy context has shifted. The majority of Russia's political elites, both left and right, now view NATO as a major foreign policy problem, if not an outright threat.

As to the consequences that NATO expansion will have for Russian foreign policy conduct, the following predictions were offered. First, the likelihood is that there will be a continued closing of the ranks over Russian security and foreign policy. At least in the short-term, those who would prefer to normalize relations with the West will have to concede considerable ground to the strengthened hard-liners. This means that more stubborn Russian opposition to the next wave of expansion is all but assured. Second, and relatedly, arms control will become a larger issue of contention than it has been in recent years. Seeking to make good the strategic loss they perceive Russia to have suffered at the hands of NATO, Russian policy-makers will be much less willing to cooperate on specific arms control treaties. Ratification of Start II and renegotiation of the Conventional Forces in Europe (CFE) Treaty could be held hostage to a Russian insistence on more generous CFE terms or on a demand that NATO relinquish plans for further expansion. Third, with a policy of equal partnership with the West currently in disrepute, Russia can be expected to intensify its search for alternative strategic partnerships, particularly with China.

Among the participants, there was some uncertainty as to whether anything could be done to redeem the situation. In one sense, the damage already has been done and no amount of face-saving — be it the creation of the NATO–Russia Founding Act or NATO's August 1997 reiteration that the doors to Russian membership remain open — will help. In another, an unequivocal offer of NATO membership at the outset would have generated an entirely different dynamic; instead of revalidating an East–West divide, such an offer would have vindicated the efforts of Russia's democrats while stimulating a healthy domestic debate over the country's face to the world. As it stands, Russian–NATO relations might yet be salvageable, but only if the West were to undertake a grand gesture of conciliation. Meaningful confidence-building measures, such as building up the WEU as a counterbalance to NATO or a unilateral reduction of NATO forces within the CFE framework, may make the recent expansion more palatable. One other possibility suggested was that NATO finally and fully commit itself to shedding its Cold War military persona, become the community of democratic states that it claims to be, and extend membership to Russia and other successor states through an extension of the current PFP framework and according to the nondiscriminatory criteria originally announced in September 1995. In seconding this proposal, another participant maintained that, quite apart from reassuring Russia that the era of spheres-of-influence and Great Power blocs was over, a transformation of NATO into a truly international community is the logical way to proceed in a world where the most severe security challenges are increasingly global in nature.

Prospects for Nuclear Disarmament. From the discussion of nuclear issues, two central points emerged. First, the nuclear threat did not end with the Cold War. Second, managing nuclear disarmament in the years to come will get harder, not easier. Whereas three years ago Russia was highly willing to countenance drastic reductions in nuclear weapons, now its main concern is to maintain its deterrence capacity and thus to ensure nuclear parity with the United States. Any further Russian reductions will be contingent on America's willingness to do likewise.

NATO expansion is only one reason offered for the diminished salience of nuclear disarmament on Russia's security agenda, according to some. Another — and more fundamental — reason stems from the economic disarray currently bedeviling Russia's conventional forces. Put simply, as long as Russia remains unable to afford the wholesale restructuring and revitalization of its conventional forces, it cannot afford to make further cuts in its nuclear arsenal. Given NATO's technological dominance and China's superiority of numbers, even massive budgetary infusions are unlikely to ever allow Russia to rely for its defenses on conventional weapons alone. Nuclear weapons are, and may well remain, the most cost-effective means of assuring Russian defense. From Russia's point of view, then, pragmatism and the "bottom line" will dictate which cuts will occur and where. Further arms control initiatives will garner support only if they allow Russia to defend itself as well and for less money.

As one participant stressed, however, the problem is not simply that nuclear deterrence remains a necessity for Russia, as it does for the U.S., but that the current force structure remains highly dangerous. Appearances to the contrary, both sides have retained a rapid nuclear reaction capacity — a situation that is simply unsustainable. The threat of accidental or incidental triggering remains as dire as ever. Promoting nuclear safety will thus require further cuts precisely in this area. If and when implemented, Start II will only create new problems; in removing land-based strategic weapons, it will force both sides to a greater reliance on sea, air, and mobile weapons — precisely those that are the most difficult to monitor and control.

The Military: Militant or Impotent? There was general agreement that the Russian military is in profound disarray. Over the last decade, the military has suffered a continuous stream of economic and social blows: defeat in Afghanistan, the loss of forward positions in the former Soviet bloc, the massive relocation of troops to Russia, humiliation and ignominy in Chechnya, and a financial crisis so profound that it has reduced thousands of servicemen to beggary and crime. The military remains over-manned, underfinanced, and otherwise ill-equipped for the transformation into a modern, professional fighting force compatible with a democratic state. In its current condition, the military is neither able to sustain itself nor transform itself in a controlled and effective way. In 1997, troop strength was cut by 100,000, with another 200,000 personnel slated for demobilization in 1998. But these cuts, which began in 1989, have not been accompanied by adequate provision for civilian retraining, relocation, or compensation. Aside from a general emiseration of both demobilized soldiers and enlisted personnel, these harsh measures have intensified militant politics, the latest manifestation of which has been led by Duma representative General Lev Rokhlin. While Rokhlin's challenge may be containable, the grievances that he represents may yet engender a radical backlash and perhaps even open insubordination in the ranks. The military is still among the most popularly respected and trusted institutions in Russia, but it is unclear how it can, in its present state of distress, assume a constructive part in Russian state building.

To date, international attention has been focused on the problem of assuring a controlled reduction of the nuclear threat, especially of preventing the proliferation of "loose nukes" and avoiding nuclear catastrophe. But the international community must be more attentive to the other security threats posed by the less dramatic but equally serious problems of economic and social distress in the Russian armed forces. More work need to be done to assist the creation of a civilian-controlled, modern, and professional military. Until this transformation is completed, the military remains a wild card in Russia's political development.

The Caucasus

In the post-communist era, the intensity and number of ethnic conflicts in the Caucasus have perpetuated its image as a second Balkans, perennially and hopelessly beset by ancient ethnic hatreds. This reputation, always exaggerated, may no longer be warranted, according to one view. Since 1994, there has been a dramatic turnaround, with de facto and/or de jure cease-fires taking hold in all of the main arenas of conflict: South Ossetia, Abkhazia, and Nagorno-Karabakh. Perhaps even more noteworthy is that the diminution of violence has occurred largely without major international intervention. Today's relative calm has been generated instead by a combination of two internal dynamics: exhaustion and stalemate. The destructive excesses of nationalism seem to have had a sobering effect on many people in the region, transforming what was a mood of romantic and militant patriotism into one of caution and pragmatism. At the same time, each of the major conflicts seems to have reached its own stalemate; on all sides, both the will and the capacity to carry on a military campaign has markedly diminished.

However precarious the current balance of forces is, all sides prefer the status quo to a resumption of open hostilities, since all believe that time and victory are on their side. The three recognized states, for example, believe that the longer the stalemate continues, the more life will return to normal and the greater the chances that interim measures for restoring the economy and stimulating development will slowly but surely bring the rebellious territories back into their respective folds. For the three separatist regions, however, it is only a matter of time before the world recognizes "their reality" as effectively autonomous, de facto nation-states. In the interim, it was argued, no side has any incentive to undertake aggressive action to alter this situation.

Thus far, the logic of stalemate has prevented a return to warfare and provided space for negotiation and dialogue. Recent statements by presidents Ter-Petrossian and Aliev have been hopeful. The Armenian government has indicated a willingness to accept a "phased" rather than a "package" approach to settling the decade-old conflict over Nagorno-Karabakh.

This said, the entire region still has far to go before peace and stability are assured. Given everyone's preference to wait things out, there have been no decisive political breakthroughs that would permit a permanent settlement of the fundamental disputes over sovereignty which lie at the core of all of these conflicts. While it is true that discussions of federalism and confederation have replaced demands for outright independence, there is reason to doubt that much has really changed. The fate of federalist solutions remains uncertain, as each of the parties to these conflicts has a radically different arrangement in mind when they use the term "federation." The same lack of consensus continues to hamper the progress of interim agreements over refugee repatriation, demilitarization, and cross-border arrangements.

Among the discussants, speculation over what steps, if any, could be taken by outside actors to help these countries move from stalemate to more positive peace processes was marked by a significant degree of caution. As was generally understood, an enduring resolution of these conflicts cannot be determined from outside but will be decided by the preferences of the disputants themselves. Within these limits, however, some suggestions emerged on how best to facilitate constructive engagement.

First, given the intractable nature of competing ethno-territorial claims, more diplomatic work needs be done to help devise and promote political formulas that de-link self-determination from secession. One participant proposed a consideration of the wider applicability of the current arrangement between Russia and Chechnya, in which an extended moratorium on the contested question of sovereignty provides greater room for interim agreements on humanitarian and economic issues to be worked out. While others agreed that this strategy has helped the immediate tasks of reconstruction, they expressed doubts about the long-term utility of deferring a final political settlement. As concerns Chechnya, few were as confident that the resolution of competing sovereignty claims could be delayed indefinitely or that their resolution would become any easier with time.

Second, there might be some unexplored potential for further democratic development to spur the peace process. As suggested in the meeting, even though the 1996 Armenian elections were not "free and fair," by revealing the depth of economic discontent they nonetheless gave a powerful incentive to Ter-Petrossian to search for a settlement in Karabakh. This conclusion was questioned, however, on the grounds that there are no fixed rules about the relationship of democratization to ethno-national conflict. While stable and legitimate institutions can help to insulate a polity from violent intergroup conflict, the very search for such arrangements in conditions where sovereignty is contested can make such conflict more likely. In this view, external actors would do better to focus their support for peace-building at transforming social attitudes rather than at devising constitutional fixes. As popular opinion is currently the biggest obstacle to a durable settlement, confidence-building initiatives could help to generate the constituency support that is needed to make peace agreements stick.

The Recovery of Economics and the Economics of Recovery. In the Caucasus, as in other war-torn regions, there is a high degree of interdependence between economic issues and conflict. Protracted ethno-territorial conflict has severely impaired the capacity of these societies to make a speedy exit from Soviet-style planning and to minimize the hardships of the transformation to market-based systems. In a region that formerly depended on rail links for 90 percent of its trade, the closing of borders in disputed territories and between the region and the outside world has had debilitating consequences. In many areas, the old transportation infrastructure has been completely destroyed by warfare. The effect of these conflicts on investor confidence has been equally debilitating. Despite today's relative calm, investors are timid, and badly needed domestic and foreign direct investment is extremely slow in coming. As it was noted, even the lucrative Azerbaijani oil sector suffers from a pervasive lack of investor confidence; to date, the amount of actual investment in this sector has been comparatively small.

There are some signs of improvement, however. Since 1994–96, when various cease-fires began taking effect, there has been a resumption of economic growth in all three Caucasian states. Inflation has been brought down to single digits, exchange rates are stabilizing, and balance of payments and current accounts deficits have moved from extremely high to moderately high levels. To be sure, most of this growth appears to have occurred in the import/export and service sectors. In the absence of more fundamental economic restructuring, self-sustaining growth remains unlikely.

An extended discussion ensued over whether and how economic reconstruction could be used to promote political and ethnic reconciliation and the further political liberalization of these states. Here, again, there was room for both hope and pessimism. On the one hand, the general mood of war-weariness and pragmatism, as well as the absolute levels of popular deprivation in the conflict zones, would seem to provide a receptive climate for conflict resolution and reconstruction efforts. At least on the elite level, economic incentives have been playing an important role in driving the negotiations forward, especially where a modicum of political will already existed.

This said, however, most participants offered a cautionary assessment of the extent to which the promise of economic growth can assist the resolution of these complex ethnic and political conflicts. One constraining factor is popular opinion. While more pragmatic-minded elites are relatively receptive to economic incentives, those who have endured incommensurable personal losses in the wars of nationhood remain both suspicious and resentful of any deal that would seek to secure political settlements via economic concessions. Unless economic reconstruction can bring the quickest possible relief to those citizens most affected by these conflicts — unless, that is, the benefits of peace can be concretely felt — these resentments could yet derail elite-brokered pacts.

Taking proper account of enduring popular sentiments will also require that donor agencies be sensitive to how aid strategies are locally perceived. It was the sense of the meeting that any strategy offering economic aid as a straightforward quid pro quo for continued inter-group cooperation is probably doomed to failure. Given the suffering endured, the vast majority of those involved in these conflicts are not prepared to reduce their sacrifices to a dollar value; nor will they readily trade their communal security and national identity for economic gain. To be effective, efforts to give economic backing to any peace process that may eventually emerge from these conflicts must avoid the appearance of bribery and sell-out. In the view of some participants, these considerations favor a donor strategy that aims less at securing short-term agreements and more at promoting region-wide cooperation in longer-term and mutually beneficial development projects. As a first step, the conferees urged a more careful consideration of the economic interests, development and reconstruction initiatives, and prevailing perceptions among the different actors on the ground.

In the course of this discussion, a second constraining factor was revealed: the utter unpreparedness of the international community to play a supporting role in the resolution of these conflicts. In one assessment, the international donor community has not paid sufficient attention to recent developments in the region or taken a serious look at what would be necessary to cement the nascent peace processes. Getting quick results on the ground will require comprehensive programs for reconstruction and repatriation. After years of fighting and neglect, the basic transportation and public utility infrastructure necessary for these tasks is wholly lacking. In the absence of international donor assistance, the repair of this infrastructure is unlikely to occur, as the risks are too great for any single private investor to bear. Yet the prospects for a timely and effective international reconstruction effort continue to be hampered by a lack of international concern, by the long lead time that such infrastructural projects require, and by continued local impediments to conducting on-site needs assessments. As it stands, then, the international community is poorly positioned to support peace in the Caucasus.

Caspian Oil: The New "Great Game." The status of the Caspian Sea as the world's greatest untapped reserve of crude oil has opened the region to intense geopolitical and economic competition. The entrance of multinational corporate interests and of new state actors such as Turkey, Iran, and the United States threatens Russia's traditional hegemony in that area while also enhancing the potential for purely local conflicts to spill over to regional and international levels. More worrisome, the competition for secure oil and gas rights appears to be at cross-purposes with the creation of economic development strategies that might help to promote local peace and prosperity and interstate cooperation.

Given the relatively early stage of this competition, assessments of the potential trajectories of conflict and cooperation remain highly speculative. There is little doubt, however, that the outcome of the current scramble over competing pipeline routes will have decisive consequences for regional alliance patterns and the future balance of power. Azerbaijan's oil endowments have already effected a number of shifts in regional alliances. Under the influence of Russia's powerful domestic oil lobby, for example, Russian policy may be moving from a traditional emphasis on military security, which favors an alliance with Armenia, to the pursuit of oil revenues, which would favor Azerbaijan. If realized, this new orientation on the part of Russia could prove highly disruptive to the still tenuous stalemate in Nagorno-Karabakh. The pursuit of a viable oil pipeline has also pushed Russia into a closer alliance with Iran, with obvious ramifications for America's geostrategic position.

Concern was expressed about the potential for new conflicts to erupt, particularly in Dagestan. Located in a strategically vital area that borders Azerbaijan, Georgia, Chechnya, and the Caspian Sea itself, Dagestan is also one of the most destitute areas of the Russian Federation. Tensions among its fourteen major ethnic groups, and between local communities and Russian military personnel, have been exacerbated by an unstable government and rampant crime. The Chechen blockade of Dagestan border trade has only added fuel to the fire. Among many participants there was a strong sense that, should Dagestan implode, as seems possible, regional stability would be severely challenged.

Both the resolution of ongoing conflicts and the prevention of new disruptions is in the interest of both the multinational oil companies and their state partners, as a stable political and social climate is essential for profits. There is as yet no evidence, however, that the oil companies or others with vested economic interests are aware of the destabilizing potential of their activities; nor have they taken any initiatives that might facilitate long-term intergroup and interstate cooperation. Instead, the oil companies are assiduously striving to avoid any appearance of partisanship and are leaving the business of conflict resolution to others.

Central Asia

With the exception of Tajikistan, the Central Asian states have been characterized by a high degree of political stability and social calm. Apart from the replacement of Soviet ideology with an official celebration of a nativist identity, there has been remarkably little change in the Brezhnev-era style of rule, despite the tumultuous changes that have occurred in other successor states. While Kyrgyzstan and Kazakstan are relatively more reform-minded than the others, the Central Asian states display a number of common features: highly personalized and paternalistic rule, the survival of nomenklatura networks, and centralized, statist economic systems. Again with the partial exceptions of Kyrgyzstan and Kazakstan, civil and political pluralism are extremely weak, where they exist at all.

Both the sources of this stability and its wider implications were extensively discussed in the meeting. One reason put forward for Central Asia's lack of dynamism is the repressive nature of these regimes. Particularly in Uzbekistan and Turkmenistan, ruling elites have been quick to quash independent political challengers, whether Islamic or liberal in orientation, by deploying the familiar repertoire of propaganda, imprisonment and exile, and selective co-optation. Repression aside, these regimes nonetheless do enjoy a considerable degree of popular legitimacy. The political culture prevailing throughout the region displays deep paternalist strains, in part because of the persistence of rural traditions in what remain largely agricultural societies and in part because of genuine popular fears of the chaos that political and economic liberalization could bring. Tajikistan and nearby Afghanistan serve as object reminders of worse fates, as the Uzbek leadership never tires of pointing out. Moreover, the shared conservatism of state and society are powerfully reinforced through institutionalized clan networks that give elites as well as their key constituencies a vested interest in perpetuating the status quo.

The Price of Stability: Conflict Deferred? In the discussion, it emerged that Central Asia's political stability has had both positive and negative consequences. On the positive side, most of these countries have successfully negotiated the collapse of the Soviet Union without systemic breakdown, massive social unrest, or a conflagration of ethnic and communal conflicts. The exception is, of course, the protracted civil war in Tajikistan, where repeated outside efforts to help reestablish a modicum of legitimate and unified government have thus far proven elusive and where the current cease-fire owes much to the continued presence of Russian troops.

Among the remaining states, however, regime continuity and social calm have been purchased at the price of political pluralism, democratic accountability, and social justice. Economic development has been another major casualty. Here, self-interested elite resistance to economic reforms has been reinforced by apparently widespread anti-capitalist sentiments. In the absence of such reforms, however, these states have been unable to attract the kind of foreign investment that would allow them to diversify and modernize their economies and to participate in the benefits of global integration. As a result, they remain hostage to a production profile bequeathed by Soviet-era agricultural policies — in particular to the cotton monoculture which has proven so wasteful of scarce water resources and so destructive of environmental health. While some interstate cooperation in reforming water-management practices has occurred, water scarcity remains a critical problem. In one participant's view, effective resource management can only be accomplished through the introduction of market-based price mechanisms and effective governance, two steps that most ruling elites have been unwilling to take.

For these reasons, two participants maintained that the present stability of Central Asia may prove illusory in the longer term. If the fate of the Soviet system is any indication, the Brezhnevite model cannot be sustained indefinitely. Given its well-known systemic constraints, economic hardship, environmental distress, and social discontent will likely worsen. In the view of two discussants, the Fergana Valley appears particularly vulnerable to renewed communal — and possibly interstate — conflict, as increased population pressures and economic hardship combine with an already tense history of interethnic relations.

There was some agreement that the situation is still amenable to early preventive measures, especially if assistance were directed to support local grassroots efforts in community development and environmental renewal. Without a concerted external assistance effort, however, there is little likelihood that local elites will undertake remedial policies on their own initiative. Both their antipathy to liberalizing reforms and their refusal to acknowledge that they have problems in common with the developing world militate against any forward-looking strategy, whether to promote sustainable development or to prevent deadly conflict.

Kleptocracy without Constraint. One of the more worrisome aspects of Central Asia's future is the endemic corruption of economic and political life and the broad criminalization of society. While these phenomena are common to all of the successor states, they appear to be far more extensive and potentially corrosive in Central Asia. One reason ventured is that, in the absence of political and economic reforms, Central Asia lacks even a modicum of the rule of law or nascent institutions of governance and accountability. Another reason may lie in the peculiar dynamics of Central Asian clan networks. Even in Soviet times, Central Asia was infamous for large-scale and officially sanctioned black market dealings. Local clan networks provided a powerful reinforcement to the corruption-generating incentives of the nomenklatura system as well as a stubborn barrier to Moscow's repeated anti-corruption drives.

Again, however, there was significant disagreement within the group about how this behavior affects Central Asia's prospects for development. On the one hand, it was argued, as experience in the developing world has shown, corruption and extensive rent-seeking are incompatible with productive investment and real growth. Popular resentments of widening socio-economic inequalities and corrupt officials are likely to intensify, threatening the very basis of political legitimacy. For these reasons, fighting corruption should be a priority of outside assistance efforts. On the other hand, the adverse consequences of this corruption may not be quite so clear-cut. After all, graft and bribery have long served a redistributive function in these societies and have provided a useful social and political lubricant. Given that these activities are intimately linked to clan traditions, the extent to which the broad populace identifies them as illegitimate or as accepted customary practices is unknown. Before one can understand the social and political implications of corruption, it is important to determine just how deep these practices go. If they are not just the function of political institutions but are also deeply embedded in culture and social custom, then eradicating them will be a daunting task. By the same token, to the extent that such activities do enjoy cultural sanction, then popular legitimacy and regime stability need not be fatally undermined.

The effects of corruption on economic development are similarly ambiguous. Widespread practices of corruption have also been prevalent in China but have not preempted meaningful economic reforms and real economic growth. Finally, as one participant observed, if corruption is an endemic structural and cultural problem, then it cannot be rectified by short-term palliatives, however well-intended, but only by reforms that aim at broad structural change over the long term. In the absence of such reforms and of alternate ways to simulate the socially useful distributive effects that corruption may have, any effort to root out corruption may be ineffectual at best and disruptive at worst.

Deep concern was expressed about the rampant criminalization of these societies. Economic hardship and permeable interstate boundaries have encouraged a boom in black market trading activity, particularly in the flow of narcotics from Asia to Europe. As elsewhere, the drug trade has provided the backbone of local and regional mafia activities and has been both cause and consequence of growing lawlessness. Perhaps more troublesome, the illicit trade in both narcotics and other goods is involving broader sectors of "mainstream" society, for whom other economic prospects are unavailable. Because they have even fewer economic opportunities and make for less obvious targets, women have been particularly vulnerable to black market recruitment as "drug camels" and as "shuttlers" in the illicit import-export trade. The wider social implications of this activity are as yet uncertain. The speakers suggested that the more communities come to depend upon illicit trade as their main source of income, the greater the threat of attendant social ills such as extortion, drug abuse, and family breakdown. In the view of some participants, however, the extent of this black market activity alongside seemingly pervasive anti-market sentiments presents something of a paradox. At the very least, it suggests that current regime policies, rather than deep-rooted cultural attitudes, are the major obstacle to market-style reforms.

Whither Islam? The belief that Central Asia is highly vulnerable to a resurgence of Islamic fundamentalism is shared by Russian policymakers and Western observers alike. The appearance of an estimated 7,000 new mosques since the collapse of the Soviet Union gives some credence to this view, as does the official appropriation of Islamic symbols and the selective cultivation of a new cult of Timur. While the search for new sources of political identity in native traditions is a natural and necessary response to the ideological vacuum left by the end of communism, the official and monopolistic character of these myth-making efforts could well prove dangerous. Not only does the propagation of a new state-sanctioned version of Islam threaten to revalidate lines of exclusion and inclusion, and thereby promote pernicious intergroup tensions, it also precludes open reflection and discussion that could help these societies come to terms with their respective pasts.

The contrasting view is that the threat of Islamic fundamentalism has been exaggerated, especially by Russian security officials who use it to justify the continuation of an extensive Russian presence in the region. There are a number of factors that militate against both the emergence of a united pan-Islamic political movement as well as the recrudescence of "fundamentalist" variants. The first is the legacy of seventy years of Soviet rule, which left a markedly secular and European imprint on these societies. Even today, the emphasis of "official Islam" remains largely secular, while Central Asian elites continue to be positively oriented to Europe. There is a still stronger identification with Russia and Russian culture than with any abstract notions of pan-Islamism, a disposition that is reflected in the considerable levels of linguistic assimilation. In short, the region has a very weak tradition of Islamic fundamentalism or of any other cohesive religious idea.

There is also a relatively strong identification with the political "state" borders bequeathed by Soviet federalism. Although these borders are relatively recent, they are nonetheless highly legitimate — in large part because, far from being wholly arbitrary conventions, these borders were originally based on meaningful societal divisions and have become more "natural" with the passage of time. Even though nation-state identities remain comparatively weak, they are sufficiently developed to provide competing foci of identity alongside clan and ethnic identities, both of which are currently more salient than Islamic affiliations.

Moreover, the societies of Central Asia are traditionally nomadic and highly syncretic, and their members are used to engaging in multiple tactical identifications, depending on the character of immediate social interactions. In the current period of reassessment, this legacy of religious and ideological syncretism is reinforced by the emergence of a multitude of competitors to official Islam, none of which has yet shown the capacity to provide a unifying vision for the plethora of discrete ethnic, national, and clan identities.

Finally, although increased interactions with Iran, Pakistan, and Turkey are exposing Central Asians to fundamentalist ideas, these states are less interested in exporting Islam than in establishing favorable economic and diplomatic ties. To the extent that Islamic fundamentalism is being supported, it is largely the result of educational initiatives by non-state outsiders.

Dilemmas of Western Engagement. For those seeking to promote constructive Western engagement in the region, the authoritarian character of most Central Asian polities presents a number of dilemmas. Most immediately, Western donors must take stock of the trade-offs between maintaining stability in the region and assisting the forces of democratic change. In one participant's assessment, while nominally supporting democracy and the market, Western activities have often worked to the benefit of authoritarian and corrupt elites. To some degree, this has been an unintended consequence of poorly conceived strategies. American assistance to Central Asian police and judicial bodies is a case in point. Intended to strengthen the capacity of state agencies to combat the illicit drug trade, this program assumes that local officials share a commonality of interests with Western countries and thereby overlooks the complicity of these very officials in the drug trade they are ostensibly seeking to curtail. As a result, Western financial and technical resources are being deployed at cross-purposes.

To a considerable degree, however, Western economic aid and private investment strategies have more or less consciously relegated democracy and social justice to the background. A less-than-noble preoccupation for securing lucrative investment deals has led to a preference for stable economic partners and a neglect of the negative political consequences that may follow. Already, many Western economic interests have shown a callous disregard for the communities in which they are operating and have provoked a significant measure of alienation and disappointment. These activities may prove to be short-sighted and counterproductive. In the longer term, both social and regional stability will require the active engagement of civil society and the existence of responsive and broadly inclusive institutions. Otherwise, these states will have little capacity for effective governance or for successfully managing the manifold developmental challenges now confronting them. In the final analysis, the current foreign aid strategies are helping to strengthen those elements least interested in economic reform and sound development and are not conducive to the creation of mutually beneficial economic partnerships.

The trick, then, is to devise forms of assistance that provide a better balance between stability and reform and that can effect constructive development over the longer term. It was strongly suggested that the bulk of assistance be refocused away from reforming unreformable states toward cultivating civic competence at the grassroots, developing the institutional capacities of the nongovernmental sector, and supporting the creation of interstate associational networks. Local-level nongovernmental organizations in the areas of health, education, and the environment are the most developed and, hence, are the most appropriate partners for Western aid. Even though these groups are, by necessity, consciously apolitical, by supporting them Western donors can better help to develop the norms and practices of accountability, transparency, and advocacy that may gradually serve to push these regimes in a more liberal and democratic direction and leave these societies better prepared if and when systemic changes should occur.

Ukraine

As a large multinational state encompassing three "civilizational" divides, Ukraine began its post-communist transition with forebodings of ethnic turmoil. Even though repeated irredentist claims have been made by some Russian Federation politicians on behalf of Ukraine's ethnic Russian population, and while interethnic tensions have often been strained as a result, no large-scale ethnic violence or militant separatism has yet occurred. Nor do these prospects seem likely. Rath