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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Rob Shilling who wrote (470)8/20/1998 11:49:00 PM
From: CIMA   of 1301
 
Global Intelligence Update
August 21, 1998

[We normally do not use waste your time blowing our horn, but we decided
to indulge ourselves a little. Our readers will recall that on August 10
we stated that Osama Bin Laden was responsible for the embassy bombings.
We had lots of company on that. We also said that Sudan was working with
Bin Laden. We were pretty much alone on that, at least in public. Today's
air strikes confirm the STRATFOR analysis. We would like to remind you
that there is a third element in our equation: Iraq. Since our job is to
forecast, and not to pat ourselves on the back, it's back to work for us.]

Russia Draws "Red Line" Against NATO

Russian President Boris Yeltsin's Aide for International Affairs, Sergei
Prikhodko, told the Russian news agency ITAR-TASS on August 18 that "There
is a `red line' for Russia which cannot allow the crossing of that line.
Should a question about the admission to NATO of any of the countries
located in the territory of the former Soviet Union be put on a practical
plane, a revision of relations with NATO will become inevitable." He said
Moscow was "concerned about the attempts to impose a NATO-centered concept
of the creation of new architecture of the European security." Prikhodko
added that Moscow is also concerned about the U.S. tendency to use
unilateral force to solve international crises. Specifically, he spoke out
against the prospect for NATO to intervene in Kosovo without first
consulting the UN Security Counsel, "whose relative charter prerogatives
are one of the cornerstones of the entire modern system of international
relations."

According to Prikhodko, President Yeltsin "is in the mood for the most
serious work" during the upcoming summit with U.S. President Bill Clinton
from September 1 to 3 in Moscow. Yeltsin is certain to raise the topic of
NATO expansion during the talks, particularly the prospects for membership
in NATO for the Baltic states or Ukraine. Yeltsin will be seeking some
sign of retreat from Clinton on NATO expansion, especially as Yeltsin will
be holding a summit with Ukranian President Leonid Kuchma on September 18
and 19 in Kharkiv. Any evidence of weakened U.S. commitment to Ukraine
coming out of the Moscow summit will give Yeltsin a great advantage in the
Kharkiv talks.

Two things emerge from Prikhodko's statements to ITAR-TASS. First, Russia
is ever more explicitly behaving as if the boundaries of the former Soviet
Union are its own. This process was accelerated recently in Central Asia,
as Taleban advances in Afghanistan caused the former Soviet Central Asian
republics to call on Moscow for military aid. Now Russia is attempting to
solidify its sphere of influence in the west, though this time without
invitation. Besides demanding that NATO abandon thoughts of including the
Baltics, Russia is playing pressure politics in the region. In the midst
of border demarcation negotiations with Latvia, Russia has launched the
largest military exercises along the Latvian border since Latvia's
independence in 1991. Subtlety is not Moscow's forte.

The second feature highlighted by the "red line" commentary is the
significant role played by Prikhodko in Yeltsin's foreign relations.
Rather than relying on the Foreign Ministry, Yeltsin appears to be holding
his foreign policy decisions close to the vest. Prikhodko was one of only
three of Yeltsin's aides to survive a presidential staff shakeup in May.
Since then, he has been Yeltsin's point man on the missile deal with
Cyprus, the crisis in Yugoslavia, and the summits with Clinton and Kuchma.
It may be that Prikhodko is silently powerful within the Kremlin or, more
likely, that he is merely trusted to carry out the decisions that Yeltsin
is making more and more on his own.

An embattled Yeltsin will meet an embattled Clinton on September 1. Both
have to appear tough, Clinton to cover his shattered domestic image with
the cloak of foreign policy leadership, and Yeltsin to do essentially the
same. With his economy crumbling around him, Yeltsin must play the strong
nationalist-imperialist card, lest his opponents play it against him. For
Yeltsin to retain control of the political situation in Russia, the "red
line" must not be crossed.

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