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From Birmingham 1998 to Köln 1999
Country Report


~ Russia Contents ~ Country Objectives ~

Political Data
Head Of State: Boris Yeltsin
Prime Minister: Sergei Stepashin
Foreign Minister: Igor Ivanov
Finance Minister: Mikhail Kasyanov
Economics Minister: Andrei Shapovalyants
Trade Minister: Mikhail Fradkov
Justice Minister: Pavel Krasheninnikov
Labour and Social Development Minister: Sergei Kalashnikov
Natural Resources Minister: Victor Orlov
Central Bank Chairman: Victor Gershenko

Sherpa: Andrei Shapovalyants

Economic Data
Public debt (external, outstanding 1997): U.S.$ 100,463,000,000
GNP (1996): U.S.$ 356,030,000,000
GNP per capita (1996): U.S.$ 2,410
Unemployment (1996): 9.1%
Inflation: 115%
Growth: - 4.6%
Ruble: - 76 %
Stock Market: - 69%

Social, Political, And Economic Overview

Of the G8 countries Russia remains the one with the most problems. Russian citizens continue to face a dismal economic situation, corruption and high crime rates. Politically Russia continues to face internal conflicts. The greatest of these is the struggle between the Duma (the lower house of the Russian Parliament) and the President, Boris Yeltsin. Recently this came to a head with the impeachment trial which narrowly failed to impeach Yeltsin, but there still exists a great deal of tension. The Duma blames Yeltsin for Russia's current economic and political weakness. Some elements of the Duma have recently criticized Yeltsin's position on NATO's bombardment of Yugoslavia as being too weak.

President Yeltsin continues to shuffle or dismiss members of his government. The most resent incident of this being the removal of the popular Prime Minister Primakov and the proposed appointment of Sergei Stepashin, former head of Russian intelligence during the Checnia War, in his place. The repercussions of this resent move are as still uncertain as it could further aggravate the hostilities between the Duma, which may fail to recognize this appointment, and Yeltsin, who may as a result dismiss the Duma.

There is also a great deal of tention and mistrust in the in the Duma itself. This is perhaps best illustrated by the result of the impeachment vote. This vote did not succeed in impeaching President Yeltsin in part because a number of delegates were not present. This led the Communist party to level unsubstantiated accusations that Yeltsin bribed many delegates in order to ensure their absence. It also failed because Zhirinovsky and his party defected to President Yeltsin's camp shortly before the vote, even though they were one of the most vocal critics of the President.

Of great significance for Russia, and indeed the international community, is the looming presidential election in 2000. This upcoming event is significant because President Yeltsin will not be able to participate in it, for constitutional and health reasons. Therefore, this election will bring a change in Russian leadership for the first time since the collapse of the Soviet Union in the early 1990s. This power vacuum means that a number of politicians are endeavoring to position themselves as best they can for the upcoming presidential race. This includes the recently dismissed Prime Minister Primakov and the current Russian special envoy for Kosovo Chernomyrdin. This election is also of interest to the West, because as a result of NATO's actions in Kosovo, it may find a more anti-western and confrontational president in Moscow in 2000.

Economically, Russia continues to face decline, inflation, and unemployment. What marginal economic gains had been achieved were destroyed by the aftershocks of the Asian Crisis which hit Russia in 1998. And although Japan has similarly had its economic problems severally aggravated by the Asian Crisis, Russia remains the G8's economic weak link. Russia, therefore, still needs economic aid, aid which will now likely be harder to come by. And yet for all the undeniable problems it faces, social, economic, and political, Russia still remains remarkably stable.

Since Moscow began participating in the Summits in 1989 it has looked to them with three aims in mind: to use the Summits as a means of gaining prestige internationally and domestically; to use it as a means of securing aid to its beleaguered economy; and as a way of enhancing its influence over issues that are important to it. In this respect the Cologne Summit is no different.

As always a major priority for Russia will be to maintain and enhance its position in the Summit. Russia will endeavor to justify the existence of the G8 and try to gain a say in all issues, including economic, dealt with in Cologne. In addition to this Russia will have a stake in what will certainly be the two main issues at this years Summit. The first is finding a solution to the Kosovo Crisis, the first military intervention of the Soviet Union's old rival NATO. And second is the reform of the international financial architecture and of the multilateral trade system, which has been pushed onto the agenda by the Asian Crisis.

Russia, like all of the G8 members, with the possible exemption of Japan, has a direct stake in the Kosovo Crisis. The NATO bombing has been a great embarrassment to Moscow because it seemingly marginalised Russia on an issue it was actively involved in and one where it has a direct national interest, one at least as great as that of the NATO alliance. Further, Kosovo offers Russia the opportunity to be a peacemaker and thus score a valuable diplomatic victory.

Russia's interest in the reform of the international financial system is a result of its unique position as the main victim of the Asian Crisis among the G8 and because any reforms will directly affect the follow of much needed capital and aid into the country. Participation in the discussion of this issue is also important to Russia because of this is achieved then Russia is one step closer to achieving its continued aim - the complete replacement of the G7 with the G8. That is Russia wants practical and not just technical full membership. This means it wants to avoid embarrassment of the Seven discussing certain topics without Russian participation, as happened at the last Summit with some economic issues.

Russia's final concern, as always, will be to secure aid and debt relief from the Seven. In particular to secure G7 support for the much needed IMF loans which has waned as a result of Russian position on NATO's military involvement in Yugoslavia.

All these issues are likely to be discussed at the Summit, as with other issues that Russia has a stake in such as nuclear safety, the proliferation of weapons of mass destruction, and others. However, it is very likely that the two issues of Kosovo and the reform of the international financial system will on the whole dominate the Cologne Summit, with the Kosovo Crisis capturing most of the media attention. Indeed even in the unlikely event a solution to this crisis is found before the Summit and NATO discontinues its bombardment, Kosovo will in all certainty remain on the Cologne agenda. The second issue, the problems of financial reform will be as important, although much of the responsibility for it will likely be delegated to the finance ministers. The issue of aid to Russia will likely garner less attention.

Russia is likely to be a key player in the resolution of the Kosovo Crisis because it is the main and most interested third party in the conflict and because it is one of the few mediators that Yugoslavia and NATO agree on. However, this does not mean the Summit is guarantied to have any success in resolving this crisis. As the current situation stands there is a stalemate between the two parties at conflict and no solution will be reached until a suitable compromise is reached or one side admits defeat (an extremely unlikely outcome in the immediate future). Thus, while the Summit is perhaps one of the best chances for resolving the conflict in the near future it is by no means a 'sure thing.'

As far as Russia's desire for future assistance and its desire for a full voice in all G7/G8 affairs, in particular international economic and financial issues, are concerned here Russia is severely handicapped. Russia simply does not have the capability in the economic field to push for more say on economic issues or the final replacement of the G7 by the G8. The amount of aid that Russia receives, on the other hand, will likely depend on, as always, Moscow's willingness to cooperate with the G7 on other issues.

Having said all this, Russia itself has bargaining chips of its own in the form of its importance for the question of nuclear safety and the Duma's decision to postpone indefinitely the ratification of SALT II. Russia's influence at the Summit may also be enhanced by a fear of its backsliding. In many western and Russian circles there is a fear that Russia may again move to a more aggressive and anti-western position. This fear is a result of the continued economic problems that Russia is enduring, problems that now almost seem endemic. It is also a result of increased anti-western sentiment among Russians as a result of resent events. The decision of NATO to strike Yugoslavia without consulting Russia has convinced some, and confirmed for others in Russia, from ordinary people to politicians, that the West does not want Russia as an equal partner but rather as, at best, a junior partner, and at worst as a client. The seriousness of this 'problem' is as yet uncertain but what worries many is the prospect that after the upcoming 2000 presidential election the West will find a Russia that is much more confrontational. Some may even fear that the Weimar Germany scenario that has been proposed for Russia may come into being.

Prepared by Ivan Savic, University of Toronto G8 Research Group, June 1999

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