BISNIS - NIS Consumer Products Report
20 OCT 95
FM AMEMBASSY MOSCOW

IMI: CONCILIATORY ZYUGANOV MEETS WITH DOUBTING U.S. BUSINESS COMMUNITY

SUMMARY

1. RUSSIAN COMMUNIST PARTY LEADER (CPR) GENNADIY ZYUGANOV DID THE SOFT-SELL OF HIS PARTY'S ECONOMIC AND POLITICAL PROGRAM BEFORE AN AUDIENCE OF SKEPTICAL U.S. BUSINESSPEOPLE AT THE MONTHLY AMERICAN CHAMBER OF COMMERCE (AMCHAM) LUNCH OCTOBER 18. ZYUGANOV EMPHASIZED THAT THE ANTI-CRIME AND LEGAL INFRASTRUCTURE ELEMENTS OF THE CPR PROGRAM WOULD PRODUCE A BUSINESS CLIMATE MORE FRIENDLY THAN THAT CREATED OVER THE PAST FOUR YEARS BY A SERIES OF REFORM-ORIENTED GOVERNMENTS. HOWEVER, THE CPR LEADER DEMURRED WHEN ASKED TO PROVIDE MORE DETAILS ON PROSPECTIVE POLICIES ON PRIVATIZATION, STATE CONTROL OVER STRATEGIC ENTERPRISES AND FOREIGN INVESTMENT. THE AMERICAN AUDIENCE WAS CORDIAL AND RECEPTIVE TO ZYUGANOV'S SENSE OF HUMOR, BUT DID NOT APPEAR TO LEAVE THE ROOM WITH DECREASED RESERVATIONS ABOUT A POSSIBLE CPR VICTORY IN THE DUMA AND PRESIDENTIAL ELECTIONS. END SUMMARY.

THE NEW ZYUGANOV: BUSINESS AND CPR SHARE SAME FOCUS ON CRIME REDUCTION AND IMPROVED LEGAL SYSTEM...

2. ZYUGANOV ASSERTED THAT HE UNDERSTOOD THE OBSTACLES FACED BY FOREIGN COMPANIES IN THE RUSSIAN ENVIRONMENT. IN PARTICULAR, HE IDENTIFIED THE LACK OF LEGAL AND REGULATORY INFRASTRUCTURE AND ORGANIZED CRIME AS MAJOR PROBLEMS. THE COMMUNIST LEADER NOTED THAT THESE ISSUES WERE AMONG THE HIGHEST PRIORITIES IN THE CPR PLATFORM. HE THEN ARGUED THAT SINCE THE REFORM GOVERNMENTS OF THE PAST FOUR YEARS HAVE NOT RESOLVED THESE ISSUES, FOREIGN BUSINESSES WOULD DO BETTER UNDER A WELL-MANAGED, COMMUNIST-LED GOVERNMENT. ZYUGANOV ALSO STATED THAT POSITIVE U.S-RUSSIAN ECONOMIC RELATIONS WERE TO THE BENEFIT OF BOTH COUNTRIES. HE NOTED THAT EVEN WHEN COLD WAR TENSIONS WERE AT THEIR WORST, THE USSR HAD MAINTAINED TIES WITH REPRESENTATIVES OF THE U.S. BUSINESS COMMUNITY. HE DID HINT THAT U.S. COMPANIES SHOULD WORRY ABOUT THEIR COMPETITORS FROM EUROPE AND ASIA, WHICH, HE SAID, WERE MOVING BOLDLY INTO THE RUSSIAN MARKET.

3. ZYUGANOV INITIALLY TOOK A CONCILIATORY LINE ON THE FUTURE OF PRIVATIZATION, SAYING THAT THE CPR WOULD NOT SEEK TO IMMEDIATELY OVERTURN THE POLICY, SO AS NOT TO CAUSE A PANIC ON THE FINANCIAL MARKETS. THE PARTY'S IDEA, HE CONTINUED, WAS TO HAVE THE DUMA REEVALUATE THE STATE PRIVATIZATION PROGRAM AND INTRODUCE CORRECTIONS "IN OBSERVANCE OF CURRENTLY APPLICABLE LAWS."

...VERSUS THE OLD ZYUGANOV: STOP PRIVATIZATION, RESTORE SOCIAL PROGRAMS, MACROECONOMIC CONSIDERATIONS SECONDARY

4. ZYUGANOV'S PITCH TO THE AMCHAM AUDIENCE WAS SIGNIFICANTLY SOFTER THAN HIS LINE IN SPEECHES RECENTLY REPORTED IN THE RUSSIAN LANGUAGE PRESS. IN THE OCTOBER 14 "SOVETSKAYA ROSSIYA" NEWSPAPER, HE ARGUED AGAINST THE GOR'S RECENT DECISION TO PROCEED WITH CASH PRIVATIZATION, AGAINST MAINTAINING LOW BUDGET DEFICITS (BECAUSE LOW INFLATION WAS "ARTIFICIAL"), FOR THE PROTECTION OF SOVIET-ERA DOMESTIC ENTERPRISES, AND FOR RBSTORATION OF MORE GENEROUS SOCIAL BENEFITS.

5. EVEN TO THE AMERICAN BUSINESS COMMUNITY, THE CPR LEADER SAID THAT HE BELIEVED THE STATE SHOULD MAINTAIN CONTROL OVER STRATEGIC SECTORS INCLUDING ENERGY, TRANSPORTATION AND MILITARY INDUSTRY. WHEN PRESSED FOR SPECIFICS ON CPR CALLS TO REINSTITUTE "PEOPLE'S CONTROL" OVER THE ECONOMY, ZYUGANOV FELL BACK ON BLANKET CRITICISM OF RECENT GOR ECONOMIC POLICIES. HE ARGUED THAT GOVERNMENTS UNDERTAKE ECONOMIC REFORM NOT FOR ITS OWN SAKE, BUT TO IMPROVE THE LIFE OF THE CITIZENS. CHUBAYS' POLICIES (ESPECIALLY PRIVATIZATION), HE CONTINUED, COULD NOT BE DESCRIBED IN SUCH TERMS. THEY HAD RESULTED IN 20 MILLION UNEMPLOYED, 15 MILLION HUNGRY (BECAUSE OF INADEQUATE SALARIES), 6 MILLION REFUGEES AND 2 MILLION SCHOOL DROP-OUTS, ACCORDING TO THE CPR LEADER. (NOTE: THESE FIGURES MAY CONSTITUTE THEATRICAL LICENSE, THEY EXCEED PUBLISHED FIGURES BY TWO OR THREE TIMES.) THIS TYPE OF REFORM HAD RESULTED IN AN "EXPLOSIVE" SITUATION WHICH WOULD ULTIMATELY LEAD TO THE END OF REFORM ITSELF, ZYUGANOV CONCLUDED.

6. ECHOING A FAVORED THEME OF MOST OPPONENTS OF THE GOR'S ECONOMIC POLICY, ZYUGANOV MAINTAINED THAT THERE WERE MULTIPLE PATHS TO ECONOMIC DEVELOPMENT. U.S.- STYLE CAPITALISM WAS NOT RUSSIA'S ONLY ALTERNATIVE TO SOVIET STATE SOCIALISM, HE ADDED. AS EXAMPLES OF COUNTRIES THAT HAVE CHOSEN OTHER ROUTES TO INTEGRATION INTO WORLD MARKETS, THE CPR LEADER MENTIONED INDIA, CHINA AND JAPAN, COUNTRIES HE HAD VISITED OVER THE PAST YEAR. ZYUGANOV POINTED TO TOYOTA, ONE OF THE COMPANIES HE VISITED IN JAPAN, AS A TYPE OF INDUSTRIAL ORGANIZATION THE CPR WOULD CONSIDER EMULATING.

CPR -- THE CHOICE OF A NEW GENERATION

7. ZYUGANOV MADE A STRONG EFFORT TO DIFFERENTIATE THE CPR FROM THE SOVIET COMMUNIST PARTY (CPSU). HE CRITICIZED THE CPSU FOR CREATING A THREE-PRONGED MONOPOLY, OVER POWER, PROPERTY AND INFORMATION. THIS HAD ULTIMATELY STIFLED ECONOMIC GROWTH, HE ALLOWED, BUT A CPR-LED GOVERNMENT WOULD NOT REPEAT THE MISTAKE. HE OBSERVED THAT THE AVERAGE AGE IN THE CURRENT COMMUNIST LEADERSHIP IS 47 AND THAT ITS DUMA CANDIDATES AVERAGE 44 YEARS. THE MESSAGE THAT FOREIGN COMPANIES SHOULD TAKE FROM THIS, HE ADDED, WAS THAT THE CPR KNOWS HOW TO OPERATE IN A DEMOCRATIC, MARKET-ORIENTED SYSTEM. REFERRING WITH IRONY TO THE ENDLESS ORATIONS OF CPSU GENERAL SECRETARIES, ZYUGANOV CUT HIS OWN REMARKS OFF AFTER ABOUT TWENTY MINUTES AND OPENED THE FLOOR TO QUESTIONS.

8. AT SEVERAL POINTS, THE CPR LEADER UNDERSCORED HIS PARTY'S COMMITMENT TO THE DEMOCRATIC PROCESS AND CONTRASTED THIS WITH (WHAT HE CLAIMED WERE) DICTATORIAL TENDENCIES IN THE CURRENT GOVERNMENT. HE SAID THAT WHILE THE CPR WOULD RESPECT CONSTITUTIONAL PROCESS, IT WOULD SEEK TO CHANGE THE CURRENT BASIC LAW. THE 1993 CONSTITUTION WAS COMPROMISED, HE ASSERTED, BECAUSE IT HAD BEEN ADOPTED BY A MINORITY OF RUSSIAN CITIZENS IN THE IMMEDIATE AFTERMATH OF THE DIVISIVE 1993 CLASHES BETWEEN THE SUPREME SOVIET AND YELTSIN. ZYUGANOV ADDED THAT THE DOCUMENT HAD CREATED AN INEFFICIENT STATE STRUCTURE WITHOUT A TRUE DIVISION OF POWERS. ON THE CPR'S POLITICAL STRATEGY, ZYUGANOV SAID THAT THE PARTY WAS OPEN TO THE POSSIBILITY OF COALITIONS WITH THE AGRARIANS, THE CONGRESS OF RUSSIAN COMMUNITIES (LED BY YURIY SKOKOV AND GEN. ALEKSANDR LEBED), THE WOMEN OF RUSSIA PARTY, "OR EVEN" GRIGORIY YAVLINSKY'S PRO-REFORM BLOC, YABLOKO.

9. ZYUGANOV HIGHLIGHTED HIS BELIEF IN THE IMPORTANCE OF A STABLE, PEACEFUL INTERNATIONAL ORDER. HE MENTIONED HIS MILITARY SERVICE, AND THE FACT THAT HIS HOME REGION, OREL, HAD BEEN THE SITE OF 600,000 WAR DEATHS OVER THE PAST 200 YEARS AS FORMATIVE INFLUENCES. HE ADDED THAT HE RECENTLY COMPLETED WORK ON A SERIOUS ANALYTICAL PAPER ABOUT U.S.-RUSSIAN RELATIONS OVER THE PAST 200 YEARS AND THAT HE HAD MADE SPEECHES AT HARVARD, THE COUNCIL FOR FOREIGN RELATIONS AND THE KENNAN INSTITUTE. ZYUGANOV SAID THAT AS A RESULT OF THIS ATTENTION TO FOREIGN RELATIONS, HE HAD BEEN CRITICIZED WITHIN THE PARTY. HOWEVER, HE SAID THAT HE HOPED THESE MEETINGS WOULD MAKE YELTSIN MORE LIKELY TO MEET WITH HIM. THE CPR LEADER NOTED THAT ALTHOUGH THE STATE DUMA BUILDING IS LESS THAN ONE KILOMETER FROM THE KREMLIN, YELTSIN HAD NEVER COME TO THE DUMA TO MEET WITH PARLIAMENTARY LEADERS.

BUSINESSMEN QUESTION COMMUNIST SOFT SELL

10. ZYUGANOV ADOPTED A RELATIVELY CONCILIATORY LINE AT THE AMCHAM LUNCHEON, AS HE HAD IN OTHER RECENT MEETINGS WITH WESTERN BUSINESSPEOPLE. NOT SURPRISINGLY, HE EMPHASIZED THOSE ASPECTS OF THE CPR PROGRAM WHICH MIGHT APPEAL TO BUSINESS, BOTH DOMESTIC AND FOREIGN. HOWEVER, THE AUDIENCE DID NOT ALLOW HIM TO GET AWAY WITH SACCHARINE GENERALITIES, RESPONDING WITH SOME TOUGH QUESTIONS ON THE SPECIFICS OF THE PROSPECTIVE CPR ECONOMIC PROGRAM. AS THEY WERE LEAVING THE ROOM, A NUMBER OF THE BUSINESSPEOPLE PRESENT EXPRESSED DOUBT THAT IT WOULD BE POSSIBLE TO CONTINUE NORMAL OPERATIONS IN A CPR-LED RUSSIA. FOR NOW, THE BUSINESS COMMUNITY AWAITS THE RESULTS OF TWO ROUNDS OF ELECTIONS WITH THE KNOWLEDGE THAT THE CPR MUST CLEAR BOTH HURDLES BEFORE IT CAN IMPLEMENT AN ECONOMIC PROGRAM.