<html><body><P>American Enterprise Institute </P> <P>November 13, 2008</P> <P>A New White House Faces a Tougher Kremlin: Tackling Contentious Multilateral Issues in US-Russian Relations</P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>9:00 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration and Breakfast</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:30</DIV></TD> <TD> <DIV class=BodyText>Welcome:</DIV></TD> <TD> <DIV class=BodyText><A target=_blank href="http://www.aei.org/scholars/scholarID.2/scholar.asp" target=_blank>Leon Aron</A>, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:40</DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel I:</STRONG>  </DIV></TD> <TD> <DIV class=BodyText><STRONG>U.S.-Russian Relations Today: A Tour d'Horizon</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists</EM>:</DIV></TD> <TD> <DIV class=BodyText><BR>Thomas Graham, Kissinger Associates</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Fiona Hill, National Intelligence Council</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Andrei Kortunov, New Eurasia Foundation</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Andrei Zolotov, <EM>Russia Profile</EM> and Harvard University </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM> </DIV></TD> <TD> <DIV class=BodyText>Leon Aron, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>11:00 </DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel II:</STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG>Democratization, NATO Membership, and the European Union</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM></DIV></TD> <TD> <DIV class=BodyText>Giorgi Baramidze, vice prime minister of Georgia and state minister for European and Euro-Atlantic integration</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Stephen Biegun, McCain-Palin 2008 and Ford Motor Company </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Petr Gladkov, independent analyst</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Taras Kuzio, Kuzio Associates</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM></DIV></TD> <TD> <DIV class=BodyText>Fiona Hill, National Intelligence Council</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>12:30 p.m.</DIV></TD> <TD> <DIV class=BodyText>Luncheon</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Keynote Speaker:</EM> </DIV></TD> <TD> <DIV class=BodyText>Daniel Fried, U.S. assistant secretary of state for Europe and Eurasia</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>1:45 </DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel III:</STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG>Energy and Pipelines</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM></DIV></TD> <TD> <DIV class=BodyText>Tuncay Babali, Embassy of Turkey</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Zeyno Baran, Hudson Institute</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Petr Gladkov, independent analyst</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Vladimir Socor, Jamestown Foundation</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM></DIV></TD> <TD> <DIV class=BodyText>Stephen Sestanovich, Council on Foreign Relations</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>3:00</DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel IV:</STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG>Missile Defense</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM></DIV></TD> <TD> <DIV class=BodyText><BR> <DIV class=BodyText>Thomas Graham, Kissinger Associates</DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Marcin Kaczmarski, Centre for Eastern Studies (Warsaw)</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Ambassador Petr Kolar, Embassy of the Czech Republic </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Fyodor Lukyanov, <EM>Russia in Global Affairs</EM></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM></DIV></TD> <TD> <DIV class=BodyText>Andrei Zolotov, <EM>Russia Profile</EM> and Harvard University</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>4:00 </DIV></TD> <TD> <DIV class=BodyText>Coffee Break</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>4:15</DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel V:</STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG>Where Do We Go from Here?</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM> </DIV></TD> <TD> <DIV class=BodyText>Stephen Biegun, McCain-Palin 2008 and Ford Motor Company</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Andrei Kortunov, New Eurasia Foundation</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Fyodor Lukyanov, <EM>Russia in Global Affairs</EM></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Stephen Sestanovich, Council on Foreign Relations</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM></DIV></TD> <TD> <DIV class=BodyText>Leon Aron, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>5:30</DIV></TD> <TD> <DIV class=BodyText>Adjournment<BR></DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR></TBODY></TABLE><BR> Leon Aron:  Good morning to everybody and welcome, dobroe utro i dobro pozhalovat . I think I still need to give a few words of explanation because this is a somewhat more intricate, structurally, event than we generally have.  Now, our wish for this conference was to become a forum in which some of the thorniest issues that divide United States and Russia could be discussed by top US, Russia and Eurasian scholars, government officials and experts without rancor and without descending into mutual recrimination.  We have been lucky to attract four American and Russian experts with very long and distinguished records of thinking, speaking, publishing about strategic issues in the foreign policies of Russia and the United States and as part of that record, obviously, of the relations between the two countries.</P> <P> In alphabetical order, our four principal Russian speakers today. Dr. Petr Gladkov, an independent analyst on leave from the presidential administration; Dr. Andrei Kortunov, president of New Eurasia Foundation; Fyodor Lukyanov, editor of Rossiya v globalnoy politike, also published in English as Russia in Global Affairs, in my view, the finest magazine published in Russia on foreign policy; and Andrei Zolotov, editor-in-chief of Russia Profile that dabbles in foreign policy but is an excellent and, again, in my view, the finest publication on Russian domestic affairs as well.  In the interest of full disclosure, I am on the board but it has not affected adversely the quality of the magazine yet.</P> <P> Their American counterparts, again alphabetically, are Steve Biegun of Ford Corporation, National Security Council and Senate and House Foreign Relations Committee, most recently a top foreign policy adviser and the principal adviser on Russia to the McCain presidential campaign; Dr. Fiona Hill, the National Intelligence officer for Russia and Eurasia at the National Intelligence Council; Dr. Thomas Graham, who is now with the Kissinger Associates and served for five years as special assistant for Russia to the president of the United States; and Dr. Steve Sestanovich presently at Columbia University and Council on Foreign Relations and also for five years, ambassador-at-large and special adviser to the secretary of state for the former Soviet Union in the Clinton administration.</P> <P> Now the way we structured it, on the first and last panels, the overview panels and what did we learn panels, kind of strategic panels, we have two persons from each side on the first panel and on the second panel, also two persons from each side but different ones.  So this way everybody among the Russian and US analysts will be able to speak.  </P> <P>Now, this is the time for me to make a technical announcement, actually two.  Please note that all the speakers here are representing themselves.  They are not representing the institutions that employ them or the ones that they are affiliated with.  This is especially true of Dr. Hill who is speaking entirely in her capacity as a scholar and not as a representative of the US government.  She is the only actual government official on our panel and I ask everybody to respect this request.</P> <P> The second technical point concerns our lunchtime speaker.  We have been very fortunate to fit this conference in a very peripatetic schedule of Dan Fried, assistant secretary of state for Europe and Eurasia.  Originally, and I think this is how it is billed in the agendas that you have, he was to speak under the Chatham House Rules, meaning he could be cited but not for attribution.  Given the size of the audience, the decision has been made by Dan Fried s office that everything he says is off the record.  We will ask the cameras to be turned off during lunchtime.  If anybody wants to cite something from Ambassador Fried s speech, they should either contact him directly or contact Kara and myself and we will let you know how to get in touch with their office for clearance.  Again, I very much count on everybody respecting these ground rules.  So these are the first and the last panels.  </P> <P>In between, we have tried to mirror some of the key structural problems between the United States and Russia by selecting three of them: domestic and foreign policy orientation of the former Soviet states specifically democratization and NATO expansion, the energy exports from Eurasia and the pipeline policies and finally, the missile defense.  And here, too, we are very pleased to have government officials, scholars and experts from the countries most affected by these developments.  We have Deputy Prime Minister Baramidze from Georgia, we have Ambassador Petr Kolar from the Czech Republic, Dr. Marcin Kaczmarski from Poland as well as Zeyno Baran of the Hudson Institute and Dr. Taras Kuzio from the Carleton University in Ottawa and Vladimir Socor of the Jamestown Foundation.  Now, the speakers and the moderators have been notified in very certain terms that in order to incorporate question and answers and given the intensity of the agenda, we asked that they speak no more than 10 to 12 minutes and I trust the moderators would be there to enforce it as well.  </P> <P>As usual, many thanks are in order - let me go over them quickly - first of all, to our speakers who fit this event in their very busy schedules, especially for the panelists who traveled from Georgia, Russia, Poland and Germany to be here.  I m grateful to my boss, Vice President for Foreign and Defense policy, Dani Pletka, for her encouragement when this conference was first conceived, I believe, last April, and the Development Office for the general and generous funding that seemed to be increased weekly as we approached this event and the lectures and seminars, the people who actually arranged all of these in this room, for their customary organization and perfection.</P> <P>There is also person that I would like to give special thanks to, who is, by now, well known to all the panelists without exception as travel counselor, communicator par excellence and the indispensable resource of last resort on myriad issues that inevitably arose in putting an event of such scale and intricacy.  It is Kara Flook who is responsible also for the format of this conference because it was she who first suggested that we expand the format beyond simply the Russian and American participants and involve countries that are directly affected by these issues.  Kara, where are you?  There we go -- well, thank you very much wherever you are.</P> <P>And now we will start on the first panel.  We will move in the order that you have here.  The order is more or less alphabetical except for Fiona Hill who asked to speak last.  Again, I know it is a difficult task to give an overview of issues of such complexity and repercussions in 10 to 12 minutes, so I appealed to the speakers prior to this conference to give us something that they consider most portentous, most important, most intriguing and put it in 10 to 12 minutes so that we have a dialogue between the speakers and with the audience.  And we will start with Tom Graham.  Thank you very much, Tom.</P> <P> </P> <P>Panel I - US-Russiann Relations Today: A Tour d'Horizon</P> <P> </P> <P>Thomas Graham:  Thank you very much, Leon.  Thank you and AEI for putting on this conference.  It is always timely to speak about Russia and US-Russian relations but I think particularly now as we look forward to a new administration in the United States.  As I was preparing my remarks for this panel, I found myself wanting to address the issues on the last panel which only demonstrates that every analyst really wants to be a policymaker and so in that spirit, I m actually going to mix some analytical points with some policy points on Russia and US-Russian relations.  And because we have limited time here - just four basic points.</P> <P> The first is not necessarily related to US-Russian relations but about the world in general and I think it is clear that we have entered a period in international affairs of great uncertainty, of unknown variation as a new global equilibrium emerges from the post-Cold War world and even now, the post-post-Cold War world.  We are all aware of the fundamental trends: the shift of global dynamism from Europe to Asia; the pressure that the nation state is under in Europe as it tries to build a supranational organization; the pressure that we see it under in the Middle East because of sectarian strife throughout that region.  But the fundamental building block that has fashioned the international order for the past 300 years is now under threat.</P> <P>We all know about globalization.  We talked a lot about the upsides in the 1990s; I think we are even much more familiar with the downsides of globalization in the present period.  All of these have created a situation in which the international organizations meant to help manage the global economic environment, the global security environment, have proven themselves inadequate to the challenges of the 21st century.  There is a great need for reforming these institutions or building new institutions to perform the functions that are needed.</P> <P> Now, as I said, all of this is commonplace; we talk about it all the time.  What I find surprising is how little this knowledge actually impacts on the way we think about Russia and US-Russian relations.  The focus tends to be on Europe - what happens in Europe.  You look at the issues we are going to discuss in this conference today, almost all focused on the Euro-Atlantic region.  And the problem with that is that I think that this tends to force our thinking into Cold War paradigms and zero-sum thinking, the very thing that we all say we want to avoid as we try to put this relationship on a better track.</P> <P> So the first, I think, challenge for the Obama administration is going to be putting Russia and US-Russian relations in a much broader strategic context.  Now, something else flows from this and that is the goal that has animated US policy towards Russia, I would argue for the past 20 years, and that is, integrating Russia into the Western community on Western terms, is dead.  Putin made that clear in his speech in February of 2007; the Georgian conflict, I think, is an emphatic exclamation point on that matter.  And Russia, while it still believes that there should trilateral cooperation among United States, Europe and Russia, certainly wants it on a different set of terms and the ones that we have been thinking about for the past 20 years.  So again, the next administration is going to have to come up with a different goal, at least, for the next four years to structure its relationship with Russia.</P> <P> Second point and that is at the starting point for any policy toward Russia for the United States has to be US national interest.  I think if we look forward over the next five to 10 years, we will put non-proliferation, counterterrorism at the top of the agenda, energy, climate change, stability in the broader Middle East, the transatlantic community, China, international financial organizations.  Now, there is a great deal of overlap in these issues.  We may have some differences over how we would prioritize those, but I think that gives us a good idea of what we need to be thinking about as Americans over the next decade.</P> <P>The second question that we ask that follows from this is how important is Russia to our achieving our long term strategic goals?  Is it indispensable?  Is its cooperation desirable?  Or is Russia, in some way, unnecessary to what we are trying to achieve?  I think if you look at the issues that I have just laid out, certainly on counter-proliferation, mega-terrorism, I would argue energy and climate change, Russia is indispensable.  It is indispensable because it is the second nuclear power in the world; indispensable because of its vast energy reserves, particularly oil and gas.  On all the other issues, I would argue, Russian cooperation is desirable.  It is easier to achieve our goals if we are working with Russia as opposed to cross purposes.  That said, the United States would still be able to advance its goals even if Russia decided that it wanted to work in opposition to us.</P> <P>Now, this approach suggests what should be the centerpiece of a more constructive US-Russian relationship going forward and that I would argue as cooperation on non-proliferation, mega-terrorism, nuclear security and energy.  Thanks to the work of both the Clinton administration and the Bush administration, a lot of the building blocks are already in place.  The Megatons to Megawatts Program that started under the Clinton administration that blends down HEU from Soviet nuclear weapons to be used in power generation in the United States is one example of this.  The Global Initiative to Combat Nuclear Terrorism, launched a couple of years ago by President Bush and President Putin, is another aspect of this.  And there are a number of other things that we are already doing, the Nunn-Lugar program for example.</P> <P>What needs to be done in the next administration is to put in some of the other key elements of this and that I would argue would be agreeing on a follow on treaty to the START which expires in December of 2009, also a follow on to the Moscow Treaty which expires in 2012.  We need to resurrect the 123 Agreement on civil nuclear cooperation that was taken off the agenda because of the Georgia events of this past summer.  Also, there is an element of cooperation on missile defense that has to be worked out, but this is an issue we are going to discuss in more detail this afternoon.</P> <P>The energy element is also probably the more troublesome one of those but also we are going to have a panel on that so we can get into that in more detail.  I would just say that what we need on part of the United States is a much more reasoned approach to Russian energy supplies to Europe that takes into the account the growing demand in Europe for energy from anywhere in the world.  And second, a Russian willingness to admit in a more expeditious fashion Western companies in the development and management of its own resources.  I imagine the financial crisis and the collapse in energy prices have actually created a better situation for doing just that.</P> <P> Third point is that a fundamental principle of US policy should be that we should try to accommodate Russian interest wherever we can where it does not jeopardize the achievement of our own strategic interest.  And so that gets to the issue of how does Russia think of its national interest.  Now, I have two Russians on the panel here, we are going to have Russians speaking in the afternoon, so probably it is a bit presumptuous of me to define Russian national interest.  But to give you very briefly an American perspective on this, looking through the literature - the remarks by President Medvedev, Prime Minister Putin - that at one level, Russia sees as its largest national interest of making Russia a great power, a country that counts for something in international affairs.  President Medvedev told a group of policy experts a few weeks ago that Russia exists as a great power or Russia does not exist at all.</P> <P>So being a great power is critical to Russia s own self identity.  That requires the modernization and diversification of the economy over the next generation, something that the financial crisis has to raise concerns in Moscow about its capacity and ability to do that.  But the second element of this self identity as a great power is the former Soviet space.  This is the region that has historically given Russia its geopolitical weight in the world.  For Russians, it is important to their economic prosperity, their sense of security going forward.  Also, great powers are supposed to radiate influence and where do you radiate influence if not into your own neighborhood.  So this is a critical element in the way the Russians think about their identity and their own role in the world.  And this leads to perhaps one of the fundamental and more serious problems in US-Russian relationship at this point - the former Soviet space.  It is an issue that has poisoned the relation over the past several years.  It is the forefront of a lot of the antagonism as well and we saw that come out in spades in Georgia over the summer.</P> <P> Now, the issue, I think, for the next administration is whether there is a way for the United States and Russia to manage their relations in this part of the world and at the same time, respect the sovereignty and territorial integrity of the countries of that region themselves, recognize that these countries have independent foreign policies, independent goals and that they should be able to pursue these with as little outside interference as possible.</P> <P>The big issue will be NATO because of the summit coming up in April of next year.  For all practical purposes, I think the desire of this administration to grant membership action plans to Georgia and Ukraine is dead because of European opposition, particularly from the Germans and the French.  And what the administration needs to do going forward is really focus on NATO s mission, what is NATO for.  With regards to Ukraine and Georgia, it is really focusing on the commercial economic ties between those countries and Europe as a way of beginning to broaden the relationship with those two countries in a way that does not antagonize the Russians and lead to the types of outcomes we saw over the summer.</P> <P> One final point on structure - one of the problems we have had on this relationship over the past, at least, two or three years is there has been an absence of reliable channels of communication between United States and Russia.  And one of the first things that a new administration will have to do is to seek out those channels.  I think it needs to have and identify a senior US government official who is basically going to be in charge of the overall relationship, the point man for Russia, someone who enjoys the confidence of the next president and knows in broad terms what his thinking is about foreign policy so that he can speak authoritatively to his Russian counterpart about where the United States would like to go, both in broad terms in its foreign policy and specifically in relationship with Russia.</P> <P>It will also be good if the Russians would come up with someone who will be a point person for their relationship with the United States that is below the rank of president or prime minister so that we can have the type of interaction that we need going forward.  If this does not happen, I think the conclusion that I would draw in any event is that this means that Russia is not a priority for the next administration and that Russia itself really does not believe that it has much hope for a more constructive relationship with the United States.</P> <P> And then the final point, it is always possible and I think we need to always bear this in mind that Russia may not be interested in a more cooperative relationship with the United States.  The point I would make is that I would think of the US-Russian relationship now much the way I think of the US stock market, and that is that the relationship is probably oversold - it has a great deal of potential.  And what the next administration needs to do is to invest a little bit in this relationship and hope that there is a big upside over the next three or four years.  It may not happen but the point is that if the downside continues to be a downside, we really lost very little in the process and will still have sufficient resources left in order to advance our interest in other ways.</P> <P> Leon Aron:  Tom, thank you so much, exactly the kind of presentation we all hoped for and on time, so I m sure Andrei will repeat all of this.</P> <P> Andrei Kortunov:  Well, as a non-native speaker, I need more time of course.  But first of all, I agree with everything that Tom said.  I think that this is a very focused and a very appropriate approach to US-Russian relations today.  Since we will have a whole day of discussions, I will try not to go into detail and let me try to limit myself to identifying the key issues as I see them in the relationship between Russia and the United States.  And I m sorry that I might sound somewhat trivial, but I think that we still have to keep in mind these very basic things because they allow us to understand better specific situations and specific reactions.</P> <P>I would venture to say that there are at least three very fundamental problems that we face in relations between Moscow and Washington, D.C. and I would label them as problems of vision, problems of trust and problems of stakeholders.  Let me very briefly describe all of the three of them.  </P> <P>First of all, their visions - I think it is important because visions and values define interest, not the other way around so when President Medvedev says, Let s forget about values, let s focus on naked interest, but the way how you approach your naked interest really depends on what you believe in.  I think that this is a serious problem that Russian and American visions of the world and of the international system are divergent.  Of course, they have never been identical; even during 1990s, there were different interpretations of how they world evolves but they were more or less compatible.  Right now, I see less and less compatibility in how Russia and United States approach the world, approach the current system of international relations.  </P> <P>If you take the United States, and I do not want to spend too much time on that, but my impression is that fundamentals are essentially the same as they were in the early 1990s.  Of course, the world turned out to be much more complicated, much more difficult place than probably many American politicians and experts thought 20 years ago.  Of course the US foreign policy committed a number of mistakes and blunders.  Of course, this path towards democratization turned out to be precarious and loaded with setbacks, but still I do not think that there was a serious fundamental shift in how Americans see the world or how they see the US role in this world.</P> <P>Now if you look at the Russian side, you can see that the vision has changed dramatically.  Ten years ago, even seven years ago, the Russian vision of the world was more or less linear progress towards a more liberal, more democratic, more market-oriented economy in the system of global politics where Russia would become an integral part of this Western community of nations.  Liberal democracy was perceived as the ultimate goal of the Russian transformation.  Right now, it is no longer the case, I m afraid, and when politicians and opinion makers in Russia discuss issues of liberal democracy and market economy, quite often, they perceive these issues not as a solution but as a problem.  It is very fashionable in Moscow today to regard the current financial crisis in the world as a very clear manifestation, not just of the decline of the US hegemony in the world but also as something which proves that market economy the way we used to know it and liberal democracy the way we used to know it are not something that offer solutions to current problems.</P> <P>So they are talking about pluralizing the idea of modernity, they are talking about alternative ways of political and social mobilization; they are talking about alternative development trajectories.  And of course, if you look at discussions at the Shanghai Cooperation or summits or discussions that we have at meetings with other BRIC countries, the message is that the world is different and that 1990s was an aberration not a rule.  We should move beyond that and it makes no sense to try to somehow adjust your self to the world which is already gone.  So I think that this is a serious issue which basically confirms very deep fundamental issues that we have between Russia and United States.  By the way, Obama is often perceived in Moscow as a socialist, as a person who actually implicitly recognizes the failure of the American liberal model and who will have to take a more activist role, not just in economy but also in managing social and political issues in the country.</P> <P> Now, the second issue, is trust - I think it is evident that trust is low.  It is also evident that this very profound mistrust that we have between the United States and Russia is not limited to narrowly defined groups of political establishments in Washington and in Moscow.  It is now something which cuts across political groups and social strata, both here and definitely in Russia.  I think that that constitutes a real problem because if we agree to disagree, if we can have a situation of trust without necessarily agreeing on everything, that could make our relations more predictable and more manageable.</P> <P>However, if the perception is that our relations essentially is zero-sum game and that whatever is done by the United States is necessarily - by default - targeted against Russia, then we have a problem, then it is practically impossible to prove that the United States has some goals other than to make life miserable for Russians.  And likewise, of course, one can argue that the United States has fallen into the same trap, that whatever Russia does is perceived par excellence as something which is anti-Western, anti-American, something which is counterproductive and destructive.  Again, I do not want to go into detail, we will have more time to discuss specific issues later but if you look at the US reaction to the Caucasian crisis, I think that this is kind of illustration to an approach which reflects the fundamental lack of trust.</P> <P>By the way, getting back to Obama, I think that this very deep mistrust of the United States and its intention affects the attitudes towards the new administration in this country.  The perception in Moscow which is shared by many politicians, many opinion makers, is that probably Obama is a great guy, probably he would really try to do something to change the relationship, but the momentum and the influence of the Washington-based political establishment is so huge that it is practically impossible to imagine that the relationship can be changed in the foreseeable future.  Therefore, there is more probably pessimism than optimism related to the transition of power in this country.</P> <P> And finally, the lack of stakeholders -- again, it is a trivial issue; nothing new about that but, still, it is a problem.  Again, the Caucasian crisis illustrates once again that when you do not have strong communities, diverse communities of stakeholders, stakes are getting very low.  Medvedev himself said, Okay, you want Cold War?  We are not scared; you can get the Cold War if you want it.   That reflects that the leverage that the United States can use trying to influence the Russian behavior and the other way around is extremely limited.  We more or less destroyed the old foundation for US-Russian relation which was created during the Cold War, but we clearly failed to build or to assist in building a new foundation for the relationship.  I think that unless this issue is approached, it is very difficult to imagine that our relations might get any better any time soon.</P> <P> Finally, is there any light in the end of the tunnel?  I think that there are at least two developments that might help us to change the relationship for the better.  First of all, I still believe that the political transition in Washington, D.C. creates certain opportunities, though I think that the role of President Bush in trying to preserve some positive trends in US-Russian relations is not properly appreciated in Moscow.  The president did a lot to prevent the relationship from sliding down but still any new administration allows both sides to start a new chapter, to turn the page, so there is an opportunity related to the political transition in this country.</P> <P>The second point and this is my last point, I do believe that the situation of the financial crisis might have more than just a sobering impact on how Russia and the United States view global developments.  It might help both sides to redefine their priorities - maybe to put aside some minor personal issues which continue to be a stumbling block in their relationship, to think strategically about changing the international system not just the financial system but the security system, the political system, and that potentially creates a new opening, a new opportunity in the relations between Moscow and Washington.  Paradoxically, in order to do something in bilateral relations, it is important to go beyond the bilateral relations to compare national agendas, to compare problems that the two countries face and on the basis of this comparison, we can probably come up with a new agenda of bilateral relations as well.  Thank you.</P> <P> Leon Aron:  Thank you very much for an excellent presentation and again, even more so, for being on time.  Andrei.  </P> <P>Andrei Zolotov:  Thank you.  After flying into Washington last night, I was in the hotel watching television, flipping through the channels and there was a long interview with Secretary of State Condoleezza Rice on C-SPAN.  Probably some of you saw that.  She kept talking and talking about very interesting things about the various focus of US foreign policy and the period of transition and she spoke about the Middle East, she spoke about Europe, of course about Iraq, about how grateful she is to President Bush for the kind of relationship they had, et cetera, and I was waiting and waiting and waiting until when she was going to mention Russia.  And I actually fell asleep before she did - or I basically turned off the TV.</P> <P>And that is sort of a very good illustration of the fact that is very rarely realized from Moscow that Russia is actually very low on the priority list of US foreign policy.  Even after the Georgia crisis when, for a while, it was at the very top - it was on the front pages of newspapers, it was a very fashionable topic to speak about, there was an issue of Foreign Affairs dedicated to it, et cetera, et cetera - and then now, again, maybe it is good maybe it is bad but we are back in a situation where the priority is pretty low.</P> <P>I think the fundamental problem of Russia-US relations is something that Dr. Kortunov described as a lack of stakeholders which otherwise, in a somewhat Marxist analysis, can be described as lack of basis, as a lack of economic foundation because here is a very contrasting situation to see: In US-China relationship where no matter what kind of the current political difficulties are today or tomorrow, there is a mutual realization of a fundamental business interest on the both sides which helps this ship sort of go through the stormy waters.  In Russia-US relationship, there is no such foundation.  That is why the entire set, the entire of body of US-Russian relationship is pretty much a hostage to geopolitics, ideology, interest of third countries and pride plus a little bit of global security with a very heavy emphasis on arms control system which, as the esteemed speakers have said, is going to present very soon another major challenge.</P> <P> Second point I wanted to make is that with all of the euphoria that you can see in liberal America today about the coming of Obama administration and with all the tendency to blame everything on President Bush and the Republican administration, we have to realize that the problems in Russia-US relations did not begin under Bush.  In fact, we had perhaps the most promising period in US-Russian relations in the first years of the 21st century immediately after September 11th, when the realization of a common threat and genuine attempt to build some sort of constructive relationship on the both sides was evident.</P> <P>But very soon, it fell prey to what I see as a trend set, actually begun, in the 1990s.  And today we have a very long list of grievances on the both sides which began, of course, with the NATO expansion and the view from Moscow that by doing so, Washington has breached the promise that had been given at the end of the Cold War by the West.  I was just a couple of weeks ago at a conference at Harvard University.  It was a conference dedicated to Andrei Sakharov and Ambassador Matlock spoke there very persuasively and with a very, very serious feeling of the opportunity lost, not only opportunity lost, something like the work of his life has been destroyed before his eyes.  That was the feeling I was getting from this very, very powerful presentation.  He spoke very openly about what promises were made and how Washington then reneged those promises.  </P> <P>So I do not think that the mere coming of Obama administration, especially with Vice President Biden who is likely to play a role in the formation of US foreign policy and who is someone who has a record of being a liberal interventionist if you want, or at least that is how that is seen from Moscow, is actually presenting all this positive outlook.  So we have today bare wounds that are out there in the perceptions.</P> <P>I happened to be at Evian a month ago at the World Policy Conference where President Medvedev came and gave a large foreign policy speech speaking about his vision of a new European security arrangement and with a certain number of negative criticisms of US policies which was absolutely at the level of what was generally said at that conference.  While listening to his speech there, it did not ring to me as a particularly strong attack against America.  In fact, it seemed like an attempt to formulate some sort of a constructive policy.  Then I read an article - it was actually a column - in the Washington Post which characterized the speech as a scathing, kind of anti-American attack.  So that was to me a very good illustration of the bare wounds which make it very complicated to actually engage in a constructive conversation.</P> <P>So we see that inability to listen -- I do not think that there has been a particular lack of contact and, of course, Tom Graham can much more authoritatively than me speak about the need for particular channels to be established.  But I think that the administrations have been talking quite a lot, but talking does not mean listening.  I think that there is a huge problem with the capacity to listen, to understand and to take into account your counterpart s vision and your counterpart s interest.  So I think that without a degree of humility, nothing can be changed for the better.  I think that there has been a very dangerous accumulation of grievances, pride on the both sides - zero-sum game basically, wherever we make a concession that is the other side s victory - the ultimatums, the whole idea of something that Medvedev spoke about at Evian, that not giving Georgia and Ukraine the prospect of NATO membership is being perceived as a capitulation before Russia.  I think that is very true, that is very much part of today s situations.</P> <P>Negative identities -- everywhere in Eurasia-- is, I think, an important component to the difficulties of US-Russian relations.  Whereas former Soviet countries and former Eastern block countries have chosen, to a large extent, to define themselves vis-�-vis Russia, at least their elites; whereas, the Russian elite has chosen to define itself vis-�-vis the United States.  That is an understandable and an easy way to behave in this situation, very much reflecting an inferiority complex.  But I think unless all post-Soviet states learn to come up with more positive identities and being less prone to react and overreact to the negativism from junior partners, we are going to have a more difficult situation ahead of us.</P> <P> And the final point is to say that there is a huge lack of realization of how difficult and dangerous the current situation is.  Apart from some people in the expert community, a lot of whom are actually in this room, outside both in the political elites and in the society in general - in the thick of the society - both in Russia and in the United States, outside the intellectual circles, people actually think it is okay that the current state of US-Russian relations is the way it is and further deteriorating.  There is a positive and the negative in this.  The positive is that that means that there is some cushion of trust still there that we are not going to have another Cold War or God forbid, hot war, but the negative is that I think this is a very dangerous situation.  Thank you.</P> <P> Leon Aron:  Andrei, thank you so much and thank you for being on time.  Before I move to Fiona, I would like to return to my introductory remarks specifically to the final point where I spoke about Kara Flook who managed be out of the room.  Kara, here you are; thanks again.  Fiona.</P> <P> Fiona Hill:  Thanks, Leon.  This feels a little bit like a panel of doctors who have been working for a long time in the same hospital.  And having listened to my distinguished colleagues diagnosis of the --</P> <P> Leon Aron:  Without curing the patient.</P> <P> Fiona Hill:  -- without curing the patient.  I was going to say we have not been washing our hands enough is part of the problem.  But anyway, I have been keeping a chart here and I thought that maybe what I might do is pick up on some of the diagnoses of my esteemed medical colleagues here and maybe talk about some of the specifics of our poor patient.  I think we heard a very important set of presentations here and I did not just want to be last because I wanted to pick up after everyone else.  It always is extremely useful to hear what everyone else has to say because I think starting with Tom s global context, in fact, what the patient has been eating and drinking and breathing in, and the environment in which they had - it s a somewhat unhealthy environment in which they have been operating in - is extremely important.</P> <P>What I think I ll do is pick up on some of these points about this global context versus the European context, the point that was also made by Andrei about the divergent visions, and then the points that were echoed both by the two Andreis here on lack of trust, and then on the common points about lack of stakeholders.  And I ll also try to prefigure a little the next panel because I have the dubious pleasure, given the intensity of debate around those three issues, of chairing that panel.  I may be kind of starting with one of the most critical issues here, one of the very nasty symptoms which is of course the Georgia crisis this summer.  This is something more than a very bad rash.  This has been really rather a very a nasty affliction for the relationship and for the European security perspective most acutely.</P> <P>I think what Andrei was saying about the shaping of the interpretations and perceptions is very important because let s see how Georgia looked from the outside rather than from inside Russia.  I think the picture inside Russia was obviously very different and one that many of us here have not really appreciated about how that was presented.  But certainly from the outside, thinking about press reports and the general analytical view that you will hear in all quarters here, that what Georgia appeared to be was a signal to the US and to NATO, as well as to the rest of Russia s periphery that, as Tom said, this is the big exclamation mark on the end of the 1990s.</P> <P>In essence, what Russia seemed to be saying, at least, that is how the outside world seemed to take it, is that the US in particular, and NATO by extension, must stop disregarding Moscow s interest or Russia would draw its red lines in blood if necessary.  And so NATO MAPS for Georgia and Ukraine are unacceptable - that was kind of loud and clear - and also there seemed to be another general message that was also seemed to be picked up in parts of the periphery when you talk to others in the neighborhood.  If you live on our periphery, from the Russian perspective, you should not be pursuing policies that threaten your security.  And even if you do, another underlining message there, that the US, NATO, the West will not help you because that is kind of the perception that you hear generally.  I have been going to a lot conferences where I have heard this view presented in different ways.</P> <P>Another of the perceptions that certainly is prevailing now in the wake of Georgia is that what Russia seems to be aiming for - tacitly, if not formally - is a recognized sphere of influence, picking up on what was said about the very beginning about the great power status and the importance of being able to project influence in one s periphery.  There seems to have been a gambit there to at least demand the rights of veto or first refusal of actions within the periphery, and certainly of actions by the US and NATO that challenge Russian interests.  And frankly, in talking to many colleagues in Russia - I was just in Moscow two weeks ago - this really seems to be also the general thrust of President Medvedev s outline for the proposed European security architecture which was, of course, put forward well before events in Georgia in June during his visit to Berlin.  But as it has been articulated since then in various public speeches and presentations, it does seem clear that underlining this idea for European security architecture is, again, the real headaches for Moscow being the United States and NATO rather than the European security writ large.  It is not really the EU or the OSCE or the other institutions.  It gets back again to the US and NATO.  So in terms of looking at what are the important points in the manifestation of our current disease of our patient, US policies and NATO enlargement seem to be intrinsic elements of the current situation.</P> <P>We also hear discussions in this context of European security from the Russian side, and I heard Foreign Minister Lavrov at one of the conferences that I was at talk about this for well over an hour.  He kept referring to Euro-Atlantic security at all times and there was not much reference of transatlantic.  I got the impression if we had gone back to the old days of the Europe from Vancouver to Vladivostok and decisions were made in Vancouver, that might be all right.  But the impression being, of course, while most decisions seemed to have been made in Washington, the transatlantic dimension of European security is, again, something of a problem.  Listening very carefully to Foreign Minister Lavrov, again, the impression that I formed and that many colleagues sitting with me there did, was that the locus of decision-making on European security that Russia would like to see would be in Europe, not across the Atlantic in Washington, D.C. but rooted in Europe.</P> <P>And the second point being, again, using this Euro-Atlantic image that the concept of Europe should most definitely extend to Russia as well and would not end with the borders of whatever the last member of the EU or NATO might be.  It is very clear as Tom said and was also echoed by Andrei and Andrei, that Russia will not join either the EU or NATO and that is the end to those ideas of the 1990s.  But at the same time, Russia has no intention of being excluded from Europe and it wants to have a say over what Europe is and of what Europe does in a larger sense.</P> <P>So when we think about this set of perceptions and perhaps in the discussion, we can see whether these are the same perceptions over this whole -- I'm taking this from a number of meetings that I have been attending, what we see, again, is that on this trust issue, certainly from the US and other perspectives, Russia now seems willing to risk tensions not just with the US but also with Europe and the West to some degree to deter the US and NATO from continuing to impinge on its interests.  And as Thomas said, we really have to cast off all of the assumptions of the 1990s that shaped policy approaches towards Russia because, now, in the wake of the events in Georgia, the angry rhetoric that we kept hearing about in protest actions is now being replaced by action, and Russian intentions, policy calculations and reactions have to be now reassessed moving forward.  This is going to be the challenge for the new administration, really figuring out not just what Russia wants but what Russia might do next which has been, of course, a big focus of speculation ever since Georgia.</P> <P>Now the financial crisis increases the uncertainty on all sides now.  I think we now also have to ship off our assumptions even of the summer because the financial crisis has given everything a completely different tinge.  And in many respects, the financial crisis has displaced Georgia in the larger discourse here.  I think that even sitting here today we have to think quite differently than we may have done several weeks ago.</P> <P>It was also a fact, as Tom and others mentioned, that US policy leads with Russia are much reduced since the 1990s.  And as Andrei Zolotov has mentioned, a lot of this has got to do with the fact that we do not have the same dense networks of economic and people-to-people links with Russia as the United States has with China.  I think all of us would agree on this which, in the case of China, as Andrei said, really enables us to manage bilateral crises.  What we have to remember here, however, is that the Europeans do have those networks, all the economic networks and the people-to-people relations, most especially Germany.  From the US perspective, there seems to be a lack of understanding of the nature of the relationship between Europe and Russia.  But the relationship between Europe and Russia is like the US relationship with China.  It is extremely important for Europe to manage its relationship very differently.  The stakes are so much higher there.  </P> <P>And so the United States is going to have to figure out a way not just of understanding the Russian perspective but also the European perspective on the relationships with Russia because this is always going to give reasons for rifts also in the transatlantic perspective because US and Europe do not have the same view on Russia, let alone the US and Russia having divergent perspectives.  As I said, as a result of this, the transatlantic alliance is in jeopardy because it seems in many respects, again, from the US perspective, that Russia is engaged perhaps in picking apart Europe and the United States and seeing in many respects no longer a unified West but a US and the rest, and Europe itself as also ripped apart by different factional thinking and different perspectives which also come out an issue of NATO enlargement.</P> <P>When you think again about President Medvedev s proposal for European security, and the statements of Foreign Minister Lavrov and others, there are some interesting dimensions to this.  Because often when the question is asked, Well, who should sit down for this new dialogue, of course, the United States is mentioned, so is the EU, the OSCE, for example, NATO.  But then France and Germany are separated out from the EU as interlocutors and to some degree, Italy.  The UK - my other former identity - is not, as it slumps in with the United States, it is not seen as a key interlocutor for Russia and the continent.  But this is very significant that there is still, in the Russian context, very much a preference for a dialogue with two of its key and traditional historic trading partners as well as political partners.</P> <P>So just putting these issues into context here, what we have really seen from recent events and recent statements, and most recently the poslaniye, President Medvedev s traditional annual address, his first, that the message seems to now be in terms of the US, that Moscow is not really that keen on engagement with the United States at this particular juncture as already been said by my colleagues here.  It is very keen on continuing engagement with Europe for all the obvious reasons that I have just outlined.  But for Moscow s perspective at this point, the ball is in Washington s court.  The message was pretty loud and clear from the poslaniye that, you, the United States are the ones to blame for what has gone wrong, for everything from Georgia to the breakdown of the European security to the international financial crisis.  And yes, we have some blame to certainly accept on the latter score but it is now spreading around fairly rapidly here.  But the message also is then you have to take the first steps.</P> <P>On the recognition that Russia may not be top of the agenda, given everything else that has happening, for an Obama administration, the Iskander missile announcement from Kaliningrad was clearly a signal that, Well, you better think again and make sure that we do not drop down as we did back in 2000, down into 10th, 11th, 12th or other place here.   Very clear that all of the issues we have on our agenda today from NATO expansion to missile defense and other security issues, as Tom said, however mostly focused on Europe, need to be on the agenda.</P> <P>What we have also seen over the last several months in things that also preceded Georgia was that Russia has been using global assets, flexing its muscle again.  This is certainly how it seems in the outside - the Stabilnost exercise, bomber flights to Venezuela, ship visits around the Caribbean, arms sales to the Middle East, enhanced activity - again, to get the US attention.  This seems much less a serious effort to reposition Russia in a Cold War posture in the region.  It is, again, to get our attention to make sure that Moscow is not forgotten. </P> <P>So on this score, when we start thinking about the last issue that was raised about stakeholders here, Russia wants United States attention; I think Russia has actually succeeded quite well in getting the US attention.  As we have already said, all of our old assumptions about the nature of relations have had to be put to one side, and I think we also are going to have to really wonder whether all of the common threats that Tom mentioned here, whether we are on the same page.  Tom mentioned mega-terrorism, counter-proliferation and a number of related issues.  And we go down the list of Afghanistan which is obviously something of great concern, proliferation in Iran, North Korea, and the Middle East peace process.  On all of these issues, if we really sat back and thought about it, we are not necessarily on the same page, in fact, it gets back to our divergent visions that Andrei mentioned.  Not only do we have divergent visions of where we think Russia should be for that matter, we also have divergent visions of the way that these issues should be resolved, and the ways that they should be addressed, and very different styles of addressing them.</P> <P>Russia would like to have a say on all of these key issues because it has old equities dating back to the Soviet era in all of these key areas that it feels could be taken into consideration.  So really what we have been engaged in is more horse trading of dissimilar interest than we have been engaged in interactions on issues of common interests for a very long time now.  We have really gotten into the business of quid pro quos rather than a serious dialogue.</P> <P>So I think, finally, I would like to echo Tom s admonition here that we really think about a different structure in the relations.  What we have also been getting signal, loud and clear from Moscow, is something along the lines that Tom has pointed out.  Moscow has been looking for points of contact and specifically a point of contact in the US establishment with an emphasis on economic relations, not just on the whole security.  It is not just Gore-Chernomyrdin back again.  </P> <P>One of the dilemmas that we have - to be honest about it - is that we have learned over the last several years that the Russian leadership does not operate in the same way as ours does.  Informal networks have a much more important role to play than formal networks when we see this in the tandem between Medvedev and Putin.  But often the official positions of particular figures do not really correspond with their weight in the system.  And so we have to, in some respects, find one of these software plug-ins basically between our two operating systems, just to find a way of talking to each other more clearly.  Because right now, we are in different - we are a Mac and kind of a desktop trying to talk to each other and our systems are not really operating.  I do this as a Mac user who finds - I cannot, you know, transfer my CDs from one to the other.  </P> <P>So what we need is that kind of troubleshooting in the relationship at this point.  And I think I agree with Tom that if we do not get that and we have seen some of these efforts, in fact with Tom s new boss, Henry Kissinger.  But that in and of itself, is a track 2 effort.  But we need to reformalize that kind of process to find a way of talking directly so that we do in fact listen to each other and find some means of reaching a new level of trust.</P> <P>Leon Aron:  Thank you very much Fiona.  Thank you to all the panelists for being on time.  That is marvelous and so we have about 17 minutes for question and answers.  Again, please take a page from the presentations and just be very concise in your questions.  Roy -- we have a microphone somewhere, right?  Just a second please.  Could you identify - all of you, very briefly - yourself before - right here.</P> <P>Roy Lennox:  Roy Lennox.  I represent Arrowhawk Partners, which dare I say, is a hedge fund.  And again, from my more financial perspective, I think one of the interesting things about the timing of the Georgian crisis was that it also marked, I think, the high in oil.  And I know that we are going to be talking about energy later on, but I mean, I think the playing field has changed immensely over the last couple of months.  When you have oil dropping from a $150 a barrel to pushing $50 a barrel this morning, and if we perceive that one of the basis of Russia s newfound strength in the world is based on its natural resources, and if we may argue that some people hope that maybe this is a very brief phenomenon but with the deepening of the world recession, we might not stop at 50 or if not down, we might stay here for a lot longer.  I would say that the playing field has been changed significantly and might actually offer the new administration a new lever in the relationships with Russia.  So I'm just being curious on what the panelists feel, from a political point of view, how the drop in energy prices impacts relations.</P> <P>Leon Aron:  Thank you very much.  Shall we start?  Tom, a few words each, yes.</P> <P>Thomas Graham:  Certainly, the answer to that is we have to wait and see.  The point I would make though is that the financial crisis has really upset all the plans that Russia has made on its modernization program.  Everything that they were talking about at the beginning of this year no longer will work in the real world because of declining commodity prices, because of the global recession that we appear to be entering into.  I think there is still a tendency in Russia, at least in a public commentary, to suggest that Russia is a much better placed than it in fact is.  It would be interesting to see what President Medvedev has to say in Washington over the weekend.  Whether this is leverage for the United States or not, hangs as an open question because we have problems of our own that we are going to have to deal with.  And if you are going to put $700 billion into fixing our economy, that $700 billion you cannot put into something else.  So what happens because of the financial crisis, the collapse in oil prices, is that each side needs to rethink very clearly what its priorities are, how it is going to act on that.</P> <P>The final point I would make though is that if nothing else, for Russia and the United States, this gives us an indication of how the world has grown mutually dependent over the past decade, and that this is a problem that we really need to try to resolve together or we are going to fail separately.</P> <P>Leon Aron:  Yes, please, Andrei on a technical note, we do have to finish at 10:55 to change the panel so that leaves us even less than 10 minutes.  Also, the questions, please speak directly in the microphone, keeping it close.  All of it is recorded and then it is recorded in our site and so it is important that that goes in the system.  Please continue.</P> <P>Andrei Kortunov:  Well, in my view, the decline of oil prices is yet not a manifestation of a much more fundamental trend.  Basically, the economic model that was erected by Mr. Putin and his team and which was very successful for almost a decade has reached the limits of its institutional capacities.  And that is what is important, not just the oil prices as such.  The question is: Where we will go from here?  Is it feasible to imagine that the government, the leadership of Russia becomes serious about changing the format of its economy, investing into human capital, trying to build knowledge-based economy?  Or they will pretend that nothing serious is going on and that oil prices are going to get back at some point and they simply have to wait and see and they have to pour the remaining resources on economically non-efficient systems and structures.  </P> <P>Now, if the decision is made to use this crisis, this cold shower as a signal that something has to be changed in how the Russian economy operates, how the Russian society operates, then it opens opportunities for the United States and for the West that creates additional leverages.  If you are serious about diversifying your economy, if you are serious about knowledge-based economy, Hugo Ch�vez is not going to do that.  You cannot resolve this issue dealing with the Iranians or even Chinese.  The West has no substitution in this case.  Of course, you can still try to draw a line between the United States and Europe but basically you will have to make additional concessions.</P> <P> So for me the question is whether these folks sitting in the Kremlin are serious about what they are telling us right now about the need to change gears and to start structural change in Russian economy.</P> <P>Leon Aron:  Okay. </P> <P>Andrei Zolotov:  I think that the degree to which the financial and economic crisis has hit Russia is still -- I mean basically, it came as a shock to most Russians.  I remember back in June at the economic forum in St. Petersburg, there was this common perception that at the time of trouble in the world economy Russia is this island of stability.  And it was not just the perception of Russians; it was a perception of many foreign businessmen who came there.  And now to realize that Russia is actually hit more, relatively more than many other countries is something that comes very, very difficult to realize and I think it is a very much a humbling experience.  So if that contributes to the humility of which I spoke in my presentation, it is for the better.  So far, I see a lot of attempts to be in denial to basically say America is to be blamed for the crisis and we are still pretty good and basically hiding, trying to have a good face, kind of hiding the true scale of the problem. </P> <P>Leon Aron:  Okay, we have three minutes for questions and answers.  There were two questioners there, right there, yes.  If you could, both of you, could ask your questions one after another very briefly and we will try brief answers.</P> <P>Male Voice:  Sure.</P> <P>Male Voice:  Right.</P> <P>Ira:  Ira, my question is for Tom Graham. I loved your formulation that Russia is no longer interested in integration on Western terms, but I wonder if that was precise.  Was it not what the West offered, cooperation on Western terms, which meant cooperate, issue after issue, by supporting us?  Did we ever offer integration which would have meant some combining of interest, some recognition of valid interest, some way of putting interests together, and is that option really completely foreclosed, the reason why Mr. Kissinger is doing just an attempt at working some of that out?</P> <P>Leon Aron:  Okay, very briefly, Andrei. </P> <P>Andrei:  My question to Tom and to Fiona, not about diagnosis but more about recipe.  And recipe was at least from Tom to appoint someone who is really very high, and important for both sides to manage its relations.  And we have actually had this experience both in Clinton administration and Bush administration.  In Clinton, we have this Gore-Chernomyrdin Commission and in the last eight years or nine years, it has been elevated even higher, the so-called Bush-Putin Personal Commission.  And looks like none of them happen to be extremely terrifically successful.  So the question is probably not so much the problem in the personalities but in the terms at which Russia can be integrated with the West if this integration of Russia with West on Western terms that so probably the question is at the Russian terms.  And Russian terms have been very clearly, as clearly as possible, have been described by both Messrs. Medvedev and Putin.  And this is a recognition of Russian sphere of influence.  So my question is, will the United States, either the outgoing administration or coming new administration is ready to accept the Russian sphere of influence, whether it is the former Soviet Union, Middle East, Venezuela or anything else?</P> <P>Leon Aron:  And all of these in a minute and a half, of course.  Okay, Tom -- anybody who wants -- Tom, Fiona?</P> <P>Thomas Graham:  We get to do this very quickly, right?</P> <P>Leon Aron:  Yes.</P> <P>Thomas Graham:  To answer Ira s question, you have to remember what the atmosphere was in this country after the breakup of the Soviet Union.  We were talking about the end of history, the universal validity of a democratic liberal market system.  And the assumption was that Russia would integrate into that system, and that it would come to understand that its long-term interests were best advanced by accepting that, so it was cooperation very much on the Western agenda.  Where we are now is that if there is going to be cooperation, that you have to take into account Russia s interests as well.  It is going to be a different type of cooperation if we are going to move forward in that.</P> <P>To answer Andrei s question, first on the sphere of influence, the short answer is no.  The problem has been that the Gore-Chernomyrdin Commission, while I think in its inception was a good idea, got over-bureaucratized as it moved forward and then became the political vehicle for two individuals in a way that was not helpful for the overall relationship.  The Bush-Putin relationship, the short answer to that is you cannot manage this relationship at the presidential level, you need presidential interest but the work gets done lower down in the bureaucracy.  And given what is on the plate of the president of the United States everyday, to expect him to put Russia at the top of his agenda everyday I think is unrealistic.  Obama is not going to do it.  And that gets to the point that you are going to need someone down, a little bit lower in the system, who has access to the president, enjoys the president s confidence, can speak authoritatively about his agenda in order to manage this very difficult and complex relationship with Russia.</P> <P>Leon Aron:  Okay, Fiona, you have half a minute.</P> <P>Fiona Hill:  I ll just say I want to agree with Tom on this and picking the person is very important because it gets back to what I said about informal networks.  We need somebody to plug in to the people who are really running the system in Russia, not just into the bureaucracy which does not mirror ours.  So this gets back to that point because that really picks up on what Tom was saying about the shortcomings of Gore-Chernomyrdin.</P> <P>What I wanted to say was really on this issue of the sphere of influence.  If Russia had a sphere of responsibility, that would be something quite different.</P> <P>And I wanted to make a point on the last question about the financial crisis because although we may have gotten concerned about Russia s actions in the periphery, Russia is extraordinarily important as an economic and trade partner still to the region around it and that includes all of the states, even Georgia.  And we have seen that about the hit to the Georgian economy that came from the rupturing of trade relations on Moscow s decision.  Because we look about this economic downturn - and Andrei, I know you will be more than well-aware of this - the regions that are going to be hit first, the places like Central Asia, especially countries like Tajikistan and Kyrgyzstan where all the migrant workers have been in the sectors that have been most affected by the downturn in Russia which is construction and retail.  </P> <P>When I left Moscow at the end of October, I literally saw hundreds of young men from Tajikistan coming back on the flight that was checking in next to me at Domodedovo back to Dushanbe.  I talked to some of them.  They have not been paid and they are being sent back indefinitely.  Forty percent of Tajik GDP was coming from remittances from people working in Russia.  And that is from the Tajik government s statistics.  In places like Uzbekistan, it is probably around 25 percent.  Even Azerbaijan with its oil boom has been dependent for subsistence for many households, from migrant workers in Russia.</P> <P>And this is what I mean about the zone of responsibility.  Whether we like it from a political perspective or not, Russia still has a very important role to play in the states of the former Soviet Union: trade ties, economic ties with Ukraine, all of these things are going to have to be addressed.  When we think about the economic crisis, it is these knock-on effects that we have to think about.  We need to have also a dialogue with Russia about what is going to happen in the rest of the region as Russia slows down and not forget about that fact.</P> <P>Leon Aron:  Okay, thank you very much to the panel.  I think it was a excellent.</P> <P>[No audio till 01:31:21; conference resumes at 01:32:19]</P> <P> <BR>Panel II - Democratization, NATO Membership, and the European  </P> <P>Union</P> <P> </P> <P>Fiona Hill:  Ladies and gentlemen, we are going to start.  We are waiting for Mr. Baramidze who is stuck in traffic and should be here, well, we hope, very soon.  We have left the last place for him.  We had been initially hoping to start with Mr. Baramidze but we will maybe give Taras -- oh, no, here he is.  As Mr. Baramidze is getting seated, I want to ask everyone a couple of favors.  As you can hear from the microphones, we are getting a lot of interference.  Would everybody be willing to turn off their cell phones and Blackberries and every other electronic device you have?</P> <P>Male Voice:  [Speaks away from the microphone].</P> <P>Fiona Hill:  Yes, and actually I think I have one, too, so I better do that.  Also, just for a quick request for our speakers, too, that when they finish speaking, if they could make sure they turn off their mics.  As you know, we probably heard two or three mics going at once.  We are going to try to finish everything - we have 11:10 now - by 12:15 so that we can shift over to lunch and give plenty of time for Ambassador Fried to get situated, and also for us all to get our lunch.  So we essentially have an hour and five minutes for this discussion.</P> <P>As I mentioned in the last panel, we probably have the most contentious set of issues in the bilateral relationship here.  In many respects, at least, certainly the first two, democratization and NATO membership, tend to even outstrip missile defense in the exchange of unpleasantries that sometimes we encounter in Russian and US relations.  And of course, given the crisis in Georgia this August, things have been very much brought into the fore.</P> <P>We are delighted that Mr. Baramidze managed to make it.  It is a great pleasure to see you again.  Giorgi Baramidze has actually been in charge of Georgia s policy of integration into Euro-Atlantic structures and spent a great deal of time working on the EU in particular.  And so we are going to begin with Mr. Baramidze and then move to Taras Kuzio, Petr Gladkov and then end with Steve Biegun.</P> <P>Mr. Baramidze, thank you so much for joining us.  </P> <P>Giorgi Baramidze:  Thank you very much.  Now, ladies and gentlemen, I want to thank Dr. Aron for inviting and giving me opportunity to speak during such an important time for my country.  This is actually the first time I'm at the American Enterprise Institute for Public Policy Research and I'm very glad to be here.</P> <P>First of all, let me congratulate the American people on electing their new president.  We are optimistic that President-elect Obama will further enhance US relationship with Georgia and strengthen support for Georgia and reinforce the transatlantic links that are so crucial to resolving important issues such as European security, Iran nuclear proliferation, global warming and so on and so forth.  I would like to wish the new administration every success and we are looking forward to working with them in the coming years.</P> <P>I have come here today to speak with you about issues that are crucial to the future of my country: democratization and integration into NATO and the European Union, and certainly, the occupation of our territories.  The 21st century will likely be remembered as a time of unprecedented global changes.  Today, the entire planet faces a massive financial crisis and political instability throughout the world which is further testing the mettle of the world leaders.</P> <P>As you know, Russia has done its part to contribute to this instability by contradicting and abrogating internationally recognized rules of civilized policy.  Russia s aggression against Georgia clearly demonstrates its ambitions aimed at dividing Europe and Euro-Atlantic community and defeating democratic values.  What was once provocative rhetoric has today become standard policy for Moscow.  Let me recall the statement of Russia s Minister of Foreign Affairs Sergey Lavrov at the Bucharest Summit, Russia will do everything to prevent Georgia from NATO integration.   This was no empty promise.  After all, the most recent brutal aggression against Georgia was the calculated step in Russians long-standing bullying policy.  Recent statements by Russia s president, Medvedev, are further confirmation that Russia s policy extends far beyond Georgia s borders, representing a drastic global problem for all of us.  Russia is trying to demolish fundamental principles of international law by imposing new brutal rules of the game.  After having occupied a large part of neighboring sovereign state, he proudly exclaimed, We will not back down in the Caucasus. </P> <P>We are deeply concerned that despite strong support from the West, Russia s military forces continue to occupy Georgian territories.  It is abundantly clear that the war is not over for several reasons.  Almost one-third of Georgia s territory, as I have said, is still occupied by Russian forces.  Russia is still in violation of the so-called Sarkozy six-point peace plan, mediated by the EU s presidency.  Russia has refused to withdraw its military forces to the lines held prior to the August 7, and has engaged in aggressive military buildup within the occupied territories.  Russia continues to obstruct the Geneva peace talks.  </P> <P>The Georgian regions of Abkhazia and South Ossetia continue to suffer ethnic cleansing by Russia and its proxies.  Russia is attempting to legalize ethnic cleansing through its recognition of Georgian regions of Abkhazia and South Ossetia as independent states.  Human rights of the people living in the occupied territories are violated on the daily basis.  Russian forces have isolated almost 50,000 ethnic Georgians living in Gali region of Abkhazia.  They are living in conditions similar to the concentration camps - deprived the right of the free movement.  People living there are being killed and raped and kidnapped everyday.  As basic human rights are violated there everyday, no one stops these atrocities.  </P> <P>Russia continues to misinform and misguide the world community, not to mention its policy of blackmailing.  Because Russia did not reach its main objective to topple the democratically elected government of Georgia, to subdue Georgia under its influence and assert control over all of Georgia s oil and gas pipelines, suggests that Russia will continue to have Georgia in its sights and to eventually open full-scale military aggression against Georgia once again.</P> <P>But despite all of the difficulties and the continued military aggression, Georgians understand that the strongest response is reinforced commitment to democratic development.  Georgia s government has tirelessly combated corruption and reformed our judicial system, police, education, health care system, and many other institutions.  For this work, the World Bank has recognized Georgia in 2006 as a top government reformer worldwide.  But the more important product of this work is apparent in Georgia s GDP per capita which has increased three times since 2003.  The state budget has increased seven times over this same period.  NATO and EU experts have confirmed and praised these achievements.  And today, a new wave of democratic reforms is already in the full swing of implementation.</P> <P>We continue to radically reform our judicial system to make it more independent by instituting life tenure for judges and adopting trial by jury.  We are fostering pluralism in media and civil society further, giving opposition parties a greater influence over public broadcasting.  The president of Georgia also announced the series of measures giving opposition parties more opportunities to have a significant role in our reconstruction and defense planning.  Despite these achievements, we understand that much more work lies ahead of us to contradict brutal Russian aggression with an even stronger democracy.  But Georgia, regardless of its adherence to democratic principles, cannot sustain Russian aggression on its own.  The consistent and strong support from the international community is as crucial as ever.</P> <P>We appreciate and value very much the assistance we receive from the United States.  Moreover, US support for Georgia s integration into both NATO and the European Union is crucial.  We are grateful to European Union to have earned its strong support.  We are determined to continue close cooperation with the European Union in the framework of the European Union Neighborhood Policy Action Plan.  We believe that relationship between Georgia and the EU will deepen further in the future as we look to introducing visa facilitation with the ultimate goal of establishing visa-free regime with European Union, securing a comprehensive free trade agreement and launching negotiations on EU-Georgia Association Agreement from next year.</P> <P>We also hope that EU will further strongly support the conditions set in the six-point ceasefire accord.  Therefore, it is important that the EU Mission monitors have access to the entire Georgian territory, of course, including occupied regions of Abkhazia and South Ossetia.  Their mandate should transform into the full-fledged ESDP Mission, of the peacekeeping mission, yet aiming for the complete resolution of the conflict between Georgia and Russia and the secure, dignified return of internally displaced persons and refugees to their homes.</P> <P>We welcome the Geneva peace talks and believe they can provide a durable solution for the conflict.  However, the Geneva process should become a functional format for negotiations.  Russia should not be given the right to sidetrack this process into another deadlock.  Furthermore, UN-NATO strong policy on non-recognition of the independence of Georgia s sovereign regions of Abkhazia and South Ossetia should show Russian leadership and its proxies that the prospects of their policy are very meager.</P> <P>I would like to underline that all the instruments provided by NATO were very effective and served as a blueprint for deepening Georgia s democratic security and economic reforms and its relations with the alliance.  It was a significant positive input to prepare our country for the next step towards the alliance membership which is Membership Action Plan.  NATO being a performance-based organization, and Georgia s performance being positively assessed by numerous NATO missions, granting MAP to Georgia at the December ministerial would be a strong implication on Georgia s security.  </P> <P>It is very important to acknowledge that the integration of Georgia into NATO is not tied to only our government.  This is a firm and irreversible choice of Georgian society because we share history, values and culture with the rest of the Western world.  This choice is reflected in the unity of all major political parties in Georgia.  The plebiscite conducted in January of this year confirmed that 78 percent of Georgian population supports NATO membership.  Integration into the alliance can be seen as a guarantee of stability not only for Georgia but for whole Eastern European and Black Sea region.  Furthermore, it will be positive sign to other nations in the region that NATO is a truly value-based organization that encourages and rewards the development of democracy and it will significantly contribute to the strengthening security and democracy in this part of the world.</P> <P>Today, we can say that despite our difficulties, Georgia is a vibrant and functional democracy in a part of the world that has little experience of it and that today needs this more than ever.  Our government knows that we must continuously earn the support of our Western friends - nothing is granted - by rebuilding our democratic, legal and economic and defense reforms.  This is what it means for us to be reliable and predictable member of the democratic community of nations.</P> <P>Finally, we made our choice to join NATO.  The international community welcomes this choice and Georgia s neighbors should respect it.  No outside power, neither Russia nor any other state should have an exclusive sphere of influence over the sovereign country.  No state has the right to threaten, pressure, or block the sovereign choice of Georgia to join the transatlantic family.  Despite the fact that the world is facing many problems, we are sure that promotion of the democracy will bring success of the entire world and we believe that the time will come when Russia understands that it is better to be part of the family of the democratic countries rather than to be enemy of it.  Thank you very much for your attention.</P> <P> Fiona Hill:  Thank you, Mr. Baramidze.  We will now turn to Taras Kuzio who will give us a perspective from Kiev via Washington of course.</P> <P> Taras Kuzio:  -- via Washington, Toronto in Canada, yeah, maybe via London as well.  Thank you for inviting me, Leon, again.  I m not sure I would give the same kind of view point as government ministers from Kiev will be probably more circumspect but I will try to give a very honest update on domestic issues and how they interrelate with foreign policy concerns.</P> <P>Firstly, especially as we are about a week away from the fourth anniversary of the Orange Revolution and I remember distinctly this room during that revolution where Ukrainian diplomats did a vosstaniye, did an uprising against the government at that time - in this very room - two days after the second round.  Let s look at the Orange Revolution gains before we look at the disappointments: free media, free elections - probably too many - political competition which is not violent, very brusk political competition.  Sometimes it gets out of hand like yesterday in parliament.</P> <P>The opposition is certainly not marginalized like it was in Georgia, and let us be honest; the opposition Party of Regions came first in both the 06 and 07 elections, and Viktor Yushchenko won 52 percent as opposed to Mikhail Saakashvili s 96 percent in presidential elections.  Ukraine also moved to a parliamentary constitution, very different to Georgia again.  After their revolution, Georgia moved to what one academic has called hyper-presidential constitution.  And I think moving towards a parliamentary constitution obviously has brought many problems; it was very imperfectly drafted, but it certainly brings Ukraine closer to Europe.  The post-communist countries that have developed better democratically have adopted parliamentary systems.  The autocratic systems and the CIS tend to be super-presidential.  It also fits more in line with Ukraine s national identity and regionalism and it also makes Ukraine very different from Russia which in political culture Ukraine is.  </P> <P>What does this mean in terms of the positives?  Well, it firstly means that Ukraine continues to diverge radically from Russia s trajectory.  And this did not just begin with the Orange Revolution.  It began under Putin 1 and Kuchma s second term.  Secondly, it adds to more confusion on the part of Russians looking at Ukraine.  They have a problem of trying to understand Ukraine because of national identity questions but also because they have a democracy, a very messy democracy on their border which actually looks not like a democracy from Moscow s point of view but like chaos.  </P> <P>What are the downsides?  Well, the downsides are that we have in effect, I would say -- could you imagine in the Western country if a political leader had five percent ratings at the end of his first term?  What would that be called - lame duck or is that beyond lame duck?  Well, Viktor Yushchenko s ratings are just below five percent and he still calls an election during a global crisis.  I would love to know his strategists.  Eighty-two percent of Ukraine s have no confidence in the president; the majority blamed him for the crisis not the government and three quarters of Ukrainians do not want him to stand for a second term.  It is not a good kind of survey of your first term.  In effect, Ukrainians are saying, You have failed as a president.   I think it is very difficult to see how you can revive those fortunes in the last year which President Yushchenko is trying to do by trying to take charge of dealing with the global crisis and hoping to gain political dividends, but I think it is a too little, too late.  </P> <P>The two, I think, worst probably downfalls but are the most difficult - just look at the transition countries of central and eastern Europe like Romania and Bulgaria -- the two biggest problem areas are rule of law and corruption which really we have not seen much progress or any progress at all.  Rule of law is pretty much abused by all political forces and of course, Ukraine s elites still remain beyond the law.  I always joke that the only place where Ukraine s leaders have gone to jail are the US and Germany, never Ukraine.  And no wonder that those who fled to the US after the revolution went back to Ukraine very quickly because, here, you go to jail as we know with Pavlo Lazarenko in California.</P> <P>Let s look at how this interacts with foreign policy - Russia and the CIS -- well, firstly the good side and then the bad side.  Good side is that CIS integration with Russia is a no-no now in Ukraine, you never read about it.  It is never raised.  I cannot remember the last time someone even raised the issue of the CIS Single Economic Space.  It is dead.  Even the Party of Regions supports Ukraine as a neutral country, as opposed to integrating into CIS.  So looking east is no longer an option for even east Ukraine s oligarchs.  </P> <P>The EU free trade agreement is far more interesting to them than CIS Single Economic Space, particularly when Ukraine was only ever willing to sign up to the first blank of a three-point Single Economic Space Agreement, i.e., the free trade area and not to the common currency and common customs union.  So that is an important reason.  We can thank President Putin for in effect raising the price of gas and therefore, turning east Ukraine s oligarchs away from Russia because they no longer can be gas junkies and to look westwards.  </P> <P>Thirdly, with the growth of the price that Ukraine is paying for gas, maybe next year the price will be in the region of $250 up from $50 four years ago, and the decline in the price of gas overall, in about two years time, Ukraine will be paying the so called market price of what central-east European countries are paying today.  Slovakia for example is paying $340 this year.  That means with Ukraine s price going up and the other price going down, Ukraine will absorb those price increases relatively well.  Of course, it has to get through the global crisis but it has absorbed them without giving up the gas pipelines which is important unlike Belarus which had to give up half of them.  Of course, that has always been a Russian objective - to get control of Ukraine s pipelines which export 80 percent of Russian gas and even that will be still 60 percent when the northern pipeline is built.  Those are the good sides.</P> <P>On the downside, we have an increasingly, of course, assertive Russia.  Fiona has already talked about that particularly post-Georgia.  The question on many peoples minds, in both Op-Eds and in policymakers minds: Is Crimea next?  I would just like to point out that not only is Ukraine not Russia s as Kuchma wrote four years ago but the Crimea is not South Ossetia and Abkhazia and it would be a different scenario if anything was tried in Crimea or Sevastopol.  But at the same time, the EU has sent precisely the wrong signals about this issue by rushing; it is like they are in a panic to rush - the Germans and the French - to restart negotiations with Russia on a new agreement and in effect, forgetting what happened a few months ago is sending precisely the wrong signal about potential border issues.</P> <P>Of course another problem area is intense opposition from Russia to NATO enlargement, particularly, I think more to Ukraine even than to Georgia.  We have extremely poor Russian-Ukrainian relations.  Every day, there is literally a slanging match between both foreign ministries, and the Ukrainian Secret Service pretty much every day talks about various Russian plots and subversive activities.  </P> <P>Another which has not really been mentioned, the downside of the Georgian crisis is that GUAM and the Community of Democratic Choice are pretty much dead as a consequence of the Georgian crisis.  Only two of the four GUAM countries even supported Georgia in the crisis - Ukraine and Georgia, of course but not Moldova and Azerbaijan.  And even there, even within Ukraine, that was an issue that was not really wholeheartedly supported apart from the president.  For example, the Tymoshenko Bloc said, This is not our war.   The major problem here is not really being Georgia because the GUAM issue has been declining for many years.  The main issue really has been that Ukraine has lacked leadership.  If GUAM has to succeed, it has to have Ukraine leadership.  If we do not have a leader for domestic policy, you are not going to have a leader for foreign policy and for regional policy.</P> <P>NATO - well, just to give some background, Ukraine has been the most active participant in PFP ever since 1994 in terms of countries from the CIS and is today involved in every NATO operation - unlike many NATO members - including in Afghanistan with police mission.  At the same time, Ukraine, I think has missed its opportunity to enter a MAP.  The best opportunity was in Riga in 2006 when there was not as much opposition from the Germans and French and there certainly was not a perception that President Bush was a lame duck president.  That was missed and the onus for that is purely on President Yushchenko because working in Washington at that time, I distinctly remember the urgency of trying to get the Orange forces to create coalition and government by the summer of that year so that a MAP could be pushed and for President Bush to come to Kiev in June of 06.  In fact, he only came in April 08 and by then, of course, it is very different.</P> <P>I think the problem with NATO is that I cannot see much progress happening in the next year or so.  And I think we really are back in some way to square one, back to the outcome of the next presidential elections.  Why do I say that?  Well, obviously Ukraine is not going to get a MAP in December.  I mean the irony is that President Yushchenko declared pre-term elections in the same weekend as the NATO review conference - originally - not exactly a good timing.  And the elections now are not going to be probably until late January or February which means the coalition and government are not in place until April.  It also means 2009 is presidential election year.  Again, NATO is not going to be really raised that often because it is not really a popular issue for candidates.</P> <P>Therefore I just really cannot see how one can see much progress and therefore, I think President Yushchenko has missed the boat on NATO if we assume he is not going to be reelected.  What that means therefore is that if you look at Ukrainian opinion polls, the only person that in poll is seen to be able to defeat Yanukovych in the second round is Tymoshenko, not Yushchenko.  If he goes into second round with Yanukovych, he loses according to Ukrainian polls.  That means, again, maybe the outcome of Ukraine s future NATO perspectives relies on a victory by Tymoshenko in the presidential elections.  And then we can talk about maybe resuming maybe a slower track as opposed to the Bush policy of more fast track NATO perspective after the January 2010 presidential elections in Ukraine.</P> <P>I really do not have much time about EU because there is nothing much to really talk about, just to say that the strange thing about the EU is just that Ukraine is the only country seeking membership which is defined as a free country by Freedom House.  Turkey and the western Balkans are described as partly free by Freedom House and may have membership perspectives.  Ukraine, today, despite all of its instability, too frequent elections, is no different and no worse in its evolution than Romania and Bulgaria for example or Slovakia in the late 1990s before they obtained membership prospectives.  The battle again for rule of law and corruption in Romania and Bulgaria happened after they obtained prospectives in 1999 not before, and of course in Bulgaria we still have many problems.</P> <P>Just looking ahead and I will finish on this, Fiona, I know I m running a bit late, looking ahead to 2009, 2010, I think that potentially with the Obama victory, we have an improvement on transatlantic relations which I think does help Ukraine s movement towards EU and NATO membership.  I think that it has tended to be better, and progressive, when transatlantic relations have been better.  Maybe this will, for example, blunt some of the opposition in Germany to NATO enlargement or EU enlargement in particular, because of the need to have good relations with the new US administration.</P> <P>The issue of European Union is still something on the cards, there are still no membership perspectives but, somehow, I m relatively optimistic that that is something that has to be resolved sooner or later.  I think this is more a question of internal EU problems than Ukrainian issue.  Because of Ukraine s geography, it just seems it cannot be forever ignored on these issues.  Unfortunately, Ukraine had the Orange Revolution at the same time that the EU went into crisis over its constitution and EU enlargement fatigue which offset the fact that EU expanded to Ukraine s western border.</P> <P>My own view on NATO, therefore, is that any potential NATO membership has to be more evolutionary now.  The revolutionary approach failed after the Orange Revolution, so therefore we are looking at potentially moving towards NATO in the next presidential term, 2010 to 2015, maybe with MAP at the beginning and membership at the end.  If that was to take place, think of it, Ukraine would have then by 2014 gone through 11 yearly action plans.  Now, action plans were introduced specifically for Ukraine 2003.  They pretty much have 95 percent of MAP, there is just one word missing.  So Ukraine would have been the longest in this process but maybe that is the only way I can see in moving ahead.  On that, I will finish.  Thank you.</P> <P> Fiona Hill:  Thanks, Taras.  And we will turn over to Petr Gladkov.</P> <P> Petr Gladkov:  Thank you, Fiona.  I think that the major topic of our panel as it is on the list actually boils down to the relationship of Russia and the former CIS countries because these relationships actually play extremely important role for the policies of those countries starting to join the NATO or European Union or whatever to go beyond the board of the CIS and the so-called Soviet influence.  To quote President Putin about the collapse of the Soviet Union, rephrasing it, we can say that whoever has no regrets about the CIS has no heart and anyone who wants to keep it in the existing form has lost his mind.</P> <P>Today s realities in the world and the post-Soviet space show that there are profound and contradictory processes, cutthroat battle for influence and players from outside - especially the United States and China - are striving to be present there.  The role of Russia in the region has significantly declined, and the region itself has become a place of harsh geopolitical competition.  Moscow and Washington are trying, on the one hand, to put each other out in order to gain control over the energy sources and routes of transportation.  On the other hand and at the same time, they collaborate there to prevent destabilization of the region, prevent it from falling into the hands of Islamic extremists or prevent the growing influence of China in the region.</P> <P>As a result, the former Soviet space remains unstable, divided inside and vulnerable on the outside.  The states that are located there and their elites are held hostage to confrontation to the great powers.  And this confrontation renders as almost impossible their normal development and transformation into fully-fledged independent states with their own national interest and priorities.  Most of them have formed the view that successful and prosperous future for them is possible only on condition that they break out of the Eurasian border and break out of the post-Soviet space.</P> <P>As a result, some of them aim for presence in NATO, others the EU, others try to directly become a strategic partner of the United States, yet others want to enter the world market for energy and thus, move on to other higher geopolitical league.  There is the former Soviet space -- sees the realization of not the long term strategy but rather an impulsive reactive policy of the great states that use the region in their favor as well as policies of survival of the local elites who try to take advantage of technical improvisation of the foreign players.  Such development is dangerous in terms of promoting and protecting the national interest of Russia and also destroys the basis for the establishment of strategic stability in the neighboring space.</P> <P>For all the importance of relations with the US, EU, China, et cetera, development of a balanced and long term foreign policy line towards the post-Soviet countries should be the foreign policy priority number one, of Russia.  The policy of Russia towards the near abroad must be based to my mind on first, the complete abandonment of any manifestations of imperialist aspirations, ambitions, the older brother syndrome, et cetera, not only in politics but in rhetoric as well.  After all, Moscow is often annoyed not by the United States policies in itself but by the rhetoric used by Washington.  Words sometimes make wounds deeper than this actually and we have been witnessing it too often.</P> <P>Secondly, it must be assumed that the main advantage and difference of Russia as opposed to the US, EU and all other players from the outside is that it is the only country that benefits from the transformation of post-Soviet space into one of the major centers of the world politics.  To the other players, Eurasia is merely an energy source and one of the forefronts in fighting terrorism for all the post-Soviet states including such countries as Ukraine, Kazakhstan and Azerbaijan.  Inclusion into global economic and political processes is possible to my mind, I may be mistaken, but to my mind, my strong opinion is that it is possible only through the benevolent attitude of Russia towards it.  But on the other hand, Moscow should not blackmail the local elites with its capabilities.  It should rather help them to reach the higher level to get to the higher league of world politics.</P> <P>Third, instead of blatant intimidation of activities of the CIS, Moscow needs to enhance the real links between countries in the region.  The current situation where a number of its neighbors in fact are in a state of small cold war with each other does not favor the interest of Russia because they undermine both regional and national security and in fact reduce Russia s influence in the region.  Russia must actively participate in any organizations that unite its neighbors even if they were not initiated by Russia or could even be a potentially unfriendly character.  The post-Soviet space is a critical area of foreign policy interest of Russia - nobody doubts that and neither Washington nor Europe could not but recognize this fact.  But this does not mean that like, say, 15 years ago the space should be simply given to Moscow.</P> <P>The heat of competition in the modern world is growing rapidly and Russia must be an attractive model for its neighbors - a democratic country with a tolerant political culture and effective public system and the foreign policy that gives its neighbors more opportunities and faster than offered by others.  Russia must be such a model that the people of the neighboring countries would require their leaders to focus on it rather than seeking protection, models and investment and encouragement from thousands of miles away.  </P> <P>Another extremely important factor in determining the state of affairs in the post-Soviet region is that the superpower states largely ceased to shape the global agenda and the agenda of the developing of this region by becoming hostage to the policies of smaller countries and regional conflicts.  And the US-Russian relations are a typical example here.  Their content has long been defined not by the issues of bilateral relations - by external third factors whether it be Abkhazia, South Ossetia, Kosovo, Iran, or Ukraine.</P> <P>Moscow and Washington have long since stopped to discuss their political agendas, what they really need.  Instead all the energy is devoted to decision of the foreign policy conflicts in which they were caught for one reason or another.  A similar pattern is emerging in the relationship between Russia and the United States while Russia itself has become the main theme of relations between the United States and the European Union.  Today, a third-rate country can create an explosive situation following the logic of which the primary players are moving into state of confrontation, cold war, which can shortly bring forth the hot war should carte blanche be given to the hot heads on the both sides.</P> <P>Fortunately in the case of Georgia, that did not happen.  Again, I may be mistaken, that the prevailing view in Washington now is that the main mistake the Georgian leaders have made was not so much the desire to return in an armed way the separatist provinces but its defiant unwillingness or inability to establish civilized relations with Russia.  And no one will believe that; they should do that themselves.  And again, I think that no American soldier will ever be sent to protect Georgia in the event of military conflict with Moscow.  And NATO even without Georgia - not disparaging Georgia - has quite a handful of problems including those with Russia.</P> <P>Actually, picking up on what had been said on the previous panel, I would say that actually it seems that all the talk about the possibility of global conflict does not stand up to scrutiny.  In today s world, there is no basis for this conflict, there is no global confrontation and I see no reason for its appearance.  Talking about the likelihood of such a collision I think leads to the fact that confrontation helps to gain political points.  It could help political journalistic expert careers and is much more difficult to make a career appeasing tension, not to mention friendship from the other countries.</P> <P>The irony of the situation in the Caucasus is that the Georgian leadership ran up exactly what the White House had told Russian leaders, namely to protect their interests in the most rigorous and tough ways.  Russia treated this in purely American ways while Georgia has started to resemble to Moscow what small and starving Cuba has been for the United States for decades - permanently incriminated -- Washington in their aggressive intentions and using any excuse to escalate the tension and accuse the large neighbor of its imperial ambitions.</P> <P>However, all is not that easy.  Russia has certainly good opportunity not only to become the winner of the conflict in the Caucasus but also to enhance its image as a country that thinks and acts strategically and is capable of effective participation in addressing major international issues.  All of a sudden however, Moscow committed a number of errors.  To act like America, Russia had to be either strong or work smarter and much more delicate than the United States.  And the fact that you want to press Georgians in Russia does not mean that it needs to be done, like it was in Russia recently.  </P> <P>I generally believe that the actions of the governments must profit both the people and the country.  Unfortunately, recently, Russia has proven to be rather inhospitable to people from outside and people, again, were taught the xenophobia and intolerance lesson.  The lack of attractiveness of the current Russian model of development has become even more apparent to many foreign observers and as well to the countries that belong to this post-Soviet space.</P> <P>And the final words about the crisis, I think that probably the crisis helps Russia to somehow change its attitude towards its neighbors and towards the citizens of the neighboring countries that work inside Russia and that bring back major parts of the national product of the countries they belong, so lots of our hopes lie now in the crisis because crisis provides a lot of opportunities for a smart leader.  Thank you.</P> <P> Fiona Hill:  Thank you, Petr.  Steve.</P> <P> Stephen Biegun:  Thank you, Fiona, and thank you, Leon, and I would try to sum up these three topics - NATO membership, the European Union and democratization.  And I will spend a little more time talking about the third one since that one is on the agenda but it has not had a lot of treatment.  </P> <P>I m aware that the comments that I m about to make are probably going to sound fairly pessimistic, and I only want to say that I m not as pessimistic only that I am dealing, as Fiona said, with some of the more intractable issues in the US-Russian relationship.  And also they go to questions of architecture and I do think we have to question the architecture of our relationship at this juncture with new governments in both countries to make sure that is best designed to produce good relations.  I do have some optimism on the US-Russian relationship.  I m going to save that part of my presentation for the final panel today.</P> <P> On the issue of NATO membership, we have talked about Ukraine and Georgia but I think we are leaving at least one party off the table which is Russia as well.  And I m going to start with Russia and its engagement with NATO.  The Clinton administration in its time and this administration in its time have both attempted to set up an architecture for engaging Russia with NATO - the Permanent Joint Council under President Clinton, the NATO-Russia council under President Bush.  And I expected there will be a temptation with the incoming administration to do the same.</P> <P>I have even seen one of the top advisers on Russia openly discuss the question of membership for Russia in NATO.  I have to say that it seems like we keep trying to fit a shoe to the foot.  It did not fit first time, it did not fit the second time, and I would caution against trying the third time.  It may not be the shoe, it may be the foot.  When I say that, I am questioning the way that the alliance has contorted itself to bring Russia into some of the fundamental considerations of NATO.  I do think it has contorted itself and I think the alliance has tried to become too many things including the chief venue for Russia s relations with the democratic West, with the West, with Europe, with the United States.</P> <P>We put Russia in an uncomfortable position where it is constantly reminded that it is close to the decisions but unable to participate in them.  That constant reminder is not healthy, in my view, for the US-Russian relationship.  We have them in this straddle, not quite in and not quite out.  And in the process I believe we have diminished the role of other institutions in Europe, including initially the OSCE, which unfortunately may be past the tipping point, but also the European Union where we have institutionalized the confusion and even a friction over the respective roles of European Union and the NATO in Europe and in its relationship with Russia.</P> <P>When it comes to Ukraine and Georgia in NATO, I think we have to be pragmatic.  Objectively looking at the results of the Bucharest summit, I do not believe President-elect Obama will be successful at least early on in gaining full MAP membership for Ukraine and Georgia, even though he has been unequivocal on his commitment to do that as has Vice President-elect Biden.  Instead, I think we do need to look to the Bucharest communiqu� for a road map of how we pragmatically go forward and that involves a couple of things.  </P> <P>In Ukraine, the issues of concern were the stability and democratic trajectory in part but also the lack of a consensus in Ukrainian society on whether or not to join NATO.  Those are very legitimate issues that NATO does have to take into consideration as it works through a cooperative program with Ukraine.  But what we should do is we should really devote ourselves to attacking those fundamental weaknesses.  We should not try to force the Ukrainian people to want to get into NATO.  We should do everything we can to develop the Western orientation, the European orientation of Ukraine, in order to make it a more natural and comfortable candidate for NATO.</P> <P>As bitter as many of my policy prescriptions will probably for some in Russia and as patronizing as the comment I m just about to make is likely to be greeted, I think this is in the best interest of Russia and I think it is in the best interest of Ukraine for sure.  If Ukraine is Western-oriented, Russia remains Western-oriented.  If Ukraine stays in its unhealthy straddle between Russia and Europe, it is not good for Ukraine and if Russia has the constant temptation to intervene in Ukrainian affairs and pull Ukraine in an orbit that is not healthy for Ukraine or Russia, then I think it is problematic for the future peace and security of central Europe.</P> <P>In the case of Georgia, the concerns of the Bucharest communiqu� were twofold, again, the trajectory of democracy and also the territorial disputes with Russia in Abkhazia and South Ossetia.  Since the Bucharest summit, we have had an even grimmer reminder of the consequences of those territorial disputes and those tensions and, again, pragmatically we have to attack these two things with vigor.  In the case of democratization or the quality and stability of the government of Ukraine, we simply have to engage more and more closely both with Ukraine and Georgia.  We should leave nothing off the table in terms of engaging at a governmental level, at a non-governmental level and cooperation with bilateral trade and investment.  </P> <P>In short, we have to use everything in the toolbox to draw these countries closer.  It maybe in the end that MAP membership is delayed for a year, for years, for some time to come, but we can create de facto on the ground the conditions of stability and Western orientation that are not only healthy for Ukraine and Georgia but are ultimately healthy for Russia.  </P> <P>A last word on NATO enlargement - I fear that we are succumbing at this point to another debate about the legitimacy or the appropriateness of the enlargement of NATO itself.  I think it is important for us to do a short historical walk backwards to remember what a tremendous accomplishment the enlargement of the alliance has been and what stability it has brought to central and eastern Europe.  The enlargement of NATO subsumed ethnic disputes that could potentially have erupted in Europe over the Hungarian populations spread across Slovakia and Romania as well as Hungary.  It subsumed nationalist tendencies in many countries.  It closed off, once and for all, any renegotiation of the World War II settlement over the borders of Czechoslovakia or the Czech Republic now or of Poland.  It also provided a venue for the breaking of the Czech Republic and Slovakia to happen in a peaceful and democratic means.  It fortified societies and countries like Slovakia against the more dangerous and dark tendencies of nationalist leadership.</P> <P>In short, it has brought peace and stability to central Europe.  Now, I do not expect Russian policymakers to ever send us a thank you for having created conditions on the borders of Russia that are far superior to what might have been the case if what had erupted in the Balkans also likewise spread through other parts of central and eastern Europe.  But I do somewhat find historical Russian comments about the necessity that the enlargement of NATO or its approach to Russia s borders poses a threat in any way, shape, or form to Russia.</P> <P>First, there is no policy planner and no policymaker of substance in Europe or the United States who is engaged with NATO who has ever contemplated a planning process that would involve some form of threat to Russia.  Admittedly, the enlargement of the alliance does close off Russia s latitude for action in certain respects, but again I believe that is in Russia s best interest.  </P> <P>Second, as Russia talks about the threatened encirclement by NATO as it approaches Russia s borders, it seems to conveniently forget a 69-year-old piece of geography.  Norway has bordered Russia since the inception of the alliance.  They have a stable and healthy relationship between two mature countries.  They trade and invest in each other s countries and Norway poses no threat whatsoever to Russia.  NATO countries on Russia s borders are not a threat to Russia.  In fact, they bring stability and opportunity for both countries.</P> <P>On the European Union - I actually think the European Union is the critical venue for US-Russian relations and for European-Russian relations in the coming administration and possibly in the coming decade.  The Europeans have a very robust agenda with the Russians on issues like energy, on trade and investment.  Generally, the European Union, I think, can be a very positive force in the development and engagement with Russia into Europe.  That said, the European Union has to be very careful not to lose its convictions or conveniently leave its principles at the door when it engages with Russia.  Dependency on Russian energy should not mute the voice of Europe when it comes to issues of the quality of democracy or the treatment of Russia s neighbors by the Russian government.</P> <P>Likewise, I think Ukraine needs to be a very central player in the future of the European Union and the European Union must continue to engage and pull Ukraine toward the West in a way that even NATO should not or cannot do right now toward the goal of eventual membership.  Georgia, more of the same should be fully integrated in all of the developmental and external aspects of the European Union with the ultimate aim of membership in the European Union and these things can be years off and even many years off, but we have to set the direction in place.  In the case of Georgia, there is a corollary with Turkey that I do believe Turkey has to have its status with European resolved before even as a matter of geographic approach that Georgia can be fully integrated but I think that is just going to have to be a matter of time.</P> <P>On the part of the European Union, the European Union actually still at the same time it is doing this, has to resolve some internal conflicts.  It has to decide what it is going to be whether it is going to be an exclusive club that keeps others out or whether it is going to be an inclusive club that brings others in.  This is a struggle for the soul of the European Union that continues to this day and the rejection of constitutions, the turmoil in economic cooperation in the midst of the current crisis, European Union is going to have to step up to the plate to play this role, but as I said a moment ago, I do believe it is the central institution for US-European relations going forward.</P> <P>Lastly, I have a couple of words on democratization.  Democratization is important in all three of these countries: in Russia, Ukraine, and Georgia.  In fact, it is the common denominator that is likely to establish the type of relations we have with all three countries.  And you can say that either as a condition which seems to be less preferable, that is, the countries have to be democratic to have that relationship with United States, or you can simply observe it as a matter of objective fact that the less democratic and the more illiberal these societies are, the less likely their policies are going to contribute to closer integration with the United States and with Europe. </P> <P>A couple of conclusions - I think United States needs to continue to play this strong and leading role in NATO.  I m not talking about United States stepping back in any way, but we need to subsume it a little bit more in other institutions in Europe and let them step up.  I think we need to continue the enlargement of the alliance.  We need to push and continue to push for MAP membership for qualified members.  To abandon the precept of NATO enlargement would be to accept the malicious and distorted view that NATO expansion is somehow a threat to countries in Europe.  </P> <P>We need to disentangle Russia a little bit.  I m not talking about throwing Russia out of NATO, but I m talking about downplaying the NATO as the venue for US-Russian relations and stepping up other places including EU, EU-Russia, EU-US-Russia and also other multilateral and, of course, bilateral US relations with NATO.  In short, I think the alliance should have its profile diminished in Europe but I think the role of it should be increased.  The European Union needs to strengthen its position in Europe, engage as closely as possible with us and then with Russia.  </P> <P>And lastly on democratization, I think we need to probably talk a little bit less about it but do a lot more to achieve it with all three of these countries.  I do think that that will create conditions for the best external policies.  It will create conditions internally that draw all three of these countries closest to the institutions which the United States and Europe have created in Europe.  Thank you.</P> <P> Fiona Hill:  Thank you very much, Steve.  The final comment that Steve made there was very interesting because in some respect, it actually does echo what President Medvedev and other Russian commentators have been saying, that they would also like NATO no longer to be just a focal point of the relationships within Europe.  So maybe, although you think you were being pessimistic perhaps you have given us some optimism that you could pick up on the last section on ways to move forward, that we seem to be actually in many respects talking along the same lines.  It is something that has also been said by some of our German colleagues that the fact that European Union enlargement has sort of ground to a halt has put too much of the spotlight on NATO and then by default the military aspects of NATO which were never intended to be at the forefront of NATO enlargement in the way that you very eloquently described even going back to the 1990s.</P> <P>Actually, we have ended that presentation surprisingly on a more optimistic note.  We have only about five minutes before Leon Aron is going to make us run for our lunch.  So what I think I will do is just pick three people who have not asked questions before to give some questions.  I can see Vladimir Socor, this gentleman here and this gentleman here.  And I m sorry if I did not see anybody else behind the pole and if you could say your three questions - yes, I got you, sir - very quickly and then I will just ask the panelist to respond.</P> <P>Who has a mic?  Mr. Socor is right here at the back.  Could you pass the mic to Mr. Socor first and then sir, if you would take it and then we have this gentleman who is sitting over here.</P> <P> Vladimir Socor:  Thank you.  Vladimir Socor, Jamestown Foundation.  I would like to applaud Steve Biegun s suggestion about de-emphasizing the NATO-Russia council.  However, I would like to take exception to the idea of somehow compensating for such de-emphasis by transferring that dialogue into the EU framework.  In fact, NATO and EU face a common problem with respect to Russia and that is Russia s creeping entry into the debates; first, as voice, and potentially, as vote in the internal debates of both organizations.  This is a challenge that both organizations must avoid.</P> <P>And related to NATO again, no speakers mentioned the problem of NATO s misadventures in Afghanistan.  Living as I do in Germany, I m very sensitive to the fact that involvement in Afghanistan has become a profoundly divisive issue in NATO among European member countries and between the two shores of the Atlantic.  Moreover, there seems to be no viable strategy, either exit or victory for NATO in Afghanistan.  How do the speakers propose to handle this problem?  Thank you.</P> <P> Fiona Hill:  Thank you.  And sir, the gentleman in stripes, sorry, I cannot see you over here.</P> <P> Matt Cover:  Matt Cover, CNSNews.com.  Everybody has talked about NATO as a vehicle for diplomatic relations but NATO is first and foremost, as I understand, a military alliance and so I guess in that light and the fact that it is a military alliance, for the panel, should that give the incoming administration pause as it pursues Georgian entry into NATO, especially given not only Russia s view as one of you said Georgia as kind of Russia s Cuba but also American involvement in both Afghanistan and Iraq.</P> <P> Fiona Hill:  Thank you.  And I heard there is a question over here.  I think it was this gentleman here.</P> <P> Malkhaz Mikeladze:  Thank you, Fiona.  I m Malkhaz Mikeladze, Embassy of Georgia.  First, thanks to all speakers for interesting ideas.  </P> <P>I have a question to Mr. Petr Gladkov and probably some other speakers who will be ready to comment on this question.  You mentioned that T bilisi should establish the good relations with Russian Federation by its own without any international support and I would ask you if it is possible to elaborate that a little bit more in detail what steps probably Georgian side should undertake in this regard.</P> <P>And I would also remind you that from the very beginning of the presidency of Mr. Saakashvili, he introduced a number of constructive approach like introducing to begin bilateral relations with new page, introducing to sign new strategic framework agreement with Russia Federation, new Georgian government to control the Pankisi Gorge which was one of the most complicated issues during the Shevardnadze presidency.  Georgian side also introduced the idea of joint control of Georgian-Russian border.  Georgian side proposed some number of constructive approaches in the limitation of state border between Russian Federation.  Georgian side promised to keep economical interest of Russian Federation on the territory of Georgia.  So these all steps were already done but could you see any further possibilities of solving of these difficult relations on Georgian side?  Thank you.</P> <P> Fiona Hill:  Well, we have some big questions there.  How do we solve Georgia and Russian relations, Afghanistan, which I do not think we can solve under this panel and also, what should we do about NATO, still is a military alliance, in less than one minute because Leon is telling us that lunch is getting cold or maybe hot depending on what we are looking forward to.  And we will also pick up this as Leon is saying, in the where do we go from here on all fronts.  So maybe if everyone could just give a quick response to whichever question they want to respond to and then we will move quickly into lunch.  One minute.</P> <P> Taras Kuzio:  Not really much on this, but just on something on what one of the previous speakers said - I think it is a common fallacy that we often hear at various conferences and newspapers, the idea of energy dependency being the reason why Western European countries seek a very close and good relationship with Russia.  I think that is a fallacy.  I do not think it is just energy dependency.  I mean the central and eastern European countries that have 100 percent dependency on Russian energy do not feel the need to appease Russia and secondly, France does not have energy dependency on Russia.  I mean, Germany and Italy do to some degree, so I think this is far deeper.  Germany is the new France in terms of obstructionism within NATO and the EU, so forget about French fries it should be something else now - freedom fries - but I think that it is far deeper than just energy dependency, this new issue in Europe.  Anyway, I will leave it on that.</P> <P> Petr Gladkov:  As a former official, I understand the desire of the representative of the Georgian Embassy to put forward the official position of his government.  It is understandable.  I think that the major thing towards the amelioration or the betterment of relation with Russia and Georgia would be as it is seen by the Russian government, to stop depicting Russia as an evil empire all over the country, I mean, Georgia.  And second, all the initiatives enumerated by the Georgian colleague mostly were interpreted by the Russian experts and leadership as mostly PR actions.</P> <P> Stephen Biegun:  I will take on Afghanistan.  I think the future NATO engagement in Afghanistan will rate as President-elect Obama - one of his top three foreign policy challenges that he faces in the first year of his administration and in part because of the territory he has staked out on the issue and in part because of the growing divergence in views between the United States and Europe on that conflict.  That said, I do believe there is a path forward but that is for another conference.  </P> <P>I agree with Taras.  Energy is not the only issue in my mind.  You say appeasement, I would say that the Europeans would leave their principles at the door - I think there is a host of them - some less flattering even than energy dependency so I completely agree.</P> <P> Fiona Hill:  Mr. Baramidze. </P> <P>Giorgi Baramidze:  I would react on the perspective on normalization of the relationship between Georgia and Russia.  Certainly what has been done, that this should be analyzed and we have to learn the lessons but, nevertheless, we shall look forward and somehow think how we can contribute to the normalization of this process.  I think as I have mentioned in my presentation that Geneva forum is quite suitable for this.  There is clarity now very much that there is a conflict between Georgia and Russia so for all bad reasons, this kind of game of the internal Georgian conflict is unfinished, this is over, Russia, the peace keeper and things like these.</P> <P>Now, everyone is talking about real things.  So there has always been conflict between Georgia and Russia, so now everyone kind of agreed that we talk about the subject.  We look to the thing and then we name it by its own name.  So now we have a chance to put all pluses and minuses in front of us and try to find 21st century European or Euro-Atlantic if you wish solution for this conflict.  I think, objectively, there are lots of interests that Georgia and Russia have in fundamental areas.  This is fight against corruption, fight against terrorism, fight against organized crime, fight against aggressive separatist which is not only Georgia s headache but the headache of Russia and entire Euro-Atlantic community.</P> <P>We have common economic interest, the energy interest, transportation, not to talk about culture and finally even security and military.  So we have been always saying about this not just to advocate my government s point but this is objective.  So what is our point?  Once Russia will finally digest the idea and to cope with the idea that Georgia, once and for all time, is a free, independent, sovereign country.  Once Russia digests the idea that this is Georgia, this is the map of Georgia, this is in the borders of Georgia so there will be no kind of illusions that we can change this, we can maybe take hold Georgia or part of it in order to then control it.  Once this idea is digested and once Russians will acknowledge that we are on the safe side which means we have to be in NATO, then I believe Russia will become more pragmatic and therefore, more constructive because in Russia -- we do not like this government that has attacked us, but we do not think they are stupid, certainly.</P> <P>So these are pragmatic people.  If they will see there is chance to have benefit of the normal relationship, then they will use it, but if they will see that there is chance to get these things for nothing, of course they will try to get it.  So if there is no reason to consider all the factors that would make them think more respectively, certainly they will disregard this.  So therefore, strong Georgia, strong transatlantic alliance means better impulse, better conditions created for solution of the Georgian-Russian conflict and durable solution and acceptable for everyone.</P> <P> Fiona Hill:  We will have lunch.</P> <P>[End of file]</P> <P> <BR>American Enterprise Institute</P> <P>A New White House Faces a Tougher Kremlin: Tackling Contentious Multilateral Issues in U.S.-Russian Relations</P> <P>Afternoon Session</P> <P>November 13, 2008</P> <P> </P> <P> </P> <P>Panel III:  Energy and Pipelines </P> <P> </P> <P>Stephen Sestanovich:  Let s get started.  I m Steve Sestanovich and my job is to preside at this afternoon s first panel.  The title of which and I m nervously checking my program -- the title of which is, Pipelines and Energy.</P> <P>Our speakers are going to be addressing one of the most interesting topics of Russian-American relations, Russian-European relations.  I would say over the past decade one can describe the role of energy in many different terms, with many different -- in many different categories.  I think it has been often seen as an opportunity.  It was in that hope that the Bush administration initiated the strategic energy dialogue.  It s been seen as a weapon.  In that respect, many western countries were stunned by the showdown between Russia and Ukraine at the beginning of 2006.  It s been seen as an intoxicant.  Many people have described it as a source of a kind of heady exuberance on the part of Russia s leadership, seeing it as the source of Russia s revival in that economic revival and more.  It s been seen as a challenge, a key agenda item for the West.  It s been seen as a clarifier that is, when prices go down a new realism creeps in to the calculations of energy producers.</P> <P>In any rate, to address some of these questions, we have a panel of four speakers, whom I ve told to adhere strictly to Leon Aron s ten to twelve minute limits.  You are going to see me at ten minutes, hand them a card that says "two minutes" and at twelve minutes you re going to see me stop them, with many thanks for their helpful intervention and that s going to be the basis for the opportunity that the audience will have to participate in our discussion.</P> <P>We ll begin with Tuncay Babali, who is from the Turkish embassy, but will be speaking in his personal --</P> <P>Tuncay Babali:  I asked to speak last actually.</P> <P>Stephen Sestanovich:  I thought we were speaking in alphabetical order?  Isn t that the way we re all lined up here?</P> <P>Tuncay Babali:  It s fine with me.  [Cross-talking]</P> <P>Stephen Sestanovich:  Okay.  You told... okay.</P> <P>We are going to be starting at the opposite end of the alphabet with Vlad Socor.  </P> <P>Vlad Socor:  [Indiscernible].</P> <P>Stephen Sestanovich:  We either start at one end of the alphabet or the other.  Yes.  Ten minutes.</P> <P>Vladimir Socor:  Plus two?</P> <P>Stephen Sestanovich:  Plus two.</P> <P>Vladimir Socor:  Well, the general theme of my presentation will be -- the general theme of my presentation will be, what should Obama, the Obama administration do differently from the Bush administration in order to ensure that U.S. policy in a Caspian-Black Sea region is, first of all, puts back on the agenda with the priority status that it deserves and second, be turned into a success.</P> <P>The Obama administration needs to do things, you know, very differently.  The outgoing administration practically abandons the U.S. leadership in this area.  This leadership had its basis laid during the second term of the Clinton administration which achieved similar progress in developing the East-West energy transport corridor from the Caspian basin via the Black Sea basin to European consumer countries.  The underlying assumption of the Clinton administration was, and it needs to be reinstated, that energy security is an indivisible transatlantic concern.  That European overdependency on Russian-delivered energy adversely affects the political cohesion of NATO and of the transatlantic community in general and that assumption has been amply verified recently.</P> <P>Clashing was the principle of transatlantic interdependency.  It is the Russian propounded concepts of future dependency between Europe and Russia; the concepts that would underlie the Russian grand design of a Eurasian economic, strategic community; that would result, ultimately, in the isolation of the United States from its European partners.  So we have a clash of these two concepts. Transatlantic energy security is a shared concern, underlying the political cohesion of this community of nations as opposed to Russia-Europe mutual dependency.  </P> <P>The mutual dependency assumption has been proven to be empty.  It is an asymmetrical relationship between Russians in one hand and European consumer countries and companies on the other.  That assumption could become true, if Europe were to develop into a single energy market and negotiate with Russia collectively.  But this is far from being the case.  In practice, Russian state-supported companies act as single sellers facing a multiplicity of European buyers and coordinating with each other, and indeed, often competing against each other for privileged access to Russian resources.</P> <P>One of the key -- one of the solutions to this quandary is opening direct access from Europe to Caspian oil and gas.  We have already seen the beginnings of development of Caspian oil and gas resources and we have ended, and we are fortunate to have ended it with Azerbaijan, clearly, in the western boat in this regard.  But the bulk of resources yet to be developed are in Kazakhstan and Turkmenistan.  So the challenge is to open direct access for Europe to those deposits and reactivate the design of the East-West Energy Corridor.</P> <P>I will start with gas, because gas has the most powerful impact on energy and political security and strategic security.  Gas is the most dependency-inducing fuel of all fuels because it has become the fuel of choice for electricity generation, because it has multiple industrial uses on which the competitive posture of many European companies, especially in Germany, depends; and because of the long-term nature of gas supply contracts, determined in its turn, by the long period of amortization of pipeline projects.</P> <P>In Turkmenistan, the super giant field has just been discovered, audited by one of the leading British companies and has yet to be put into operation and on the market.  There will be, there should be a political and diplomatic as well as business battle over the choice of export routes from the Turkmen gas fields of South Yoloten and Osman, which is almost certainly one of the largest in the world; the same situation with Kazakhstan s super giant Kashagan oil fields on the oil side of the equation.</P> <P>In this regard, Azerbaijan and Georgia are the transit corridors, by definition.  There is a widespread perception that the safety of the Azerbaijan-Georgia transit corridors and its attractiveness to investments has been adversely affected by the recent Russian invasion.  This perception is erroneous, however.  Kazakhstan has just announced its intention to increase significantly its oil exports through these corridors in the short-term and increase them massively in the medium term.  There are other indications as well, showing that business confidence is rapidly returning to the Azerbaijan-Georgia Transit Corridor.</P> <P>We re all concerned about Georgia and we all recommend a number of measures to consolidate Georgia and provide for its security in the post-invasion period.  But I would suggest that Azerbaijan deserves equal attention and it is not getting that attention, certainly not enough.  Georgia and Azerbaijan are linked inseparably.  They form a tandem.  The success of one is dependent on the success of the other, both as indivisible links in the Transit Corridor and the success of each one of them is a nation state project.</P> <P>We ve seen recent high-level visits to Azerbaijan by Vice President Cheney and Undersecretary of State Negroponte from the outgoing administration.  These gestures have come too late -- have come late.  We ve seen a situation in Azerbaijan in which highly dedicated, valiant, I would say, U.S. officials of the assistant secretary and deputy assistant secretary level, have to compete with the Russian President and with the Russian Prime Minister and those are heads of Gazprom and the giant Russian oil companies in Azerbaijan.  This situation is unsustainable in the long run.  Azerbaijan needs far greater attention than it does get.</P> <P>The oil picture -- still to complete the gas picture, the primary task ahead is to reactivate the Trans-Caspian Gas Pipeline project and link it with the Southern energy transport corridor, consisting primarily of the planned Nabucco pipeline with the Baku-Tbilisi-Erzurum and Turkey-Greece-Italy Inter-connector as smaller capacity adjuncts to it.</P> <P>The oil picture, here, there is a double challenge here.  The first one -- to deviate from the Caspian for a moment.  In the Baltic Sea, where the Russian Government plans to divert, or at least, says that it plans to divert the bulk of the oil traffic through the Druzhba Pipeline into the Baltic Pipeline System for export through the Baltic Sea by a new tanker line to Northern European ports.  This risk is creating a situation in which countries alongside the Druzhba System and countries alongside the proposed tanker line in the Baltic Sea could compete with each other for limited amounts of Russian oil.</P> <P>Similarly with respect to gas pipelines, Russia will face a gas shortfall in the years ahead.  Not shortage, but shortfall.  It will have to supply at one and the same time, four sets of competing customers: Russia s population, Russia s industry, West European consumers and, potentially, Far-Eastern consumers.  Due to under-investment in Russia s gas fields, Russia has no way of supplying all these customers at the same time.</P> <P>Russia s answer is twofold: first, to build surplus transport capacity through gas pipelines.  The total capacity of existing and proposed Russian pipelines: Nord Stream, Yamal 1, possibly Yamal 2, the Ukrainian System, Blue Stream, South Stream, considerably exceed Russia s actual export potential.  Russia s strategy is to create a number of markets, regional and sub-regional, at the downstream end of each pipeline and have countries at the end of each, compete against each other for limited amounts of available Russian gas.</P> <P>And the second response is to create the so-called OPEC for Gas which would not function like the OPEC for oil.  It would function in a completely different way, but it would be a cartel and which would allow Russia to offset, to some extent, the loss of some European markets due to its gas crunch, by controlling transport rather than controlling, to the same extent, the markets.</P> <P>Conclusion, a couple of recommendations.  The incoming Obama administration should actively consult with Europe and create a consultative mechanism, between Europe and the United States, between the European Union and the United States, the consultative standing, consultative mechanism on energy security issues.  Second, to introduce, into it s energy policy, elements of State s intervention.  The pipeline projects cannot be left at the mercy of market forces or at the mercies of short-term interest of private corporations.  State intervention in a limited way is necessary through credit guarantees, possibly, in the case of the European Union, subsidizing the pipeline projects.</P> <P>Thirdly, encourage greater reliance in Europe on nuclear energy, given the fact that the single largest factor behind the growth in demand for gas is the writing off of nuclear power plants.  Gas is replacing nuclear and that s one of the many reasons for the growth in gas demand.  This is the single most important region.</P> <P>And finally, the final recommendation, working together, the United States and Europeans or at least those European countries that are friends of the United States, need to work together at the level of intelligence agencies and at the level of media management, to expose cases of corruption in Europe, corruption that is piggybacking on Russian energy projects and the Russian energy deliveries to Europe.  That type of corruption has become a cancer in Western Europe.  It is adversely affecting the European Union and the United States.  We need full disclosure and we need financial monitoring and other types of intelligence monitoring and exposure of these activities through the mass media.</P> <P>Stephen Sestanovich:  Thank you very much, Vlad.</P> <P>Vladimir Socor:  Thank you.</P> <P>Stephen Sestanovich:  Our second speaker is Petr Gladkov who will, I hope, pick up where Vlad left off.  Can you please send me my card back?  </P> <P>Petr Gladkov:  Okay, thank you.  Mikheil Saakashvili s attack on South Ossetia and bombing of Tskhinvali and what has followed, called into question the reliability of Georgia as an alternative to the Russian Transit Corridor as it was previously heavily positioned.  Moreover, the conflict has created a serious problem as all alternative channels of supply of energy from the Caspian basin to the West were stopped.  Azerbaijan had to send the oil produced on the fields of Azeri-Chirag-Gunashli through pipelines Baku-Supsa and railroad Baku-Batumi.  On August 10, SOCAR said that it was closing all transit through Georgian ports and they created a stop from the Terminal Kulevi, 51 percent of which is owned by SOCAR, which appeared near combat zones.</P> <P>On August 12th, the work of the Baku-Tbilisi-Erzurum and Baku-Supsa Pipelines were stopped and Azerbaijan had to redirect part of it to the Baku-Novorossiysk Pipeline.  The oil supplies from the terminal in Batumi that was terminated by Kazakhstan as well because our government already took hold exports from Georgia and redirect the flow of oil for 1 million tons per year for domestic consumption.  And despite the fact that the Russian war planes did not attack the pipelines, direction of oil exports to the stabilization situation of the Caucasus region has been swift and large scaled.  Now, for the first time, the huge risk factor was demonstrated, carried by the policy of the United States and the European Union and the Caspian region which is aimed primarily at reducing the influence of Moscow through energy exports that bypass Russia, without taking into account the security problems of these routes.</P> <P>Let s now assess the impact of war on the countries in the region.  Georgia.  Georgian positions are drawn to the West, but the reality suggests that without the loyalty of the Russian Federation, many issues can not be resolved.  And Georgia is going to continue to be an agro-transit country.  Now, its leadership will have to, firstly, address the needs of the general population and secondly, to understand what to do with the army in which it has invested enormous resources.  Secondly, the lost war will undoubtedly lead, not only to high investment cost of the projects in Georgia, but also to freezing or even elimination of some of them.  For example, Azerbaijan postponed the commencement of construction of the new oil depot and Kazakhstan has refused to build another oil refinery in Batumi.  </P> <P>Thirdly, Tbilisi political losses are also very weighty.  The long term impact of the crisis is that the West will have to abandon belief in the use of Georgian territory in the oil and gas projects without taking into account the views of Moscow.  </P> <P>And fourthly, there is relevance of the concept of territorial integrity.  The republic is still divided into separate principalities, so that hardly depend on Tbilisi.  In fact, Adjara and Svaneti, Mingrelia and Javakheti are particularly autonomous and hold the context of the increasing poverty of their people will now exclude the Ossetic approach of Georgia to addressing national problems.</P> <P>Iran.  The country has not led the situation in the region without due attention and invited the neighbors to extend the operation in the exchange of gas, oil and oil products.  The proposal has not gone unnoticed.  On August 26th, according to Iran News Agency the first shipment of Azeri oil was transmitted through Iran.  Moreover, Mr. Nozari, Iranian oil minister mentioned the possibility of establishing a system of the export pipeline that would become competitive to the BTC pipeline.  The Western countries will probably have to reconsider their relations with Iran too, the reason maybe lack of Azerbaijan and Turkmenistan gas resources efficient to fill such a large pipeline as Nabucco.</P> <P>In case of large gas production investment, Iran may become its main source, only more so that the Ossetian campaign has weakened the role of Georgia as a station ground for West and Iran.  Reducing thus the likelihood of this U.S.-Iranian armed conflict which now actually has come to complete zero with the election of Barack Obama, I think.</P> <P>Turkey.  Ankara not only confirmed for itself the unreliability of Georgia as an energy partner.  Recent developments in Pakistan where the United States refused to support its long-standing prot�g� Pervez Musharraf appear to have reinforced doubts in the Turkish leadership about the reasonability of unilateral orientation to the West.  </P> <P>The Turkish Government actually did not allow the United States Navy warships, sent to the coast of Georgia, to pass the Turkey-controlled Bosporus and the Dardanelles until the end of the conflict.  Moreover, Washington was denied passage into the Black Sea of two warships with the tonnage of 140,000 tons and the U.S. Military had to change its heavyweight ships for more modest patrol boats.</P> <P>The communication risks of Georgia, which were manifested in the war, seem to have increased the interest of the possibility of Ankara opening the boarders with Armenia and the use of its territory as a transport to manage the corridor alternative to Georgia.  Of course, this is not the case of today.  One of the conditions to start a Turkish -- I mean, Turkey-Azerbaijan-Armenia deal will be the end of the Nagorno-Karabakh conflict, but we ll have to wait.</P> <P>Azerbaijan.  The country is also ready to explore new options and also for the sale of its energy supplies.  This is understandable.  The lack in Azerbaijan of viable alternative to Ceyhan pipe was the cause of Azerbaijan in August to drastically reduce the oil production.  Now, Azerbaijan is planning to continue -- they initiated in August, a swap scheme oil export to the Iranian Port of Neka.  This route is more profitable for Azerbaijan than exporting oil through the BTC.  Here, it receives both reduction of the length of the route and reduction of the total transportation cost.  From Baku to Neka the cost was about $10 per ton from Baku-Tbilisi-Ceyhan pipeline, more than $20.</P> <P>It is no coincidence then that it is Azerbaijan, immediately after the war that the United States Vice-President Dick Cheney visited.  The Washington people believed that Baku, fearing a similar to Southeast Ossetia Military Operation launched by Russia in order to support Karabakh.  The loss for U.S. security guarantees and at the same time intensifies participation in competing with Caspian Gas Pipeline Project Nabucco.  However, Ilham Aliyev made it clear that while he appreciates the relations with Washington; he s not going to quarrel with Moscow.  As Azerbaijan took along Kuwait but it could accept the proposal Russia s Gazprom to see the concern of export gas in the market price.</P> <P>Kazakhstan.  Kazakhstan s already fairly cautious in its attitude to Russia, eliminating pipeline routes despite the pressure from the West, is likely to increase even more.  In Spring 208 [2008], the BTC pipeline transmitted $875,000 of oil daily, a designed capacity of 1 million barrels per day.  And Azerbaijan oil is not enough to fill the pipe and the calculation is based on the involvement of Kazakhstan oil with the help of Kashagan, the BTC pipeline transmission capacity is going to reach this 1 million barrels a day.</P> <P>And the events of this evaluation could affect the transportation solution for Kashagan.  Of course, there will be no breaking of arrangements on the Kashagan deliveries to the BTC, but neither will there be any significant expansion.  Moreover, by year 2014, the transportation solutions in Kashagan may change by themselves and completion of construction of the route Kenkiyak, and Kumkol, which will connect the Western Kazakhstan with China, as well as the oil pipeline between the field and Aktau terminal to the Caspian Sea enable to transfer Kashagan oil to China and Iran.</P> <P>The implementation of decisions to extend the BTC in the Atyrau-Samara Pipeline will support the favor of anything but the BTC.  In addition of acquisition by KazMunayGas of 75 percent shares over the Romanian company Rompetrol, the transportation option from Kazakhstan to the Black Sea ports, Novorossiysk and Supsa, becomes more desirable than the use and the BTC route and Mediterranean, simply because actually we just derived conclusions on the participation of Nabucco Project as well.  They were mostly likely not join it.</P> <P>The Russian Federation will defend themselves on Ossetia, Russia is not always seriously consolidated society in regional elites with a central power but also put forward a strong claim to restore its influence in the Caucasus and Caspian Region.  The experience of the recent days will make the region more carefully weigh the risk of oil and gas infrastructure projects, with great attention being paid to the existing routes to Russia and forget about such exotica as the White Flow, White Flow 2 and 3 [White Stream] projects developed by GUEU.  All of them involve construction of a paid pipeline from Turkmenistan on the bottom of the Caspian Sea through Azerbaijan to the Georgian port of Supsa, and then to the Black Sea through the Crimea in the direction of the E.U.  </P> <P>It is difficult to say now, how fundamental the consequences effects on Russia forcing Georgia to peaceful victory in the sector of the Caspian Region.  However, the speed of reaction to the events of the participants of these markets suggest significant increase in the importance of the immediate effect as it says on the prospects of individual projects and the entire regions of the oil-energy policy. One thing is clear; the consequences of this war are likely to exceed the war itself.  </P> <P>The idea of establishing a corridor for Caspian energy that eliminates the territory of Russia, of course, will live, but the real advancement of these projects will require much more effort from the West for the political dialogue with all parties, not to mention that the global financial crisis has a race enemy for notion of cheap money have been dedicated to all those projects.  Thank you.</P> <P>Stephen Sestanovich:  Thank you very much, brutal but brilliantly brief.  Our next speaker is Zeyno Baran.</P> <P> Zeyno Baran:  Hi.  Thank you.  I m glad I m going after the two, so what I ll say is going to actually, hopefully, fit in well.  Thank you for putting energy and pipelines as one of the topics because this is -- especially the geopolitics of it is not discussed often enough.  But I think energy and pipelines, especially as we heard, in the European and Eurasian region is I think one of the most difficult areas for U.S.-Russia relations because the Russian leadership considers maintaining its monopoly over the Eurasian space as in its strategic interest.  And therefore, considers any move for the producers or consumers to diversify away from Russian-controlled networks as anti-Russian.  Vlad talked a lot about oil and I ll just focus on gas.</P> <P>As we know for over a decade, Gazprom, the giant monopoly, was able to purchase Central Asian gas at below world market prices, channel it to lower-paying Russian customers and then sell its own domestic reserves to Western Europe at high prices.  Through this mechanism, Gazprom has made billions of dollars of profit and has maintained its influence over the Central Asian region.  Now, Gazprom wants to continue to protect its lucrative European markets by freezing out independent Central Asian suppliers.  By maintaining and strengthening its monopoly power, the company then will strengthen its leverage and that of the Russian Government over European gas consumers.  Therefore, I would say -- and both the Clinton and the Bush Administration has said, The establishment of the direct Central Asia-Europe energy corridor is in American strategic interest as well, as it would help improve European solidarity, transatlantic unity and the future of the vast space that Russia considers to be in its sphere of influence.</P> <P>So, now the challenge is what to do when U.S. and Russia declare two dimetrically-opposed approaches in their strategic interests.  In fact, this goes back to the Clinton-Yeltsin years, and since then, the Russian leadership has considered the Central Asia, Caspian, Black Sea, and the Baltic Sea Region, in its sphere of influence and as a zero sum game.</P> <P>Over the years, we have seen President Putin operate as the de facto CEO of Gazprom and use control over energy infrastructure as a key foreign policy tool.  And now, we have the former President of Gazprom as President of Russia.  I don t think there s any Western company that has this kind of a relationship with its leadership.  And I think it has been rather na�ve for both the Clinton and the Bush Administrations to assume that we can cooperate with Russia on Western terms and convince Russia that this is a -- there will be a win-win outcome when Russia operates out of a completely different framework and we heard earlier, Dan Fried saying that it doesn t know how to deal with U.S. as an non-enemy image.  </P> <P>So going forward, I think for the Obama team, it would no longer be simply na�ve, but outright dangerous to ignore the direction Russia is headed, and the role the Eurasian region plays in this vision.  And we just saw recently that Russia will even use force in this region to defend its strategic interest.  </P> <P>Well, of course the Obama administration should not be developing relations with Russia on the basis of a Cold War rationale.  They also need to be sober that the Russian psyche seems to be operating within that frame work.  So, I believe the U.S. -- the incoming administration needs to reorganize its Russian policy to meet the Russian challenge and decide what will the U.S. do to promote and defend its strategic interest across Europe and Eurasia, when they conflict with those of the Russians?</P> <P>Now, Georgia has been, for years, called the weakling in the East-West corridor, because of the strong Russian opposition to Georgia s western direction.  Very recently, we have been all focusing about Saakashvili, whether he s crazy, what s going on between him and Putin but -- and it s been almost reduced to a personal -- and a caricature.  But remember, President Shevardnadze survived assassination attempts.  Russia tried to attack Georgia before, many, many, times.  And it was -- thanks to U.S. political support that we didn t see what happened earlier.  And a lot of that had to do with trying to stop the Baku-Tbilisi-Ceyhan and the parallel gas pipe line from being constructed.</P> <P>And I wouldn t say that the war was necessarily about destructing the existing transportation infrastructure, but about demonstrating the corridor s vulnerability, as well as sabotaging future energy infrastructure projects across this corridor.  And if you don t believe me, you just heard it.</P> <P>And in fact, I would also say that there has been too much focus on who shot first in August.  We have Mr. Andrei Illarionov here and I don t want to misquote you, but he did say on the record and in several places that the Russian government began preparing for the invasion of Georgia four years ago as part of a more general attack on the West and the West democratic free market and security ideas in the post-Soviet states.  And he served at the Kremlin.</P> <P>So what should be the U.S. policy when it comes to energy and pipelines?  We know what it is already.  Vlad talked about it, I ve talked about it, we know what it is.  It is working with the producing countries in the Caspian.  Transit countries like Georgia, Ukraine, Turkey and the Europeans who will be the consumers, especially of gas.</P> <P>There s no need to change policy.  It simply has to be implemented and it has to be implemented at the top level.  Top level is important because -- I ll quote Zbigniew Brzezinski from a statement that he made at a June Senate hearing.  Top leaders in these countries by and large, are also top energy executives.  They have to be approached at a very high level, with a degree of respect for their sensitivities and vulnerabilities.   And he s right.  We need top level engagement.</P> <P>I believe the Russian strategy is to play on the incoming administration s desire to have cooperation with Russia on other more urgent issues like counter-terrorism, counter-proliferation and any move in the Eurasian energy space is going to be labeled as America moving with a cold war mentality.</P> <P>I would say -- then if the U.S. does actually have this let s cooperate with Russia on the more urgent issues, then it would be just a continuation, frankly, of the Bush Administration s policy.  And in fact, I would argue that without denying Gazprom and the Kremlin the continued and increasing use of energy as an instrument, the U.S. is not going to be able to get Russia to cooperate on areas like Iran or other areas.  And also, we re not going to see the kind of transatlantic cooperation that we need.  And again, Vlad talked about this in greater detail because of the use of energy to divide Europeans and leave them unable to come together on any issue that Moscow considers to be, again, in its sphere of influence.</P> <P>So the U.S. needs to show political will.  That it will stand by what it says is in American strategic interest and will work with our allies to implement them.  The European commission today, issued yet another paper calling for solidarity to achieve energy security.  But we know that they will simply not be able to come together.  Individual countries are too small and too vulnerable to deal with Russia.  Only a united Europe can and in cooperation with the U.S.  And this has been missing and we can say that the transatlantic partnership was not working for a number of reasons, but there s no more excuse.  Now, we need to come together and work together.  And this would be my first suggestion.</P> <P>Second, we need to seriously consider and mean it, mean that we consider Azerbaijan, Kazakhstan, and Turkmenistan as strategic energy partners critical in supply source and route diversification.  Azerbaijan can export significant amounts of gas to Europe via Nabucco, TGI or other projects.  But it will only do so, if there is a direct and meaningful, E.U.-Azerbaijan cooperation.  Baku already has millions of dollars coming from oil sales.  And there s no need for Azerbaijan to sell its gas just to obtain additional revenues.  What Azerbaijan does need is strategic integration with the EU.  Otherwise, I think Azerbaijan would rather leave the gas on the ground, than sell it via Russia or just directly to Turkey.</P> <P>So then, again, large-scale gas production for -- in Azerbaijan, will depend directly in their ability to access European markets.  If Azerbaijan can obtain this access, then its gas will flow westward and Europe will have diversification.  If not, then the gas will stay in the ground.  And that will mean that Gazprom s pressure on Central Asian producers, will increase and subsequently.  Westward movement of all gas from Central Asia will take place exclusively through Russian controlled networks.  And that means no diversification from this part of the world.</P> <P>Engaging in this kind of a partnership with Central Asia is also actually -- the U.S. engaging in this kind of partnership with Central Asia will also be good for Russia.  Because if Gazprom cannot have continued monopoly access to Central Asian gas, then Gazprom will have to invest in domestic production and that would lead to bringing more western investment and operators and opening up the system and make more gas available for Europe.</P> <P>Next point, renewed partnership with Turkey.  Turkey - Tuncay will talk about this in greater detail, but I would argue that Turkey will remain a reliable transit country for Europe, if it is pulled closer to the E.U.  And for that, the energy chapter and the membership talks with the E.U. need to be opened.</P> <P>Next point, I think there s too much focus on the Iranian gas and I think that can distract us.  That can destruct us from paying attention to Azerbaijan and Turkmenistan.  Yes, Iranian gas is important and it s going to come up.  But if you listen to what the Iranians say they want do when they can produce gas, Europe does not come first in their priority.  They have six other priorities, including regional and their own needs before they send gas to Europe.</P> <P>So, let focus on what we want to do, what we can do, what our guys say they want to do.  Maybe it s also time for --</P> <P>Stephen Sestanovich:  Are you wrapping up?</P> <P>Zeyno Baran:  Yes, wrapping up.  Let me then just close by quoting incoming Vice-President Biden from the same June hearing, since he said it best and he s going to be the next vice president.  No wonder the President and Prime Minister of Russia spend more time running Gazprom than they do running the country.  It is not just the sheer volume of oil and money that is enhancing Russia s power.  They have shown that they are willing to use their dominance of both ends of most existing pipelines to extract, not just economic deals, but increasingly political influence.  So we need-- this is still Biden.  So we need diplomacy to forge a common strategy among energy consuming countries in Europe and a shared effort that can confront Russian dominance.   So hopefully, he will do that when he comes into office.  Thank you.</P> <P>Stephen Sestanovich:  Thank you Zeyno and Senator Biden. Our 4th and final speaker is Tuncay Babali, and I should emphasize that Tuncay is a counselor at the Turkish Embassy but he s speaking here in his personal capacity.</P> <P>Tuncay Babali: Thank you.  What I m going to do is to focus on some facts about Turkish-Russian bilateral and energy relations so that we can have stimulating discussion afterwards because it explains a lot about Turkish policies towards energy security in Eurasia and vis-�-vis the regional countries and allies.</P> <P>Turkey is increasingly at the crossroads of the world energy trade.  And because of tanker traffic through the Turkish Strait, Bosporus, and Dardanelles, and Turkey has become an important North-South oil transit route, the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum, natural gas pipelines make Turkey an important -- also East-West route transit country.</P> <P>Economic opportunities always present diplomatic liabilities as well.  Turkey s energy sector importers have grown and it has come under increasing pressure.  Turkey found itself caught between competing U.S. and Russian interest as a result of August 2008 Georgia conflict.</P> <P>And Turkey s zero problems with neighbors policy, which was in effect since 2002, may make it popular with some and certainly led others to question the strength of the U.S.-Turkish strategic partnership.  But analysis of Ankara s options showed that it has little option besides greater caution and engagement, and that energy concerns rather than reassessment of its Western ties, motivates its outreach to Russia and to certain extent, Iran.  </P> <P>But let me, before delving upon Turkish-Russian bilateral relations, make one thing clear.  For Turkish Foreign policy practices, there are three major principles, and those are there for a reason and it s not changeable and it s not a matter of option for any government in Turkey and those first, in order of importance.  First, Transatlantic relations, NATO alliance, and our relations with the U.S. and Western Allies; second, E.U. policy, E.U. rapprochement policy, E.U. Accession policy; third is our regional responsibilities and the relations with our neighbors.  Those are not changeable and Turkey s western location is not just six years of issue, it s 150 years of location.  It s not going to change.</P> <P>So, bilateral relations with Russia, those are always characterized as ever closer cooperation and multi-dimensional partnership.  And the growing Turkish-Russia relationship is logical, based on both Turkish and Russia s economic interest.  In many ways, the private sector has driven Turkish-Russian rapprochement.  In 1990, Turkish-Soviet trade was only $1.7 billion.  And last year, it reached a record $28 billion.  And this year, Russia is going to be the Turkish number one trade partner with probably more than $36 billion of trade turnover, toppling Germany from its place.</P> <P>And the energy cooperation, both gas and oil, forms the basis of Russian and Turkish economic relations.  Gas is Turkey s major import.  In 2007 alone, Turkey imported 23 BCM gas from Western and Blue Stream Pipelines and this is an up of 18 percent from the year before and it s going to be 25 percent more this year.  So, Turkey is the 3rd largest importer of Russian gas after Germany and Italy, which makes it dependent on Russian gas supply for more than 65 percent, as of now.  And if Turkey cannot tap other major supplies from Azerbaijan, Iraq and Turkmenistan -- and those are not mutually exclusive options, and Turkey is pursuing to tap those gas resources to flow through Turkey -- this dependency, in the early 2010 s will reach 80 percent.  </P> <P>In addition, Turkey imports approximately 30 percent of its oil from Russia and Turkey is following Ukraine and Great Britain as the 3rd largest importer of Russian coal.  Last year, we paid $800 million to Russia for coal imports.</P> <P>It s not just geography and energy, of course, that make Russia such an attractive trading partner for Turkey.  Even though Russia s population is twice that of Turkey s, if the energy sector s contribution is subtracted, the Russian economy is smaller.  Russia provides Turkish industry with ample opportunities and Turkish contractors have engaged in projects worth close to $28 billion since 1989, $5 billion alone in 2007.  On the other side, Turkish direct investments in Russia reached to $6 billion by the end of 2007.  And by comparison, if I go back to the trade volume that we have with Russia, it s three times more than what we have with United States now.</P> <P>Tourism has helped cement our relations also.  In 2007, 2.5 million Russian tourist visited Turkey.  This is very important in terms of people to people relations with Russians.  This actually makes it -- this is happening for the first time in our history of relations with Russia, this people to people relations.  In the year of 2007 was a Russian culture year in Turkey and this year is the Turkish culture year in Moscow.  I want to mention one specific event which has enormous symbolic effect - the Russian Red Army Chorus sang together with the Ottoman Army Chorus Mehter in Kremlin Palace and it was interesting to see a janissary singing Kalinka.</P> <P>It says in this symbolic meaning because those countries have fought, over the 500 years of their joint history, 13 major battles, so it s interesting changes.  So, in December 5th and 6th, 2004, Russian President Putin, paid his first bilateral visit to Turkey.  This was second to Chairman of the Presidium of the Supreme Soviet of USSR, Nikolay Podgorny, who visited Turkey in 1972, but you can imagine this was a rather symbolic visit.  As a matter of fact, this was the first visit of our diplomatic relations history of 512 years by a Russian Head of State.  So in that visit, we signed the Joint Declaration of Cooperation, and our relations were characterized officially as multilateral, strengthened partnership.  </P> <P>So bilateral consultation mechanism is established in 12 different subjects between Turkish and Russian MFAs, and in February 2006, held its first, and second meetings held in November 2006 and June 2008.  And Turkish Prime Minister Recep Tayyip Erdogan visited in 2005, three times, Russia.  And in June 2006, I accompanied our President Ahmet Necdet Sezer to his first official bilateral visit to Russia in June 2006.  And President Gul is scheduled to visit Russia in this coming December.</P> <P>So, in terms of energy strategy, what drives Turkey?  One is the diversification.  That s single one word that we need to diversify our energy supply routes and sources.  Second, liberalize our energy market.  Third, to become a key transit country and eventually an energy hub in its region.  So, as of now, three quarters of the world s proven oil and gas resources are located in regions neighboring Turkey and there is an increasing dependence in Europe, U.S. and East Asian  countries, on Russian, Caspian, and Middle East oil and gas resources.  </P> <P>There is one element that the congestion of tanker traffic in the Bosporus drives Turkish energy policies as well.  I must mention that between 1996 and 2007, there was a 240 percent of increase in tanker traffic through Bosporus.  This is not sustainable way, there are now -- in 1996, it was 4,000 tankers, now it s more than 10,000 of tankers are crossing Bosporus.</P> <P>And planning for an accident in the congested shipping passage is every Istanbul officials or Turkish officials nightmare.  All Turkish officials are remembering the conflagration which follows the collision between two Greek Cypriot tankers at the Black Sea entrance to the Bosporus.  The accident killed 29 crewmen, polluted the waterway with 19 million gallons of crude, shut the channel for a week and caused a billion dollar damage.</P> <P>Today s ships, four times as large as involved in the accident ply the waterway and Turkey has gotten lucky, actually.  Between 2004 and 2007 alone, there were 103 accidents in the Bosporus.  Over the same period, 651 tankers experienced technical breakdown or malfunction during the passage.  So -- and Russian officials and Russian energy companies are aware of the current traffic through the Bosporus, is unsustainable.  The solution lies at the use of alternative oil export options and bypass the Straits.  So, Turkey embarked upon this Samsun-Ceyhan Pipeline project, which the groundbreaking ceremony took place in April 2007.  And this is the joint venture between Turkey s Calik Enerji, Italy s ENI and India s OIC Company.</P> <P>There s also multi-pipeline system between Turkey and Israel that s being discussed, which will extend Samsun-Ceyhan Oil and Blue Stream Pipelines to the Israel and beyond.  There was a memorandum of understanding between Turkey and Israel and I want to just briefly touch upon the geopolitical reality check that we faced in Georgian Crisis.  It was -- I m just going to quote our Prime Minister s remarks, how Turkey felt during this time.  It would not be right for Turkey to be pushed toward any side.  Certain circles want to push Turkey into a corner either with the United States or Russia after the Georgian incident. One of the sides is our closest ally, the United States.  The other side is Russia with which we have an important trade volume and we are obtaining two-thirds up for our energy from Russia.  We could act in line with the Turkish national interest".</P> <P>So that explains a lot and I will now go to the conclusions of my presentation here in which goes: Russia s invasion of Georgia is a milestone that marks the dawn of a new era certainly.  And although Turkey officials sees Russia as a strategic neighbor, the future of Russian-Turkish energy relations and the North-South corridor largely depends of Russia s vision of energy security for Europe and the world.  And Turkey doesn t want to see Russia-U.S., Russia-NATO or Russia-West sanction.  </P> <P>Turkey also doesn t want to pay for the strategic mistakes and miscalculations of Russia and/or Georgia.  So Turkey s western credentials should not be criticizing every major policy decision.  We take on in every conflict around us as a NATO ally and enjoying membership to all major transatlantic organizations, Turkey has already anchored in the West.</P> <P>So on energy, if the E.U. and the U.S. are really serious about having diversified energy routes and sources, it s worth noting at the moment that Georgia s, Azerbaijan s and Turkmenistan s foreign policy outlook is more important for Russia than it is for the U.S. and the E.U.  And that really needs to change otherwise, given the fact that Turkey s BOTASH will start negotiations with Gazprom in the coming months for price revision of 6 BCM gas contract via western route that will expire at the end of 2011.  Turkey, as any other country, would soon come to an undesirable and long resistant point to choose towards apparently more realistic north-south energy access.</P> <P>It s also pertinent to underline once more that dialogue, engagement and cooperation between the producing, transit and consuming countries will gain more importance in the future due to increasing interaction between energy issues and international critics.  Win-win formulations and cooperation between all interested parties will only serve to the security of all Eurasia.  Winner-takes-all approach will always produce rivalries in the region.  Thank you very much.</P> <P>Stephen Sestanovich:  Thank you very much, we have eleven minutes for questions and not for comments and I would ask people to keep their questions very brief as a show of respect to other questioners who want to have their questions answered. Yes, please identify yourself briefly and ask your brief question.</P> <P>[Audio Gap]</P> <P>Dan Doty:  On the energy sector, any major diversification of European supply is obviously going to result in a hit to Russian income and I was just wondering what policies you would advocate for maintaining trust in the relationship between the U.S., E.U. and Russia and how to allay their fears that such diversification would be a threat to their government and economy?</P> <P>Stephen Sestanovich:  How to allay Russian concerns that might arise as a result of diversification efforts by Europe?</P> <P>Vladimir Socor:  Let me try to handle that.  Russia s concept is security of demand.  It wants the assurance of long term demands from its European customers.  Long term demand for gas is actually ensured by the long term contracts.  The prospect ahead is that Russia will not have enough gas to supply its existing customers, all of them at one and the same time.  Diversification would not reduce the amount of the absolute amounts of Russian gas coming to Europe.  It would reduce the share of that amount in the overall imports of energy.  It would not reduce the Russian volumes in absolute terms.  It would reduce the share of those volumes in the overall imports.</P> <P>Let me take this opportunity to answer remarks about Russia s --</P> <P>Stephen Sestanovich:  Just very briefly.</P> <P>Vladimir Socor:  Yes.  The disruption incidents on the transit corridors that he mentioned occurred during the hostilities.  The situation has changed significantly in the intervening two months.  The information is outdated -- correct but outdated.  And let me not conclude without a smile, the Russian speaker said that Mingrelia, Javakheti and are practically autonomous principalities in Georgia.  Actually, Mingrelia is the political stronghold of President Saakashvili.  In Javakheti, former president Shevardnadze, the current President Saakashvili and all the governing parties during this period have carried, overwhelmingly, the elections in Javakheti.  And Svaneti, the third area that the Russian speaker mentioned is actually half occupied by the Russian troops - sorry, peacekeepers.</P> <P>Stephen Sestanovich:  Very briefly.</P> <P>Petr Gladkov:  Yes, first of all I didn t [indiscernible] this information, it was right for the time being and, of course, military invasion of Georgia, of course, prevented the oil transport at this particular time. So I learned that the military solution to the problem is not the right ones and to your question -- answer to your question.</P> <P>I think that this represents a challenge to Russia actually, after all, probably now it is time, in the time of crisis, it s time to reconsider our approach; Russian government approach to the economy, to modernize it because it was very easy to use the high increase of money due to high prices of the oil.</P> <P>Now when the situation is different, maybe it s time for Russian government to change its approach to its economy, try to modernize and diversify it.  And second, well Mingrelia is a stronghold of the third thing -probably it may be a stronghold of Mr. Saakashvili but I wouldn t overestimate the level of support of Mingrelia for Saakashvili and to Javakheti is inhabited by Armenians and Armenians was always against the central power of Georgia; just a small comment to that.</P> <P>Stephen Sestanovich:  Yeah, over here. [Audio glitch]</P> <P>Vladimir Socor:  In the same order in which we spoke, the bottom line here is that there is no societal control of the allocation of oil and gas revenues by the Russian government.  That s actually the most important element in the democratization agenda.  It s not just an abstract agenda for the sake of a political science concept.  It is an agenda to create societal checks and, if possible, direct controls over the way in which the Russian government spends its oil and gas windfall revenues.  And there is no restraint on this government to spend those revenues primarily for the armaments, security services and the personal interests of Russia s rulers.</P> <P>Stephen Sestanovich:  If you have a brief response.</P> <P>Petr Gladkov:  Yes, to the grassroots response to what is going on in Russia.  So far, I m surprised to see that there is particularly no feeling of a crisis in Russia, actually not at all.  People were afraid that restaurants will be closing, people will be getting fired and the tourist agencies sales for the New Year will lower down.  So far nothing of this kind happened but it s only the beginning.</P> <P>Stephen Sestanovich:  Over here.</P> <P>Male voice:  I have a question for Mr. Babali and Ms. Baran.  What is the potential role for Turkey in securing -- we ve talked about security of the transit corridors in South Caucasus -- does Turkey have a long-term role in securing those transit corridors, and I m thinking at least in terms of its relations with Armenia, and what can Turkey do to diminish Armenia s political and economic isolation and dependence on Russia?  Thank you.</P> <P>Tuncay Babali:  Georgian conflict actually shift lots of geopolitical balances in the region.  Actually, the rapprochement between Turkey and Armenia started well before the conflict with President Sarkisian s invitation to President Gul.  And as you know, it s dubbed as a football diplomacy, soccer diplomacy, if you like, our president went to Yerevan.  And before that, Russian Foreign Minister, Sergey Lavrov was in Istanbul and they were also instrumental in this rapprochement.</P> <P>So, our relations are improving, although there is no direct connection between Nagorno-Karabakh and Turkey s rapprochement with Armenia.  Definitely, the regional projects will take off after resolution of Nagorno-Karabakh or if you see the end of the tunnel.  And there are some encouraging developments in the region with this latest Moscow Summit that took place and recently, there can be a trilateral, another follow-up foreign minister s meeting between Turkey, Armenia, and Azerbaijan.  And you can expect another trilateral summit between the presidents of these three countries.</P> <P>So, our president made it clear in November last year when he attended the Baku-Tbilisi-Kars railway road groundbreaking ceremony that Turkey is in favor of creating a Benelux type of market, free market in the Caucasus.  So, it s open to Armenia as well.  So, I just will leave with that.</P> <P>Stephen Sestanovich:  Very briefly.</P> <P>Zeyno Baran:  Sure, very briefly.  Well, just to add on the existing pipelines, Turkey, Georgia, and Azerbaijan actually have established a system for pipeline security, and Turkey has been with its NATO and other capability for many years, dealing with pipeline security issues.</P> <P> </P> <P>Panel IV: Missile Defense</P> <P>Andrei Zolotov:  Ladies and Gentlemen, let s begin the next panel otherwise we ll miss a lot of interesting comments today.  So we re starting the panel in another yet very contentious issue in Russia-U.S. relations, which is not limited to Russia-U.S. relations but involves other countries.</P> <P>And I m honored to introduce today s panel.  We have Ambassador Petr Kolar of the Czech Republic, Marcin Kaczmarski from the Centre for Eastern Studies in Warsaw, Fyodor Lukyanov, the chief editor of Russia in Global Affairs, and Thomas Graham of Kissinger Associates, who will speak in this order.  And we ll need to finish at 4 o clock, which is in 50 minutes.  So with four speakers, you have seven to eight minutes each.  Eight minutes is maximum to speak so that we can have a discussion.  Thank you.  Ambassador.</P> <P>Petr Kolar:  I m privileged to be the first.  Thank you very much.  Thanks for giving me the chance to address you.  I ll try to be brief.  My remarks are pretty simple.  I can speak from the other perspective and the Czech perspective so I can explain why we, I mean, the Czech government was negotiating with the United States about the U.S. base, the U.S. Army on our soil.  We re asked, sometime ago, just to start with the kind of the checking, if it is possible and if it is very useful and if it would be useful for United States to have a missile defense base in our country.  At the time, it was not clear how they would like to do that, if they would divide it for two countries, or if it would be in one country.  So that was in 2004 or something, maybe even a year later.</P> <P>I know that from that time, some things changed and we were also having the elections and then a new government came to the power and the United States started with the official request to negotiate and they came with the proposal that in our country, there should be the U.S. radar, which is part of the missile defense project.  They were looking into three areas and, finally, they found one, which is close to Prague, relatively close to Prague, and they started to negotiate.</P> <P>From the very first day, we were insisting that this project should be not only bilateral.  We were saying that we are, as members of NATO, responsible to have our security and defense indivisible, that we should do it with our NATO allies and finally, this, let s say, approach, was pretty successful.  As you probably know, we have this Bucharest language from the Bucharest Summit of NATO, where under NATO, it s saying that this project is something that NATO would like to participate.  I am not quoting that properly but the language is pretty clear and it s supportive.</P> <P>We believe that this system is useful.  We perceive it as a prevention, as kind of being the deterrent.  It s not Star Wars.  It s not something that should attack anyone.  There was a missile that those interceptors, which are, hopefully, going to be based in Poland.  Ten interceptors are not wearing any war hats.  They should destroy the attacking missile by the kinetic energy and they are not designed to attack anyone, just to kill these vehicles.  So that s why it s called kill vehicles.   There s this missile attacking our territory or the territory of the United States.</P> <P>Also, when I say that we perceive it as a prevention, we believe, as the most atheistic nation in Europe, that some moments in Bible are very much truth and real so we believe that Noah had to build his ark before the flood, not after.  So it s better to do it now than to do it later.</P> <P>And we believe that this system, once built, should actually prevent attacks and should prevent some crazy maniacs somewhere.  I m not identifying any country, any territory but somewhere, from some part of the globe, would prevent them from developing missiles, which could be used as a threat against our territory, against our life and against our allies.</P> <P>So the important thing is that we have it ASAP.  NATO project, we want to have it as a NATO project and we want to have it ASAP.  That s clear signal that NATO security is indivisible and we believe that this is prevention.  It s a defensive system so that s why we support it.   Short remarks on the beginning but to debate this later on.  Thank you.</P> <P>Andrei Zolotov:  Thank you.  Marcin?</P> <P>Marcin Kaczmarski:  Thank you.  I will try to present, as I m not representing the Polish government, I will try to present the Polish view on Russian policy towards and the issue and its impact on Russian-American relations.</P> <P>Russian Foreign Minister Sergey Lavrov pointed out that a missile defense deployment in Polish Poland and the Czech Republic as one of the red lines, next to Kosovo independence and NATO enlargement.  And the main question is to what degree is this issue important in Russian-American relations and to what degree is this issue able to influence Russian-American relations trajectory or to what degree is it only used as a useful foreign policy tool by Russia?</P> <P>If we look at Russian resistance towards missile defense, it has two characteristic features.  Firstly, its strong opposition is a rhetoric one.  It talked about isometric response.  It s the threat to withdraw, that Russia withdraws from IMF Treaty.  And on the other, we had the issue of Iskanders which are to be deployed in Kaliningrad Chernyakhovsk.</P> <P>But on the other hand, Russia demonstrated some signs of readiness to compromise with the U.S.  Its consultations in the formula two plus two , especially in March and April 2008, Russian opposition towards missile defense seemed to weaken and Russia seemed to accept American project.</P> <P>One year earlier, we saw two proposals by then President Putin to share data from Gabala and Armavir radars with the Americans in case the U.S. gives up the idea of deploying MD installations in Poland and Czech Republic.  And we had quite an unclear situation in October 2007 when Russia seems to be sending some offer to Iran and seems to be ready for a kind of tradeoff with the U.S.</P> <P>If we look at what could be Russian losses caused by a missile defense, and I mean real losses and those perceived by the Kremlin.  Firstly, it s when U.S. deploys an MD system in Central Europe; it will be the sign of the end of strategic parity, which, in fact, ended in 2002 when the U.S. withdrew from ABM Treaty.  But it will be another symbol of the end of strategic parity and of strategic advantage of the United States.</P> <P>Secondly, Russia, as it is in Poland, Russia does not buy the American argument that the system is targeted against Iran and Moscow repeats that the system is directed against the U.S.  Another potential loss for Russia is strengthening the U.S position in Europe.  As it was told here already, Russia perceives international relations and its relations with the U.S. as zero-sum game and every advantage for the U.S. is the loss for Russia.</P> <P>And last but not least, Russia perceives the deployment of a missile defense in Poland and Czech Republic as another symbol of, on the one hand, encircling Russia, and on the other, of neglecting its interests that Russia would like to persist in Central Europe.  And there is this constant aim of Russian foreign policy to maintain a dual status of membership in NATO as where Central Europe would have little lower security status than Western Europe.  </P> <P>And if we look at what Russia is using and the issue of it, firstly, it s one of elements of its multidimensional relations with United States and it s used for bargaining with Washington to have, to get concessions in other spheres.  Secondly, opposition towards missile defense plans created Russian opportunity to demonstrate its new position, its new assertiveness, its new global stance.  Thirdly, it s a very useful tool of dividing Europe and United States.  </P> <P>If we look at any threats that Russia is talking about, I mean here the withdrawal from IMF, the deployment of Iskander missiles, it can be clearly seen that they are not endangering U.S.  They are endangering, firstly, Europe, and Russia wants to create the image of U.S. as a country which threatens global stability and which the fact it threatens European security.</P> <P>As we may see, this game, from Russian side, hasn t totally succeeded because if, in 2007, European states, Western European states were divided on the issue, after this Bucharest Declaration, there is much less gain for Russia.</P> <P>And, as I have to finish concluding, is Russia ready for compromise?  I would claim that no because firstly, missile defense issue has a very big symbolic meaning for Russia.  And claming strategic parity is possible only when both states, Russia and the U.S., do not have such systems.  Secondly, this is very useful in Russian-American game for Europe because MD can be used as a tool of dividing Europe.  Thirdly, Russia has little -- does not have enough influence on Iran to propose a real trade-off, I mean, encouraging Iran to give up its nuclear program in exchange for U.S. resigning from its program.  And Russia won t stop this opposition because in case it wins, it would be a very big political success.  Thank you.</P> <P>Andrei Zolotov:  Thank you, Marcin, for being so quick.  Fyodor.</P> <P>Fyodor Lukyanov:  Thank you very much.  First of all, I would like to thank Leon Aron and American Enterprise for this invitation.  It s my third time here at these such conferences and every time, it s very interesting to discuss because the environment is changing so, really, we find ourselves, every time, in a new situation.</P> <P>I don t belong to the group of Russian expert community which welcomed a recent statement by President Medvedev in the poslaniye, in the State of the Federation Address, about Iskander because I m sure that it was very wrongly -- a very wrong time and very wrong place to do.</P> <P>At the same time, I can understand at least one motivation why he did this statement.  It was, maybe, overreaction to previous years of consultations or conflicts around missile defense.  And I think that Undersecretary Fried just brilliantly described the position which generated such a reaction from Russian side, no tradeoffs, no deals with Russia, and what are Russian legitimate interests, it will be defined by the American side.  And that s why missile defense issue became such an emotional thing.</P> <P>But even putting aside emotions, I would say that there is a conceptual conflict, which needs to be formulated in order to find a way to settle it.  This is a conflict between the global nature of the problem of missile defense, which requires, actually, a concerted solution and the desire of the United States to act at its own discretion in this field.</P> <P>Commencing in 2002, the U.S. decision to unilaterally withdraw from the 1972 ABM Treaty, President Bush explained that America needed freedom and flexibility to protect itself.  That is self-reliance, regardless of external reactions.  But initially, when the missile defense issue was first raised in the 1960 s, it wasn t a global issue, an issue of global strategic stability, an issue of global importance so it was not supposed to be discussed internationally.</P> <P>The subsequent development, after U.S. withdrawal, had given clear evidence of such an approach.  For example, the intention to deploy elements of missile defense system in the Czech Republic and Poland was actually an arbitrary decision of the United States rather than the result of consultations with allies or of an internationally recognized assessment of Iranian or somewhere else, someone else s missile threat.  And Europe, I would say, at that time, was just informed that she needs protection and then what Poland s mentioned after that, the NATO discussion came much later.</P> <P>So anyway, this issue, the issue of missile defense, could be a big obstacle for Russian-American relationship with the new administration.  At the same time, it could be a very good way to try to resolve a lot of problems we have.  But to achieve it, we need to put this issue in the international context and discuss it in a package or in a basket with all related issues, like Iran -- the nuclear program of Iran, nonproliferation and arms control talks.  Because I m afraid that if missile defense project will be continued, in a way it is now, it will be extremely difficult to expect that arms control talks and discussions about START I or continuation of START I Treaty will be very difficult because it will mean, actually, that U.S. and Russia will discuss reduction of nuclear potentials, both sides, but also Russia nuclear potential, which will mean that Russia will discuss how to make it easier for the United States to create this universal shield against those missiles, so it s very interconnected.</P> <P>And of course, the problem is that, really, elements in Czech Republic and Poland don t undermine Russian nuclear potential.  But of course, it s not the final stage of the project but the initial one.  And after the third site, we will proceed to the fourth, fifth, and so on and that will really change the whole strategic stability situation not only for Russia.  Thank you.</P> <P>Andrei Zolotov:  Thank you, Fyodor.  Tom Graham, please.</P> <P>Thomas Graham:  Thank you very much.  It s difficult to find anything to say after three excellent presentations.  But let me make a few brief points before we open this up to discussion.</P> <P>First, I want to pick up on something that Fyodor said at the end, that you have to think of missile defense, really, in a context of a whole host of other issues.  Now, I wouldn t have picked the ones that Fyodor did.  I think if you re thinking about this in terms of Russian interest, U.S.-Russian relations, the package to look at is really NATO enlargement in Europe, its strategic stability, its U.S. activism in the former Soviet space.  And all of these things are a complex of issues, which has led Moscow to believe that the United States is not prepared to take Russia's interest into account while it pursues its own.</P> <P>Now, as I said this morning, I ve always thought that a principle of diplomacy is that you should be willing to accommodate the interest of others if it doesn t jeopardize the achievement of your own strategic interest and I think that s the way that we need to approach missile defense as well.  So this raises three clear questions, that is, what are U.S. interests?  How are Russian interest involved in this?  And then is there a way to accommodate Russian interest while still advancing U.S. interest?</P> <P>Very quickly on U.S. interest, picking up on what has already been said on this panel, I think, obviously, there is a ballistic missile threat, certainly, over the next ten, 15, 20 years.  I think we re all concerned about the proliferation of ballistic missile technology.  The North Koreans are certainly working on this.  The Iranians are working on this.  And given that any new technology, particularly one as complex and complicated as missile defense, needs a long lead time in order to perfect it, we ought to be working on missile defense, at this very moment, on the technologies, thinking through the architecture so that, as it has already been said, we don t build the ark after the flood has already come upon us but we have it in preparation.</P> <P>That said, I also am of the view that the threat is not urgent.  This is not particularly for thinking about Iran, which is most directly related to the deployments in Poland and the Czech Republic.  This is not something that we have to resolve tomorrow or the day after tomorrow.  I think we re still years away from the Iranians having a technology and delivery capability that would threaten the overwhelming majority of the territory of Europe, let alone the United States.  That s another way of saying that we have time, we ought to do this deliberately, and certainly, we ought to not make haste in moving ahead on something like this.  If we have to pay a political price for this in our relationship with our European allies, with the Russians as we move forward, we ought to stand back and see how we can accommodate everyone s interest.</P> <P>Now on the Russian side, again, I ll be presumptuous and lay out what I think the Russian interest or concerns are in all of this.  First, I think it s a question of the United States moving its military infrastructure closer to Russia s borders.  This violates, I think, what Russia sees as ought to be a pact and agreement between the United States and Russia, the two major nuclear powers, on how they situate their military forces.</P> <P>Second, building a bit on what Fyodor had said about the fifth, the sixth, and the seventh site, I would argue in a slight different way.  I think the Russian side would be concerned about the technological breakthrough possibilities.  You ve got a system now.  Whether it works or not is a matter of debate, even within the American community, let alone outside.  But who knows what new physics you might discover as you work in this project and what the implications of that may be for missile defense or your ability to deal with what another country hopes is its enduring strategic deterrent?</P> <P>And then finally, I think this problem is made all the more serious from the Russian standpoint because they don t believe there is an urgent Iranian threat.  And if the United States is moving rapidly to deploy this force in the absence of a real threat, well, then who else could it be directed against other than Russia, which does have a force in the field that is capable?</P> <P>Now, I d add a footnote here.  If it turns out that this really isn t directed against Russia, that s even worse.  That means we don t take Russia seriously.  And so I think there s a psychological element here where part of the Russian political leadership really wants it to be directed against Russia because that means we re important in the world and that, in a strange way, I think does impact on the way they think about this issue.</P> <P>Now, what does Russia want?  I would argue that it s overriding consideration at this -- but it s not really related to missile defense.  It s really related to the United States and the way the United States has pursued its policy, in Russia's mind over the past eight years, and that is, that they want to put an end or put constraints on what they see as American unilateralism.  To put it another way, what Russia would like to do is transform the United States into a normal great power.  That is, a great power that realizes that it is one of many poles in world affairs and that it has to take into account the interest of the other great powers as it pursues its own interest around the globe.</P> <P>With respect to missile defense, I think the Russian position is that if you can t prevent this deployment, then you can raise the price to the United States, you can try to persuade the United States to take measures that assuage your concerns, or you also offer joint cooperation because what better way to put constraints on the United States and get insight into the missile defense program than by actually working with them and constructing it?</P> <P>Quickly, so what should the U.S. approach be on this?  I think we can slow down the process of deploying the sites in Poland and the Czech Republic.  I think the financial crisis and the budgetary considerations are going to compel the next administration to do that.  In any event, we ll see but I would be surprised if they want to put a lot of money into a system that they don t have an overwhelming confidence in.  I think we ought to propose to the Russians a joint assessment of the missile threat, particularly from Iran, a joint assessment of what the possible architecture should be, dealing with missile threats over the long term, putting some constraints on the time that you discuss this because you don t want to, in any negotiation, have this non-ending because a threat will emerge at some point and there will be a need to deal with it in an efficient fashion, and then continue to work on the technology to make sure that we have something that works.</P> <P>Then again, as I said, you can t do this in isolation.  We re also going to have to talk about NATO strategic -- the follow-on to START I, and so on and so forth.</P> <P>And then finally, as I said at the beginning, it s quite possible that the Russians will not want to engage in this type of approach.  They don t really want to cooperate, that there s something else at play here.  Again, I think it s, certainly at this point, it s worth trying to make the investment, in the sense, to challenge the Russians to live up to what they re saying about what they want to do.  If it doesn t work out, the United States has many other ways of dealing with this issue, many other possibilities over the long term.</P> <P>Andrei Zolotov:  Thank you very much and thank you for accepting this policing of time, which was very, very severe.  As a result, we have some 25 minutes for discussion.  Please, let s take two or three questions at a time and then have the panelists answer it.  Yes, you sir.</P> <P>Dick Rickers-Mayer [phonetic]:  Yes, Dick Rickers-Mayer, Washington University.  A factual point, first of all, President Medvedev did say already that the United States would be included with the new security system with Russia.  The reason for that is because the United States is the only country that can threaten Russia with nuclear attack.</P> <P>And when we talk about missile defense, we should go back, some of you are as old enough as I am to remember the SDI, Ronald Reagan s Strategic Defense Initiative, what that meant, from the Russian perspective, is that we ll reject it and We embrace the First Strike concept.   In short, we embrace absolute security.  This is what the administration today has been doing for eight years. In this way, the Russians are very suspicious.</P> <P>Andrei Zolotov:  Excuse me, could you get to your question please?</P> <P>Dick Rickers-Mayer:  Okay, the question is how does anyone here on the panel respond to that?  Because we have to look at some real questions rather than -- one of our Russian comrades talked about this but people in the military do and so we should.  We should anticipate where the problem is going to have a [indiscernible].  Thank you.</P> <P>Andrei Zolotov:  Thank you.  The gentleman in the back, your question.  And ladies and gentlemen, please ask questions and not make statements.  Thank you.</P> <P>Dan Casmer [phonetic]:  Dan Casmer.  I m an associate with the Institute for European, Russian, and Eurasian Studies at George Washington University.  A very na�ve technical question: if you actually have to use the missile defense against an ICBM coming in, over whose territory does the interception occur and where the debris falls?  Thank you.</P> <P>Andrei Zolotov:  And the third question from the middle here in the back.</P> <P>Stephen Lee [Phonetic]:  Hi, I m Stephen Lee.  I just have a question regarding the discussion so far regarding missile as a way or mechanism for nuclear attack.  But I think the presumption is that that is going to be the mode of attack that we are most concerned about.  The question is that what about other forms of non-traditional delivery, which are, I think, much more of a concern, especially with some of the terrorist organizations.  Is that something that we should consider and how should we deal with that?</P> <P>Andrei Zolotov:  Thank you.  We have had some very specific questions.  Who would be -- some of them are actually questions for military experts.  Who would volunteer to answer?</P> <P>Thomas Graham:  I think everyone is looking at me and I m not a technical expert either.  Let me take this in reverse order.  Look, first, everyone realizes that there are other ways of delivering nuclear weapons, non-conventional means and we need to think about that.  It would be a mistake to believe that the U.S. government doesn t have numerous people focused on different types of threats and ways of dealing with them.  That doesn t negate the fact that delivery by missile is a possible threat and one that you can see a path to that over the next generation.  And so while we re dealing with other aspects of the threat, we also need to be dealing with the missile threat, which is exactly what this administration has done and I think what the Obama administration is going to do as well.</P> <P>The technical question, I think the way that this system would work at this point, a lot of the debris would fall over, obviously, Europe, parts of Eastern Europe and Russia.  And obviously, that is a -- well, this is the reality.  How much damage it would do is another matter.  And again, that s something for scientific and technical experts to talk about.</P> <P>The final, or the first question, I think the simple answer to that is that contrary to what a lot of people might believe outside the U.S. government, the U.S. government sees this system as directed against Iran, when they re thinking about the Polish and the Czech sites.  This is not, in our minds, a vehicle to obtain any type of superiority over the Russians.</P> <P>Now, that may not be persuasive to the Russians and the point that I was making is that you have to take these perceptions into account.  We know what we re trying to do.  We haven t persuaded the Russians that that is, indeed, what we re trying to do.  And I think that many of them are sincere in raising the concerns about where the United States is headed over the long term, what the capabilities of this system might be later on, and we have to deal with that.  That s why I suggested that we could take a more deliberate approach to this, try to deal in a reasonable fashion with Russian perceptions, Russian concerns, and see if there s a way that we can work this out that assuages those concerns but doesn t jeopardize, I think, the long-term national interest the United States has in developing and perfecting a missile defense system.</P> <P>Andrei Zolotov:  Anybody else who wants to add something?  Ambassador?</P> <P>Petr Kolar:  Well, I m not a technical expert at all.  I m not an engineer or show you some trajectories and how it would be killed and where the debris will be falling down and what territories will be affected.  I can address this question from the point of view of the principal.  I just believe that it s better to have some debris falling on our hats than to have a missile attacking our territory.  And even if the United States is the target, for me, as a member or a citizen of the Allied Countries, the same alliance with the United States, I can t imagine that we would prefer to have the United States attacked and destroyed or paralyzed, at least, by some nuclear missiles than to risk some debris falling in our territory.  The United States is too important an ally and the NATO would not work without that.</P> <P>So very simple view, may I say something even more principal?  I just -- speaking about this Russian interest and about our positions and the United States, how we need to be cautious and so on, well, I may be too na�ve and may be too idealistic.  We were living in part of the Soviet s sphere of the influence for 40 years.  And when the Cold War ended, we believed that Russians are freed, as we were liberated, that the Soviet regime, Soviet Communist regime collapsed.</P> <P>And I believe that the Russians are profiting from that.  They should be profiting from that.  They are the winners.  They are not losers.  They, like we, are finally having a chance to do something with their own lives and with their own future.  And I think if we speak about the interests, every normal state has a clear interest that this is to have a prosperous democratic society and to have a peaceful neighborhood.  </P> <P>So I really don t understand why, still, for Russians, we, Westerners, we, NATO allies, or United States is perceived as an enemy.  There are some other enemies.  I can spare for it.  There are some other enemies.  We, Czechs, we are not paranoid about Russians.  We simply cooperate with them.  We have a lot of business with Russia.  We have a lot of investors there working quite hard.  And we don t understand why Russians still perceive us as a threat, as an enemy.  It s something, from the point of view of a principal, I don t understand.</P> <P>Once we are trying to offer transparency and confidence building measures, well, I would expect that they will really study that and they would say, Okay, we have a problem.  But that ended.  Let s just speak about those liaison officers in our embassy in Prague and how often they could visit this base and what they could do there.   But to reject it as kind of the signal that, You are the enemy.  We don t want to talk to you because it s obvious you want to dominate, it s strange.  We don t want to dominate.  We just want to partner.  It s clear.  Thank you.</P> <P>Andrei Zolotov:  Fyodor, would you like to respond?</P> <P>Fyodor Lukyanov:  Yes, very shortly.  So of course, we are not afraid that Czech Republic will dominate us.  That is not the case.  I would say, generally, that this system is such a system of global importance and I agree that we have a lot of sources of threats, both in so-called or formerly called the rogue states or terrorist organizations or any other.  But it should be to bring stability and security to everybody, it should be inclusive and it should be a product of really broad discussion between all parties involved.  If not, then this system will always raise, will always produce, generate concerns in the countries which are not included.</P> <P>Andrei Zolotov:  Thank you.  Do we have more questions?  Please, gentleman in the middle, then over there, and then you.</P> <P>Male Voice:  Yes, [indiscernible].  I m with [indiscernible] Paper [indiscernible].  I am still puzzled by President Medvedev s speech.  You gave some explanation but still, he should have advisers around him.  And so, didn t he see that it limited space for President-elect Obama to make some decision?  Because once you push him that hard at the beginning what the reaction could be from the American public.  So what could be the explanation?  Wasn t it pointed at the American Congress when the Democrats, in some way, they listened to Russia and they -- yes, this is the question.</P> <P>Andrei Zolotov:  Thank you.  Over here, and please be short.  We would like to have another round of questions.</P> <P>Harry [Phonetic]:  Hello.  I m Harry.  I m with the Government Accountability Office.  I m curious about Medvedev s present to President-elect Obama the day after election of the threat to install Iskander missiles in Kaliningrad and out of curiosity, I looked up on the Wikipedia and I saw these are not Scuds.  These are highly accurate, very capable missiles with an accuracy of 20 meters.  I m wondering whether this threat is some sort of paradnost or that we need to take it seriously.  And if we take it seriously, is there a possibility for some sort of tit for tat response that we have to install Pershings or something like that to counter these missiles and back and forth?</P> <P>Andrei Zolotov:  Thank you.  And over here please.  Sorry, you ll be in the next round of questions.</P> <P>David Ahearn:  Yes, Dave Ahearn with Space & Missile Defense Report.  To Thomas Graham, the interceptors that would be used in the European missile defense system are actually just a variant of the ground-based missile defense interceptors now installed in Alaska and California.  Is it your feeling that, basically, what they re doing is removing one stage from that system and the rest of it would be the same?  Do you think there is a serious doubt here that the European interceptors might not work unless there is a lot of testing first?</P> <P>Andrei Zolotov:  Thank you.  Tom, do you want to start again?</P> <P>Thomas Graham:  Sorry, I mean, the simple answer is I m not a technical expert and so I don t know the answer to that question.  My sort of understanding is that this is a system that still needs to be perfected in some ways.  Now, how effective it is at this point?  I can t tell you.  The experts in the government will.  But anyway, the point that I was making is that I think that where we are now, we have time and that given that we have time, we ought to consider different approaches to this to try to assuage some of the Russian concerns.  I m not talking about an open-ended discussion with the Russians but certainly more than we ve done previously and I think a new administration has an opportunity to do that if it packages it in steps forward on a follow-on for the START Treaty, resurrects the I, II, III Agreement and so forth, I don t think you can do this in isolation.</P> <P>Fyodor Lukyanov:  I started with saying that I was also quite surprised by words by President Medvedev so I don t belong to his advisers so I can t explain the logic behind this.  Would I be his adviser, I would recommend him, maybe, to make this statement not now but three months ago or four months ago in July, directly after Secretary Rice signed the agreement with Czech Republic about stationing the radar there.  At least, in this case, it would be, so to say, final greeting to Bush administration, which, of course, the relationship is quite undermined anyway.</P> <P>So as for your question about the intention, judging by follow-up statements by the Vice-Minister of Foreign Affairs Grushko, a couple of other Russian officials, and interview which Mr. Medvedev gave yesterday with the French newspaper Figaro, I think that is an attempt to downgrade a little bit the reaction and to present the statement as actually an invitation to bargaining because he said yesterday in this interview that Iskander would be deployed in Kaliningrad only in case if missile defense elements will be deployed in Poland and Czech Republic.  So I think we should consider it as a way to start to bargain.</P> <P>Andrei Zolotov:  Marcin?</P> <P>Marcin Kaczmarski:  Maybe I will start with a small clarification.  Iskanders, the deployment, the plan of deployment of Iskanders is, in fact, nothing new because it was planned in Russia to re-arm the units in Kaliningrad with Iskanders.</P> <P>But as far as I understand the Russian policy at present, I would say that the main motive of President Medvedev to challenge the new elected President Obama was to show Russian determination, that it wants to demonstrate that the election of Barack Obama doesn t change anything in Russian foreign policy, that the new administration should decide, unanimously, whether it wants to strike a deal with Russia and then Russia accepts that or whether it continues with the plans of missile defense and then it will face tough opposition of Russia.</P> <P>Andrei Zolotov:  Thank you.  Please here and then Peter Cheremushkin and then Andrei Illarionov and you will be the last.</P> <P>Charles Hoke [phonetic]:  Thank you.  Charles Hoke.  I was interested in and had carefully followed what Mr. Graham had said this morning and then his remarks this afternoon in panel.  My concern, and I think most of the American public is concerned about perceptions, which you addressed.  My question would be to you, when you said we must consider the perceptions that Russia holds, you concluded by saying that with the financial crisis, in which we and the world are involved, that perhaps, this should give us a little pause to go ahead and basically, based on the limits of both North Korea and Iran perceive to be, to make a missile that we could continue to work on the technology and during the course of that time, we might find something else in play here.   I was just wondering, Mr. Graham, what you think, from your perspective, you think could possibly come to be in play here, in terms either of their perspectives or in terms of Russia s interest?  Thank you.</P> <P>Andrei Zolotov:  Thank you.  Peter.</P> <P>Peter Cheremushkin:  Thank you.  Peter Cheremushkin with the Interfax News Agency.  My question is to the representatives of Poland and Czech Republic.  Since Poland and Czech Republic claim that it doesn t view Russia as a threat, why you guys do not permit the access of Russian inspectors on the sites of missile defense?  Thank you.</P> <P>Andrei Zolotov:  Thank you.  Andrei Illarionov.</P> <P>Andrei Illarionov:  My question to Fyodor and Andrei, to you, as well, if you can, it s actually a great strong feeling, especially from all the discussion, that the timing and the way how this statement has been made, we re talking about Mr. Medvedev s statement on missiles, that the real, some kind of, underlying intention was not to remove missiles from Poland and Czech Republic but to keep them.  Because otherwise, whether you would just, Fyodor, would you advise to do it three months ago or a month, you or anyone would advise to do it in a very different way.  If it was a real desire that Poland and Czech Republic would not have missiles on their territory, the behavior on the Russian side would be quite different.  So just if it is so, it looks like it is so.  So just what would be your somewhat of an assessment to what was the real reasoning why it is not necessary for the Russian authorities to have missiles on the Poland and Czech Republic territories?</P> <P>Andrei Zolotov:  Last question please.</P> <P>Jill Dougherty:  Thank you.  Jill Dougherty from CNN.  I think this question would be for Mr. Graham.  I wonder if you could define more specifically what the Obama position on this is because after all, just a few days ago, we apparently had a discussion between President-elect Obama and the Polish leader, in which the Polish side came out with a completely different understanding of what Obama actually thinks about this system.  Obama, he seems to be saying Let s test it.  See if it works.   I mean, is that what he thinks or is this a way of kicking it down the road for a bit or where do we stand?  Do we know?</P> <P>Andrei Zolotov:  I guess I ll start answering since Mr. Illarionov posed the question to me as well, is that I think that we, very often, try to kind of read more in various Kremlin statements than there is to read there.  We are, somehow, kind of, I think, very often see kind of every move as necessarily being very rational, necessarily being very thought through.  And kind of as well, on the other hand, our experience in more mundane, sort of daily issues, not as important as this kind of statement.  And I m sure your experience, probably as well, from working in the Kremlin, is that very often, there are some very, very minor issues that affect these decisions.</P> <P>So my rational answer is that I, once again, I mean, I don t know who advised this and I cannot imagine someone really advising it.  I think that the actual dating of the presidential address was the kind of the day after U.S. presidential election was a related thing in order to kind of overshadow the whole news effect.  But trying to say that the Kremlin really wants to keep the missiles there, I mean, that would be, for me, too much of reading in it.</P> <P>Fyodor Lukyanov:  Sort of for add -- I don t think that Kremlin really wants those elements to be deployed in Poland and Czech Republic.  There is a logic which is based on a very rude real politics, which is quite typical for the contemporary Russian leadership, which means that to achieve something, to start a bargaining, first, we should demonstrate, as Marcin said, demonstrate that our position is absolutely strong and it will be no compromise.  So whether this logic is right or wrong, I m not sure it s right but it s not a completely irrational move.</P> <P>Andrei Zolotov:  Tom, do you want to continue answering?</P> <P>Thomas Graham:  [indiscernible] </P> <P>Andrei Zolotov:  Okay.</P> <P>Thomas Graham:  Do you want to go first?</P> <P>Andrei Zolotov:  Ambassador?</P> <P>Petr Kolar:  Well, I don t want to be rude but I, originally, when I got a question like that, why that we are not perceiving Russians so why we are not allowing the inspectors to be there, well, first, it s not the truth.  We said that we have no problem with the liaison officers based in Russian embassy in Prague who could inspect the base.  Of course, we need to know that and this is not that the United States the only partner is for Russia that is going to be in our territory, so for our Russian friends, most probably, quite hard to accept the fact that we are the part of the negotiation as well, not only Washington D.C.</P> <P>As you are right, we are not going to dominate Russia, definitely not the Czech Republic, but I believe that not even the best is now going to dominate and it s not something they wish the West to dominate.  We just are looking for some normal relations.</P> <P>Unfortunately, this representation of Russia, which we are dealing with today, is not making us, our job, giving us chance to make our job easier, with the Iskanders and the other things.  Okay, if they build some site in Kaliningrad, it s wasted money.  We believe that they will not use it against us.  Never because they finally would realize that this base there in our country and in Poland is not against Russia.  So I would suggest they should invest their money in something more wiser and more productive but okay if they want to do that.</P> <P>And there is a psychological aspect as well.  We are negotiating with our partners in NATO and the United States and this is about the American troops in our territory.  And it s not easy for our public to accept that because of the experience with the temporary deployment, as we call it, temporary deployment of Soviet troops, they came in 68.  Nobody asked them.  Nobody invited them.  They came.  So with Americans, we are trying to negotiate and they are asking and if we say no, they will be not there.  It s quite a huge difference.</P> <P>Still, this psychological perception after 20 years is coming back.  It s like a flashback every time.  Every time, some messages, like Iskanders, are coming from Moscow.  So please, if you could help us with your leaders, it would be great to have this situation easier and we would be then very happy, like you would be, I m sure.  That s all.</P> <P>Andrei Zolotov:  Okay, Marcin?</P> <P>Marcin Kaczmarski:  As Polish Foreign Minister representative has repeated, Poland is ready to accept the presence of Russian inspectors on permanent basis in case Poland gets such a possibility to have inspectors on permanent basis on the Russian bases in Kaliningrad.  But it was commanded by Russian MFA as something very strange and they didn t even want to discuss this issue.</P> <P>Andrei Zolotov:  Tom?</P> <P>Thomas Graham:  Very quickly, on the first question, there s something else that I had in mind, is that I can think of a scenario in which if we had a joint assessment of Iranian possibilities, if we look at the reason more broadly, we might decide that Pakistan, in some way, might be a threat long term. And after all, they have nuclear weapons and delivery systems, that on the basis of that, you might come up with an architecture for missile defense in Europe that looks slightly different from the one that the United States is proposing at this point that might include radars, interceptors on Russian territory, in addition to radars and interceptors on Czech territory and Polish territory.</P> <P>I think in the context of a sort of broader effort to try to get the strategic relationship with the Russians back on track, that there is some merit in trying to initially pursue this.  Whether it works or not, it depends on the receptivity to this approach on the Russian side and at the end of the day, to whether each side believes the other side is going to be constructive in doing that.  But I would give that a chance and then as I said, work on the technology as you re doing this and maybe we ll come up with a different configuration that meets everybody s interest and puts a lot more pressure on the Iranians than we have at this point.</P> <P>I ve said twice today that I ve been presumptuous in talking about Russia interest, particularly with other Russians in the room, I d really be presumptuous to talk about Obama s views on missile defense, after having spent six years in the Bush administration so I will leave it.  I m sure there are more Obama supporters in this room than there are Bush supporters and perhaps, some of them could address that question for you.</P> <P>Andrei Zolotov:  Thank you very much.  Let s please join me in thanking the panelists for this discussion.</P> <P>[Applause End of Panel IV]</P> <P> </P> <P>Panel V:  Where Do We Go from Here?</P> <P> </P> <P>Leon Aron:  Ladies and gentlemen, I know that, emotionally and mentally, we re somewhat fatigued but I call upon you to open yourself up for one final stab at U.S.-Russian relations.  If I may entice you, this is a free-for-all, as it were and what I mean by that is that given how exhaustive the coverage has been thus far, we, probably, will be less with our speakers than with the question and answers.  This is a wrap-up panel.  This is a panel where I ve encouraged the speakers to tell us what it is that they learned today that they find portentous for the U.S.-Russian relations, in whatever form.  What it is that fascinated them?  What it is that they thought differently of now that they ve heard of others?</P> <P>So with that, I call on everybody who survived to listen and then help us engage in a discussion.  In their alphabetical order, and I hope that that s the way we re sitting, now, Steve, you ll start.</P> <P>Stephen Biegun:  Thank you very much.  Okay, thank you again, Leon.  And what did I learn?  Well, one thing I learned is that losing an election isn t the worst thing in the world.  It couldn t compare to the U.S.-Russian relationship as your portfolio.  And I think Dan Fried was right, that I think the people who will inherit this portfolio are ready but they don t suffer any illusions about some of the challenges that it presents.</P> <P>I want to make a couple of observations on how the relationship, I think, is viewed in each place, at least among the negatives, and then talk about some of the options going forward.</P> <P>First, I think Dan Fried did a decent job of describing the U.S. perspective but I don t think it was a complete job.  I agreed with what he said but he didn t say it all.  I think he s right in that the United States has had an open and patient approach to partnership with Russia but there are other pieces to that.  I think the U.S. government is very frustrated with the Russian government over those places where the Russian government has either failed to cooperate or, outright, obstructed solutions on issues that we and our European allies are looking to find for issues, like for example, Iran s nuclear program.</P> <P>I also think there is a corrosive influence in the U.S.-Russian relationships and that there is a general indifference, or at least, there has been a general indifference in the United States to this relationship among the general society, for sure, but even among some policymakers and it may not be entirely malicious.  It s, in part, simply a reordering of priorities in a world in which the threats of nuclear proliferation, of global terrorism, September 11th, wars in Iraq and Afghanistan and so on, nuclear programs in North Korea and Iran, where does Russia fit in to that?  It s a catalyst for solutions in some of those but it s not at the centerpiece of the crises that dominate U.S. foreign policy today.</P> <P>On the Russian side, I think Dan also captured the negative view that there are some quarters that view the United States and perpetuate the image of the United States as a hostile power that s seeking to keep Russia down and that even there is a counter-narrative written about the 1990 s that the whole purpose of the aid program and the engagement was to keep Russia as a supplicant.  I find that thinking absurd but it s there.</P> <P>Also, there are some who see the United States as an outright threat to Russia s security and seeking to isolate Russia at a minimum.  And finally, there is a view, among some, that the U.S. is a rogue power that is largely indifferent to Russia s interests as it pursues its own.  So I think Dan tapped on a couple of these but I think the complete picture is probably even worse.</P> <P>So where do we go?  I can t really say what the Russians should do except that we have to hope that they agree that we should go on a positive direction but we have to accept the fact that that may not be the case.  But that said, I think their first priority has to be establishing a common approach with our European friends and allies on how we engage Russia.  I think that, really, will strengthen our policy and it will diminish the ability of those who don t want to cooperate in Russia to divide and conquer.</P> <P>Second, I think we need a full-court press with all of Russia s neighbors, particularly countries like Georgia and Ukraine.  Diplomatic trade and investment, we have to engage them through the institutions, the OSCE, the European Union, NATO, and also through bilateral relations.  It has to be total.  We have to send diplomats over.  We have to do conferences.  We have to maintain a constant presence.  We shouldn t abandon the MAP program but pragmatically, I don t believe the MAP program is a near-term possibility.  But as some others discussed, I think de facto that we can create the elements of more stable, more democratic, more sovereign -- a stronger sovereignty in these countries.</P> <P>Third, we have to do the same with Russia.  It s not about isolating Russia and in some cases, we do, what I just mentioned, together with Russia.  We need a full-court press with Russia on trade investment on diplomatic initiatives on arms control, nonproliferation on Iran, North Korea.  We have to keep pushing, even if Russia refuses to cooperate, and we always have to leave an open door in case there is change of view.</P> <P>The election in the United States presents us with the possibility to establish a new relationship with new lines of new communication and I think that s, again, an opportunity.  I don t think we should waste any energy trying to create new structures for the U.S.-Russian relationship.  I think we should just get on with it.  The government offices are there to do it.  We should appoint good people and we should engage.</P> <P>And lastly, in every case where necessary, we do have to push back.  On CFE, on Kosovo, on Russia s conflict with Georgia, we simply cannot lose our voice, and in particular, and especially, on the erosion of democracy in Russia because it is my heartfelt view that an undemocratic government will produce illiberal policies.  Now, I m not so Pollyannaish as to believe that a democratic government will be perfect.  But I am of a view that the deterioration of Russia s democracy is directly related to the deterioration of U.S.-Russian relations.</P> <P>Lastly, we should not assume that everything will happen on a linear basis.  There is much change out there, even beyond a new president in the United States.  We have a global economic crisis, the bottom of which we may not have yet seen, which will change the nature of our relationship with many countries in the world and will change each country s individual priorities.  It may have them more focused on matters at home or it may seed more dangerous tendencies.  We ve seen this before in times of global economic downturn.</P> <P>We have to assume that President-elect Obama will undertake new policies on issues like Iraq, which really, I don t see as a strategic challenge to Russia s interest but it s been an annoyance factor for Russia, just as it has been for many other countries around the world.  And without endorsing the policies that the Obama government, the Obama administration will necessarily pursue or are committed to pursuing, I would say that it does offer a chance to reshuffle the deck a little bit and maybe to change the tone in relations.</P> <P>Lastly, we don t know what s going to happen elsewhere in the world, with Iran s development of a nuclear weapon, of the possibility of regional conflicts in many places around the world, which will force all of us to reorder our priorities and our relationships.</P> <P>My point is that we can t assume anything will proceed on a linear basis.  So what we need to do is get to work on the hard challenges of developing relationships with our new government, with the administration in Russia, prepare for the worst, and hope for the best.</P> <P>Leon Aron:  Thank you very much, Steve.  Now, alphabetically, you re next.</P> <P>Andrei Kortunov:  Thank you, Leon.  Sitting here and following the discussion, I was trying hard to make a case for optimism, which turned out to be quite difficult.  I know it reminds me of an old joke about who is an optimist.  An optimist is a person who goes to the cemetery and discovers all the pluses there.  And I guess that it s not really easy to be optimistic, given the current stature of U.S.-Russian relations.  But still, I think that we can construct a case for optimism.  And I have to confess that, of course, I am biased here because I do believe that Russia is a predominantly Western country.  It shares its culture or its basic values, its history with the rest of Europe.  In many ways, it is very close to the United States in terms of national psyche.</P> <P>And when they say that Mr. Putin or Mr. Medvedev made a speech and defined Russia s future and somehow, closed the option of integration, I m a little bit skeptical about that.  I think that with all due respect, it s not option of Putin or Mr. Medvedev to decide for the country and for the Russian people.  So in my view, this is something that deserves, probably, a close consideration.</P> <P>And following the discussion, I d like to make a comment that, in my view, there are at least two factors which will drive Russia closer to the United States and closer to the West at large.  And first of all, the social transformation of Russia itself, the dynamics of social development will gradually, with some setbacks, with some explosions of hypernationalism and xenophobia, but still, I think these are very profound trends which will get Russia closer to its Western partners.</P> <P>And second, I think that external pressures on Russia will grow over time, not only in terms of oil prices, which are still important, but also in terms of global problems, in terms of issues that Russia will have to handle together with its Western partners.</P> <P>So if we put aside fluctuations of the political life in Moscow and look at these long-term trends and long-term developments, I think that we have reasons to be moderately optimistic about Russia becoming a part of the Western community of nations.  We cannot talk about a specific schedule.  We cannot say how much time it will take.  But after all, it s a matter of political will.  It s a matter of persistence.  It s a matter of steps taken by Russia s partners.  It s a matter of the Russian people at large.</P> <P>Now, speaking of what can be done in the short-term future, I have a couple of ideas which were generated during the discussion of what has to be done by the West and by the United States in particular.  First, I think the name of the game for the next couple of months will be predominantly damage limitation.  And I think that for a number of reasons, it s good that the MAP issue, especially for Ukraine, is postponed.  Again, I don t think that MAP is critical to define the future of Ukraine as a nation.  I think that this issue can wait.  But in order not to add insult to injury, I think it s important not to push this issue, for the time being at least.</P> <P>Second, on the Caucasian issue, which we discussed today, I think it will be critically important to avoid a temptation to start a new arms race in the Caucasus.  Unfortunately, the dangers there, I think both sides are ready to flex their muscles, and it would be a natural reaction to what has happened there in summer.  But I think it is really important to start working on at least limiting the damage and on preventing this whole crisis from horizontal or vertical escalation, which, in my view, is still possible.  I have some specific ideas on what can be done by Russia and Georgia but it would take us probably another hour to discuss even some of them.</P> <P>Second, one point was made here.  I believe it s certainly important that U.S.-Russian bilateral relations should be put into a broad international framework.  Probably, we will not be very successful in confronting traditional issues of U.S.-Russian relations, some stumbling blocks like ABM or the Caucasus.  But I don t think that our attention should be totally consumed by these issues only.  There are other problems and some of them might be easier to start working from a blank page, so to say.</P> <P>For example, I think that now, we have a very clear erosion of international law.  And otherwise, I mean, Russians, Americans contributed to the erosion of international law by our actions in Kosovo and in the Caucuses.  It eroded the power of the United Nations and neither side is interested in seeing the United Nations going down the drain.  So this is one of the issues that, in my view, should be discussed by the United States and Russia in a more benign way and probably, we will come to some kind of understanding on issues like that.</P> <P>Of course, the international financial system is another issue that can be discussed.  And even if we believe that what Medvedev said on this new security architecture in Europe is sheer propaganda, I would still suggest that you guys give Medvedev the benefit of the doubt.  Let s dig into this initiative.  Let s come with some counter-initiatives.  Let s start a process of negotiations.  And I think that might ignite some kind of creative thinking on the Russian side as well because Russia also needs, at least the political leadership in the Kremlin, might need some kind of encouragement to think creatively and to go beyond its conventional wisdom and to think out of the box.</P> <P>Now, I do believe that Europe is critical, indeed, and a lot will depend on whether the United States can get to a consensus with its European allies in dealing with Russia.  And again, the temptation here might be to have European allies lining up behind the United States, supporting the U.S. position on whatever the United States decides on Russia.  I think that would be a mistake.  I think this is something which can hardly be accomplished.  It might split the Trans-Atlantic unity more than any actions from Moscow.  So I think that for the United States, for American politicians, it s really important to understand the positions of both the old Europe and the new Europe and try to find a common denominator.  Maybe with the Obama administration and the declared intention to go multilateral, it would be easier to do.  I don t know but this is something that, in my view, might really define the future of the relationship because right now, if you look at the situation from the Russian side, of course, the perception is that the whole idea of the West is being eroded.  And basically, we can hardly talk about any kind of common Western policy towards Russia.</P> <P>Finally, now, let me say that I don t think that any appeasement policy will work but I don t think that any policy which is directed at sheer containment will work either.  Because there are very many people in Moscow who would really applaud a new containment policy by the United States because this policy is likely to consolidate their own positions and they would love to see fortress Russia reemerge and they would love to see the concept of sovereign democracy dominating the political discourse in the country.  And I don t think that any of us would like to offer such a present to our counterparts back in Moscow.</P> <P>So if we are talking about policy of selective involvement, if we are talking about policy of sticks and carrots, the policy implies that you should have both sticks and carrots.  And I would just specifically emphasize carrots, for example, and it s very unfortunate that the nuclear agreement between Russia and the United States was not submitted to the U.S. Congress.  I think this is something which is practical, which reflects U.S. interest, and I hope that with the new administration, we ll have this agreement get into Congress.  Maybe some other symbolic actions like the notorious Jackson-Vanik amendment, again, not a big deal but it might be an important signal to Moscow.  And I think that a couple of signals like that might change the dynamics of the relationship and might help us to start a new chapter, hopefully, more productive than the chapter that we are closing right now.  Thank you.</P> <P>Leon Aron:  Thank you very much, Andrei.  We ll go now to Fyodor.</P> <P>Fyodor Lukyanov:  Thank you.  Surprisingly, what I learned from today s discussion is quite similar to what Andrei presented just now.  I think we can t expect any miracles.  And even I would be doubtful about the chance to open a new chapter because it s not the case in politics to open completely new chapters.  But we can at least pretend that this chapter is quite new.</P> <P>The reality of the economic crisis will cause all countries to better set priorities, to rank intentions, and to give up secondary tasks in favor of the more important ones.  It s absolutely obvious both for Russia and I think even for the United States.  Russia will need to work out criteria for identifying its vital interests, which still are very vaguely formulated, despite that fact that Russia demonstrated and proclaimed, the readiness to use force to defend those interests, but still, it s not completely clear what kind of interests there are.</P> <P>But of course, to separate vital from non-vital will be very important and so it s very exciting to discuss with Daniel Ortega an opportunity to dig a new channel through Nicaraguan territory, to be alternative to the Panama Channel, which Vice Prime Minister Igor Sechin did in August during his visit to Nicaragua.  It s, I understand, is very interesting.  But unfortunately, such kind of projects should be terminated now because of crisis.</P> <P>I would put four points of, more or less, practical suggestions.  First, I agree with Andrei said about the international law.  I would say we need to reinvent a big part of conceptual framework of international relations because in recent years, some very important notions were undermined, notions like sovereignty, criteria of use of force, territorial integrity, conflict resolutions, and all parts contributed to degradation of these notions so I think we need, maybe, a theoretical discussion about new principles or revised principles of international law.</P> <P>Second is security.  We need to come back to the strategic agenda and take different aspects of that, not isolated but in full context.  Such issues as nonproliferation, including Iran and North Korea, arms control and missile defense should be discussed in the same package, where Russia and the U.S. would be, probably, leading counterparts but other important actors as EU, China, India, and some others should be included.</P> <P>Unfortunately, institutions we have in Europe now do not match the goal to strengthen peace.  OSEC has been heavily criticized before but Georgian crisis demonstrated that unfortunately, these bodies are quite dysfunctional.  And even election monitoring, which remained the last working function of OSEC, proved to fail since we definitely were facing politically motivated and politically influenced assessments in recent years.</P> <P>Whether OSEC is worth to be reformed or replaced, this decision should be taken based on all European process.  Anyway, the military basket should be restored in full format to discuss issues as, for example, future of CFE Treaty.  Despite suspension of this treaty, Russia still says that a comeback is possible after some kind of negotiations.</P> <P>Anyway, idea about Helsinki II promoted by Dmitry Medvedev is right in time, actually.  Europe needs renewal of basic agreement of the framework of principles, which, like the Final Act of 1975, would include, again, different baskets, from military guarantees to borders, which is very acute again, to economy, energy, and humanitarian guidelines and democracy as well, a question of democracy.</P> <P>Of course, it s impossible to formalize democracy in one document and it s not necessary.  But this notion, at least, might not be used as a geopolitical instrument, as we partly witnessed last year during the campaign of the democracy promotion.</P> <P>NATO might not be considered as a universal security body which can automatically expand eastwards.  Situation of 1990 s, whether we like it or not, was quite unique and we can t expect the same role for NATO now as it was in 1990 s when Russia was in geopolitical coma, so to say, China was still completely focused on internal development, and so on.</P> <P>Now, unlike situation at that time, alliance became not an instrument of spreading stability but rather the opposite.  And countries outside NATO, which are concerned about their security, and I think those concerns are quite legitimate, should be given strongest security guarantees from all the great powers involved so that all of them are equal guarantors with clear responsibilities for this security.</P> <P>Third is economy.  Interdependence, per se, is not a guarantee for stable development.  It can turn into spoiling source of mutual insecurity, mistrust, and suspiciousness.  I strongly agree with what Fiona Hill said in the first session about the special constellation of interdependencies between U.S. and China on the one hand and Russia and the European Union on the other hand.  And both relations, I think, in the future, could generate a completely different construction of interest in this multi-polar world which has been welcomed so much in many capitals, in Moscow, Paris, Beijing, and so on, could see differently than we expected.  So for example, what would happen to the relationship between U.S. and China given that fact of how much interdependent they are, that s a very interesting question.  And the second question is what kind of relationship will, not now but in the ten, 15, 20 years time, will develop between Russia and the European Union?  Because in my mind, to play a real role in the future world, in the 21st century world, neither Russia nor the European Union alone can expect any kind of significant influence.</P> <P>Anyway, financial crisis now is testing world powers ability to go beyond selfish interest and work together in common solutions.  So hopefully, the G20 Forum, which opens tomorrow, I think, here in Washington, could be the first step towards creating new architecture, not an elitist club but a really representative organization to address economic issues.</P> <P>Last year, we heard several times about a new division of the world, between so-called liberal capitalism, the Western capitalism and so-called authoritarian capitalism.  It s a new idea what kind of conflict we can face in the 21st century.  I think now, we can say that those predictions were not quite accurate because just today, just now, we see that both options of capitalism, both liberal one and authoritarian one, are in certain trouble and we don t know what will be the final outcome of the current turmoil.  Certainly, Russia will change, both internally and as I agree with Stephen, that there is, of course, an interconnection between domestic development and foreign policy.  But I think that U.S. also will need to overcome the current overstretch because even the world leader is unable to deal with everything else, everything at the same time.  So I think we can expect really a prioritization on both sides.  And then after that, we can see what kind of priorities are coinciding and what are clashing.  Thank you.</P> <P>Leon Aron:  Thank you very much.  And now to Steve.</P> <P>Stephen Sestanovich:  I want to have my microphone on when I thank Leon for putting this event together.  It s been an interesting day.  Like many of the speakers, I cannot avoid commenting on the thick gloom that has been expressed by a number of people.  But my general view is that when the experts say, No new chapter is possible, I think the right advice is to expect one.  Experts are generally wrong.  As leading indicators of events, I would say their record is not too good.</P> <P>My second kind of major impression of the day is that I think the sort of clear single message, really, that comes from all of the discussions is that we re not really talking about pure bilateral Russian-American relations.  The biggest issues and the most complicated ones and the most consequential ones, for American policy, certainly, will include other countries.  The future of Russian-American relations is, obviously, going to depend, to a great extent, on the way each side approaches relations with others, particularly with other states of the former Soviet Union.  And I think it would be kind of impossible to ignore, from all the panels that we ve heard, the importance for effective American policy of concerted deliberation and implementation with its European allies.  And I think the panels have also confirmed the priority of that set of relations for Russia itself.</P> <P>I m left with a lot of questions though, I mean, and I would maybe want to conclude by posing a number of them that I believe are -- that we re not really in a position to answer but that we need to monitor, that a map, in the old sense, of the relationship or at least of the agenda, that leaders on both sides and policymakers and brilliant commentators will want to be watching.  What are the major moving parts of the relationship whose place in it can be adjusted by different strategies?  Where is there sort of room for adjustment in this relationship?  And here, although I preface this by saying that the relationship, it s hard really to analyze this as a purely bilateral relationship.  I want to raise my map of questions that focuses, to a considerable extent on that bilateral relationship.  And let me just raise four questions.</P> <P>First is how will the issues that were seen as the pillars of the Russian-American relationship in the outgoing administration, as devised, I think, essentially after September 11th, how will they figure in the relationship in the future?</P> <P>This morning, Tom Graham endorsed the idea of a relationship based on three sets of common interests, nonproliferation, counterterrorism, and energy.  I cannot fail to note that these issues were seen as the centerpiece of Russian-American relations in the early Bush administration.  They were expected to be the strong foundation for what people, I think, justifiably call the best Russian-American relationship ever.  We, former Clinton officials, at the time, were full of envy at this blooming success of a relationship based on these three pillars that Tom endorsed for the future.  I cannot fail to note, however, that in many respects, these pillars have proved a kind of disappointment.  I would say each of them has turned out to involve less certain common interest or at least, has proved to be a weaker platform for cooperation between Russia and the United States.  And I think going forward, both governments will surely want to explore this record to understand the shortfall of these expectations.</P> <P>Are the priorities actually different?  Maybe the two countries just don t see these three pillars in the same way.  If so, does that mean cooperation is not possible?  Or at least, not possible unless one resorts to what our lunch speaker, my old friend, Dan Fried, called tawdry tradeoffs?   I like that word.</P> <P>The second question I would raise -- so the first question is what role will the issues that we re supposed to be strongly cooperative, in this previous administration, what kind of cooperation will be possible on that basis in the future?  Second is how will the issues that the two sides in the previous administration thought they could manage very effectively keep from disturbing the relationship?  How will they figure in the future?  In here, I would mention strategic arms control, European security, including NATO enlargement and Russia s periphery.  These issues weren t ignored.  They were, to some degree, subordinated.  I think Steve would agree, in the early Bush administration, there was, in some cases, an agreement to disagree.  In other cases, formulas were found for limited agreement.</P> <P>But all came to the fore in the course of the deterioration of the past several years, so much so that now, when have a conference on what s gone wrong in the relationship, we tend to focus on these issues, which just five years ago, people thought were manageable and didn t expect to have a large impact on the relationship.  And I think these disagreements have magnified each other.  I would say the whole complex of military security issues, as Fyodor has suggested in arguing about the way they need to be approached, have interacted with each other.  It seems as though the anxieties about ballistic missile defense, for example, are greater because there s uncertainty about the future of the strategic nuclear regime.  That s a second set of questions.</P> <P>A third question is suggested, but I think not for the first time, by Dan s talk at lunch, where he said how does Russian-American relations, how does the relationship fit into the overall narrative that the leaders -we all now use these terms from literary criticism, Leon has instructed us in this respect -what s the overall narrative about their country s place in the world and their mutual interaction?</P> <P>Here, I would agree with Dan that the most significant element of change over the past several years has been the growing claim of Russian officials and commentators that the relationship is actually kind of inherently conflictual, unavoidably competitive, and that the United States and NATO harbor deeply malevolent intentions toward Russia.  I mean, my favorite example of this, from just, I don t want to dig back too far, but just last month, Mr. Patrushev, the Secretary of the Security Council, gave an interview in which he talked about why it was -- he has a long background in intelligence, so presumably knows what he s talking about -- why it was that NATO wanted to have Ukraine in the alliance and he said it s because, you see, we want to be able to put high tech precision weapons into Eastern Ukraine so that they are within reach, striking distance of industrial targets in European Russia.  And I just, I would reflect on that comment for a little bit and ask yourself what would people say if that comment had been made by his counterpart in -- I mean, or something comparable had been made by his counterpart in the American government.</P> <P>In a more encouraging way, but still commenting on this narrative, President Putin had, I believe in his press conference in Bucharest, said that it was really important for NATO to work at addressing this enemy image that was shared by the Russian public, the perception that NATO was a threat.  He said put this on the agenda for NATO how to -- he didn t use the word narrative but he said how to address this perception of a threat.</P> <P>I think one question is going to be to what extent does all this talk really reflect deep belief or is it just a kind of rhetorical ladder that leaders can work themselves into in electoral season, I might note, and then put aside.  How susceptible is it to modification?  Andrei has said that it s not for Medvedev and Putin to define the Russian public s view of the West.  And yes, I think that s right but they re, of course, not alone.  And you ve noted how many people we didn t identify in Moscow who would love a period of confrontation.  So there are people who are going to be working for, who welcome that prospect.  They re presumably the people who put the phrase privileged interests into the President s speeches.</P> <P>So is a new narrative possible?  The end of the Cold War created a new narrative after many decades in which people thought a new narrative was not possible.  September 11th created a new narrative and I would say the international agenda can change.</P> <P>Which gets me to the fourth question which has popped up periodically in the course of our discussions during the day and that is how will the international economic crisis affect Russian-American relations?  This is now the single biggest preoccupation of both countries leaders and of leaders in almost all countries.  It s one that hasn t been prominent in Russian-American relations since, say, the 90s and never in a way in which it is now.  How will that be integrated into Russian-American relations?  What impact will it have on priorities?  What impact will it have on approaches?</P> <P>One could conceive of a very constructive narrative that could be devised here.  One could also conceive of a pretty negative narrative and one hears that, to some extent, in Russia, in the suggestions that this is all just another reminder of how many bad ideas are hatched in the United States.  But I don t think one has to rely just on contemporary rhetoric to think of bad narratives.  The 30s, after all, were a period of prolonged economic distress in the world and they, well, it ended in tears.  And I wouldn t forecast this here.  I would actually, as I began by saying, not begin with the presumption or end with the presumption of gloom.  I think we may very well find that this is the beginning of a or an opportunity for leaders to write a more constructive narrative but that remains to be seen.  Thank you.</P> <P>Leon Aron:  Steve, I couldn t have thought of a better conclusion.  It was excellent, brilliant.  You summarized the things and you brought forth all sorts of things for us to chew on.  Please, this time, I think we will actually welcome some comments, provided that they re not too long and perhaps, do have some question in the end.  Please.</P> <P>Jay Strigen [Phonetic]:  I m Jay Strigen.  I want to thank you for your presentations.  And my question would be directed to Fyodor and to Andrei.  We could talk about Russian-American relations, how to improve them.  I think the biggest frustrations for those of us who want to see them improved here, in this same particular, was that improving them does not seem to be a top priority of the Russian government or even belong to the list of the top priorities, while there are those of those in the government who want to seem them improved but the have other priorities, which they perceive as more urgent, this economy situation about how to strengthen their power and maybe how to assert themselves more in the Caucasus and the rest of the world.</P> <P>History suggests that one, the improvement of Russian-American relations is not one of the top priorities in Moscow.  These relations tend, if not to deteriorate, but worsen.  Take as an example the Russian-Georgian conflict this summer.  We could discuss again how to assign the blame but there is no question that here, in the States, the Georgian side has won the public relation of battle, so to speak.  And part of the reason why is that the Russian side did not seem to even try too hard to win it. Mr. Saakashvili was a fixture at different Washington courtesy cocktails, cocktail circuit.  He spoke in this very room a couple of years ago.  While from the Russian side, all they saw basically was articles in Washington Journal and Washington Press.  But the likes of Mr. Rogozin, the best thing I could say about Mr. Rogozin, I guess, is he s not [indiscernible] by any stretch of the imagination.</P> <P>So my question to Andrei and Fyodor is if you saw this perception but improving of Russian-American relations is not the top priority in Moscow and if you do that, how do you think it could become more of a priority?  Thank you so much.</P> <P>Leon Aron:  Not just you, but everybody else, could you identify your affiliation please?</P> <P>Male Voice:  Oh, there are other several hats, I think.  I m with Southern Baptist in Washington.</P> <P>Leon Aron:  I see.  Okay, thanks.  Well, to Fyodor, right?</P> <P>Fyodor Lukyanov:  Well, if I might, I think that the United States might be perceived in Moscow as a problem.  But, at least in theory, it might be also perceived as a part of the solution.  I think it s very important to present a case where the United States is a part of the solution.</P> <P>For example, if you take the current situation in Afghanistan and what the United States and its allies are doing there, one can, I think, make a case that, basically, they are helping not just themselves but they re helping Russians as well.  If we look at the financial crisis again, you can, of course, speculate that the whole crisis was generated here in this country and we are just innocent victims of the developments in the American financial sector.  But it s clear that without the United States, the problem can hardly be resolved.</P> <P>So for me, the question, the only way to put relations with the United States back to the top of the agenda is to convince the Russian political class, the Russian establishment, that there are certain issues in this world which are really important for Russia which cannot be resolved without an active U.S.-Russia cooperation.  And I agree that these are exactly issues which go beyond bilateral relations.  These are issues which might be more central to our Russian national agendas and to the perception of what is really important for Russia.  So the question is how to really make the case for that.</P> <P>Andrei Kortunov:  For the time being, certainly, to improve relationship with the United States is not a priority for Russian administration.  I don t think that to improve relationship with Russia is a priority for U.S. administration.  So in this regard, it s a harmonious approach from both sides.  I don t think that we can expect any big efforts from Russian side to improve relations in the near future.  I think Fiona Hill mentioned in the first session, and I totally agree, that Russian view now is that Bush administration destroyed everything in recent years, both internationally and bilaterally, and because of that, now, it s their, your, American, turn to send the first message.  If this message will be sent, then Russia can, maybe, reply.  But Russia will not do it firstly.  So I try to describe the perception in Russian elite in Kremlin.</P> <P>And as far as the PR war is concerned, of course I think that Russia performed very badly in Georgian crisis.  But frankly speaking, even if Russia would perform brilliantly, I don t think that it could change the picture in the West, for good reasons, because in this particular constellation, war between giant Russia and the tiny Georgia, regardless which happened, sympathies will inevitably be on Georgian side.</P> <P>Leon Aron:  By the way, responding to something that you said, if there are any Russian officials left here, you said something about Saakashvili being here in this very room and then on the cocktail circuit.  This room is open to all manner of representatives of the Russian government.  We can even offer them cocktails afterwards.  But by all means, and some of the people, in fact, on this panel know that we have made that a concerted effort to get some fairly high officials through all kind of means, private and official.  We have an excellent representation here anyway.  But in any case, that is the case.  And so if there are Russian officials here, please let me know if there is a strong desire for cocktails or anything else.</P> <P>We have Andrei Illarionov and then right there.  Yes.</P> <P>Andrei Illarionov:  I have not a question.  I have comment and this is relatively short.  I think this wonderful thing that you have organized here became very conspicuous in the sense of demonstration of total defeat of the United States in their relations with current Russia.  And I would be even more precise, it s not so much U.S.-Russia relations but in relations between, let s say liberal democracy and authoritarian authorities, it became very clear now what kind of conclusions we can have.  Is there any interest on the side of the United States in having relations with Russia?  Yes, there is interest.  Is there any interest on the Russian side to have contacts and relations with the United States?  No.  They are clear.</P> <P>United States is persistently saying that okay, we consider Russia as a partner with whom we can cooperate.  And Russia said, okay, Georgia, we consider you as an enemy and as a hostile enemy and that s all, and very clear.</P> <P>If we look into the content of the discussion over the last eight to nine years, just look how this agenda has changed over these years.  There is no more talk about Chechnya, about human rights violations, about political prisoners in the country, about the flawed and falsified elections, about the absence of rule of law, about the division of powers, about this suppression of mass media, about this absence, real absence of political parties, in any sense, in the country.</P> <P>And now, the agenda that actually, this topic has really some kind of absence in this discussion for the whole day today.  Even the more international scene, it became very clear that even after the Russian authorities, once again, authoritarian authorities have proclaimed sphere of influence and actually, it has been supporting from the other side, oh, no, let s talk about not sphere of influence, of sphere of responsibilities.  Sorry, it s worse.</P> <P>Sphere of responsibility is giving the not only something it s really right, it s legitimizing of the actions in the some kind of in all these spheres.  And now, after all this discussion, it s not only some kind of the Russian -- some remnants of the some kind of civil society democratic forces have been about them.  Now, even the other countries that actually aspiring for democratic future and even some kind of relations, more intensive relations with the Western countries, like Ukraine and Georgia, are clearly abandoned and this is very clearly proclaimed.  We are not going to do anything in Georgia and Ukraine.</P> <P>Looking at our last eight to nine years in this evolution of the agenda between these, let s say, some kind of two authorities, I just wonder how far this evolution can go.  And certainly, it s rather hard to avoid the impression that we have had in history, such a very remarkable evolution of relations that have happened 70 years ago in 1930 s, that there was exactly a very similar, at least, in the way some Western leaders were some kind of assessing evolution in some Central European countries, it s a regular barrel of fast abandoning one of the crucial elements of liberal democracy, international war, and security of smaller nations in Europe.  We definitely remember very quite well what has happened after that.</P> <P>Leon Aron:  I would like to briefly just clarify a few things.  Obviously, this is a much larger issue.  First of all, in this very room, a few months ago, we had, and you were present, we had then Nemtsov and Ryzhkov and a few other people talking precisely of the things that you re talking about.  You cannot cover everything in one event and you cannot, in general, we d learned, that to lose focus is to lose your audience and to lose effectiveness.  We are very concerned about Russian domestic developments.  One of the papers in the package is my quarterly report, Russian Outlook, which contains a lot of issues, touches upon a lot of issues that you are mentioning.</P> <P>Secondly, there is a perception that whatever challenges Russia presents and whatever reactionist behavior caused in the Caucasus, my impression, listening to you, is that there s absolutely no response.  Well, on these very panels, I believe that the Georgian representative, I believe that as far as the missile defense, the Czech ambassador and Marcin, I think, addressed very -- in no uncertain terms, the problems that they have with the Russian approach.  So it is my sense, well, I would call upon you to perhaps, maybe step back and remember what happens here and how, in our small way, we re trying to give a comprehensive map of what s happening in Russia.  And whether we re succeeding or not, I don t know, but we re certainly trying.</P> <P>Yes, you were on the line.</P> <P>Andrew Martin [Phonetic]:  My name is Andrew Martin and I m merely an inquisitive American citizen.</P> <P>Leon Aron:  Welcome.</P> <P>Andrew Martin:  So a brief comment with a related question, it wasn t just a few days after Russia invaded Georgia that the Russian stock exchange took a huge hit and foreign direct investment in Russia took a huge hit.  And I was talking with a friend around that time and I said, Who needs international law when you have the invisible hand to slap people in the face?   So my question is, I fully believe, actually, that the basic tenets of free market capitalism could potentially deter conflict in the short term and the long term.  So I wanted to see what you guys thought about that belief.</P> <P>Leon Aron:  Well, my immediate reaction is that it did not prevent World War I and World II, where there has been a great deal of commercial and economic engagements, say, between France and Germany.  So it s certainly not a panacea but I ll let others comment on that.</P> <P>Stephen Biegun:  I ll say just a word.  Unfortunately right now, the rules of global capitalism are under siege themselves so it s difficult to separate the wheat from the chaff when the barn is on fire.  And I think that s going to be a bit of a challenge to have.  Economic influences change behavior or alter behavior, although I would agree with you that an immediate aftermath of the conflict in Georgia, that definitely, there were economic consequences, capital flight and some other things that were just knee jerk reactions.</P> <P>I also am not Pollyannaish about this, but I do have some confidence in the ability of economics to change societies and to change politics.  It s not a guarantee of liberal society when there s a development of middle class.  But the middle class is an essential element of developing a pluralistic and liberal society.  And I think until the economic crisis, this was one of the bright spots in Russia, was that there was a growth of a middleclass that, one would hope, would eventually begin demanding a rule of law, protection of property rights, and find a way to manifest its will in a system that s not democratic, by any stretch of the imagination, in Russia today.  I think that that s going to be retarded a little bit by the global economic downturn.  But in the long term, I would still hold that out as one of the locus, loci of optimism in the future development of Russia s internal society.</P> <P>Stephen Sestanovich:  I don t want to out-Pollyanna Steve but I would actually note something positive, which I think has to be observed about the way in which the Russian elite has responded to this crisis.  And I think that s separate from the case of the war in Georgia because if you had not had a really big international downturn, you would probably have had a reversal of those capital flows and people would be saying, really, Russia is a great place to do business.  The reason they are not saying that is because there are much deeper doubts about the prospects of how Russia will fare in this international crisis now.</P> <P>But I would add something different here.  If you think about the way in which Russia responded, the Russian elite and then the body politic to the crisis in August of 1998, it was a rout for liberals and it created a kind of upsurge of criticism of Russia s integration into the international economy, a whole chorus of claims that Russia had to find its own way, that the whole Washington consensus and the expectation that Russia could reform itself on the model of Western economies was an illusion.</P> <P>I remember talking to Russian officials at the time who said, We re going to have to have our own new deal and it s not going to be just like your new deal.  It s going to be a Russian new deal.   I am struck by how little of that there is this time around.</P> <P>Now, this is an early phase of the crisis and we may find that as it goes forward, there are more voices of that sort, calling for a disengagement, calling for protectionism, calling for an insulation from the international economy, and a reassertion of different institutions from Russian Soviet history.  I mean, you can imagine bad outcomes.</P> <P>But so far, I would say that in the early going, the liberal solutions have enjoyed a certain kind of credibility and renewed strength.  I don t quite know how to explain that.  But I think, and I think some hopeful explanations are credible at least, we may find that changing.  But for right now, the reaction of most Russians, maybe it s the creation of a middleclass, maybe it s the technocratic elite who claim to know how money works, maybe it s the lack of confidence of the top political leadership about how to provide an alternative set of policies.  But for right now, there is a response in Russia that is very much within the international mainstream.</P> <P>Leon Aron:  I may pass over the participants, but we ll see.</P> <P>Mitchell Pullman [Phonetic]:  I ll try to be quick.  My name is Mitchell Pullman.  I also wear many hats.  I do public diplomacy contract work for the State Department but I ve also been an OSCE elections monitor six times so I m one of those ineffective OSCE elections people Fyodor was talking about.  And I talk about that comments about the OSCE pass without commenting on them.  It s clear for many of us who have worked on OSCE elections missions that the Russian government has done a lot to undermine the OSCE and is constantly working to undermine the OSCE.  Those of us who work as election monitors are drawn from all over the OSCE and increasingly, including places like Russia and Belarus itself.  Many of them are local political people, elections officials.  They re not high level diplomats, not all of them at least, or VIP s.  And election fraud isn t rocket science.  If you find a hundred ballots tied together all marked for Yanukovich, it s fraud in a ballot box.  And yet, every mission I ve been on, or most of them, before the reports are even written the Russian government is already releasing statements saying the OSCE didn t do its job correctly.  It s biased.  It s biased against the government.  And it s just simply not true.  And I would add that I was talking to a woman who was on a recent mission.  Her partner was Russian.  And increasingly, I see it as a vehicle whereby Americans and Russians, as well as people from other former Soviet republics can work together on problems.  I would also add the OSCE has been very effective in places like South Ossetia.  I mean, it s ironic to me that after the Ossetian conflict, the Kremlin was citing the OSCE after it had worked to de-fund the South Ossetian mission; that they had been complaining about it earlier and then after the conflict, is citing the OSCE.</P> <P>I would also add that ideally, I would like to see Russian grassroots civic organizations during elections observing in Russia.  I have a friend who used to run one.  He didn t work with the OSCE but he can t operate anymore.  He was shut down.  We have those sort of organizations here in the U.S., the League of Women Voters.  It shouldn t be a strictly international effort to observe elections missions.  It should be, first and foremost, domestic, as far as I m concerned. But even that is not really plausible anymore.  But I completely take issue with you.  I think the OSCE does a fine job and I think it should be reinvigorated.  It could be a source of Russian-American partnership.</P> <P>Leon Aron:  First of all, thank you very much for a very useful correction.  Fyodor, would you like to respond to this briefly?</P> <P>Fyodor Lukyanov:  Very short, first about OSCE South Ossetia, now we can read a lot of statements, including from officials from the OSCE, criticizing the mission that they did not do the job before the war.  Maybe people on the field did it but not on the higher level.  So OSCE, I don t mean that people working on the field are bad.  But OSCE, as a political organization, which should be an efficient mechanism, is not working.</P> <P>About elections, Russia is a special case.  I agree that Russian behavior vis-�-vis monitors is a very special one.  But I base my assessment on results of monitoring in other post-Soviet republics and my feeling is that it s very much politically connected when we read OSCE papers in Georgia, Kazakhstan, Armenia, and others.  So sometimes, it looks like politics plays a role in the final assessment.  It s very important because OSCE decision, OSCE assessment became a significant factor for internal development in all those countries.  And as we could see in many of them, starting from Georgia and Ukraine and finishing in Armenia last year, it could really generate significant turmoil within the countries.  And that means that OSCE should be much more cautious and responsible maybe.</P> <P>And a final point, okay, we can discuss about monitoring.  But OSCE, initially, was about three baskets.  All two other baskets were abandoned so maybe we need to restore OSCE in full scale to discuss all issues, then, why not?</P> <P>Leon Aron:  Dan Dombey from the Financial Times.  Sorry.  </P> <P>Dan Dombey:  Yes, I d like to ask a question which is a grotesque simplification, if I can, as a journalist.  Is it your sense, is it people s sense here on the panel that the Putin-Medvedev government needs an enemy and that enemy needs to be the U.S., particularly at times of economic strain?  I ask that just because despite what Fyodor said about it being a harmonious low priority for both sides, not to -- engagement is a low priority for both sides, it s fairly clear that the Obama administration s rationale in foreign policy is to engage, at some level.  It s not so clear what the Russian policy is going to be and we saw Medvedev s speech and it s clear there is always a temptation at difficult times to hit out at a country which you can demonize.</P> <P>Is that going to be the single most important factor going ahead, Russia s reluctance to engage with the U.S. because it is the useful enemy?</P> <P>Leon Aron:  Okay, Andrei and Fyodor, what do you think?</P> <P>Andrei Kortunov:  Well, I think that Russia is at a very important juncture right now.  For almost ten years, we had continuous growth of economy and real incomes increased quite considerably.  And for the first time in ten years, the country faces real economic problems.  And right now, probably, it is still too early to say that it affects people in the street but definitely, it will.  We have a mortgage crisis already and I think that we might have growth in unemployment and things like that.</P> <P>So there are two answers to this challenge, two answers to the question.  The first, which is an easy one, to say, Okay, these are probably generated by Uncle Sam.  So we should tighten our belts.  We should close our borders.  We should isolate ourselves from the turmoil in the international financial markets and we will probably get away with that.   In short term, that might be a perfect answer.  But in the mid-term, it might be suicidal.</P> <P>Now a more responsible answer, we ll say, Okay, let s look critically at our performance and let s think about what we did wrong.  In this case, it opens new opportunities.  It suggests creative thinking about how the economic and the social policy has to be changed.</P> <P>In my view, right now, the Russian leadership is not ready to take the second approach so they stick to the first one because it s kind of almost like an instinct.  But I think, and again, maybe I m biased here but I think that if and when the crisis deepens, they will have to come with some more imaginative ideas, rather than to blame everything on the United States and its egotistic financial policies.</P> <P>Leon Aron:  Okay, and actually, the final word of this conference, Fyodor.</P> <P>Fyodor Lukyanov:  I m not sure that Russia will be the main priority for the next American administration, maybe a little bit higher than for Bush administration but certainly not among the first three or five priorities.  For Russia, I think that the real reassessment of the situation could come, not now.  Maybe psychologically, atmosphere will improve now after Bush s departure because of some special reasons.  My personal view is that so-called friendship between Mr. Putin and Mr. Bush played a very negative role for the relationship between the U.S. and Russia.</P> <P>But the real reassessment could come in a couple of years when Russia will face a very unpleasant situation.  They need to keep a political parity with China because Chinese development is crucial for the whole world, and especially for Russia, being a neighbor.  And of course, we are not interested to be junior partner to the United States.  That s quite obvious.  But I think that to be junior partner to China will come as a terrible shock for Russian establishment and that will generate a new prism through which Russia will look at the world.  And I think it could happen quite soon, maybe, especially given a new presidential term in Russia.  Maybe Mr. Medvedev, if he will continue both terms, he will face this question quite soon.</P> <P>Leon Aron:  Well, thank you very much.</P> <P>[Applause]</P> <P>[End of transcript]</P> <P> </P> <P><BR> </P></body></html>