(The reader should note that these terms can only loosely apply to the Russion situation. The Russian democracy that ultimately emerges will certainly be very different from either Western or old Latin American paths of democracy. It shall be reflecting our culture and history. When I mention two paths of democracy, I mean that the one Russia ultimately chooses could be based on twocompletely different values - it can become a democracy based upon a market economyor become an oligarchic system based on monopolistic ownership and criminal behavior.)

Russians will make this fateful choice, and we will be the principal victims  or beneficiaries of it.  However, contrary to the new conventional wisdom  in  the United States that sees Russia as essentially “irrelevant,” in fact, the onsequences  of  our  choice for Americans, Europeans, and others with whom we share  this  shrinking  globe, should not be underestimated. 

The purpose of this essay is to summarize for a Western audience my view of where  Russian  markets  and  democracy  stand and where we are going.  The essay  begins  by clarifying the question with which I began.  I then go on to explore the specific shape of the choice we face about Russia’s economy. The  section  that  follows  assesses  the  current state of our democratic institutions.   I then turn to the question of the West and its impact upon our  choices.  A concluding section addresses the classic Russian question: “What is to be done”? 

As  at  several  prior junctures in the past decade, Russia must once again make  an important choice about its future.  However, unlike those previous choices,  this fork in the road will not be decided in a single day with a cataclysmic event like a coup or election.  No, the decision about which road Russia will take is being made through decisions by millions of people over the course of the coming  years.   Nevertheless,  which path we choose is no less important than  choices  made  earlier  in  the  decade and will similarly affect the society in which our children and grandchildren live. 

I use the term Latin American or corporatist-, criminalist-style democracy and  Western style democracies  to describe two systems, both of  which are, on the surface, democracies and market economies, but which underneath  share  less in common than most observers recognize. Most Latin America  countries of the 1970’s and 1980’s had markets driven by oligarchs who  had  personal  wealth  as  their  highest  cause, average citizens had limited economic opportunities.  These countries kept press and other civil freedoms  in  check.   Civilian  rule of government was prone to suspension with laws and constitutions obeyed only when convenient.  Society, from the street  to  the  halls  of power, was rife with corruption.  Personalities, contacts, and clans counted for more than institutions and laws. 

Alternatively,  in  Western-style  democracies  markets  are  driven by the consumer,  and government economic polices are conducted for the betterment of  the  nation,  not  the  individual  in  power. Through hard work citizens can get ahead.  Civilian  freedoms are universally  respected, even if the opinions expressed differ from those of  the  government.   Civilian rule is unchallenged and corruption is minimal. Laws and constitutions are universally accepted and both government leaders and citizens abide by them. It is almoust universally accepted that Western-style democracy as well is far from being ideal. However, we have to admit that up to now the mankind have not invented anything better. 

Over  the  past year, the Yabloko party, of which I am the leader, has been making  the  argument that Russia is at the fork in the road looking at the Latin   American - vs. Western - option.   Increasingly,  our diagnosis  is coming to be shared by others even by some members of the Russian government.  More and  more  Russians are coming to appreciate that we now stand at a fork in the road. 

Most  Western  conventional wisdom on the Russian economy holds that Russia is  making  steady  progress  toward  creating  a  normal  market economy. 

 On the positive side, the  Russian  economy  has  achieved  success  in  overcoming inflation, in keeping its currency reasonably stable.  Moscow  is  clearly a boomtown with numerous economic  success  stories.  Some of the newly established or privatised corporations with international mentality and ambitions are making their way to the top with different degree of success. Certain Russian regions have received favorable  international credit ratings, and a handful of Russian companies have  held  successful  international bond issues. Young people are now ready to adapt themselvese to the new market system  and seek to remain clean  as  the  country  develops new rules. The International  Monetary  Fund,  while occasionally delaying tranches of its $10  billion loan because of poor tax collection, always seems to reinstate the  tranche  after  promises  by  senior  Russian  officials to do better.  All of this would seem to point toward a normalized market economy on the Western path. 

But  while  the Russian economy has success stories, there are clearly many aspects  of  the  economy  pointing toward a corporatist, criminalist-style market.   The  most  important  of  these trends is the rise of the Russian oligarchs,  who have created robber-baron capitalism.  Far from creating an open  market  economy,  Russia  has formed and consolidated a semi-criminal oligarchy that was already largely in place under the old Communist system. After  Communism’s  collapse  it  merely  changed its appearance, just as a snake sheds its skin. 

The   new  ruling  elite  is  neither  democratic,  or  Communist,  neither conservative  nor  liberal,  neither  red nor green.  It is merely selfish, greedy,  and  rapacious.   In  a famous  interview  with  the  Financial Times in November  1996, one of the new russian tycoons  claimed Russia’s seven largest bankers, who became the core of President Yeltsin’s reelection campaign headquoters,  controlled over 50% of the Russian economy. No  one  doubts  that  these robber-barons  are nomenklatura capitalists, and have had a profound impact on the Russian economy, but  the  market  of  insider  deals  and political  connections  that they are creating stands in the way of an open economy  that  would benefit all Russian citizens.  The robber-baron market cannot  tackle  important  social and economic questions, it only addresses those issues which affect its masters’ own short-term power and prosperity. 

At the  recent  debates at Harvard University’s   U.S.-Russian   Investment   Symposium  and  later  at  Davos even Western investors started to sharply criticize the robber-baron mentality of many Russian business leaders and the process of  privatization  program  under  Anatoly  Chubais,  in which, “First, the assets  of  the  state  were  stolen, and then when the state itself became valuable  as a source of legitimacy, it too was stolen.” 

Last  summer’s  Svyazinvest  auction is an example of how these tycoons operate.  This auction was to be the first where competitive bids were held for a privatizing company.  Unlike earlier  auctions, where connections and agreements among the tycoons were enough to  gain  huge  shares of industry for a fraction of their actual worth, during the  Svyazinvest  auction  the  leaders  of the financial industrial groups  could  not  agree on who would get the company and were therefore forced to  bid  against  each  other, resulting in a “banker’s war.”  A war fought not with  bullets,  but  through allegations of corruption aired by their media outlets,  resulting  in  the  removal  of  some of them  from  government and corruption  charges  against Anatoly Chubais and his team.  Such a chaotic, personal,  and  scathing  auction  does  not  connote  a healthy capitalist  system.   As  I  write, the players are positioning themselves for a second  round in this war, the Rosneft Oil auction. 

There are many reasons why a country with nuclear, chemical and biological weapons should not be allowed at the begining of  the XXI century to slip into the chaos of  semi-criminal, corporate, oligarchic rule of rubber-barons. Unfortunately those who believe that capitalism of the robber-barons will eventually give way  to  a  market economy that benefits all in society, as occurred in the United  States  at  the  turn of the century, are mistaken.  America had an established  middle  class with a work ethic and a government that remained  largely  free  of robber-baron infiltration.  The American robber-barons were still investing in their own country. Russian robber-barons are stealing in Russia and investing  abroad. This activity will never bring economic grouth to our country. In Russia in the late 1990’s,  no  emerging  middle class exists and the robber-barons who are deeply involved  in  the  government , are  capable of altering policy for their private benefit. 

In  the  meantime, while the big boys (they are all men) fight over an ever larger  controlling  stake  in the Russian economic pie, the government has been  unable  to  create  the  necessary  economic  conditions in which the majority  of  Russians can thrive.  The issue is not only that the majority of Russians remain worse off than before the economic transition began, but it  is  also the fact that they cannot become better off. Economy is stagnating at half of its pre-crisis level,  real incomes  have fallen by third and living standards in most regions deteriorated to the level of several decades ago. The government policy to curb inflation resulted not only in tremendous wage and pension arrears, but also in not paying the government’s bills for goods and services it consumed. This resulted in total disarray in payments, when up to 75% of goods and services in the economy are paid in kind or by promissory notes  that could not be cashed, or transacted through illegal channels with no taxes paid on them. Pensions and wages of government employees were cut to 40% or less of their former  value in real terms, and the government still can not collect enough taxes to cover these expences. Tax receipts have fallen to less than 20% of the country’s GDP while external debt grew manifold, and domestic debt which was next to nil just a decade ago has reached almost 15% of the country’s yearly product. Debt-servicing expenditure, pushed by exorbitant interest  paid out to local bankers and foreign speculators, will take no less than 25% of the total government expenditure in 1998. The current Russian market economy has  created  a  handful of super-wealthy, while leaving the rest behind to struggle.  It  is  no  wonder  these  economic  policies  resulted  in  250 Communists and 50 Zhirinovsky-ites being elected to the State Duma in 1995. 

Furthermore,  corruption  reminiscent  of  Latin American in the 1970’s and 80’s  also bedevils our economy.  The EBRD ranks Russia as the most corrupt major  economy  in the world.  Corruption permeates our economy from street crime,  to  mafia hits, to inappropriate book deals in the corridors of the Kremlin,  to  bids for stakes of privatized companies.  Recent polls by the Public  Opinion  Foundation  show that Russians believe the best way to get ahead  in  Russia is through contacts and corruption.  When asked to select from  a  list  of  criteria  what  was  needed to become wealthy in today’s Russia, 88% saw connections as a source of wealth and 76% chose dishonesty, while  only  39%  said  hard  work.   Anyone  who attempts to start a small business  in Russia will encounter a Mafia-extortion demand, so there is no incentive  for  entrepreneurship.  Better to stay at home and grow potatoes at  your  dacha.   A  crime-ridden market cannot be effective - there is no certainty  of  tomorrow, which means that with or without inflation, nobody will   invest.   Such  a  market  can  support  the  level  of  consumption (semi-pauper for the majority of the population) for some time, but it does not and cannot provide any progress. 
With  such challenges, despite the good news about the Russian economy over the  last year, it is clear that the Russian market is still leaning toward the corporatist, criminalist, oligarchic path. 

Perhaps  the  most  cited  examples of successful Russian democracy are the Russian  elections.   Over  the  past three years, elections have become an accepted  way  of  life  for Russians. In 1996, for the first time in their 1000  year  history,  Russians  elected their national leader. Russians now accept  that the correct and appropriate way for a leader to gain office is through  an  election.   This  was not always the case.  A mere three years ago, debate raged in Russia as to whether the ruling authorities would even allow  elections  to  occur.   However, from the Duma elections in December 1995,  to  the  presidential  elections  in June of 1996, to the subsequent gubernatorial and regional legislature elections, again and again elections  have  been  successfully  held in the Russian Federation.  In many of those elections,  notably in the Duma election and some regional governors races, opposition  candidates  from  the  Communist and other parties have won and taken  office.   With  minor exceptions, voting and vote counting have been peaceful and comparatively free.  Voter turnout has been higher than that of the United States. 

Although  the  recent  elections  have  been  a positive development in the creation  of  Russian democratic institutions, some disturbing trends exist that  point  to trouble in future elections.  While international observers have  cited Russian elections as free and fair, the campaigns preceding the elections,  most  notably  the presidential election, have been notoriously unfair.   Financial  restrictions  on  campaigns are routinely ignored.  By some  estimates,  the 1996 Yeltsin presidential campaign cost well into the hundreds  of millions of dollars (by comparison, the 1996 Clinton campaign, both  primary and general election, cost $113 million).  Officially, Russian presidential  campaigns  could only spend $2.9 million.  No major outcry or judicial proceedings resulted from this overspending. 

Perhaps  even  more disturbing is the often cited European Institute on the Media  (EIM)  survey  which  documents  the flagrant biases of the media in favor of Yeltsin. First, according to EIM, Yeltsin enjoyed 53% of all media coverage,   while  his  closest  competitor  received  only 18%.  Yeltsin, therefore, appeared on TV more than all other candidates  combined.   Second,  EIM found media coverage extremely biased. Giving  candidates  a point for each positive story and subtracting a point for  each  negative  one, prior to the first round of the election, Yeltsin scored  a  +492,  while his competitor earned -313.  In the second round, Yeltsin had a +247 to his competitor’s -240 despite the fact Yeltsin disappeared from the public eye a week before the election! 

Elections,  like much of Russia are also at a fork in the road.  As Russian consultants  learn  more “tricks  of  the  trade”, the possibility becomes more realistic that together with the oligarchs they might try to turn future elections in Russia  into nothing but window dressing  as a cover for irremovable oligarchic rule, as was the case in the casein the Soviet Union, where results were predetermined and the people an afterthought. 

In  the  governing  process,  Russia’s  democratic  institutions  have  not developed  as  fully  as  its  elections.   Russia’s  system  of checks and balances is underdeveloped and often the rule of law is not respected.  The judicial  branch  of  government remains overly influenced by the executive branch.  While the  lower  house  of  parliament has indeed made some headway in becoming more than just a talking chamber where the occasional fight breaks out  among  deputies, and the Executive Branch now lobbies the Duma to pass the budget,  the  START  II  treaty, and other issues, Yeltsin and his teem still reserve the option of bypassing the Duma altogether and ignoring the Constitutional process whenthe Duma  disagrees  with an executive initiative or is unwilling to be coopted by  promises  of some new monthly leadership meeting with the President and Prime  Minister. One  example  of  such  a  strategy  is  the budget, where compromises  are  made  to  ensure  passage,  and  are  essentially ignored throughout  the  year.   Another  example of such actions is the persistent rumor that Yeltsin will seek an unconstitutional third term as president. 
No  successful  democracy in the world today functions without some kind of political  party  system.  The development of a functioning political party system   in  Russia  has  been  an  unambiguous  disappointment.   Although political  factions exist within the Duma, and those factions boast varying degrees  of  regional  activities,  a functioning political party system in Russia  has  yet  to  develop.  A number of reasons exist for this.  First, after  70  years  of “party rule,” Russians are understandably skeptical of political   parties.    Second,   the  President’s  actions  have  actively undermined  the  development  of  a political party system.  By choosing to remain above parties and rejecting any party affiliation, President Yeltsin has  promoted  the  concept  that  parties  and  party  development  are an afterthought   in   Russia’s   democratic   development.   Yeltsin  accepts assistance  of  like-minded  parties  when it is politically convenient and distances  himself  from  them  when  inconvenient.  Because of his lack of affiliation,  no  party  is  the  true party of the government, and Yeltsin cannot be held accountable to the people short of a general election. 
Third,  for  political  reasons, Yeltsin in the past has attempted to limit the development of parties by seeking to abolish the party-list system that elects  half  of  the  Duma  seats.   The  party-list system allows parties clearing a 5% hurdle to enter the Duma.  In 1995, only 4 parties did so and over  half  of  the  Duma  seats  were  won by parties in opposition to the Yeltsin  Administration.   Having the list system ensures that parties will exist  in  some part of Russian society.  In 1998, Yeltsin renewed his call to  change  the election law.  In order to have better control of the Duma, Yeltsin   advocates   having  the  entire  chamber  elected  from  regional districts,  similar  to  the  system  used in the United States.  With more control  over  local  leaders,  Yeltsin  believes he can influence who wins these  Duma  seats.   (In  reality,  organized  crime would buy many of the seats.)  If he succeeds in abolishing the list system, Yeltsin will destroy the  only  arena  in  Russian  society  where  parties currently exist, but would not minimize  a  major  source  of  opposition.   Such a strategy is politically disadvantageous for Yeltsin. But even more than that, it is damaging for Russian democracy, which  needs  a  functioning  party system to allow people to express their views to the government. 

The  Russian  media  also  earns  a  mixed review.  Clearly Russians have a variety  of  sources from which to gain news.  Opposition newspapers exist.  Journalists are free to conduct investigative reporting and to write their own opinions.  The November book payment  scandal,  where  senior  members  of  Yeltsin?s economic team were revealed  to  have  accepted  $500,000  in  exchange  for writing a book on privatization,  first broke in the Russian press.  Political leaders appear on  programs  like  Hero of the Day and Itogi to explain their views to the people.   Yet  the  media,  especially  in  the  last  two years has become entirely  controlled  by  the oligarchs, who are part of thwe government and  use their editorial boards and programmers  to  promote  their own selfish agendas.  Nowhere was this more evident  than  in  the  Svyazinvest  bid  in  August,  where  the resulting “banker’s  war”  played  out  in the media.  A Russian citizen by reading a certain  paper  or  watching  a certain television station get either  one or another  group of oligarchs’  version of the truth, which directly contradicted   each   other.   The  media  fracas  eventually  had  serious implications for government personnel. 

At  the  meetings  last  fall  in  Washington ,  I explained how important the Russian service of Radio Free Europe/ Rado Liberty remains in Russia.  Unfortunately, at a time in Russia where newspapers and television stations  are  required  to  serve  their  masters,  where  journalists and articles  can  be  purchased,  RFE/RL, as in Soviet times, remains Russia’s  main impartial news supplier. 
In   sum,  Russian  society  shows  some  signs  of  developing  democratic institutions.   Elections are held, freedoms are allowed, parties do exist, the   media   expresses   diverging  views,  but  such  minimum  democratic institutions  exist  in  both  Latin-America- and Western-type democracies. True,  Russia is better off with these institutions than without them.  But the quality of each of these institutions is what will determine which path Russia  takes.   It  is  not  enough  only to have them, they must function appropriately to reflect the people’s needs and will. 

What are some of the main problems which Russia faces and which are at the same time, from my point of view, relevant for the West ?  Russia and the West face similar  challenges in the post-Cold War world:  The most serious threat to all  players  is  the  loss of control of nuclear, biological, and chemical weapons.  Indications of the increasing risk of massive loss of control are evident  in  the  troubles  aboard  the  Mir  space station, the suicide of Vladimir  Nechai, (not Neachi, please!)  (Director  of the Chelyabinsk Nuclear complex who killed himself  because a lack of money meant he could no longer ensure the safety of  the operations or pay his staff), and the recurring examples and rumors of nuclear smuggling.  Russia has literally thousands of tons material that could be used in weapons of mass destruction.  Under the rule of corrupted oligarchy and without proper control, this  material  could  become  a  black market commodity available to the highest bidder.   The control of Russia’s nuclear, biological, and chemical arsenal  is  an  issue  of  world safety and cannot be ignored by either Russia or the West. 

A  second reason Russia is still relevant to the West is stability.  Russia borders  some of the most unstable regions in the world.  For centuries, it has  acted  as a wall between those instabilities and Europe. Today this wall is of no less importance when drugs trafficking, terrorism spreading, arms smuggling becomes more and more rampant.  If that wall has  holes  in  it, it will be dangerous for Europe. 

 Furthermore, Russia and  the  West  share  a  desire for stability in order to promote economic development.   In  recent  months,  the  West has focused on developing the Caspian  region’s  oil  resources.  Russia is a key player in the area, and finding  a  peaceful resolution to the Chechen issue will play a large role in  determining how oil leaves the region. Furthermore Russia is arguably the  greatest  untapped  economic  market in the world.  The development of Russia’s  economy  presents  a  great opportunity for Western companies and economies. 

Why  is  the  path  Russia chooses so important for the West?  The choice will  determine what type of Russia the West will work with as it confronts the  challenges  of  the 21st century.  A Western-style democracy in Russia would  produce  a  partner  with  the West in confronting these challenges. Russia and the West would work together in maintaining control over weapons of  mass  destruction  and  would be more likely to cooperate in containing regional  conflict  in areas like the Caucasus and Middle East. Finally the rule of law  would govern business relations and allow for economic development and growth beneficial for both societies. 

A  corporatist-style  Russian  government  on the other hand, would be more challenging   and  less  stable.   One  scenario  for  a  corporatist-style government,   sees   Russia?s   leaders  valuing  stability  and  therefore cooperating  and  working  with  the West to ensure the status quo.  Such a system, although stable on the surface would be built on false foundations, as  in  Indonesia  at  the  moment,  where  any  change of leadership would threaten to undermine the entire order.  Another scenario for this style of government  suggests  a contentious Russia, where Western actions and goals are  seen  as circumspect.  Cooperation on important global issues would be less forthcoming, and the rules and laws would change to fit personalities, hindering   economic   development. 
As  Russia  is  making its choice, the West?s actions have played a role in the  decision,  and  unfortunately  up  to  now, they have not promoted the correct  path.   Nowhere  is  this  more evident than in the NATO expansion debate. 

I  personally  believe that the main reason behind NATO enlargement is that NATO  is  a  huge bureaucracy, and like any bureaucracy which does not know what  to  do, it expands as a rule.  Furthermore, NATO expansion at the moment is not a military threat for Russia. Nevertheless it is bad for Russia because it demonstrates the ultimate collapse of the overall foreign policy  of  Russia over the last five years.  For any country in the world, if  a  military  alliance moves closer to its borders without incorporating that  country,  this  means  that  the  foreign  policy of that country has dismally  failed.   The  talk  this  is  a different NATO and that it is no longer a military alliance is ridiculous.  It is like saying that the thing advancing toward your garden is not a tank, or rather, it is a tank, but it is  painted pink and carries flowers and plays music.  The people say,  “But it is still a tank, isn’t it ?”   “Well,  yes,  it is a tank, but it will act more like a tractor.”   It  does  not matter how you dress it up, a tank closer to your garden is still a tank. 

The  most important message of NATO expansion to Russians, however, is that despite  all  the  rhetoric about Russia’s democratic and market victories, and  a  partnership  with  Russia,  the political leaders of Western Europe and the United  States do not really believe that Russia can become a Western-style democratic  country  within  the  next  decade  or so.  In their eyes, Russia due to its history is considered a second class democracy.  Perhaps this is understandable,   ample   evidence   exists  to  support  this  view.   The combination  of  Chechnya  (an arbitrary war in which Russia killed 100,000 people  unnecessarily),  the  collapse of the armed forces, failed economic reforms, a semi-criminal government, and Yeltsin’s unpredictability  has given the West enough justification for them to conclude  that Russia for the time being cannot be a dependable partner and therefore they should continue to expand their military alliance. 

Ironically,  if  the U.S. explained its push for NATO expansion honestly in those  terms to the Russian people, the Russian citizens, while finding the conclusion distasteful, would at least understand why NATO is expanding and respect  the  West  for  telling  the  truth.   But  when  the West says to Russians:  “Russian  democracy  is fine, Russian markets are fine, Russia’s relationship  with  the  West  is  fine, and therefore NATO is expanding to Russia’s  borders,”  the  logic  does  not  work, and it leaves the Russian people  and leaders bewildered and resentful.  Furthermore, this resentment will  only be exacerbated if the West  continues this doubleface policy. 

I am afraid that the above arguments might be used in public to explain NATO expansion in case  the relations between Russia and US seriously deteriorate. However I would prefer to hear them voiced in a friendly and clear, althought in diplomatic way, without waiting for the partnership to fals to pieces.  (this is an explanation of the thought, so please edit it into acceptable English) 
Finally,  the  West’s  insistence on promoting personalities in Russia over institutions  also  hinders  Russia from choosing the right path.  The West plays  favorites,  and  I recognize that I am one of them, even though I am not in power.  However, the danger comes when the West, while promoting the rhetoric of democracy and capitalism, backs Yeltsin, Chubais, Chernomyrdin, Nemtsov,  Gaidar,  even  when  they  embark  on actions that do not promote democracy  or  markets. However when Yeltsin ordered tanks to fire at the parliament the West supported him. When he ordered the army to start the war in Chechnya the West still supported him. That leads us to believe  that had Yeltsin canceled the presidential election in 1996, the West would have  supported  his  choice despite the fact that the decision would have ended Russia’s nascent democratic experiment. 

On the economic side first of all  the present system of economic management, when most large enterprises are run by insiders in disrespect of the owners’ rights,  should be radically reformed. “Collective” enterprises which   look  more like Soviet-style “kolkhoz” in terms of management and  responsibilities should be gone. Instead the government must  encourage  responsible management based on the notion of private property;  ensure   and protect owner’s rights. The bankruptcy law should be fully enforced  to help eliminate incompetent managers, crooks and old-style “Soviet”  directors, who are unable to adapt to market realities. Enterprises that hold workers to produce nothing but debts should be closed or sold out. 

Second, a new set of “rules of the game” should be established. The most important step is to separate business from political power in order to fight corruption. There must be a decisive break with the legacy of the past when administrative power stood  above the law or public control. The action must be clearly made, unumbiguously announced and implemented forthwith.  Individual businesses should be regulated by clear-cut  and duly adopted laws, not by government officials or local barons, often not too easily distinguished from gang leaders.  The power of oil and gas tycoons who generate huge profits using the country’s natural resources  must be curtailed. They should be made accountable to parliamentary bodies, their activities transparent and subject to public control. 
Corruption also prevents an entrepreneurial middle class from emerging.  If  one knows that one’s purse may be stolen at any moment, all of one’s energy is  devoted  to  protecting  oneself  from  this  threat.   Similarly, if a would-be  businessman  knows  that  everything he works for is likely to be stolen,  he  will  produce  only  for himself and his family.  Therefore, a massive  government  effort  to  stamp  out corruption must be pursued.  In these efforts, we can actually learn from the Latin America of today to see how  they converted corruption within the country into legitimate business. Open  accounting  that meets international standards is a key prerequisite. Also,  a  strong,  independent, and incorruptible judiciary which will hold corrupt  officials  accountable  is  required.  Senior government officials must  agree  to  have  a three-part declaration drawn up for themselves and their closest relatives.  The declaration would cover income, property, and expenses,  and  would  be  filled  out  twice  a  year  and reviewed by the independent  judiciary.  Another thing that can be accomplished immediately is  repealing the law that makes Duma members immune from prosecution.  The large number of corrupt individuals running for Duma seats to gain immunity is repulsive.  How can a legislature fight corruption when its members have their own deals on the side? 

Third, free competition must be supported by encouraging small - and medium - sized business activities, removing red tape and excessive regulation standing in their way. Former Soviet monopolies should be destroyed in order not put up with monopolistic domination by a small group of large companies which account for 50% of the country’s GDP while employing only 3% of the country’s labour force. 

Fourth, land reform should be implemented. There can be no stable development of agricultural sector until major part of the country’s land is taken from hands of oligarchic landlords who “inherited” it from the state. Without real private property of land it is impossible to speak of real privatisation. 

 Fifth, law-enforcing power should be strengthened to reduce criminal pressures on the economy.  As I mentioned above, the  judicial system must be reformed and necessary provisions made to ensure its independence and effectiveness. Activities of regional authorities and regional legislators should also be closely monitored  to ensure their conformity with the law. 

And finally, there is a need to decentralise power and financial resources of the country.  Russia will be doomed to instability and underdevelopment if 85% of the nation’s money will still concentrate in its capital, as it is now.  Local initiative and entrepreneurship should be encouraged and fostered  if we want fruits of economic growth to be shared between Russia’s numerous regions, social and ethnic groups. 

To  ensure  an  established  middle  class emerges, an open market conomy must emerge based on private property and competition.  Unregulated prices,  low  inflation,  and  a  stable  currency  are absolutely necessary but, in Russia, not sufficient set of conditions for a competitive economy. Perhaps more than anything else,  a  growing  economy  in  Russia can help create a middle class where people  know  that  hard  work  and not connections are the best way to get ahead.   To  do  this  it  is necessary to cut taxes and sharply reduce  regulation  of  private  business  to  allow  maximum  freedom  for entrepreneurship. 

 The  immediate task before us is to reform the country’s totally unrealistic tax system. Unable to put larger sectors of profitable buisnrsses under control by tax authorities the government  invents still new ways to tax those businesses which do not want or are unable to cheat and conceal their profits.  Currently, Russian  enterprises are taxed at up to 80%. Faced with hard competition stemming from black or semi-black marketeers, they find themselves unable to survive and grow without relying on criminal support or “goodwill” of corrupt officials. As a result with all the high tax rates public revenue falls billions of  dollars  short,  causing wage and pension arrears and a barter economy. 

I am proposing that the complicated and unimplementable tax system should be substituted with a simple and clearly defined set of fiscal rules with no more than  five  federal  taxes and one or two local ones  that  can amount to only 20% of an enterprise’s profits. At the same time during at least the current  transition period more weight should be given to taxing the  the use of natural resources. Imported luxuries and large overseas expences should be also subject to higher taxation.  This  simplified  plan will allow a steady stream of revenue for the  Russian  government and will free economic development from strangling regulations. Our analyses shows that low taxes combined with the control on incomes from the use of natural resourses would support Russia’s budget much better than high taxes which nobody is ready to pay. 

On  democratic institutions, Russia must allow the  judicial branch of government  to  become  equal and independent. Russian laws must be passed and followed in accordance with the Constitution. Elections will continue, although the  playing  fields  for  the campaigns must be leveled. The attempt to abolish the party-lists elections testify that the ruling elite fear that civil society would present an unwanted alternative to the corporative society which benefits the present authorities. 

Russian  media  remains  free  from direct political censorship as before  but  is  now controlled by the robber-barons, who, in fact, are part of the government.  An  independent and trust-worthy source of news is needed. The  government should relax its editorial control over Russion television and allow it to operate in the same manor as, for example, the BBC.  Also an objective newspaper that is not beholden to its funders, where Russians can trust that they are getting imparcial news , must be created. 

For the West, four  ideas.  First, do not exacerbate tensions in ways that divert Russians from their priority challenges at home. Expanding NATO was  a  mistake, expanding NATO further would be even more than that.  I understand  the  domestic and historical pressure to do so, but such a move will significantly scar relations for the foreseeable future and lessen the likelihood for jenuine Russian-Western cooperation.  Promise to assist those who seek security guarantees, hold joint exercises with them, but do not incorporate countrees on the Russian borders into NATO  and  do  not  station  NATO  troops there for at least the next decade.  It is not in your interest. 

Second,  tell  the  truth.   The  West  needs  to regain the respect of the Russian populace by speaking honestly to the Russian people.  In the Soviet era, the West was respected by the Russian people because they knew that it spoke the truth when their own leaders would not.  This has changed as your policies  have  emphasized  personalities  over  actions  and institutions. Depersonalize  your  relations  with Russia.  While you must certainly deal with  those  who  serve in the government, recognize that those individuals can  do wrong and can be diplomatically criticized and held accountable for undemocratic  actions.  You criticize each other and the likes of Netanyahu  for  pursuing  policies  you  disagree with, so why should Yeltsin and your other favorites be above the fray?  With the 1996 presidential election the last  chance for a Communist resurgence ended.  The West should now promote the  development  of  democratic  institutions  and  hold  Russia’s leaders accountable for their policies. 

Third. Do not treat us as a second class democracy. Apply to Russia the same criteria of democracy and market economy that you would like to have applied  to your own countrees. Be honest in assesing Russian elections, Russian freedoms, Russian laws, and  Russian human rights situation. Do not suggest that we should elect a President you would not whish for yourselvese. Never give us advice you would also not be willing take. This holds true because although we have different histories, we belong to one civilisation. And next century will be the century when not  separate countries but the civilisations will compete. 

Finally, the West can also promote and help develop the free market economy by investing in Russia and making sure that investment benefits the people, not  just  the robber-barons.  Building factories in Russia, hiring Russian  citizens,  offering  training, exposing Russian workers to Western business practices, all help.  Hold Russian business partners accountable and demand  open  record  keeping.   Refuse  to pay bribes. Such tough actions from the West will help steer Russia in the correct direction. 

True,  the  choice  of  which  path  Russia  takes  to  the next century is primarily Russia’s but the decision will affect us all.  The decisions made by  both  Russia  and  the  West  will determine which fork.   I am against Russia  spending  the  next century like those Latin American countries that have struggled to move  from a criminal  to  a civilized capitalism, with varying degreesof success.  Our goal is civil society, real democracy, observance of human rights and freedoms, with a  competitive  market and a strict anti-monopoly policy.   I do not accept  the  emerging dictatorship of crime and corruption that holds my countrymen in  check.   I  have  absolutely no doubts  that  a free, democratic, and dignified  country  can  be built in Russia. It may not emerge as the greatest  or  strongest  power in the world, but it will be far better than what  it  was  or  what  it  is  today. It will be  a Russia that works for its citizens  and  is  a  constructive  player  in world politics.  This can and must be achieved.  And I am working to create that Russia.