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Farewell to the empire? National identity, domestic structures, and foreign economic policies of the post -Soviet states

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Farewell to the empire? National identity, domestic structures, and foreign economic policies of the post -Soviet states

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Content INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UM I a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9” black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. ProQuest Information and Learning 300 North Zeeb Road, Ann Arbor, M l 48106-1346 USA 800-521-0600 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. FAREWELL TO THE EMPIRE? NATIONAL IDENTITY, DOMESTIC STRUCTURES, AND FOREIGN ECONOMIC POLICIES OF THE POST-SOVIET STATES Copyright 2000 By Andrei Pavel Tsygankov A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (INTERNATIONAL RELATIONS) May 2000 Andrei Pavel Tsygankov Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: 3018041 Copyright 2000 by Tsygankov, Andrei Pavel All rights reserved. ___ ® UMI UMI Microform 3018041 Copyright 2001 by Bell & Howell Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. Bell & Howell Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, Ml 48106-1346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UNIVERSITY OF SOUTHERN CALIFORNIA TH E GRADUATE SCHOOL UNIVERSITY PARK LOS ANGELES. CALIFORNIA 90007 This dissertation, written by ANDREI P. TSYGANKOV under the direction of hJS. Dissertation Committee, and approved by all its members, has been presented to and accepted by The Graduate School, in partial fulfillment of re quirements for the degree of DOCTOR OF PHILOSOPHY Dean of Graduate Studies Date . Apr,i 1 # 21A#2000t DISSERTATION COMMITTEE Chairperson Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Farewell to the Empire? National Identity and Foreign Economic Policies of the Ex-Soviet Republics This dissertation asks why some post-Soviet republics decided to organize their economic activities around old partners, Russia and other republics, while others put all their energy into restructuring their economies away from what the former Soviet empire. Its main original claim is that the new nations’ strength o f national identity shapes its foreign economic policy. The stronger the national identity, the more likely the nation is to restructure away from the former empire. In the post-imperial context, conventional explanations, such as those from market and power considerations, also contribute but are not sufficient to explain variation in external economic orientations. The influence o f national identity on policy outcomes is mediated by domestic structures. In the post-imperial nation, a well-developed national identity increases the power of nationalist-oriented groups and their ability to influence the foreign policy decision-making process. The ex-republics’ historical experience with national independence, as well as some other indicators, are employed for operationalizing national identity. A focused comparison of decisions by three republics that vary as to strength of national identity but are similar in other important respects suggests the significance of this national identity explanation relative to likely rivals. Latvia, with a strong sense of identity, chose to deal with Russia and other CIS (Commonwealth of Independent States) members on a bilateral basis and entered preferential arrangements with European countries beyond the former Soviet region. Ukraine, an example of a country with Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. moderate identity strength, entered the CIS but has never been supportive of the organization’s initiatives and, like the Baltic republics, was also determined to “go West.” Finally, Belarus, a nation with relatively weak identity, pursued an effort to reintegrate with Russia and the CIS at the expense of developing ties with Europe. In addition to three comparative case studies, a bivariate regression study reinforces the identity thesis. It also suggests a number of cases with deviant behavior and offers a brief qualitative investigation of two o f them. The final chapter draws out implications for theory and policy making. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. For Julia 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Acknowledgments This dissertation could have not been written without the generous assistance and support of my friends, colleagues, and family. I am indebted to all of them for being available whenever I needed their help and support. Naturally, I alone am responsible for the final product and any possible errors it may contain. First and foremost, I would like to thank my main advisor, John S. Odell. Upon my arrival at the School of International Relations, I had merely an intuitive understanding of what interested me. It was only through working with John that I was able to shape my ideas into a viable project. He is everything a graduate student can wish for: an accessible and patient listener, a tough critic, and a resourceful supplier of ways to improve scholarship. He also practices a set of rigorous research standards and, by making them explicit to his students, he helps to provide the discipline and rigor required in preparing a dissertation. I both used and abused these qualities, and have greatly benefited from them. My other dissertation committee members read the entire dissertation and suggested numerous improvements. Andrzej Korbonski provided the regional expertise, J. Ann Tickner contributed greatly to my understanding of culture and identity issues, and Jeffrey Nugent suggested several ways of making my statistical treatment of the subject more rigorous. Material support for the researching and writing of the project came from the Institute for the Study of World Politics, the USC Graduate School, and the USC School iii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of International Relations. I also benefited from spending several weeks at Stanford University’s Hoover Institution, and would like to express my gratitude to librarian Molly Molloy for her assistance with my research. Through personal conversations and the reading various portions of my dissertation, other friends and colleagues contributed valuable comments and ideas for improvement. They are (in alphabetic order) Hayward Alker, Caroline Betts, Coit Blacker, Laurie Brand, Eileen M. Crumm, Karen Dawisha, Paul D’Anieri, Richard Easterlin, Sherman Garnett, John Garofano, Amy Gurowitz, Surupa Gupta, Mohammed Hafez, Saori Katada, Peter J. Katzenstein, Jeffrey W. Knopf, Alan Kronstadt, Timur Kuran, Gail Lapidus, Cecelia Lynch, Daniel Lynch, Andrew Manning, Martha Merritt, Michael McFaul, James McGuire, James Millar, Gunnar Nielsson, Peter Rosendorff, Terry O’Sulliven, Peter Reddaway, Sung Jun Jo, Thomas Schmalberger, and Paul David Steenhausen. Although their suggestions were not always consistent with one another, I appreciate them all. Their recommendations caused me to rethink my ideas and ways of defending them, and provided the necessary intellectual context for the emergence of the final product. I am also indebted to the many folks in Russia and other former Soviet republics who supported my project and contributed to its progress, either by providing comments or by helping me to identify potential interviewers and arrange meetings with them. Dmitri M. Feldman, Boris I. Pruzhinin, Pavel A. Tsygankov, and Andrei V. Zagorski in Russia, Ruslan M. Postolovsky and Sergei V. Sereda in Ukraine, Elena Gapova, Melissa iv Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Merrill, and Anton A. Slonimski in Belarus, and Tatyana Muravskaya in Latvia were especially helpful and generous in sharing their time and ideas. Furthermore, I am grateful to Alan Kronstadt and J. Ann Tickner for the editorial comments and assistance that helped me, a non-English speaker, to shape the dissertation into a readable manuscript. My parents Svetlana M. Luchinova and Pavel A. Tsygankov taught me discipline and faith in myself. They never doubted me and were supportive of my research life in the United States. I felt their support constantly, even being thousands miles away from home. My daughter, in her eagerness to learn, constantly reminded me of my own research responsibilities. Finally, I am grateful to my wife, Julia V. Godzikovskaya, who shared with me all the ups and downs of graduate school. This dissertation is dedicated to her, as a modest way of expressing my appreciation for her love and support. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. “The community of political destiny, i.e., above all, of common political struggle of life and death, has given rise to groups with joint memories which often have had a deeper impact than the ties of merely cultural, linguistic, or ethnic community. It is this “community of memories” which, as we shall see, constitutes the ultimately decisive element of national consciousness” Max Weber (1978, 903) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table o f Contents Dedication ii Acknowledgements iii Quote vi List of Tables viii List of Charts ix List of Figures ix 1. Introduction 1 THEORY 2. National Identity, Domestic Structures, and Foreign Economic Policy 23 CASES 3. Latvia 73 4. Ukraine 127 5. Belarus 191 6. Comparing and Explaining Policy Outcomes 240 ADDITIONAL EVIDENCE AND IMPLICATIONS 7. Evidence from Other Ex-Soviet Republics 278 8. Conclusions and Implications 332 References 354 vii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. List o f Tables Table L I. The Former Soviet Republics: Net Percentage Change in Terms of Trade (rubles to world market prices, in 1990) 17 Table 2.1. Main Foreign Economic Policy Instruments 66 Table 2.2. The Ex-Soviet Republics: Main Foreign Economic Policy Instruments 70 Table 3.1. Linguistic Situation in Latvia, Ukraine, and Belarus, 1989 124 Table 3.2. Latvia, Ukraine and Belarus: Basic Economic Data, 1991-1996 125-26 Table 6.1. Latvia’s, Ukraine’s and Belarus’ Foreign Economic Policies 249 Table 6.2. National Identities and Foreign Economic Policy Outcomes in Latvia, Ukraine and Belarus: The Causal Process 250 Table 6.3. Latvia’s, Ukraine’s and Belarus’ Post-1996 Policies 265 Table 7.1. Foreign Economic Orientations of the Ex-Soviet States, 1991-1996 281 Table 7.2. Possible Economic, Political, and National Identity Determinants of the Ex-Republics’ Foreign Economic Policies 288-89 Table 7.3. Bivariate Regressions of the Ex-Republics’ Foreign Economic Policy on Hypothesized Economic, Political and National Identity Determinants 290 Table 7.4. The Ex-Soviet Republics: Selected National Identity Strength Indicators, Their Ranking and Score 303 Table 7.5. Bivariate Regression of the Ex-Republics’ Foreign Economic Policy on Hypothesized National Identity Determinant (as measured by national identity strength score) 304 Table 7.6. Armenia’s Expected and Actual Foreign Economic Policies 312 Table 7.7. Turmenistan’s Expected and Actual Foreign Economic Policies 320 viii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. List o f Charts Chart 2.1. Chart 2.2. Chart 2.3. Chart 2.4. Figure 7.1. Figure 7.2. The Process of National Identity Formation Expected Deviation of the Post-Imperial States’ Economic Policies from the Former Empire Main Foreign Economic Policy Instruments The Ex-Soviet Republics: Main Foreign Economic Policy Instruments List of Figures The Ex-Republics: The Three Types of Policy Behavior The Ex-Soviet States: Foreign Economic Orientations Versus National Identity Strength Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 1. INTRODUCTION The end of the Cold War has reinforced the necessity to rethink the historical and cultural bases of the world politics. As a result, everyone has became increasingly aware of cultural and normative influences in the international arena. The so called constructivist turn in scholarship1 seems to have seriously undermined the “wisdom” that cultural variables are too evasive to be considered by those committed to standards of rigor and progressive knowledge cumulation. The value and principal significance of constructivism lies in its emphasis on multiple paths of human development. By studying various cultural contexts, in which economic interests get formed and meaningfully function, constructivism promises a more sensitive “down top” approach to development as a process that is nonlinear or heterogeneous. In this increasingly globalized and yet persistently diverse world, it provides us with knowledge about the forces determining variety of economic trajectories. A number of key security issues have already been investigated from this perspective.2 International Political Economy scholarship, however, has been generally much slower in responding to the new challenge, and a number of research programs, such as economic security, remain practically untouched by approaches others than those formulated from neorealist and neoliberal perspectives.3 In an attempt to move 1 Most important statements include Wendt 1992, 1999; Katzenstein 1996; Finnemore 1996; Berger 1998; Duffield 1998. 2 For various overviews, see Checkel 1998; Dash 1998. 3 Which is may be why some scholars went so far as to suggest that the field is stagnating (Jervis 1998,990). For exceptions investigating various IPE issues from the cultural norms’ perspective, see Crane 1999; Williams 1999; Tsygankov 2000. 1 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. beyond these accounts, this study offers a constructivist analysis of economic behavior of the post-Soviet republics after 1991. Some of them directed their economic activities primarily toward Russia and other traditional partners, former members of the USSR, while others shifted their foreign economic policies sharply away from what used to be the Soviet empire and toward new partners. A central reason for the difference in policy outcomes is substantial variations in the strength of the new nations’ national identities. By selecting for examination a region where cultural influences on state policy making are explicit, this study reminds us of the relevance o f those influences world-wide and opens itself to further empirical investigations beyond the former Soviet region.4 The study offers a detailed analysis of the newly independent nations’ policies in order to bring the national identity perspective into International Political Economy studies and establish it with the use of both qualitative and quantitative techniques. The study, therefore, offers a sophisticated and culture-sensitive understanding of the former Soviet republics' economic behavior that warns against the still common simplified perception that all the newly independent states (NIS) will soon become a part of the global "free-market" world, especially those NIS that are strategically located and endowed with rich natural resources. Because national identity is involved, the question of "joining" the community of Western developed nations is actually much more complicated than one might think. At the same time, we should question expectations that all the former Soviet republics will return to their traditional trading 4 The conceptual universe o f cases is potentially rich and includes, in addition to the former USSR, eastern European countries— former members of the Soviet block—and post-imperial nations in 2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. area sooner or later, that only the political ambitions of their leaders are currently driving them away from establishing some sort of customs union on the territory of the Soviet Union. Again, the issue is more complicated, and some of the NIS, while being relatively weak as economic entities, are still likely to pursue an aggressive policy of restructuring their trade pattern and thereby of "joining" the West. This project suggests that this process is likely to happen to those NIS that possess a relatively strong sense of their nationhood and therefore perceive economic relations with the former metropole as threatening to their national identity. The Question The central question of this study is how the newly independent nations behaved during first five years of independence after 1991 and why their foreign economic responses to the post-1991 international environment differed dramatically. Immediately after the break-up of the USSR, some observers were convinced that the newly independent nations would become, sooner or later, a part of the "free-market" world.5 Others suggested that the ex-Soviet republics might eventually remain in their traditional area and that it is primarily the political ambitions of their leaders that are currently driving them away from establishing some sort of a union on the territory of the former USSR.6 It soon became evident, however, that the emerging picture did not general. 5 The view was wide-spread in Ukraine and some other republics during 1990-1991 (see more details in Boffa 1996, 230, 252. 6 Before independence, the NIS were national republics and been forced to trade primarily with one another, rather than with countries outside of the Soviet borders. The share of inter-republican trade comprised up to 85-90 percent o f the republics' total trade (Bradshaw 1993,29). Accordingly, a 3 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. fit any of these expectations. “Joining” the world community of independent nations has proved to be more difficult than one might think it would be. The prospects for some sort of imperial restoration, too, remain remote, at best. Fortunately or unfortunately, after five year of the NTS’ independence, they pursued—primarily via signing bilateral and multilateral preferential agreements— fundamentally different patterns of international behavior. At least three distinct pattern of the NIS’ foreign * 7 economic responses can be identified. "Loyalists" announced their intention to keep their loyalty to their old partners and to establish a regional economic union on the territory of the Soviet Union. They showed little desire to search for new economic partners; instead, they committed themselves to transforming the CIS (Commonwealth o f Independent States) into a customs union. Belarus, Kazakhstan and Kyrgizstan were among the major "loyalist" NIS. "Independents" chose to become full-fledged members of the world trading system and to find new, primarily Western economic partners. Despite being closely connected with Russia and other ex-Soviet republics, and even economically dependent on them (oil and gas dependence on Russia is the most obvious aspect), these nations have been much less cooperative with the CIS than the first group. The Baltic republics commonly held expectation was that the former republics would do their best to keep this pattern alive (See for example Slay 1991, 2). 7 It is worth emphasizing that this project does not study actual trade flows and trade patterns. Following the research tradition o f International Political Economy, it focuses, instead, on the state as a unit o f analysis and asks the question about motivations underlying state behavior, not the behavior o f private economic actors. Because I study state action, not private activity, the primary focus of my study 4 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. became the strongest proponents of this type of policy. By 1993-1994, Estonia, Latvia and Lithuania had signed a number of trade agreements with northern European nations and established the necessary domestic institutions for launching successful market- oriented foreign economic activities. The third group of nations falls somewhere between those poles. Nations that belong to this group pursued a policy which cannot be identified as staying with the old trading partners, because they made serious efforts to sign new commercial agreements with new partners. However, unlike the Baltic republics, these nations were less committed to following this type of strategy. They maintained their relationship with Russia and the CIS, and while not committing themselves to the CIS as a customs union, they stressed the importance of good relations with Russia and other CIS members. Also unlike the Baltic republics, they were slow and indecisive in establishing domestic economic institutions necessary for shifting their trade pattern towards Western countries. Ukraine, Azerbaijan, Turkmenistan, Ukraine and some other nations fall in this category. The question of variation in the economic strategies of the fourteen NIS has not received much attention in the scholarly literature. Economists have been either Q preoccupied with other foreign trade issues, or dissolved this question in a more general question of economic viability of the NIS.9 Foreign policy experts, while concerns economic agreements, not patterns o f trade or other economic activities. Next chapter returns to this point and specifies the meaning o f the term ‘foreign economic policy’ as used in this study. 8 See WB 1995; Michalopoulos and Tarr 1996. 9 Wyzan 1995. 5 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. generally more sensitive to this problem, have failed to analyze it in a systematic way. To date, the best that has been done are small-n comparative studies of some of the NIS' foreign policies mentioning the relevance of the issue of economic restructuring but with no specific focus on it.1 0 The first step toward understanding the causes of differences in the NIS’ policies is to consider possible general ways of explaining countries' foreign economic policies in a market-oriented international environment. Insufficient Explanations Following the established International Political Economy (1PE) perspectives one can imagine at least three different ways of answering this question.1 1 This section addresses possible explanations of the observed variation and suggests that none of them is sufficient to account for the newly independent nations’ foreign economic policies. International market conditions The first perspective—from international market conditions—operates on the assumption that market conditions are the strongest stimulus in shaping foreign economic policies. International trade theory assumes, for example, that the point of departure for formulation of foreign trade policy is a country's comparative advantages in resource endowment (natural resources, labor, technology, etc.). If this theory applies,1 2 then in a newly independent nation we should see shifts in trade policy and in 1 0 See for example Burant 1995; Kulinich 1995; Vares 1995; Kubicek 1997. 1 1 Chapters 6 and 7 further address the issue o f alternative explanations. 1 2 Each of the IPE perspectives is, of course, based on its own ontological and epistemological assumptions and world-views, and some of these assumptions are in conflict and cannot be reconciled 6 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the direction of trade to the extent that former trade departed from comparative advantage. This perspective, while being generally applicable to the NIS, misses the fact that they were just emerging out of a command political economy in 1991 and, therefore, lacked the of institutions necessary for launching market-oriented trade activities. Conventional trade theory and—more generally—the international market perspective abstracts from national institutions and traditions, and it is not designed primarily to explain government policies in the first place. It is therefore not particularly helpful in clarifying how the new actors of the world economy make their choices and why they chose to direct economic ties toward one country/set of countries, and not to another. Apart from the idea that each country should have some sort of marketable resource to trade, this perspective does not tell us enough about variation in their policies of becoming independent actors of the world economy. International power structure It was in response to the insufficiency of the international market perspective that another perspective—from the international power structure— has emerged. Being driven by different political biases and empirical preferences, it theorizes the influences of international power from the standpoint of the developed and the developing worlds. Neorealists are especially concerned with implications of economic power for nation military security and security arrangements; dependency theorists, on the other hand, (Biersteker 1999). This incommensurability on the level o f assumptions makes a dialogue across paradigms difficult, but not impossible: some room should be granted for juxtaposing and comparing 7 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. focus on more equal distribution of economic power and ways of maintaining national autonomy in economic decision making. Both versions emphasize that the distribution of economic power is of key significance and no individual nation, whether developed or developing, can afford to ignore this factor in its foreign economic policy.1 3 The neorealist version makes particularly strong claims arguing that economic and commercial decisions can be best understood if analyzed as driven by nation’s power needs.1 4 Each nation is expected to use physical resources available, economic and military, for maintaining its security arrangements, particularly when the efficiency of national security arrangements is questioned. Pursuit of economic reorientation then can serve as a way to reduce dependence and create a better security arrangement, rather than as a way to become wealthier. The power perspective while is useful for clarifying the NIS' economic policy motivations, is insufficient for identifying differences across countries' policies. For example, during 1991-1996, none of the NIS experienced any direct threats to its security from elsewhere, and yet their foreign economic policies turned out to be quite different. As far as indirect threats go, with Russia proclaiming the strategy of “reintegrating the Near Abroad” in 1993, the NIS did face the danger of being pulled back in Russian ‘sphere of influence’ by means of economic or political coercion,1 5 but their reactions to Russian efforts were far from being homogeneous. various philosophical beliefs in various empirical situations and with the use o f testable propositions. 1 3 Some major statement representing views from developed and developing worlds, respectively, are Hirschman 1969; Krasner 1978; Gowa 1994 and Wallerstein 1974; Cardoso and Faletto 1979. 1 4 Holsti 1986; Gowa and Mansfield 1993. 1 5 Porter & Saivetz 1994; Drezner 1997. 8 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Some of the ex-Soviet republics, such as Ukraine and the Baltics, perceived Russia’s newly proclaimed strategy as threatening their security, while some others remained indifferent of Russia’s intentions and was not nearly as worried about their sovereignty and independence. Nor can the dependency perspective account adequately for the NIS’ varying foreign economic policies. Obviously, during the many decades of empire, the ex- Soviet republics developed various degrees of economic interdependence and dependence on the metropole. They became asymmetrically dependent on Russia’s market, fuel and supplies, as Russia had a more diversified economy and was richly endowed in natural resources.1 6 Yet, such dependence did not prove to be the only significant factor for understanding the NIS’ policies. For example, the important division among the republics in their endowment in tradable resources, most notably oil and gas, can be helpful in understanding differences in economic policy of countries that are drastically different in this respect, but not of those that are similarly rich or poor with respect to their resources. This division can provide some insights why energy-rich Azerbaijan and energy-poor Kyrgyzstan explicate different patterns of behavior, but is of no assistance in understanding policy variation within the group of energy-poor countries, such as Ukraine and Belarus. 1 6 Krivogorsky and Eichenseher 1996, 34-35; Shishkovetal 1997, 83-84. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. National political institutions The problem with both neorealist and dependency perspectives is their relatively low sensitivity toward domestic perceptions of power resources relevant for restructuring foreign economic activities. What often matters in foreign policy decisions is not the international pressure, but the way it is perceived on the national level. As a result, nations that face similar challenges abroad may behave differently. Calculations of power—military or economic—are done by policy-makers operating in varying national contexts and, therefore, is incomplete without considering domestic arrangements. One influential way to consider domestic conditions has been to bring national political institutions perspective in the International Political Economy. What matters in policy formulation, the supporters of this approach claim, is a different composition of social and political institutions as well as an ability of states to overcome the pressures of economic interest groups.1 7 This perspective is an important addition to the previous two perspectives, but it, too, has limitations for explaining the observed variations. Theoretically, the perspective should predict variation in the NIS' foreign economic policies on the basis of variation in their political institutional arrangements. The problem is, however, that having emerged out of the same empire in the 1991, all the newly independent nations inherited domestic institutions that were product of the same centralized rule and do not vary enough to be able to predict the wide variation in the NIS’ foreign economic 1 7 Katzenstein 1977; Hall 1986; Mastanduno, Lake & Ikenberry 1989; Keohane and Milner 1996. 10 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. policies. It is only at later stages that the NIS’ political institutions and state structures became relatively more diverse, with more democratic, society-led regimes shaping up I Q in the western Eurasia and more authoritarian towards the south of Moscow. Such increasing diversification of the ex-Soviet republics’ political regimes is hardly helpful, however, in clarifying their foreign policy choices: for instance, the fact that by the 1997, the Baltic nations, Ukraine and Kyrgyzstan established democratic institutions cannot tell us why these three represented three distinct patterns of economic orientation.1 9 Something else must determine the NIS' economic policy formulation, something that has not yet been captured by any of the above-listed perspectives. The Argument in Brief In attempting to compensate for the weaknesses of economic and political explanations, this study proposes to develop a national identity explanation for the former Soviet republics’ international economic policies.2 0 National identity is a cultural norm that reflects emotional or affective orientations of individuals toward their nation and national political system. It involves symbolic, socially constructed meanings which is well captured in the Benedict Anderson definition of nation as an "imagined political community."2 1 1 8 Gati 1996; Dawisha and Parrott 1997a, 1997b. 1 9 They each represent the nations with independent, moderate and traditional pro-Russian orientation as it was outlined above in the “Research Question” section. 20 For others more recent efforts to adopt a national identity perspective in international studies, see especially, Lapid and Kratochwil 1996; Katzenstein 1996; Krause and Williams 1997; Prizel 1998. 2 1 Anderson 1991, 6. 11 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Rather than looking at national political arrangements, the national identity perspective emphasizes domestic cultural institutions thereby highlighting the sources of state structures and identity. It does not treat institutions as endogenous of the state; instead, it sees them as capable of influencing state actions independently.” This becomes a major advantage in theorizing about the post-imperial nations, or the newly emerged nations, as the NIS are. The NIS are emerging out of an empire and going through the process of nation-building. Whereas the NIS do not vary significantly in their political institutions, they are different in their cultural characteristics, such as national memory and cultural perceptions of the outside world. While sharing the same imperial legacy, the republics differ across various dimensions relevant for understanding their national identities and specifics of their identification vis-a-vis the ex-empire and the ex-metropole. At least three groups of newly independent nations can be identified depending on how strong their national, that is non-imperial, feelings are. The nations of one group may have had some experience of independent nationhood and, therefore, some sense of national identity before they had been incorporated into the empire. If this independence experience was lengthy enough and the domestic institutions of sovereignty grew relatively strong, these nations also developed a strong connection, both physical and symbolic, with the world of sovereign nations. All this became imprinted in these nations memories and led to perceiving the 22 Conversely, the state structures approach, as one o f its early proponent has recently acknowledged “has typically focused on the variability in the autonomy and the capacity o f states, not on 12 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. metropole as threatening their security and the outside world as neutral or potentially friendly. Assuming the absence of other powerful actors with strong imperial ambitions, the states of this group after the imperial disintegration will be unlikely to identify externally with the ex-metropole. Rather, they are likely to relate to the world of sovereign nations, assuming the growing strength and the only alternative this world represents to the old imperial order in terms of the authority principles.2 3 On the other extreme, one can imagine the group of nations that did not have any historical record of independence and had been incorporated into the empire without a well-developed sense of their political identity. This lack of ability to identify themselves with a country or region outside the empire (weak external identification) led them to perceiving the metropole as neutral or potentially friendly and other parts of external environment as threatening to their security.2 4 Finally, some nations may fall somewhere in between these two groups having difficulties of establishing their identification with the empire or the world of sovereign nations.2 3 For comparative purposes, it may be useful to conceptualize the effects of national identity on policy makers in terms of degree of national identity strength. Depending on how firmly the national (non-imperial) identity is established and, therefore, how strongly their identity” (Katzenstein 1996, 23). 2 3 Conceptually, this conflict between the two systems o f authority relationships was recognized by many scholars o f empires, nationalism and state-building (see for example, Seton-Watson 1977, Chaps.6-8; Doyle 1986; Strange 1996; Dawishaand Parrott 1997; Barkey and von Hagen 1997). 2 4 This, of course, will be true when holding many other things equal. 2 5 In his study o f economic nationalism, Rawi Abdelal (1999) arrived at a similar line of argument by suggesting that the ex-Soviet republics’ politicized identities shaped their economic behavior. Abdelal and I arrived to our conclusions independently, which further validates our studies’ results. 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. people in the newly independent nations identify themselves with the nation as a non imperial entity, the policy makers of the newly independent states may view the goals of these nations’ survival in a fundamentally different way. A relatively well developed national identity constitutes a non-imperial reality, thereby exerting relatively strong regulative effect and providing policy makers with a resource for challenging the institutional legacies of the former empire and broadening a nation’s options in choosing an optimal strategy of international economic adjustment. The ex-imperial nations, therefore, may vary in their economic policies depending on their ability to challenge the inherited imperial institutions for the purpose of assuming control over their policies, or in other words, depending on how strongly they are affected by the national identity norm. The effect of national identity on policy making is mediated by domestic struggle of culture-based political coalitions. With the decline of an empire, this sense of national difference and national “selfhess” gives additional stimulus to a rapid development of nationalist-oriented social movements pursuing goals of nation-building. Depending on circumstances, nationalist movements may appeal to the population’s linguistic and religious instincts or historical feelings. Nationalists get involved in a political process of competing with empire-savers for mobilizing social support. If national identity is strong and the large share of the population has gone though the process of making a general identification with the nation, such support turns out to be sufficient. As a result, nationalists replace the old pro-imperial elite as a result of a coup or elections, and set the agenda of economic decision making. If not, decision making is likely to remain under the control of empire-savers. 14 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. National identity effects on policy making can be operationalized in a number of ways. This study proposes that for the post-imperial nations, the factor that is crucial for capturing the level of their national identities development is these nations’ historical experience with national independence. Those nations that had enjoyed such an experience for a relatively long time (before they were incorporated into the empire) have a relatively better chance of developing and maintaining their non-imperial identity through the time o f their colonial existence. For constructing a more inclusive picture, other indicators will be employed as well. It must be emphasized emphatically that by putting forward the national identity perspective, this study does not mean to suggest that other factors are unimportant in the post-Soviet nations’ economic behavior. Rather, these factors, of market and power nature, are insufficient and should be supplemented with national identity considerations. The perspective this study develops merely seeks to point limitations of conventional approaches and illustrate possible explanatory opportunities of bringing cultural variables in international political economy. Research D esign This study uses two types of empirical research aimed at generating a new hypothesis for political economy studies and evaluating it at least on a preliminary basis. First will come comparative exploration of a small number of cases or observations. In this phase I prefer to use comparison across cases as well as detailed case research. The main goal here will be to try to improve the hypothesis by learning more about the 15 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. process through which national identity conceptions function (or do not function) in politics and policy making on foreign economic issues, and to check for spurious relationships. At the same time, if cases are selected carefully for theoretical reasons, such that they are similar with respect to plausible alternative causes of the main dependent variable, at least those alternatives can be ruled out as threats to the identity interpretation for these cases. Thus the project will select three republics that vary as to strength of national identity but are relatively similar with respect to other possible influences, in order to isolate the former for particular attention. Two of the most important rival interpretations are relative security threats and international market conditions. As far as the NIS’ economic competitiveness is concerned, the fourteen republics varied in the degree to which they would probably have benefited from abandoning the Soviet trading system and conducting their trade at world prices. According to calculations by Watson, all except Russia and Turkmenistan had enjoyed subsidies under the Soviet system, so that all others were expected to suffer terms-of-trade losses from shifting the same trade to world prices -- but in widely varying degrees (See the Table 1). Belarus, Latvia and Ukraine are adjacent in the 2 6 George 1982, 15. 16 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 1. The form er Soviet republics: net percentage change in terms o f trade (rubles to world market prices, in 1990) Winners Russia +35% T urkmenistan +3 3 Losers Kazakhstan -2 Uzbekistan -8 Kyrgizstan -13 Ukraine -15 Belarus -20 Latvia -25 Azerbajan -26 Tajikistan -30 Estonia -32 Armenia -33 Lithuania -35 Georgia -45 Moldova -53 Source'. Watson 1994:405. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. center of this spectrum, as roughly equivalent in economic respect and, therefore, represent a reasonable set of cases for comparative examination.2 7 As for the relative security threats, those that had larger military capabilities might have been expected to be less worried about trading with the ex-hegemon than those with weaker military capabilities. All the NIS other than Russia naturally faced a huge disparity in capabilities, but the weaker republics did not differ dramatically in this respect. In terms of conventional weapons, none of the fourteen would stand any chance were it to resist Russia’s possible attack, which make them roughly the same in terms of selecting for a qualitative comparison. Ukraine, Belarus, and Latvia then can be selected for our study with the intent to control for power influence on their foreign economic policies. These three republics amply illustrate the likely range of potential variation in strength of national identity. In terms of their experience with national independence, they can be seen as representatives of at least three distinct groups among the fourteen 2 7 This, of course, is only an approximate appraisal. The three are not and cannot be identical: most experts suggest, for example, that Ukraine was somewhat better placed than the other two with regard to their potential for economic restructuring. Yet this is counterbalanced by two circumstances. First, while the three are not economically identical, they are relatively similar and form a group of most economically advanced republics in the former USSR when compared to most other ex-Soviet republics. Experts’ estimations o f the NIS’ economic viability and potential to integrate their economies into the world economy vary, but they are fairly consistent in terms o f suggesting a similarity between Baltics, Ukraine and Belarus (See for example Corbet and Gummich 1990; Schroeder 1992; Erikson 1992; Vavilov & Vjugin 1993; Brown & Belkindas 1993; Watson 1994; Krivogorsky and Eichenseher 1997, 35). Second, being economically stronger Ukraine is not the strongest on the national identity dimension (Latvia is), which suggests an additional test for the national identity hypothesis: if the hypothesis has any merit we should not see Ukraine pursuing the most aggressive pattern o f economic reorientation. 18 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ex-Soviet republics.2 8 Baltic republics would exemplify nations with relatively well developed political identities. Before they have been incorporated into the Soviet empire in 1940, they all enjoyed a quarter-century period of independent nationhood. This period allowed them to maintain the sense of independent identity even during the Soviet occupation, despite Soviet efforts to incorporate them culturally. At the other extreme are Belarus, Moldova, and the five Central Asian republics. While different in many dimensions, these nations are similar in having no experience with independent statehood before their incorporation into the Soviet empire. Finally, Armenia, Azerbaijan, Georgia, and Ukraine fall somewhere in between those two poles. Compared to Baltic nations, the experience of these nations with national independence was rather short-lived and fragmented, but it proved to be sufficient to develop and retain—even through the period of Soviet empire— a set of historical myths glorifying the idea of national independence 2 9 For the purpose of this study, it would therefore suffice to select Belarus, Latvia and Ukraine the cases from the three identified groups. Latvia, Ukraine, and Belarus amply illustrate the likely range of potential variation in the strength of the effect of national identity. One reasonable proxy for this variable is the number of years of experience as an independent entity the nation has had. Belarus, at one extreme, had 2 8 All the former Soviet republics, with the exception o f Russia. As the former hegemon, Russia is incompatible with the NIS in its institutions and perceptions o f the outside world and, therefore, cannot be analyzed with the use of the tools chosen for the analysis o f the rest of the NIS’ national identities. 2 9 In constructing my classification, I found useful typologies o f Soviet and post-Soviet nations, offered in the following works: Rakowska-Harmstone 1974; Armstrong 1988; Szporluk 1992; Suny 1993; 19 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. had no such experience at all prior to 1991, and Latvia had possessed all the attributes of nationhood during 1921-1940. While Latvia and Belarus may be considered the most "obvious", or the "most-likely" cases of the national identity effect, the case of Ukraine is far less obvious and can serve as an additional test of the national identity hypothesis. The Ukraine falls somewhere in between Latvia and Belarus in terms of its national identity strength and, therefore, for the national identity hypothesis to be valid, Ukraine should pursue the economic policy falling in between those of Latvia and Belarus.3 0 The second phase of the project then attempts a statistical test of the national identity hypothesis, as refined during the first phase. Compensating for the relative shortcomings of small-n analysis, this phase aims at adding rigor to the analysis by employing additional empirical evidence and thereby improving causal inferences of the research. Fourteen of the former Soviet republics during five years of their independence are selected3 1 for quantitative test of the major hypothesis of this project and for assessing relative merits of competing explanations, such as market conditions, relative power, political institutions, and national identities. The evaluation of their relative merits is based on bivariate regressions of various independent variables to the foreign economic policy score. Taken separately, such evaluation, of course, is only tentative and would require further research. However, when complimented with in Dawisha and Parrott 1994; RFE/RL RR, 1993-95; Chinn and Kaiser 1996; Bremmer and Taras 1997; Brzezinski 1997. 30 Unlike Armenia, Georgia, Moldova and Tajikistan, these three have also been relatively peaceful since the Soviet disintegration, which allows us to isolate an additional potentially rival explanation— the republics’ participation in military conflicts. 20 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. depth qualitative investigation, such statistical analysis provides us with extra confidence in evaluating the explanatory potential of the national identity hypothesis. O rganization o f the Study The next chapter develops a national identity explanation for the former Soviet republics' foreign economic policies. It introduces the three main concepts around which this study is organized and establishes theoretical framework for answering in a preliminary fashion the following set of questions. What is national identity and what are its basic dimensions? How does the identity get constructed? What are the conditions of its change and stability? How can national identity be compared across cases and what type of effects it may possibly have on countries’ economic policy making? What is the agency through which national identity exerts its effects on policy makers? Finally, how the answers to these questions should be modified for the conditions of post-imperial nations, the direct subject of this study? Chapters 3-5 turn to case studies and trace the influences of national identity on Latvia’s, Ukraine’s and Belarus’ foreign economic policies during 1991-1996. The analysis is focused on how the three behaved vis-a-vis three goals of economic reorientation: minimizing economic ties with old commercial partners; finding potential new partners and establishing necessary domestic institutions for switching trade towards new partners; and signing trade agreements, both bilateral and multilateral, with new partners. 3 1 As the former hegemon, Russia is incompatible with the NIS in its institutions and perceptions o f the outside world and, therefore, will be excluded from the analysis. 21 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. After observing Latvia’s, Ukraine’s and Belarus’ policies on each of through three stages, chapter 6 summarizes the analysis. It sidesteps a detailed case study research and offers an explicit comparison across cases reinforcing the argument made. The chapter does two additional things— it extends the argument into the post-1996 period and addresses five alternative explanations. Chapter 7 extends the analysis beyond the three cases’ comparison and explores how the argument made holds against other ex-Soviet republics. The chapter proposes a way of analyzing the fourteen republics’ foreign economic orientations and to assess relative merits of competing explanations. It also suggests a number of cases with deviant behavior, an avenue for further research of the issue, and offers a brief qualitative investigation of two of them. The final chapter summarizes the overall findings and their implications. It concludes that not only does national identity matter for explaining varieties of the ex- Soviet republics’ economic policies, but it seems to be the strongest predictor of their behavior, relative to explanations of economic and political nature. The analysis shows that the ex-Soviet nations’ economic considerations turned out to be embedded in varying cultural contexts and it is only in these cultural contexts that economic interests could be formed and meaningfully function. In addition to summarizing the study’s major findings, the final chapter draws the implications of the analysis for theory and policy making. 22 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 2. NATIONAL IDENTITY, DOMESTIC STRUCTURES, AND FOREIGN ECONOMIC POLICY This chapter develops a national identity explanation for the foreign economic policies of the former Soviet republics'.1 The purpose of the chapter is to introduce the three main concepts around which this study is organized and to establish theoretical framework for answering in a preliminary fashion the following set of questions: What is national identity and what are its basic dimensions? How does the identity get constructed? What are the conditions of its change and stability? How can national identity be compared across cases and what type of effects may it possibly have on countries’ economic policy making? What is the process through which national identity exerts its effects on policy makers? Finally, how should the answers to these questions be modified for the conditions of post-imperial nations, the direct subject of this study? National Identity The discussion in this section is concentrated on the concept of national identity. Specifically, I consider dimensions of national identity, the process of its formation, change, and the effects on policy making.2 I then modify this framework for the analysis of post-imperial nations and theorize the effects of post-imperial national identity on policy making process. Finally, I establish indicators of identity of the post- 1 For other more recent efforts to adopt a national identity perspective in international studies, see especially Lapid and Kratochwil 1996; Katzenstein 1996; Krause and Williams 1997; Prizel 1998. 2 While my study focuses more specifically of national identity effects, it would hardly be fair to omit its other attributes. 23 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. imperial nations and offer a preliminary classification of the post-Soviet nations in terms of their national identity strength. National identity: dimensions, formation, change Following recent studies, I will refer to identity as a varying construction of nation and nationhood.3 National identity is a cultural norm that reflects emotional or affective orientations of individuals towards their nation and national political system. Feelings of attachment, involvement, rejection, and the like are usually referred to as manifestations of identity.4 National identity should be distinguished from ethnic identity. The latter refers to feelings of loyalty and attachment toward an ethnic group and may have nothing to do with institutions of statehood that are normally held responsible for the emergence and maintenance of national identity. Conversely, national identity involves the symbolic, socially constructed meanings shared across society as a whole, and not just within ethnic group(s)5 which are well captured in the Benedict Anderson definition of nation as an "imagined political community."6 It is, in the words of another prominent theorist, "the community of political destiny, i.e., above 3 Here and elsewhere, I distinguish between ‘nation’ and ‘state’ as units of analysis. Whereas ‘nation’ refers to identity of a nation as a whole, ‘state’ is associated mainly with bureaucratic apparatus or institutions capable of influencing society. The “Domestic Structure” section returns to this point. 4 Almond and Powell 1966, 50; Mackenzie 1978, 12; Dijkink 1996. The affective orientations should be distinguished from other dimensions o f political culture: cognitive orientations (knowledge and beliefs about political objects), on the one hand, and evaluative orientations (judgments and opinions about political objects), on the other (Almond and Powell 1966, 50). 5 Further clarification o f relationships between national and ethnic deserves a more extended treatment and should be a subject o f special analysis. For our purpose, it is sufficient to emphasize the national dimension of political identity. It is important to note, however, that national and ethnic have points o f similarity and cannot be entirely separated from each other. The sense o f nation is rarely shared across various ethnic groups in equal amount. Especially at earlier stages o f society-building, one or a few ethnic groups can exert a particularly strong influence on the rest of a society, thereby playing a strategic role in establishing an “imagined political community.” 24 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. all, of common political struggle of life and death" that "has given rise to groups with joint memories which often have had a deeper impact than ties o f merely cultural, linguistic, or ethnic community."7 Dimensions National identity is a complex phenomenon, a product of domestic and international history. At least two dimensions of national identity may be introduced as worthy of our attention, unity and distinctness. The unity dimension describes how homogeneous a nation is in sharing various myths and visions about its history, territory, and institutions, as well as in language and religion. It can be seen in both qualitative (various aspects of national unity) and quantitative (overarching degree of strength) terms. National distinctness, on the other hand, describes how similar or different a nation is vis-a-vis other nations-members of international society. A sense of distinctness reflects the external dimension of national identity; in the process of various identification with neighbors and other international actors, a nation identifies itself and learns about various aspects of its uniqueness, specialty, and commonness vis-a-vis the others. The distinctness dimension then may be helpful in understanding the dynamics of threats and alignments in world politics. Both unity and distinctness are integral parts of national identity and refer to societal boundaries in inclusive (creating an overarching collective self-consciousness) and exclusive (separating out those outside the physical or metaphorical boundaries) terms, respectively.8 6 Anderson 1991, 6. 7 Weber 1978, 903. See Smith 1993, 14; Tamir 1995,425; Haas 1997, 23 for similar constructivist definitions. 8 I borrow this formulation of inclusiveness versus exclusiveness from Migdal 1997, 230 25 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Formation In contrast to what modernization theorists argued, national identity- building is not contingent on the establishment of a Western-like economic and political system; it will go on so long as nations exist facing a variety of challenges from within and abroad.9 Identity formation is a process that is always open to change and never completed; a national community, in the words of Ernest Renan, is the result of a "plebiscite of everyday life." It has to do with making sense of reality by establishing and reestablishing certain meanings. It is therefore a process of obtaining significance, or signification, through which newly emerged and highly contested meanings evolve into meanings that are little contested and institutionalized. The stages of this process and main forces responsible for its development are summarized in chart 1. At stage I, as a result of historical practices1 0 new meanings emerge in a society allowing room for new interpretations of its past and present. Here the newly emerged meanings/interpretations are highly contested and marginal in their influence due to overwhelming power of hegemonic discourse. At stage II, however, the newly emerged meanings receive a chance to increase their influence. 9 A good place to go to learn more about identity as a highly contested concept is David Laitin’s (1998) recent study Identity in Formation. The author argues that the Russian-speakers in the post-Soviet republics are facing a radical crisis o f identity because these republics’ center did not hold. 1 0 Historical practices are referred here as various facts, events and experiences nations go through during their development. 26 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Chart 1. The Process of National Identity Formation Stages o f Identity formation Forces responsible fo r identity formation II III Emergence of new meanings Distribution o f new meanings Consolidation of new meanings and identity Historical . Conducive New policies practices institutional reflecting newly arrangements established identity Repetitive historical practices • Activities of political entrepreneurs 27 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Due to conducive institutional arrangements, repetitive historical practices1 1 and activities of political entrepreneurs, the new meanings get spread in a society thereby increasingly obtaining hegemonic status. Finally, at stage IE, identity formation reaches the point when the new meanings are sufficiently consolidated and get exploited, both socially and politically, for the purpose of their further consolidation. In the meantime, history does not stop— new meanings emerge challenging the old identity’ content and boundaries and encouraging change. ~ Identity therefore is established through a process of constant competition between old and newly created meanings. It is a relational phenomenon to the extent that it is always constructed via the self’s interaction with its environment. By tipping new meanings, various historical practices play the role of what psychologists refer to as significant Others. The significant Other initiates the process of actor socialization and transfers a socially relevant knowledge and its meaning to the Self, thereby imbuing him with the decisive influence.1 3 Different theories offered various treatments of nation/state identity formation and suggested a rich variety of ways in which nations relate to their significant others. Some scholars analyzed national identity formation as a process of adjustment to various external challenges. Building on various insights of psychological and 1 1 Something that some scholars referred to as “double backing o f social process” (Alker 1997, 390) and others as “repertoires o f social categories” (Laitin 1998, 17). 1 2 My thinking about process o f identity construction was influenced by Martha Finnemore’s and Kathryn Sikkink’s (1998) theorizing about a norm’s “life cycle,” as well as David Laitin’s (1998) study of ethnic identity crisis and formation. 28 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. psychoanalytical studies, they argued, for example, that identity is constructed via the self s interaction with external environment.1 4 One group suggested that the other in states’ identity formation is the discourse of international politics as anarchy.1 5 Others related the state identity process with its foreign policy practice and foreign policy debates.1 6 Other scholars showed more appreciation of societies’ domestic historical practices as something that may spur the process of national identity formation. Such an approach has merit because even when tasks posed by the international system are relatively similar, they are rarely solved in the same way across nations. National traditions, histories, ethnic composition and homogeneity embedded in institutional arrangements get their way and eventually find an expression in a "national formula" or strategy of responding to outside challenges.1 7 A traditional way to study the issue has been to trace how national political integration and nation-building has been formed by 1 3 For good overviews o f various insights o f psychological and social psychological literature, see Berger 1963; Berger and Luckmann 1966; Bloom 1990; Neumann 1997. 1 4 The paths o f applying the insights of identification theory in philosophy (Taylor 1977; Hiley, Bohman, and Shusterman 1991), history (LaCarpa 1982; Hunt 1989), sociology (Berger and Luckmann 1966; Goodman 1978; Emirbayer 1997), anthropology (Hatch 1997), literature criticism (Bakhtin 1981, 1984), and other humanitarian disciplines have been peculiar. However, it is worth noting that, ironically. International Relations as a discipline was one of the last (if not the last) to open itself to those interested in following these paths. It is ironic because “international” by definition implies studying how people communicate across geographical and cultural divides, thereby sharing meanings and making identifications. 1 5 Ashley 1987; Walker 1988; Der-Derian and Shapiro 1989; Wendt 1992. 1 6 Tzvetan Todorov (1984), for example, was one o f the first to trace how state identity can be formed and confirmed via practices o f invasion. In his The Conquest of America he traced how the early 16t h -century Spanish conquerors built their identity around their domination of the indigenous civilizations o f the Americas. For other examples of relating the state/national identity process with foreign policy practices, see especially Dalbi 1988; Campbell 1992; Neumann 1996. 29 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. relating them to the tasks of economic and political modernization.1 8 Recent post positivist studies, on the other hand, drew attention to the contested nature of the nation- building process by revealing its conflicting implications for various social and cultural groups.1 9 Change Identity change comes as a result of increased tension between old and newly created meanings (this is often referred to as identity crisis). It can be classified in terms of the change’s form and substance. By its form, national identity change can be both incremental and revolutionary. Incremental change comes as a result of a country's adaptation to domestic/international pressures of relatively low degree. Revolutionary change, on the other hand, occur when a society must respond to environmental pressures which are formidable in their potential effects. Revolutionary change comes as a result of social revolution, war, or any other event directly challenging the previously existing national image of the self. The illustrations of revolutionary change in national identity may include Russia's transition from a relatively open economic system to economic autarchy after the First World War and the October 1917 revolution, or Japanese and German transitions from mercantilist-type of systems after the Second World War. On the other hand, Chinese economic reform since 1979 may illustrate incremental change, as it undermines — slowly but surely — the 1 7 IPE literature has been traditionally interested in varying national responses to intemauonal economic change and traced the impact of national institutional arrangements on choosing an optimal strategy o f international adjustment. See, for example, Katzenstein 1977; Ikenberry 1986; Simmons 1996. 1 8 For overviews, see Huntington and Dominguez 1975; Ross 1997. 1 9 Feminist scholarship, for example, interpreted the formation of national identity as a women- excluding rather than a gender-neutral process by demonstrating how, due to state efforts, women were 30 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. country's communist identity and creates its new entrepreneurial and capitalist image that is increasingly reflected in the country’s institutions. Identity change can also be classified in terms of substance. For example, depending on one's evaluative standards, national identity can change in a more progressive way (learning) or in the opposite direction (regression). With some notable exceptions, the discussion of these issues has yet to come to the IR discipline.2 0 Applying these insights about national identity to the post-imperial nations requires a certain modification. It is this historical experience of being effectively deprived of sovereignty for a relatively long time that makes them special and affect, in crucial way, their sense o f identity and community. Both the unity and distinctness dimensions of national identity have been affected. National unity has been undermined and weakened as a result of imperial efforts to make those nations think and act as if they share the identity of empire without having an identity of their own. National distinctness was also decreased and formed almost exclusively vis-a-vis the empire. With no sovereignty—a fundamental attribute o f national security present—nations' identity came to be heavily dominated by concerns about their survival or security. Without being satisfied, those concerns became exacerbated, pushing off the agenda denied both the status and corresponding opportunities to command a cash income. See, for example, Lovett 1989; Charlton, Everett, and Straudt 1989; Tickner 1992; Elshtain 1995. 20 Exceptions include the volume edited by Adler and Crawford (1992), as well as the literature on learning, in which the issue o f progressive identity change has been considered ("complex learning" as contrasted to "simple learning"), albeit in a brief, non-systematic way and with no reference to the "national identity" problematique (see, for example, Nye 1987; Breslauer and Tetlock 1991; Mendelson 1993). One promising way to develop a research agenda for studying identity change is to incorporate insights from recent constructivist literature (Finnemore 1993; Klotz 1995; Katzenstein 1996a; Finnemore 31 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. many other important concerns, such as preserving the linguistic and other cultural specifics of a nation.2 1 Not surprisingly, the question "how are we different from/similar to other nations?" in the imperial context sounds as "how are we different from the empire?" To put it the strongest way, for the post-imperial nations identity is security,2 2 and they are likely to perceive all other problems, including those related to their economies, in the light of their concerns about the survival o f national community. Post-imperial nations, o f course, are not homogeneous. While sharing the same imperial legacy, they differ across various dimensions relevant for understanding their national identities. Scholars of empires, imperial disintegration, and post-imperial nationalism suggested a long list of such dimensions, which includes, among others, pre-imperial historical experience with nationhood, degree of peripheral elite's incorporation into the empire, level of economic development, ethnic homogeneity, stability of geographic borders, and linguistic and religious differences from the metropole.2 3 All these differences are likely to affect the extent to which aspirations for sovereign nationhood are shared across a society and how strongly a society identifies itself with the ex-empire and the ex-metropole. Depending on how strongly the 1996) into the learning (regimes and epistemic community) literature. For a noteworthy attempt to move in this direction, see Knopf 1998. 2 1 These are the issues that some West European nations are especially concerned with while considering joining the European Union. Rather than being worried about the physical survival o f their national entities, the Europeans are preoccupied with maintaining their cultural and institutional specifics in a highly complex and increasingly globalized web o f political and economic meanings. 22 This is not to say that the post-imperial nations necessarily seek security from the ex- metropole. Assuming the existence o f other powerful actors in world politics, the post-imperial or newly independent nations may be subjected to other equally threatening influences as far as their newly- acquired sovereignty is concerned. 32 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. meaning of community is established and how pronounced national (that is, non imperial) feelings are, various societies may identify themselves externally in a very different way.2 4 At least two groups of nations can be identified. The people of one group may have had some experience of independence and therefore some sense of national identity before they had been incorporated into the empire. If this independence experience was lengthy enough and the domestic institutions of sovereignty grew relatively strong, these people also developed a strong connection, both physical and symbolic, with the world of sovereign nations. All this became imprinted on these nations’ national memories and led to perceiving the metropole as threatening their security and the outside world as neutral or potentially friendly. Assuming the absence of other powerful actors with strong imperial ambitions, the nations of this group after the imperial disintegration will be unlikely to identify externally with the ex-metropole. Rather, they are likely to identify with the world of sovereign nations, assuming the growing strength and the only alternative this world represents to the old imperial order in terms of the authority principles. On the 2 3 On this, see Eistenstadt 1963; Eisenstadt 1967; Seton-Watson 1977; Doyle 1986; Laitin 1991; Smith 1993; Kaiser 1994; Dawishaand Parrott 1997. 2 4 I am well aware of the limitations related with attempts to trace variation in national identity in terms o f its strength. National identity is a variable rich in qualitative substance. It is a variable that is fuzzy, complex, and multi-dimensional. Yet, in my opinion, this is true o f any ideational phenomena and should not preclude us from trying to emphasizing those dimensions that are o f particular relevance in learning about causal connections. It is in the interests o f being more socially scientific that we must not limit ourselves to a discussion of exclusively qualitative or quantitative dimensions of national identity. 25 Ever since the Peace of Westphalia, the system of international relations has been in the process o f its progressive development toward the global ascendancy of national sovereignty and away from traditional imperial polities (see Seton-Watson 1977; Giddens 1985; Motyl 1992; Dawisha and 33 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. other hand, one can imagine the group of people that did not have any historical record of independence and had been incorporated into the empire without a well-developed sense of their political identity. This lack of ability to identify themselves with a country or region outside the empire (weak external identification) led them to perceiving the metropole as neutral or potentially friendly and other parts of external environment as threatening to their security.2 6 Thus, due to their special nature, the post-imperial nations may find themselves in between two different systems of authority relationships that are associated with an empire and the world of sovereign nations-states, respectively. The choice the post imperial people will be making then is a choice between these two significant others, a choice of identifying with only one of those at the expense of another. These significant others then are likely to exert fundamentally different influences on the process of identification among post-imperial nations depending on the degree in their national identity strength. More specifically, by accepting the qualities from one significant Parrott 1997). Not surprisingly, for the former imperial nations, the world o f empires and the world of sovereign nations are fundamentally conflictual, and perhaps incompatible, as long as an empire “denotes a dominant society’s control of the effective sovereignty of two or more subordinate societies” (Parrott 1997, 7). Conceptually, this conflict between the two systems o f authority relationships was recognized by many scholars o f empires, nationalism and state-building (see, for example Seton-Watson 1977, Chaps.6-8; Doyle 1986; Strange 1996; Dawisha and Parrott 1997; Barkey and von Hagen 1997). 2 6 This can only be true holding many other things equal. Some nations that had a little experience with independence may still perceive the metropole as threatening if they are fundamentally different from the metropole on some other dimensions. If given historical chance, these difference may play out against the metropole and contribute to the process o f national identity formation. The example might be cultural differences between the metropole and periphery (language, religion, etc.) which may help to explain why some parts o f an empire succeed relatively early while others stick to the metropole until its very breakdown. For instance, the fact that Greece won its independence from the Ottoman empire as early as in 1829 while Romania and Bulgaria did so almost a half century later (Rustow 1997, 190) may have more to do with the relative strength o f Greek ethnic, anti-Turkish identification, and less to do with the Greek national independence experience. 34 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. other a nation will be likely to perceive another significant other as neutral or even threatening to its survival.2 7 National identity effects on policy making The previous section has considered the process by which the self relates to the other and acquires its identity. This section turns to the effects of an acquired identity on the self s behavior and, therefore, will for analytical purposes view identity as a relatively stable rather than a constantly changing phenomenon. In particular, I consider four possible effects of national identity on behavior, or policy-making. A developed sense of national identity can serve as a guide in interpreting the political situation, determining policy objectives and choosing among policy options. It can also provide policy makers with additional resources for mobilizing necessary social support.2 8 Determining how the political situation is interpreted by the actor is the first step in analysis and should precede other steps in determining the actors' behavior. Many rational choice approaches rush to estimating potential costs and benefits of a political act without bothering to reveal on just what scale of meaning the cost/benefit calculations should take place. This makes the estimate fundamentally flawed, as the social situation and the political situations are never value-neutral or objective, and 27 The latter conclusion is far from being an original one, as the literature on identities widely accepts the proposition chat there is an important relationship between identity and construction o f the threat (see for instance Bloom 1990,32-53; Connolly 1992; Campbell 1992; Neumann 1992; Katzenstein 1996, esp. 19-26, 37-49, 403-413). 28 For earlier attempts to study policy making, particularly economic policy making, as driven by nationalist aspirations, see Breton 1964; Johnson 1965, 1967. 35 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. •}Q individual actions always takes place in the context of meanings attached to them. National identity, as collective emotion, is an important key to considering politics in a "web of significance."3 0 As with other components of culture and social institutions, it plays the role of constitutive norm or the norm that constitutes, creates, or revises the actors or interests rather than explicitly regulating the actors' behavior.3 1 It guides individual interpretation of reality and helps policy makers to make sense of the political situation.3 2 As individual policy makers share collective socially constructed meanings, they should be expected to determine policy objectives consistently with those meanings (other things being equal). Depending on how strongly these meanings are shared, the determination of a policy objective at any given moment can be a more or a less easy business. Accordingly, in choosing among various options a policy maker is likely to accept those that in her view meet the established national goals and national self-image and to reject those that do not. 2 9 This observation goes back to Weberian central insight that social action can only be understood if investigators take into account its meaning for those involved (Weber 1978). For attempts to add to rational choice approaches to economic policy by accounting for effects o f individual, rather than socially held, beliefs, see especially Odell 1982, 1988; Hall 1989; Goldstein and Keohane 1993; Woods 1995; McNamara 1997. 3 0 The expression is taken from Geertz 1973. 3 1 For a more extended theoretical discussion o f the constitutive versus regulative norms, see Wendt 1999. Valerie M. Hudson offered a somewhat similar way o f conceptualizing the effects o f culture on foreign policy by distinguishing among culture as shared meaning, culture as value preferences, and culture as a template for human action (1996, 7-19). For empirical applications, see especially Klotz 1995; Finnemore 1996; Katzenstein 1996a, 1996b. 3 2 For a theoretical discussion o f sensemaking in organizational studies, see March and Olsen 1989, 39-52; Weick 1995. 36 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. To illustrate how national identity can be crucial in interpreting the political situation and setting a certain policy behavior, let us briefly consider two examples. The first example considers Japanese and German foreign policies since the Second World War. In coping with external threats, both countries eschewed violent state practices and did not pursue militarist goals, in striking contrast to their national histories between the 1880s and 1945. One major reason was these countries’ changed identities under the decisive influence of multilateral security institutions, such as the UN, NATO, or the more limited bilateral context of the US-Japanese Security Treaty. The two countries also agreed to participate in the Marshall Plan, having perceived it as being in accord with their new identity posture. On the other hand, Soviet Russia refused to participate in the arrangement despite US invitations. Its identity was formed by the 1917 Socialist revolution and the revolution-related hostility towards the Western world, and its cultural perception of the Marshall Plan has been entirely different from that of Germany or Japan. Cultural meanings, however, are not always shared in an equally strong way.3 4 Often, a sense of national identity is not developed sufficiently to make a decision quickly and firmly. Contradictory influences on a nation's identity can be exerted from both inside and outside. In this case, a conflict of influences is likely to generate a 3 3 Berger 1996; Katzenstein 1996b; Duffield 1998. 3 4 Martha Finnemore and Kathryn Sikkink suggested that cultural norms can have different influences depending on what stage of their “life cycle”— emergence, cascade, or internalization— they are in (1998, 895-96). 37 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. conflict of interpretations. In the words of March and Olsen, social rules do not eliminate conflict: Rules and their applicability to particular situations are often ambiguous. Individuals have multiple identities...Situations can be defined in different ways that call forth different rules...Consequently, describing behavior as rule following is only the first step in understanding how rules affect behavior.3 5 The second step is to understand what particular rule is likely to be evoked. Generally speaking, it is likely to be the rule which reinforces the initially developed image of a nation of itself. Conversely, when an influence runs counter to the existing image of a nation, it is likely to be perceived by the nation as threatening to its security. The more fundamental the challenge to values and traditions on which the nation is built, the more likely it is that a nation will perceive the challenge as a threat. Or alternatively, in situations of identity crisis, a nation may invoke the rule that has been recently used or recendy revised in response to crisis and, therefore, comes to attention first.3 6 Finally, as an inter-subjectively shared structure of meanings, a strong national identity can also provide policy makers with additional resources for mobilizing necessary social support. Again, depending on how strongly a nation as a whole feels about a particular political decision, mobilizing support might be relatively more or less difficult. If the policy decision is perceived as corresponding with a society's identity, a political coalition favoring the decision is likely to be able to overcome opposition and to obtain the necessary social support. If otherwise, a society is likely to be split, with 38 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. little chance for the decision to be implemented. European countries in the wake of new technological challenges, such as rapid innovation in computer and other industries, might serve as an illustration. France, in the word of a French political scientist, has not yet "found the way to modernize while preserving our imagined community." As a result, with the political left and right, socialists and conservatives increasingly indistinguishable, the racist, extreme-right National Front party of Jean-Marie Le Pen has swept to a series of victories in municipal elections and generally increased its showing to 15.2 percent in the 1995 presidential election.3 7 The above-made points can be applied to the Newly Independent nations and their policy making. First, preoccupation with issues of security is likely to guide policy makers' interpretation of reality and to constitute their policy interests and behavior. Second and related, survival — economic, political, and cultural — is likely to become the major policy objective for the post-imperial nations. Depending on their national identities, some will view survival in terms of reuniting with the ex-metropole while others will pursue the goal of nation-building and reaching a full-scale sovereignty. Third, depending on the way in which policy objectives are defined, policy-makers are likely to accept those policy options that meet the established national goals and national self-image, as these are defined, and to reject those that do not. Finally, the extent to which the defined policy goals (reunification with the ex-metropole or full 35 March & Olsen 1989, 24. 3 6 Ibid., 25. 3 7 Cohen 1997, A6. 39 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. national independence) are shared across a post-imperial nation may or may not provide - IQ policy makers with additional resources for mobilizing necessary social support. Turning to the issue of foreign economic policy making in the post-imperial nations, we may be able to formulate the following points. Depending on how strongly people in those nations identify themselves with the nation as a non-imperial entity, the policy makers may view the goals of survival in a fundamentally different way. A strong national identity challenges the institutional legacies of the former empire, and thereby broadens a state's options in choosing an optimal strategy of international economic adjustment. The ex-imperial nations will therefore vaiy in their economic policies depending on their ability to challenge the inherited imperial institutions for the purpose of assuming control over their policies or, in other words, depending on the strength of their national identities (other things being equal). The difference in policy objectives suggests differences in policy tradeoffs. To those with a stronger national identities, survival is likely to mean establishing independent political institutions and assuming control over economic policy making even at the cost of economic benefits from cooperating with the ex-metropole. Conversely, those with a relatively weaker national identities may view their survival in terms of close economic cooperation with the ex-metropole, even at the cost of their sovereignty and national independence. Holding other things constant, those with a stronger sense of national identity are likely to be mobilized faster and be more 38 The next section will consider this issue in more detail, classifying post-imperial nations with well-developed, poorly-developed and an intermediate sense o f national identity in terms o f their domestic 40 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. supportive to policy makers' efforts of protecting national independence. A strong national identity is therefore likely to be employed by policy-makers as a lever in pursuing more independent policy. One can expect that the stronger a country's national identity, the more likely that country’s government will be to perceive economic cooperation with the former metropole as threatening to its security and the more likely that its policy will run counter to the old, empire-initiated economic pattern (again, other things being equal). The simple matrix below hypothesizes four levels of policy deviation from maintaining the old economic pattern that may be expected in the post-imperial states based on the interaction of identity and economic motivations. The incentive to pursue a policy of economic reorientation will depend on two factors: the strength of the *>Q society’s national identity and assessments of its economic viability. The stronger the national identity and the higher the perceived threat from the former metropole, the greater the need for policy deviation from maintaining the old economic pattern. Similarly, the more cost-efficient the economic deviation, the greater the impetus to achieve it for development purposes. When the political and economic conditions differ in their strength, either security or economic motivations may prevail (square 2 and 3 compared). Finally, when a society’s identity and the structures and coalition-building processes. 3 9 To a certain degree, such assessments o f economic viability will be culturally based, as well. 41 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Chart 2. Expected Deviation of the Post-Im perial States’ Economic Policies from the Former Em pire Strength o f national identity strong identity weak identity cost-efficient 1. High deviation 2. Medium deviation Economic com petitiveness cost-inefficient 3. Medium deviation 4. Low deviation 42 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. threat perception are low along with its economic viability, the government is very unlikely to adopt a policy of economic deviation from the old imperial pattern (square 4). Capturing the strength of national identity The discussion above suggests the necessity to account for at least two forces in capturing the strength of national identity: historical practices and institutional environment. It is through historical practices and their repetition that a nation becomes more or less susceptible to newly created meanings and interpretations, and these may eventually be incorporated in its identity. Institutions are also important in capturing the strength of identity because they provide space in which meanings emerge, spread and are consolidated. Both historical practices and institutions can be more or less conducive to identity consolidation and can therefore be analyzed in terms of their ability to capture the strength of national identity. Since national identity is often defined in terms of citizens’ sense of common origins or common destiny,4 0 it is important to find ways to measure the ‘commonness’ of a nation's historical experience in order to account for its historical practices. This characteristic can be seen in both qualitative ("what kind of experience?") and quantitative ("how strongly does the national experience differentiate nation from empire?") terms. Nations and ethnic groups may be united by a variety of historical events; their sense of unity is developed in the process of being ruled by common 40 See, for example, Emerson 1960,95; Weber 1978, 903; Bloom 1990, 52; Smith 1993, 11. 43 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. leaders, under the umbrella of common political and social institutions, and in the course of fighting against common enemies. For the post-imperial nations, one reasonable way to capture a commonness of their historical experience is to look at their experience with independent nationhood before the incorporation into the empire. It is through this experience that nations might have developed — in various degrees — the sense of commonness and distinctness. Quantitatively, it may be measured, among other ways, by number of years of independence a nation experienced before its incorporation in the empire. Qualitative measurements can be developed by analyzing the various challenges a nation faces during times of relative stability versus instability. As for nations’ institutional arrangements, the relevant literature suggests at least four institutions that provide space for (and therefore affect) the process of national identity formation. These four — geographic territory, state, national economy, and culture — can be more or less conducive to maintaining a nation’s cohesiveness and distinctness from the outside world.4 1 Each of them can be measured in a number of ways. Territorial unity fosters emotional attachment and sense of unity.42 Asking questions about the length of maintaining territorial unity, the scope and types of change 4 1 O f course this differentiation in no way implies a nation’s exclusiveness or isolation. A nation inter-relates with others in variety o f ways: it trades, fights, communicates via mail and traveling, allows migrations and cultural exchanges, etc., thereby developing its external identification (Deutsch 1979, 1981). A nation also reaches out externally when its primordial cultural characteristics (especially language and religion) are shared across the board (Brubaker 1995; Huntington 1996). The originally- established cohesiveness and distinctness, however, allows a nation to maintain its identity in a highly complex web of inter-national ties. 42 Stalin [1905] 1994; Smith 1986, 163; Taylor 1989; Kaiser 1994; Coleman 1995; Dijkink 1996. 44 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. a nation’ s territorial boundaries have undergone, and about the peripheral territory's geographical distinctness (climate, location, etc.) from that of the metropole may help to obtain additional quantitative and qualitative characteristics of national identity. Commonness of political institutions also deserves to be considered by national identity scholars. It is particularly through political institutions that an ethnic group eventually turns into a nation. In the words of Karl Deutsch, "nationalities turn into nations when they acquire power to back up their aspirations."4 3 For the post-imperial nations, the institutions that enforce peripheral distinctness from the empire are of particular relevance.4 4 Some of these might have been created before the imperial incorporation and have simply outlived the empire while maintaining the periphery's sense of distinctness.4 5 Others might have been established by the imperial rulers themselves, as it was with the Soviet federalism which put in privileged position some ethnic groups, but not others.46 Another example may be Russia's attempt in 1815 to allow a more liberal constitution for Poland than in Russia itself, which eventually led to the Polish national uprising and subsequent violent repression on Russia's side.4 7 Other things being equal, a nation's identity may also become stronger after a nation reaches a certain level of economic development. As with political institutions 4 3 Deutsch 1966, 105. 44 For the argument that distinct political institutions are critically important in mobilizing periphery and determining the stage o f its independence, see Doyle 1986, 92-95, 369-71. 4 5 An example might be the independence o f a peripheral Church from the metropole v/hich, others being equal, can facilitate the rise o f peripheral nationalism. For an account o f how this may occur, see Levi and Hechter 1985. 46 For various accounts o f the Soviet federalism and its effects on the republics’ identity and the system’ s stability, seeLapidus 1984; Gleason 1990; Roeder 1991; Slezkine 1996; Brubaker 1996, 23-55. 47 Doyle 1986, 370. 45 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and territoriality, a developed economy helps to foster the sense of national unity and 'belongness,' as well as the sense of nation's relative distinctness.4 8 A variety of more and less aggregated variables can be used for measuring the level of nations' economic development. Finally, a nation’s distinctness and degree of homogeneity in terms of religion, language, customs, and racial appearance can also become relevant for national identity formation. These cultural features are often referred to as "primordial"4 9 because they change much slower than many other historically contextual national characteristics.5 0 Although primordial or ethnic features do not by themselves constitute the sense of nation and national identity, they may become relevant to the nation-building process if peripheral nations and their elites chose to exploit their primordial distinctness in anti imperial mobilization.5 1 Nations’ primordial qualities can be captured through various measurements of the periphery's cultural (linguistic and religious) distinctness from the metropole, the level of cultural homogeneity, and the extent to which those 4 8 Many scholars endorse this argument. For examples, see Gurr and Harff 1994. 91; Coleman 1995, 12; Wintrobe 1995, 65; Barkey 1997. 4 9 The term comes from Geertz [1963] 1994. 5 0 It is worth noting that even primordial features are not exactly primordial. They do change over time and in response to certain historically contingent events. Not surprisingly, primordial features are often invoked in a struggle of nationalists for mobilizing social support for their historically- and socially-constructed claims for the right o f having "their own" state. For the argument that ethnic identity is a reflection o f autonomous political choice, see Armstrong 1988. For the analyses of exploitation of primordial features and of religion and language-based nationalisms, see Laitin 1991, 1998; Van Evera 1994; Juergensmeyer 1996. For extending primordial, mainly religion-based argument to the analysis of civilizations, see Huntington 1996. 5 1 For the argument about importance of ethnicity and cultural unity for understanding consequences o f Ottoman, Habsburg, Russian and Soviet empire and imperial break-up, see Barkey 1997. 46 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. characteristics change over time (for example, as a result of the imperial efforts to incorporate the periphery). Variation in national identity strength Historical practices and institutional arrangements should not be assumed as equally important in defining the degree of national identity strength. Primordial features, for example, may not matter as much if taken out of their social and historical contexts. Most modem nation-states are multi-ethnic, multi-linguistic and multi religious, which does not preclude them from relatively peaceful existence and development. Nor will territoriality or degree of economic development, taken individually, necessarily foster a nation’s anti-imperial identity. Following the above-developed logic of identity formation, I assume the primary significance of historical practices in establishing national identity of the post-imperial states. It is through historical practices that the new meaning of sovereign nationhood emerged and eventually became a part of domestic political discourse capable of challenging the traditional imperial practices and authority structures. Institutions, however important, are seen here as being of secondary importance and only indirectly responsible for challenging the imperial authority structures and determining the relative strength of the periphery's nationalist feelings. ” They provide a space for meaning 5 2 Peripheral nationalists may not be united along ethnic lines and still share their anti-imperial feelings. On the other hand, after winning independence and at earlier stages o f society-building, the role o f one or several ethnic groups may be particularly important in establishing an “imagined political community.” At later stages, however, the sense o f nation, although still rarely shared across various ethnic groups in equal amount, may become more evenly distributed across the nation as a whole. 47 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. distribution, but they do not produce meanings on their own. History, historical practices do.5 3 On the basis of this assumption, one can construct the following variation in identity strength of the post-imperial nations. Some nations may emerge out of empire with a well preserved memory of national independence they had experienced before their incorporation into the empire. Their sense of commonness would be relatively well developed. Externally, they would also identify relatively strongly with a country/region other than that of the empire. The institutional factors responsible for shaping the identity of these nations may vary: they may weaken the sense of national identity somewhat as well as make it stronger. The other group of the post-imperial nations may be weak in its national identity dimension. These nations may vary in terms of factors of secondary importance, but they would have commonly weak national identities due to their lack of historical experience with independent statehood. Finally, one can imagine nations falling somewhere in between the two groups in terms of strength of national identity. Although the people of this group might have some experience with independent statehood in their past, they would still differ from the first group in terms of its significance for preserving their national memory. The above typology can be illustrated with the example of the fourteen post- Soviet nations.5 4 Baltic nations (Latvia, Lithuania, and Estonia) exemplify nations with 5 3 Ethnic identity, for example, does not yet constitute national identity, it simply implies a combination o f shared territorial and primordial characteristics. 5 4 AH o f the former Soviet republics, with the exception o f Russia. As the former hegemon, Russia is incompatible with the NIS in its institutions and perceptions o f the outside world and is therefore 48 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. relatively strong identities.5 5 Despite some variation within the group, they are similar in many important respects. They all enjoyed a quarter-century period of independent statehood before they had been incorporated into the Soviet empire in 1939. During this period they developed particularly acute sense of belonging to the European civilization of sovereign nations and established close economic and cultural ties with Western and Northern European nations. Ail this allowed Baltic nations to maintain a sense of their own identity even during the Soviet occupation and despite Soviet efforts to incorporate them culturally in addition to incorporating them politically and economically. At the other extreme are Belarus, Moldova, and the five Central Asian nations. While different in many dimensions, these nations are similar in having no historical experience with independent statehood. These seven emerged as republics in the late 1930s, relatively late as compared to other post-Soviet states, and under the initiative of Moscow. In other respects, the nations of this group vary. For example, some have difficulties in distinguishing themselves from Russia and Soviet empire because of linguistic and religious similarity (Belarus); others have relatively large proportions of excluded from the analysis. In constructing my classification, I found useful typologies o f post-Soviet and post-communist nations offered in the following works: Rakowska-Harmstone 1974; Armstrong 1988; Brzezinski 1989/1990; Szporluk 1992; Suny 1993; Dawisha and Parrott 1994; RFE/RL RR, 1993-95; Chinn and Kaiser 1996; Bremmer and Taras 1997; Brzezinski 1997. 5 5 Arguably East European nations, the former Soviet bloc members can be also considered part o f the group if one wishes to extend the analysis beyond the former Soviet republics. They are comparable with Baltics in having a significant historical experience beyond the Soviet empire and identifying strongly with the European civilization o f sovereign nations and Europe as a region. In addition, they exercised more control over their domestic policy making and, while their domestic political institutions varied substantially (Comisso and Tyson 1986), overall these institutions were distinctly stronger than those o f the ex-Soviet republics. 49 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Russians residing on their territories (Kazakhstan, Kyrgyzstan, Moldova); still others are relatively homogeneous ethnically (Tajikistan, Uzbekistan, Turkmenistan).5 6 Finally, Armenia, Georgia, Ukraine and, to a lesser extent, Azerbaijan would seem to fall somewhere between those two poles. As compared to Baltic nations, the experience of these nations with national independence was rather short-lived and fragmented, but it proved to be sufficient to develop and retain—even through the period of Soviet empire—a set of historical myths glorifying the idea of national independence. For such reasons these nations, along with Baltics, are sometimes referred to as “historic nations.”5 7 Ukraine, for one, may refer to a Cossack state which existed in the seventeenth and eighteenth centuries, as well as to a brief period of independence between 1917 and 1920, after which Moscow created the Ukrainian Soviet Socialist Republic. Georgia and Armenia may build on the period before they became a Russian protectorate, as well as on the period of their short-lived independence after the October 1917 revolution. Finally, Azerbaijan, too, was briefly independent before the Soviet incorporation. Thus, on the scale of historical experience 58 with national independence, these four fall roughly in the middle group. 56 For data from 1989, see Bremmer and Taras 1997, 706-707. 57 Brzezinski 1997, 128. For the argument about Ukraine as a historic nation, see Bilinsky 1992; Burant 1995. 5 8 On other dimensions relevant for national identity formation, they differ. For example, Ukraine is similar to Russia in terms o f language, religion and appearance; Georgia and Armenia are Orthodox countries, as is Russia, but Azerbaijan is predominantly Muslim. Azerbaijan and Armenia are also much more ethnically homogenous than are Georgia and Ukraine. 50 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Dom estic Structures This section attempts to specify how the causal link “national identity — foreign economic policy” may work. It suggests that the causal chain between national identity and policy outcomes is more complex and contains an important intervening variable— domestic structures and coalition-building processes. Domestic structures are an important addition to the national identity variable in answering our research question for at least two reasons. First, it allows us to trace the process of interrelations between national identity and trade policy outcomes thereby checking whether this correlation is really causal, and not spurious.5 9 Second and related, by tracing process we get closer to identifying the agency through which national identity energy gets transmitted into state policies.6 0 Thus, in my analysis the domestic structure is a variable that provides us with important details about the process of state economic policy formation in the former USSR, thereby allowing us to learn more about the “how” as well as the “why” aspects of the research question.6 1 5 9 On process-tracing and the analysis o f “mechanisms” that enable causes to produce effects, see George 1982; Yee 1996; Van Evera 1997, 64-67. 60 This may reduce the limitation o f recently developed norms and identity explanations o f state behavior. For criticism o f these approaches on the grounds that they o f attention to agency, see Kowert and Legro 1996, 492-95; Checkel 1997. 6 1 These two sides are, in my opinion, intimately related and can only be meaningfully separated on a highly general epistemological level. When it comes to empirical investigation, however, a causal analysis is incomplete without telling the “how” side o f the story. On the other hand, well-performed and empirically-oriented interpretive investigations are always suggestive in terms of further causal analysis and can be viewed as complementary rather than hostile to positivist-like investigations (for the argument contrasting these two approaches, see Taylor 1977; Hollis and Smith 1991; Neufeld 1993; for the argument about their complimentarity, see Weber 1977; Price 1994; Price and Tannenwald 1996, 124-26, 151-52). 51 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Domestic structures is a variable that has been employed by scholars of foreign /r*y economic and security policies. “ Specifically, the approach emphasizes political institutions and societal structures. In this section, I first describe domestic structures in general terms summarizing various insights from the literature. I then modify the framework to the conditions of the post-imperial nations and offer a preliminary typology of the post-imperial nations in terms of their domestic structures, with some arbitrary selected illustrations from the post-Soviet region. Domestic structures Most of analytical approaches emphasize two main elements of domestic structures, society and state, linking the first two together in terms of their impact on policy outcomes.6 3 Society Following most influential comparative studies of the 1950s and 1960s, the domestic society has been often theorized in terms of structure of its economic and class actors. Scholars traced how the composition of societal actors may affect the growth trajectories, paths to modernization, stability of political institutions, and types of political system.64 The focus on various economic actors in conceptualizing society 6 2 The literature that analyses the foreign policy outcomes as a function o f domestic politics is rapidly growing. See, for example, Migdal 1974; Katzenstein 1978; Hall 1986; Gourevich 1986; Evangelista 1988; Mastanduno, Lake, Dcenberry 1989; Snyder 1989; Ayoob 1991; David 1991; Risse- Kappen 1991; Milner 1992; Checkel 1993; Evans, Jacobson, Putnam 1993; Rosecrance and Stein 1993; Risse-Kappen 1995; Peterson 1996; Milner 1997; Knopf 1998. 6 3 My approach to domestic structures has been particularly influenced by Thomas Risse- Kappen's framework (1991, 1995), which encompasses both institutional structures and coalition-building processes. 6 4 See especially Lipset 1960; Gerschenkron 1962; Moore 1965; Huntington 1968. 52 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. remains in many ways central in studies of economic and political development,6 5 and it was this focus that was borrowed by and remains most influential in international political economy.6 6 In other areas of international studies, however, society recendy came to be analyzed in terms that go beyond a composition of class or interest-based groups. In security studies, for example, explanations from the idea- and culture-based structure of society have recently became popular.6 7 Overall, scholars seem to be on their way to rethinking the Weberian insight that any understanding of society should not be reduced to interest-based explanations and that culture and culture-based coalitions are as important if we are to interpret societal process adequately. Societal structures can vary along many dimensions, producing variations in policy outcomes. The question that is relevant for our investigation is to what extent a society is capable of generating support for a government’s economic policy. We ought to know in particular the degree of societal economic and cultural polarization, the strength of social organization, and the degree to which social pressure can be mobilized in favor or against certain policies. How homo- or heterogeneous is the society in terms of ideological and/or class cleavages and how well developed are social coalitions and organizations in their ability to express grievances and raise demands? These are the central questions of our study. 6 5 See, for example, Mares 1985; Robison 1988; O’Donnell 1988; Przeworski 1991; Poznanski 1992; Silva 1993; Olsen 1993; Haggard and Kaufman 1995; Maravall 1997. 6 6 See especially Katzenstein 1978; Gourevich 1986; Ikenberry 1986; Rogowski 1989; Keohane and Milner 1996. 67 Snyder 1991; Jonston 1995; Chilton in Risse-Kappen 1995; Peterson 1996; McAdam, McCarthy, and Zald 1996; Herman in Katzenstein 1996. 53 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. State For the last fifteen to twenty years, the state has been treated by many social scientists as an autonomous political actor relatively independent from social pressures in determining policy outcomes.6 8 The state is now associated with instrumental institutions capable of influencing and structuring society (the state apparatus), rather than with a system that is subjected to that apparatus.6 9 This narrow definition of state, with its emphasis on political institutions, came to be the most influential focus of analysis. As with society, state can vary along many different lines relevant for understanding political outcomes. One important dimension is the state capacity, or ability to mobilize required social resources in support of a policy decision which, in turn, depends on the degree of its centralization and legitimacy. The former refers to the nature of political institutions: Is executive power concentrated in the hands of one decision maker who controls the bureaucratic infighting among governmental agencies? To what extent can the government control the legislative process?7 0 State legitimacy, on the other hand, refers to a symbolic dimension of capacity to extract social resources.7 1 State capacity should not be confused with state strength, or the degree of 6 8 This notion of state autonomy was first introduced by Max Weber in his well-known definition (1978, 54), but was later abandoned in favor of elite- (Mills 1956; Putnam 1976) and systems-based (Parsons 1963; Easton 1965) analyses. Since the late 1970s, the state has been brought back in (Katzenstein 1978; Krasner 1978; Skocpol 1979; Nordlinger 1981; Evans, Rueschemeyer, and Skocpol 1985) and is now widely considered to be an important addition to society-based explanations (and not something subsumed by those explanations). 6 9 Biersteker 1990, 180. 7 0 Katzenstein 1977:3-22, 295-336; Risse-Kappen 1991; Peterson 1996, Chap. I. 7 1 In part, legitimacy is linked to institutions, but more often it implies degree of social trust given to these institutions, to a state leader personally and to policies that are implemented within 54 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. state intervention in the society. State capacity, as John Bcenberry has demonstrated, is about state flexibility in controlling policy outcomes. The ability to re-impose the market, for example, can be as powerful an indicator of state capacity as the ability to intervene in the economy.7 2 Depending on societal and state characteristics, they can be linked in different ways and have differing impact on policy. The relevant question here is who - society, or state, or both - is capable of setting the agenda of decision making and, therefore, controlling policy outcomes. For example, in countries with centralized political institutions but polarized societies and rather weak social organizations, the policy networks are likely to be state-dominated. The policy-relevant coalition building would then be restricted to the political elites and would more or less exclude societal actors. On the other hand, societal control of the policy networks may be expected in countries with comparatively homogeneous societies and a high degree of societal mobilization but less centralized state structures. The policy-relevant coalition building would take place among societal actors; accordingly societal actors and public opinion would play a major role.7 3 established institutional framework (Weber 1978; Fukuyama 1995). Barry Buzan’s distinction between the idea o f the state and the institutional expression o f the state is relevant here (see Buzan 1991, 65). 72 Ikenberry 1986, 133, 135. Besides, state intervention in the economy varies widely. Thomas Biersteker, for example, identified six forms of such intervention: influence, regulation, mediation, distribution, production, and planning (1990). 7 3 Risse-Kappen 1991, 486; Peterson 1996, 31. 55 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Domestic structures o f the post-imperial nations Post-imperial nations as a group, as argued in the previous chapter, are different from all other nations due to their lack of experience with sovereign statehood. This sovereignty deprivation leads policy makers to perceive all major problems confronting the newly independent nations, including economic ones, in the light of their preoccupation with survival or security. In terms of post-imperial domestic structures, this suggests that, at least in some cases, security-based social cleavages might be more important than purely economy-based cleavages. Security self-determination should not be understood as having the same substance in different societies. Rather, as I have argued, it is a variable that is determined by various cultural perception of security threats, in particular by various national identities. This makes the Weberian insight about significance of culture-based coalitions especially relevant for adequate interpretation of policy making processes in the post-imperial societies. Simultaneously, this suggests that economic classes/interest groups-based typologies of society, still popular in international political economy, must be complemented by the analysis of culture-based cleavages. In the post-imperial nations, an important social cleavage may emerge between those seeing security as national self-determination and nation-building and those who argue that security cannot be provided without saving the empire and bandwagoning with the former metropole. This division between “nation builders” and “empire savers”74 may, of course, be partly 7 4 Roman Szporluk formulated the distinction for the analysis of domestic divisions in Russia, the metropole. “Empire savers” equate Russia’s greatness with domination over neighboring people while 56 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. determined by elites’ perceptions of political objectives and chosen strategies of achieving those objectives.7 5 However, it can hardly be attributed merely to the policy makers’ visions and strategic,s as it can be traced as continuously reproduced by various national governments within the same country. The latter suggests the involvement of social factors, such as national memory and cultural perceptions of threats. Earlier, I hypothesized that post-imperial nations vary in their economic policies depending on the strength of their national identity. After introducing domestic structures to the analysis, the process of causality becomes more clear. Strong national identity means that people en masse have gone through the process of making a general identification with the separate nation rather than with the entire empire. With the decline of empire, this sense of national difference and national selfness gives additional stimulus to a rapid development of movements supporting national independence, or nationalist movements.7 6 Nationalists get involved in a political process of competing with empire-savers for mobilizing sufficient social support. If such support turns out to be sufficient, nationalists have good chances of replacing the old pro-imperial elite as a result of a coup or a democratic elections and setting the agenda of economic decision making. “nation builders” believe that Russia should reconcile with the loss of empire and achieve its proper place by concentrating on domestic needs (Szporluk 1989). The distinction, however, has wider implications and may be applied for the post-imperial nations in general, including those that have broken away from the metropole. 1 5 For various analyses o f national elites’ political strategies vis-a-vis the ex-metropole and the external environment in general, see Rogowski 1985; Snyder 1991, 1993; Posen 1993; Snyder and Karen Ballentine 1996; Treisman 1997. 76 One of the most popular definitions o f nationalism links it with a doctrine claiming that the state and the nation should be congruent (see Gellner 1983, Chap. I; Rogowski 1985). 57 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. State structures is another important element in our “equation,” and policy outcomes are not determined by exclusively societal pressures. States, of course, maintain and exercise a certain policy autonomy and therefore have a room for maneuvering in response to societal pressures. At the same time, they have to deal with social pressures whether states are completely subject to these pressures (low- centralized state) or merely supportive of social demands in setting the policy agenda (highly-centralized state). Types o f variation in post-imperial domestic structures Applying these points requires a modification of the above-formulated typology of domestic structures. Depending on degree of national identity strength, domestic society can be either nationalist or empire-oriented.7 7 Strong national identity produces relatively homogeneous societies mobilized around nationalist demands and policy agenda. Conversely, a weak sense of national identity leads to the emergence of pro imperial societies that are likely to be particularly sensitive to calls for political and economic reintegration with the former metropole. Lastly, a moderate degree of national identity is likely to produce a society that is considerably less certain about its future economic and political identification than the previous two societal types. In this society, a balance between those favoring nation building and those in favor of 7 7 For the sake of focusing discussion on national-identity based cleavages, I abstract from other social cleavages, such as those ethnically- and income-based ones. It is worth noting, however, that such homogeneity o f a society in sharing commitment to national independence does not exclude its heterogeneity in many other respects. A society, for example, can be mobilized around nationalists and yet divided along socio-economic lines. 58 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. maintaining the closest politico-economic relations with the former colony is likely to be generally maintained without prevalence on either side. To illustrate these theoretical expectations, I draw some examples from the post- Soviet region. It should be emphasized that these examples serve the purpose of nothing more than illustrating the above-formulated typology. Baltic people may present a relatively obvious example of homogeneous nationalist-oriented society. During the first years of their independence, they had relatively weak, low-centralized states due to the process of fundamental transformation in their political systems. Mass-based nationalist movements, such as Popular Fronts in Latvia and Estonia and Sajudis in Lithuania, were particularly active and won a majority of seats in the national legislatures. A new, nationalist-oriented elite came to power for conducting the policy which was outlined while in opposition to communist regime. The activists of nationalist-oriented movements have rapidly advanced to become prime-ministers and presidents. The policy networks, therefore, were primarily society-controlled. State, loosely speaking, can be considered low-concentrated, especially during 1990-92 when the main institutions of communist rule were in the process of their dismantling and new ones, such as a constitution and presidency, were only emerging. State power became more consolidated and concentrated as Baltics moved in the second half of the 78 1990s and stronger divisions between legislative and executive power emerged. 7 8 An example o f such divisions can be debates over citizenship laws in 1997-98 in Latvia, with parliament pushing for more discriminatory regulations vis-a-vis Russian speakers and president defending a more moderate version of the law. 59 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Belarus during 1992-94 can help to illustrate the “weak pro-imperial society/low-concentrated state” combination. Due to the weakness of nationalists, Belarus was much less persistent in its independence drive, and the dissolution of Soviet empire caught the republic by surprise. The parliament was dominated by conservative politicians whose mindsets were formed during the Soviet era. This was somewhat compensated for by Belarus’ first leader, Chairman of the Supreme Soviet Stanislav Shushkevich, whose personal political stance was that of centrism, or moderate nationalism. However, with no presidential authority established, Shushkevich lacked the ability to control a policy making process. In 1993, his efforts to develop Belarus’ institutions of independent statehood were opposed by the pro-empire-oriented Prime Minister Vyacheslau Kebich. With the support of the largest parliamentary faction, the conservative "Belarus" and the government under his control, Kebich was increasingly capable of challenging Shushkevich, making the overall policy making process ineffective and eventually leading to Shushkevich’s forced resignation in favor of active supporters of Belarus’ reintegration with Russia.7 9 Ukraine may serve as a relatively good illustration of the “polarized society/highly-centralized state” domestic structures. It falls in between Baltic states and Belarus in terms of degree of societal nationalist orientation. Nationalist movements such as Rukh were quite active during the Perestroika era and managed to secure nearly a third of the seats in the 1990 elections to the republican Supreme Soviet. 79 See, for example, Markus 1995a, 47. 60 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The nationalist ideas were eventually seized by the republic’s political leadership, although Ukrainian state has never been completely supportive of nationalist demands. The Ukrainian state proved to be much stronger as compared with that of Belarus during 1992-94. A Presidency was established considerably early, with the former Supreme Q f\ Soviet Chairman Leonid Kravchuk winning 62 percent of the vote in December 1991. Despite a number of ethnic tensions, the state building and the concentration of presidential authority in Ukraine have generally been successful.8 1 Foreign Economic Policy The final section spells out what this study means by foreign economic policy. It establishes the originality of the issue addressed, defines foreign economic policy goals and instruments, and applies the concept of foreign economic policy to the post communist nations. Foreign economic policy With some notable exceptions, previous studies of foreign economic policy overlooked the central question asked by this study. At least four bodies of EPE literature can be identified: studies of government preferences for protectionism or trade openness; studies of strategic trade and industrial policy; studies focusing on international economic orders and the reasons for their openness or closure; and, finally, studies of economic regionalism. Each is useful yet insufficient for answering the question addressed herein. 80 Motyl and Krawchenko 1997, 269. 8 1 Ibid, 258-59. 61 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Scholarship explaining government use of trade restrictions8 2 studies how government actions were designed to facilitate or, conversely, inhibit external flow of goods and services in general, from any country/group of countries. Building on this scholarship, my study proposes to further explore how governments facilitate or inhibit external trade with one country/group of countries at the expense of the other, not of the outside world in general. In addition, it goes beyond considering unilateral government policies, such as imposing trade restrictions, and looks at a broader set of actions relevant aimed at restructuring state economic activities, including negotiating bilateral and multilateral agreements. The studies which focus on strategic trade and industrial policy8 3 are also devoted to an essentially different subject. The issue here is national industrial competitiveness in the world of increasingly globalized economic relations and the extent to which government—by supporting temporary, potentially competitive industries and upgrading their resources and capabilities— should intervene in the process of domestic adjustments to international demands. Competitiveness can certainly matter for national ability to restructure the external trade from one region to another, but only indirectly and with the use of additional governmental efforts. The literature on openness/closure of international trade regimes8 4 explains the degree of international cooperation, particularly among advanced industrialized 82 Schattschneider 1935; Milner 1988; Lake 1988; Eichengreen 1989; Goldstein 1993; O'Halloran 1994. 8 3 Milner and Yoffie 1989; Richardson 1990; Porter 1990; Prestowitz 1992; Tyson 1992. 8 4 Krasner 1976; Ruggie 1982; Yarbrough and Yarbrough 1987; Grieco 1990; Gowa 1994. 62 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. countries. It is relevant for understanding domestic and systemic conditions favoring such cooperation, however much less so for understanding the reasons behind states’ decisions to restructure patterns of trade activity. The literature as a whole is about international cooperation—it does not study the formation of foreign economic policy at the national level. By focusing on international arrangements, it tends to disregard the fact that the attitudes of state-participants toward these arrangements are variables that should be studied on their own terms. Finally, there is a rapidly growing body of research devoted to the political economy of regionalism8 5 which asks the questions of international cooperation as they arise in distinct geographical contexts. In particular, scholars of regionalism are interested in learning about the reasons for the contemporary proliferation of regional arrangements in Europe, Latin America and Pacific Asia, as well as of diversity of various regions’ institutional forms and degrees of trade diversion rather than trade creation.8 6 However the question why some states participate in a regional arrangement while others do not has yet to be addressed by scholars of regionalism. The motivations behind states’ decisions to change or maintain their regional economic orientations still await of their systematic investigation. There are exceptions. Various foreign policy analyses, for example, addressed the research question asked by this study. Their answers, however, are rarely 85 See especially Frankel and Kahler 1993; Stalling 1995; Mols 1996; Mansfield and Milner 1997. 86 The formulation of trade diversion versus trade creation in the context o f studying the issue of economic regionalism goes back to Jakob Viner’s seminal work on customs unions (1950). 63 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. systematic. The question of foreign economic orientation is mentioned, but in a general security context, with no particular focus on it and without any attempt to generalize the results beyond small number of cases selected.8 7 The exception here is a Kal Holsti’s study published in a leading theoretical journal.8 8 The author selected post-war Japan and Finland for qualitative comparison of their policies of restructuring trade patterns for the purpose of generating the hypothesis that “the survival or autonomy of the O Q political community is a more fundamental value than economic maximization.” In the author’s account, the fact that Finland chose to trade with both the USSR and Western countries while Japan restructured substantial portion of its trade towards the United States reflects the two states’ preferences for military alliances and suggests that “governments seek both power and plenty; but when the two are incompatible, the former predominates, and commercial opportunities have to be managed in such a fashion as to enhance security concerns.”9 0 After generating an interesting hypothesis, however, the study has never been followed up with empirical research aiming at confirming, disconfirming or further developing it. The question of foreign economic orientation, therefore, remains insufficiently explored. My study attempts to investigate the issue further. It refers to foreign economic policy as state action aimed at shifting country’ s international economic activities from one country/group o f countries to another. As a result of such policy, a country is 8 7 See, for example, Burant 1995; Kulinich, 1995; Webber 1997. 8 8 Holsti 1986. 8 9 Ibid., 669. 9 0 Ibid., 645. 64 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. expected to increase its economic activities (trade, investment, financial capital, production) with a new country or group of countries at the cost of decreasing it with the old one, or vice-versa. By their very nature, state actions will thus be more favorable toward some countries and less favorable toward others. For the purposes of this study, I will focus mainly on state trade activities and exclude from consideration issues of redirecting investment, financial capital, labor movement and production patterns. Foreign economic policy, or policy of economic orientation, can vary from a relatively low to a relatively high degree of government support to deviation from a traditional pattern. The objectives of foreign economic policy can be achieved through a number of policy instruments. The instruments available to policy makers can take the form of unilateral as well as bilateral and multilateral actions providing the basis for a country’s increased economic cooperation with another country/group of countries at the expense of the third side. The following list of foreign economic policy tools is proposed in chart 3. Some of these instruments might be more important than others in accomplishing foreign economic reorientation. International economic agreements can vary in terms of fostering cooperation and integration among the signatories. Both bilateral and multilateral agreements can promote various levels of international cooperation and integration moving from removing tariff and non-tariff restrictions to trade in goods and services among states (free trade agreement), to accepting a common external tariff against 65 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Chart 3. M ain Foreign Economic Policy Instruments Unilateral actions Bilateral and multilateral Trade policy instruments On import side. 1. Import quotas. By imposing high quotas on imports from country A and low quotas on imports from country B, a state encourages B and discourages A to export, thereby redirecting its commercial activities from A to B. 2. Import subsidies. By subsidizing those who import from B and not those who import from A, a state contributes to redirecting its economic activities towards B. 3. Tariffs. By imposing high tariffs in trade with country A and low ones with country B, a state encourages B and discourages A to export, thereby redirecting its commercial activities from A to B. On export side. 4. Export quotas. By setting high quotas on exports to country A and low quotas on exports to country B, a state encourages trade with B and discourages trade with A. 5. Export subsidies. By subsidizing exporters to country A, but not to country B, a state contributes to redirecting its economic activities towards A and away from B. 6. Taxes. By setting higher export taxes in trade with country A than with country B, a state encourages trade with B and discourages trade with A. For example, by introducing VAT on exports to countries o f the former Soviet Union exclusively, a country contributes to redirecting its trade away from the former Soviet republics. Monetary instruments 7. Abandoning previously established currency regime and currency area. By abandoning previously established currency regime with country A, a country B makes financial transaction with A more complicated, thereby contributing to redirecting its economic activities away from A. An example might be an introduction o f national currency and leaving a previously existed common currency regime. 8. Setting more / less favorable prices for trading. Setting higher prices in imports from country A and lower on B ’s goods should contribute to economic reorientation towards B and away from A, others being equal. For example, by switching from relatively low regionally set prices and introducing a hard-currency only transactions with the previous economic partners, a country redirects its economic activities away from the old region and towards countries beyond it. 1. Negotiating quantity o f commodity supplies (barter). By negotiating supplies of goods with country A and not with country B, a state redirects its trade away from B and towards A. 2. Negotiating reduction o f import / export restrictions. By negotiating reduction o f trade restrictions with countries A and B, but not with C and D, a state increases its commercial activities with A and B at the expense o f trading with C and D. 3. Negotiating common external tariff that is higher than before. By negotiating common external tariff with countries A, B and C, a state increases its economic activities with A, B and C and against the rest o f the world. 4. Negotiating a regime for currency and payment cooperation. By setting mechanism of currency and payment coordination with countries A and B, a country increases its economic activities with A and B and against the rest of the world. 5. Negotiating reduction o f capital I labor movement restrictions. By reducing restrictions for capital I labor movement in relations with countries A and B, a country increases its economic activities with A and B and against the rest o f the world. 66 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. factors of production within the union (common market). In terms of market access and restructuring external economic activities, free trade/customs union/common market agreements, for example, are relatively more important than deal-specific types of agreements.9 1 Foreign economic policy can vary depending on state efforts to reorient a country’s economic activities. A variation in states’ external economic policies can be observed via the use of the above-considered policy instruments. This study proposes that a country, geographically located between country/group A and country/group B, will redirect its commercial activities toward A and away from B if it adopts all or substantial portion of the above-listed measures in a way preferential toward A and discriminatory toward B. More specifically, a country redirecting its commercial activities toward A and away from B may do some of the following: 1) set relatively low import quotas and tariffs in trade with A, and high with B; 2) offer subsidies to domestic producers in order to decrease trading barriers with country A set relatively lower import quotas in trade with A than with B; 3) set relatively high export quotas in trade with A, and low with B; 4) offer subsidies to exporters to A, but not to those to B; 5) set relatively low export taxes in trade with A, and high with B; 9 1 In addition to those listed above, there might be instruments aimed at encouraging or discouraging trade in services (banking, financial capital, foreign direct investment) with certain countries, regulating cross-border labor movement, or reorienting production structure away from one region and toward another. In principle, all o f them qualify for conducting policy o f restructuring economic activities and can therefore be included into the list o f foreign economic policy instruments. For the purposes of 67 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 6) abandon a previously established currency regime with A; 7) set relatively low prices for trading with A, and high with B; 8) negotiate barter supplies of goods with A, and not with B; 9) negotiate the reduction of trade restrictions with A, but not with B; 10) negotiate a common external tariff with A against B and the rest of the world; 11) negotiate a currency and payment regime with A, but not with B; and 12) negotiate a reduction of capital / labor movement restrictions in relations with A, but not with B. Foreign economic policies o f the post-Soviet nations How can the above-formulated propositions be applied to the ex-Soviet nations? In addressing the question, this section will emphasize objectives and instruments available to policy makers as well as suggest a way of observing varying economic policy outcomes in the former Soviet region. Before the Soviet collapse, the republics were forced to trade primarily with one another, rather than with countries outside of the Soviet borders.92 After the breakup, the fourteen newly-independent nations emerged to become international actors and, logically, faced some strategic options. First, a republic might have pursued a policy of restructuring away from the traditional area, Russia and the Commonwealth of Independent States (CIS). Second, it might have made all efforts to maintain the this study, however, I limit myself to the above-listed items relevant for restructuring foreign trade activities. 92 The share o f inter-republican trade comprised up to 85-90 percent o f the republics' total trade (Bradshaw 1993, 29.) 68 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. previously established economic ties at the expense of new partners beyond the ex- Soviet region. Finally, some intermediate strategies could have been advanced too, with measures aimed at diversifying a country’s previously heavily concentrated economic ties, but without the intent of breaking away from the traditional area of economic activities. Each of these policies or strategies requires certain policy instruments. In the former Soviet region, the following tools became particularly widely used for accomplishing the identified goals. These tools can be loosely structured as those minimizing economic ties with some partners at the expense of others; finding potential new partners and establishing necessary domestic institutions for switching trade toward new partners; and securing relations with new partners (see chart 4). Each of the three above-identified economic policy patterns can be found in the former Soviet region among the ex-Soviet republics. Some nations directed their economic activities primarily toward Russia and other former members of the Soviet state. They showed little desire to search for alternative trading partners and instead committed themselves to transforming the CIS into a regional economic union. Belarus, Kyrgizstan, and Kazakhstan can be seen as representative of the group. Other nations choose to become full-fledged members of the world economy and to find new, primarily Western partners. Despite being closely connected with 69 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Chart 4. The Ex-Soviet Republics: M ain Foreign Economic Policy Instruments For minimizing economic ties with A. 1. setting relatively high restrictions for import from A. 2. setting relatively high restrictions for export to A. 3. banning barter trade and abandoning previously established currency regime with A. 4. abstaining from entering preferential economic agreements with A as a participant. For establishing domestic institutions fo r market-oriented activities. 1. lifting trading quotas and restrictions 2. macroeconomic stabilization which includes liberalization of prices and establishment of foreign exchange system. For maximizing economic ties with B. 1. setting relatively low restrictions for imports from B. 2. setting relatively low restrictions for exports to B. 3. negotiating bilateral preferential agreements with B. 4. negotiating multilateral preferential agreement with B (but not A) as a participant. 5. negotiate barter and specific-deal arrangements with B. 70 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Russia and other ex-Soviet republics, and even economically dependent on them (oil and gas dependence on Russia is the most obvious aspect), these nations became the strongest proponents of economic reorientation away from traditional partners and toward new partners. The Baltic nations became the strongest proponents of this type of policy. By 1993-1994, Lithuania, Latvia, and Estonia had signed a number of trade agreements with northern European nations and established the necessary domestic institutions for launching successful market-oriented foreign economic activities. Finally, there were nations falling in between those two poles in terms of their foreign economic policies. The reorientation was seen by them as strategically important, but unfeasible in a short-term perspective. Accordingly, the policy course eventually chosen was that one of a ‘lesser evil’—cooperation with Russia and other CIS members while gradually preparing to become a competitive participant in the world economy. These nations maintained their relationship with Russia and the CIS and, while not committing themselves to the CIS as a customs union, they stressed the importance of good relations with Russia and other CIS members. Also unlike the Baltic nations, they were slow in establishing domestic economic institutions necessary for shifting their economic patterns toward Western countries. Ukraine, Azerbaijan, Turkmenistan, and some other nations may be seen as falling into this category. For the purpose of observing the republics’ policies and their outcomes, this study will look separately at their policies vis-a-vis Russia and the CIS, on the one hand, and countries beyond the ex-Soviet area, on the other. The objective basis for judgments about the extent of the ex-Soviet republics’ reorientation will be the amount 71 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of restrictions maintained by them in economic relations with the Russia/CIS pole and established as a result of negotiated bilateral and multilateral preferential agreements or unilateral governmental actions. Additionally, the study will consider the efforts undertaken by the ex-Soviet republics for establishing domestic institutions for conducting market-oriented activities. 72 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 3. LATVIA Latvia was one of the first of the ex-Soviet republics to choose to become a full- fledged member of the world economy and to find new, primarily Western, economic partners. Despite being closely connected with Russia and other ex-Soviet republics, even economically dependent on them (oil and gas dependence on Russia is the most obvious aspect), Latvia chose against entering Russia-dominated CIS or directing its trade towards Russia and CIS countries. Instead, by 1993-1994, Latvia, accompanied by other Baltic nations, designed an ambitious strategy to establish close economic relations with the Western European nations. As a result, by 1996 its trade with EU members comprised 47% of total trade, while its trade with Russia decreased from about half to only 21.5% (see table 3.2 at the end of this chapter). To understand the sources and the nature of Latvian economic policies, this chapter begins with the analysis of Latvian identity formation as reflected in its history. It then turns to the effects of the republic’s national identity on domestic politics and—through it—on international economic policies toward Russia and CIS states, on the one hand, and the nadons beyond the ex-Soviet region, on the other. National Identity National identity, as argued in the previous chapter, is a product of a country’s external and domestic history. This section reviews various historical factors that shaped Latvia’s national identity and helped to preserve it even under imperial rule. I argue that Latvian identity was formed around its experience with independent 73 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. statehood during the interwar period and that it is this experience that primarily, although not exclusively, accounts for the relatively high degree of strength of the country’s national identity. It is during this period that Latvia makes significant progress in internalizing the norm of sovereignty and identifying itself with European sovereign nations. Latvia’s other characteristics— relative stability of geopolitical borders, (sub)political institutions, economic cohesiveness, and cultural features— affected the acquired sense of identity in their own way serving as domestic filters transmitting the influence of the sovereignty norm. The experience with independent statehood and the persistent national memory When Mikhail Gorbachev came to power and initiated the policy of Perestroika, to Latvian nationalists the “point of departure” in their struggle for independence was “the fact of the existence of the Republic of Latvia, an independent state that had been demolished in 1940.”1 Indeed, unlike most of the ex-Soviet republics, Latvia was independent during the interwar period. It became independent in 1918, in the aftermath of the Russian Revolution. Before then, Latvia was for almost two centuries a province of the Russian empire. The cultural influences of Northern and Central European countries— most notably Germany and Sweden—that had previously ruled parts of Latvia2 persisted, however, and in the late 19th century it was in part those 1 See, for example, the conversation with Ilmar Latkovskis, a leader of the Movement for National Independence o f Latvia (Atmoda, 1989, 17 July, p. 5). The view was (and still is) widely shared in Latvian society (Personal interviews, Riga, May-June 1999). 2 Lieven 1993,44-46. 74 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. influences which gave rise to demands for autonomy within the empire. In November 1918, after the fall of the Russian empire, the Young Latvian Movement, Latvia's most active nationalist movement which promoted Latvian autonomy within the confines of the Russian empire, initiated the declaration of the independent Republic of Latvia. By 1922, despite armed resistance from the Bolsheviks and local Germans, the independent government of Latvia managed to win full control of the country. All attributes of nationhood, including international recognition, a constitution, an electoral system, the state's official language, and an independent foreign policy, were established.3 In August 1940, however, Latvia's, as well as Lithuania's and Estonia's, period of independence was also terminated following the signing of the Nazi-Soviet pact in August 1939. The pact’s secret protocols defined respective spheres of influence, with the Baltics falling within Moscow's area. Fifty years of colonial status led to dramatic changes in Latvia's domestic economy and composition of trade. Together with other nations, Latvia was remote from the decision-making process at the center and could hardly influence its policies at the regional level.4 The Soviet regime also did its best in pursuing policies of Russification and Sovietization. Mass deportation of Balts to Siberia and the large-scale influx of Slavs were examples of this policy. Yet the sense of a Latvian national identity was by no means eliminated. For Latvia, the twenty-year period proved to be sufficient to internalize the international norm of sovereign nationhood and develop a sense of its own national self. The flagrant 3 Misiunas and Taagepera 1993, 8-14; Lieven 1993, 54-74. 4 Prazauskas 1994, 160. 75 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. manner in which Latvia was incorporated into the USSR could not abolish the fact that it had developed an identification with European independent nations, and not with Russian empire (which it was a part of before the October Revolution). Consistent with identification theory, Latvia had absorbed a socially relevant knowledge and its meaning from its significant Other (European independent nations) and could only perceive the incorporation into the empire as a threat to its acquired identity. Not surprisingly, the incorporation caused many attempts at resistance to Soviet rule5 and only exacerbated the Latvian sense of “non-Russianness” or “non-Sovietness.” The irony, as one analyst observed, was that "the period of Soviet occupation strengthened nationalism among the Baltic people to a degree it never would have attained under independent political existence."6 For the Baltic peoples ... it is not only a fact that the inter-war years symbolize the fulfillment of their nationalist dream of self-determination. The brutal Communist regime after 1940 has made that period stand out in contrast as the golden era of freedom and progress... Rather than producing an identification with the Soviet state, fifty years of Russian Communist rule in the Baltic states had resulted in an identification with an almost mythical Europe. Russia and the Soviet Union came to stand for all things evil, Europe for everything that was good and worth striving for.7 There are many examples indicating Latvia’s resistance to Sovietization and Russification. For one, Latvia was relatively successful in resisting pressures of language Russification, a direct threat to its cultural identity. Despite the large influx of Russian speakers during the years of occupation, it did significantly better than 5 See Conquest 1986, 183-208; Muizniek 1997, 377-379. 6 Misiunas 1994, 94-95. Algimantas Prazauskas made a similar point (1994, 160). 7 Gemer and Hedlund 1993, 67-68. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Moldova, Ukraine and Belarus in preserving its own language.8 But perhaps even more telling are historical attempts of Latvians to restore the “historical justice” and to return the “freedom” from the empire. Two of those attempts deserve a special mention; they reflected the existing strength of national memory, but also contributed to it by the very fact of their existence. The first attempt came in 1941, with the outbreak of the World War II being used by Latvia, as well as Lithuania and Estonia, for the purpose of restoring independence from the Soviet empire. Two separate quasi-govemmental bodies, the Central Organizing Committee for Liberated Latvia and the Provisional State Council, were formed and tolerated by the newly-established German regime. At one point, Latvian politicians were ready to collaborate with the Nazis and proposed the formation of a Latvian army to fight the USSR in exchange for the establishment of a formally independent nation entity, albeit one with somewhat circumscribed sovereignty.9 In the aftermath of Stalin’s death, Latvians again tried to mobilize national sentiments and implement more independent economic and political policies using a period of the regime decentralization. Led by Eduards Berklavs, at the time Deputy Chairman of the Council of Ministers, Latvian authorities attempted to assert more control over the republic by slowing the influx of Slavic settlers, promoting native cadres, expanding the use of the Latvian language in the education system and in party affairs, and increasing republican autonomy in management of the economy. The 8 See data in Prazauskas 1994. 9 Misiunas and Taagepera 1993, 48, 67. 77 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. attempt was terminated in 1959, when Berklavs was charged with “bourgeois nationalism” and purged from the party and the country.1 0 Latvia’s interwar experience with independence in many ways thus determined how people of Latvia situated themselves vis-a-vis the empire, on the one hand, and the outside world, on the other. The period served as a basis for internalizing the sovereignty norm. More than twenty years of practicing independent domestic and foreign policies established a certain cultural context that could not have been destroyed by a forceful incorporation into the empire. Feelings of being culturally alien persisted and proved to be strong enough to generate powerful nationalist sentiments that were quickly mobilized with the decline of the empire. Other factors effecting Latvian identity The experience with independent nationhood, however important, was not the only factor affecting how strongly Latvians identified with their nation. To obtain a more complete picture of Latvia’s identity formation, one must look at how the externally imbued cultural meanings traveled domestically, particularly after Latvia had been subjected to the imperial rule. To do that, the nation’s domestic institutions— territorial, political, economic, and cultural— should also be considered. Some of these institutions strengthened Latvia’s identity while others weakened it. A detailed analysis 1 0 Trapans 1991, 29; Muiznieks 1997, 339. In addition, 2,000 other native Latvians were removed from positions o f higher responsibility, but the memory o f the event proved very much alive. In 1971, for example, a letter from seventeen Latvian old communists (who preferred to remain anonymous), addressed to several o f the world’s communist parties, not only openly defended Berklavs’ line but went further by vigorously denouncing Soviet policies in Latvia (Shtromas 1994, 100; Clemens 1991, 208). 78 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of these institutions’ evolution and effects on national identity formation would constitute the subject of a separate study; for our purposes, a brief review will suffice. As an ethnic group, Latvians have had relatively stable geopolitical borders since the 18th century. Two events essentially contributed to the emergence of “territorial Latvia.” In the early 18th century, the south-western part of Latvia was annexed by Russia as a result of Peter the Great’s victory over the Swedish army, and in 1773 eastern Latvia was also incorporated into the Russian empire.1 1 Since then, for over two hundred years Latvia’s territorial borders remained generally unchanged,1 2 creating a sense of territorial belongingness and distinctiveness. Latvia was much less lucky in preserving its political institutions. During the interwar years, Latvia made a considerable progress in developing its own political institutions: constitution, national government, political parties. The incorporation into the Soviet empire, however, meant a break point in Latvia’s political institution- building. Its national institutions were replaced with those typical of the Soviet regime. Moscow imposed its control over foreign and domestic affairs through the Communist party networks. Yet, as significant setback as it was, Soviet rule did leave some room for preserving Latvia’s institutional autonomy. Soviet federalism gave privileges to 1 7 ethnic Latvians, and quasi-political institutions (republican governments, Supreme 1 1 Although the Baltic German nobility o f western central Latvia continued to enjoy considerable economic and cultural autonomy and a special relationship with St Petersburg at this time (Smith 1996, 148). 1 2 The exception was a part o f the Abrene district in the northeast, about 2 percent o f the pre-war territory and population (Misiunas and Taagepera 1993, 74, xvi; Sergounin 1998, 49). 1 3 Gleason 1990; Roeder 1991. 79 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Soviets, flags, etc.) helped to maintain in the republic a sense of a quasi-state unit, thereby providing an institutional room for preserving Latvia’s national memory. Economic development was another important factor affecting Latvia’s national identity formation. It played a paradoxical role, however. On the one hand, the fact that Latvia was one of the most urbanized and industrialized republics in the USSR helped to transform the society into a more cohesive and uniform national entity. On the other hand, economic modernization in Latvia undoubtedly undermined its ethnic identity, as it was largely designed by Moscow planners, without any respect to its ethnic composition and with the use of extensive influx of ethnic Russians.1 4 The latter leads us to yet another potentially important factor in formation of Latvia’s sense of unity/distinctness, its ethnic and religious composition. The large influx of Russians, the “imperialists,” has negatively affected Latvia’s sense of national unity. In 1991, ethnic Latvians comprised only 52.5 percent of the population, while34 percent were ethnic Russians (see table 3.1 the end of this chapter).1 5 It is no accident that Russians, by and large, decided against participation in Latvian nationalist organizations and instead preferred either to stay neutral or even add their support to empire-saving voices. A poll taken in late 1988 indicated, for example, that 48 percent 1 4 Hiden and Salmon 1994, 126. The Moscow-designed industrialization meant the emergence o f many defense-related plants in the Latvian economy (Personal interview with a head of department at Latvia’s Privatization Agency, Riga, June I, 1999). 1 5 This ethnic composition contrasts with that one of the interwar time. In 1935, for example, Latvians and Russians accounted for 77 and 8.8 percent, respectively (Krickus 1993, 30). In terms of religion, Lutheran confession prevails in Latvia, with a significant minority o f Catholic background. Yet, again, this only accounts for the non-Russian population. The local branches o f Russian Orthodox Church constitute another source of religious influence, having a significant effect on the cultural and political attitudes o f the local Russian population (Dawisha and Parrott 1994, 110). 80 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of Russians in Latvia believed there was a need for Interfront, an empire-saving organization, compared to a mere 6 percent of Latvians.1 6 To summarize, Latvia’s national identity was built around its experience with independence during the interwar period. By the time of its incorporation into the Soviet empire, the people of Latvia had already acquired a coherent sense of being different. It was unified and distinct as an independent nation, with clear territorial borders, strong political institutions and, at the time, a relatively homogenous ethnic population. Furthermore, its close geographic proximity to Europe and historically extensive foreign ties with European and particularly North European countries created a distinct dynamic of external identification with Europe rather than with Russia. The experience of being part of the USSR in some ways undermined, but in others strengthened, a sense of distinctness among the people of Latvia. By the time of Gorbachev’s Perestroika, these feelings of distinctness and alienation from the empire were vastly exacerbated by Latvia’s perceived economic backwardness relative to Sweden and Finland, countries that before World War II were at a relatively similar level of development.1 7 The strength of Latvia’s national identity helps to illuminate the domestic political dynamics of Latvia in the late 20th century, and in particular how and why nationalists managed gain control over the policy making process. 1 6 Clemens 1991, 170. 1 7 The “point o f reference for the Balts was not that Ukrainians, Jews, Kazakhs and even Russians have also suffered under Communist rule, and that democratization o f the USSR within its established boundaries could be a solution to their problems. The perceptual framework o f the Balts was instead patterned on what they know about the conditions in the pre-war independent Baltic states, and in contemporary Sweden and Finland” (Gemer and Hedlund 1993, 67). 81 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Domestic Structures In Latvia, nationalist-oriented movements proved themselves to be capable of mobilizing the society and eventually gaining control over the policy making process. In contrast, the empire savers had relatively weak social support and little ability to influence policy making. This section offers a framework for understanding how the energy of Latvia’s national identity found its expression in the domestic political arena, in the struggle of political forces with diverse policy agendas. Before nationalists came to power and began implementing their foreign economic policy vision, they had had to mobilize the society and defeat the empire-savers in the domestic struggle. Society Following the above-constructed framework (see chapter 2), Latvia’s late-20th century society can be seen as composed of two main groups, each with distinct political orientations: the nationalists and the empire-savers. Nationalists Nationalist-oriented movements, or the movements committed to Latvia’s full-fledged independence from the USSR, started to emerge in Latvia in 1988, when Moscow-initiated reforms were well under way and an unofficial grass-roots activism had gained prominence.1 8 Two major organizations were established, the National Independence Movement and the Popular Front.1 9 The more radical Independence Movement immediately pronounced the restoration of the independence of the Republic of Latvia founded in 1918, thereby making itself the target of attacks by 1 8 Dreifelds 1989, 79-87; Muiznieks 1997, 382. 1 9 For a more detailed analysis o f Latvia’s popular movements, see Trapans 1991. 82 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. hard-line Communist and the Soviet press.2 0 The Popular Front was established a few months later than the Independence Movement, and with more modest goals. Its first program spoke of “sovereignty” for the Latvian Soviet Socialist Republic rather than the restoration of the independent Republic of Latvia.2 1 The variation in pursued goals stemmed in part from the two movements’ social bases. While the Independence Movement was formed by people who had previously worked in the political underground,2 2 the Popular Front was more mainstream and had a strong support among the Party members. Symptomatically, on October 1988, when the Front emerged, one- third of the delegates of its founding congress were members of the Communist Party.2 3 The fact that Latvian nationalism emerged relatively early and pursued a relatively bold agenda(when compared with other non-Baltic republics) had a lot to do with support given to it by society during the Soviet era. In one way or another, various social stratums were supportive of broadly defined nationalist goals. In the words of historians, dissent—disagreement with or opposition to the system—was, almost by definition, endemic within the Baltic republics... A whole spectrum of individuals, encompassing a major portion of the Baltic populations, could be characterized as falling within this group, and their general goal was shared by, among others, passive nationalists seeking to preserve and maximize the national forms of the Soviet system, members of the intelligentsia striving to enrich the national cultures and thus make them attractive and immune to 20 Karklins 1994, 75. 2 1 For the first program o f the popular Front of Latvia, see Sovetskaia Latvia, 19 October 1988. 22 Its leader Eduards Berklavs was charged with “bourgeois nationalism” for attempts to reassert Latvian control in the aftermath o f Stalin’s death and subsequently expelled from the Party (Trapans 1991, 29). 2 3 Muiznieks 1997, 386. 83 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. denationalization, and even some national Communists. All seemed to be striving for an improvement within the system.2 4 Gorbachev’s Perestroika became a great opportunity for nationalist-oriented movements. Many of them viewed the 20th century as the “age of decolonization” and thus as strong evidence in the case against the continued existence of empires, including the Soviet one. One of the first nationalist activities was the organization in August 1987of mass demonstrations on the anniversary of the Nazi-Soviet pact. In two years, the Popular Fronts of the Baltic republics arranged the "Baltic chain" as a symbol of protest against the pact, which led to the long-awaited official Soviet acknowledgment of the existence of the secret protocols.2 6 In October 1989, the Popular Front declared the goal of "complete independence"2 7 and, in March 1990, nationalist movements achieved victory in the elections to the Latvian parliament, winning about 70 percent of the seats.2 8 It was a clear sign that, as one of the Popular Front’s leaders said, “the demands for independence is not confined to extremists, but is shared by the majority.”2 9 Not only were the nationalists able to influence the policy making process, but after 1990 it was they who were actually determining the policy agenda. As a result of 2 4 Misiunas and Taagepera 1993, 250; see also Shtromas 1994 on this point. 2 5 See, for example, the article by Ianis Rukshans, “Is there an alternative to Latvia’s independence?,” which develops the argument about the inevitability of imperial disintegration due to the effect o f the world-wide spread o f the decolonization norm (Atmoda, 1989, 21 August, p. 5). 2 6 Vares 1995, 167. 2 7 Plan to Achieve Latvian Independence 1990. 2 8 Muiznieks 1997,400. 2 9 Clemens 1991,212. 84 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. the growing popularity of nationalist ideas, nationalist-oriented politicians dominated the national legislature. Ivars Godmanis, one of the People’s Front leaders, was appointed Prime Minister, with 131 deputies voting for him, forty-six against and six abstaining.3 1 This put the nationalists in the control of the executive process, as well. Subsequent referendum and nation-wide elections generally confirmed the notion that all the mainstream forces in the society shared the values o f national independence. Although with the beginning of painful economic reforms popular support for nationalist-oriented groups declined somewhat, nationalist ideas became institutionalized, thereby preserving their fundamental importance in the policy making process. Empire savers As a reaction to nationalist activities, the movements supporting Latvia’s colonial status within the empire, or the empire-saving movements, emerged. In January 1989, a Russian-dominated Internationalist Front of the Workers of the Latvian SSR (Interfront) was established with the agenda of upholding the leading role of the Communist party' and protecting the Russian-speaking community from the ethnic claims of Latvian nationalists.3 2 The main support for the movement came from hard line forces in Moscow, conservative Communist party members, retired military 30 Both the National Independence Movement and, especially, the Popular Front acquired large memberships as early as 1989. The number o f registered members o f the Independence Movement grew from 600 in late July 1988 to over 11,000 by November 1989. And the Popular Front, at the time, claimed a membership o f 250,000 people, almost one-tenth o f the country’s total population (Karklins 1994, 75; Clemens 1991, 204). 3 1 Latvian Information Bulletin, “Ivars Godmanis - New Latvian Prime Minister,” 1990, June, 3. Another example was the appointment o f Einars Repse, a prominent activist of the People Front, as Head o f the Bank o f Latvia. 85 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. officers, and workers and managers in the military-industrial complex.3 3 The Interfront also maintained ties with the leaders of the Baltic Military District, the KGB, the pro- Soviet parts of the Ministry of Interior and the Prosecutor’s Office,3 4 and—not surprisingly—shortly after its appearance, it became a center of resistance to Latvian independence. Unlike nationalist movements, however, the Interfront enjoyed little popularity in Latvian society. Even ethnic Russians, allegedly the empire savers’ main pillar, were far from enthusiastic about supporting the Interfront. During the March 1991 referendum on the issue of independence, 74 percent voted in favor, implying that from 38 to 45 percent of Russians supported independence, apparently with the belief that it would bring prosperity.3 5 The turnout at demonstrations in support of the Interfront’s goals was typically low, and “most of activities of the pro-Soviet forces were organized by traditional Soviet power holders rather than by participants themselves.”3 6 It was these Soviet power holders, such as Minister of International Affairs Boris Pugo in Moscow and a leader of the Interfront colonel Viktor Alksnis in Riga, who were standing behind the National Salvation Committee during the anti-independence coup attempts in January and August 1991.3 7 Accordingly, with the disintegration of the 32 For the text of the Interfront’s Declaration adopted at its constituent congress, see Declaration 1989. 3 3 Karklins 1994, 104; Muiznieks 1997, 386. 34 Gemer and Hedlund 1993, 113. 3 5 ElU CP 1994-1995, 25; Muiznieks 1997, 391. 3 6 Karklins 1994, 104. 3 7 Ibid. 86 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. USSR, Interfronts in Latvia and other Baltic republics had effectively lost most of their organizational resources. As a result, influence of the empire savers’ policy continued to decline. The institutional channels could have hardly be mobilized, with centrist and nationalist party representatives dominating the national legislature and executive bodies. Since 1994, a new Latvian Socialist Party claimed to reflect the interests of the Latvian Russian population, which had only six members in the parliament (6 percent of the seats) and claimed a membership of about 1000 people. Another leftist party, the National Harmony, received 13 percent of the vote and, accordingly, elected 13 members to the Saeima.3 8 State The institutional structure of Latvia’s state was defined by nationalists with their rise to power in 1990. Until the nation-wide election of the President, the state, while possessing policy making tools, was relatively low-centralized. The state was legitimate, and it owed the legitimacy essentially to the popularity of the nationalists. Degree o f centralization At this time, Latvia’s state was relatively low centralized when compared with many other presidential democracies in the former Soviet region. After achieving the independence, Latvians adopted what an expert called “the extremely egalitarian” constitution of the 1922. According to the constitution, the head of state was to be elected by the parliament, and his government 3 8 Plakans 1997, 276-79. 87 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. lacked any veto against parliamentary decisions. Parliament fixed the budget, •7 Q confirmed the cabinet, and fixed the strength of the armed forces in peace and war. The parliament was therefore the “core institution” whereas the president—before the Guntis Ulmanis’s election in 1993, at least4 0 —was assigned an essentially ceremonial role 4 1 Paradoxically, for those supporting a strong presidency as an optimal institution for conducting economic reforms, Latvia’s low centralized state, with the parliament providing the political basis of reforms, proved to be highly successful. This implies that, under certain conditions, a “strong executive does not necessarily guarantee a more coherent and determined implementation of the first phase of economic reforms.”42 Legitimacy One of those conditions is, of course, legitimacy, or a high level of public trust in the executive power. Such a level of trust assumes that the executive power is created by a society with a relatively homogeneous system of policy preferences. Various studies suggest that, at least during its first years, Latvia’s executive bodies were, indeed, highly legitimate. The extremely high level of mobilization during the confrontation with the old system produced a parliament with relatively homogeneous policy preferences in favor of national independence, with about 80 percent of deputies either members of the Latvian Popular Front and the National Independence Movement, or those sympathetic to these two nationalist movements. Predictably, after being elected the Supreme Soviet passed a resolution 3 9 Hope 1994, 48-49. 40 Ulmanis was seen by some analysts as seemingly desiring to enhance the role o f the presidency (Nprgaard et al. 1996,70). 4 1 Ibid., 70. 88 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. stating as the ultimate goal of its work the eventual achievement of full independence and confirmed the cabinet committed to the accomplishment of this goal.4 3 Although the government’s legitimacy declined soon after its confirmation, mainly because of pressing issues of the economic and ethnic situation,4 4 the rating of confidence in presidency remained at a consistendy high level.4 5 As a result of the combination “homogeneous society—low centralized state,” the policy making process in Latvia may be characterized as society-dominated. Changes came primarily as a result of national elections through which the society, mobilized by nationalist movements, gained comparatively easy access to the decision making process. The idea of gaining genuine independence from the disintegrating empire preoccupied the minds of Latvian politicians, and it was hardly surprising that after the nationalists’ victory in the 1990 elections, Latvia pursued even more aggressive policies towards assuming control over its domestic and foreign affairs. It terminated the "leading role" of the Communist Party. The 1940 annexation of Latvia by the Soviet Union was declared illegal by the Latvian parliament; the constitution of 1922 was reinstated, and so was the official name of the republic—the Republic of Latvia. All these taken together provided nationalists with an institutional basis for advancing a policy of economic reorientation away from the metropole. 42 Ibid., 223. 4 3 Plakans 1997, 256; RFE/RL Daily Report, “Latvia Reaffirms Independence,” 1991, August 22. 4 4 In addition, the government was severely undermined by allegations that three of its members had links with the KGB (Krickus 1993; Bungs 1994; EIU CP 1994-1995, 27). 4 5 N0rgaard et al. 1996, 107. 89 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Foreign Economic Strategy Logically, a policy of economic restructuring assumes accomplishing three tasks: 1) minimizing economic ties with old partners; 2) finding potential new partners and establishing necessary domestic institutions for switching economic activities towards new partners; and 3) signing economic agreements, both bilateral and multilateral, with new partners. A policy of economic restructuring is observable in each of these three dimensions. The following section traces in greater detail Latvia’s economic policies from 1991 to 1996 along these dimensions. Russian pole This section considers Latvia’s foreign economic strategy along two of the following lines. First, I consider Latvia’s attitude toward multilateral economic institutions with Russia as a participant, most prominently the CIS. Second, I analyze Latvian bilateral policies with respect to Russia. Specifically, I focus on Latvia’s decision to introduce national currency and on its trade policy vis-a-vis the ex- metropole. The “economic autonomy” and economic independence drive Latvia’s attitude toward multilateral arrangements in place of the USSR was clearly demonstrated by its active participation in the so-called “economic autonomy” effort during 1988-1990. Latvia’s nationalists sided firmly with their Estonian and 90 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Lithuanian counterparts in demands, at first, for more “economic sovereignty,” and in late 1989 for “full economic and political independence” within the USSR.4 6 The “economic autonomy” program was originally drafted by a group of Estonian politicians and economists in a wish to seize the momentum of Gorbachev’s Perestroika and to transform the Soviet federation into a system with more rights for non-Russian republics, particularly for the three Baltic nations. In late 1987 some basic first principles were drawn up for a program of Estonian economic autonomy within the USSR. It is worth quoting those principles at length, both because they constituted the core of the program and because, within about a year, they were embraced by Latvia in its economic claims 4 7 Although the program never had a chance to be actually implemented, its principles, in an important way, highlighted the general philosophy underlying Latvian further policy making in economic affairs. The following nine points constituted the basis for the program: 1. The law of value and the commodity-money relationship form the basis for steering and planning the economy. 2. Economic institutions and enterprises on Estonian territory should be under Estonian control. 3. Trade with the other Soviet republics should be based on market principles and on direct relations between producer and consumer. 4. A convertible ruble should be established as an international currency and form the basis for economic relations with enterprises and economic institutions in other parts of the Soviet Union. 5. The republic as a whole accepts its share of the burden of the Soviet budget, as it is determined by the all-Union Supreme Soviet, but separates its own local budget from that of the Union. 46 Clemens 1991, 107, 206. Latvian Information Bulletin, “Plan to Achieve Latvian Independence,” 1990 (January), 4-5. 47 Gemer and Hedlund 1993, 87. 91 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 6. There is to be complete economic self-determination in the whole republic, in all economic spheres. 7. Economic pluralism ensures competition between producers, in the best interest of the consumers, and promotes different forms of economic organization. 8. Labor mobility between Estonia and other parts of the union is controlled by special mles, designed to achieve a rational use of labor resources. 9. Steering is based on economic principles, with independent enterprises, and controlling bureaucracies are abolished.4 8 The program’s leitmotif was that of autonomy, the meaning of which had nothing to do with special economic zones within the USSR.49 Such arrangements, the authors argued, would only perpetuate Russia’s domination over the Baltics. Instead, autonomy was supposed to save the republics from the status of “exploited colonies.”5 0 It required that the republics have the right to enter into various economic arrangements with foreign firms without consulting Moscow. In June 1988 the program was echoed in the resolution adopted by the extended Plenum of the Latvian SSR Writers’ Union, the organization that later gave birth to the Popular Front.5 1 And in September of the same year, following the program, the state planning (Gosplan) directors of Estonia, Latvia, Lithuania joindy demanded that the republics have exclusive control over republic property and the right to decide all issues of economic development, price formation, taxation, wages, and economic incentives.5 2 4 8 Ibid., 78-79. 4 9 Clemens 1991; Smith 1996. 5 0 The perception that Latvia, as well as other Baltic republics, had been exploited by Russia and some other republics was short o f scientific evaluations, but nonetheless widely shared by mainstream politicians. A number o f policy makers, including those strongly favoring Latvia’s independence, expressed their frustration with the lack o f professional discussion o f the economic aspects of independence (Personal interviews, Riga, June 1999). 5 1 Penikis 1996, 269-70. 5 2 Clemens 1991, 138. 92 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The center’s reaction to the republics’ economic autonomy drive was that of limited acceptance of their demands. In part this coincided with Gorbachev’s own plans to reorganize the Soviet federation, pushing him toward defining these plans in a clear way. Moscow’s responses— first, the March 1989 draft program on republican autonomy by the USSR Council of Ministers and then the November 1989 USSR Law on Economic Autonomy of the Lithuanian, Latvian and Estonian Socialist Republics5 3 —were, however, inadequate. The crucial issues, such as the treatment of property rights in land and natural resources and in the ‘all-Union’ systems, were not decided; many formulations were vague, and the price control and supply system remained in Moscow’s hands.54 In words of an observer, “the Balts cannot obtain economic sovereignty through these reforms, which promise no more than a kind of semi-autonomy. This will not satisfy them, to put it mildly.”5 5 The events which followed proved the accuracy of this observation. The center’s suggested reforms were met with increased efforts to establish economic and political bases of the republics’ independence. In August 1989 the leaders of Popular Front of Latvia stated the goal of total economic independence, not just economic self- financing, the significance of which was predicated by the fact that at the time the Front largely determined “the current political situation in the republic.”5 6 Anticipating the difficulties of further negotiations with Moscow, Latvian academics begun a discussion 5 3 For detailed analyses o f those documents, see Tedstrom 1989; Bond and Sager 1990. 5 4 Tedstrom 1989, 8; Trapans 1991, Bradshaw et al. 1994, 169; Hiden and Salmon 1994, 170. For the reactions of the Popular Front activists, see Atmoda, 1989, 17 July and 31 July. 5 5 Trapans 1991,98. 93 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of Latvia’s economic survivability “under emergency conditions.” Sensing the possibility of Moscow ordering an economic blockade against Latvia the day after “Latvia has acquired full independence,” they nonetheless urged policy makers to continue the independence drive as a way to eventual salvation.5 7 Latvia’s empire savers responded with severe criticism of the Popular Front recommendations and projections. A Latvian Communist, a military officer and a leader of the Interfront, Viktor Alksnis, for example, made a case for republic economic inter-dependence arguing that A nationalist mind is being placed beneath perestroika essentially negating the development of the republic within the USSR... [Latvia was] producing expensive industrial output from cheap raw materials essentially through the heavy labor of Uzbek children and women. But what if our egocentrism permeates to Tyumen, which supplies us with oil and gas for next to nothing, what if it also raises the question of bringing [oil] prices in line with world prices?5 8 Apart from Moscow, however, the empire savers’ voices were weak, and the republic doubled its efforts along the chosen path. Even the actual attempts by Moscow to impose an economic blockade against the neighboring Lithuania and Estonia5 9 and subsequent Moscow-orchestrated military coups in Latvia and Lithuania of January 56 Clemens 1991,208. 57 Ibid., 209. The issue sparked a major debate between the Popular Front and its supporters, on the one hand, and those committed to economic autonomy within the Soviet Union, on the other. The former were writing for the newspaper Atomoda, the latter, such as prominent economist Sergei Dimanis, mainly for the newspaper Sovietskaia Molodiezh ’ (Personal interview with an economist and leader o f the faction Equal Rights o f Latvian parliament, Riga, June 1999). 5 8 Ibid., 207. The point on world prices was also made by policy makers in Moscow. For example, in early 1990 Gorbachev, in his appeal to the three Baltic republics, said, “You get independence and switch to world prices, and you’ll end up in the soup.” Various calculations demonstrated the validity of the point (See, for example, Hanson 1990) 59 Hiden and Salmon 1994, 170-77. 94 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 19916 0 could not have stopped Latvia and other Baltic nations from pursuing an independence path. Against the expectations of Russia, such attempts only strengthened Latvia’s reorientation drive.6 1 The CIS stance Unlike many other republics, Latvia was explicit about its intentions not to participate in drafting a new Union treaty, the Gorbachev-initiated attempt to preserve the unity of the increasingly diverse republics. While sending an observer to forums discussing such a treaty, the Latvian government adopted a special declaration to prevent any attempts of involving the republic in the process of drafting a treaty. The declaration stated that, because of Latvia’s May 4, 1990 declaration of independence, the government would neither take part in the drafting of the Union treaty, nor sign any treaties that did not recognize the May 4 declaration. Latvian policy makers were convinced that, as deputy chairman of the Supreme Council of Latvia and observer in a meeting of the Federation Council Andrejs Krastins said, “judging from Gorbachev, the new treaty will be a facade behind which the unitary system of government will be AO strengthened.” “ By the time the CIS came into existence and replaced the Soviet Union in December 1991, Latvia was already on the fast track of distancing itself from Moscow. 60 Lieven 1993, 244-54; Gemer and Hedlund 1993, 147-52. 6 1 Given the perception o f Latvia’s insecurity vis-a-vis the ex-metropole, Russia’s economic coercion could have hardly led to anything but feelings o f further alienation among Latvian policy makers and politicians. Ironically, Russia in its own way greatly contributed to the formation o f Latvia’s reorientation policy (Personal interviews with a head o f department at Latvia’s Privatization agency and a senior specialist at the Bank o f Latvia, Riga, June 1999). 95 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. After the bloody clash with Moscow in January 1991, Latvian voters voted overwhelmingly (73.7%) for independence in the March referendum of the same year, and the nationalists’ efforts to minimize ties with Moscow were considered to be both necessary and legitimate. It was hardly surprising to anyone when Latvia and other Baltic nations decided against joining the CIS, despite the invitations of the new Russian regime. As Latvian Prime Minister Ivars Godmanis said, “our membership in a Union of any type if excluded. We could only conclude a specific agreement with an economic union as a whole, of course, if it is created.” Instead of entering multilateral arrangements in place of the former USSR, Latvia would aim to join the European Community, its leaders said.6 3 Politically, this became evident in the exercise of control over Latvia's borders and the replacement of old Soviet passports with Latvian ones. In addition, Latvia was the second of the Baltic republics (after Estonia) to introduce a visa requirement for CIS’ citizens.6 4 On the domestic scene, the fear of maintaining ties with the CIS and Russia resulted in a discriminatory citizenship policy towards those Russians that happened to reside in Latvia.6 5 Economically, Latvia's response to the formation of the CIS was a decision to deal with CIS members on a strictly bilateral basis and not to engage in any collective 62 Latvian Information Bulletin, “Latvia Rejects Participation in Drafting o f New Union Treaty,” 1990 (October), 3; Clemens 1991, 213. 6 3 RFE/RL Daily Report, “Latvia Will Not Join Soviet Economic Union,” 1991, October 10; Moscow BALTFAX, “Godmanis: W e Will Only Join Economic Union,” in FBIS-SOV-91-191, 2 October, 1991, p. 57-58. 64 Misiunas 1994, 104. 96 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. arrangements. One form of this came through bilateral Most Favored Nation (MFN) agreements. During 1992 Latvia concluded MFN agreements with a number of former Soviet countries, establishing lower import tariffs for Latvian goods, excluding agriculture. The other form of bilateral dealings with CIS members was in barter agreements that served to compensate for the sharp decline of trade among them, partially the result of their messy transition to new currency systems.6 6 Bound by economic needs and a deep level of integration into the economy of the former USSR, Latvia could not simply turn its back on the ex-Soviet republics. But proposals for searching for solutions to economic problems on a cooperative basis6 7 were not acceptable for Latvian policy makers either. The prevailing mood was that dealings with the former Soviet republics—members of the CIS—should be treated as a temporary solution, that by no means could it be considered the best solution, but rather a necessary "evil" of Latvia's transition away from Russia's authoritarianism and socialism and towards Western freedom and capitalism. The fact that Russia was also moving away from capitalism and authoritarianism was viewed by many Baltic politicians as something potentially problematic and unnatural for Russia that would eventually lead to total breakdown in the east. Thus, the primary task of Latvia, as well as other Baltic nations, “was to sever as many links [with Russia] as possible so as not 6 5 See Barrington 1995,738-39; Krickus 1993, 29-34; Gimius 1993, 33. 6 6 For example, in 1994 barter agreements were signed with the Central Asian republics (EIU, Quarterly Economic Report 1995, 1, 30). 67 Many analysts suggested that the Baltics would benefit from participation in some kind o f economic union among the former republics. One example was a proposal to create a "clearing 97 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. to be dragged into the maelstrom.”68 Dealings with Russia and other CIS members on a bilateral basis seemed to be a compromise acceptable to Latvian politicians. Currency cooperation with Russia In Baltic nations, national currency was overwhelmingly given special consideration among many other attributes of national sovereignty. In Anatol Lieven’s words, no symbol of independence was more ardently desired in the period 1990-92 than the restoration of the pre-1940 Baltic currencies. It was believed that these would bring economic miracles, and politicians, like prophets, repeatedly promised the Appearance of the Kroon, the Litas and the Lat, and anathematized each other when it failed to materialize.6 9 Captured by the ‘economic autonomy’ ideas, politicians and policy makers viewed currency independence as a prerequisite for gaining distance from Russia and other traditional economic partners.7 0 In the early 1990s the ideational rationale for introducing national currencies was reinforced by pressing economic considerations. As a result of Moscow’s short-term economic embargo in 1990,7 1 Latvia was experiencing the deficit of goods and products outlets. Accompanied by deteriorating economic and political conditions in the rest of the former USSR, this produced rapidly growing inflation in Latvia and other Baltic arrangement or payment union" among them (See Schroeder 1992, 561; similar thoughts were expressed in Nyberg 1993 and Bronstein 1993). 6 8 Misiunas 1994, 103-104. 6 9 Lieven 1993, 355. 70 Shen 1994, 58. The goal o f establishing Latvia’s own convertible currency was first stated explicitly by the Popular Front o f Latvia’s second congress held on October 9, 1989 (Plan to Achieve Latvian Independence 1990,4). 7 1 Shen 1994, 55; Shteinbuka 1993, 494. The embargo was especially severe in Lithuania and lasted for about two months, from the middle o f April until the end of June (Senn 1997, 358). Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. nations (see table 3.2 at the end of the chapter). Tight monetary policy might have allowed policy makers to reduce inflationary pressures, but the Latvian government had no control of its monetary policy and was entirely dependent on the use of the ruble as a medium of exchange. Latvia and the other Baltic nations faced a tough dilemma. To be sure, it was becoming increasingly less sensible to continue staying in the ruble zone given the above-listed developments. At the same time, breaking with the ruble might have led to a number of negative consequences, one of the most important of which would have been an inevitable decline in trade activities with the former Soviet region. " Latvia’s trade with Russia and other republics comprised up to 90 percent of its total trade before the Soviet disintegration, making many players inside and outside the country worried about the consequences of currency reform. Inside the country, opposition came from leaders of industry terrified that the reform would cut them of the required supplies from the rest of the former USSR. Latvian leaders themselves were aware of problems the currency introduction might have brought with it.7 3 Outside, the IMF and World Bank, for example, were highly skeptical of the value of an early introduction of national currencies, and warned in particular against breaking links to markets in the East.74 Under these conditions, in May 1992, the Latvian leadership made a compromise decision by introducing a provisional currency, the Latvian ruble. Latvian 72 Other difficulties with implementing currency reform are listed in Shteinbuka 1993, 495. 7 3 Moscow TASS, “Economic Confrontation With Russia Seen,” in FBIS-SOV-91-209, 29 October 1991,42. 7 4 Lieven 1993, 356-357; Krasts 1998, 31. 99 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. rubles coexisted with Russian rubles as legal tender, and—due a series of liberal policy measures7 5 —were accepted and preferred to the Russian rubles by Latvians. As early as late July, all the negative inflationary influences from Russia and other republics were repressed, and the Latvian ruble became the sole legal tender within the Latvian market. Originally pegged at a 1:1 rate, by the mid-1993 one Latvian ruble could have bought as many as five Russian rubles.7 6 This strengthening of Latvian currency undoubtedly reinforced Latvia’s general reorientation drive, as Latvian goods were becoming increasingly less competitive on Russian markets.7 7 Finally, in October 1993, the Latvian ruble was replaced with Latvia’s own currency, the lats. The currency reform was thus successfully implemented, despite some domestic and outside opposition to it. Nationalist beliefs constituted the ideational environment in which the reform could have been carried out: “Monetary independence...meant freedom from Moscow’s rule and a natural part of shedding the Soviet identity and ‘returning to Europe.’”7 8 Reinforced by immediate economic concerns, such as the necessity to cope with growing inflation, those beliefs worked against the option of staying in the ruble zone. For example, the political roots of the Latvian State Bank chairman Einars Repse were on the radical nationalist side of politics, helping to adopt the tight money policy dictated by the IMF and to resist pressures from Russian 7 5 Shen listed six policy measures to boast the Latvian ruble’s confidence. 1994,59. Crucially, Latvia’s currency reform was proceeded by rapid price liberalization and accompanied by liberal banking regulation (Lainela and Sutela 1997, 139). 7 6 Shen 1994,58, 60. 7 7 Personal interview with a senior specialist at the Bank o f Latvia, Riga, 2 June 1999. 100 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. managers and workers to increase their wages. Institutionally, this became possible because of the State Bank’s constitutional independence from political control.7 9 Trade cooperation with Russia Latvia’s trade policy thinking was essentially similar to that behind currency reform. Trade reorientation away from Russia and toward western markets was widely perceived as a crucial prerequisite for achieving economic self-reliance and complete political independence. Russia, on the other hand, was increasingly seen as a sinking ship that had been activating all the leverages available to continue extracting benefits from the Baltic economies and, therefore, further blocking them from development. Breaking away from Russia was therefore viewed as something in the economic interests of Baltic nations. At the same time, most Latvian policy makers were well aware that, due to heavy economic dependence on the other ex-Soviet republics, the reorientation could not be accomplished without immediate losses. These losses could only be made up for with the passing of time. For many years, up to 90 percent of industrial concerns in the Baltic were run solely or jointly by All-Union authorities.8 0 Before the Soviet disintegration, almost all of Latvian trade was with the Soviet Union, primarily with Russia. In 1991, for example, 95 percent of Latvian exports went to the USSR and a 78 Lainela and Sutela 1997, 124. Latvian Prime-Minister Guntar Krasts made a similar point (1998, 29). 79 Lieven 1993, 360-61. 80 Hiden and Salmon 1994, 171. 101 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. o 1 similar proportion v/as imported. Russia accounted for about 50 percent of total trade (see table 3.2 at the end of the chapter). Latvia was particularly dependent on Russia’s supplies of energy and Russia’s transit to the West via Latvian territory.8 2 These complex considerations were well summarized by a Latvian policy maker: Our economic situation is determined by the economic crises in the eastern market upon which we were made to be dependent. Now we have become an independent country. Russia still wants us to be part of its sphere of influence. Moscow uses policies trying to make us dependent. Our biggest market was and still is to a marked measure Russia. We have to have alternative economic relations [other than with Russia]; otherwise we will continue to be dependent on it. This has to be done quickly.8 3 To reduce the immediate losses from the reorientation policy, it was proposed that Russia be seen as an important, albeit a short-term, partner. Economic ties with the East, while not a strategic priority, should be maintained for the sake of more smooth reorientation toward western markets. A series of bilateral agreements was supposed to help to maintain those ties, while Latvia’s mid-term objectives were to be reached by gaining memberships in Western multilateral institutions.8 4 * In 1992, after Moscow’s recognition of the Baltics’ independence, Latvia signed a number of trade agreements with Russia.8 5 Barter agreement were particularly common form. In April 1992, for example, an agreement was signed according to 8 1 ElUCP 1993/94 1993, 34. 82 Rossiia i Pribaltika 1997, 4; Hiden and Salmon 1994, 192. 8 3 Shen 1994, 166; Similar thoughts were expressed by Latvian Supreme Council Chairman Anatolijs Gorbunovs in November 1991 (RFE/RL Daily Report, “Gorbunovs: Priorities for Latvia,” 1991, November 8). 8 4 Shen 1994, 170-171; Ebel 1997, 183; Hiden and Salmon 1994, 192. 85 Moscow BALTFAX, “Clearing Settlements’ With Russia Suspended,” in FBIS-SOV-92-005, 8 January 1992, 81; RFE/RL Daily Report, “Latvian-Russian Talks in March,” 1992, February 27; 102 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. which Latvia was provided with a certain amount of energy resources in return for food supplies to Russia. The other form of bilateral dealings with Russia and other CIS’ members was in Most Favored Nation (MFN) agreements. During 1992 Latvia concluded MFN agreements with a number of former Soviet Union countries, establishing lower import tariffs for Latvian goods, excluding agriculture. In October 1992 a similar agreement was signed, although not ratified, with Russia. Such an approach, however, did not prove to be sufficient for reviving trade. In the winter of 1991-2, Latvia experienced a particularly sharp decline in trade with the CIS states, largely as a result of the Soviet disintegration. In 1992 Latvia’s trade volume fell dramatically, by about a third, and the decline continued in 1993.8 7 At the time, Latvia was still largely isolated from the world economy to compensate for the decline.8 8 The MFN agreement with the former Soviet states, despite being signed, did not come into force until mid-1994.8 9 The critical example was the October 1992 agreement signed between the Latvian and Russian governments. In the agreement, the two sides pledged to extend MFN status beyond 1992 and gradually establish a free trade agreement. However, the Russian parliament has not ratified the agreement. As a result, even the previously arranged MFN agreement collapsed: Russia applied double- “Latvian-Russian Economic Accord,” 1992, July 23; “Latvia, Moscow Council Agree on Economic Cooperation,” 1993, March 10. 8 6 The rate o f MFN tariffs is 15%, five percent lower than a standard tariff. Agricultural goods, particularly those from Russia and Ukraine, were subject to higher tariffs. After June 1992 Latvia also had export tariffs which were applied to metals and metal products, timber and wood products, fur and leather (EIU CP 1993/94, 1993, 35; Trade policy 1994, 54). 8 7 ElU CP 1993/94 1993, 34; IMF Economic Review 1994,31. 8 8 Bradshaw at al. 1994, 174. 103 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. MFN tariff rates (30 percent) on Latvian goods, and Latvia applied 20 percent tariffs rather than 15 percent.9 0 Even deal-specific bilateral agreements with Russia, many of which had been signed, went unfulfilled. Latvia was particularly affected by Russia’s failure to provide previously negotiated amounts of raw materials and parts9 1 and by Russia’s threats to switch to world prices in its trade with the newly independent states.92 So acute did the problem become that it was described by some Latvian officials as “economic warfare by Russia against Latvia.”9 3 Russia’s tough and non-cooperative stance vis-a-vis Latvia was, at least in part, politically motivated. Moscow complained about violations of human rights of the 8 9 N0rgaard et al. 1996, 159; RFE/RL Daily Report, “Russia Gives Latvia Temporary Most Favored Trade Status,” 1994, June 1. 9 0 RFE/RL Daily Report, “Latvian-Russian Economic Accords,” 1992, October 29; Trade Policy 1994, 54. 9 1 At the end of 1991 one Latvian official was complaining that Latvia had supplied the republics o f the former USSR with goods worth I billion rubles more than it received. Others argued that, while they had met their obligations to deliver products to Russia and other ex-Soviet republics on 80 percent, they only fulfilled their commitments on 30 percent (Riga Radio Riga Network, “Negotiator on Economic Talks With Russia,” in FBIS-SOV-91-235, 6 December 1991, p. 45; Moscow TASS, “Economic Confrontation With Russia Seen,” in FBIS-SOV-91-209, 29 October 1991,42; RFE/RL Daily Report, “Russia Restricts Gasoline Supplies to Latvia,” 1991, November 7; “Godmanis on Energy Crisis in Latvia,” 1992, January 16; “Fuel Shortage Cuts Flights Out o f Riga,” 1992, February 10; “Russia Wants Reduced Prices on Latvian Imports,” 1992, March 25). 9 2 In the words of Yeltsin, the introduction o f world prices in trade with the republics was a form o f recognizing their independence (Moscow BALTFAX, “Yeltsin, Gorbunovs Discuss Economic Ties,” in FBIS-SOV-91-211,31 October 1991, 39. See also Moscow TASS, “Economic Confrontation With Russia Seen,” in FBIS-SOV-91-209, 29 October 1991, 42; Moscow BALTFAX, “Russia Warned Against Hard Currency Deals,” in FBIS-SOV-91-210, 30 October 1991,58). 9 3 For example, leader o f the People’s Front faction, the majority faction of the Latvian parliament, Minister o f State and the head of Latvian delegation for the talks with the USSR Janis Dinevics said on one occasion: “I have gained the impression that the USSR endeavors to specially delay their [talks’] start in order to weaken Latvia economically and to make it more submissive” (Riga Radio Riga Network, “Minister on ‘Economic War’ With Russia,” in FBIS-SOV-91-227, 25 November 1991, 58. See also Izvestiya, “Accused o f Economic Warfare,” in FBIS-SOV-91-211, 31 October 1991, 39; Riga Radio Riga Network, “Negotiator on Economic Talks With Russia,” in FBIS-SOV-91-235, 6 December 1991,45). 104 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Russian-speaking population in Latvia9 4 and about the Latvia’s unilateral decision to nationalize the oil pipeline, and was even considering economic sanctions against Latvia and other Baltic nations. At the time, Yeltsin singled out the Baltic nations and Ukraine as countries that should be forced to pay hard currency for their energy deliveries, due to their differing economic and political policies.9 5 As a result, opposition to governmental policy was growing. Large state enterprises, in particular, wanted a closer relations with the East.9 6 The workers in those enterprises united in the Union of Free Trade Unions of Latvia were strongly behind this idea. In January 1992, for example, the organization issued an appeal to the governments and trade unions of the Commonwealth of Independent States in which it argued that the whole of the historically formed economic relations within industry—and the entire national economy of Latvia—is oriented toward close links with the economy of the former USSR. ..Only together will we be able to overcome this difficult time, economic hardship, and everything which was left to us as a legacy from totalitarianism.9 7 The view also found some support in the growing private sector, where many people shared a past in the communist apparatus or the communist youth organization 94 In September 1992, Latvia drafted citizenship laws, in which ethnic Russians (33.1% of Latvia’s population) were denied citizenship unless they or their families resided in the country before 17 June 1940 (Chinn and Kaiser 1996, 109). 9 5 RFE/RL Daily Report, “OMON Behind Petroleum Shortage in Latvia,” 1991, December 6; Moscow ITAR-TASS, “Russia Introduces Double Taxation on Latvian Goods,” in FBIS-SOV-93-023, 16 February 1993, 78; Drezner 1997, 105-106. 96 A department head at Latvia’s privatization agency (personal interview, Riga, 1 June 1999). 97 Riga Radio Riga Network, ‘Trade Unions Appeal For CIS Solidarity,” in FBIS-SOV-92-020, 30 January 1992, 75. Also see Komsomolskaya pravda, ‘Trade Unions Organize Petition for Economic Demands,” in FBIS-SOV-92-216, 6 November 1992, 71. 105 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Komsomol.9 8 The situation was pressing the government to go beyond the originally- designed approach in economic relations with Russia. Despite all the difficulties, Latvia did not consider making political concessions or changing its policies vis-a-vis Russia and the CIS in a fundamental way. Faced with collapsing trade, Latvian leadership kept pressing for MFN treatment by Russia while activating a series of tools to make the reorientation real and to compensate for the recent losses. First, in mid-1992, after Latvia abolished all Soviet-era export quotas and licenses and replaced them with export taxes, it used the taxes as a lever in encouraging the reorientation to the West. Although in principle using the export taxes might discourage exports, setting different rate of taxes on exports to different areas may serve the purpose of reorientation. In particular, in order to encourage exports to the West, Latvia set the export tax rates on exports to non-convertible currency areas (including Russia) and on barter trade higher than on exports to areas outside the former USSR.9 9 Second, import tariffs were also discriminatory against Russia and some other CIS 100 countries with whom Latvia did not have trade agreements in effect. With a new law covering import duties entering into force in March 1994, the new tariff structure 9 8 Samorodni 1993, 94; Nprgaard et al. 1996, 148. 9 9 Excluding specific rates, two-thirds of the taxes on exports in convertible currencies were below 10 percent compared with one-tenth o f taxes on export in non-convertible currencies. This bias against exports in non-convertible currencies was only reduced at the end of 1993 (Sorsa 1994, 147; Moscow BALFAX, ‘Tariffs Must Be Paid in National, Hard Currencies, in FBIS-SOV-93-029, 16 February 1993,78) 1 0 0 Twenty percent duties were charged relative to 15 percent on goods from countries with trade agreements (Ibid., 148; Riga Radio Riga International, “Government Introduces New Import, Export Tariffs,” in FBIS-SOV-92-206, 23 October 1992,73-74). 106 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. maintained the discriminatory pattern.1 0 1 Third, Latvia actively used energy and other raw materials re-exports from Russia taking advantages of at the time relatively low prices.1 0 2 Finally, Latvia was actively working on the marketization of domestic economies in preparation for market-oriented commercial activities and the eventual breakthrough in establishing economic relations with the West. The next section returns to this. Commercial reorientation away from the ex-metropole was due to the same nationalist beliefs that gave birth to currency reform. These beliefs can be traced at least to the “economic autonomy” program, which first conceptually linked successful development with control over the national economy. As Seija Lainela and Pekka Sutela wrote, Latvia and other Baltic nations have demonstrated “an almost religious devotion to currency convertibility and trade reorientation” which were seen “as essential elements of the escape from the former Soviet Union and a return to Europe”:1 0 3 1 0 1 As Piritta Sorsa reports, the unweighted average duty for imports from trading partners with which Latvia had no trade agreements was 13.4 percent compared to 10 percent for those with agreements. Free trade agreements with most of EFTA countries and with other Baltic countries, which granted duty-free entry to industrial goods, further intensified the discriminatory pattern (1994, 149). 1 0 2 Most o f this was done illegally, via various processing schemes, which allowed private actors to bypass border taxes (Sorsa 1994, 145, 151). The government regulations were far from strict, and some evidence suggest that border service was heavily corrupted (Moscow POSTFACTUM, “Private Fuel Trade Ban May Be Lifted,” in FBIS-SOV-92-025, 6 February 1992, 80; Tallinn BNS, “Officer Says Border Service ‘Fully Corrupt,’” in FBIS-SOV-94-209, 28 October 1994, 43). Some Russian experts even argued that as much as 70 percent o f Baltic exports to the West became possible due to re-export of Russian goods (Kuznetsov 1998, 8). Such estimates, while undoubtedly exaggerated, point to a source of economic reorientation. The re-export had been particularly beneficial until the mid-1993 when Russia moved closer to setting domestic prices o f fuel closer to world market levels. Instructively, energy re exports by Latvia reached over $ 100 million of the first half of 1993, but plummeted to only $15 million in the second half of the year (IMF Economic Reviews 1994, 32). 1 0 3 Lainela and Sutela 1997, 140. 107 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. There was the feeling of an overwhelming national mission, and this explains the relative weakness of lobbies and vested interests in Baltic politics. If industrial lobbies would have decided the issue, the reorientation of trade from Russia to the West would certainly have been much slow er.. .In principle, the lobbies may become more powerful when politics normalizes as the national mission is fulfilled. But by then traditional lobbies will have been much weakened by economic and social change.1 0 4 Domestic economic institutions While shifting the economy away from the former Soviet Union was overwhelmingly considered in Latvia to be an important precondition of national independence, the reorientation toward Western countries was economically impossible because of incompatibility in their economic systems. Latvia inherited from the Soviet Union a highly centralized, immobile economy with only minor market incentives for development. A series of measures were necessary for Latvia to prepare for market- oriented foreign economic activities. Two crucial conditions are usually identified as of particular significance— macroeconomic stabilization and lifting trading quotas and restrictions.1 0 5 These conditions are normally recommended by leading Western economic agencies, such as the World Bank and IMF,1 0 6 both of which Latvia joined in April 1992. Impatient to become a part of the West and encouraged by the Western I < M Ibid. 1 0 5 Macroeconomic stabilization establishes domestic preconditions for market activities and usually identified as inseparable from foreign trade transformation (Slay 1991, p. 8; Michalopoulos and Tarr 1996, 22). Lifting up quotas and restrictions is essentially the continuation o f the same process, as it reduces the state interference and encourages free exchange o f goods and services. 1 0 6 See, for example, Trade Policy Reform 1994, 5-8, 19-23. 108 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. financial assistance that had already been received by that time,1 0 7 Latvia's nationalist coalition began to implement a package of economic reforms. Macroeconomic stabilization efforts began with price liberalization reform in December 1991 and January 1992. It was accompanied by an immediate economic recession (see table 3.2 at the end of the chapter), as later became the case in the rest of the USSR. Only a highly popular government could afford to launch this kind of reform. In December 1991, farm procurement and food retail prices were fully decontrolled. In the following month gasoline and diesel prices were fully liberalized. And, finally, in July 1992 price ceilings for oil, liquefied gas, and coal for industrial uses were also eliminated. By mid-1992 price liberalization was completed. Another important part of the stabilization program was the establishment of a coherent foreign exchange system, which took Latvia about two years to complete (see the previous section in this chapter). The nationalist coalition also deserves credit for beginning the process of changing the Soviet-era trade regulations. All state orders, export quotas and licenses were abolished in mid-1992 and replaced by export taxes ranging from zero to 100 percent. The Tariff Council was established for dealing with trade issues on a permanent basis. As a result of its activities, the tariff regime was modified. In September 1992, for example, the Tariff Council abolished export taxes on most goods. 1 0 7 Schroeder 1992, 562. 109 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Duties remained only on timber and wood products, metal and metal products, leather, furs, and some other products. Domestic reforms proved to be a politically costly enterprise. As a result, the nationalist government lost some of its credibility. As Latvia plunged into a recession, the Godmanis Popular Front’s government became increasingly unpopular, and a series of ministers departed or were forced to resign. In February 1993 the Popular Front, becoming less popular and less cohesive, ceased to exist as a ruling coalition and was replaced by a more credible, right-of-center grouping, Latvian Way (Latvijas Cels), established by the acting president and chairman of the Supreme Counsil Anatolijs Gorbunovs and a number of leading politicians.1 0 8 The shift of forces was reflected in new elections that took place in June 1993 and brought a victory to the new coalition. The fact that the nationalists lost some of their credibility was also reflected in their inability to liberalize the tariff regime completely. The system was still structured to favor domestic industry and agriculture. Latvia kept a relatively high import tariff, especially on agricultural products. The standard tariff rate was 20 percent, and a tariff rate of up to 45 percent was imposed on goods that could be produced locally.1 0 9 Those tariffs were applicable to all countries, including the other Baltics, but in the spirit of nationalism, agricultural goods from Russia and Ukraine were subject to higher tariffs. Domestic pressures on the government, particularly from the agricultural sector, remained strong after 1992. In March 1993 specific import duties were imposed on 1 0 8 A new coalition also took a more moderate stance on the status of Latvia's Russians, the largest minority (EIU, Country Profile 1995, 25). 110 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. grain, flour, and bread. A new series of import tariffs on agricultural products were introduced in 1994*1 0 and 1995 to protect domestic farmers. Those pressures were reflected in the October 1995 parliamentary elections that produced a divided parliament, with leftist and left-of-center protectionist parties controlling around 40 seats in the 100-seat chamber. With parliamentary seats divided between parties of leftist and left-of-center protectionist orientation and nationalists favoring more openness, Latvia became a less homogeneous society, somewhat slowing its move toward national independence. The reforms, however, in no way stopped the formation of independent economic policies in the country. By the time of a new ruling coalition emerged, price liberalization was fully completed and currency reforms were well under way. As a result of price liberalization and the establishment of a new foreign exchange system, annual inflation dropped from 950 percent in 1992 to 37 percent in 1994 (see table 3.2). Similarly, the fact that the nationalist-oriented policy of foreign trade liberalization was abandoned did not slow Latvia’s development significantly. Rather, it can be considered as the country’s way of catching its breath on the rapid move toward the Westernization of its markets. The main barriers for launching market-oriented trade activities, such as quotas and surrender requirements, were removed. By the end of 1993, with the completion of its currency reform, Latvia was well on the track toward gaining membership into Western trading institutions. This was accomplished, in the words of 1 0 9 EIU, Country Profile 1995, 39. I l l Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Latvian Prime Minister, because “national identity and firm confidence in the necessity of building an independent state were especially meaningful for a successful start and further development of economic reform.” 1 1 1 Looking beyond Russia Among other post-Soviet nations, Latvia was one of the most active promoters of its independence and of establishing economic and political ties outside the Soviet Union. In a sense, the creation of independent foreign policies in the Baltic republics 11^ actually began before they gained independence in August 1991. ~ Gaining access to Western markets and economic institutions was perceived to be a strategic priority, in fact, the goal in itself. Latvia and other Baltic nations thought of themselves as “returning” to Europe, where they belonged historically, culturally, geographically. Originally formulated that way, the intention of joining Western economic arrangements was reinforced by Soviet and, later, Russia’s behavior. First, the Moscow coup of August 1991 and the ensuing Soviet break-up in December of the same year facilitated the process o f alignment with Western European countries. In the eyes of Latvian politicians and Balts in general, the coup had only confirmed Russia's aggressive imperialist intentions and left no chance for the once entertained idea of the Baltic nations as a gateway between East and West.11 3 If anything, the coup pushed the 1 1 0 Dairy products and pork were subject to 55% duties, other meats 40% (EIU, Quarterly Economic Report Ist quarter 1995, 30). 1 1 1 Krasts 1998,29. 1 1 2 Vares 1995, 157. 1 1 3 Ibid., p. 166. An opinion poll taken before the coup provided some support given to the idea o f Baltic nations as a bridge between the West and the USSR (Liepins 1993, 200). 112 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Baltics toward the West and away from the East. The West was perceived as friendly and sufficiently stable, whereas the East was seen to be much less predictable and inherently hostile. Russia, too, was perceived as a threatening, potentially expansionist nation. Russia’s tendency to view post-Soviet nations as within the natural sphere of its influence, demands to grant dual citizenship to ethnic Russians living in these countries, and other behaviors were widely considered in Latvia as indicators that Russia remained a threat to Latvia’s independence.1 1 4 In their wish to become Europeans, the Baltic authorities undertook measures toward rapprochement with Western European countries. They started with efforts to pursue bilateral cooperation with those countries. After winning wide international recognition of its independence and becoming a member of the United Nations, the IMF, and the World Bank, Latvia launched a series of bilateral free trade agreements (excluding agriculture) with European countries. During 1992, such agreements were signed with Sweden (March), Norway (June), Finland (November), and Switzerland (December).1 1 5 Latvia’s major goal, however, was perceived as entering into Western multilateral arrangements, primarily the European Union. At least three main reasons were listed by Latvian politicians and observers for attributing the highest priority to multilateral forms of cooperation with Western countries: such cooperation was seen as capable of giving the Baltic nations a new stimulus for advancing their economic IUMisiunas 1994, 104; Sergounin 1998; Personal interviews, Riga, May-June 1999. 1 1 5 See “Annex” in Trade Policy Reform In the Countries o f the Former Soviet Union, op. cit. 113 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. reforms in the market direction; it was supposed to provide them with access to alternative markets; and it would have given tangible security benefits.1 1 6 However surprising it may sound, nationalists were not worried about losing Latvia’s national identity by joining another union. “European-ness” did not seem threatening to their identity. In fact, they whole-heartedly embraced the idea of joining Europe. Eager to overcome Russia’s damaging influences, nationalists perceived the membership in the “European family” as a way to bolster Latvia’s non-imperial identity and to pursue their national-state.11 7 Latvia’s efforts to participate in alternative multilateral international economic arrangements can be analyzed as advancing in three directions: First and foremost, Latvia wanted to establish close relations with Western European countries, most notably through the European Union and the European Free Trade Association. Secondly, it participated actively in forming the inter-Baltic economic union, with Lithuania and Estonia as additional members. Finally, it expressed an interest in cooperating with those of the former Soviet republics that were eager to reduce their economic dependence on Russia. Striving for the EU membership Despite some early advantages,1 1 8 accomplishing the goal of becoming Europeans proved to be much more difficult than was originally expected. As one 1 1 6 Bleiere 1997, 61-70; Krasts 1998, 35; Logfren 1998, 47. 1 1 7 Shen 1994, 171; Logfren 1998,48. 1 1 8 Some analyses indicated that Latvia, as well as other Baltic republics, were granted Most Favored Nation and Generalized System of Preferences statuses eariier than other newly independent 114 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Baltic leader sardonically remarked, “joining” the USSR was easy; joining the EU was proving to be a long a complex process.1 1 9 Pushed in the Western direction by their original cultural priorities and increasingly heavy-handed Russia’s policies, Baltics faced tight trade restrictions as much as the other post-Soviet nations. Nonetheless, it seems clear that Latvia and other Baltic nations were firmly supportive of eventually becoming EU members. Latvia revealed interest in joining the EU from the very beginning of its national independence drive. With the European Community’s (now the European Union) recognition of Latvian independence on 27 August 1991, the channels of mutual interaction were open. The first steps toward access to the EC markets were made in May 1992, with the signing of trade and cooperation agreements with the European Community and the obtaining MFN status from the EC. Latvia and other Baltic nations also signed a political declaration with the EC, declaring their shared ideals and pledging foreign policy coordination.1 2 0 This was a critically important step for both advancing further cooperative relations with the EC and for facilitating domestic economic reforms. nations (Kaminski 1994, 247). Baltics were also better situated culturally in the sense that many Western countries never recognized the legitimacy o f Baltic incorporation into the USSR. 1 1 9 Ibid., 46. 1 2 0 Vares 1995, 166; RFE/RL Daily Report, “Latvia Initials EC Trade Pact,” 1992, February 6; “Latvia Ratifies Accord with EC,” 1992, September 18. 115 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Progress toward joining the EC became more concrete in 1993-1995. In June 1993, Latvia and other Baltic nations applied to become EC associate members.1 2 1 Government commissions were formed in the Baltic countries to develop the bases for eventual integration. In April 1994, Latvia became the first former Soviet republic to initial a preliminary free-trade accord with the European Union1 2 2 that took effect in January 1995. The opening of the European market1 2 3 came as both an opportunity and a challenge, since not all Latvian goods were competitive. The results of entering the competition, however, proved to be rewarding. During 1995-1997, Latvian exports to and imports from the EU countries increased by 1.6 and 2.2 times, respectively.1 2 4 In the fall 1995, Latvia’s European drive was somewhat undermined, with the populist Movement for Latvia and the Party of Unity gaining 24 out of 100 seats in the parliament. A combination of anti-European and pro-Russian views undermined the country’s pro-European orientation. The episode, however, became an additional push for the leadership’s European drive. On October 13, Latvia’s President Guntis Ulmanis used his power to call for an extraordinary meeting of the Cabinet of Ministers with 1 2 1 The actual associate membership in the EU was gained in June 1995 (Vares 1995, 166; Ozolina 1998, 148; RFE/RL Daily Report, “European Parliament Ratifies Association Agreements with Baltic States,” 1995, November 16). 1 2 2 Initially the agreement will benefit Latvia more than the EU, as the EU abolished all tariff barriers and allowed for the free movement of goods, services, and capital between Latvia and EU member nations, while Latvia has four years to bring its trade regime in line with EU standards (EIU, Quarterly Economic Report 1994, 3, 31; Ibid., 1995, 3, 25; RFE/RL Daily Report, “Free Trade Talks Between EU and Baltic States,” 1994, March 4; “European Union Toward Closer Ties with Baltics,” 1994, June 24; “Baltic-EU Free Trade Accord Signed,” 1994, July 19). 1 2 3 Europeans eliminated trade restrictions on most goods, although not on textile and agricultural products (Krasts 1998, 35). 1 2 4 Krasts 1998, 36. 1 2 5 The Movement for Latvia was led by right-wing German businessman and did not share Latvia’s enthusiasm about entering the EU. 116 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. only one point on the agenda—the formal application to the full EU membership. The ministers unanimously supported the application and, on October 27, Latvia became the first post-Soviet country to apply for full membership in the EU. In support of the move, the chairmen of all eleven political parties represented in the new parliament met with Ulmanis and signed a declaration expressing their positive attitude toward application for EU membership and asserting that admission into the EU was the most essential goal of Latvia’s foreign policy. " Whereas Latvia's full membership in the organization is not likely before 2005, given the Union's own preoccupation with internal problems,1 2 7 Latvia's trade regime,1 2 8 and the Union's intention to admit the Baltics as a group rather than on an individual basis,1 2 9 it certainly marked the interest of both sides in continuing economic cooperation. The EU drive received overwhelming support in the society. In the words of one observer, many of those same nationalists who helped to bring about the demise of Soviet rule “are now among the prime advocates of EU membership.” In April 1995, when the parliament considered the foreign policy concept of Latvia with clearly 1 2 6 Even Socialist Party Chairman Filip Stoganov, whose party had been considered to be opposed to EU membership, signed with the understanding that, when it comes to that point, a national referendum over the joining the EU would be held (RFE/RL Daily Report, “Latvia Formally Applies for EU Membership,” 1995, November 16; “Latvia Hands In Application to Join EU,” 1995, November 30; Ozolina 1998, 109). 1 2 7 EIU, Quarterly Economic Report 1995, 3, 25. 1 2 8 Latvia can only be admitted to the EU after it brings its tariff structure in line with EU standards, which is going to take a while because o f domestic, particularly agricultural, protectionist pressures. 1 2 9 One example of such an intention is the announcement by the European Parliament Chairman Klaus Haensch on April 10 and 11 in Vilnius and Riga that the European Union will admit the Baltic republics as a group, not individually (The Jamestown Monitor. E-Mail Bulletin, April 11 1995). 1 3 0 Jofgren 1998,47. 117 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. defined goal of eventual joining the EU, it stated that “the EU is essential to the likelihood of the survival o f the Latvian people and the preservation of the Latvian state.”1 3 1 Only a few abstained or voted against the concept. National surveys also amply illustrated the adherence of Latvian elite to the idea of entering Europe and gaining full membership in the EU.1 3 2 The elites’ attitude toward the EU was well expressed by Prime Minister of Latvian Republic Guntar Krasts, who said that “Integration of Latvia into European Union provides us, or—to be more precise— returns us, to our historical and geopolitical identity.”1 3 3 Finally, the general public was also quite receptive to the country’s eventual membership in the EU.1 3 4 Inter-Baltic cooperation Latvia’s cooperation with other Baltic countries began even before the disintegration of the USSR, with the signing of the Agreement on Economic Cooperation with Lithuania and Estonia in April 1990, and with the adoption of the Declaration on Unity and Cooperation and establishment of a Council of the Baltic States to assist in the full restoration of independence.1 3 5 The Baltics closely 1 3 1 Ozolina 1998, 148. 1 3 2 Connor et. al. 1995, 44-45; Bleiere 1997, 78; Ozolina 1998, 149. 1 3 3 Krasts 1998, 39. 1 3 4 In 1995, for example, when people were asked how they would vote if a referendum in EU membership were held at that time, as much as 80 percent o f respondents in Latvia were ready to vote in favor of membership (of those who had the right to vote and knew how they would vote) (Bleiere 1997, 77). At later stages, some Euro-skepticism emerged in Latvia, but a majority of the population still viewed the prospects of the country’s EU membership quite favorably. Ethnic Russians, too, were generally positively disposed toward the country’s EU’s drive (Personal interview with a researcher at the Latvian Institute of International Affairs, Riga, June 4, 1999). 1 3 5 The adoption o f the Declaration renewed the Treaty on Unity and Cooperation and the resulting declaration signed by Estonia, Latvia, and Lithuania in Geneva on 12 September 1934, before they had been incorporated into the Soviet empire (Vares 1995, 158). 118 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. coordinated their efforts to gain the EU memberships.1 3 6 Their trade and cooperation agreements with the European Community and the obtaining of most-favored-nation trading status from the EC in 1992 were concluded jointly, not individually. So too was a political declaration with the EC on shared ideals and foreign policy coordination. The Baltics' communique on applying for associate membership in the EC in June 1993 was a joint one, as well. Finally, the three Baltic nations signed association agreements with the EU almost simultaneously in June 1994. After the demise of the Soviet Union, inter-Baltic relations continued to proceed smoothly, despite the appearance of some disagreements.1 3 7 They announced their intention to set up a customs union as early as September 1991. The union, it was announced, would establish a common external tariff at approximately EC levels and allow free movements of goods, services and people within it.1 3 8 In September 1993, the three states reached a free-trade agreement, excluding agriculture,1 3 9 and in June 1996, this agreement was supplemented with a long-sought treaty on free agricultural trade and plans for establishing common Baltic transportation and communication systems.1 4 0 lj6 In a certain way, this was encouraged by the Union's officials (see fn. 132). 1 3 7 For example, Latvia established high import tariffs, particularly on agricultural products, and this was upsetting for agricultural exporters in Lithuania and Estonia, for whom Latvia is a key market (EIU, Quarterly Economic Report 1995, 1, 30). 1 3 8 Schroeder 1992, 561. 1 3 9 RFE/RL Daily Report, “Baltic Free Trade Agreement,” 1993, September 14; “Baltic Free- Trade Agreement,” 1994, February 17. 1 4 0 The Jamestown Monitor, 1996, June 16; RFE/RL Daily Report, “Baltic Prime Ministers Sign Free Agricultural Trade Agreement,” 1996, June 17. 119 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Other reorientation efforts In addition to its interest in joining the EU, Latvia advanced its efforts to establish closer relations with another European organization, the European Free Trade Association (EFTA). The EFTA unites all the European countries outside the EU, most of which had established bilateral trade ties with Latvia as yearly as during 1992.1 4 1 In November 1995, Latvia was the first of the ex-Soviet nations to initial a free trade agreement with the EFTA, thereby taking another crucial step toward its Westernization.1 4 2 Latvia also signed free trade agreements with Slovakia, Slovenia and the Czech Republic.1 4 3 Another line in the efforts to strengthen a position of a country free of Russia's influence was Latvia's attempts to establish economic ties with Ukraine and to support Ukraine in its efforts to establish better relations with the West. These attempts began in 1995 and must be considered in the broad context of Latvia's search of favorable security arrangements and the wish to minimize Russian influence. The presidents of Ukraine and Latvia, Leonid Kuchma and Guntis Ulmanis, said on a few occasions that they were interested in mutual support in foreign policy and cooperation within a "common economic space" from the Baltic to the Black Sea.1 4 4 1 4 1 Trade policy 1994,53; RFE/RL Daily Report, “Baltic States and EFTA,” 1995, June 15. 1 4 2 RFE/RL Daily Report, “Latvia, EFTA Initial Free Trade Agreement,” 1995, November 9. 1 4 3 RFE/RL Daily Report, “Latvia, Slovakia Sign Free Trade Agreement,” 1996, April 22; “Latvia, Slovenia Sign Free Trade Agreement,” 1996, April 24. 1 4 4 For example, during Ulmanis' two-day visit in 1995, the two sides agreed to create a joint commission to implement agreements on mutual diplomatic support, trade, cooperation in the military- industrial sector, and in possible construction o f a Black Sea-Baltic Sea oil pipeline. The notion that this constitutes a region in its own right, described as an "inter-marium" (between the Seas) or as the Ponto- Baltic Isthmus, is traditional in European geopolitics. The idea of close cooperation among the peoples of 120 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Summary At least since August 1989, Latvian leaders entertained the idea of achieving economic independence from the USSR and it was not particularly surprising that, immediately after the Soviet break-up, Latvia pursued a distinctive strategy of restructuring its economic pattern. It declined invitations to participate in the Russia- initiated Commonwealth of Independent States, and chose to deal with Russia and other CIS members on a strictly bilateral basis, specifically via signing bilateral most-favored nation treaties and barter agreements. The idea o f signing preferential economic agreements within the CIS framework, such as Economic Union or Customs Union, never had any appeal to Latvian policy makers. Instead, Latvia was preparing itself for diversifying its economic activities away from Russia and the CIS states. Like the other Baltic nations, Latvia became one of the fastest reformers of the former Soviet region. By 1993, price liberalization, removal of the Soviet-era trade restrictions, and the establishment of a coherent foreign exchange system were completed. In addition to these domestic economic changes, Latvia was actively searching for new economic partners beyond Russia and the former Soviet region. In terms of finding alternative multilateral arrangements, Latvia’s major accomplishment was getting closer to eventual membership in the European Union. In the region stretching from the Baltic to the Black Sea dates back to the nineteenth century and the inter war period, as a plan to secure the region's freedom from Russian domination. The idea reemerged after the fall o f communism, but lost some o f its strength after its main promoter and historic source, Poland, became eligible for NATO membership. Some elite groups in former western Soviet republics continue to view the Baltic-Black Sea region-wide cooperation as a means to ultimately reduce economic dependency on Russia, but the position o f Belarus jeopardizes such plans. Moreover, Russian fears o f a 121 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. October 1996, after concluding a free trade accord and gaining an associate membership status in the organization, Latvia became the first post-Soviet nation to apply for full membership in the EU. In addition to the EU, Latvia joined the European Free Trade Association as an associate member. It also established a free trade area with other Baltic nations and concluded a series of bilateral free trade agreements, mostly with European countries. A national identity perspective helps to understand Latvia’s economic strategy. It indicates that one of the main reasons for Latvia’s aggressive policy is the strength of its national (non-imperial) identity. Latvia had significant experience with national independence before it was incorporated into the empire and it ‘ joined’ the USSR with a clear sense of being different. Its identity was formed around its experience with independent nationhood during the interwar period, as it was during this period that Latvia made significant progress in internalizing the norm of sovereignty and identifying itself with European sovereign nations. As a result, a strong historical sense of national distinctness was preserved through the imperial period and, with the decline of empire, it became a tool for mobilizing society around nationalist-oriented groups. In the post-imperial context, a strong national identity increased the power of nationalists, bolstering their ability to influence the foreign policy decision-making process. Paradoxically, it was nationalism, often associated with autarchy and isolation, that helped Latvia to gain cordon sanitaire have forced the idea's promoters to move cautiously, if at all (The Jamestown Monitor, 1995, November 22; November 27; Samorodr.i 1993). 122 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. access to the global economy. After achieving the victory in national elections in March 1990, nationalists gained an upper-hand in the decision-making process and began implementing their economic policy vision. Their policy was a reflection of their main concerns with national independence. The issue, as one observer put it, “was seen first and foremost as one of security—a major instrument to preserve and strengthen the state’s sovereignty.”1 4 5 Sensing the possibility of economic difficulties, nationalists nonetheless urged the continuation of the drive toward independence and reorientation away from Moscow as a way to eventual salvation. Economic difficulties were perceived as temporary and as a necessary price for admission into the world of sovereign nations. 1 4 5 Bleiere 1997, 78. 123 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 3.1. Linguistic Situation in Latvia, Ukraine, and Belarus, 1989 Latvia Ukraine Belarus Ethnic Russians (percent) 34 22 13 Russian as mother tongue for persons of titular nationality (including diaspora in other republics) (percent) 5.0 18.8 28.5 Kindergartens with Russian as the language instruction (percent) 38.8 40.2 72.7 Students in schools with Russian as the medium of instruction (percent) 47.6 51.8 79.2 Library collections (percent) Russian Titular nationality language 47 46 61 38 82 16 Newspapers (number of copies per issue, in thousands) Russian Titular nationality language 764 2,008 8,044 15,682 '3,579 1,773 Book published (number of copies, in thousands) Russian Titular nationality language 3,518 13,110 91,683 95,231 48,133 9,404 Sources: Prazauskas 1994, 152-153; Bremmer and Taras 1997,714-15. 124 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 3.2. Latvia, Ukraine and Belarus: Basic Econom ic Data, 1991-1996 Real GDP growth (%) 1991 1992 1993 1994 1995 1996 Latvia -8.3 -33.8 -11.7 2.0 -2.0 3.3 Ukraine -11.9 -17.0 -14.2 -24.3 -11.8 -10.0 Belarus -1.2 -9.6 -11.6 -20.2 -10.0 2.8 Sources: EIU, Quarterly Economic Reports 1996; EIU, Country Profiles 1998-2000. Consumer price inflation, annual average (%) 1991 1992 1993 1994 1995 1996 Latvia 125 951 109 37 27 18 Ukraine 91 1310 4735 891 377 80 Belarus 84 969 1188 2220 709 53 Sources: EIU, Quarterly Economic Reports 1996; EIU, Country Profiles 1998-2000. Unemployment rate (%) 1991 1992 1993 1994 1995 1996 Latvia n/a n/a 5.3 6.5 6.1 7.1 Ukraine - 0.3 0.3 n/a 0.4 0.9 Belarus 0.2 0.5 1.4 2.1 2.7 3.2 Sources: IMF, Republic o f Belarus 1998, 83; IMF, Economic Review, Ukraine 1993, 102; IMF, Ukraine — Recent Economic Development 1997, 70. Average dollar wages 1991 1992 1993 1994 1995 1996 Latvia n/a 29a 76.5 139.6 186.1 189.8 Ukraine n/a 19.5 14 27.3 48.5 68.6 Belarus n/a 27.5 23 23.9 65.1 88.9 a State sector only. Sources: 12; Michapoloulos and Tarr 1994, 12; IMF, Republic o f Latvia — Recent Economic Development 1996, 81. Continued on next page 125 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Total trade, exports and imports ($ bln.) 1991 1992 1993 1994 1995 1996 1997 Latvia exports n/a 0.77 1.04 0.99 1.28 1.42 1.67 imports n/a 0.69 0.96 1.24 1.65 2.10 2.47 Ukraine exports n/a 1.51 3.95 9.53 14.93 16.32 16.11 imports n/a 1.94 3.96 11.08 20.10 23.76 26.89 Belarus exports n/a 3.44 1.94 2.46 4.65 5.15 7.38 imports n/a 3.40 2.47 2.98 5.51 6.81 8.69 Sources'. EIU, Country Profiles 1992-1998; EIU, Country Reports 1994-1997; IMF, Direction o f Trade Statistics Yearbook 1998 1999. Trade with Russia, exports and imports (% o f total) 1990P 1992 1993 1994 1995 1996 1997 Latvia exports 50.0 26.1 28.6 28.1 24.9 23.2 20.1 imports 52.4 29.7 28.1 23.5 21.6 20.3 15.6 Ukraine exports 65.9 n/a n/a 40.1 40.3 34.8 22.5 imports 74.1 n/a n/a 54.1 37.8 35.1 29.6 Belarus exports 57.7 41.3 40.7 47.1 44.4 58.8 62.7 imports 62.6 54.0 45.9 62.9 56.1 51.7 53.3 a Share of interrepublican trade with Russia (Watson 1994, 375-76). Sources: EIU, Country Profiles 1992-1998; EIU, Country Reports 1994-1997; IMF, Direction o f Trade Statistics Yearbook 1998 1999. 126 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 4. UKRAINE In comparison with Latvia, Ukraine chose a moderate foreign economic course. Its government decided to join the CIS (although it has never been an active participant in the organization) and was in general more active in bilateral cooperation with Russia. While determined to diversify its economic activities towards Western partners, Ukraine has been much less successful than its Baltic neighbors. The Ukrainian leadership has also been much less decisive in maintaining its originally-declared commitments to foreign economic reorientation, and its policy making during the period from 1990 to 1996 can be broken down into at least two sub-periods, each following its own distinct patterns. This chapter reviews and analyzes Ukraine’s foreign economic policy in greater detail while adopting the above-suggested theoretical framework. National Identity This section reviews the process of Ukraine’s national identity formation and argues that Ukraine may serve as an example of a country with a moderate degree of national identity strength. Although Ukraine had some historical experience with independence and, hence, some memory of it, this memory has never had the opportunity to be consolidated. For the country as a whole, the experience with independence was simply too short and sporadic to internalize the norm of sovereignty and develop a strong identification with the world of sovereign nations to the same extent as Latvia. At best, the sovereignty norm has been internalized only partially and mainly among elites. National identity development, however, received additional 127 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. support from the incorporation of western lands into the rest of Ukraine in 1939. Never previously a part of the Russian empire, western Ukraine displayed a strong resistance to the incorporation, serving as an ‘island’ of diffusion o f nationalist ideas and a source for strengthening the country’s national identity. Paradoxically, some Soviet institutions also facilitated the formation of the Ukrainian national self. The experience with national independence and unification Unlike their Latvian counterparts, Ukrainian nationalists could not boast of significant historical experience with national independence. To support their calls for Ukraine’s gaining sovereignty and leaving the USSR, they referred to two main attempts of Ukraine to establish national independence, both rather sporadic and short-lived. The first episode goes back to Ukraine’s 17th century’s experience with Cossackdom; the second emerged as a result of the early 20th century’s breakdown of the Russian empire and the subsequent three years of independence and cultural reawakening in Ukraine.1 The Cossackdom emerged in the mid-17th century when Ukraine was culturally and politically divided between the Polish-controlled Catholic west and the Moscow- oriented east. Recruited from rebellious serfs and peasants hiding from political authorities in the vast Ukrainian steppes, Cossacks defended their autonomy from Poles and Russians and pursued a distinct economic and political style of living. They were electing their leaders, or hetmans, and lived as free farmers and border patrolmen.2 In 1648, under the leadership of Hetman Bohdan Khmelnytsky, an independent Cossack 1 Torbakov 1996; personal interviews in Kiev, July 1998. 2 Wilson 1998, 6. 128 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. state was established, and this lasted until 1654. Practically all strata of the Ukrainian population, dissatisfied with the harshness of Polish and Russian rule, sided with the Cossacks. Yet the difficulty of fighting simultaneously on three fronts against the Poles, Russians, and Tatars eventually forced Ukrainian leaders to seek an alliance with Moscow, formalized with the Treaty of Pereiaslav. Despite the original intentions of those signing the Treaty,3 it effectively ended the short-lived Ukrainian independence and for many years after subjected Ukraine to Russian empire. The Cossackdom, however, became one of the key myths constituting the Ukrainian national idea and has always been very much alive among nationally conscious intellectuals.4 The next attempt to establish and consolidate national independence in Ukraine came with the decline and subsequent disintegration of the Russian empire. While at the time the idea of independence did not command wide support in Ukrainian society, it gained strength as the only way to preserve Ukrainian survival under the external and domestic upheavals. World War I, the Bolshevik revolution, and the Civil War posed a threat to the very survival of Ukraine as an autonomous unit and, by 1918, elites embraced the idea of independence as “the only option that offered them refuge from 3 There is a debate among historians about whether the Treaty was intended to begin the process o f integrating Ukraine into Russia or merely to establish a tactical alliance between equal sovereign nations. Those more nationalist-inclined historians typically emphasize the latter (for a discussion, see Basarab 1982; Rudnytsky 1987; Wilson 1998, 6-7). The subject reacquired political significance during the Ukrainian late-20t h century transition to independence (see, for example, Morrison 1993, 679; Kohut 1994, 132; Torbakov 1996). 4 The enduring importance o f the Pereyaslav myth can be seen from the fact that in 1992 a ceremony was organized in what is now the town o f Pereyaslav-Khmelnytsky to renounce the agreement once and for all. As John Morrison said, “all Kiev’s negotiations with Moscow take place in the long shadow cast by Khmelnytsky” (1993, 679). 129 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. imperial collapse and Bolshevik takeover.”5 Yet internal turmoil and external circumstances made it impossible to build institutions of independent statehood. Fierce military fighting between the Bolsheviks and the Whites that was taking place on Ukrainian land, and the lack of an army and strong allies eventually led to mass social revolt in Ukraine and the deaths of millions of Ukrainians and Russians. No government could maintain order under these circumstances. Three short-lived governments succeeded each other until Ukraine was retaken by the Bolsheviks and, in December 1922, formally proclaimed a part of the USSR. Although both episodes played an important role in fostering Ukraine’s national memory (particularly among elites), their role was primarily symbolic: by themselves, they were not sufficient for internalizing the sovereignty norm and building an overarching sense of national identity. Nothing similar to what happened in Latvia took place in Ukraine. When Bolsheviks took over Ukraine in 1922, it was at its early stages of gaining the sense of being a non-imperial entity. Some strata of political elites felt attracted to the ideal of sovereign statehood, but the masses were ignorant, at best. In the period of 1939-45, however, Ukraine’s identity formation received additional support from its western lands, never previously part of the Russian empire. As a result of the Ribbentrop-Molotov pact the western territories6 were incorporated into the Soviet empire and united with the rest of Ukraine. Although the western lands 5 Motyl and Krawchenko 1997, 240. 6 Western territories were composed o f Galicia, Volhynia, northern Bukovina and southern Bessarabia. Two of these regions (Galicia and Volhynia) were previously under Poland, one (Bukovina) under Romania and one (Ruthenia) under Czechoslovakia (Szporluk 1979, 78). 130 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. did not have the status as being formally independent and were parts of other countries, they had something important to bring to Ukraine’s national identity formation. First and foremost, they had never been part of Russia7 and thus were never subjected to policies of linguistic Russification that had been practiced before the Revolution. Instead, they enjoyed a reasonable degree of linguistic autonomy, as the Ukrainian language continued to be used in the press and in voluntary societies of various kinds. Second, the western lands preserved a strong nationalist underground that had operated throughout the Second World War years and continued to resist the Soviet authorities until after the war had ended. Third, despite large-scale emigration to the west, there Q remained a Ukrainian intelligentsia in west Ukraine, including the main city, Lviv. All these points indicate that the western lands contributed greatly to the process of Ukraine’s national identity formation, helping to diffuse nationalist ideas and preserve the legitimacy of the ideal of an independent nation. Ukraine’s historical experience with national independence and its unification with the western lands helped to build a sense of distinctness from the empire. While not as strong as in Latvia, Ukrainian sense of national self persisted, even becoming stronger during post-1939 colonial existence. Two episodes from the Soviet period can help to illustrate the existence of Ukrainian national feelings. First, in 1939-41, the population of Galicia, one of the western lands, supported Germany’s attack on the 7 With the exception of Volhynia, which was occupied by Poland in 1919. 8 Szporluk 1979, 78-80. 131 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. USSR9 in a bid for increased independence. During the war Ukrainian nationalists continued to fight for independence from the Stalinist regime. The nationalist guerrilla warfare was doomed given the unfavorable conditions: the Soviet state was strong and consolidated; the German occupiers would not allow the formation of alternative state structures; and the Western powers were unable or unwilling to intervene.1 0 Yet fighting continued through the mid-1950s. A second attempt to reassert national rights came in the 1960s, under the leadership of Ukraine’s first party secretary, Petro Shelest. In attempting to oppose the influx of non-Ukrainian cadres into the republic, far-reaching reforms in the educational system were proposed with a goal of gradual conversion to a completely Ukrainian- language education. The new elite also sought its own ideology, which, while coexisting with Soviet ideology, might have had the potential to undermine it.1 1 By the 1970s, as some scholars have suggested, Ukraine was actually in the position of being capable of translating its symbolic sovereignty into genuine sovereignty. " Yet, as previously occurred with Stalin’s rise to power, the process of “neo-Ukrainization” was abruptly interrupted with Brezhnev’s ascension to power, tightening control over Ukraine and replacing Shelest with Kremlin loyalist Vladimir Scherbitsky.1 3 9 Motyl and Krawchenko 1997, 242. 1 0 Wilson 1998, 17. 1 1 It is no accident that this period gave rise to a full-fledged human rights movement in the republic and their samizdat publishing activities Solchanyk 1990, 177. 1 2 Motyl and Krawchenko 1997, 243. 1 3 Solchanyk 1990, 177. 132 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. To summarize, by the time of the Iate-20th century imperial decline, Ukraine did acquire a sense of its national distinctness from the empire and wanted to preserve it through specific policies. This sense of national self was constructed from various pieces, such as some sporadic experiences with national independence and the incorporation of pro-western lands, and was still lacking strength and coherence to the extent extant in Latvia. Various social and territorial strata were far from consolidated vis-a-vis the idea of independent nationhood, but the process of national identity formation did take off and went considerably far in the sense that there were serious forces sharing the idea of independence, as well as the networks for their activities. Other factors shaping Ukrainian identity In addition to its historical experience with independence and national unification, Ukraine’s identity formation was affected by its experience as a part of the Soviet empire. In a sense, the effect of relations with Moscow was more significant for Ukrainian identity than it was for Latvia, as Ukrainian national feelings were far less pronounced and widespread by the time of the country’s unification within the Soviet borders (and, hence, much less able to preserve them). As happened in Latvia, though, the effects of Soviet experience reflected in Ukraine’s domestic features—territorial, political, economic, and cultural—were ambiguous; some encouraged while others discouraged national identity formation. The territoriality dimension did favor the strengthening of Ukrainian national identity; relatively stable geopolitical borders were acquired only in the mid-20th 133 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. century, much later than in Latvia. Historically, at least since 16th century, Ukraine has possessed a dual political and cultural identity, the result of the division between a European-oriented Catholic west and a Moscow-oriented Orthodox east.1 4 Only in 1945, when Stalin annexed western lands, did Ukraine become a formally unified territory, having received an important attribute of nationhood.1 5 This gave the nation a chance to start working on unifying its poorly integrated western and eastern areas. As with Latvia, the establishment of the Soviet regime in Ukraine inevitably meant destruction of most of the previously-existing indigenous political institutions and imposition of new institutional arrangements, with the task of subjecting republican life to Moscow’s control. Yet in Ukraine, Soviet institution-building arguably played a more constructive role than in Latvia. By the time of its reincorporation into the empire, Ukraine’s basic political institutions were all but wrecked—the result of domestic and external turmoil—and the Soviet regime, in its own way, provided for their consolidation and strengthening. The shape of those sub-national institutions— Supreme Soviets, governments, courts, army divisions, academy of science divisions, etc.—was, of course, decided in the Kremlin and, therefore, should have served the purpose of further stabilization of the empire. However, by supplying the republics, including Ukraine, with all these institutions, the Kremlin paradoxically supplied 1 4 Some scholars classify countries with dual political cultures as “cleft countries” (Huntington, 1996, 165). For other analyses o f Ukraine emphasizing the country’s cultural and political division between the ‘East’ and the ‘W est’, see, for example, Rumer 1994, 132; Arel 1995; Burant 1995; Furman 1995,72-74; Holdar 1995. In reality, Ukrainian territorial division is more complex and can be analyzed, for example, in terms o f Northwest, Central, Western, Eastern, and Southern, or in other ways (see, for example, Subtelny 1995). 134 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. institutional channels which in principle could be mobilized by local politicians for resisting imperial policies.1 6 Economic development played a mixed role in Ukraine’s identity formation, just as it did in Latvia. In part the result of Soviet industrialization, Ukraine became one of the upper-level developed republics, with its degree of urbanization one of the highest and its infant mortality rate one of the lowest.1 7 It therefore unquestionably passes the test of creating necessary economic preconditions for making a successful transition from parochial loyalties to a nation-wide sense of unity. At the same time, Ukrainian industrialization, as with that of Latvia, became possible due to a large influx of ethnic Russians, serving as a factor undermining the sense of Ukraine’s ethnic cohesiveness. Finally, Ukraine’s cultural record and its change during the Soviet period had a mixed effect on the republic’s identity formation. Historically, Ukraine had some features encouraging its cultural distinctness from the metropole and others strengthening Ukraine’s similarity with Russia. For example, Ukraine does have its own distinct language, but is similar to Russia in its religion.1 8 During the Soviet period the religious link between the two nations came to the point of subjecting Ukraine’s 1 5 Khrushchev completed the process by transferring Crimea to the Ukrainian SSR in L954 to mark the 300* anniversary of the Pereiaslav Treaty (Subtelny 1995; Wilson 1998, 17). 1 6 Scholars analyzed, for example, how Soviet federalism allowed local consolidation, undermining the stability of central power (Lapidus 1984; Roeder 1991). 1 7 Schroeder 1986, 300; Bradshaw 1993, 8. 1 8 Western Ukraine is Catholic, but the people o f the eastern and more populous region practice an Orthodox religion which dates back as far as the Cossack movement and constitutes a crucial element o f Ukraine’s identity. 135 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Orthodox Church to the formal influence of the Moscow Patriarch.1 9 The religious nexus therefore strengthens Russo-Ukrainian cultural ties and complicates the process of Ukrainian post-imperial nation-building. The other problem is the degree of Ukraine’s linguistic Russification, which is much higher than in Latvia (see table 3.1 at the end of chapter 3). With some simplification, one can say that the East prefers to speak Russian, while the West speaks primarily Ukrainian.2 0 Overall, by the beginning of Gorbachev’s reforms and the subsequent Soviet disintegration, Ukraine had acquired some important components of national identity. This identity was weaker than that of Latvia, mainly because of Ukraine’s modest experience with national independence. The process of Ukraine’s identity formation was also complicated by its late accomplishment of territorial unity and some cultural similarities with Russia. At the same time Ukraine’s historical experience with independence, however short-lived and sporadic, laid a foundation for belief in the distinctiveness of Ukraine as a nation apart from the Russian nation, a belief that was reinforced in the course of unifying the eastern and western lands. Ironically, the Soviet regime, too, in many ways encouraged Ukraine’s national identity formation. It was the Soviet regime that had modernized the Ukrainian economy, granted Ukraine a national republican autonomy, established (sub)political institutions, and completed the process 1 9 The authorities relied on the centralized Russian Orthodox Church to displace the Catholic Church and the revived (during the German occupation) the Ukrainian Autocephalous Orthodox Church, indoctrinating and absorbing their followers (Bociurkiw 1977). 2 0 Prazauskas 1994; Wilson 1998, 23. One striking fact o f contemporary Ukrainian life, at least in the country’s eastern and central regions, is what can be called an inter-linguistic communication style. 136 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of territorial unification of eastern and western lands, thereby creating important preconditions for fostering self-identification of Ukraine as an independent nation (national identity). Dom estic Structures Unlike their Latvian counterparts, Ukrainian nationalists, over the course of five years of independence, did not manage to mobilize the society around their ideas and could not provide Ukrainian leadership with firm social support for implementing its policies. However, they did play an important role in domestic political struggle, offsetting the influence of empire-savers and providing the ideological rationale for a continued nation-building process. Society Nationalists Nationalists, or nation builders, were those committed to Ukraine’s secession from the USSR and acquisition of a full-fledged national independence status. Nationalist groups emerged during the Perestroika years and were particularly active in western Ukraine, with its much better preserved national memory.2 1 Inspired by various dissent activities during the Soviet period, nationalist groupings emerged, in many cases as their direct continuation.2 2 The largest of them were the Ukrainian People’s During inter-linguistic conversations, two or more people engage in a talk while maintaining their own language preferences and not switching to either Russian or Ukrainian. 2 1 Burant 1995, 1127; Furman 1995, 73; Wilson 1998,23. 22 The Ukrainian Helsinki Union, for example, laid the foundation for the emergence o f the Ukrainian Republican Party (Prizel 1997, 339). 137 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Movement for Perestroika (Rukh), the Ukrainian Republican Party, and the Ukrainian Democratic Party.2 3 Before Perestroika, nationalism in Ukraine did not enjoy wide social support and was mainly popular among some strata of humanitarian intelligentsia. Nationalist ideas only gained influence when the old communist beliefs were completely discredited in the course of Gorbachev’s reforms and the so-called party of power decided to abandon them. In March 1990, nationalists, while hampered by the ruling regime, received about 17% of the vote to national legislature.2 4 In autumn 1990, their efforts were supported by student and worker protests in Kiev,2 5 and in 1991 nationalism had gained a truly nation-wide recognition, due mainly to support given to it by the newly-recognized leader of the new nomenklatura, Leonid Kravchuk. In March 1991, in the referendum on the preservation of the USSR, the idea of independence received the support of close to 90 percent of voters in western oblasts' and in yet another republican-wide vote m December, 90 percent of all Ukrainians gave their support to independence.27 The triumph of nationalists, however, proved to be rather short-lived. After 1992, with economic recession and declining living standards, the ruling elite became less receptive to nationalist ideas and somewhat more sympathetic of empire savers’ demands. 2 3 Martyniuk 1993,40; Prizel 1997, 339-40. 2 4 Seventy-eight out o f 450 seats. 2 5 Motyl & Krawchenko 1997, 249. 2 6 The vote inspired Ukrainian nationalists (RFE/RL Daily Report, “Chomovil Says W est Ukraine Vote Exceeded Expectations,” 1991, March, 20). 2 7 RFE/RL Daily Report, “Republics and Successor States Final Referendum Results in Ukraine,” 1991, December 5. Scholars continue to debate the ‘why’ question, with some suggesting that the reasons for such overwhelming support for independence, particularly in the east, had to do with various misinterpretations o f the meaning o f ‘independence’ (Glivakovski 1992; Laikov 1999). 138 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Beyond the ideational channels, nationalists had a few instruments with which to influence the policy making process. The idea of independence could only reach masses when supported by the ruling elite.2 8 After 1991, however, when the ruling regime withdrew its unequivocal support, nationalists were not nearly as successful in mobilizing mass support.2 9 They could hardly set the legislative agenda in the left- dominated parliament and never actually controlled more than 15 percent of the seats.3 0 But for a few notable exceptions, they held no serious government positions.3 1 The media was highly dependent on the state32 and therefore could hardly be used by nationalists as a channel for mobilizing mass support in favor of their policy preferences. To summarize, Ukrainian nationalists had to rely on support the of the party in power and had no institutional means of challenging it. Empire savers Empire savers were those willing to accept Russia’s domination in one way or another for the sake of accomplishing other goals, primarily of socio- 28 For example, in January 1990, when various dissident movements formed a human chain o f close to half a million Ukrainians and stretching from Lviv to Kiev, the action was accompanied by logistical support from what was then the communist government (Prizel 1997, 339). 2 9 In September 1992, for example, the Rukh and New Ukraine movements launched a campaign to force new legislative elections, but the drive failed to obtain the three million signatures required by law (Dawisha & Parrott 1994, 136). 30 During the 1994 elections, for example, both national-democrats and ultra-nationalists received only 13.8 percent o f the total vote (Wilson 1998, 137). One exception was Ihor Yukhnovsky, an opposition representative and one o f the six vice premiers o f Leonid Kuchma’s first cabinet. The other was Viktor Pynzenyk, also vice-primer and a member o f Rukh. Both, however, did not keep their government jobs. In 1993, the former was replaced with Vasyl Yevtukhov, and the latter resigned in protest at the contra-reform policies (Prizel 1997, 346; RFE/RL Daily Report, “New Ukrainian Economic Appointments,” 1993, March 29; EIU Country Report, 4t h quarter 1993, p. 20-21). 32 Prizel 1997, 351. 139 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. * 5*5 economic nature. Politically related to parties of communist and socialist orientation,3 4 they enjoyed wide social support among workers, industrialists, peasants, and bureaucrats feeling nostalgia for the “good old” Soviet system. Regionally, empire savers were concentrated in Ukraine’s eastern oblasts, much more Russified and economically dependent on the ex-metropole. An opinion poll taken in May 1995 indicated, for example, that in Donetsk only 29.6 percent of residents identified themselves with the population of Ukraine as a whole, while 32.8 percent felt that they belonged to the “Former Soviet” category. For comparison, in Lviv (Galicia) the numbers were 75.4 and 8.5 percent respectively.3 5 As in Russia, empire-saving forces in Ukraine were seriously defeated by Gorbachev’s reforms and the subsequent Soviet collapse. They could hardly resist the state-building efforts pursued by the new nomenklatura during the first one or two years of independence. However, by the end ofl992, with Ukraine plunging into economic recession, the situation began to change. Communist and socialist-oriented parties reemerged.3 6 More and more people felt that the country was going in the wrong direction: their percentage increased from 35 to 72 percent over the period January 1992-October 1994.3 7 By 1994, despite the trauma of Stalinism, the percentage of those willing to trade their freedom for economic security was about the same as the 3 3 The extent to which empire-saving forces were ready to sacrifice attributes of Ukraine’s independence varied: socialists, for example, were not ready to denounce the Belovezhe agreements for the sake of restoring the pre-1991 status quo as proposed by communists (Rosiia, iaku mi 1997, 121). 3 4 Major parties of leftist (communist and socialist) orientation are the Socialist Party o f Ukraine, Communist Party of Ukraine, and Peasant Party of Ukraine (Martyniuk 1993, 41). 3 5 Casanova 1998, 89. 140 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. percentage of those against it.38 Various polls indicated that the country was tom between various economic and political alternatives,3 9 and with their lagging behind Russia economically, Ukrainian empire savers increased their political credentials and ability to influence policy making process. Unlike nationalists, empire savers did not have new ideas to sell to the public and appealed mainly to people’s nostalgia for economic security. To many Ukrainians, this nostalgia proved to be stronger than their feelings of national identity. The same people who voted for national independence in March 1991 supported close economic and political ties with Russia from 1993 on, which allowed empire savers to obtain a significant number of seats in the national legislature and to use strikes (particularly initiated by coal miners in the east Ukraine) for putting pressures on policy makers. In addition, Ukrainian empire savers on various occasions obtained support (more moral than financial) from Russian politicians for the idea of Russo-Ukrainian union.4 0 Neither nation builders nor empire savers succeeded in setting the policy agenda during the five years of Ukrainian independence. Rather, each grouping had its own social support and its own way of influencing decision makers. Nationalists pioneered the ideas of independence, but were much less prepared to deal with negative, 3 6 The Communist Party o f Ukraine was legalized in June 1993 (Martyniuk 1993, 39). 3 7 Prizel 1997, 361. 3 8 Ibid., 360. 3 9 Casanova 1998, 99. 4 0 Yuri Luzhkov, Mayor o f Moscow, and Konstantin Zatulin, at the time the Chairman of the State Duma Committee on the CIS Affairs, revealed themselves as particularly outspoken supporters of the pro-integration feelings (see, for example, RFE/RL Daily Report, “Ukraine’s Foreign Ministry Protests Statement by Moscow Mayor,’’ January 16, 1995; “Reaction Among Russian Officials to Crimean Events,” March 20, 1995; “Soskovets, Duma on Ukraine,” March 27, 1995). 141 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. particularly economic, consequences of Soviet disintegration and offer a program for Ukrainian economic recovery. In their turn, empire savers maintained that economic security should not be sacrificed to national independence and that it could only be attained by restoring close ties with the ex-metropole. State Ukrainian state structures were less constrained by societal pressures than was the case in Latvia. As was theorized in chapter 2, in a polarized society such as Ukraine, the governing body would typically obtain more space for policy maneuvering than in a relatively homogeneous society. Not surprisingly, the Ukrainian state needed to develop an institutional capacity for mediating nationalists’ and empire-savers’ demands. Overall, it succeeded: during the first five years of independence, the Ukrainian state possessed all the required instruments for conducting a consistent policy course and overcoming, when necessary, an excessive resistance from nationalist or empire saving groupings. Degree o f centralization Ukraine’s state was much more centralized than that of Latvia. The December 1991 election of Leonid Kravchuk, Ukraine’s first president, was the first major step toward centralizing state authority required for overcoming excessive social pressures and conducting independent policies. In early 1992, a new constitution draft further strengthened the powers of the president at the cost of weakening those of the parliament.4 1 In particular, the president could directly 4 1 Dawisha & Parrott 1994, 136. 142 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. supervise the work of the government and issue decrees on various economic and political affairs ~ and, in the absence of the adoption of the constitution until June 1996, had maintained these powers.4 3 Ukraine’s parliament, too, took steps aimed at preventing nationalist and empire-saving parties from exerting excessive pressures. For example, in advance of the March 1994 elections, the parliament passed an electoral law that heavily favored incumbents and independents.44 Finally, in the Soviet spirit, the state essentially retained control over the media.4 5 Legitimacy Legitimacy, or the level of public trust, is another important dimension of state capacity. Ukraine’s government was highly legitimate during 1991 and 1992, the result of its commitments to then widely popular ideas of national independence. Symptomatically, in the 1991 presidential election, Leonid Kravchuk received 62 percent of the vote.46 In the referendum on independence, even in Russian- speaking Crimea and such regions as the Donbass, 54 percent and 84 percent of the turnout, respectively, voted “Yes,” due largely to politicians’ linking Ukrainian independence with hopes of prosperity.4 7 State legitimacy declined, however, during the second part of Kravchuk’s term and was only partially improved with Leonid Kuchma’s election as the country’s second president in July 1994. The fact that 42 Pogrebinsky 1993, 9; Prizel 1997, 346. 4 3 Even after the constitution had been adopted, the President’s special power to issue decrees was extended for three years (Prizel 1997, 359). 44 Ibid., 351. 45 While 46 percent of the media is directly owned by the state, the remaining 64 percent need the state for paper, access to printing presses, and financial support (ibid.). 46 By contrast, in November 1990, when Kravchuk was associated with the party apparatus, his popularity among Kievans was so low that he did not even figure in the top twenty most popular politicians (Motyl & Krawchenko 1997, 252). 143 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Kuchma had received only 52 percent of the vote and was closely followed by Kravchuk, with 45 percent, signified a relative decline of state capacity over the 1991- 94 period. Ukraine’s policy making process was more state-dominated than that of Latvia. The Ukrainian state experienced constraints from various social poles and, hence, had a number of options to pursue in its policy. Logically, in a society divided between nationalists and empire-savers, a state could choose among pro-nationalist, pro-imperial, and balancing strategies. The Ukrainian state, at various stages of its existence, exploited pro-nationalist and balancing strategies, having also given a rhetorical due to the pro-imperial feelings of the eastern lands. During 1990-1992, nation builders had the upper hand in influencing the policy agenda. At the same time, the state retained relative control over the policy making process. Quite symptomatically, despite the widespread popularity of national independence, it was Leonid Kravchuk, a former high ranking communist apparatchyk, who became a president and in charge of policy implementation. Vyacheslav Chomovil, a former dissident and leader of a key nationalist organization, Rukh, also ran for president, but received only 23 percent of the vote.4 8 The Rukh movement had no choice but to announce its support for Kravchuk’s policies. Kravchuk, too, made explicit his intention of cooperating with nationalists on the basis of the idea of 4 7 Morrison 1993, 685; Laikov 1999. 4 8 Motyl & Krawchenko 1997, 269. 144 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukraine’s independent nationhood.49 The change came in the second half of 1992, with some nationalists having withdrawn their support for the ruling regime. The Rukh split in two parts, and Chomovil announced his group’s opposition to Kravchuk’s course calling for accelerated economic reform, the creation of a federal state, and more cooperative relations with the CIS states.5 0 By 1994, the state realized the limitations of its pro-nationalist orientation and began to drift toward the empire savers. The change of policy orientation was particularly noticeable during a 1994 presidential election campaign in which both major competitors (Kravchuk and Kuchma) promised more cooperation with Russia and other CIS states, and the more Russia-oriented Kuchma defeated the more nationalistic Kravchuk.5 1 An opinion poll taken in eight eastern and southern oblasts and Crimea in May 1994 revealed that as many as 47 percent of Ukrainians would have been against Ukraine’s independence at the time if they were to repeat their December 1991 vote.52 Against some expectations, however, Kuchma did not become a voice of the empire savers. Rather, under his leadership the state pursued a balancing strategy: the accomplishments of state- and nation-building period were preserved, while priority was given to accelerating marketization and improving relations with the ex-metropole and other CIS members. Instead of relying on either nationalists or empire savers, the state 4 9 For example, see his speech at the Rukh’s congress in February 1992 (Kravchuk 1992, 205- 208). 5 0 Dawisha & Parrott 1994, 137. 5 1 In a close race, Kuchma received about 52 percent o f the votes cast while the incumbent president, Leonid Kravchuk, got 45.5 percent (RFE/RL Daily Report, “Kuchma Elected Ukrainian President,” July 12, 1994). 145 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. chose to build a social consensus and encourage the growth of political parties and movements with more “centrist” orientation, those supportive of nationhood, but not at the expense of economic reform. Foreign Economic Policy Following the above-proposed framework, this section reviews and analyzes Ukraine’s foreign economic policy along three dimensions: relations with Russia and the CIS; domestic preconditions for reorienting external economic activities; and search for alternative economic partners beyond the former Soviet area. Russian pole The belief in the virtue of economic nationalism By early 1990, Ukraine’s political elite began to increasingly share a belief in the virtue of economic nationalism as a way to improve the republic’s economic situation. The political vacuum generated by the decline of empire started to be filled with nationalist ideas, and the party in power finally gave in by embracing nationalist slogans and demonstrating its willingness to do what it takes economically in order to build independent nation- and statehood. At the core of the belief was the idea of Ukraine’s colonial dependence on Russia, the metropole. Ukraine was commonly believed to possess the strongest economic potential of all the republics, including Russia. “At least we can feed ourselves—we will never starve” was a commonly shared sentiment, one also shared by 52 Mezavisimaia gazeta, 15 June 1994, 3. In December 1991, 90 percent o f Ukrainians voted for independence. 146 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. most prominent economists. Due to the size of its economic resources and its strategic geographic location, Ukraine was routinely compared with France and Germany, not with the other republics or countries of Eastern Europe.54 It was argued that the reason why Ukraine did not become “like France” was that it was systematically exploited by the metropole. As a deputy head of Ukraine’s parliament Ivan Plushch argued in December 1991, Why is it that our people have lived on their own land for a thousand years and still have not reach the level of the world civilization and in the wake of the 21st century, still have been doing dirty physical labor and unable to take a hot shower after work? That is because during many centuries, the Ukrainian people have never been masters on their own territory. We have always been alienated from the results of our own work.5 5 Since Ukraine, as was widely believed, was the richest republic within the empire and, in fact, was the one that had to ‘feed’ Russia, it seemed only logical to further argue that Ukraine could prosper by leaving the USSR and restructuring economic activities away from the old partners. Indeed, many believed that should the old unfair and exploitative system be removed, Ukraine would quickly—in span of three to five years—become one of the largest economically developed European countries. Such beliefs almost 5 3 Morrison 1993, 685. 5 4 Methods of arriving to such conclusions were dubious, at best, and economically illiterate, at worst. For example, some o f these calculations were based on the amount o f coal and steel Ukraine was producing, without taking into consideration Ukraine’s own energy needs or the world demand for coal. There was never a serious public discussion o f issues o f Ukraine’s viability and potential of integration into the world economy. Quite often, people would learn about Ukraine’s ‘competitiveness’ and ‘richness’ from propagandist materials (listivki) of nationalist groupings (personal interviews with a senior economist at the Institute of World Economy and International Relations and a chief o f department at the National Institute of Strategic Studies, Kiev, July 1998). 5 5 Plushch 1993, 93. Similar remarks were widely circulated by many other politicians and policy makers. Hence, when Leonid Kravchuk emphasized the “necessity, by common efforts, to protect 147 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. inevitably led to the conclusion that it was the building of an independent nation that would be the key to solving Ukraine’s economic problems and that the building of such a nation would be incompatible with any form of political, economic and military integration with Russia.5 6 One can identify at least three sources of the emergence and the subsequent rise among Ukrainian elites of a belief in the virtue of economic nationalism. The first was the work of Ukraine’s Diaspora economists who had often advanced the “internal colony of the USSR” argument. In the 1970s, one of them concluded, for example, that “the Ukrainian population was forced to bear a heavy and greatly disproportionate burden in supporting the Soviet economy and the central government’s activities by being forced to suffer a lower standards of living than otherwise would have been the case.”5 7 The second source was domestic and had to do with writings of Ukrainian nationalists such as Levko Lukianenko,5 8 which later contributed to the Rukh’s economic ideas. Finally, the belief in economic nationalism was supported by a Deutsche Bank study according to which Ukraine had the best prospects in terms of integration into the European markets.5 9 The study’s conclusions were widely Ukraine from attempts to economically rob it” (1992, 207), he merely reflected an already existing and deeply shared belief. 5 6 Morrison 1993, 685; Babak 1995, 31-33; personal interviews. 5 7 Melnyk 1977, 172. More on this point in D ’Anieri 1997, 16-17 and Wilson 1998, 168-69. 5 8 Dergachev 1996, 100-104. 59 In the study, Ukraine took first place with 83 points out o f 100, followed fairly closely by the three Baltic republics and Russia (Corbet and Gummich 1990).The study was later criticized for not considering the extent o f Ukraine’s dependence on Russia for energy supplies as well as Ukraine’s dependence on Russia and other republics for the final assembly o f industrial products (Zviglyanich 1996, 125). Some scholars and policy makers denounced the study as having propagandist rather than scholarly 148 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. publicized domestically, with President Kravchuk and other politicians quoting them with pride as evidence supporting their policy course.6 0 Under conditions of political uncertainty, the idea of economic nationalism turned out to exert the strongest influence on Ukraine’s policy community. The former communist nomenklatura abandoned previously popular ideas of the enlightened socialism, but apparently was too conservative or economically illiterate to embrace market liberalism as a policy guide. In the meantime, the ideas of economic nationalism were already in the air waiting to be adopted. They were available, increasingly popular, and sounded somewhat familiar to those already used to thinking about politics in zero-sum terms. Not surprisingly, having embraced those ideas, Ukrainian policy makers were eager to practically implement them. The CIS stance Ukraine’s attitude toward the CIS went through at least two major stages. During 1990-92, a Ukraine fascinated with the ideas of economic nationalism, resisted any Moscow-initiated attempts to create supra-national institutions in place of the Soviet Union. Later, particularly after 1993, however, this attitude changed somewhat, and the Ukrainian leadership publicly acknowledged that the CIS could serve some important purposes, such as economic cooperation among its members. The country’s strategic orientation, however, remained a European one, and even with Kuchma as a president Ukraine continued to be a restrained participant in CIS affairs. intentions (personal interview with a former high-level government bureaucrat, National Bank o f Ukraine, Kiev, July 1998). Others scholars offered more positive evaluations (Schroeder 1996, 23). 149 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukraine’s original attitude towards the CIS was in many ways predetermined by the resistance of Ukrainian leaders to Gorbachev-initiated attempts to negotiate a new Soviet treaty. Whereas this drive was not nearly as aggressive as the one by Latvia, it was distinctively persistent. Unlike some other republics, including Belarus, Ukraine firmly resisted many versions of a new Union treaty that were initiated one after another by the President of the USSR.6 1 It avoided entering Moscow-initiated multilateral agreements and began pursuing its own economic policy, without Moscow as an intermediary. In November 1990, for example, Ukraine, together with Russia and Belarus, negotiated to coordinate price changes, thus demonstrating an attempt to enhance economic cooperation among the republics without the Soviet center. " Another example was the Treaty on Economic Community signed in October 1991 and intended to create a "common economic space" in which the republics would cooperate on economic policy, trade, and other matters. Ukraine refused to sign the treaty, viewing it as an obstacle to its independence. Explaining in a television address why Ukraine was staying out of the economic union, the deputy head of the Ukrainian parliament, Ivan Plyushch, declared, “History has given us a chance to become an independent nation, and we do not want to continue to be a colony.”6 3 The leadership’s attitude was fully in accord with that of the nationalists. Rukh, for example, issued a 60 Motyl & Krawchenko 1997, 246; Plushch 1993, 68, 93. 6 1 This resistance is well documented in Solchanyk 1992, 1993. 62 Izvestiia, November 20, 1990, 3. 6 3 RFE/RL Daily Report, “Ukraine Refuses to Sign Economic Accord,” October 18, 1991; Nahaylo 1992a, 25. 150 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. statement calling the treaty a "real danger" to Ukraine's nationhood. The agreement, it said, is above all a political document aimed at salvaging the Soviet empire.64 Eager to become independent from Moscow, Ukraine, along with young Russia’s leadership, was directly responsible for the immediate break-up of the Soviet Union. The possibility of concluding a treaty still existed in the fall of 1991, when Gorbachev had gone back to Moscow after the failed coup. Kravchuk insisted, however, that Ukraine would only consider entering into agreements "in which it does not lose a drop of its statehood."6 5 In December 1991, the leaders of Russia, Ukraine, and Belarus met at Belovezhie. Kravchuk went along with Boris Yeltsin’s proposal to sign a treaty about the establishment of what would soon become the Commonwealth of Independent States, because he shared Yeltsin’s aspiration to eliminate the political center personified by Mikhail Gorbachev.6 6 The creation of a new union was, therefore, merely the fastest and most effective way to eliminate the old one. Ukrainian leadership did not see any future for a strong political center and viewed the newly emerged CIS as an “instrument for civilized divorce” with Russia and other ex-Soviet republics. This view was widely shared among political elites and is illustrated by the statement of Dmitrii Pavlychko, chairman 6 4 RFE/RL Daily Report, “Other Republics Economic Treaty Criticized in Ukraine,” November 13,1991. 65 RFE/RL Daily Report, “Kravchuk on Foreign Visits, Independence, and New ‘Union,” October 8, 1991. Many similar statement were made by Kravchuk and others during the fall 1991 (see RFE/RL Daily Report September 30; “Gorbachev Cannot Imagine New ‘Union’ Without Ukraine,” October 14; “Other Republics Economic Treaty Criticized in Ukraine,” November 13). 6 6 Just a few weeks after the Belovezh’e agreement, Kravchuk noted with pride in a public interview that Ukraine had been “the force” that had “destroyed the [Soviet] empire” (RFE/RL Daily Report, “Kravchuk on Ukrainian Independence and the Commonwealth,” December 30, 1991). 151 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of the Ukrainian parliament’s Foreign Affairs Committee and a senior advisor to the Ukrainian president, who saw the commonwealth as a temporary system that would be discarded after Soviet nuclear weapons were destroyed. In Pavlychko’s words, the commonwealth should have played merely a transitional role as the Soviet republics consolidated their independence and developed economic relations.6 7 While nationalists were pushing to leave the CIS altogether,6 8 the leadership was hoping the problem would be solved by itself, and the new union would disintegrate after the manner of the old one. This attitude began to change in late 1992, when Ukraine plunged into economic recession and hyperinflation (see table 3.2 at the end of chapter 3). The economic consequences of the Soviet disintegration, as well as Ukraine’s own isolationist stance, hit the country badly. Coupon collapsed6 9 and Ukraine experienced an extremely sharp decline in trade7 0 (See table 3.2). Efforts to find alternative energy sources were far from successful, and the country was again forced to rely on Russia for its economic survival, though it was in no position to pay Russia back.7 1 In addition, Ukraine faced severe 6 7 RFE/RL Daily Report, “Ukrainian Presidential Aide Sees Commonwealth as Temporary,” December 18, 1991; ElU Country Report, No. 1, 1992, 75. 6 8 Moscow Programma Radio Odin Network, “Rukh’s Chomovil on CIS ‘Imperial Momentum,” in FBIS-SOV-92-068, April 8 1992, 45-46; Kiev Ukrayinske Radio First Program, “Rukh Urges Suspension of CIS Membership,” in FBIS-SOV-92-073, April 15 1992, 44. At one point Vyacheslav Chomovil, a Rukh leader, went as far as to say: “Over a period of time we’ll forget about the commonwealth” (ElU Country Report, No. 1, 1992, 75). Addressing his followers later, in December 1992, he attacked the CIS as “one o f the greatest moral and psychological blows against any newly attained independence” and described it as a “neo-imperial phantom” which existed to “pump resources out o f Ukraine” (Morrison 1993, 689). 6 9 In 1993, annual inflation reached 10,200 percent (Aslund 1995, 127). 7 0 The country’s 1992 foreign trade volume declined by 33.5 percent (Boss and Havlik 1994, 240). 7 1 Whitlock 1993; Smolansky 1995. 152 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 77 problems with production supplies. ~ All these factors stimulated the decline of nationalist ideas and sharp criticism of the government’s policies. The east-central region in particular only gave national independence its conditional support and was not prepared to stand for independence at the expense of economic security. Led by newly- emerged and reemerged parties of empire-saving orientations, the east demanded to reverse the strategy of economic nationalism and to restore disrupted economic ties with Russia. Donbass’s miners went on strike, and local governors of eastern oblasts began negotiating treaties directly with neighboring Russian cities “to restore the traditional, above all, economic ties.”7 4 These pressures soon took the form of territorial division, threatening to split the country along its ‘east versus west’ line. Under such conditions, the early illusions of fast and relatively smooth integration with Western economic institutions began to fade, and the state launched a search for broader social support for its policies, beyond nationalist-oriented groupings. As a result, the original perception of the CIS as an organization with only temporary functions serving to the “civilized divorce” of the ex-Soviet republics started to change, too. Instead, the CIS was increasingly viewed as able to serve some important functions and, therefore, as something that should continue to exist and not be disbanded after the 72 Gonchar 1995. 7 3 Martyniuk 1993, 39; Wilson 1993. 7 4 D’Anieri 1997, 21. According to Chairman o f the Finance and Budget Committee o f the Russian parliament Nikolai Gonchar, the “foreign economic relations of Ukrainian oblasts neighboring on Russia are almost entirely focused at Russian oblasts and regions.” For example, this indicator for Kharkiv Oblast measures 80 percent, and for Luganks and Donetsk oblast, 90 and 85 percent, respectively. For their part, the foreign economic relations of a number of Russian oblasts that border Ukraine are also ‘tied’ to neighboring Ukrainian regions. Above all, this is true o f Belgorod, Rostov, and Bryansk oblasts” (Gonchar 1995, 143). 153 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. manner of the USSR. Confronted by severe economic problems, Ukrainian leadership felt that the CIS could and should have facilitated economic cooperation among the Soviet successor nations and that, should it have been disbanded, the situation in Ukraine would have became even worse.7 5 The year 1993 was a time of increased Ukrianian activity in CIS matters. At a CIS summit in Minsk in January 1993, Ukraine signed an agreement on interstate banking and, in July of the same year, the Prime Ministers of Ukraine, Russia, and Belarus issued a joint statement calling for the creation of a customs union and a single market in goods, services, and capital.7 6 This spurred debate over the country’s further participation in CIS economic affairs. In September 1993, Ukrainian leadership made a controversial decision to join the CIS Economic Union agreement, albeit as an associate member only.7 7 The agreement sought to achieve both economic and political goals. Economically, it was hoped that the agreement would help secure some dismantling of the trade barriers between the former Soviet republics that proliferated after 1991. The treaty was supposed to provide for a “gradual deepening of integration” through the progressive establishment of a free trade zone, customs union, and a common market, as 7 5 RFE/RL Daily Report, “Ukraine Debates CIS Summit Participation,” September 23, 1993; Kuzio 1994, 199; Garnett 1997, 64. 7 6 RFE/RL Daily Report, ‘Toward the Integration o f Russian, Ukrainian, and Belarusian Economies,” July 12, 1993; Moscow ITAR-TASS, “Sign Statement on Economic Integration,” in FBIS- SOV-93-131, July 12 1993, 1-2. The Economist responded to the development with the comment that “the growing recognition, particularly among Ukrainian managers, that post-independence optimism concerning an economic reorientation towards Europe was hopelessly misplaced” (ElU Country Report, 3r d quarter 1993, 17). 7 7 RFE/RL Daily Report, “Nine CIS Prime Ministers Initial Agreement on Economic Union,” September 24, 1993; Kiev Ukrayinske Telebachennya Network, “Ukraine Signs as ‘Associate,” in FBIS- 154 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. well as monetary coordination.7 8 Politically, the leadership was making an effort to bandwagon a shift from the country’s generally nationalist mood to one of “why do we need this independence?” The signing o f the Economic Union agreement preceded a heated discussion at home. Nationalists argued against Ukrainian participation in the treaty on the grounds that it served the interests of Russian domination over other CIS members. Empire- savers, on the other hand, pushed for Ukraine’s more active role in CIS matters. A roundtable of Communist and pro-Communist parties and groups, held in Kiev on August 20, urged that Ukraine form an economic union with its two neighboring Slavic nations. The discussion continued in the parliament.7 9 After much hesitation, Kravchuk supported the “economic union” agreement— drafted initially by Kuchma with the Russian and Belarussian governments— as a blueprint for a more integrated CIS. Speaking to the Ukrainian parliament on September 1, 1993, Kravchuk said it would be senseless for Ukraine to oppose economic integration, citing the example of Western Europe’s single market and the NAFTA agreement. He called for a dispassionate calculation of the costs and benefits of economic union and, in a passage directed at nationalists, added: “On the basis of euphoria and emotions one can quickly take a decision but the after-effects will be very SOV-93-185, September 27 1993, 3; Moscow ROSSIYSKIYE VESTI, “Paper Reports on Signing of CIS Economic Union Treaty,” in FBIS-SOV-93-187, September 29 1993, 1. 7 8 Trade policy reform 1994, 18; ElU Country Report. 2nd quarter 1994, 25. For full text of the treaty, see Russia and Eurasia Documents Annual 1995, 31-32. 79 RFE/RL Daily Report, “Ukrainian Leader Wary of Proposed New Economic Union,” August 23, 1993; “Ukraine Debates CIS Summit Participation,” September 23, 1993. 155 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 80 complicated. It is time to learn something from experience.” The actual decision, however, had not been made until the Ukrainian delegation arrived in Moscow. Only there, after numerous discussions with Russia and other CIS members participants, did Kravchuk decide that Ukraine should join the controversial agreement, but only as an associate member.8 1 It seems very likely that the decision was motivated primarily by the desire to avoid further domestic polarization and even confrontation over the country’s cultural identity. If so, it served its purpose well. Having arrived from Moscow, Kravchuk faced criticism from both sides of the political spectrum, and the ambiguously defined the status of Ukraine in the CIS Economic Union helped him to withstand attacks for “betrayal of national interests” from both left and right. Upon returning home, he claimed, for example, that “we did not sign the agreement, because it was only signed by full members. That is to say we could not sign it even if we wanted to.” " In early 1994, however, facing reelection and in need to confirm his willingness to cooperate within the CIS framework, he argued just the reverse— that Ukraine was in fact a full 83 member in CIS economic matters. 8 0 Morrison 1993, 691. 8 1 According to the treaty, associate status can be granted if a “state accepts only part o f the commitments o f this Treaty” and “with the EU countries consent.” The treaty, however, left unspecified exactly what “part” can a state accept or reject (Russia and Eurasia Documents Annual 1995, 32. 8 2 Kiev MOLOD UKRA YINY, “Further on Kravchuk Comments on Return From CIS Summit,” in FBIS-SOV-93-188, September 30 1993, 28. 8 3 “We have signed all the economic documents which were put to the CIS Heads of State Council. Thus, I believe that in actual fact there is no difference between those classed as full members and as associate members o f the Economic Union... We are playing and will continue to play the most full and active role in the Economic Union” (Rossiyskiye Vesti, “Kravchuk Denies Quarrel With Russia,” in FBIS-SOV-94-082, April 28 1994, 55). 156 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The 1994 election of Kuchma as president confirmed that Ukraine no longer believed in the virtue of breaking away from Russia and the CIS. In one of his speeches in Lviv, Kuchma declared that “the CIS countries and first of all Russia, form a zone of our special interest. Here we have our main sources of raw materials, sales markets, close technological and cooperative ties.”8 4 At the same time, the earlier efforts of nationalists-led Kravchuk did not disappear without an effect; like his predecessor, Kuchma was committed to strategic goals of “returning to Europe” and protecting Ukraine’s sovereignty. Like the nationalists, Kuchma wanted to practice economic relations with Russia and other CIS members on a bilateral basis and resented efforts to strengthen the CIS-based multilateralism. The actual difference between his vision and the vision of the early economic nationalists was that the goal of integrating with Europe was no longer defined in zero-sum terms as if it could only be reached at the cost of moving away from Russia and Eurasia. Instead, the new leadership proposed to view cooperation with Russia and the CIS countries as a precondition for establishing coherent economic foundations for Ukraine’s independence and continued European drive.8 5 Ukraine, therefore, remained a restrained participant in CIS multilateral initiatives. For example, it maintained its reservations about participating in the CIS Economic Union and remained an associate (not a full) member of the arrangement. It 8 4 Filipenko 1995, 54. 8 5 In a December 1995 government program, for example, the goal o f establishing a free trade zone with Russia is listed among other measures intended to shore up Ukraine’s foreign economic 157 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. also abstained from signing the Payment or Customs Union agreement among the CIS members and it remained highly critical of Russia for its desire to dominate in the former Soviet area and for its intolerance of other republics’ sovereignty.8 7 This policy stance remained at odds with Moscow’s preferences for Ukraine’s more active role in CIS affairs, but it served well in maintaining a domestic balance between pro-Russian and nationalist-oriented forces. On the one hand, Kuchma realized the importance of taking seriously the empire-saving demands and did move away from the earlier- isolationist policies.8 8 On the other hand, he remained open to nationalist pressures and did not become Ukraine’s president “in order to become a vassal of Russia.”8 9 In early 1995, for example, Kuchma severely criticized the pro-Communist organizers of a campaign in favor of holding a referendum on the creation of a new political, economic, activities, such as stepping up exports o f agricultural products and protecting domestic producers from foreign dumping (Yanevsky 1995, 57). 8 6 The Payment Union agreement was originally signed on November 21, 1994. Its participants pledged to create a Union-based payment system to deal with payments related to mutual trade and credit relations. Ukraine expressed its willingness to join the agreement after the introduction o f the country’s national currency (in September 1996), but never did so (Trade Policy and the Transition Process 1996, 197). The Customs Union further proclaimed a commitment to customs and payment regimes and eventual monetary union (Kiev UNIAN, “Belarusian Way’ o f Integration With Russia Rejected,” in FBIS- SOV-95-107, June 5 1995, 45; Moscow INTERFAX, “Kiev Not To Join CIS Customs, Payment Unions This Year,” in FBIS-SOV-96-003, 4 January 1996,42). 8 7 Ukraine’s sensitivity toward these issues was clearly demonstrated in an exchange between Russian president and Ukraine’s foreign minister. In September 1995, Yeltsin issued an important decree outlining Russia’s strategy in the CIS on the premise o f reconstituting it as a great power (Mihalisko 1995). Responding to the decree, Ukraine’s foreign minister wrote an extended memo for distribution in policy circles in which he argued that Ukraine did not view the CIS as a suprastate structure or a preferential arrangement; instead, Ukraine wanted to maintain “normal” and “equal” relations with Russia and other CIS members while remaining open for the larger integrative trends in the world (Garnett 1997, 63-64). 8 8 Even during his tenure as prime minister Kuchma argued that “we are definitely being pushed toward this [closer integration with Russia] from below, and if we don’t do it ourselves, others will do for us. I don’t think there is any other way” (Moscow Ostankino Television First Channel Network, “Premiers Comment on Economic Integration,” in FBIS-SOV-93-131, 12 July 1993, 3). 8 9 Solchanyk 1995, 50. 158 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and military union with Russia, Belarus, and Kazakhstan. While visiting a military unit in the Chemihiv region, Kuchma told reporters that such a union would “do no one any good, including Ukraine” and warned organizers that, as recently elected president of an independent Ukraine, he would not allow anyone to "rock the boat we are in" and would do his utmost to strengthen its independence.9 0 Currency cooperation with Russia A somewhat similar pattern of behavior was demonstrated by Ukraine in its bilateral relations with Russia. At earlier stages, Ukrainian leadership did not value cooperation with the ex-metropole very highly, viewing it as incompatible with the goals of establishing national independence. In late 1992, this attitude started to change, and normalization of economic relations with Russia was placed firmly on the policy agenda. Ukraine’s policies in both currency and trade domains may illustrate how this patterned developed. In the currency domain, Kravchuk and his supporters felt that the early introduction of hryvna (national currency) and a unilateral departure from the “ruble zone” were the key steps in bringing economic salvation to Ukraine.9 1 Proposals to create a currency regime for the purpose of coordinating economic policies in the former USSR92 were not given serious consideration. The belief in the necessity and urgency of introducing the hryvna was consistent with the ideology of nation-builders who 90 RFE/RL Daily Report, “Kuchma Denounces Campaign For New Political Union,” January 17, 1995. 9 1 Ivan Plushch, for example, was o f those who argued, in May 1991, before the Soviet disintegration, that Ukraine will eventually need to have its own currency (Plushch 1993, 69-70). 159 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. believed that the major priority was, as Stepan Khmara put it, “securing the self- sufficiency of the national economy and its independence from the influence of external economic competitors or political maneuvering.”9 3 Moreover, very few people realized that leaving the ex-Soviet currency area would require some serious sacrifices on Ukraine’s part. In the words of an observer, “Cutting the economy off from Russia by leaving the ruble zone and trading at world prices was seen not as the price of political independence, but as an economic objective in itself.”9 4 Consistent with the beliefs it held, Ukraine was one of the first in the former Soviet area to introduce its own, albeit temporary, currency (coupon). It did so in January 1992, in order to leave the ruble zone, but not necessarily to speed up its own economic transition. In fact, the step could be seen as hurting Ukraine’s prospects so long as the Ukrainian leadership was not going to accompany it by other measures, such as price liberalization and inflation controls. Whereas in Latvia the introduction of national currency was part of a general package of economic reform measures, in Ukraine it was merely a way of reacting to Russia-initiated price liberalization and, inevitably, a sharp increase in prices in the area of ruble circulation. Since Ukraine could not print more rubles to offset negative consequences of the Moscow-initiated price reform (such a decision could only be made in Moscow), coupons were supposed to play the role. Salaries would be paid in coupons, and prices would remain government-controlled. Unlike in Russia, Ukrainian leadership, it did not see 92 For such proposals, see, for example, Williamson and Havrylyshyn 1991. 9 3 Wilson 1998, 170-71. 160 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. immediate price liberalization as a key step of economic transition and was hoping to protect its citizens from the increase in consumer prices. Further events confirmed that it was not the market reform Ukrainian leaders had in mind. In March 1992, the Ukrainian parliament approved in closed session (with just 24 votes “against”) a presidential program called “Foundations of Ukraine’s National Economic Policy.” This program considered national control over monetary affairs one of the key pillars of economic reform. In the words of the program’s principal author, Oleksandr Yemelyanov, the main problem was that Ukraine was totally financially dependent on Russia: At a time when Ukraine has become an independent nation and the Union center has ceased to exist, our economy continues to be managed from afar, now through financial, monetary, and pricing policies. In practice, Ukraine has not taken, indeed, has not been able to take, any serious independent decision on the economy9 5 The problem, labeled by the program’s authors as the “extremely dangerous price race” (referring to Russia’s liberalization reform), could only be solved upon the condition of “complete withdrawal from the ruble area and the swift introduction of a separate currency.”9 6 In November of the same year, Ukraine, acting consistently with the program’s recommendations, unilaterally banned the ruble from circulation on its territory, thereby leaving the ruble zone. The official exchange rate allocated was one 9 4 Morrison 1993, 685. 95 Komsomolskaya pravda, “National Economic Policy Theses Detailed,” in FBIS-SOV-92-060, 27 March 1992, 55. The program was only published later in Holos Ukrainy (May 1, 1992, 6-7). 96 Ibid; See also an interview with Yemelyanov published in Uriadovii Kurier (No. 13, March 1992,4). 161 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. coupon to one ruble, despite the fact that in reality one coupon could only buy one-half ruble. A further development demonstrated the shortsightedness of Ukraine’s monetary isolationism. The policy of delaying price liberalization by assuming control over printing money proved to be a disaster for the country’s economy. The lack of reform led to the outflow of goods to Russian markets, a development that could have hardly been stopped by the introduction of the coupon. The temporary currency was losing its real value relative to ruble9 7 (see table 3.2 at the end of chapter 3), and Ukraine was further lagging behind Russia in living standards. As a result, the hryvna was introduced in September 1996, only after the government finally realized the importance of other reform measures. With a few isolated exceptions, Ukrainian economists did not foresee the collapse of their early introduced currency; politicians also believed in the strength of the political momentum built up behind the idea of establishing an independent currency and central bank.9 8 All this suggests that, although the decision to leave the “ruble zone” was in part pushed by Russia’s own isolationism,9 9 its main 97 During November-December, Ukraine printed 100 million coupons, which immediately spurred the inflation by 50 percent a month. Over 1992, prices increased 2500 percent (Finansoviie izvestiia, January, 21-27, 1993, p. VII). 98 When the governor of Ukraine’s central bank, Vadim Hetman, expressed doubts over the wisdom o f leaving the ruble zone, he was brusquely overruled by Kravchuk (Morrison 1993. 686). 9 9 Russia’s isolationism was reflected, for example, in its unwillingness to coordinate its price liberalization with its CIS counterparts. Kravchuk was complaining at one point that “none o f the policies, price, taxes or any other, is coordinated” (Nezavisimaia gazeta, January 13, 1993, p. 5). Another possible dimension o f Russia’s essentially isolationist policy stance had to do with its decision to stop issuing ruble credits to Ukraine (RFE/RL Daily Report, “Russia Suspends Credits to Ukraine,” September 23, 1992). Russian intellectuals and policy makers generally believed that Russia would have been better positioned for further economic reforms if it had remained in the ruble zone alone (Nezavisimaia Gazeta, November 14, 1992, 1; Kliachko and Solovei 1995). 162 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. origin was domestic and rooted in elites’ belief in the virtues of economic nationalism. The belief that Ukrainian “colonial status” was the main obstacle and that the key to prosperity was independence from the metropole including the independence in monetary affairs was wide spread and proved to exert the strongest influences on policy making.1 0 0 Trade cooperation with Russia A somewhat similar, although distinct, pattern was demonstrated in Ukraine’s trade relations with the ex-metropole. At earlier stages, Ukrainian leadership did attempt to limit commercial activities with Russia for the purpose of their reorientation toward other markets beyond the former Soviet region. In Ukraine, however, such a policy proved to be much less successful than in Latvia: already, by 1993, the policy of breaking away from Russia was largely reversed and Ukraine, instead, became the strongest proponent of establishing a free trade area with Russia. Ukraine’s first reaction to the Soviet disintegration and calls to create an economic union among the CIS members was to restrict its relations within the former USSR to bilateral trade agreements. Most of these were agreements on barter deliveries of “vital” or “strategic” goods.1 0 1 A similar policy was proposed vis-a-vis the ex- metropole, but the priority goal was to gradually reduce the dependence on trade with Russia. For that, a series of government measures were proposed. The above 1 0 0 Other scholars arrived at similar conclusions (Morrison 1993,685; Babak 1995, 33). 1 0 1 In other words, raw materials, energy products, and basic consumer goods to ensure production and supplies These agreements were signed by Ukraine with most republics during 1991 and 1992 (Trade Policy Reform 1994, 67). 163 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. mentioned March 1992 economic program outlined the strategy of reducing Ukraine’s commercial dependence. The introduction of national currency was to be accompanied by export and import restrictions and the establishment of customs posts at all borders, especially those with Russia. Along with the introduction of coupon, commercial restrictions were intended to stop the growing outflow of Ukrainian goods abroad (mainly to Russia, where prices were higher due to their liberalization). Other measures aimed at trade reorientation included subsidies for domestic producers, banning barter trade and introducing regime of hard-currency trade with the ex-Soviet republics, and 10*5 lifting a ban on the re-export of goods from the countries of the ruble zone. “ The president-initiated program was overwhelmingly supported by the parliament and 103 recommended for being “taken into consideration” by various economic ministries. Economic agents and government agencies, however, took “into consideration” very few of those measures. Export and import restrictions had been in effect even before the program was designed, without making much progress in terms of maintaining the country’s economic stability.1 0 4 Subsidies for domestic producers were 1 0 2 Uriadovii kurier, No. 13, March 1992, 4; Komsomolskaya pravda, “National Economic Policy Theses Detailed,” in FBIS-SOV-92-060, 27 March 1992, 55. 1 0 3 Personal interview with a deputy o f Verhovna Rada who was present while the voting took place, Kiev, July 1998. 1 0 4 For example, in August 1991, Ukraine imposed a ban on the export o f sixty scarce consumer goods. Prime Minister Vitold Fokin justified the measure on the grounds that large amounts of goods were taken out o f the republic, goods that “we badly need ourselves.” Farms were sending grain and other produce to the republics with higher than wholesale prices (RFE/RL Daily Report, ‘Temporary Ban on Exports from Ukraine,” August 13, 1991). During 1992 and 1993, the government applied export quotas to a large list o f raw materials, but also to certain capital and consumer goods, totaling about 180 products (Pro perelik tovariv 1992; Trade Policy Reform 1994, 66). 164 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. never applied,1 0 5 primarily due to the government’s lack of resources. Ban for barter- based trade operations and insistence on trade for cash also remained only on paper.1 0 6 Given that as much as 45 percent of all Ukrainian trade was conducted in barter,1 0 7 such a ban could have brought catastrophic consequences for the economy. Finally, while a ban on the re-export of goods from the countries of ruble zone (mainly Russia) was lifted, at the time it alone could have hardly produced the expected reorientation outcome. The very existence of such re-export indicated Ukraine’s dependence on Russian markets and, without being accompanied by other measures, could have not brought strong reorientation effects. Ukraine’s lack of economic reform, as well as its heavy dependence on Russian markets1 0 8 (see table 3.2 at the end of chapter 3), prevented a full-fledged implementation of the strategy outlined in the March 1992 program. From mid-1992 on, the potentially destructive outcomes of the strategy were increasingly obvious to Ukrainian leadership, and it began to realize— in a hard way—the significance of preserving close economic ties with Russia. A severe decline in trade and the collapse of the coupon generated social pressures and political resistance from striking miners and pro-Communist groups. Ukraine’s trade unions, particularly those representing 1 0 5 Trade Policy Reform 1994, 66. 1 0 6 Barter was first officially allowed in January, albeit with many bureaucratic complications (Moscow News Fax Digest, “Rules for Barter Operations Streamlined,” in FBIS-SOV-92-l 14, 12 June 1992,73-74). In early May, the government ruled that “all subjects o f foreign economic activities o f Ukraine have a right to conduct barter-based trade,” and this was approved by the parliament (see Pro poriadok provedeniia bartemikh operatsii 1992). 1 0 7 MacArthur 1997, 212. 1 0 8 Before the Soviet disintegration, Ukraine’s trade with Russia accounted for up to 70 percent o f its total trade (Bradshaw 1993, 27). 165 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. eastern oblasts, were explicit in their demands for stronger ties within the CIS and argued in favor o f reestablishing broken economic links via coordination of actions with the CIS unions.1 0 9 The leadership began losing its legitimacy and needed an additional public support. Kravchuk acknowledged mistakes his leadership made in his overdue public statement of early-1993: “We obviously overestimated the potential of our economy. We overlooked the fact that it was structurally incomplete.”1 1 0 A number of steps were undertaken to intensify trade cooperation between the two countries. First, Ukraine attempted to normalize bilateral relations. In late-1992, it initiated contacts with Russia’s side and, as a result, a few economic agreements were signed. One of them pledged to coordinate the two sides’ economic policies and introduce most favored treatment in mutual trading.1 1 1 In order to deal with pressing energy problems and the country’s rapidly increasing debt to Russia, a series of energy negotiations were launched.1 1 2 The early 1993 meeting of Ukrainian and Russian presidents even announced the need to negotiate a bilateral treaty on friendship, partnership, and cooperation in the nearest future.1 1 3 In addition to bilateral efforts, Ukraine made some unilateral steps to correct its previously isolationist stance. Import 1 0 9 Kyyivska pravda, “Leaders Vows Political Offensive,” in FBIS-SOV-92-247, 23 December 1992, 64-65; Kiev UNIAR, ‘Trade Union Congress Adopts Resolutions,” in FBIS-SOV-93-166, 30 August 1993,41. 1 1 0 D’Anieri 1997,21. 1 1 1 Uriadovii kurier, June 26, 1992, 2; RFE/RL Daily Report, “Economic Agreements Signed Between Russia and Ukraine,” October 23, 1992. 1 1 2 RFE/RL Daily Report, “Russian-Ukrainian Economic Relations,” November 4, 1992; Smolansky 1995, 72. 1 1 3 Izvestiia, January 16, 1993, 1; RFE/RL Daily Report, “Russian-Ukrainian Talks,” January 15, 1993. 166 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and export quotas were reduced or eliminated.1 1 4 In August, the value-added tax and excise taxes on trade with Russia and other CIS members were eliminated.1 1 5 These steps were only partially helpful1 1 6 and, in June 1993, under Ukraine’s continued decline of trade, another bilateral agreement with Russia was concluded. This agreement again sought a revival of trade and provided both sides with MFN status, including the mutual exemption from import taxes. It again promised to establish a free trade zone, liberalize banking regulations, and provide for the free movement of labor in five regions on each side of the border.1 1 7 With Kuchma’s arrival as Ukraine’s president, the policy of establishing a free trade area with Russia became one of the key directions of Ukraine’s trade policy. Pushed from below, Kuchma, a former industrialist himself, wanted to give the enterprises a free hand in restoring the old links with Russia,1 1 8 given Ukraine’s trade dependency on the ex-metropole.1 1 9 In February 1995, as a result of Kuchma’s policy, the two countries were able to initial a friendship and cooperation agreement and sign a new trade agreement, “On the mechanism of realization of the free trade agreement.”1 2 0 Russia, however, did not 1 1 4 For example, in May, export quotas were eliminated for the following products: cement, iron ores, some petrochemicals, graphites, timber, paper, and ferrous metal manufactures (Trade Policy Reform 1994, 67). Quotas were reduced for many other products (Pro Liberalizatsiiu 1993). 1 1 5 D’Anieri 1997,21. 1 1 6 Largely because the best bilateral intentions and promises remained on paper only. 1 1 7 RFE/RL Daily Report, “Ukraine, Russia Sign New Economic Accord,” June 6, 1993. List of goods to be traded and prices were subject to repeated re-negotiations (“Annex” in Trade Policy Reform 1993). 1 1 8 Jung 1995,51-52. 1 1 9 This dependency decreased after 1991, but was still significant. In 1994, Russia was Ukraine’s most important trading partner, with Ukraine’s exports to Russia accounting for about 40 percent and imports for 30 percent o f total trade (RFE/RL Daily Report, “Ukrainian Foreign Trade in 1994,” February 9, 1995). 1 2 0 Markus I995e, 58; Kutsai 1995. 167 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. seem to be as interested in implementing the agreement, which, again, significantly reduced the practical effects o f Ukrainian policies.1 2 1 Ukraine thus sharply reversed its original nationalist commercial policy toward Russia. As with the currency introduction, Ukrainian commercial intentions could not be fulfilled, partially because of their poor design and partially because of lack of efforts by the leadership to reform the domestic economy (the next section returns to this point). It is important to emphasize, however, that behind the idea of trade reorientation, as well as behind the ideas of breaking away from the CIS and leaving the ‘ruble zone,’ was the already familiar belief in the virtue of economic nationalism. As two Ukrainian scholars observed, “in Ukraine’s political life, the motto ‘Independence is above all other things’ gained status of the most important one. Everything was sacrificed to it, and everything was justified by it.” ~ The belief in economic nationalism had emerged before Ukraine gained independence, and it can be traced back to the nationalist programs and slogans of the late-1980s and early-1990s. After Kravchuk came to power, nationalist-minded intellectuals and government-affiliated economists worked closely to develop a Ukrainian foreign economic policy vision. To give just one example, the March 1992 program was prepared by Olexander Yemelyanov and Volodimir Shcherbak, both economists from a government agency 1 2 1 According to the calculations o f Ukraine’s Ministry o f Foreign Economic Relations, a new agreement would have saved Ukraine about $1.15 billion annually. Ukraine placed blame on Russia for its failure to follow the agreement, arguing that Russia never eliminated or reduced the list of goods not subjected to the free trade agreement. The list constituted 91.8 percent of all Russian goods that were exported to Ukraine (Kutsai 1995). A similar point was also made by other scholars (Samodurov 1997, 14; Sekarev 1997, 268). 168 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (Gosplan, or State Planning Committee), but also with the involvement of Rukh’s- affiliated economist Vladimir Cherniak.1 2 3 Defending the program, Cherniak described it as a “sharp turning point” and declared, consistendy with the period’s popular nationalist beliefs, that “following the Russian path would lead to a total collapse of the Ukrainian economy and total dependence of Ukraine on Russia.” 1 2 4 Only in 1993 did the ideas of economic nationalism lose their early popularity among policy circles and various social groups. Domestic economic institutions As was argued in the previous chapter, reorientation of the ex-Soviet nations’ international economic activities cannot be successful without conducting a series of domestic reforms, such as macroeconomic stabilization and dismantling the old trade regulation system, one designed under the communist regime. In Ukraine, however, the efforts aimed at gaining economic independence were not accompanied by decisive marketization at home, as was done in Latvia. Kravchuk’s government announced its intention to liberalize prices, introduce its own national currency, and conduct privatization in early 1992. The best intentions remained frozen on a declaratory level until the end of 1994, which undoubtedly slowed Ukraine’s progress in foreign 12 2 Luzan and Luzan 1998, 99. 1 2 3 In general, the March program, in its main ideas, was influenced by the earlier-drafted program o f the so-called democratic platform within the Communist Party o f Ukraine. The latter was written in 1989, with close involvement o f Rukh-affiliated nationalist-minded economists. Vladimir K. Cherniak was one o f the program’s principal authors responsible for the economic sections. One o f the few, Cherniak was never a member o f the Communist Party; instead he was a key participant in Rukh’s activities and later was elected to parliament from Rukh (personal interview with a former Democratic platform activist and a Rukh’s leader, Kiev, July 1998). 1 2 4 Nahaylo 1992a, 28. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. economic reorientation. This section briefly reviews Ukraine’s domestic marketization efforts, concentrating on price liberalization, the establishment of a foreign exchange system, and trade regulations. Rather than decontrolling prices in a rapid and decisive manner, as was done in Latvia, the Ukrainian government followed a path of gradual and, supposedly, less painful partial price increases. By the time Leonid Kuchma became president and, in October 1994, announced a new and radical package of reforms, there had been at least five major increases in administered prices—three in 1992 and two in 1993. The government continued, however, to set prices on most basic food items, as well as energy, public utilities, housing rents, transportation, and communication.1 2 5 These attempts at gradual price decontrol were halted in June 1993 when, after the fifth large increase of administered prices, the parliament imposed a moratorium on price increases on basic food items until October. Real changes only came as a result of Kuchma's intention to accelerate the pace of reforms. Due to these efforts, in early 1995, prices were freed at the producer level, with controls remaining only for natural monopolies and a small number of artificial monopolies. At the retail level, price controls remained on bread, public utilities, public transportation, and housing rent.1 2 6 Ukrainian efforts to establish a foreign exchange system faced similar obstacles. Despite the government’s early announcements of an intention to introduce its own 1 2 5 At the end of 1992, for example, price controls were estimated to apply to about 30 percent to 40 percent o f turnover, while administered prices applied to some 10 to 12 percent o f turnover (Trade Policy Reform, p. 68). 1 2 6 Ibid, 68. 170 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. national currency, hryvnya, this was not accomplished until a much later time. In November 1992, Ukraine left the ruble area and introduced the coupon, supposedly an interim step in introducing national currency. However the exchange rate of the coupon vis-a-vis the U.S. dollar and the Russian ruble has been constantly changing. For example, over the May-December period of 1993, the parallel market exchange rate increased from an average of 2,939 to 32,871 to the U.S. dollar.1 2 7 The foreign exchange auctions were not functioning in a stable way and were abolished in November 1993 as a result of dwindling of National Bank of Ukraine’s reserves. Thus there were two exchange rates for the coupon—official and market—a situation that ended only after Kuchma's reform package was introduced. Monthly inflation was p g extremely high— in November 1994 it reached the point of 72 percent " — and only went down in 1995, decreasing to 5.8 percent per month in May1 2 9 (see table 3.2 at the end of chapter 3) A full-fledged national currency, the hryvna, was introduced in September 1996.1 3 0 Finally, Ukraine was slow in altering its trade regulations. In 1992, along with Latvia, Ukraine faced a sharp decline of trade.1 3 1 Unlike Latvia’s, though, the Ukrainian government tried different measures that often contradicted each other. For 1 2 7 Le Gall L994, 67. 1 2 8 Lapychak 1995, 43. 1 2 9 The Economist, May 20, 1995,47. 1 3 0 RFE/RL Research Report, “Ukraine Introduces National Currency,” September 3, 1996. 1 3 1 Oleg Slepichev, the minister for foreign economic relations, declared in December 1993 that hard-currency exports to countries outside the CIS were down by 20% to $4.9bn in 1993, while trade within the CIS was in an even worse condition (EIU Country Report 1st Quarter 1994, 21). Within the CIS, the situation was particularly desperate due to the size o f Ukraine's debt to Russia (mainly for fuel). At the end o f the year, Ukraine owed Russia $2.5bn {ibid.). 171 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. example, in 1992-93 Ukraine had significant surrender requirements.1 3 2 In mid-1993. however, in attempt to both revive trade and join the World Trade Organization, the government cut import and export quotas in May and June 1993, and in August exempted enterprises which traded with the rest of the CIS from both value-added tax (VAT) and excise duty. Yet, instead of following this line o f liberalization, the government announced that a VAT and excise duty must be paid on all imports after April 1, 1994. Importers had to pay a 28 percent VAT on goods at the borders before they were sold, while VAT had previously been paid after a sale.1 3 3 In the absence of domestic economic preconditions and an effective administration for collecting duties, this measure did not give any significant positive effects. A fairly consistent trade restriction policy only came as a result of Kuchma’s reform package in 1995. With the exception of some surrender requirements and a quota on grain, the export of all items was liberalized, although the introduction of import tariffs and non-tariff barriers was estimated to be likely, especially for food and agricultural produce.1 3 4 Ukraine was considerably socially constrained in conducting pro-Westem domestic economic reforms; empire-saving attitudes in Ukrainian society were undoubtedly stronger than in Latvia. Yet the explanation for Ukraine’s inconsistency in 1 3 2 The foreign exchange tax introduced in February 1992 required the surrender o f 20-75% of export proceeds (the share varying with the type o f product), with no compensation. Since mid-1993 Ukrainian enterprises have been obliged to surrender 50% o f all hard currency earnings ( [EIU Country Profile 1994-95, 28). In January 1993 Ukraine also imposed export tariffs on 103 commodities groups {Ibid.). 1 3 3 EIU Country Report 2n d quarter 1994, 24. 1 3 4 Ukraine is considered to have a long-term comparative advantage in agricultural products C EIU Country Report 4 lh quarterI995, 26), but may have needed time to develop its agricultural production to be competitive internationally. 172 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. establishing domestic preconditions for market-oriented foreign economic policies would not be complete without considering the quality of its leadership. The reason why Kravchuk did not prove to be able to do what Latvian Popular Front leaders did—make a commitment to market-based domestic economic reform1 3 5 —had in part to do with the fact that Kravchuk was the former communist apparatchik, with none of his own firmly established beliefs in the Western reforms. When, in 1991, the state embraced a nationalist policy agenda, there were no direct society-based obstacles to introducing the reform package at earlier stages instead of waiting until late 1994. In principle, the state could have initiated rapid marketization in the immediate aftermath of the Soviet disintegration, in the same manner as was done in the Baltic countries. The state was legitimate and centralized enough to do so. It could have found relatively broad social support for such reform, including among nationalists who initiated and led the reform in Latvia. On the contrary, in the late 1994, it was in many ways more difficult to introduce the reform package: the society was split and tired of the unproductive and painful attempts of previous governments which led to a drastic decline in living 1 3 5 In addition to its skepticism towards market economy, the Ukrainian elite was suspicious toward the West, typical o f the Soviet-breed nomenklatura. In 1992, the exaggerated optimism was quickly replaced with an equally exaggerated resentment toward the West, which was accused o f having eyes only for Russia and o f trying to keep Ukraine as a backward colony, subservient to Moscow. As a result, state capacities were geared toward searching for a “third,” supposedly less painful, way o f reform, thereby lagging behind in terms o f redirecting foreign economic activities toward Western countries (Morrison 1993, 692). 1 3 6 Ukraine’s major nationalist movement Rukh, for example, has given only conditional support to Kravchuk and was divided between those who backed Kravchuk as chief spokesman for Ukrainian nationhood and those who pressed for speeding up domestic reform. In August 1992, this split in Rukh prompted an exodus of Kravchuk supporters who established a new political coalition called the Congress o f National Democratic Forces. The remnants o f Rukh created the New Ukraine movement that declared its political opposition to Kravchuk and called for accelerated domestic marketization, among other demands (Dawisha and Parrott 1994, 137). 173 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. standards and left little hope for future improvement. Trade unions turned into a well organized political force whose demands for larger social spending1 3 7 the state could no longer afford to ignore. To illustrate the point, let us consider for a moment what is perhaps Ukraine’s most painful issue related to its efforts to diversify foreign economic activities—energy needs and dependency on Russia for supplies of oil and gas. Before 1991, Russia supplied Ukraine with about 85 percent of its oil needs and about 50 percent of its gas.1 3 8 The government originally hoped to minimize this dependence by maintaining energy deliveries priced significantly below world levels for a few years, while intensifying its search for potential new suppliers of oil and gas and striking deals with them.1 3 9 The success, however, was quite limited given rapidly rising prices for energy supplies from Russia and Turkmenistan and the deteriorating state of Ukraine’s own economy.1 4 0 Lagging on reform, Ukraine accumulated a huge energy bill: in 1994, its total energy debt to Russia stood at $1.7 billion, $1.5 billion for gas and $200 million for oil and oil products.1 4 1 Russia demanded payment in cash or in economic and 1 3 7 Kiev UNRINFORM, “Kravchuk Meets Union Leaders To Discuss ‘Crisis,” in FBIS-SOV-93- 113, 15 June 1993, 31; Kiev Ukrayinske Telebachennya Network, “Kravchuk Addresses Trade Union Federation,” in FBIS-SOV-93-I67, 31 August, 42: Kiev UNIAR, “Union Committee Labels Price Hikes ‘Genocide,” in FBIS-SOV-93-234, 8 December 1993, 52: Kiev Ukrayinske Radio First Program Network, ‘Trade Union Election Platform Advocates ‘Civilized’ Reform,” in FBIS-SOV-94-004, 6 January 1994, 52. 1 3 8 Moskovskiie Novosti, 1992, March 22,2; Nezavisimaia gazeta, 1993, April 9, 1,3. 1 3 9 Whitlock 1993,40. 1 4 0 Smolansky 1995a, 71, 79. 1 4 1 Markus 1995d, 19. 174 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. security assets,1 4 2 and Ukraine was forced to make some important concessions.1 4 3 The situation only improved in 1995 when the Ukrainian government, instead o f giving its assets away, started to apply other measures, including borrowing from international creditors, reducing energy consumption, and—most importantly—speeding up domestic reforms and cracking down on its domestic customers by holding them responsible for their debts. As a result, by the end 1996, Ukraine managed to pay Russia for 92-95 percent of its energy supplies.1 4 4 In retrospective this, too, could have been accomplished much earlier if Ukrainian leadership had moved more decisively with domestic marketization. Looking beyond Russia The story of Ukraine’s foreign economic reorientation efforts would be incomplete without learning about its attempts to establish alternative economic ties. This section reviews Ukraine’s search for alternative partners, focusing on its efforts to enter both multilateral and bilateral arrangements outside of the former USSR. I argue that Ukrainian attempts and successes in establishing alternative ties were much more modest than those of Latvia, yet greater than those of Belarus. 1 4 2 For example, Russia offered Ukraine to pay its debts by granting Russia 30 to 50 percent of the shares in Ukrainian energy enterprises or by trading its share o f the Soviet Union’s assets abroad. In the security domain, other proposals included that Ukraine give up its post-Soviet share o f the Black Sea fleet in exchange for forgiveness o f its energy debt or to grant M oscow exclusive rights to Sevastopol, the headquarters o f the fleet (Markus 1995d; Drezner 1997, 96-105). 1 4 3 In April 1994, for example, the Ukrainian leadership agreed to give up 30 percent of the shares in its gas facilities. At about the same time, it was also agreed that Ukraine would take only 20 percent o f the fleet (164 ships) and sell the rest o f its share (669 vessels) to Russia in exchange for forgiveness of its debt (Markus 1995e, 58). 1 4 4 Nezavisimaia gazeta, December 31, 1996,3; Drezner 1997, 103. 175 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Like Latvia, Ukraine saw a vital necessity in reducing its dependence on Russia and the former Soviet area. Nationalist-oriented movements were worried that the CIS might eventually become an obstacle to Ukraine’s broader integration with European economic and security institutions. As with their counterparts in Latvia, they did not see much of a threat to Ukraine’s sovereignty in seeking closer ties with European multilateral organizations. In 1993, major nationalist-oriented organizations of Ukraine, such as the Congress of Ukrainian Nationalists, the Republican Party and the Democratic Party, stated, for example, that in the nearest future, the CIS may transform itself into an autarchic economic organization, the so called Euro-Asian area of economic cooperation, and it has already acquiring a clear political shape. It is in this light that one should view the attempts to pull Ukraine and Belarus into the CIS Economic Union, first of all on the side of Russia. Ukraine must make a historical choice: to play the role of a founder of this organization (as it has already happened in 1922 with the formation of the USSR) or find its way to direct integration with Europe—first, with the post-communist countries of Eastern Europe— and, in the future, to learn its place in the united Europe.1 4 5 Both Kravchuk and Kuchma, in line with the views of nationalist-oriented forces, built their policies on the premise of economic diversification and developing closer ties with European countries. The European Union was perceived as being of particular significance. In addition, Ukrainian leaders attempted to develop closer relations with East European nations. 1 4 5 Rosiia, iuku mi 1995, 139. 176 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Attempts to enter alternative multilateral arrangements Since the disintegration of the USSR, Ukraine’s leaders were explicit about the country’s strategic goal of eventually joining EU.1 4 6 Ukraine was the first CIS nation to initialize an agreement on partnership and cooperation with the EU and to reach such an accord in June 1994. The agreement liberalized some of Ukrainian-EU trade covering twenty-five areas. At the same time, a number of critically important restrictions on ‘sensitive goods’—including steel, coal, textiles, agricultural products and nuclear materials—remained in force.1 4 7 It was said the restrictions remained due in part to Ukraine’s lack of progress with domestic reform. Article 4 of the agreement stated explicitly that further progress of Ukrainian-EU relations would be determined by Ukraine’s commitment to continuation of market economic reform but, in 1998, the sides might begin negotiations about the creation of a free trade zone.1 4 8 All this generated hopes for further liberalization among the political class. Boris Oliynik, chairman of the parliamentary commission on foreign affairs and CIS relations, evaluated Kravchuk’s signing of the agreement as an indicator that Ukraine was “returning to Europe.” Anatolii Zlenko, Foreign Minister at the time, also expressed hope that Ukraine would gradually be absorbed into the “European economic zone.”1 4 9 1 4 6 RFE/RL Daily Report, “Kravchuk on Ukrainian Independence and the Commowealth,” December 30, 1991; “More on Ukraine’s Partnership Agreement with EU,” March 24, 1994; “Zlenko on Ukraine and the EU,” June 14, 1994; “Ukrainian Foreign Minister on EU,” May 7, 1996. 1 4 7 Burant 1995, 1131; EIU Country Report, 3r d quarter 1995, 27. 1 4 8 Sidenko 1997, 18; RFE/RL Daily Report, “More on Ukrainian Partnership Agreement with EU,” March 24, 1994. 1 4 9 Burant 1995, 1131. 177 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Unlike Latvia, however, Ukraine never managed to gain even associate EU membership and, by the end of 1996, its prospects for further liberalization of relations were still not very bright.1 5 0 A Ukrainian analyst, a scholar of his country’s foreign economic policy, summarized the major difficulties Ukraine was experiencing in its relations with the EU. He listed six major obstacles on the Ukrainian path to becoming an EU member. First was Ukraine’s low progress in market economic reform, which had to do with its relatively late start.1 5 1 Second, and related to the first, Ukraine’s legal framework was still in many ways incompatible with that of the EU. Third, a number of Ukrainian industries, such as ferrous metals, agriculture, light industry, while crucial for the country’s economy, did not really ‘fit’ the EU priorities for development. The fourth had to do with the low competitiveness level of Ukraine’s enterprises, which would inevitably lead to their quick bankruptcy after the unified competition rules would have been adopted by the country. Fifth, Ukraine was not psychologically prepared to give up its national autonomy in economic decision making. Finally, the Ukraine’s financial situation did not allow it to be a full-fledged contributor to the EU budget.1 5 2 1 5 0 At the time o f this writing, Ukraine is resuming its efforts to establish firmer cooperation with the organization. In June 1998, for example, Ukrainian Prime Minister Valery Pustovoytenko. at a meeting o f the Ukraine-EU cooperation council in Luxembourg, again brought up the issue o f Ukraine’s possible associate membership in the nearest future (Varfolomeyev 1998). 1 5 1 As noted earlier, the real reform efforts came only in 1995. 1 5 2 Sidenko 1997, 19-20. A similar list was given in Budkin, et. al. 1995, 153-55. 178 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Central European countries, too, were perceived by Ukraine as its geographically and historically ‘natural’ partners.1 5 3 Upon Ukraine's independence in 1991, its leaders pressed for membership in the Central European Initiative (CEI), created together with Poland and Hungary. The CEI, successor to the Pentagonale that was established in November 1989, currently includes the Austria, Bosnia-Herzegovina, Croatia, the Czech Republic, Hungary, Italy, Poland, Slovakia and Slovenia. Although its economic significance is far smaller than that of the EU,1 5 4 it does undertake projects in transport, energy, science and technology, information and cultural exchanges1 5 5 and therefore could have contributed to the accomplishment of Ukraine’s foreign economic goals. According to then-Prime Minister Vilaly Masol, Ukraine was particularly interested in cooperating with the CEI in the spheres of power engineering and transport. In July 1994, it gained an associate, not full, membership in the CEI because it had yet to undertake market reforms. In 1996, Ukraine, along with Albania, Belarus, Bulgaria, and Romania, finally became a member of the organization.1 5 6 Visegrad countries represented another arrangement to which Ukraine was attracted. The organization had a wide-ranging agenda combining both economic and security issues, and was composed of the four most stable and advanced of the post 1 5 3 Kiev INTELNEWS, “Foreign Trade Minister on Development,” in FBIS-SOV-95-109, 7 June 1995, 58. 1 5 4 It mostly coordinates the economic and security activities of its members with those of other European countries. The CEI’s major initial purpose was to facilitate membership to W est European institutions, such as the EU (RFE/RL Daily Report, “Central European Initiative Agree on New Members,” October 10, 1991). 1 5 5 Burant 1995, 1129. 1 5 6 RFE/RL Daily Report, “Central European Initiative Agree on New Members,” October 10, 1996. 179 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. communist nations in their transition to capitalist democracy: Poland, Hungary, the Czech Republic, and Slovakia. As far as economic issues were concerned, the Visegrad Group coordinated their policies in migration and trade, as well as in preparations for admission to the then-European Community. In particular, the group members established a regional customs union—the Central European Free Trade Area, or CEFTA.1 5 7 Ukraine declared its interest in joining the Visegrad Group on many occasions. Here, again, the voices of Ukraine’s government and nationalist leaders sounded in unison. For example, in December 1991, Mykhaylo Horyn, then vice chairman of Rukh and a member of Ukraine’s parliament, said to Bronislaw Geremek, chairman of the foreign affairs committee on the Polish Sejm, that “Ukraine is very interested in joining the triangle Warsaw-Prague-Budapest.” In February 1992, another Rukh leader Ivan Drach acted together with Ukrainian foreign ministry officials in urging their Polish counterparts to facilitate Ukraine’s membership in Visegrad. Shortly thereafter, Ukraine’s President and Prime-Minister were announcing their country’s 158 interest in joining the group. Yet, the efforts to join the Visegrad arrangement or its free trade association were unsuccessful to a significant extent because of Ukraine’s lack of progress in 1 5 7 Cooperation among the group members began to decline after 1993, due to increasingly diverging interests (Bunce 1997, 244, 252-53; Rossiia-Ukraiina-Vishegradskaia gruppa 1997, 96-97). 1 5 8 Burant 1995, 1128-29; RFE/RL Research Report, “Ukraine Looks to Visegrad Triangle,” May 26, 1992. 180 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. serious economic reform.1 5 9 One of the conditions for Ukraine’s membership in Visegrad and CEFTA, as seen by the organization members, was its admittance to the World Trade Organization.1 6 0 To facilitate the process of Ukraine’s acquiring membership in the CEFTA, the Slovak Republic was determined to conclude a bilateral free trade agreement with Ukraine.1 6 1 Other ideas of multilateral cooperation were also entertained by Ukraine’s leaders. In 1993, for example, Ukraine signed an agreement to create the Eastern Carpathian Euroregion (ECER), composed of Ukraine’s Zakarpattiya oblast’, two voivodships in Poland, and some Hungarian jurisdictions. The undertaking’s activities were supposed to include the construction of border-crossing points, the development of communication and tourism, and promoting small and medium-sized businesses. ~ Another idea was to establish closer economic cooperation with Baltic nations. In a meeting between Leonid Kuchma and Latvian President Guntis Ulmanis, the two sides expressed an interest in establishing a “common economic space” from the Baltic to the 1 5 9 The other reason concerns security implications o f Ukrainian membership in the organization. Such membership is hardly in Russia’s geopolitical interests, and the Visegrad members cannot fail to take this into consideration (Burant 1995, 1129; Rossiia-Ukraiina-Vishegradskaia gruppa 1997, 96). 1 6 0 Joining the WTO was a key priority o f Ukrainian leaders, but at the time their progress was relatively modest (Kiev INTELNEWS, “Progress in WTO, GATT Membership Talks,” in FBIS-SOV-95- 122, 26 June 1995,71; Kiev INTELNEWS, “Deputy Primier on EU Free Trade Agreement Prospects,” in FBIS-SOV-95-228, 28 November 1995, 55). 1 6 1 Bratislava Rozhlosova Stanica Slovensko Network, “Slovakia; Meciar on Ukraine’s Efforts To Join CEFTA,” in FBIS-EEU-96-017, 25 January 1996, 7. 1 6 2 Burant 1995, 1129. 181 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Black Sea, as well as in concluding a number o f agreements on cooperation in trade and I other issues. Alternative bilateral ties Bilateral ties are another vehicle for redirecting a country’s economic activities from one region to another. During the first five years of its independence, Ukraine made considerable progress in establishing bilateral ties beyond Russia and the CIS. In Western Europe, Germany emerged as Ukraine’s major partner. The two countries’ interest in strengthening their economic ties was mutual.1 6 4 Geographic proximity, tremendous economic power, and the potential for security cooperation make Germany particularly attractive as an economic partner.1 6 5 Germany has also emerged as Ukraine’s major partner in developing cooperation in energy, machinery, and communication issues.1 6 6 By the end 1996, the two countries had a number of trade 1 6 3 The idea o f establishing the Baltic-Black Sea League as an alternative to plans for integration within the CIS was proposed in July 1994 by representatives o f Ukraine’s Republican, Democratic, and Green Parties. The organizers envisaged the formation o f a “Baltic-Black Sea bloc o f free peoples” with participation o f the three Baltic nations, Poland, Belarus, Moldova, Romania, and Bulgaria (RFE/RL Daily Report, “Baltic-Black Sea League Proposed,” July 29, 1994). See more details in the Latvian chapter above. 1 6 4 Along with the U.S., Germany is the biggest investor in Ukraine. By August 1995, German investment accounted for 20 percent o f Ukraine’s total investment, most of which went to the machine building industry, metals, domestic trade, the food industry, and light industry (RFE/RL Daily Report, “Foreign Investment in Ukraine,” August 29, 1995). 1 6 5 Ukraine, Russia, Germany 1994, 167. 1 6 6 Segodnia, September 3, 1996, 5. 182 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. agreements in effect.1 6 7 At the time, Germany was Ukraine’s largest trading partner in the EU; Ukrainian-German trade totaled $1.6 billion in 1995.1 6 8 Poland became another important partner for Ukraine. The start of successful bilateral relations was given by political steps that both nations had undertaken. Ukrainian nationalists began to establish contacts with leaders of Polish Solidamost’ as early as the end of the 1980s. In October 1990, Poland signed a declaration on friendship and cooperation with Ukraine, at the time a Soviet republic with no independent foreign policy. Finally, on December 2, 1991, Poland was the first nation to recognize Ukrainian independence.. Economic relations also began to develop.1 6 9 While the relationship between the two had not always been smooth due to Poland’s newly emerged economic and political interests in 1993, by 1995 the original impulses for partnership had gained the upper hand. Ever since, the two countries have referred to their bilateral cooperation as a “strategic partnership.” 1 7 0 Further political cooperation helped to bolster bilateral economic relations. For the 1992-1996 period, Ukrainian-Polish trade increased five times, from $275.4 million to $1.39 billion.1 7 1 Yet both sides acknowledged much larger potential for economic cooperation between 1 6 7 In September 1996, for example, German Chancellor Helmut Kohl and Ukrainian President Leonid Kuchma signed seven economic agreements, including a deal with a coal-mining enterprise and an agreement to modernize the Odessa airport (RFE/RL Daily Report, “German Chancellor Signs Agreements with Ukraine, September 4, 1996). 1 6 8 Ibid. 1 6 9 RFE/RL Daily Report, “Poland and Ukraine to Barter,” July 19, 1991; “Ukraine and Poland Sign Economic Cooperation Agreement,” October 7, 1991. 1 7 0 Burant 1997, 108-110; Geremek 1998, 76. 1 7 1 The real trade turnover is much higher, but the data do not capture the booming inter-border “suit-case” trade. 183 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. “strategic partners.”1 7 2 For example, Poland is important to Ukraine in its continuing to play the role of firm supporter of Ukraine’s bid for the EU membership.1 7 3 In Asia and the Middle East, Ukraine was trying to develop trade cooperation with Turkey and Iran, being especially interested in importing energy products. Iran and some of the ex-Union republics, such as Turkmenistan and Azerbaijan, were seen by Ukraine’s state as providing potentially strong alternatives to Russian energy supplies.1 7 4 For example, in May 1993, an accord was concluded with Iran that included the sale of 4.5 million tons of oil to Ukraine and detailed a project to jointly construct a gas pipeline.1 7 5 This potential, however, remained mostly non-materialized. Apart from various plans and a few actually implemented short-term agreements, little was accomplished, largely due to Ukraine’s inability to find the necessary financial resources and to pay world-level prices for energy supplies.1 7 6 By the end of 1993, it became clear to Ukraine that a “short-term solution to its vital fuel problem could not be found in Central Asia or the Middle East but only in Russia, and Ukraine had no choice but to accept and adapt to this painful reality.” 1 7 7 1 7 2 The main difficulties were different level of economic development, low border access due to shortage o f customs posts, and the lack o f a payment mechanism (Burant 1997, 114). 1 7 3 Jamestown Monitor, “Ukrainian-Polish Informal Summit,” September 29, 1998; Geremek 1998, 77; Pikhovchek 1998. 1 7 4 Moskovskiie novosti, 1992, March 22, 2; Whitlock 1993,40. 1 7 5 Whitlock 1993,40; see also RFE/RL Daily Report, “Ukraine and Iran Cut $7 Billion Pipeline Deal,” February 5, 1992; “Ukraine’s Trade Ties with Turkmenistan, Iran,” May 13, 1993; “Ukraine Signs Transport Agreement with Iran,” July 12, 1993. 1 7 6 See, for example, RFE/RL Daily Report, “Ukraine-Turkmenistan Gas Dispute,” March 5, 1992; ‘Turkmen-Ukrainian Gas Agreement Initialed,” January 19, 1995; Smolansky 1995a, 71, 79; Smolansky 1995b, 18. 1 7 7 Smolansky 1995a, 84. 184 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Turkey emerged as yet another partner of strategic significance. Along with Poland, it was one of the first nations to recognize Ukraine’s independence in December 1991. Relations with Turkey were typically seen by Ukrainian observers as offering a chance to break away from the Russian embrace, because of Turkey’s pivotal position in the Black Sea region (it controlled the Straits and, in the future, stood a good chance of gaining control over a lion’s share of transport routes and oil pipelines leading to the Caspian area, Central Asia, and the Middle East).1 7 8 As a result, a number of bilateral economic agreements were concluded, and in 1992 the volume of their trade amounted increased dramatically, making Ankara one of Kiev’s main trading partners. The rise of Ukraine’s export volume was particularly impressive: after gaining the independence, it had always been six to ten times greater than that of its imports.1 7 9 In 1994, the two countries signed a number of agreements, among them one on cooperation in the construction of the northern Turkish pipeline.1 8 0 Turkey was thus increasingly becoming both an important trading partner and a territory though which alternative supplies of oil and gas could be delivered to Ukraine. In the Third World, the Ukrainian government expressed a particularly strong interest in trade cooperation with China. China was quick to recognize the independent status of the former Soviet republics hoping the newly independent nation would help 1 7 8 Smolansky L995b, 22. 1 7 9 Turkey is in need of optical devices, automobiles, electrical appliances, ships, and airplanes, all o f which are produced by Ukraine (Mhitaryan 1996, 9). 1 8 0 Smolansky 1995b, 33; Mhitaryan 1996, 9 -1 1. 185 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. counterbalance Russia's influence.1 8 1 Partly as a result of increased political contacts, trade between the two ballooned. “ According to Deputy Prime Minister Valerii Shmarov, trade between China and Ukraine for 1993 totaled $679 million, with Ukrainian exports to China accounting for $580 million.1 8 3 By 1994, China was Ukraine's largest trading partner outside the CIS and its third-largest trading partner overall, after Russia and Turkmenistan.1 8 4 There is strong potential for a further increase in their bilateral trade.1 8 5 Other bilateral economic partners of Ukraine include Hungary, the Czech Republic, Baltics, Moldova,1 8 6 Belarus, and some other ex-Soviet republics.1 8 7 Overall, Ukraine’s success in establishing relations with alternative partners may be evaluated as relatively modest when compared with that of Latvia. Such partners were identified, and some progress in getting closer to them was, indeed, made. Reorientation of export 1RR - activities, as economists indicated, was particularly impressive. Yet in terms of market access, not much has been accomplished as Ukraine has yet to become a 1 8 1 While the West grew increasingly critical o f Kiev during debates in Ukraine's parliament over ratification of the START I and accession to the NPT in 1992 and 1993, Beijing restrained its criticism (see Markus 1995d, 34). 1 8 2 In fact, trade and economic-cooperation agreement between Ukraine and China was signed a day before China officially recognized Ukraine's independence. 1 8 3 RFE/RL Daily Report, “Ukrainian-Chinese Trade Commission Meets,” April 6, 1994. 1 8 4 RFE/RL Daily Report, “Jiang Zemin in Ukraine,” September 7, 1994. 1 8 5 RFE/RL Daily Report, Li Peng in Ukraine, June 26, 1995. 1 8 6 For example, a free trade agreement was signed with Estonia. It had been initialed in May 1995 and covered all products including agricultural ones, which led to a significant increase in Ukrainian-Estonian trade (RFE/RL Daily Report, “Estonia, Ukraine Initial Free Trade Treaty,” May 19, 1995; “Estonian-Ukrainian Trade Increases Rapidly,” July 2, 1996). In 1996-1997, Ukraine has also started to entertain the establishment o f customs union with Moldova (RFE/RL Daily Report, “Moldova, Ukraine Strengthen Cooperation,” January 11, 1996; “Moldova, Ukraine to Set Up Customs Union,” March 3, 1997; “Moldova, Ukraine Discuss Planned Customs Union,” September 16, 1997). 1 8 7 Gaidukov and Chekalenko 1998. 186 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. member of Europe-based free trade associations and to develop bilateral relations with countries beyond the CIS area. As a result, it still remains strongly dependent on Russia’s market, with all the negative implications of such dependency. Summary Like Latvia, Ukraine was determined to gain economic independence from Russia and the former Soviet region, but it choose a more moderate course. Ukraine entered the CIS, even participated in its establishment, but has never been supportive of CIS initiatives. Instead, it viewed the newly created organization as an “instrument for civilized divorce.” Until approximately the middle of 1993, the Ukrainian leadership even advocated a commercial break from Russia, its major trading partner. However, as soon became evident, most of the government-outlined measures aiming at restricting trade with Russia could not work because of Ukraine’s heavy dependence on the ex- metropole. The country’s leadership had a little choice but to adopt a much more cooperative economic stance toward Russia and, with the election of Leonid Kuchma Ukraine’s second president, Ukraine became a consistent advocate of a free trade zone with Russia. For example, in February 1995, the two countries signed an agreement “On the mechanism of realization of the free trade agreement,” and in 1997, a treaty on friendship and economic cooperation between the two sides was concluded. Also like Latvia, Ukraine was determined to diversify its economic activities away from Russia and the CIS and toward Western partners. However, it has been 1 8 3 Havrylyshin 1997. 187 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. much less successful in doing so than its Baltic neighbors. In part, this can be attributed to Ukraine’s slow and inconsistent domestic reform. Despite many government announcements about intentions to accelerate economic reform, actual reform was not started until late 1994/early 1995. Prices were being regulated, and there were no consistent policies as far as monetary and trade regulations were concerned. Again, the situation has only changed with Kuchma’s arrival. It should not, therefore, come as a surprise that Ukraine, while declaring its commitment to finding alternative economic partners, accomplished relatively little when compared to Latvia. Like Latvia, Ukraine expressed a strong interest in eventually gaining EU membership, but never gained associate, let alone full, status in the organization. Ukraine also failed to gain membership in the Visegrad Group, another organization of European nations it was interested in joining. In terms of relations with multilateral partners, it only became a member of the Central European Initiative, a far less significant organization than the EU in terms of market access. Bilaterally, Ukraine developed trade relations with many European, Asian, and Middle Eastern countries, relying mainly on barter and deal- specific rather than free trade agreements. From the perspective this study seeks to advance, Ukraine may serve as an example of a country with a moderate degree o f national identity strength. Although Ukraine had some historical experience of independence and some memory of it, particularly in its western regions, these never received an opportunity to be consolidated. Despite general acceptance of the idea of Ukraine’s cultural 188 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. distinctiveness by its elite, for the last one hundred years Ukraine was only independent during the period of 1917-1920, a brief and fragmented experience. In addition, the Ukrainian “east” and “west” were only reunited in the late-1930s, too recently by historical accounts. All these factors made it difficult to create a strong overarching sense of “Ukrainian” and overcoming the sense of a relatively pro-Russian east and a relatively pro-Westem west of Ukraine. Taken together, these factors help to understand why Ukrainian nationalism was not as strong during the Perestroika years and could not provide Ukrainian leadership with firm social support for implementing its policies. It gained prominence only when the old communist ideas were completely discredited in the course of Gorbachev’s reforms and the so-called party of power decided to abandon them. At the time, nationalists won about 17% of the vote in the national legislature and, in 1991, nationalism gained truly nation-wide recognition, due mainly to support given to it by Leonid Kravchuk, the newly recognized leader of the new nomenklatura. In March 1991, in the referendum on the preservation of the USSR, independence received the support of close to 90 percent of all Ukrainians. As a result, the belief in the virtue of economic nationalism, originally bom inside the nationalist-oriented movements, infiltrated the minds of policy makers and gave rise to Ukraine’s early efforts to break away from the ex-Soviet region. The triumph of the nationalists, however, proved to be rather short-lived. After 1992, with economic recession and a decline in living standards, the ruling elite became less receptive to nationalist ideas and somewhat more 189 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. sympathetic to the empire savers’ demands. This duality of national identity and domestic political debate found its reflection in Ukraine’s dualistic foreign economic policy. 190 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTERS. BELARUS Belarus pursued a much more pro-Russian foreign economic policy than the two nations considered above. It joined and became an active participant in the CIS and proposed to establish monetary and customs unions with the ex-metropole. In addition, Belarus has been the least persistent of the three nations in domestic liberalization and pursuing alternative economic relations. As a result, its trade with Russia has increased in importance since independence.1 This chapter analyzes Belarus’ economic behavior in greater detail and traces it to the country’s relatively weak national identity and, hence, relatively strong cultural affinity with the ex-metropole. National Identity Belarus was the weakest of the three in its national identity dimension. Unlike Latvia, it had virtually no experience with independent nationhood and was always a part of various empires. Although some attempts to attain independence can be found in Belarus’ history, particularly before its re-incorporation into the Soviet empire, those attempts never led to any success even for a short period of time. And, unlike Ukraine, the Soviet annexation of Belarus’ western lands did not lead to the rise of nationalist feelings—for various reasons, Belarus’ west was fundamentally different from that one of Ukraine. The crucial difference between Belarus, on the one hand, and Ukraine and the Baltic nations, on the other, is that the former was incorporated into the Soviet empire without having a clear sense of being different. Not surprisingly, Belarus has 1 EIU, Quarterly Economic Report 1998. 191 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. demonstrated a high degree of loyalty to the “Old Brother,” and the policy of acculturation and assimilation by the Russians proved to be particularly successful. The experience with national independence The beginning of Gorbachev’s Perestroika caught Belarus by surprise, as the newly-emerged nationalist movements had little to rely on in their nation-building efforts. Of course, Belarus, as with many other small nations, experienced various cultural influences, including those alternative to the influence of Russia,- but its people never actually had their own state. The country has always been a part of empire— the Grand Duchy of Lithuania, then Poland, and after that, with the rise of Russian hegemony to the east, Belarus became a dependent of the Russian empire.3 The only exception to this was a short period of independence in the immediate aftermath of the Russian disintegration in the early 20th century. By that time, with Russia’s defeat in war and the following disorders throughout the empire, nationalism began to develop, as Belarus was going through the Adradzen ’ ne (Revival) period.4 During this period (1906-1917), the repressive policies of the Russian government were relaxed, the ban on the Belarusian language (as well as other non-Russian languages) was lifted, education was expanded, and peasants began to attend school for the first time, and the publishing 2 Some Belarus intellectuals emphasize the cultural influences the nation went through while being a subject of the Grand Duchy o f Lithuania, which in the early 1990s laid out the ground for the idea o f establishing the Baltic— Black Sea federation (personal interview with a professor at Belarussian State University, Minsk, May 1999). Section three o f this chapter returns to this point. 3 Clem 1996,211. 4 The Adradzen ’ne period is often referred to as “the formative years of Belorussian political nationalism” (Vakar 1956, 91). 192 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of Belarusian classic literature and Belarusian newspapers were allowed.5 Belarus, however, did not manage to consolidate its independence. One reason for that was that the nationalist aspirations were almost always “a pawn in the larger schemes of the German military, Polish nationalists, and Russian revolutionaries.”6 Second, and no less important, national awareness in Belarus came late and as a purely intellectual phenomenon, with no roots among the peasants.7 As a result, the Bolsheviks were more successful in imposing their control over Belarus than over Latvia and Ukraine, which o led only to “the ten month period of symbolic independence,” compared to about three years in Ukraine and twenty-two years in Latvia. When the Germans, who occupied Minsk, left in December 1918, the Russian army arrived and established the Belorussian SSR thereby terminating Belarus’ independence period. Nor could Belarus receive support for its national identity formation from its western lands after the manner of Ukraine. Like Ukraine, Belarus was united with the Soviet troops occupying and formally incorporating its western territories into the USSR in 1939, under the Ribbentrop-Molotov pact.9 Yet Belarus’ western lands were hardly comparable to those of Ukraine in terms of their ability to spur the process of identity formation. First, all these territories were under Russian control before 1914 and s Zaprudnik and Fedor 1995, 17-18. 6 Suny 1993, 35. 7 Ibid', Zaprudnik and Urban 1997, 281. 8 Vakar 1956, 105. 9 The Soviet west Belorussia included the present oblasts of Brest and Grodno. It also included Bialystok, which was ceded to Poland in 1945 (Szporluk 1979, 79). 193 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. experienced heavy Russification,1 0 whereas Ukraine’s western lands were never part of Russian empire before their incorporation into the USSR and enjoyed a reasonable degree of linguistic autonomy while under different empires. Second and related to the previous, nationalist feelings were far less developed in west Belarus than in west Ukraine, in part the result of stronger influences from the Russian Orthodox church. Finally, Vilnius, west Belarus’ traditional center of the intelligentsia’s activities and a loose analogue of Ukraine’s Lviv, was not included in Belarus’ territory when the annexation took place.1 1 It should not come as a surprise then that, by the time of its incorporation into the USSR, Belarus was much less equipped to resist the influences of Sovietization and Russification than were Latvia and Ukraine. It possessed a much weaker sense of its historical or linguistic distinctiveness from the empire. Historically, Belarus had some opportunities for developing a stronger sense of national self—Kastus’ Kalinowski’s national uprising of 18631 2 and the ‘Revival’ period of the early 20th century were only two of them—but it has never been in a position to take advantage of those opportunities. Linguistically, too, Belarus was in a disadvantageous position. In the words of a historian comparing the two’s linguistic situations, “the west Belorussians found themselves in the USSR with little prior experience of using their language in social communication, while the Ukrainians of Galicia and Bukovina could look back at almost a century a such use of their language. Transcarpathia and Volhynia had also had their own 1 0 From 1859 to 1906, publication in Belorussian was prohibited in Russia, and it was only after 1906 that the first Belorussian-Ianguage periodicals were found {Ibid.). 1 1 Szporluk 1979, 80; Marples 1998, 14. 1 2 Zaprudnik 1993, 58. 194 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. schools and press during the inter-war period— something which west Belorussians had failed to achieve except for a brief period in the 1920s.” 1 3 In addition, Belarusians over the course of 18th and 19th centuries, were forced to change their religion: first, from Orthodoxy to the Uniate Church and then, in 1839, back to Orthodoxy, which further discouraged the development of their national distinctness.1 4 There is ample evidence backing the above conclusions about the relative weakness of Belarus’ national identity. One indicator is the extent to which the policy of acculturation and assimilation by the Russians proved to be successful in Belarus, an inevitable price for a high degree of loyalty to the Old Brother1 5 (see table 3.2 at the end of chapter 3). By the mid-1970s, virtually all power in the republic was concentrated in the hands of non-Belorussians (mostly Russians), and all government record keeping was done in Russian. As a result, in 1984, for example, Belarusians were ranked in last place (15th) of the titular Soviet nationalities in the percentage of ethnic groups residing in their national republic who retained the capacity to speak their native language.1 6 Another indicator is the absence in the republic of historical attempts— comparable to those in Latvia and Ukraine—to encourage its national development. 1 3 Szporluk 1979, 80. Steven L. Guthier (1977) reached similar conclusions about Belarus’ linguistic situation. 1 4 In this point, Belarus, too, is in unfavorable position if compared to Ukraine. One scholar wrote, for example, that the Uniate Church “could have become a foundation for the development o f Belarussian national consciousness in the same way that it became a foundation for the growth of Ukrainian national consciousness in Galicia” (Burant 1995, 1132). Some o f Belarus’ intellectuals also emphasized this point (personal interviews with Vice-Rector o f Belarusian State University and Director o f the Center for Studies o f Gender and Nationalism at European Humanities University, Minsk, May 1999). 1 5 In the words o f Jan Zaprudnik, the nomenklatura in Belarus was the most Russified part o f this Russified republic (1993, 124). 1 6 Marples 1993, 262. 195 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Latvians and Ukrainians tried to take advantage of the outbreak of the World War II and to reassert their claims for independence from the Soviet regime. They also attempted to reassert their national rights in the 1950s and 1960s, in the aftermath of Stalin’s death. Nothing of this kind took place in Belarus. While under occupation by Nazi Germany Belarusians, by and large, choose against participating in anti-Russian military activities, having a deep mistrust and negative attitude toward the brutal German occupation regime.1 7 Apart from emphasizing the heroic resistance to the German occupation,1 8 little was done to forge Belarus’ national feelings. As for the post-Stalin era, Belarus did not experience anything similar to Petro Shelest’s attempts to “re- Ukrainize” the political apparatus by opposing the influx of non-Ukrainian cadres into the republic, or to Eduards Beklavs’ attempts to reassert Latvian control over the republic.1 9 Other factors shaping Belarus’ identity Short on the experience with independent nationhood or national unification, something that would make it comparable with Latvia or Ukraine, Belarus’ identity formation was very much affected by its experiences within the Soviet empire. Some of 1 7 Belarus was occupied as early as June 1941 and remained under German occupation for almost the entire war period. Belarussians suffered enormously during the occupation, and this undoubtedly damaged their national character. More than two millions lives were lost and more than one million buildings destroyed. An American observer, after six months o f travel across Belarus, called it “the most devastated territory in the world” (Zaprudnik and Fedor 1995, 22; Marples 1996, 120). 1 8 Zaprudnik and Urban 1997, 284. 1 9 This is not to say that Belarus did not have its own leaders interested in promoting national culture. Petr Masherov, who emerged as Belarus’ leader in 1965, is sometimes refereed to as one such leader. He often appeared in public in national costume and spoke the native language at some official functions (Marples 1996b, 3). It is not known, however, o f Masherov having had on his agenda far- 196 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. these experiences, such as the establishment of the republic’s own territory and political institutions, might potentially have supported the growth of Belarus’ national consciousness, as they did in Ukraine. In Belarus, however, the original Russification was too strong and the national idea too weak; Belarus’ people were unable to take advantage of the Soviet institutional designs and to arrive at the time of the Soviet disintegration with a well-developed image of their national self. This section briefly reviews some of Belarus’ experiences with the Soviet empire following the analytical framework developed above. A Belarusian sense of nation could not be supported by the stability of its geopolitical borders: its very boundaries, legitimate ethno-territory, and the capital (Minsk) were established only in 1939, very late when compared to Latvia. When the Soviets expanded to the west and annexed the Baltics, they also annexed the western part of Belarus which had previously been ceded to inter-war Poland. Only then was the geographic denouement of Belarus as the BSSR (Belorussian Soviet Socialist Republic) completed and Belarus’ nation, for the first time in their history, was united on their own legitimate territory. In a similar manner, Belarus’ acquiring of its own political institutions— Supreme Soviet, government, academy of science, etc.— came as an unsolicited gift from the existing Soviet regime. Unlike Latvia and Ukraine, Belarus did not have much reaching reforms comparable with those designed by Shelest or Berklaus (personal interviews with journalists at Belorusskaya gazeta, Minsk, May 1999). 197 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of its own institutions, and so their establishment, with the shape and form designed by the Kremlin, did not face any significant resistance in the republic. Economically, by the beginning of Perestroika, Belarus was one of the most developed and urbanized Soviet republics and therefore should have acquired a nation wide, as opposed to local, sense of unity. This, however, was largely the result of late Soviet modernization efforts. Even as late as 1959, Belarus, compared to Latvia and Ukraine, was less a developed economy. For example, it had 46 percent of its total population living in cities, relative to 52 and 56 percent in Ukraine and Latvia, respectively.2 0 The essentially rural basis of Belarus’ society becomes even more •y i obvious when one goes farther back to the interwar and pre-Soviet periods." The fact that Belarus caught up with most developed republics relatively late, during the 1960s and 1970s, suggests that in this important respect Belarus’ identity was also acquired late and, therefore, had litde time to be consolidated. Finally, Belarus’ cultural experience with the Soviet empire was hardly encouraging for its national identity formation. By the time of the incorporation of its western region, most west Belarusians were Catholics possessing a somewhat better preserved linguistic identity. Yet, because of the particularly severe damage caused by World War II, intensive purges against the intelligentsia, and the Russification policy pursued by Stalin, the Belarusian west turned out to be much more assimilated to the Soviet culture. In the early 1990s, figures for the Catholic population in Belarus ranged 2 0 Schroeder 1986, 301. 2 1 Guthier 1977; Suny 1993, 33. 198 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. from 8 to 20 percent."" As for language, despite the fact that Belarusians comprise up to 80 percent of total population, many preferred to speak Russian rather than Belarusian. In 1988, for example, 38.7 percent of titular Belarusians, urban residents, considered Russian their mother tongue, as opposed to 26 and 6.6 percent in Ukraine and Latvia, respectively2 3 (see table 3.1 at the end of chapter 3). All this suggests that Belarus might indeed “be compared to the Russified areas of Ukraine, but without complication of an opposing western nationalism.”2 4 To summarize, by the beginning of Perestroika, Belarus had little to use in its nation-building efforts. Its historical experience with independence was too short (only ten months), too brief to foster national memory. The Soviet annexation of Belarus’ western lands, too, did not lead to the rise of nationalist feelings—Belarus was lacking a sense of its national distinctiveness. Soviet policies further discouraged the development of Belarus’ national identity through practices of religious and linguistic Russification. In addition, Belarus, in terms of its economic development, caught up with Ukraine and Latvia relatively late and was still lacking a sense of nation-wide unity. All these factors led some scholars to conclude that “Soviet nationalism superseded and served to eliminate Belarusian nationalism” and “there is evidence to suggest that the concept of New Soviet Man took on real meaning” in the republic.2 5 This assessment overwhelmingly correlates with estimates of many Western as well as — Zaprudnik and Fedor 1995, 36. 2 3 Prazauskas 1994, 152. 24 Chinn and Kaiser 1996, 158. 2 5 Marples 1996, 119. 199 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. indigenous scholars.2 6 If anything, taken together, the factors considered above can be helpful in explaining why nationalism never became a serious challenge to the empire- savers’ position in post-Soviet Belarus. Domestic Structures Belarus’ society was far less mobilized and politicized than those of Latvia and Ukraine. As a result of Belarus’ weak national identity, nationalist-oriented forces did not manage to win mass support in their struggle for strengthening the republic’s independence. Over the five year of Belarus’ post-imperial existence, the nationalists became marginalized as a political force, whereas the empire-savers gained an upper hand in the decision making process. Structure o f the society Nationalists The movements committed to national independence emerged in Belarus at about the same time as in the Baltic republics and Ukraine. Their emergence was stimulated mainly by concerns of the intelligentsia about status of the Belarusian language, as well as by more recent events: the discovery of 500 mass graves of Stalin’s execution victims in the Kuropaty Forest by archeologist and future leader of most prominent nationalist movement, Zenon Poznyak, and the Chernobyl nuclear reactor disaster.2 7 In addition to the influences of Moscow’s anti-Stalinist policies, Belarus’ 2 6 One Belarus scholar concluded, for example, that “Belarussians have problems identifying themselves as a nation lacking a sense of shared origin, experience and culture” (Gapova 1998). Scholars, politicians, and policy makers across political spectrum generally share this view, although they are far from united regarding the implications of Belarus’ identity weakness for practical policy (personal interviews, Minsk, May 1999). 2 7 Zaprudnik 1989, 37-45; Marples 1993, 261. 200 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. nationalists were very much influenced by the Baltic Popular Front movements.2 8 The political agenda of Belarus’ nationalists was closely modeled on those of the Baltic Fronts, and its “main goals” were specified as: achievement of independence for Belarus and transition to a commonwealth of independent states; establishment in Belarus of a democratic republican government without any party monopoly or dominance of any ideology; rebuilding of a market economy in the Republic closely linked with the economies of the neighboring countries; and renewal of the Belarusian nation and culture and rebuilding in Belarus of a civil society.- The main nationalist movement in Belarus was the Belarus Popular Front “Revival” (BPF) established in October 1988; two other, less influential, organizations— the National-Democratic Party and the Social-Democratic Union (Hramada)— emerged in 1990-1991.3 0 Belarus’ nationalists could never boast of wide support in society or among state officials. Nationalist forces were active mainly in Minsk and in some parts of the Hrodna and Brest regions.3 1 In the words of both a Russian and a Belarusian analyst, “whereas in Baltic countries the Popular Fronts are truly nation-wide movements ... Belarus’ Popular Front’s social basis is confined to intelligentsia in Minsk and other large urban centers.” " Large sectors of the population were hardly aware of nationalists’ efforts to attract wider attention to Belarus’ national history and cultural 2 8 Not only did Belarus’ nationalists follow many Baltic initiatives and programs, but they had joint activities, too. For a more detailed account of the Baltic-Belarus’ nationalist connection, see Mihalisko 1991; Muiznieks 1995. 29 Zaprudnik 1993, 151. For the political programs and views o f Belarus’ nationalists, see Poznyak 1989; Zaprudnik 1989; Mihalisko 1991; Marples 1993, 260-262; Zaprudnik 1993, 148-153; Andreev 1997. 30 Andreev 1997; Mihalisko 1997, 241-244. 3 1 Marples 1996, 122. 201 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. situation. Symptomatically, a survey taken in 1992 showed that 32 percent of ethnic Belarusians considered the history of Russia and Belarus to be identical, 37.6 percent of ethnic Belarusians had no knowledge of Belarusian culture, and 55 percent denied that “nationalism” had any positive potential.3 3 Nor were nationalists able to win the support of officials. On the contrary: in contrast to the Baltic republics and—to some extent—Ukraine, Belarus’ movements for national revival have never been tolerated, let alone supported, by the republic party and government officials.3 4 From the time of its emergence, the BPF faced fierce resistance from the ruling establishment and even had to hold its founding congress in Vilnius because of harassment at home.3 5 Media, too, was mainly controlled by the officials, and the Front’s activists came to rely on samizdat?6 As a result of social apathy and intolerance from the ruling establishment, nationally-oriented forces stood little chance, and Belarus’ national idea, in words of •y-j independent and nationally-minded observers, has not taken root on the Belarus’ soil. The BPF and other nationalist movements never controlled a significant amount of seats in the national legislature. During the 1990 national elections, the BPF, as the main nationalist democratic opposition, secured only about 10 percent of the 360 deputy 32 Furman and Bykhovets 1996, 63-64. 3 3 Marples 1993, 265. 3 4 Zaprudnik 1989, 50; Marples 1996, 116; Mihalisko 1997, 240. 35 In October 1988, for example, Minsk officials dispatched riot police to disperse a demonstration by the informal groups and Popular Front sympathizers. Tear gas, truncheons and water hoses were turned on participants (Mihalisko 1991, 127; Andreiev 1997). 3 6 During the 1990 national elections, technically multiparty, the Communist Party had control over the media and its members headed most of the country's enterprises and institutions (Mihalisko 1991, 128; Markus 1995b, 75). 202 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. seats, mostly in the capital city of Minsk.3 8 The 1995 parliamentary elections showed even poorer results.3 9 Conservative politicians, whose mindset was formed during the Soviet era, dominated the parliament. All these factors made it impossible for Belarus’ nation-builders to compete with the old political elite and its empire-oriented supporters.4 0 With the rise of increasingly dictatorial president Aleksandr Lukashenka, nationalists’ opportunities to challenge the empire-savers were further reduced, as Lukashenka’s intention appeared to be to eliminate the Belarusian Popular Front as a political force 4 1 Empire savers In contrast to nation-builders, empire-saving forces found wide social support and were increasingly able to control the policy agenda. At least three organizations can be identified as pursuing the agenda of reintegration with Russia. The most powerful was the Party of Communists of Belarus established in 1992 as the successor party to the Soviet-era communists. Two other organizations— the Slavic Union “Belaya Rus’” and the Belarusian People’s Movement—were more openly great 37 Personal interviews, Minsk, May 1999. 3 8 Markus 1995b, 75. 3 9 Marples 1995a, 10; Mihalisko 1997, 264-65. 40 The only exception appears to be the effect nationalist ideas had on adoption by the Belarus’ parliament o f the Declaration o f Sovereignty in June 1990. By adopting the declaration, however, the communist-dominated parliament was reacting to the rapidly shrinking center of the Soviet power, rather than to nationalist pressures at home. A nationalist-minded writer Vasil Bykau, recognized the “purely theoretical” significance of the declaration and ventured a rather pessimistic forecast: “There is not any real fulfillment o f this sonorous declaration, and it is doubtful that with such an obvious, to put it mildly, conservatism of the CPB and the Soviets, sovereignty will be achievable in the near future” (Zaprudnik 1993, 153). 4 1 Marples 1996, 135. In 1996, Zyanon Paznyak and Sergei Naumchik, two prominent leaders of the BPF, were forced to seek political asylum at the United States in order to escape prison at home (Segodnia, 1996, August 2, 3). 203 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. power nationalistic and oriented towards cultural, and not just politico-economic union with Russia.4 2 That the empire-saving attitude was widely shared by Belarus’ political class could be seen in its behavior regarding the republic’s status of sovereignty. The process of Belarus’ independence had been greatly retarded from the beginning. While the Declaration of State Sovereignty was adopted by the newly formed Supreme Soviet of the Belarusian Soviet Socialist Republic (June 1990),4 3 no elaborate plans of independence existed prior to its adoption, and it was only in the aftermath of the failed coup that the republic's parliament mustered the majority required to give the declaration the status of constitutional law (August 25, 1991) prior to the adoption of the new constitution.4 4 The empire-saving views also found major support on the mass level, which was demonstrated by practically all elections and referendums held in Belarus from 1990 to 1996. In the first parliament that largely determined the policy agenda through 1990- 1994 period, 86 percent of seats belonged to communists,45 which eventually led to the ouster of Belarus’ first moderately pro-independent leader, Stanislau Shushkevich. His followers—Viachelsav Kebich and, especially, Aleksandr Lukashenka—proved to be either ambivalent or openly hostile toward the republic’s independence. During the 1995 presidential race, the two competed in the rhetoric of reintegrating the While Rus’ 42 Andreev 1997; Mihalisko 1997, 245-46; Sergeievand Fadeiev 1998. 4 3 Replaced by “Belarus” on 19 September 1991. 4 4 Paznyak 1995, 141. 4 5 Mihalisko 1997, 245. 204 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (Belarus) into the Great Rus’ (Russia), with no room left for the independence ideas.4 6 Lukashenka, a stanch supporter ofthe empire-saving ideas, won 80 percent of the vote 4 7 By successfully exploiting the low level of Belarusians’ national identity, Lukashenka promoted Russian to a state language alongside Belarusian, restored a version of the old Communist flag, and gained popular approval of his wish to unite with Russia 4 8 Not surprisingly, all major channels of political influence—parliament, the presidency, media, and state apparatus— were monopolized by the empire-oriented forces, with little room for the nationalists’ supporters. State The structure of Belarus’ state was defined by the efforts of empire-savers in policy circles and with support given to it by the empire-saving attitudes in society. The state went through two major stages in its formation. Until the election of Lukashenka a president, the state was relatively low-centralized and had low legitimacy in the sense that Belarus’ first leader, Stanislau Shushkevich, was elected by the Supreme Soviet, not in nation-wide elections. After Lukashenka’s election, the state acquired more legitimacy and was transformed into a highly-centralized institution. Degree o f centralization During the first two years of independence, the state was relatively low-centralized, with a dual-track policy symbolized by the 4 < s Kotikov 1996. Those candidates opposing the integration— Paznyak and Shushkevich— garnered a total of 22.7 percent of the vote (Burant 1995, 1135). 4 7 Mihalisko 1997, 254. 4 8 Marples 1998, 14. Lukashenka, in his own way, expressed the generally widely shared desire o f Belarussians to maintain close economic, political, and cultural ties with the ex-metropole (personal interview with Vice-Rector o f Belarusian State University. Minsk, May 1999). 205 Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. Shushkevich—Kebich rivalry. Whereas the former was Chairman of the Supreme Soviet and symbolized the supreme state power, the latter served as Prime-Minister, in charge of day to day policies and with solid support in the parliament. The change came when the Constitution of 1994 declared Belarus a presidential republic and granted more power to the executive branch, although a balance between the executive and legislative branches was generally observed.49 Lukashenka, however, was never satisfied with the amount of power granted to him and strove to eliminate checks and balances over his presidency. In 1996, he proposed his own draft Constitution for referendum which received over 70 percent of the votes, with more than 84 percent of the Belarusian electorate participating.5 0 Adopted with many violations,5 1 Lukashenka’s constitution gave him an awaited “legal” dictatorial power to veto legislative acts with little chance for reconsideration and to rule by decree without being vetoed by parliament.52 As a result of Lukashenka’s efforts, state power in the republic became highly-centralized. Legitimacy Despite the dictatorial tendencies of the Lukashenka regime, Lukashenka’s state-building policies enjoyed wider social support than the low- centralized state associated with his political predecessors. A poll taken in 1993, for example, showed that the then-existing political system of pluralism and democracy was 49 Ibid, 254-55. 50 Markus 1997, 59. 5 1 Bykowski 1997. 52 Karmanov 1996; Shushkevich 1997. 206 Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. rejected by 48 percent5 3 whereas Lukashenka’s regime and policies were repeatedly supported by 70 and more percent during nation-wide referenda held on various issues from 1995 tol997.5 4 Foreign Economic Policy This section reviews Belarus’ international economic policy along three dimensions. It considers Belarus’ economic ties with the ex-metropole after imperial disintegration, its efforts to establish domestic institutions relevant for market-oriented activities, and its attempts to engage in alternative economic activities. Russian pole Unlike its Latvian and Ukrainian counterparts, Belarus’ political elite did not possess a belief in economic reorientation away from Russia. The collapse of communist ideology and the party system in Moscow was not something Belarus’ nomenklatura had looked forward to and it had a paralyzing effect on Minsk. Quite typically, Belarus’ state sovereignty was proclaimed (in July 1990) only when the immediate neighbors—Baltic republics, Russia, and Ukraine— had done so earlier in 1990. Pressured by the sovereignty proclamation made by neighboring republics, the communist majority in the Supreme Council of the BSSR accepted the urging of the Belarusian Popular Front in favor of sovereignty. Even then the Supreme Council’s leadership did not see sovereignty as being in contradiction with the goal of preserving 53 Zaprudnik 1994, 135. 207 54 Kotikov 1996. Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. the Union, and so Article 11 of the declaration proposed “to immediately commence the elaboration of an agreement on a union of sovereign socialist states.”5 5 The winds o f change did bring to power some new people, such as the Supreme Soviet Chairman Stanislau Shushkevich and Foreign Minister Petr Kravchenko, but even those politicians were not imbued with the ideas of economic nationalism and, instead, believed in the necessity of new economic union in place of the old USSR. Despite the influences of more radical nationalist-oriented processes taking place in the neighboring Ukraine and Baltic countries, Belarus’ new leaders were convinced that political sovereignty and economic union were not at odds with each other and should be pursued together, not one at the expense of the other. For instance, Petr Kravchenko, addressing the United Nations on Belarus, listed achieving real independence and sovereignty for the nation and “creating a single economic space, a new union of sovereign states” as the first two foreign policy priorities.5 6 This attitude helps to understand the direction taken in Belarus’ new foreign economic policy. The CIS stance Belarus’ CIS stance was in many ways predetermined by its participation in Gorbachev’s efforts to negotiate a new Union treaty among the Soviet republics during 1989-1991. Unlike the Baltic republics or Ukraine, Belarus’ leadership had hardly any 5 5 Zianon Paznyak, a leader o f nationalist-democratic opposition, denounced such a union as a “noose around the neck o f the Belarussian people” and proposed an alternative declaration o f sovereignty. However, the opposition counterproposal garnered only 47 votes out of 345 (Zaprudnik 1993, 152-53). 5 6 “We stand for preserving, developing and giving new substance to traditional economic relations and on this basis— for participation in the process to form a community o f sovereign states to replace the USSR” (Moscow TASS, “Kravchenko Addresses UN on Foreign Policy,” in FBIS-SOV-91- 208 Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. objections or reservations about the Gorbachev-proposed arrangements. They clearly did not see Belarus as a fully sovereign entity and were prepared for a limited form of sovereignty within a “renewed” federal union.5 7 Some even went as far as to support the August 1991 anti-Gorbachev coup in Moscow, the initiators of which had pledged the introduction of the state of emergency for the purpose of restoring the USSR.5 8 It was not until December 4, just a few days before Yeltsin and Kravchuk flew to Belarus to announce the establishment of the CIS, that Belarus’ leadership started casting doubts on the republic’s adherence to the Union treaty.5 9 The leadership attitude in favor of a “renewed union” rested on wide social support. Polls indicated that about four out of five citizens of the BSSR were opposed to secession and condemned separatist efforts.6 0 Not surprisingly, Belarus’ behavior in the immediate aftermath of the Soviet break-up was also at odds with those of Ukraine and Baltics. Together with their Ukrainian counterparts, Belarus’ leaders participated in the creation of the CIS, but their vision of the CIS diverged significantly from that of Kiev. Rather than viewing the CIS as a vehicle for a “civilized divorce,” Minsk officials hoped that the CIS would become a viable construct, capable of preventing further disintegration and putting the union together.6 1 Unlike their Ukrainian counterparts, they planned to develop multilateral 189, 30 September, 1991, 70). Very similar thoughts were expressed by Shushkevich (Moscow Pravda, “Shushkevich Previews Minsk Summit Meeting,” in FBIS-SOV-91-251, 31 December, 1991, 59). 5 7 Mihalisko 1992, 7-8. 5 8 Sanford 1996, 144; Mihalisko 1997, 242. 5 9 Mihalisko 1992, 8. 6 0 Zaprudnik and Urban 1997, 292. 6 1 FBIS-SOV-91-251, “Shushkevich Previews Minsk Summit Meeting,” 1991, 3 1 December, 59- 60; Zalomai 1993, 10; Rozanov 1998, 69-70. 209 Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. cooperation within the CIS framework, rather than limit themselves to cultivating primarily bilateral ties with CIS members. Committed to transforming the CIS into a viable arrangement, Belarus was a consistent signatory to all major economic and even some security agreements designed within the CIS framework. The CIS Economic Union agreement, for example, was signed in September 1993 and ratified in November of the same year. ~ Despite resistance from the national-democratic opposition,6 3 even cornerstone documents rejected by some other CIS members,6 4 such as the CIS Charter and the Security Pact, were embraced by Belarus officials. Obviously, even the CIS security agreements, let alone those on closer economic cooperation within the CIS framework, were not seen as threatening Belarus’ national sovereignty. With Russia proclaiming a strategy of reintegrating the CIS area in 1993-1994,6 5 not only was not Belarus’ leadership pushed away from Russia and the CIS, it also became an ardent supporter of Russian efforts. Accompanied by Russia, Kazakhstan, and Kyrgyzstan, Belarus formed the CIS’ newly emerged ‘inner core.’ In addition to previously signed agreements within the CIS framework, this continued efforts at establishing economic union with Russia and other ‘inner core’ participants by signing new agreements on monetary union (1994) and customs union (1995). Each of those efforts is reviewed below. 62 Boss and Havlik 1994,243. 6 3 RFE/RL Daily Report, “Belarus Leader Against Stronger CIS Integration,” 1993, January 15; “Parliamentary Opposition in Belarus Against Economic, Military Union With Russia,” 1993, April 8; “Opposition to CIS Security Pact in Belarus,” 1993, April 30. 6 4 Ukraine, Moldova and Turkmenistan abstained from signing both documents (Zagorski 1997, 12, 64). 210 Reproduced with permission ofthe copyright owner. Further reproduction prohibited without permission. Leadership’s vision vis-a-vis the CIS and policies directed to restoring a new Union were consistently opposed by Belarus’ nationalists. The leaders of nationalist movements argued that the CIS would detract attention from the more important task: transforming Belarus into a sovereign nation. While the parliament was busy ratifying the CIS founding documents, the Belarusian Popular Front called for the addition of seven provisos to the agreement for the sake of bolstering Belarus’ independence from Russia. When the CIS documents were nonetheless ratified by a virtually unanimous vote, the Popular Front launched a series of open-air meetings and started a campaign calling for new parliamentary elections.6 6 One of these meetings adopted a motion that asserted: The government and Supreme Soviet exhibited a disgraceful, slavish readiness to sign even Gorbachev’s Novo-Ogarevo accord. Shushkevich was the only one who went to Belavezha [the scene of the Slavic summit] not knowing anything. The new commonwealth is a compromise between Russia, which wants to take over the role of the Soviet Union together with its property, and Ukraine, which is striving towards independence. Belarus remains an economic and political appendage of Russia ... Minsk should not be a bureaucratic creature of the commonwealth, the center of mafia structures, a place to dump worthless rubles and further Russify us. Our country should not be Russia’s window on Europe but an independent [and equal] European state.6 7 Opposing all plans for restoring the Union and establishing the CIS, the BPF instead advocated the creation of an East European Commonwealth with Belarus, Ukraine, 6i Mihalisko 1995. 6 6 Mihalisko 1992, 8. 6 7 Ibid, 8-9. 211 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. £ 0 Lithuania, Latvia, and Estonia as participants. The nationalists’ pressures, however, hardly had any effects on the leadership attitude and policies.6 9 Currency cooperation and monetary union with Russia The first two years following Soviet disintegration brought severe economic hardship to independent Belarus. Along with many other ex-Soviet republics, it was badly hit by the disruption of old economic ties as well as by Russia’s institution of price liberalization. Trade volume plummeted, the price of fuel more than doubled, a cumulative fall of more than 25% in GDP and real wages, and very high inflation7 0 (see table 3.2 at the end of chapter 3) were some of the consequences of the break-up of the USSR. In the monetary realm, the republics faced a number of choices about how to cope with rising economic problems. Latvia left the ruble zone and implemented a program o f rapid domestic marketization. Ukraine, albeit a slow reformer, also decided in favor of leaving the ruble zone early and introducing a national currency. Belarus followed its own path. Neither reforms nor independent monetary policy were put on the agenda. Instead, Belarus’ leaders made an effort to secure economic stability by 68 Zaprudnik and Urban 1997, 293; Vechemiy Minsk, “Popular Front Warns Against Pro-Russia Orientation,” in FBIS-SOV-93-249, 30 December 1993, 61. 69 On the first anniversary of Belarussia’s Declaration o f State Sovereignty on July 1991, the BPF’s leader Zyanon Paznyak complained, for example, that nothing had changed in Belorussia in the year since sovereignty was declared. The republic, in his view, had the most reactionary leadership in the country (RFE/RL Daily Report, “Belorussian Sovereignty Day,” 1991, July 29). In 1995, frustrated with the poor performance o f nationalists in parliamentary elections , he said, “People’s mentality has not changed. They still believe populist promises and will vote as the big promiser will tell them” (Belorusskaya Delovaya Gazeta, “Interview With Popular Front Leader Paznyak,” in FBIS-SOV-95-186, 26 September 1995, 90). 70 Babosov 1993, 37; Boss and Havlik 194, 241. 212 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. avoiding inevitably painful reforms and staying within the ruble area. In January 1992, Belarus followed Ukraine in introducing a coupon in an attempt to protect local markets from invasion by outsiders with rubles.7 1 However, the goal of establishing the Belarus ruble as the sole legal tender was never firmly set by Belarus’ authorities. Subsequent H 'y actions confirmed that Belarus itself was far from committed to currency reform. “ In October 1992, Belarus participated in an agreement “On a common market system and coordinated monetary and credit policies between states using the ruble as legal tender,” along with seven other CIS republics. The agreement stipulated that the ruble would remain legal tender on the territory of those CIS states while permitting the issue of other forms of quasi-currency (coupons, etc.). It was also agreed that emissions would fall within an agreed total volume of ruble emission.7 3 In September 1993, when the Russian Central Bank had announced a currency reform and unilaterally withdrew the old rubles from circulation,74 Belarus was also among those asking Russia to form a new ruble zone. In so doing, it demonstrated its readiness to further subordinate parts of its monetary sovereignty to Russia’s demands. An agreement was signed on September 7, 1993 in Moscow, with those signatories pledging to accept not only the Central Bank of Russia as the sole emission center, but also more tightly coordinated economic 7 1 Zaprudnik 1993, 197. 7 2 This was hardly surprising as the leadership view was that the introduction o f national currency would mean “virtually a process o f disintegration” (Pravda, “Shushkevich Previews Minks Summit Meeting,” in FBIS-SOV-91-251, 31 December 1991,60). 7 3 Boss and Havlik 1994, 245. 7 4 Russia was dissatisfied with the state of payments on the territory of the former USSR. By announcing a currency reform involving the withdrawal of old Soviet and Russian ruble notes from circulation on its territory, Russian leadership hoped to liberate itself from the ‘burden’ of the republics it 213 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. policies.7 5 It was Russia, not Belarus, that yet again broke the agreement by setting unrealistic demands, thereby effectively ending the existence of the ruble zone.7 6 Although Belarus demonstrated its readiness to compromise its monetary sovereignty in hopes of overcoming its economic problems,7 7 the leadership was, in fact, far from united as to monetary cooperation with Russia. Whereas the bona fide nationalists were too weak to play a major role in debates about Belarus’ foreign economic policy, some mainstream policy makers with political stance of centrism, or “moderate nationalism,” did try to challenge the steps compromising the republic’s national sovereignty. Belarus' Chairman of the Supreme Soviet, Stanislau Shushkevich, for example, while not prepared to go as far as BPFs leaders in emphasizing Belarus' distinctiveness from Russia, did support the idea of Belarus' national independence and nation-building and insisted on Russia's treatment of Belarus as a sovereign political entity. Several other policy makers shared Shushkevich’s stance.7 8 believed it had been subsidizing. By so doing, it hoped to better position its economy for further reforms (see, for example, Lekant 1992). 7 5 Boss and Havlik 1994, 245; Sanford 1996, 140. 7 6 Shortly after, Russia demanded of its new partners the pooling o f gold and hard currency reserves and oversight of their foreign trade operations. This proved too much and in November this new arrangement was terminated by the introduction o f national currencies by many, including Belarus and Kazakhstan (Boss and Havlik 1994, 245; Webber 1997, 52). 7 7 Energy dependence was one aspect o f this, and Minsk was hoping to continue to enjoy favorable prices for supplies o f fuel from Russia (Markus 1995d; Sanford 1996, 140; Becker 1997, 124). 7 8 Chairman of the Belarusian National Bank Stanislav Bahdankevich was another high-profile policy maker committed to national independence in economic affairs. He was among few others who objected to Article 5 of the Russia-Belarus monetary treaty, whereby all Belarusian asserts and liabilities were to be transferred to the Central Bank o f Russia and the National Bank o f Belarus was to be abolished. Bahdankevich believed that questions of coordination in the issuing o f money, the budget deficit, credit rates, and the rest could be decided through agreement between the two sovereign banks (Rossiyskiye Vesti, “National Bank Chairman o f Currency Unification Treaty,” in FBIS-S0V-94-079, 25 April 1994,72; Moscow Mayak Radio Network, “National Bank Disagrees With Monetary Union 214 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Domestic struggle over the issues of monetary and economic independence was therefore represented by two major views. On the one hand, there were Shushkevich and his supporters arguing against trading national sovereignty and for economic and security cooperation with Moscow on equal terms.7 9 On the other, there were those willing to push Belarus' attempts to establish close economic cooperation with Russia and other post-Soviet republics all the way to political unification, with Russia as a power-holder. This temptation found its supporters on both sides. In Moscow, the empire-savers seemed to be gaining momentum, while reformers such as economics minister Yegor Gaidar and finance minister Boris Fedorov resigned, in part due to their opposition to the negotiations over economic union with Belarus.8 0 In Belarus, the conservative, empire-saving forces began to concentrate around Prime Minister Vyacheslau Kebich, who was more strongly oriented toward Russia than was Shushkevich and who was willing to accept economic union with Russia on terms that infringed on Belarus' sovereignty. The following examples can illustrate the difference in views of the two politicians. In 1993, Shushkevich and Belarusian banking authorities found unacceptable the monetary terms of the Russian Committee on Economic Relations, Treaty,” in FBIS-SOV-94-093, 13 May 1994, 54). Lukashenka removed Bahdankevich on September 15, 1995 (Marples 1995). 7 9 In this, Shushkevich was firmly supported by Belarus’ bona fide nationalists, first and foremost the Belarus Popular Front, which argued— at least after 1992— in favor o f the introduction o f a national currency (Moscow INTERFAX, “Popular Front Releases Economic Reform Proposal,” in FBIS-SOV-92- 075, 17 April 1992, 54; Radio Minsk Network, “Popular Front Calls Russian Money Reform ‘Treacherous,” in FBIS-SOV-93-146, 2 August, 1993, 65). 8 0 Markus 1997, 56. 215 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. under which republics could remain in the ruble zone,8 1 and began introducing a full- fledged national currency.82 Kebich, however, favored remaining in the ruble zone, despite Russia's terms. In March, he proposed an economic "confederation" with Russia, having noted that Belarus "cannot exist without close cooperation with [Russia, Ukraine, and Kazakhstan]" and that "it is not Russia that needs Belarus ... it is we who need Russia."8 3 Shushkevich's responded to the idea of a confederation with Russia in the following way: The road to a confederation, if one is possible at all, is rather long and time is needed before other republics are ready to accept the idea. For the time being, it's Kazakhstan and Russia, which call for a confederation. They may have reasons for closer union but the idea of such a union is unacceptable to Belarus because it runs against the Belarusian constitution, which says we are seeking a neutral status.8 4 In their turn, empire-savers also brought cultural arguments into the debate about Belarus' sovereignty. The question of Belarus' integration with Russia, Kebich and his supporters argued, was "not just a question of economic circumstances. We are linked QC by the closest spiritual bonds; we have a common history and similar cultures." Given the fact that Kebich had the support of the largest parliamentary faction, the conservative "Belarus" and the government under his control, he was increasingly 8 1 Those included allowing the Russian Central Bank to regulate the amount o f credit and cash issued by the National Bank of Belarus and bringing Belarus’ legislation on banking into line with Russia’s (Rossiyskiye vesti, “National Bank Chairman of Currency Unification Treaty,” in FBIS-SOV-94- 079, 25 April 1994, 72)’ 82Markus 1995c, 64. 83Dawishaand Perrott 1994, 183. ^Zaprudnik 1994, 138. 8 5 Burant 1995, 1136. Similar remarks were made by Mechyslaw Hryb: “We do not conceal our vital interest in union with Russia. Our countries are very closely linked in all spheres, and our people 216 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. capable of seizing initiative over Shushkevich and of conducting his own economic policies toward Russia. In September 1993, as a result of this policy, the prime ministers of Belarus and Russia signed an accord on monetary union within the CIS framework. In the summer of the same year, the parliament had first tried to remove Shushkevich through a no-confidence vote over the issue of his refusal to sign the CIS Collective Security Pact, one of the implicit Russian conditions for Russia-Belarus economic integration on Russia's side.8 6 Finally, in January 1994, Shushkevich was ousted, with 209 voting against him and 36 for him, and he was replaced by one of Q*7 Kebich's cronies, Mechyslau Hryb. Unlike Shushkevich, Hryb was a proponent of the CIS Collective Security Pact and of economic integration with Russia even at the cost of 88 Belarus' sovereignty, and he had considerable support in the conservative parliament. With removal of Shushkevich, one of the few reform-minded individuals to hold a prominent government position, Belarus' efforts to reintegrate with Russia were bolstered considerably. In 1994, Belarus' parliament readily ratified the CIS charter, QA including the section on collective security, and in April a Belarus-Russia agreement on monetary union was concluded. According to the agreement, Russian troops were to use Belarusian military installations free of charge; the Russian Central Bank was to be the sole center for currency emission; Belarus was to cede control of its fiscal and regarded each other as brothers from time immemorial” (Krasnaya Zvezda, “Hryb Cited on Domestic Concerns, Russia Ties,” in FBIS-SOV-94-072, 14 April 1994,46). 8 6 Shushkevich had resisted the Pact for months, favoring Belarus’ international status as a “neutral state,” but he did not have much support in the pro-communist parliament and therefore was severely constrained in conducting an independent foreign policy. 87Markus 1995a, 47. 217 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. monetary policy to Russia; and the country was to amend its legislation to bring it in line with that of Russia.9 0 The agreement came under fire from Belarusian nationalists for contravening the country's constitution and betraying its national sovereignty,9 1 but it was signed under terms that were objected to by Shushkevich and the nationalists. Both nationalists and empire-savers were hoping to find wide social support in Belarusian society. Shushkevich and the national-democratic opposition, for their part, demanded a new referendum and new parliamentary elections before the ratification of the treaty on economic union with Russia. They argued that the monetary union would turn Belarus into a “banana republic” in relations to Russia, if not another oblast’ of the Russian Federation, and were hoping that people would vote against this kind of union.9 2 The reality proved nation builders wrong. The question of violations of the Constitution in connection with the signing of the monetary merger agreement was supported by only 63 votes in 360-seats parliament.9 3 The demands for referendum also did not go through. And if the 1994 presidential election, as well as subsequent 8 8 Ibid. 8 9 B urant 1995, 1135. 9 0 Markus 1995c, 64; Markus 1997, 56. For the text of the treaty, see Nezavisimaia gazeta, 1994, January 25, 3 and Minsk BELAPAN, “Monetary Merger Treaty With Russia Detailed,” in FBIS- SOV-94-072, 14 April 1994,44. For various reactions to the treaty in the Russian press, see Izyestia, 1994, April 14, pp. 1, 3; Rossiiskaia gazeta, 1994, April 19, p. 2; Vek, 1994, April 15-21, p. 7; Segodnia. 1994, May 6, p.3. 9 1 A major charge was that the agreement violated those articles o f the Constitutions guaranteeing that Belarus would conduct its domestic and foreign policy on an independent basis (Minsk BELAPAN, “Monetary Merger Violates ‘Fundamentals’ o f Statehood,” in FBIS-SOV-94-073, 15 April 1994,56; Minsk BTK Television Network, “Paznyak on Relations With Russia, Merger,” in FBIS-SOV-94-121, June 23 1994,46-47). 9 2 Mihalisko 1994, 115; Burant 1995, 1136. 218 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. consolidation of the Lukashenka’s regime was of any significance, Belarus’ society was overwhelmingly predisposed toward union with the ex-metropole, so long as it provided the sought economic security. Ironically, it was again Russian, not Belarusian, opposition that prevented implementation of the accord.94 Trade cooperation and customs union with Russia The story of Belarus’ search for trade cooperation with Russia runs parallel to its efforts to establish a monetary union with the ex-metropole. Immediately after the Soviet disintegration, Belarus’ trade position was similar to those of Latvia and Ukraine, with all the three republics being heavily dependent on inter-republican trade.9 5 Belarus, however, was the least psychologically prepared for conducting independent foreign policies and has chosen a path of normalizing and strengthening relations with Russia without investing too much effort into seeking out new trading partners. Its trade with Russia has increased in importance since independence.9 6 As Russia began erecting trade barriers with the former Soviet republics, Belarus sought to preserve its economic links even at the cost of sovereignty and so pursued the creation of a customs union with Russia as a way of solving its economic problems. In March 1992, after signing bilateral agreements with Russia, Kazakhstan, and the Kyrgyz Republic pledging not to impose tariffs or taxes, Belarus made the first effort to secure economic cooperation on the territory of the former USSR through a 9 3 Radio Minsk Network, “Deputies Uphold Constitutionality o f Monetary Merger,” in FBIS- SOV-94-082, 28 April 1994, 68. 94 Markus 1995a, 49; Vek 1994, April 15-21, p. 7. 95 See for example Watson 1994, 383; Bradshaw 1993, 29. 219 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. multilateral arrangement. Along with other CIS members (except Turkmenistan), it signed an agreement on principles of customs policy trying "to secure the free movement of goods across signatories' boundaries and a common customs policy with third countries."9 7 Other economic agreements concluded by Belarus’ during 1992- 1994, particularly those about entering the CIS Economic Union and Monetary Union go with Russia, also intended to secure commercial ties with the republics. In reality, however, largely due to Russia’s unwillingness restrained attitude, none of these agreement worked.9 9 This did not deter Belarus from new attempts to reintegrate with Russia; on the contrary, with the election of Lukashenka a president, Belarus’ efforts increased considerably. In January 1995, Deputy Prime Minister Mikhail Myasnikovich—again at the initiative of the Belarus’ side—signed a series of agreements with Russian Deputy Prime Minister Aleksandr Bolshakov. These made a number of concessions to Russia in return for a customs union.1 0 0 In February 1995, building on these agreements, Belarus’ and Russia’s presidents finally signed an agreement on a customs union. Like the monetary union agreement, the new accord allowed for the stationing of Russian troops in Belarus at two military bases in Hancavichy and Baranavichy free-of-charge. In exchange for cheap energy, Belarus also became a transit corridor for Russian energy 96 ElU. Quarterly Economic Report 1994,4; Rozanov 1998, 71. 9 7 Barner-Barry & Hody 1995, 286. 98 The 1994 agreement, for example, promised to lift all trade customs duties and transit charges in the first stage (Minsk BELAPAN, “Monetary Merger Treaty With Russia Detailed,” in FBIS-SOV-94- 072, April 14 1994,44). 9 9 Markus 1997. 220 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. exports to the West. Finally, the accord envisaged open borders and called for the two countries to align their tariff policies.1 0 1 In May of the same year, the two presidents issued a separate decree “On canceling of the customs control on the border of Russian Federation with the Republic of Belarus,” and in June their respective governments ruled to implement the decree.1 0 2 Belarus’ trade policies stood in sharp contrast with those of Latvia and Ukraine, the countries that abstained from entering any preferential agreements with Russia. For example, Ukrainian policy makers argued that such agreements, the customs union in particular, would bring asymmetrical benefits to Russia and raised about forty different objections to Russian-designed customs arrangements.1 0 3 Belarus’ nationalists, too, were thinking in relative terms and launched a campaign against the customs union and Lukashenka’s bid for economic reintegration with Russia. The Popular Front’s “shadow cabinet” issued a statement which said that the agreement signed would result in “the liquidation of the independence of the state, the complete poverty of the Belarusian nation, huge looses, and the irreversible desecration and destruction of national, material and cultural possessions.”1 0 4 It further argued that the “economic amalgamation of the states” promised by Point 2 of Article 1 of the agreement would 1 0 0 Markus 1995c, 64. 1 0 1 A list of some 200 goods that had different tariffs was drawn up (Markus 1997,56-57; Drakokhrust 1997, 3). For a text of the agreement, see Russia and Eurasia Documents Annual 1995. 1 0 2 On Canceling of the Customs Control 1995; Feofilaktova 1996; Drakokhrust 1997, 3. 1 0 3 Nezavisimaya Gazeta, “Pinzenik Opposes CIS Customs Union,” in FBIS-SOV-95-233, 5 December 1995,45; Uryadovyy Kuryer, “Ukraine: Minister Explains Refusal to Join CIS Customs Union,” in FBIS-SOV-96-019, 29 January 1996,48. 1 0 4 Minsk BELAPAN, “Article Criticizes Customs Pact With Russia,” in FBIS-SOV-95-OI8, 27 January 1995,76. 221 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. only strengthen Russia at the expense of Belarus because the agreement was concluded on Russia’s economic and security terms.1 0 5 Another more centrist national-democratic party, the United Democratic Part of Belarus, added support to the BPF’s efforts by arguing against the adoption of Russian tariffs by Belarus, one of the key points of the agreement. The step, in the view of the party, would hurt many dynamic and promising sectors, such as electronics, instrument-making, light and food industries, because it would make them far less competitive on international markets.1 0 6 Integration, if it had to occur, should be developed from below, proceeding from the specific requirements of business rather than from politicians’ desire—this would be the only way to make it mutually advantageous.1 0 7 Nationalist efforts to stop Belarus’ drive towards reintegration with Russia interwove with efforts to fight the evolution of Lukashenka’s regime in an increasingly authoritarian direction. Faced with the opposition to his authoritarianism in the national parliament, Lukashenka advised the body to dissolve itself1 0 8 and called for a referendum with four questions, at least two of which dealt with Belarus’ further relations with Russia. The four questions were: greater presidential power (including the right to dissolve the parliament), restoring Russian as the state language, developing closer links with Russia, and restoring the old, Soviet-time red-green-white Belarusian 1 0 5 Ibid, 77. 1 0 6 Kommersant-Daily, “UDPB’s Daneyko Cited on Customs Union,” in FBIS-SOV-95-112, 12 June 1995, 66. 1 0 7 Ibid., 67. 222 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. national flag and national coat of arms.1 0 9 In desperation, opposition leader Paznyak asserted that the reactionary communist and authoritarian forces in Russia were using Belarus as a political laboratory to try out methods for establishing Red-Brown (communist and extreme imperial nationalist) authoritarianism within a traditional Slavic framework (Russia—Ukraine-Belarus). He also asserted that Lukashenka’s drive would most likely lead to civil war and the loss of Belarus’ independence.11 0 Pazniak and other opposition leaders of the parliament also went on a hunger strike to protest Lukashenka’s efforts. These efforts accomplished little. By denying the national-democratic opposition—as well as the more progressive moderate politicians—access to the mass media, Lukashenka won the referendum with an overwhelming 75-83% of the vote in May 1995. The parliamentary election was held simultaneously, with very few seats won by the opposition. Ironically, the support for Belarus’ nationalist efforts came from Moscow. Despite the referendum’s results and Lukashenka’s victory, the Kremlin did not rush forward with integration. In July 1995, customs controls on Belarus-Russia trade were removed,1 1 1 but some were soon erected anew.1 1 2 In addition, Belarus, 1 0 8 Under the old Constitution, the parliament’s term was supposed to end by March 25, but the parliament claimed that, under the new 1994 Constitution, it could continue its work until a new parliament is elected (Turevich 1995, 11). 1 0 9 Sanford 1996, 146. 1 1 0 Ibid. 1 1 1 Becker 1996, 121; Feofilaktova 1996. 1 1 2 One o f the reasons cited by Russia’s side was rising illegal trade from other former Soviet republics, especially Ukraine, which was compromising Russian producers, especially those producing vodka, timber and strategic materials (Feofilaktova 1996; Markus 1997, 57). Belarus benefited significantly, however, from exploiting the customs union by taxing goods in transit to and from Russia via Belarus (The Jamestown Monitor, “Russian Subsidies to Belarus,” 1997, October 9). 223 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. despite the accord’s terms, was not bringing its legislature in line with that one of Russia.1 1 3 The customs union story was typical of Belarus’ economic policy efforts and represented a link in the whole chain of efforts to secure traditional ties with the ex- metropole. Preceded by the monetary union drive, it was followed by another integration agreement between the two countries, this one signed in Moscow on April 2, 1996. The Treaty on the Formation of a Community called on the two sides to establish a politically and economically integrated community, so they could pool their material and intellectual resources to improve living standards.1 1 4 The treaty was easily ratified by Belarus’ parliament,1 1 5 but yet again met with strong opposition in Russia,11 6 and again remained largely a declaration of intent. In the view of one commentator, the treaty contained a fundamental contradiction because “Belarus expected an economic bailout, while Russia was unwilling to carry the costs of a union.” 1 1 7 Belarus’ policy of reintegration with Russia would have not materialized without the considerable social support. Unlike their Latvian and Ukrainian counterparts, nationalists in Belarus had a little chance to resist the influence of empire-savers both 1 1 3 Ibid. 1 1 4 For the treaty’s full text, see Nezavisimaia gazeta, 1997, April 1, 3. For various analyses, see Marples 1996c; Turevich 1996. 1 1 5 Drakokhrust 1997,4. 1 1 6 For contrasting views on the effects of the agreement, see NG-Stsenarii, 1997, May 5, 8; Kozhokin 1996/97. 1 1 7 Markus 1997, 58; The Jamestown Monitor, “Belarus Economy in “Free Fall” - Will Moscow Bail It Out?” August 2, 1996. The treaty implementation was also complicated by the 1996 ‘Torg-Expo” scandal, which implicated a privileged company and the president’s administration in the Iow-tariff import of alcohol into Belarus and its subsequent resale in Russia. As a result o f operations such as Torg-Expo, 224 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. inside and outside of parliament. The old elite firmly controlled power in the country and repressed all attempts to challenge it.1 1 8 Having little support in parliament, the BPF tried to mobilize support for an early reelection and succeeded in collecting a sufficient numbers of signatures in favor of it.1 1 9 This had little impact, however, mainly because of a lack of mass support for the nationalists' moves. The weakness of people's national sentiments greatly contributed to the failure of Shushkevich's efforts and to essentially the empire-saving orientation of Belarus' economic policy.1 2 0 The predominant mood in the Belarus’ society appeared to be “it is better to be well-fed and unfree than independent and starving.”1 2 1 Just as Latvia's society was considerably homogeneous in terms of sharing nationalist feelings, Belarus was united by its citizens' unwillingness to risk harming economic relations with the former metropole for the sake of illusory goals of national sovereignty.1 2 2 nearly $1 billion was unaccounted for in Russia’s customs budget (Feofilaktova 1996; Drakokhrust 1997, 4). 1 1 8 In 1993, for example, the government banned public demonstrations, one of the few tools the BPF had at its disposal. "9 Zaprudnik and Urban 1997, 295. 1 2 0 Perhaps the best example is the Belarus June-July 1994 presidential elections where Russophone Alyaksandr Lukashenka was elected the country's first president with 80 percent o f the vote, and the two major candidates were running on a platform of economic reintegration with Russia and competed in their pro-Russian rhetoric rather than supporting Belarus' national independence (Nezavisimaya gazeta, 21 March 1996; Burant 1995, 1135). 1 2 1 Plant director Mikalai Yarokhau told Belarusian Radio that “it is better to be in a defense union [with Russia] with a sound economy than impoverished but neutral in principle” (Mihalisko 1994, 114). 1 2 2 Interestingly enough, the argument about the effects o f national culture on the economy and economic policy, similar to the one pursued in this study, was advanced in Belarus’ academic press. For example, in his article “Russian Culture, Belarusian Character, and the Economy” published in the journal Literatura Imastastsva” Pavel Bich argued that Russian cultural stereotypes took root in Belarus’ society and that “in order to build a normal statehood, economy, and policy, the Belarusians should liberate themselves from spiritual submission to Russia culture” (Zaprudnik 1994, 143-144). 225 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Domestic economic institutions Belarus’ experience with establishing domestic market-oriented economic institutions went through two main stages. Until the end of 1994, the pattern of Belarus’ domestic marketization was similar to that of Ukraine. With the election of Lukashenka as a President, Belarus even made some efforts to reverse the processes of marketization, albeit with limited success. Motivated by the idea of reintegration with Russia, Belarus’ leadership was hoping that union with the ex-metropole would solve its economic problems. Belarus was slow in deregulating prices, and it was not until the end of 1994 that economic decrees on price liberalization on important commodities such as vodka, dairy products, meat, and many services were signed. The new president, Aleksandr Lukashenka, made attempts to reverse the process of liberalization. For example, his decree of December 1994 lowered the liberalized prices of consumer goods.1 2 3 Reversing the process proved extremely difficult, however, and the decree caused serious shortages of foodstuffs in January 1995.1 2 4 Government policy toward establishing Belarus' foreign exchange system illustrated the same point. In 1994 inflation averaged 30-40 percent per month, and the exchange rate depreciated further and ended the year at 10,600 Belarus rubles to the dollar. However, instead of trying to reduce inflation by tightening its monetary policy (as it was done in Latvia and in post-1994 Ukraine), Belarus signed an agreement 1 2 3 Dabrowski and Antczak 1996, 49. 1 2 4 Ibid. 226 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. with its former metropole on monetary union and the re-entry of Belarus into the ruble area. Belarus continued this policy during 1995. In May of that year, in a national referendum, a majority (83.3 percent) of the population voted in favor of closer integration with Russia.1 2 6 Clearly Belarus did not see itself as independent and was not ready to take responsibility for its own economic problems. The country's leadership, in the words of The Economist, seemed "to look on economic integration with Russia as a substitute for reform."1 2 7 The same point can be illustrated with regard to Belarus' trade restriction policy. Despite the devastating impact of the disintegration of the command economy and the p o collapse of the Soviet Union on Belarus' trade volume and trade balance, " Belarus avoided measures of improving the situation by lifting quotas and surrender requirements until 1995.1 2 9 Instead, the government activated the use of barter,1 3 0 and its hopes of stopping the further fall of trade volumes relied on economic reintegration with Russia through monetary union. In April 1994, the government also introduced 131 export tariffs in order to control the export of various commodities from Belarus. Finally, aiming at reintegration, the Belarus government adopted separate tariff policies 1 2 5 WB 1995,40. 1 2 6 Markus 1995b, 78. 1 2 7 The Economist, May 20 1995,47. 1 2 8 In 1992, for the first time trade with the former Soviet Union went into deficit, and during 1993 trade continued to deteriorate. 1 2 9 Export licenses, for example, were required for seventy-five categories o f products. Quotas were applied to mineral fertilizer, timber, and basic foodstuffs (Trade Policy 1994,42). 1 3 0 EIU. Quarterly Economic Report 1994, no.l, 32. 1 3 1 OMRI Daily Report, “Presidential Decree on Export Tariffs,” 1996, February 9. 227 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. toward the countries of the former Soviet Union and those outside the area.1 3 2 As a result of these measures, Belarus' trade with Russia was indeed increased, but so were its trade debts to the ex-metropole.1 3 3 Belarus’ inconsistency and eventual failure with domestic economic reform can be attributed to its weak national identity and hence to the overwhelming predominance of empire-saving orientations in the society. Nationalist-oriented forces, with their belief in the virtue of the western marketization,1 3 4 were in no position to influence the economic decision-making process. The lack of internal cultural motivation to become a genuinely independent actor in the world economy greatly contributed to Belarus’ experience with establishing domestic market-oriented institutions. As two analysts aptly put it, Comparing Ukraine and Belarus, one notices the great importance o f the independence factor. The strong presence of this factor in Ukraine finally 1 3 2 For example, in 1992 it imposed no tariffs or duties on trade with the former Soviet republics. Simultaneously, import duties on a wide range of goods from countries other than those o f the former USSR were imposed with most rates in the 5 percent to 30 percent range (Trade Policy 1994, 41). 1 3 3 Belarus authorities claimed that Russia accounted for 61.4% o f CIS trade in 1992, 71.3% in 1993, and 82.9% in the first eight months o f 1994 (EIU. Quarterly Economic Report 1994, no.4). In the meantime, by the end o f May 1994, Belarus' trade debts to Russia rose to Rb681bn (US$395m) {Ibid., no.3, 42). 1 3 4 As was the case in Ukraine, Belarus’ nationalists were not uniform in sharing the belief in the utmost significance o f market reform. They were— at least implicitly—divided between those who placed the highest value on establishing the institutions o f nationhood (national army, borders, currency, etc.) and those pressing for speeding up domestic reform. For example, the Popular Front’s original proposals for economic reform can be seen as pro-nation rather than merely pro-market in their orientation. Similar to Ukraine’s March 1992 program, these proposals seemed to overplay the significance of national currency and breaking away from Russia at the expense o f other measures of economic stabilization, such as privatization and price decontrol (Moscow INTERFAX, “Popular Front Releases Economic Reform Proposal,” in FBIS-SOV-92-075, 17 April 1992, 54). Some other democratic and nationally-oriented organizations, on the other hand, were more pro-market and less anti-Russian, emphasizing the necessity o f price reform as a step in Belarus’ economic recovery (Kommersant-Daily, “UDPB’s Daneyko Cited on Customs Union,” in FBIS-SOV-95-112, 12 June 1995, 66-67; Bogdankevich 1997). Overall, however, both groups were critical o f governmental policies and appreciative, albeit to a different degree, o f the importance o f domestic economic reform. 228 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. mobilized the political elite to struggle with deep economic crisis that began in 1994 to threaten the unity and independence of the Ukrainian state. In contrast, Belarusian political leaders, Prime Minister Vyacheslau Kebich until July 1993 and President Lukashenka thereafter, have tried to realize the idea of monetary and economic union with Russia as a substitute for real economic transition.1 3 5 Yet, as in case of Ukraine, this would be an incomplete explanation. As in Ukraine, Belarus’ low commitment to domestic economic reform had to do in part with the leadership change. Also as in Ukraine, Belarus’ early leaders probably could have begun more boldly and would have accomplished more than they did. But even more importantly, Lukashenka’s anti-reform stance was hardly inevitable, and another president, should he have been elected, might not necessarily have pursued a Lukashenka-style dictatorship. Metaphorically speaking, given the social constraints it was unlikely that Belarus would have elected somebody like Ukraine’s Kuchma to replace its own version of Leonid Kravchuk. But Belarus could have elected another Kravchuk (somebody like Viacheslau Kebich)—if there would have been no Lukashenka among presidential candidates—and the economic reform, albeit as slowly and inconsistently, would have had a good chance of being continued. Alternative economic ties Absorbed with the efforts to transform the CIS into a custom union and reintegrate with Russia, Belarus did not express much interest to finding new trading partners and entering alternative economic arrangements outside of the former Soviet Union. Unlike Latvia and Ukraine, and although in a comparable trade situation, 1 3 5 Dabrowski and Antczak 1996, 77. 229 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Belarus was much more passive in pursuing visible foreign economic activities before and after the Soviet disintegration. At least three alternatives to unilateral dependence on Russia were identified, but were never pursued by Belarus' leaders. The most radical alternative was put forward by the Belarusian Popular Front as early as 1989 and may be termed the European alternative. The idea was to create a Baltic-Black Sea political-economic association that would unite Belarus, the three Baltic republics of Lithuania, Latvia, and Estonia, Ukraine, and Moldova. The association was supposed to help its members resist economic pressures from Moscow as well as gain gradual access to Western European markets. It would serve as a counterbalance to the huge Eurasian Russia and as a safeguard to sovereignty.1 3 6 In the BPF’s own words: The BPF comes out in favor of Belarus' entry into the European political, economic and defense structures, together with its Central-European neighbors: Baltic states, Poland, Ukraine. Alongside, we support all the initiatives aimed at the closer coordination of policies and economies of the Inter-Sea countries, those of Central and Eastern Europe... The BPF believes: the integration into Europe, our way back to our original and natural European home, is the only guarantee of the preservation and consolidation of the Belarusan independent statehood and of the Belarusan nation's survival. Historically, Belarus was formed as a typical Central-European country, its society has always shared the traditional Western values, and it was only first the Russian and later the Soviet occupations that tore the country away from its natural civilizational and cultural context. In the "Europe of Fatherlands" we can become ourselves, equal among equals.1 3 7 1 3 6 Paznyak 1995, 147; Andreev 1997; personal interviews, Minsk, May 1999. 1 3 7 BELARUS — TO EUROPE 1997. Belarus’ nationalists, along with their Ukrainian and Latvian counterparts, perceived Russia as doomed to stay imperialistic and authoritarian and unable to become democratic and economically developed (Moscow ITAR-TASS, “BPF Leader Sees Russia as Enemy of Independence,” in FBIS-SOV-94-112, 10 June 1994,46; London THE TIMES, “Opposition Leader Promises to ‘Sever Moscow Ties,” in FBIS-SOV-95-025, 7 February 1995,44). 230 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Another alternative was a compromise between complete separation from the CIS and membership into the Baltic-Black Sea Association. The Belarusian Social- Democratic Party ("Hramada") suggested that the best option for Belarus would be not to sign the CIS statute but, rather, to become an associate member and cooperate in the economic fields (without cooperating in military and defense affairs). Ideally, Belarus should initiate and create a new international organization, something like a smaller European Community, that could be joined by some of the ex-Soviet republics (Baltics, Ukraine, and Moldova) and by the former CMEA countries such as Poland, the Czech Republic, Slovakia, Romania, and Bulgaria.1 3 8 Finally, there was a more moderate idea favored by Shushkevich, according to which Belarus would not separate itself from the CIS and Russia, but would instead take full advantage of economic cooperation within the CIS under the following conditions: 1) such cooperation must be pursued for the purpose of strengthening, not weakening Belarus' sovereignty, and 2) Belarus should not limit itself to the CIS, searching for other trading partners as well.1 3 9 None of these ideas was given a serious consideration by Belarus' policy makers. Even the latter, most moderate alternative did not have a chance to be fully implemented, mainly due to Shushkevich’s resignation. Instead, President Lukashenka glorified an empire as an ideal means of coexistence for Belarus and Russia. Ironically, the idea of Baltic-Black Sea political-economic association advanced by Belarusian and 1 3 8 Paznyak 1994, 148. 1 3 9 Similar ideas were developed in Antoniuk 1997; Davidenko and Madushevski 1998. 231 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukrainian nationalists was denounced by the president as conflicting with the goals of Belarus’ sovereignty.1 4 0 Alternative multilateral arrangements The first two years of Belarus’ independence were marked by its interest in developing relations with European countries, particularly with members of the European Community. Although Belarus’ leaders were never as explicit about their European orientation as their Ukraine counterparts, the interest in Europe seemed to be persisting. The idea of economic involvement in the “European process” had emerged in 1991, if not earlier. The head of the Supreme Soviet, Stanislav Shushkevich, and other officials traveled to European countries investigating the opportunities for Belarus to obtain status as an associated member of the EC.1 4 1 On the level of public statements, the idea was first articulated in September 1991 by Belarusian Foreign Minister Petr Kravchenko. While addressing the United Nations he placed involving Belarus in the European process next to other main directions in his country’s foreign policy.1 4 2 In 1992 and 1993, Shushkevich on a number of occasions expressed Belarus’ willingness to join the European Community, emphasizing that entry into the EC should not be viewed as conflicting with Belarus’ traditional close ties with Russia.1 4 3 1 4 0 Lukashenka 1997b. 1 4 1 Moscow INTERFAX, “Idea of becoming EC Associate Member Explored,” in FBIS-SOV-91- 193, 4 October 1991, 64. 1 4 2 Moscow TASS, “Kravchenko Addresses UN on Foreign Policy,” in FBIS-SOV-91-189, 30 September 1991, 70; Paznyak 1994, 142. 1 4 3 RFE/RL Daily Report, “Shushkevich on the Belarusian Ruble,” 1992, May 20; “Lalumiere in Belarus,” 1993, May 5; Zaprudnik 1993, 212. 232 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In 1994, reflecting the leadership change, the country’s drive towards Europe slowed considerably. In January 1995, after years of hesitation, Belarus finally initialized a partnership and cooperation agreement with the EU.1 4 4 Symptomatically, Belarusian leaders neither looked at those relations as a priority over economic confederation with Russia nor anticipated that ties with Europe would go beyond bilateral relationships. Even while signing the accord in Brussels in early March 1995, President Lukashenka stressed that Belarus was interested in the agreement solely for the economic benefits it entailed; he did not see it as a step on the road to the Belarus' integration with the EU.1 4 5 After 1996 the president became increasingly hostile toward the perspective of joining the EU, proclaiming at one point that “it is not Belarus that needs the European Union, but the European Union that needs Belarus.” 1 4 6 Europeans, in their turn, expressed reservations about Belarus’ entry in the EU. European Commission member Hans van de Broek said, for example, that Belarus was “on the farthest approaches from being admitted into the European Union” because of its lack of economic stability and democratic reform.1 4 7 Another indication was the delay in signing the comprehensive trade accord between the EU and Belarus in 1996, also due to Belarus’ lack of commitment to economic and political reform.1 4 8 Later in the same year, the EU suspended enacting its provisional trade agreement with Belarus 1 4 4 According to the agreement, Belarus was to obtain MFN status and removal o f restrictions on its exports (RFE/RL Daily Report, “European Agreements with Belarus,” 1995, March 8). 1 4 5 Burant 1995, 1134. 1 4 6 Maisenia 1996. 1 4 7 RFE/RL Daily Report, “EU Official on Belarus,” 1995, November 3. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. because of human rights abuses in the country, a result of the increasingly authoritarian policies of Lukashenka’s regime.1 4 9 Beyond the European Union, Belarus, like Ukraine, tried to gain membership in the Central European Initiative and became an associate and, later, a full member of the organization.1 5 0 Unlike Ukraine, however, Belarus expressed little desire to join the Visegrad Group. When asked whether Belarus was interested in the triangle, Chairman of the Parliament Shushkevich said in July 1992 that although Belarus sought economic ties with Poland and other countries, “our country imports most of its raw materials, especially from Russia. We cannot in an artificial manner worsen relations with it.” 1 5 1 Bilateral ties A similar pattern was shown by Belarus’ development of bilateral economic ties beyond Russia and the CIS countries. Most of these ties were developed during the country’s first two years of independence and began to fade after 1994. During the first years of independence, Belarus advanced bilateral ties with European and Third World countries, mainly via trade agreements granting MFN status1 5 2 In Western Europe, Germany became Belarus’ most important neighbor and 1 4 8 RFE/RL Daily Report, “European Commission Urges Trade Accord with Belarus,” 1995, November 3; “Belarus Signs Interim Trade Agreement with EU,” 1996, March 26. 1 4 9 RFE/RL Daily Report, “Belarusian Reaction to EU Trade Ban,” 1996, June 17; “EU Issues Warning,” December 16; Violation of Human Rights in Belarus 1997; European Union Declaration on Belarus 1997. 1 5 0 Burant 1995, 1134; RFE/RL Daily Report, “Central European Initiative Agree on New Members,” October 10, 1996. 1 5 ‘ Burant 1995, 1133. 1 5 2 During 1992-1993, such agreements were signed with Poland, the Czech Republic, the Slovak Republic, Romania, Finland, Austria, China, Vietnam, Mongolia, the U.S., Kuwait, and Cuba. During the same period, similar agreements were initiated with India, Turkey, and Switzerland. 234 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. trading partner. In the words of Belarus’ Foreign Minister, relations with Germany were more solid than with any other country in Western Europe.1 5 3 During the 1992-1993 period, German exports to Belarus more than doubled.1 5 4 In addition to developing trade ties, Belarus also had an interest in Germany as a potential creditor and as a supporter in its persistent drive toward EU membership.1 5 5 In Eastern Europe, Ukraine and Poland emerged as Belarus’ two most important partners. Ukraine was the first among other nations to establish diplomatic relations with Belarus and remains its second most important trading partner after Russia.1 5 6 Relations with Poland started to develop after the signing of a Declaration on Good- Neighborly Relations and Cooperation in October 1991. In 1991, Poland absorbed 19 percent of Belarus’ exports and sold Belarus much-needed grain and sugar. Minsk also expressed interest in using the Polish port of Gdynia, which is closer and less expensive than Ukraine’s Odessa, for the shipment of goods.1 5 7 On one occasion, Belarus’ Foreign Minister argued that the two sides should cooperate more closely because “the West was not ready to open its markets to either Polish or Belarusian goods.” 1 5 8 At later stages, however, relations with Poland turned in a more problematic direction, the result of both domestic change in Belarus and Polish concerns about Belarus’ excessive dependency 1 5 3 RFE/RL Daily Report, “Belarusian Foreign Minister in Bonn,” 1994, March 4. 1 5 4 Markus 1995c, 65. 1 5 5 RFE/RL Daily Report, “German Credits for Belarus,” 1992, June 29; “Belarusian Foreign Minister in Germany,” 1994, August 29. 1 5 6 Zaprudnik 1993, 217; Lukashenka 1997a. 1 5 7 Zaprudnik 1993, 216; Moscow INTERFAX, “Trade, Cooperation Agreement With Poland,” in FBIS-SOV-91-200, 16 October 1991, 73. 1 5 8 RFE/RL Daily Report, “Walesa in Belarus,” 1993, June 29. 235 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. on Russia.1 5 9 In 1993-1994, Polish-Belarusian economic relations even took a greater turn for the worse, with bilateral trade decreasing from $320 million in 1992 to $218 million in 1993. Economic agreements signed between Belarus and Poland were being implemented unsatisfactorily slowly,1 6 0 and disagreements over trade policies abounded.1 6 1 Belarus was slow to develop relations with developing countries, though this had more to do with indifference than with economic potential. The potential, as some analysts argued, was there: many Third World countries had been Soviet clients and relied on Soviet military equipment as well as other machinery, so Belarus, with its relatively large military-industrial complex, could have had a number of ready-made markets. “ China was one example of neglected opportunity. The contrast with Ukraine is particularly instructive here: in 1995, bilateral trade stood at just $30 million annually, a mere fraction of Ukraine’s $837 million.1 6 3 To summarize, Belarus’ leadership did not take advantage of existing foreign economic options, having fallen behind Ukraine, the Baltic nations, and some other former republics. Belarus’ successes in winning access to markets beyond the CIS area via signing free trade agreements— bilateral or multilateral— or diversifying its 1 5 9 RFEJRL Daily Report, “Polish-Belarus Relations,” 1992, November 23; “Polish, Ukrainians, Belarusian Foreign Ministers Meet,” 1996, July 22. 1 6 0 RFE/RL Daily Report, “Poland, Belarus Reach Economic Agreements,” 1993, June 9; “Walesa in Belarus,” 1993, June 29. 1 6 1 RFE/RL Daily Report, “Polish Foreign Minister in Belarus,” 1994, October 26. In 1995, a high ranking Belarusian official was complaining that Polish tariffs on Belarusian goods were 15 percent higher than those of the European Union countries (RFE/RL Daily Report, “Belarus Official on Trade with Poland,” 1995, June 23). 162Markus 1995c, 65. See also Zaprudnik 1993, 211. 236 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. economic activities in any other way, should be recognized as modest, at best. With the ouster of Shushkevich and the rise of Lukashenka, the country practically ceased its search for new commercial partners outside Russia. As a result, trade dependence on Russia only increased in significance over the first five years of Belarus’ political independence. "The focus on Russia,” as one observer put it, “has led the country to neglect its relations with other countries, and Belarus is now widely perceived as a nonentity on the international scene."1 6 4 Summary Belarus pursued a much more pro-Russian economic policy than the two other republics considered above. From the very birth of the CIS, Belarus was the most willing participant and most consistent signatory of major CIS economic initiatives. Moreover, it became an ardent advocate of forming the CIS ‘inner core’ via the establishment of monetary and customs unions with the ex-hegemon. As Russia began erecting trade barriers with the former Soviet republics, Belarus sought to preserve its economic links even at the cost of sovereignty. As a result, its trade with Russia has increased in importance since independence. As far as efforts to reach out beyond Russia and the CIS area are concerned, Belarus’ economic policy was similar to that of pre-1995 Ukraine. Prices were not liberalized until the end of 1994, the exchange rate was kept depreciated, inflation was rising, and the old Soviet trade instruments (such as quotas and surrender requirements) 1 6 3 Markus 1995c. 237 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. were widely practiced. With the election of Alexander Lukashenka as Belarus’ first president, the country’s leadership even tried counter-reform and accelerated the establishment of customs and monetary union with Russia as a substitute for domestic reform. Not surprisingly, Belarus has been the least persistent of all the three nations in pursuing alternative economic relations. A national identity perspective helps to explain the peculiar turn taken in Belarus’ foreign economic policy. From this perspective, Belarus can be seen as a republic with a relatively weak national identity. Unlike Latvia and some other ex- Soviet republics, Belarus’ people did not have their own state for nearly their entire history and have long suffered from domination by neighboring powers. Its very boundaries and legitimate ethno-territory and the capital (Minsk) were established only in 1939, very late as compared to Latvia. When reunited under the Soviet rule, Belarus had been very different from Ukraine: its national identity formation could not benefit from the rise of Ukraine-like nationalist feelings. The crucial difference between Belarus, on the one hand, and Ukraine and the Baltic nations, on the other, is that it was incorporated into the Soviet empire without having a clear sense of being different. Not surprisingly, Belarus has demonstrated a high degree of loyalty to the Old Brother, and the policy of acculturation and assimilation by the Russians proved to be particularly successful here. 1 6 4 Ibid. For similar observations see Tsegolnikov 1994; Maimenia 1996; Belarusian Review, 1995/96, Winter, 12. 238 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. As a result of its weak identity, Belarus’ nationalists could not command the support of large sectors of the population. There was little they could use in their nation-building efforts and appeals to Belarus’ population. The exposure of Soviet crimes and abuses of power did prompt the establishment of a Popular Front, whose philosophy of national independence was very much in line with Latvia's and Ukraine’s bona fide nationalists. Nonetheless, Belarus' Popular Front proved to be incapable of competing with the empire-savers, or the old political elite for an independent international economic policy. Its social support turned out to be narrow and, from the time of its emergence, the BPF faced fierce resistance from the ruling establishment. The state was dominated by conservative politicians whose mindset was formed during the Soviet era. As a result, the empire-savers remained in control of the foreign economic policy making process, and it was their attitude that eventually triggered the policy of reintegration with the ex-metropole. That attitude found itself in an aphoristic expression of a plant director in whose opinion it was “better to be in a defense union [with Russia] with a sound economy than impoverished but neutral in principle.”1 6 5 1 6 5 Mihalisko 1994, 114. 239 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 6. COMPARING AND EXPLAINING POLICY OUTCOMES This chapter summarizes a comparison of the behavior of Latvia, Ukraine and Belarus and seeks to accomplish three things: First, it compares and explains the three nations’ policy outcomes. Second, the chapter extends the argument made in this study into the post-1996 period.1 And third, it addresses five types of alternative explanations that could be offered by those observing the variation in the foreign economic policies of the respective countries. Comparing Policy Outcomes This section recapitulates and explicitly compares the foreign economic policies chosen by Latvia, Ukraine and Belarus after the Soviet disintegration. In the aforementioned manner, it focuses specifically on their economic relations with Russia/CIS, domestic reform, and relations with the outside world. Relations with Russia and the CIS The CIS stance The three republics under consideration pursued distinct policies toward the newly emerged CIS, which in part was predetermined by their attitude towards the Gorbachev’s efforts to negotiate a new Union treaty. Latvia had no intentions of participating in Gorbachev’s efforts, having adopted the declaration of independence in March 1990. Neither did it want to participate in the CIS, despite invitations from the leaders of Russia’s newly established state. At least 1 By this I will mean the events that took place from the beginning of 1997 to the beginning o f 1999. 240 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. since August 1989 (at which time the goal of achieving economic independence was stated by leaders of Popular Front), Latvian leaders were entertaining the idea of achieving economic independence from the USSR. It was hardly surprising that after the Soviet disintegration they chose to maintain the distance by dealing with CIS members on a strictly bilateral basis, specifically via signing bilateral MFN and barter agreements. Like Latvia, Ukraine was not willing to participate in a new Union treaty. Although it was not as persistent in its independence drive and later declared independence as was Latvia, Ukraine was increasingly suspicious of the idea of joining multilateral agreements with Moscow as a participant. In contrast with Latvia, Ukraine entered the CIS, even participated in its establishment, but never really saw the arrangement as having a bright future. On the contrary, many Ukrainian leaders viewed the CIS as an “instrument for civilized divorce” with Russia and other ex-Soviet republics. This attitude changed somewhat in 1994-1996, due mainly to Ukraine’s emerged hopes to convert the CIS into a free trade area, hopes which were made evident in the country’s decision to sign up for associate membership in the CIS Economic Union. However, even then Ukraine did not see itself as a full-scale participant in CIS economic, let alone security, affairs. Of all three cases, Belarus was undoubtedly the most willing participant in multilateral arrangements that included Russia. Unlike Latvia and Ukraine, it had no objections to the Gorbachev-proposed Union and was ready for its establishment right 241 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. up until the disintegration of the USSR. Belarus’ vision of the CIS was also sharply different from those of Latvia and Ukraine. The Belarus leaders’ image of the CIS was the one of a viable multilateral organization capable of restoring the broken economic ties and putting the union back together. Accordingly, Belarus was a consistent signatory to all major economic and, after 1992, security arrangements, including the CIS Economic Union, the CIS Charter, and the Security Pact. It also became an ardent advocate of the idea of forming the CIS ‘inner core’ and willingly signed agreements about monetary and customs unions. Monetary policies The three also differed in their bilateral monetary and trade policies vis-a-vis Russia, the ex-metropole. Latvia’s monetary policy was in many ways predetermined by its ‘economic independence’ drive. The country’s leadership was firmly in favor of introducing independent currency, but-due to potentially serious economic problems breaking away from the ruble zone would have involved-proceeded gradually, in two steps. In the first stage, it introduced a provisional currency, and only one and a half years later (in October 1993), a provisional currency was replaced with the lats, Latvia’s own currency. By that time, the lats originally pegged at 1:1 rate to ruble became, due to a series of liberal policy measures, five times stronger than Russia’s currency. Ukraine also declared its intention to have an independent currency, but proceeded at a much slower pace. In November 1992, a half-year later than Latvia, it also left the ruble zone by introducing a karbovanets. As compared to Latvia, however, 242 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukrainian leaders were inconsistent and indecisive reformers, which significantly delayed the actual introduction of the hryvna. Karbovanets depreciated quickly, and Ukrainian producers were willingly accepting rubles instead of karbovanets from consumers. Only in the early 1995 did policy makers commit themselves to serious economic reform and fighting inflation. After creating the necessary preconditions, in September 1996 the hryvna was finally introduced as the country’s sole legal tender. Belarus was least willing among the three to leave the ruble zone and have an independent currency. Originally, the idea of an independent currency emerged,- but was never seriously considered by Belarus’ authorities. Neither reform nor independent monetary policies were put on the agenda. Like Latvia and Ukraine, Belarus introduced a coupon, a quasi-currency, and allowed its free circulation to offset the pressures resulting from the deficit of rubles. But unlike the former, it was never committed to actually leaving the ruble zone. In September 1993, Belarus was among those asking Russia to form a new ruble zone after the Central Bank of Russia announced a currency reform. And in 1994, a newly emerged Belarus’ leadership became a front runner in its attempts to secure a monetary union with Russia. In April of the same year, such agreement was, indeed, concluded. The agreement stipulated that, among other things, Belarus was to cede control of its fiscal and monetary policy to Russia; the country was to amend its legislation so as to be in line with Russia; and the Russian Central Bank 2 Moscow Radio Rossii Network, “Republic Reportedly Developing Own Currency,” in FBIS- SOV-91-226, 22 November 1991, 67. 243 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. was to be the sole center for currency emission. It was clear that Belarus’ authorities saw monetary union with Russia as a substitute for a painful economic reform. Trade policies Finally, one can also identify Latvia’s, Ukraine’s, and Belarus’ distinct commercial behaviors toward Russia. Latvia’s trade policy was the one of aggressive reorientation away from Russia and toward Western markets. Despite its heavy dependence on the ex-metropole, particularly in energy issues, Latvia was determined to ‘go west.’ At the same time, maintaining economic ties with Russia, although not a strategic priority, was seen as a short-term necessity. A series of bilateral agreements, mainly of barter nature, were signed with Russia. MFN agreement was also concluded, although agricultural goods, particularly those from Russia, were subjected to higher tariffs. Neither MFN nor many signed deal-specific agreements were properly implemented, however, and Latvia must have had to compensate for losses from trade with the ex-metropole by actively using energy and other raw materials re-exports from Russia, at the time taking advantage of relatively low prices. It also introduced a series of trade restrictions discriminative toward Russia and other CIS countries with which Latvia did not have trade agreements in effect. Finally, Latvia was actively putting domestic economic institutions for market-oriented activities in place. As a result, Latvia’s trade with Russia decreased from about 50 to 21.5 percent over the first five years of independence.3 3 ElU CP 1993/94 1993, 34; EIU CR 1st 1998, 5. 244 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukraine’s initial trade policy stance was similar with that of Latvia. In some ways Ukraine’s early attitude toward future commercial relations with the ex-metropole was even more extreme than that of Latvia. The idea of commercial break with Russia clearly underlined the March 1992 presidential program “The Foundations of Ukraine’s National Economic Policy” which contained, among others things, measures such as export and import restrictions on trade with Russia, domestic subsidies to encourage reorientation, and banning barter trade with Russia. Most of it remained on paper, however, and could never have been implemented mainly because of high degree of economic interdependence between the two. In the second half of 1992, the potentially destructive outcomes of the earlier outlined trade policy became obvious to Ukrainian leadership, and a more cooperative stance was adopted. With Kuchma as president, Ukraine became a consistent advocate of establishing a free trade zone with the ex- metropole and actually managed to get a somewhat reluctant Russia to sign relevant agreements for removing commercial restrictions between the two republics. Although never fully implemented, the agreements, as well as the general policy change, helped to prevent a further decline of Ukraine’s trade with Russia. Unlike Ukraine and Latvia, Belarus never expressed any interest in reorienting its trade away from Russia. As Russia began erecting trade barriers against the former Soviet republics, Belarus sought to preserve its economic links even at the cost of risking its sovereignty. Despite Russia’s often passive, hands off attitude, Belarus’ leaders were consistent in pushing for economic and customs union with the ex- 245 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. metropole. As a result, the two sides signed and partially implemented an agreement on customs union (1995) and even made a step toward reunification by signing in 1996 the Treaty on the Formation of Russia-Belarus Community and promising to pool the two’s material and intellectual resources. Domestic institutions Of the three cases, Latvia was the fastest reformer. In a bid for establishing the institutions necessary for market-oriented economic activities, it concluded price liberalization reform by mid-1992. At the same time, Latvia abolished all Soviet-era trade restrictions, such as state orders, export quotas and licenses, and replaced them with export taxes and tariffs. Latvia also made significant progress in establishing a coherent foreign exchange system by introducing an independent currency unit, the lats, in October 1993. Unlike Latvia, Ukraine cannot be called a fast reformer. Despite many government announcements about its intention to pursue economic reform more energetically, the actual reform was not started until latel994-/early 1995. Until Kuchma became president, the government continued to regulate prices. The exchange rate of the coupon vis-a-vis the US dollar and the Russian ruble was constantly changing, and the foreign exchange auctions were not functioning predictably. Nor was there a consistent trade policy. The situation began to change in 1995; only then were most prices were liberalized. Trade policy also became more liberal with the abolition of most surrender requirements and quotas. Inflation went down to 5.8% per month as 246 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of May 1995, and the actual national currency was finally introduced in September 1996. Belarus’ policy was similar to that of Ukraine until early 1995. Prices were not liberalized until the end of 1994, the exchange rate kept depreciating and inflation rising, and quotas and surrender requirements were widely practiced. In 1995, Belarus, like Ukraine, faced a new threshold, but its choice was different from that of Ukraine. Instead of finally deciding in favor of reform, as Ukraine did, Belarus attempted to reverse the previously attempted economic policies. For example, Belarus’ leadership tried to reintroduce price controls. And instead of building institutions for conducting independent monetary and trade policies, it put all its energy into the advocacy of monetary and customs union with Russia. Economic partners beyond Russia When it comes to the search for economic partners beyond Russia and the former Soviet region, Latvia again stands out as the most consistent and aggressive policy actor of the three. In terms of entering alternative multilateral arrangements, Latvia’s major accomplishment was progress on the path toward eventual membership in the European Union (EU). In January 1995, Latvia concluded a free trade accord with the EU, and in June of the same year, it gained associate membership status in the organization. In October 1996, Latvia was the first post-Soviet nation to apply for full membership in the EU. In addition to the EU, it became an associate member of the European Free Trade Association (EFTA) and participated in the establishment of a free trade union with the other Baltic 247 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. republics, Lithuania and Estonia, as participants. Finally, a series of bilateral free trade agreements were concluded— mostly with European, but also with some post-Soviet nations other than Russia. Ukraine was somewhat less consistent and less successful in its search for trade partners alternative from Russia. Like Latvia, it expressed interest of gaining EU membership, but never managed to gain associate, let alone full, membership in the organization. An agreement on partnership and cooperation reached in June 1994 was all that was accomplished on a policy level by Ukraine as far as the EU is concerned. Ukraine also failed to gain associate or full membership in the Visegrad Group, another organization it was interested in joining for the purpose of diversifying economic activities. In terms of multilateral arrangements, it only became a member of the Central European Initiative (CEI), an organization of marginal significance in terms of market access.4 Bilaterally, Ukraine developed trade relations with many European, Asian, and Middle East countries, relying mainly on agreements of barter and deal- specific natures, not on free trade agreements. Finally, Belarus was the least persistent of all three in pursuing alternative economic relations. Like Ukraine, it became a CEI member. It also signed a partnership and cooperation agreement with the EU, although a half-year later than Ukraine and with an emphasis on the strictly bilateral nature of future relations between Belarus and the EU. Since that time, however, Belarus’ relations with the EU became considerably worse, mainly 248 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. due to Belarus’ lack of commitment to economic and political reform. It was also less successful than Ukraine in locating potential bilateral partners beyond the ex-Soviet region. The foreign economic policies of Latvia, Ukraine, and Belarus after the Soviet break-up are summarized in table 6.1. Explaining Policy Outcomes The main argument The main argument of this study has to do with the cultural viability of newly independent nations as post-imperial entities. Depending on their histories before becoming a part of empire, as well as within the empire, some of post-imperial nations turn out to be more prepared for independence than others. A cultural identity of a non imperial nation, or national identity, is acquired if five major characteristics— historical experience with independent statehood, territoriality, (sub)political institutions, economic integration, and cultural homogeneity— are present and developed to a degree that allows to differentiate the nation from empire. If such identity has, indeed, been acquired by the time of imperial disintegration, a newly independent nation is likely to be motivated primarily by its concerns about preserving and strengthening its status as an independent entity. Accordingly, a nation’s policy, including its economic policies, is likely to reflect its concerns about nation-building and to be a function of post imperial national identity strengths. This argument has been developed through its 4 The CEI included Central European countries, and its main purpose was to facilitate these countries’ membership to the EU by coordinating their economic activities, rather than to create alternative economic arrangement. 249 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 6.1. Latvia’s, Ukraine’s and Belarus’ Foreign Economic Policies Latvia Ukraine Belarus The Russian pole The CIS stance no participation passive participant active participant Monetary policy independent currency (1993) independent currency (1996) monetary union with Russia Trade policy promotion of MFN agreement promotion of free trade area customs union with Russia Domestic preparations fast reformer slow reformer slow reformer until 1995; counter-reformer after 1995 The Western pole EU — associate membership EFT A - associate membership inter-Baltic free trade area a number of bilateral free trade agreements EU - partnership / cooperation accord CEI — membership many bilateral barter and deal- specific agreements EU — partnership / cooperation accord, with the emphasis on its strictly bilateral basis CEI - membership limited number of bilateral barter and deal-specific agreements 250 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 6.2. National Identities and Foreign Economic Policy Outcomes in Latvia, Ukraine and Belarus: The Causal Process National Identity — (Causal variable) (Intervening variable) — State Economic Behavior (Dependent variable) National Identity Domestic Structure Economic Policy Outcomes Strong (Latvia) Society mobilized around nationalists (empire-savers are weak). Nationalists control policy making process. High degree of deviation from the old pattern (active participation in multilateral agreements with countries others than Russia, but not with those having Russia as a participant) Moderate (Ukraine) Society is heterogeneous. Nationalists are strong, but so are empire-savers. State controls policy making process Medium degree of deviation from the old pattern (passive participation in multi lateral agreements with Russia as a participant and beyond) Weak (Belarus) Society mobilized around empire-savers (nationalists are weak). Empire-savers control policy making process. Low degree o f deviation from the old pattern (active participation in multilateral agreements with Russia as a participant, but not in those without Russia) 251 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. application to Latvia, Ukraine and Belarus and is summarized in table 6.2. Other things being equal, nations with stronger post-imperial identities produce relatively strong nationalist movements that eventually come to power and set the agenda of foreign economic policy making. As a result, these nations’ policies explicate a significant deviation from the old imperial pattern, and this finds its expression in their trade and monetary policies. On the other hand, nations with relatively weak national identities do not empower nationalists with cultural resources sufficient to mobilize society and win an access to the policy making process. Empire-savers exercise control over policy making and — predictably — these nations’ foreign economic policies follow essentially the pattern of cooperating with the ex-metropole. Finally, in nations with a moderate degree of national identity strength, neither nationalists nor empire-savers prevail in the domestic political struggle. In these nations, the policy makers need to deal with influences from both poles. As a result, policy turns out to be much more complex than in the former two cases, with outcomes falling somewhere between the high and the low deviations from the old imperial pattern of economic activities. The role of national identity strength The strength of national identity played a key role in differentiating the foreign economic policies of the post-imperial republics. Latvia had significant experience with national independence before it was been incorporated into the empire. During the inter-war years, it enjoyed all the attributes of nationhood, including international recognition, a constitution, an electoral system, an official state language, and an 252 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. independent foreign policy. By the time Latvia was forcefully incorporated into the Soviet empire it had already developed a clear sense of national distinctness and identification with the world of sovereign nations. This memory of being different from the empire persisted throughout the Soviet era and was reinforced via various political, economic, and cultural institutions. As a result, with the end of the USSR, Latvia’s nationalists were able to figure most prominently in the domestic political arena and eventually managed to mobilize the society around their demands. Ukraine’s national identity was far weaker as compared to that of Latvia. Ukraine did acquire some important components of national identity by the beginning of Gorbachev’s reforms. Most importantly, it had some experience with independence in its historical past, the memory of which was particularly alive in the western lands. At the same time, Ukraine’s experience with independence never had the opportunity to be consolidated. Despite the elite’s general acceptance of the idea of Ukraine’s cultural distinctiveness, over the past one hundred years Ukraine was only independent during from 1917 to 1920, a short and isolated experience. In addition, the Ukrainian “east” and “west” were only reunited in the late-1930s, fairly recently, by historical account. All these factors made it difficult to create a strong overarching sense of “Ukrainian” overcoming the sense of a relatively pro-Russian east and relatively pro-Western west. This helps to explain why, by the late 1980s, Ukrainian nationalists were much less prepared to compete with supporters of the old imperial regime. 253 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Finally, Belarus’ national identity was the weakest of all three. In fact, the argument is sometimes made that Belarus had barely any sense of national distinctness by the time of the imperial break-down.5 Before being incorporated into the empire, Belarus’ people did not have their own state for almost their entire history and have long suffered under the domination of neighboring powers. Its very boundaries and legitimate ethno-territory and the capital (Minsk) were established only as recently as 1939. The crucial difference of Belarus from Ukraine and the Baltics is thus that it was incorporated into the Soviet empire without having a clear sense of being different. Not surprisingly, Belarus has demonstrated a high degree of loyalty to the Old Brother, and the policy of acculturation and assimilation by the Russians proved to be particularly successful here.6 Apart from the fact of proclaimed independence on March 1918, there was little Belarus’ nationalists could use in their nation-building efforts and appeals to Belarus’ population. Among other indicators, data on the linguistic situation were used to provide a comparative perspective on national identity strength in Latvia, Ukraine, and Belarus. Such data suggest that by 1989, the three were distinct with regard to their ability to resist the policies of Sovietization and Russification, with Latvia, Ukraine and Belarus going in decreasing order (see table 3.1 at the end of chapter 3). The degree of national identity development in the republics that emerged from the empire helps us to understand the cultural context in which the decision making 5 See, for example, Marples 1996, 119. 6 Marples 1993; Andreev 1997. 254 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. process of these republics was taking place. Varying degrees o f national identity strength played varying constitutive roles in setting these nations’ patterns of behavior. To Latvian policy makers, getting away from the ex-metropole and “going west” for new economic relations made a perfect sense, as their minds were preoccupied with the idea of strengthening national independence. The same idea, although not as firmly socially established, dominated the minds of Ukrainian politicians. This is particularly true for Kravchuk’s presidency, but Kuchma, his successor, also demonstrated his sensitivity toward the issue of preserving independence by linking it with the successful economic reform. Of all three, escaping the ex-imperial area made the least sense to Belarus. Unlike Latvian and Ukrainian leaders, Belarus’ policy makers did not seem to be very concerned about consolidating their acquired sovereignty. Whereas both Latvia and Ukraine were prepared to suffer, if necessary, in order to firmly establish their independence, Belarus did not see the point of following their example—its set of priorities simply stood in sharp contrast with that of Latvia and Ukraine. National independence was overwhelmingly seen as being a too abstract, if not meaningless, concept worthy of sacrificing for the sake economic survival. The role of domestic structures The effects of national identity on policy making were mediated by the domestic structures. This study has adopted this variable for the purpose of tracing how the causal process takes place and how the energy of national identity gets transformed into certain state behavior. Playing the role of intervening variable, the domestic structures 255 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. proved to be valuable in spelling out the effects of national identity on the policy making process and on policy outcomes. In the case of Latvia, strong national identity empowered nationalist-oriented movements to mobilize the society and to eventually control the policy making process. In the words of two historians, “dissent-disagreement with or opposition to the [old Soviet] system — was, almost by definition, endemic within the Baltic republics”7 which, far from surprising, was transformed into the anti-system nationalism and brought the nationalist-oriented Popular Front victory in the 1990 parliamentary elections. On the other hand, the empire-saving voices, apart from Moscow, were weak and effectively losing their organizational resources. As for the state structure, it was relatively low centralized, with the parliament having an upper hand in crucial policy decisions. This combination of a relatively homogeneous nationalist-oriented society and a low centralized state produced nationalist-dominated policy networks. After achieving victory in the 1990 elections, Latvian nationalists assumed control over the country’s domestic and foreign affairs. They terminated the “leading role” of the Communist party, restored the pre-Soviet constitution, and pronounced Latvia independent. With nationalist leader Ivars Godmanis as Prime Minister and the required social support, Latvia was fully prepared to advance a policy of economic reorientation. In Ukraine, nationalists were relatively stronger in the western lands, the area with better preserved national memories, and weaker in the east. Overall, nationalism 7 Misiunas and Taagepera 1993, 250. 256 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. could only command social support for a short period of time, and it only gained prominence when the old communist ideas were completely discredited in the course of Gorbachev’s reforms and newly recognized leader Leonid Kravchuk, a former high- ranking communist apparatchyk, embraced the nationalist rhetoric. The triumph of the nationalists, however, proved to be rather short-lived. After 1992, with economic recession and a decline in living standards, the ruling elite became less receptive of nationalist ideas and somewhat more sympathetic with the demands of empire-saving segments of Ukrainian society. The relatively highly centralized system of presidential authority combined with a culturally heterogeneous society to provide the state with a space for political maneuvering. Neither hard-core nationalists nor empire-savers were really in control of the policy making process, and the state, at various stages of its existence, pursued different blends of pro-nationalist and pro-integrationist strategies. The Ukrainian state was relatively more nationalist during the 1990-1992 period and more Russia- and CIS-oriented during 1994-1996 (as was reflected in its dual economic policies toward Russia). Overall, however, the Ukrainian policy course over the first five years of national independence can be seen as moderately nationalist as compared with that of Latvia. In Belarus, as a result of its weak identity, nationalists could not command the support of wide segments of the population. The exposure of Soviet crimes and abuse of power did prompt the establishment of a Popular Front, whose philosophy of national independence was very much in line with Latvia's and Ukraine’s nationalist movements. 257 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Nonetheless, Belarus' Popular Front proved to be incapable of competing with the old empire-oriented political elite. The social support for Belarus’ nationalists turned out to be narrow, and from the time of their emergence they faced fierce resistance from the ruling establishment. As a result, they lost the 1990 national elections and had no access to the policy making process. The state, too, was dominated by empire-oriented politicians and therefore had few constraints in pursuing an essentially pro-imperial economic policy. Extending the argument into the post-1996 period The post-1996 period has essentially demonstrated continuity in the identified patterns of foreign economic policy of the three republics under study. Latvia has generally maintained its pro-European orientation and increased its prospects of becoming a full member in the European Union, Europe’s major economic institution. In February 1998, the Europe Agreement entered into force. Replacing the Agreement on economic cooperation and fully incorporating the Free trade agreement with the EU, the Europe Agreement made explicit the intention of pursuing the gradual integration of Latvia into the organization.8 Joining the WTO also facilitated Latvia’s reorientation efforts.9 Latvia also continued its domestic efforts to harmonize its national legislature with that of the EU.1 0 Latvian leaders continued to view the country’s full incorporation 8 Europe Agreement 1998. 9 The Jamestown Monitor, “Latvia Gains Admittance to WTO,” 1998, October 15; Birkavs 1999. 1 0 Unlike Estonia, however, Latvia was not placed on the fast-track to accession negotiations and was expected to be invited to those negotiations by the end o f 1999 {The Jamestown Monitor, “ European Union Disappoints Latvia and Lithuania,” 1998, November 5; “Latvia, Lithuania Retain Hope After EU Nondecision,” 1998, December 15). 258 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. into European economic and security institutions as the number one priority on their policy agenda.1 1 The relations of Latvia with Russia and other CIS members were, on the other hand, overshadowed by its European drive and so remained relatively undeveloped. In contrast to the early years o f Latvia’s nation-building, the country’s leaders became somewhat more favorably disposed toward economic cooperation with Russia and expressed their willingness to overcome mistrust and alienation in relations with the ex- I metropole. ~ At the same time, they made clear that Russia’s economic sanction would not result in any political concessions on Latvia’s part ; such measures, had they had been undertaken, would only have accelerated Latvia’s reorientation efforts.1 4 Latvian policy makers kept viewing the economic relations with Russia in terms of the relative gains and security risks involved. The attitude was best summarized by Latvia’s foreign minister, Valdis Birkavs: “Let the volume of trade with Russia increase, but let the relative share of Russia in our total trade decrease.” 1 5 1 1 Ulmanis 1998; Birkavs 1999. 1 2 Ibid. 1 3 For some examples o f Russia’s economic sanctions toward Latvia, see the chapter 3 1 4 For instance, on one occasion Moscow threatened to introduce stricter trade restrictions and cut relations with certain Latvian enterprises accused o f supporting Latvia’s most nationalist movement, the Fatherland and Freedom/National Independence Movement. The purpose o f the move was to stop Latvia in its quest for NATO membership. The reaction from Latvian officials, however, was the opposite from what Moscow might had expected. Guntars Krasts, Prime Minister and leader o f the Fatherland and Freedom movement, responded that Russia’s actions only demonstrated the risk o f trade dependence on Russia and should spur Latvia to accelerate the reorientation o f its foreign trade (The Jamestown Monitor, “ Russian Blacklist o f Latvian Firms Is Political Motivated,” 1998, June 10). 1 5 Birkavs 1999; The Jamestown Monitor, “ European Union, Germany Surge Ahead o f Russia in Latvia’s Trade" 1998, October 22. 259 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. As in the early years of independence, Latvia’s post-1996 policy rested on broad social support. Until Iate-1998, Latvia was led by a coalition of nationalist-oriented parties, with a prime minister representing the Fatherland and Freedom and foreign minister from Latvia’s Way and their movements dominating in the parliament. After the October 1998 election, left and center-left parties became better represented in the parliament, but were still far from able to seriously influence, let alone control, the policy agenda. Latvian voters expressed a clear preference for pro-Westem parties and, hence, for the policy of further reorientation toward European countries.1 6 Nor did Ukraine depart significantly from its earlier foreign economic policy pattern. Ukraine’s policy makers continued pressing for the country’s more pronounced European policy while trying to secure its bilateral ties with the ex-hegemon. In words of first deputy foreign minister Anton Buteiko, “Without breaking off our relations with our former partners in the Soviet Union, the main thrust of our policy is toward integration with Europe and the Transatlantic powers.”1 7 In 1998, the partnership and cooperation agreement came into effect. Ukraine Prime Minister Valery Pustovoitenko, at a meeting of the Ukraine-EU cooperation council in Luxemburg on June 1998, said that Ukraine should become an associate member of the EU. Later, president Kuchma signed a decree confirming Ukraine’s strategy of integration into the EU, and the 1 6 Nationalist parties— the People’s Party, the Latvia’s Way, and the Fatherland and Freedom— amounted to a sixty-two— seat strong majority in the 100-seat parliament. On the minority side, the “centrist” New Party won eight seats, the left-of-center Social Democratic Alliance fourteen seats, and the leftist People’s Harmony Party— whose electorate is mainly Russian— sixteen seats (Prism, “As Latvia Turns So Turn the Baltics,” 1998, October 16; The Jamestown Monitor, “Latvia Misses Chance to Form a Stable Majority Government,” 1998, December I). 260 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ukrainian cabinet ordered the Ministry of Justice to coordinate government activities in adapting Ukrainian legislature to the EU standards. The EU became Ukraine’s second largest trade partner, after Russia. Ukraine also intensified its efforts to become a member of the WTO.1 8 Ukraine’s relations with its traditional partners were generally developing along the same lines. On the one hand, Ukraine continued to view the CIS as a strictly consultative organization “in which independent countries conduct bilateral relations with an emphasis on economics.” 1 9 Despite empire-saving pressures, Ukrainian leaders refused to join the customs union of Russia, Belarus, Kazakhstan and Kyrgyzstan or the Russia-Belarus union.2 0 On the other hand, Ukraine continued to press for further development of bilateral economic relations with Russia. As was the case before 1996, the main issue concerned the establishment of a free trade zone with the ex-metropole, something which never was fully implemented despite many previous attempts. Russia 1 7 Financial Times Survey, 1998, May 5, p. I; Tarasiuk 1998a. 1 8 Varfolomeiev 1998; Tarasiuk 1998a; The Jamestown Monitor, “Kyiv Sets Specific Goals For Relations With the European Union,” 1998, October 15; “European Union-Ukraine Summit,” 1998, October 19. 1 9 Den \ 1998, July 15, I; The Jamestown Monitor, “Ukraine’s Six No CIS,” 1998, July 8; Izvestia, 1998, July 23, I. 20 Regarding the customs union, Kuchma insisted that “a free trade regime among the CIS states should be introduced first, and only then will it be possible to agree on a customs policy” (Varfolomeiev 1998). Kuchma also announced that he “categorically opposes” any Russian-Ukrainian-Belarus union (The Jamestown Monitor, “ Seleznev Calls Ukraine to Order” and “Ukrainian Reaction Reflects Internal Rifts,” 1998, October 2; “Kuchma Sends Lukashenka Home Empty-Handed,” 1999, March 16). Rather than entering Russia-dominant ‘unions,’ Ukraine attempted to counterbalance Russia’s ambitions by joining Georgia, Moldova and Azerbaijan in the GUAM alliance. The organization united states with common security and economic concerns, especially in the transportation of oil from Caspian fields (Varfolomeiev 1998; The Jamestown Monitor, “GUAM Countries Speak With One Voice,” 1998, October 7). 261 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. continued imposing various restrictions, and trade between the two kept shrinking.2 1 In attempting to halt this development, Ukraine initiated the so-called “Big Treaty” on friendship and cooperation with Russia. Among other documents, the treaty included the Program of Russia-Ukrainian cooperation until 2007 and promised to facilitate the development of trade and economic relations.2 2 The treaty provoked criticism and encouragement on both sides,2 3 but it was eventually ratified by Russia.2 4 It remains to be seen whether it will deliver on its promises. In other words, Ukraine continued to pursue a dual foreign economic course, thus responding to domestic pressures from both nationalists and integrationists. The Ukrainian parliament, unlike that of Latvia, was dominated by left and left-of-center forces, and nationalists were in no position to control parliamentary decisions. On the other hand, the key executive positions were controlled by people either formally 2 1 One striking example was Russia’s introduction o f value-added tax on Ukrainian goods in October 1996. The tax provoked the so called “sugar war” between the two countries. It contributed greatly to the decline o f Russia-Ukrainian trade and was abolished only in February 1998 (Nezavisimaia gazeta, 1996, September 9, 3; Moskovskiie novosti, 1997, November 16-23, 6; Sidenko 1998, 120; Tarasiuk 1998a). — Rossiisko-Ukraiinskiye otnosheniia 1998, 67-102; Nezavisimaia gazeta, 1998, February 26, p. 1, 5; February 28, 1, 5. 2 3 Nezavisimaia gazeta, 1998, February 26; 1998, February 28; Sodruzhestvo NG, 1998, 3 (March), p. 2; Grinkevich and Kuz’menko 1998; Nezavisimaia gazeta, 1999, January 21; 1999, February 17. 2 4 The Jamestown Monitor, “Russia’s Federation Council Conditionally Ratifies Treaty With Ukraine,” 1999, February 18. 2 5 Rukh, the major nationalist movement, held eighty to ninety seats in the 450-seat parliament, whereas various leftist parties and movement controlled about half all seats. In September 1998, for example, half the parliament cheered Russia’s parliamentary delegation and its chair, Gennady Seleznev, when he attacked Kyiv’s leaders for limited participation in the CIS and called for the expansion o f the Russia-Belarus Union. Seleznev was referring to the union as an economic and security bloc, a Slavic counterweight to the West. He also referred to Russians and Ukrainians as a “single people,” thereby denying Ukrainian national identity (The Jamestown Monitor, “Seleznev Calls Ukraine to Order,” 1998, March 4). In March 1999, the Ukrainian parliament decided in favor o f joining the CIS Parliamentary 262 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. affiliated with Ukraine’s nationalist organization or generally supportive of Ukraine’s independent statehood and nationhood. In addition, a majority of the population continued to support independence,- the result of Ukraine’s progress in its nation- building efforts. All these factors suggest that Ukraine’s policy course can be successful only if it is careful and responsive to various social pressures. Examples of these pressures were plentiful. In September 1997, for example, eighty-six parliament deputies called for Ukraine to join the Russia-Belarus Union. The Treaty of Friendship signed by Ukraine and Russia also prompted a reaction from the Right, and the Ukrainian Republican Party and an informal group known as Nation and State launched a campaign to begin impeachment proceedings against President Kuchma.2 7 The policy makers were well aware of the duality of Ukrainian society, charting the middle course and maneuvering between nation-builders and empire-savers. Finally, Belarus continued its attempts to reintegrate with Russia and, more broadly, the CIS at the expense of developing ties with European countries. Lukashenka’s efforts to reinstall the command economy led to inflation, shortages of basic food staples, wage arrears, and a collapse of industrial production of alarming proportions2 8 —the very outcome predicted by non-government economists.2 9 His response to this was intensification of his Russia policy in a hopes of obtaining Assembly, with 230 votes from those supporting the decision (The Jamestown Monitor, “Ukrainian Parliament Joins CIS Interparliamentary Assembly,” 1999, March 4). 2 6 According to one poll, 61 percent o f Ukrainians agree that “Ukraine must be independent despite the existence o f many obstacles on the way to its statehood” (Den’, 1998, July 16, 1). 2 7 Marples 1998, 15-16; Nezavisimaia gazeta, 1998, February 28, 1. 2 8 The Jamestown Monitor, “Lukashenka Frantic to Buy Social Peace,” 1998, December 3. 263 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. additional resources to offset domestic social pressures. Along the lines of the 1996 treaty on Russia-Belarus union, a new agreement was signed in April 1997. The new agreement again provided for common citizenship and called for coordinating security and economic policies and eventually the creation of a single currency.3 0 And in December 1998, the two sides signed a political declaration “On Further Unification of Russia and Belarus” and promised to subject the unification treaty to the public discussion and referendum of their domestic constituencies. In Boris Yeltsin’s opinion, this meant the beginning of a new nation.3 1 Lukashenka, too, praised the accomplishments of the reunification process.3 2 The two leaders, however, continued viewing the union in fundamentally different terms— something that had already became evident in before 1996 and caused the union’s failures. Lukashenka was thinking about preserving state sovereignty and was not about to give up Belarusian “accomplishments” (such as ownership of industry and collectivized agriculture) as the basis for the unification. Russia’s policy makers, in their turn, expected Belarus to amend its legislature in line with that of Russia and to be prepared for acting on the ex- metropole’s other economic and political terms.3 3 The difference of expectations again produced a number of obstacles to unification.3 4 29Turevich 1998. 30 RFEJRL Daily Report, “Yeltsin Approves New Agreement With Belarus,” 1997, April 3. 3 1 Nezavisimaia gazeta, 1998, December 26, 1. 32 Lukashenka 1998. The Jamestown Monitor, “Primakov Keeps Rising in Lukashenka’s Estimation,” 1999, February 22. 3 3 The Jamestown Monitor, “High-Level Russia-Belarus Meeting Fails to Settle Differences,” 1998, June 11; “Pan-Slavism Plus Collectivism Equals Empire,” August 4; “Lukashenka Previews Treaty o f Unification With Russia,” 1999, April 8. For further clarification of Russia’s preferences, see NG- 264 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Lukashenka’s unification drive generated fierce resistance from domestic nation- builders, the forces committed to Belarus’ active participation in European institutions and to gaining distance from Russia. Despite the brutalities o f Lukashenka’s regime, there was evidence of increased support for the efforts of nationalist-oriented forces. In 1998, it was not only the Popular Front; a number of political and social movements united in protesting Lukashenka’s authoritarianism and attempts to find the solution to Belarus’ problems on the way of reunification with the ex-metropole.3 6 The country’s aggravated economic and political situation produced conditions for possible alliance between the working class and the nationally- and reform-minded intelligentsia. Up until the beginning 1999, Lukashenka maintained a tight grip on power. Table 6.3 summarizes the differences in the post-1996 foreign economic policies of Latvia, Ukraine, and Belarus. This analysis indicates that during 1997 and 1998 the three nations generally maintained the difference in their foreign economic orientations, suggesting that the argument made in this study remains applicable to the post-1996 period, as well. This is not to imply that, with national identity influences having gained an upper hand, the post-Soviet nations neglected economic considerations in their external policies. Rather Stsenarii, 1997, May 5, 6; Nezavisimaia gazeta, 1998, December 26, 1,5; Nezavisimaia gazeta, 1999, January 20,4; The Jamestown Monitor, “Liberal Imperialism and Belarus,” 1999, January 21. 3 4 Nezavisimaia gazeta, 1999, January 20,4; The Jamestown Monitor, “Russia-Belarus Union: Saber-Rattling Amid Economic and Political Failure,” 1999, February 16. 3 5 RFEJRL Daily Report, “Demonstration in Minsk,” 1997, April 2; The Jamestown Monitor, “Young Front Demonstrates in Minsk on Independence Anniversary,” 1998, July 28; “International Support Sought Against Re-Annexation o f Belarus By Russia,” 1999, January 4. 3 6 The Jamestown Monitor, “Belarusan Opposition Unveils Political Strategy,” 1999, January 14; “Opposition Activity Picking Up in Minsk,” January 29; “Democratic Congress in Minsk,” February 1. 265 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. T able 6.3. Latvia’s, Ukraine’s and Belarus’ Post-1996 Policies Latvia Ukraine Belarus no participation in passive participant active participant The Russian pole the CIS of the CIS o f the CIS passive bilateral active bilateral further efforts of cooperation with cooperation and reintegrating with Russia promotion of free trade area with Russia Russia formally The Western pole EU — additional EU — additional EU — further progress progress isolation 266 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. it is to say that these nations’ economic considerations turned out to be embedded in varying cultural contexts and it is only in these cultural contexts that economic interests could be formed and meaningfully function. The three countries’ policy makers all faced comparable economic dilemmas and yet made sharply different economic policy choices operating in different cultural universes. In their economic decisions, these policy makers were motivated by both economic and national identity concerns, but it is the latter concerns that turned to have had the decisive impact. The structure of economic interests was undergoing change following the process of establishing cultural meanings, not vice versa. It follows then that economic rationality should not be seen as entirely separated from its cultural context and that the latter that determines the former, not the other way around. Once the cultural identity is established, economic interests, too, start taking root. Possible Objections This final section will address five types of possible objections to the argument pursued in the study. These five amply illustrate the specter of alternative explanations. I will consider the behavior of external actors other than Russia; the behavior of Russia itself; the republics’ political institutions; leadership and policy commitment to domestic economic reform; and ethnic identity. The behavior o f external actors other than Russia One might argue that the ex-Soviet republics could have benefited from economic cooperation with external actors in varying degrees, and the republics’ foreign 267 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. policies might therefore be seen as a reflection of such cooperation. The strongest way to make the argument is to consider the importance of the republics’ varying access to international markets. Various analyses indicated, for example, that Latvia and other Baltic republics were treated separately from the rest of the former Soviet republics. For example, they obtained Most Favored Nation and Generalized System of Preferences statuses from OECD countries earlier than the other republics.3 7 Presumably, this separate treatment should have put Latvia in a better position to reorient its commercial activities toward the Western countries and thus should have encouraged Latvian policy makers to “go west.” The market access argument, however, is only partially applicable to explaining the policy differences described above. Even based on the core of the argument, one cannot explain the policy differences of Ukraine and Belarus, as these two were granted 38 the market access privileges by OECD countries at approximately the same time. The main problem with the argument has to do with the fact that, as this study has argued, the formation of Latvia’s, Ukraine’s, and Belarus’ foreign trade policies had begun before they received formal independence and were granted preferential access to Western markets. For example, their various decisions vis-a-vis participation in the Commonwealth of Independent States were predetermined by the events of 1990- 1991—Gorbachev’s new Union treaty initiatives, the August 1991 coup, and the post- 3 7 MFN status subject a countries’ exports to tariffs applied exports from GATT members; GSP status puts a country’s product rates on the same footing as rates applied to imports from selected developing countries (Kaminski 1996,403-405). 3 8 Kaminski 1994, 247; Kaminski 1996,404. 268 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. coup rise of Russia—and made before the end of 1991.3 9 Latvia’s trade policy was predicated on beliefs in the virtues of economic nationalism that had been formulated back in the late-1980s. Being granted market access has, at best, reinforced its policy choice, but has virtually no independent causal effects. The behavior o f Russia The other side of the ‘equation’ is the behavior of Russia, the ex-metropole of the Soviet empire. One might argue that the ex-Soviet republics’ reorientation policies were the reflection of various Russian pressures, rather than of various strengths in their national identities. Both political and economic behavior of Russia might have contributed to the republics’ policies. Military and political threats to security One might assert, for example, that Latvia and Ukraine experienced more threats to their security and independence from Russia than Belarus and it was these external threats that pushed Latvia and Ukraine away from the ex-metropole. For example, in January 1991 Latvia experienced a direct invasion, with Soviet Army troops seizing the main newspaper publishing plant and attacking the Interior Ministry. Russia’s post- 199 1 intentions can also be viewed as threatening the republics’ security. As monitored via Russia’s public statements, particularly those about status of ethnic Russians, 3 9 Ivars Godmanis, the Latvian Prime Minister, said in October 1991 that “our membership in a Union o f any type is excluded.” Belarus’ leaders, on the other hand, kept pressing for a “renewed” union up until the demise o f the USSR (RFE/RL Daily Report, “Latvia Will Not Join Soviet Economic Union,” 1991, October 10; Mihalisko 1992, 8). 269 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Russian military presence, and the strategy of “reintegrating the Near Abroad,” the newly independent nations could well have perceived those intentions as disturbing.4 0 The argument is flawed, however, as it does not spell out the sources of the republics’ various perceptions of Russia. Having suggested the reasons for Latvian and Ukrainian concerns with Russia’s behavior, it does not tell us why Belarus was not nearly as worried, despite the fact that Russia maintained military bases for its strategic forces on Belarusian territory. In the realist spirit, the argument assumes nation independent military and security posture and therefore cannot explain why Belarus made significant steps to weaken its military status relative to Russia4 1 at the cost of improving its economic relations. The national identity argument pursued in this study does not “black box” domestic sources of various security perceptions and so can do a better job in explaining the Belarus “anomaly.” It suggests that Latvia’s and Belarus’ varying perceptions of Russia were cultural, rather than merely political, in nature. Economic coercion The supporters of economic sanctions42 argument might suspect that Russia was hardly a passive player and was probably using its available economic levers when possible. The Russian economic statecraft then might have been responsible for the observed policy outcomes in the three republics. There are indeed plentiful examples of Russia applying or threatening to apply economic pressures on the republics to achieve 4 0 Porter & Saivetz 1994; Drezner 1997. 4 1 For instance, Belarus was the first to turn over its nuclear weapons to Russia; it allowed the presence o f Russia’s military bases on its territory; and eventually it entered into a military alliance with the ex-metropole (Sanford 1996, 140). 270 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. its foreign policy goals. Daniel Drezner documented, for example, how Russia applied various economic pressures on Kazakstan, Latvia, Turkmenistan, and Ukraine to extract various concessions from them.4 3 He showed, in particular, how Russia and Russian companies manipulated its energy prices in dealing with energy-dependent Latvia and Ukraine.44 This should have and did prompt the two nations to search for alternative energy sources so as to avoid similar Russian pressures in the future. It should then have contributed to their foreign economic reorientation policies. The economic coercion argument should therefore expect the republics to pursue policies of economic reorientation away from the source of potential economic dependency. This expectation, however, is not met once applied to Latvia, Ukraine, and Belarus. All three were heavily dependent on Russian energy supplies and experienced similar pressures from Russia to pay their energy debts. Therefore, all three, objectively speaking, should have been interested in breaking away from such dependence. Nonetheless, the republics’ responses to their dependence were remarkably distinct. Latvia decided against joining the CIS economic initiatives and backed the decision with rapid domestic marketization preparing for eventual breakthrough in relationships with the West. Ukraine, on the other hand, chose in favor of participating in the CIS and kept delaying its domestic economic reform up until 1995, negatively affecting its ability to pay energy debts. Finally, Belarus, instead of activating its search for alternative economic partners and marketizing the domestic economy, tried to solve the 42 As an example o f one o f the most important statement, see Baldwin 1985. 4 3 Drezner 1997. 271 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. problem by paying off the arrears with foreign credits and political concessions to the ex-metropole.4 5 Russian protectionism One might also assert that Latvian, Ukrainian, and Belarusian policy outcomes resulted from Russia’s protectionist pressures, rather than from the nation’s own cultural identities. The policy of preferential economic agreements is always a two-way process and, in conducting their policies, the two could not disregard Russia’s own preferences with regard to tariff and non-tariff restrictions. Russia began erecting trade barriers as soon as the Soviet Union fell apart and maintained them — contrary to its own outcry for the necessity of “reintegrating” the ex-Soviet space -a t relatively high levels even after MFN and free trade agreements with the republics were concluded.46 Russian protectionism might have caused the republics to pursue reorientation more actively than did the policy of economic openness. Although the three did indeed have to pay attention to Russia’s trade policy, they were not uldmately dependent on it in their responses. There are at least two categories of evidence indicating that the republics were conducting their trade policies relatively independently of Russia. First, the design of these three’s policies began before the Soviet break-up and Russia’s emerging protectionism, a fact observable via the three 44 Ibid., 97-109. 45 As a result of its willingness to cooperate, Belarus continued to receive Russia’s oil and gas at a subsidized rate longer than Latvia and Ukraine and was even forgiven some o f its energy debts (Markus 1995d). This, o f course, was possible only to a limited degree given that it was increasingly private companies, such as Gazprom, that were dealing with the republics and seeking a hold in their economies. 272 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. countries’ attitude toward the new Union treaty during 1990-1991. Second, the actual variation in Russia’s treatment of Latvia, Ukraine, and Belarus had not emerged until 1995. Only then did Russia sign a customs union agreement with Belarus and, in May of the same year, eliminate its trade restrictions on the border with Belarus.4 7 In the same year, Russia also signed an agreement with Ukraine (“On the mechanism of realization of the free trade agreement”) which was supposed to give Ukraine considerable advantages in its trade with Russia relative to Latvia and others not bound with the ex-metropole by free trade treaties. As far as the period before 1995 is concerned, Latvia, Ukraine, and Belarus were hurt by Russia’s discriminatory barriers to a relatively similar degree, and yet they pursued quite different economic policies. National political institutions Those favoring the national political argument4 8 might assert the relevance of domestic arrangements in understanding the three republics’ policies. This study does not argue that domestic structures are unimportant—they are merely insufficient for explaining the observed policy variation. The domestic structures’ shapes, by themselves, do not adequately explain the variation in Latvia’s, Ukraine’s, and Belarus’ policies. For example, the “homogeneous society — low centralized state” combination does tend to produce the society dominated type of 4 6 One possible explanation o f such behavior by Russia was its general unwillingness to trade with the cash-stripped republics at the cost of advancing economic ties with the countries of the ‘Far Abroad.’ 4 7 In fact, some sources suggest that even after signing those 1995 agreements, Russia - in violation of the documents — kept practicing trade restrictions (Samodurov 1997, 14; Feofilaktova 1996). 4 8 The most important statements are Katzenstein 1977; Hall 1986. 273 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. policy network, but it does not tell us yet what kind of social groups are likely to mobilize society around their demands. Those groups may be entirely different in their policy preferences: they might be nationalist, as in case of Latvia, or empire-oriented, as in Belarus. The national identity dimension, once employed, tells us which of these groups is likely to be dominant and which is likely to be marginal, and so helps to determine why one society is more nationalistic than another. As the study indicates, domestic structures are important in spelling out the national identity effects on policy making, but it is national identity strength— and not the domestic structures—that triggers the causality process. It is national identity that comes first, thereby determining the shape of domestic structures and defining foreign economic policy outcomes. Leadership and policy commitments Next, one might argue that the republics’ behaviors cannot be adequately understood without exploring qualities of political leaders and their personal commitments to economic reorientation policies. For example, a frequently heard comment about Belarusian President Alexander Lukashenka is that his dictatorial style is something that drives the republic away from developing economic relations with the West. The comment implies that Belarus, had it had another, more democratic leader, might have had different foreign trade policy, as well. While not without truth, the argument is only partially helpful in explaining the republic’s policies during the five years of its independence. The problem lies in the 274 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. argument’s narrow focus on individual policy makers and their perceptions of what might be an optimal foreign economic strategy for their countries. The individually- tailored argument may be helpful in explaining policy differences across various governments associated with individual state leaders, but it is less useful when applied to state policies as continuously outliving various governments and cutting across them. The argument made in this study is of the latter nature: it has been built by observing the policies of Latvia, Ukraine, and Belarus’ from 1990 to 1996, a period during which a number of governments and policy leaders were changed. For example, in 1995 Belarus elected Lukashenka as its first president, but was previously ruled by Stanislau Shushkevish and, more briefly, by Viacheslau Kebich. And Ukraine went through a significant change from Kravchuk’s to Kuchma’s leadership. What matters in explaining this kind of overarching policy change is not so much an individual perception of a beneficial policy, but a perception expressed by nation as a whole and monitored via various nation-wide reactions to policy choices by individual national leaders. This national perception cannot be separated from a nation’s previously formed image of itself, or its national identity. Ethnic identity Finally, one might admit that national identity does make a difference in the republics’ foreign economic policies, but suggest that national identity should be conceptualized in a different way. For example, one might argue that national identity does not need to be understood in constructivist terms, as something formed out of the 275 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. republics’ historical experience before and during the empire. The supporters of a primordialist account may suggest that the ethnic components of national identity, such as language and religion, should account for countries’ economic orientations. For example, one might assert that Ukraine and Belarus were religiously and, to a lesser extent, linguistically closer to Russia and therefore could not break away from it to the extent Latvia did. This study does not argue that ethnicity is irrelevant-under some circumstances it may figure quite prominently. What it does argue, however, is that language and religious compositions of the republics’ population should be viewed as a historical phenomenon, and not something given or waiting to be discovered. Primordial factors might in fact matter, but not when removed from their social and historical contexts. For instance, what do we make of the fact that the Latvian population, as compared with that of Belarus, is much more heterogeneous in terms of the proportion of ethnic Russians residing in the country?4 9 A purely primordialist account might mistakenly assume that it is Latvia which should be more pro-Russian in its foreign policy orientation, and that it is Belarus which should reorient itself away from Russia, not vice-versa. The linguistic data, however, will begin to make sense after we place them in the relevant socio-historical context. It is socio-historical factors, such as the degree of linguistic Russification and the extent of resistance to it (comparative data on the 4 9 Fully 33% in Latvia as compared to 13.2% o f Russians living in Belarus (Chinn and Kaiser 1996,95, 131). 276 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. republics’ degree of linguistic Russification are provided in table 3.2) that will be of assistance in interpreting the role of primordial factors in the observed policy variation. 277 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 7. EVIDENCE FROM OTHER EX-SOVIET REPUBLICS Introduction The purpose of this chapter is to explore whether the main argument of this thesis holds among other ex-Soviet republics. The chapter proposes a means of comparing the foreign economic orientations1 and assessing the merits of competing explanations for their differences, such as market conditions, relative power, political institutions, and national identities. It generally confirms the merits of the national identity hypothesis. The chapter also suggests several deviant cases and offers a qualitative analysis of two of these cases. The evaluation is based on bivariate regressions of various independent variables to the foreign economic policy score. Taken separately, such evaluation is only tentative and would require further research. However, when added to the qualitative investigation, such statistical analysis provides us with extra confidence in evaluating the explanatory potential of the national identity hypothesis. Foreign Economic Orientations of the Post-Soviet Republics In order to capture variation in the NIS’ foreign economic policies, this chapter emphasizes the significance of preferential agreements that were concluded by the ex- Soviet republics with Russia, on the one hand, and countries beyond Russia, on the other. For the purpose of consistency, throughout all the fourteen cases, I apply only one criterion to determining the variation in the republics’ economic policies. 1 This means all the former Soviet republics, with the exception o f Russia. 278 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Specifically, I focus on multilateral agreements, assuming that this criterion is sufficient for capturing the variation in the republics’ behavior and that, in one way or another, it will reflect their bilateral and unilateral policy inclinations, as well." On this basis, a way of ranking o f the post-Soviet republics’ foreign economic orientations is proposed, and three major types of policy behavior are identified. In particular, the post-Soviet nations are classified as those favoring economic integration with Russia (the “inner core”), those interested in active reorientation away from the former hegemon (the “spoiler”), and those whose policy stances situate them in between the two poles (the “outer core”). Preferential agreements and foreign economic orientations: the dependent variable The newly emerged post-Soviet nations faced important policy choices vis-a-vis Russia and the Commonwealth of Independent States, as well as countries beyond the former Soviet area. This section considers the policies they pursued toward these two poles. Specifically, I investigate the extent to which the ex-Soviet republics went into two major agreements within the CIS framework: the CIS Economic Union and the Customs Union. Should these agreement have been implemented in full, the CIS would have become an area of economic integration, with policies discriminatory towards non- 2 Multilateral preferential agreements are good indicators o f governmental intentions. Potentially, they can lead to high degree of economic reorientation and generally require relatively strong commitments on the part o f those willing to join an economic arrangement. By going into such arrangements, nations voluntarily place restrictions on their unilateral policies, thereby limiting their policy flexibility. 279 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. •y CIS members. Having constituted the economic body of the Russia-initiated CIS, these agreements should therefore serve as a reasonable base for making judgments about the new nations’ economic policies toward the Russian pole. I also look at the ex-Soviet republics’ policy stances vis-a-vis the introduction of national currencies. The ex-Soviet nations varied with regard to their willingness to participate in Russia-initiated monetary arrangements. Prior to Russia’s unilateral decision to end the existence of the ruble zone, some of the republics had already made a decision to introduce national currencies and therefore to leave the ruble zone for the sake of pursuing more independent external policies. Others republics, Belarus and Kazakhstan among them, remained committed to the idea of currency union and signed a September 1993 framework agreement with Russia that envisaged a ‘ruble zone of a new type.’ In the end, it was only Russia’s unilateralism that eventually forced these nations to embark on the path of adopting their own national currencies.4 In addition to the ex-Soviet nations’ policy choices vis-a-vis their traditional economic partners, this section considers preferential economic (primarily trade-related) agreements the new republics went into beyond the former Soviet area. For example, 3 The CIS Economic Union treaty envisaged the creation of a market-based common economic space by such means as free trade (involving a unified customs regime), a multilateral payment mechanism involving national currencies (followed at later stage by possible monetary union), and transnational ventures in investment, finance, and production. The Customs Union further proclaimed a commitment to customs and payment regimes and eventual monetary union, and its signatories agreed to “coordinate their customs policies and create a single customs space regulated by common acts” (Webber 1997, 50,55). 4 Shortly after, Russia demanded o f its new partners the pooling of gold and hard currency reserves and oversight of their foreign trade operations. This proved too much and in November this new arrangement was terminated by the introduction o f national currencies by many, including Belarus and Kazakhstan (Webber 1997:52; Markus 1995). 280 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Baltic nations, in an effort to diversify their trade away from Russia, expressed interest in joining the European Union and initialed a free-trade accord with the organization. Another example is the behavior of central Asian republics that decided to join the Economic Cooperation Organization (ECO), a preferential arrangement launched in 1992 with the participation of Turkey, Iran, Pakistan, Afghanistan and Azerbaijan.5 Table 7.1 summarizes the ex-Soviet nations’ foreign economic orientations toward Russia and countries other than Russia. The summary offered was derived from four sources — three for the republics’ orientations vis-a-vis Russia, and two for orientations toward countries beyond the former USSR. The republics’ orientations can be described by observing their decisions whether to participate in multilateral preferential economic agreements within and beyond the former Soviet area. Let us assign a score o f+1 when a nation becomes a member of an organization outside the area, and a score of -1 when it joins an organization limited to former Soviet republics. In a similar manner, let us assign a score of +0.5 for an associate membership or a bilateral free trade agreement with an organization outside the former Soviet area and a score of -0.5 for the same arrangements within the area. If consistent, the exercise should provide us with an objective foreign economic orientation score of the republics. As a result Georgia, for example, can be assigned a score “-1” since it signed one economic agreement with Russia within the CIS framework and no agreements beyond the ex-USSR area. Azerbaijan would score higher (“0”), since it entered one 5 See more in Trade policy 1996, 189-93. 281 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. agreement within the CIS (“-1”) and one beyond the CIS (“+1”). Associate memberships and bilateral free trade agreements with regional organizations were coded as 50% significant relative to gaining a full membership (100%) in an organization, on the one hand, and not participating in it, on the other. Ukraine’s behavior, then, should be evaluated as “-0.5”, and that of three Baltic nations as “+1” (the summation of two bilateral treaties, each with a score of 0.5). A full record of the republics’ dependent variable score is also presented in table 7.1. The derived classification is imperfect in terms of capturing foreign economic orientations of the republics, as it mainly focuses on one dimension of foreign economic policy (preferential agreements, primarily multilateral). It can, therefore, be criticized as insufficiendy robust. Yet since no systematic data on the republics’ unilateral policies, as well as of bilateral arrangements they might have entered, are available, I choose to rely on the above-described means of capturing the ex-Soviet republics’ foreign economic policies. In so doing, I was reassured by the reasoning that no classification or typology is perfect and that the sources I rely on, despite their possible deficiencies, are objective in a sense that I, as the author of this project, was in no way responsible for their creation.6 “Inner core, ” “outer core, ” and “spoilers": The three types o f policy behavior The above-proposed score assignment yields at least three types of economic policy behavior in the former USSR. The “inner core” group includes republics that 6 Another possible objection might be that each o f membership with a multilateral organization is an indicator of this organization policy as much as a nation policy toward it. My answer to it is that I trace nation behavior vis-a-vis several organizations, not just one, which allows me to identify at least some continuity and consistency in nation policy. 282 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission o f th e copyright owner. Further reproduction prohibited without permission. Table 7.1. Foreign Economic Orientations of the Ex-Soviet Republics, 1991-1996 Components Score CIS Economic Union CIS Currency Union CIS Customs Union PTAs with countries beyond the fo rm er USSR Armenia -1 -I 0 0 -2 Azerbaijan 0 0 0 + 1 (ECO) 0 Belarus -1 -1 -1 0 -3 Estonia 0 0 0 + 1 (2 free trade treaties w/ EC+EFTA) + 1 Georgia -1 0 0 0 -1 Kazakhstan -1 -1 -1 +1 (ECO) -2 Kyrgyzstan -1 0 -1 + 1 (ECO) -1 Latvia 0 0 0 +1 (2 free trade treaties w/ EC+EFTA) + 1 Lithuania 0 0 0 +1 (2 free trade treaties w/ EC+EFTA) + 1 Moldova -1 0 0 0 -1 Tajikistan -1 -1 0 + 1 (ECO) -1 Turkmen-n -1 0 0 + 1 (ECO) 0 Ukraine -0.5 (associate member) 0 0 0 -0.5 Uzbekistan -1 -1 0 + 1 (ECO) -1 Sources'. Zagorskii 1997,64; Trade Policy 1996, 189-93; The European Free Trade Association 1996; W ebber 1996,291. ’ A decision to introduce or abstain from introducing independent currency in 1993 in reaction to Russia’s announcement about taking rubles out o f circulation. to oo u > chose to keep loyalty to traditional economic partners and showed relatively little interest in finding new partners. Armenia and Kazakhstan signed two of the three main CIS economic agreements, and Belarus became a signatory to of all of them. None of them entered into preferential agreements beyond the former Soviet area. The “outer core” republics, while maintaining an interest in economic ties with their traditional partners, were less committed to it. In addition, some nations within the group made visible efforts to diversify their economic relations. This group is diverse and unites three distinct sub-groups. Azerbaijan and Turkmenistan signed one of the key CIS agreements (on Economic Union), but also entered the Economic Cooperation Organization, a preferential arrangement with Turkey, Iran, Pakistan, Afghanistan, Kyrgyzstan, and Tajikistan as participants. Ukraine became an associate member in the CIS Economic Union and did not enter into any preferential arrangements beyond the former USSR. Georgia and Moldova signed the CIS Economic Union agreement, but likewise nothing beyond the former Soviet area. Finally, Kyrgyzstan, Tajikistan, and Uzbekistan each signed two CIS agreements, and also entered the Economic Cooperation Organization. The final group, the “spoilers,” were the most determined to become full-fledged members of the world economy and to find new, primarily Western, trading partners. The Baltic nations, members of this group, decided against any affiliation with the CIS, instead committing themselves to gaining membership in Western political and 284 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Figure 7.1. The Ex-Republics: The Three Types of Policy Behavior Low degree o f deviation from the traditional pattern 'Inner core ’ (-3;-2) Armenia Belarus Kazakhstan High degree o f deviation from the traditional pattern — ■ » 'Spoilers’ (+) Estonia Latvia Lithuania Tajikistan Uzbekistan ‘Outer core ’ (~I;0) Georgia Azerbadjan Kyrgyzstan Turkmenistan Moldova Ukraine 285 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. economic organizations. The three types of policy behavior are summarized in figure 7.1. The Determinants of Post-Soviet Foreign Economic Strategies: Hypotheses and Evidence In this section, I consider three groups of possible explanations for the republics’ foreign economic orientations — economic, political/policy, and national identity. Their evaluation is based on bivariate regressions of the foreign economic policy score on independent variables and visual inspections of their relations. Such evaluation can only be tentative, especially given that the number of cases (fourteen) is limited.7 For this reason, a multivariate technique would not be meaningful. Economic explanations Economic explanations are a logical place to start in an analysis of economic policy. Three explanatory variables were identified as potentially significant for understanding the causes of foreign economic orientations. Other indicators might be employed, but the three were assumed to be sufficient for obtaining a general picture of the importance of economic variables. Hypotheses Geographic proximity Geographic proximity is a variable commonly used for explaining patterns of trade8 and one potentially important for explaining foreign economic orientations. The rationale here is that the closer a country is to an alternative 7 Just as correlation does not prove causality, bivariate regression cannot establish causal relationships. 286 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. center of economic activity, the more likely it is to entertain the option of diversifying or even completely switching its economic activities away from traditional partners. Again, the fact that the ex-Soviet republics were emerging from command economies, with no or little market incentives for development, makes the case even stronger. The collapse of socialism, for the first time in more than fifty years, allowed the republics to attempt to find their place in the world economy as defined by their own analysis of comparative advantages, and not determined by Moscow’s state planners. Geographic proximity is usually captured by calculating the distance between trading countries. The ex-Soviet republics had a diverse geographic location—from Central European to Central Asia and Caucusus—and different large potential markets in close proximity. In the case of Turkmenistan, for example, it would make more sense to calculate the distance from Iran, its closest neighbor, than with European countries. To obtain a measurement of geographic proximity, the distance in miles (as the crow flies) was calculated between the ex-Soviet nations’ capitals and the capitals of neighboring countries—the large markets closest to them. In the case of the Western post-Soviet republics, the target countries were Germany and Sweden, while the Central Asian and Caucasian republics were assumed to be interested in developing ties with Iran, Turkey, and China. Gravity In addition to geographic distance, it may also be argued that what is important in determining foreign economic reorientation is a country’s access to 8 Hewett 1976; Van Seim 1997, 60. 287 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. alternative markets and the relative size of those markets. For example, the gravity model designed for predicting patterns of trade normally supplements the geographic distance measure with variables designed to capture the size of the closest alternative markets.9 In order to supplement the distance with the size of the alternative markets, I obtained data measuring the extent of the former Soviet republics’ trade with countries others than Russia. After learning about the republics’ largest potential markets, I constructed a gravity variable in which the economic size of the republics’ largest trading partners outside Russia (measured as the size of their GDP in US dollars) was weighted by the geographic distance between a particular republic and its largest alternative trading partner. For instance, in case of Estonia, the absolute size of Finland’s GDP was weighted by the distance between Helsinki and Tallin, the capitals of the two countries. Natural resource endowment Resource endowment is a variable widely used by trade theorists for explaining patterns of commercial activities and distribution of gains from trade. If the point of departure for formulation of foreign economic policy is a country's comparative advantages in resource endowment (natural resources, labor, technology, etc.), then in a newly independent nation we should see shifts in economic policy and in the direction of trade to the extent that former trade departed from what would be expected under comparative advantage alone. Those nations that are resource rich should be able to gain more from international market exchange and therefore should tend to be more 9 Van Seim 1997, 60. 288 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. interested in diversifying their economic activities away from the old, politically organized economic area. A measurement of natural resource endowment (oil and gas in particular) is one very rough way of capturing variations in the republics’ comparative advantages. Some scholars have argued that for the post-socialist nations, a reorientation of trade is easier in resource- based goods, such as mineral fuels, wood, metals, leather, and vegetables, because quality is more uniform and less important to sales than in the case of machinery and equipment.1 0 One can hypothesize then that the greater a country's resource extraction capabilities, the more likely a country is to pursue a policy of economic diversification/reorientation away from its traditional markets. Exports of primary commodities expressed as a share of total exports might be an appropriate way to measure a country’s natural resource endowment. Various economic, political, and national identity determinants and their measurements are summarized in table 7.2. Evidence Table 7.3 shows the results of bivariate regressions of the foreign economic orientation score on each of the independent variables. In particular, it indicates that the regression coefficients for gravity and natural resource endowment are positive and that the one for geographic distance is negative, as was expected. However, none of the variables is statistically significant, suggesting that there are no significant relationships 1 0 Sorsa 1994, 146. 289 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced w ith permission o f th e copyright owner. Further reproduction prohibited without permission. Table 7.2. Possible Economic, Political, and National Identity Determinants of the Ex-Republics’ Foreign Economic Policies Economic Determinants Political Determinants National Identity D eterminants I 2 i 4 5 6 7 S 9 Armenia m 0.006 34 1 29 1 1 1 9.3 Azerbaijan 601 0,007 89 2 18 1 1 2 2.1 Belarus 598 3,44 61 2 28 0 0 1 25.8 Estonia 238 1.88 59 0 8 2 1 2 4.7 Georgia 634 0.006 95 0 20 1 1 1 1.7 Kazakhstan 2037 0.27 57 1 31 0 0 2 2.5 Kyrgyzstan 2158 0.25 24 0 33 0 0 2 2.1 Latvia 450 3.88 69 0 14 2 1 2 5 Lithuania 426 3.99 77 0 16 2 1 2 2.1 Moldova 790 0.37 61 1 27 0 0 1 6.8 Tajikistan 2523 0.11 98 0 29 0 0 2 2.2 Turkmenistan 410 0.87 92 1 29 0 0 2 1.3 Ukraine 750 0.003 70 2 28 1 0 1 17.2 Uzbekistan 1033 0.22 96 2 27 0 0 2 1.5 continue on next page to VO O Reproduced w ith permission o f th e copyright owner. Further reproduction prohibited without permission. 1 G eographic proxim ity, as distance to the nearest largest m arket, miles 2 Gravity, ratio of the economic size o f the republics’ largest trading partners outside Russia (measured as the size of their GDP in US dollars) and the geographic distance between a particular republic and its largest alternative trading partner (measured in miles its the crow Ilies). The data about the republics’ largest trading partners outside Russia were for 1994 3 Endowment with natural resources, as exports of primary commodities, % of total exports, 1992 4 M ilitary power, as estimate o f ability to resist an attack from Russia (2 = over 40,000 o f armed forces, I = 10,000 to 40,000, and 0 = less than 10,000) 5 Sovereignty, time elapsed, in months, between M arch 1988 as a starling point and declaration of republican formal sovereignty or the equivalent 6 Independence experience, an estimate o f number of years of independent statehood in the 20'h century (0 = no experience; 1 = some experience; 2 = significant experience) 7 Territorial unity, an estimate o f stability o f geopolitical borders (0 = relatively unstable; 1 = relatively stable) 8 Cultural distinctness, similarity or difference with/from Russia in language and religion (2 = different on both dim ensions; 1 = different on one dimension) 9 Cultural resistance, percent switching native language to Russian, 1979 Sources: www.indo.com /cgi-bin/disl/; World Development Indicators 1999; ElU, various; Kaminski 1994, 241; Spruyt 1997, 327; Evangelista 1996, 183, The author’s estimates; RFE/RL RR, 1993-95; Luilin 1998,46 to VO Table 7.3. Bivariate Regressions of the Ex-Republics’ Foreign Economic Policy on Hypothesized Economic, Political and National Identity Determinants Coefficient P2 Economic Determinants DISTANCE -0.0006 .14 GRAVITY 0.2704 .12 NATURAL RESOURCES 0.0165 .10 Political Determinants MILITARY POWER -0.0603 .19 SOVEREIGNTY -0.1201** .56 National Identity Determinants INDEPENDENCE EXPERIENCE 1.0484** .52 TERRITORIALITY 1.1875* .26 DISTINCTNESS 1.2778** .28 RESISTANCE -0.0826* .24 Note: Number of Cases is 14. Entries are unstandardized regression coefficients. * p < 0.05 * * p < 0.025 292 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. between the republics’ geographic proximity, gravity, and natural resource endowment11 and their policies of foreign economic orientations. The coefficients of determination < ) (R-) are too low to capture a significant portion of the variance. The low explanatory power of the economic variables can at least partially be attributed to the fact that we are dealing with what were communist economies. Isolated for a long period of time from the world market-based incentives, these economies were not build around their comparative advantages in resource endowment. Instead, they were heavily integrated into what used to be called the ‘unified economic complex,’ built from above and primarily dependent on the decisions of Moscow planners, thus suggesting a need to employ variables that are of a political nature. Political explanations The next step is to consider merits of political explanations relative to economic ones. This section takes up two variables relevant to an analysis of economic policy. Hypotheses Military power Relative military power explanations, commonly used in analyses of nations’ military strategy and alliances options have also been applied in some studies of economic policy. The underlying logic has been that economic viability is an important dimension of nation power, in addition to its military capabilities. A nation’s economic policy choices, then, may be viewed as a reflection of relative power 1 1 In addition to measuring the republics’ endowment with natural resources by exports o f their primary commodities, I tried to measure it by exports o f oil and gas (as percentage o f the republics’ exports), but this effort did not improve the results (R2 =0.01). 293 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. maximization drives.1 2 If the hypothesis applies, some of the former Soviet republics may, for example, have pursued policies of economic restructuring away from the ex hegemon and entered an economic arrangement with a potentially powerful actor in order to extract marginal power benefits (such as balancing Russia) from it. Therefore, the nations that are weaker in power terms should be expected to pursue more aggressive policies of foreign economic diversification. Military power was estimated as the republics’ ability to resist an attack from Russia, the most likely potential hegemon. Size of armed forces is one common measurement of a country’s military capabilities. Republics were divided into three groups in terms of their ability to resist a possible Russian attack: relatively powerful (assigned score of 2 for armed forces over 40,000 troops), possessing limited power (1 = 10.000 to 40,000 troops), and incapable of significant military resistance (0 = less than 10.000 troops). Eagerness for sovereignty My final measurement has to do with the Soviet republics elites’ struggle for sovereignty within the USSR. It is introduced here as a * 13 political measurement serving to express peripheral elites’ power maximization dnve. The underlying logic is that the peripheral elites’ dissatisfaction and frustration with distribution of political authority within the system may at later stages find its reflection in secessionist economic policies. One might hypothesize that, when given a chance at 1 2 Hircshman 1945; Knorr 1975. 1 3 The eagerness for sovereignty itself may be caused by a country’s sense o f national identity, but may also be affected by other factors, such as degree of economic development, integration, territorial 294 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. attaining independence, those who are dissatisfied and frustrated with the system to a larger degree are likely to pursue a more aggressive policy of economic reorientation than are those who are relatively satisfied. An available measurement of the republics’ drive for sovereignty is time elapsed (in months) from Estonia proclaiming its formal sovereignty in November 1988 to Kyrgyzstan following suit in December 1990.1 4 During this time interval, all the republics declared formal sovereignty or the equivalent (e.g., in Georgia, constitutional amendments gave the republic legislative sovereignty and the right to its natural resources; in Armenia, parliament passed a declaration of independence). Evidence As table 7.3 indicates, political variables in general may be seen as more promising tools for explaining the ex-Soviet republics’ policy outcomes. The regression coefficients for the military power and the eagerness for sovereignty variables are negative, as expected. Eagerness for sovereignty turned out to be a particularly promising variable: it is significant at the .0025 level and explains 56 percent of the variance. The fact that the elites’ strive for sovereignty proved to be the strongest predictor (R2 = .56) may suggest the existence of complex causal chain linking national identity and population size, ties with international associations, etc., as it is documented in literature on secessionism (see for example, Emizet and Hesli 1995). 1 4 Measuring the sovereignty drive by the republics’ behavior during the period o f 1988-1990 allows us to eliminate the possibility that the drive itself might have been caused by the republics’ foreign economic policies. Empirically this is not the case, as the sovereignty drive predates the republics’ economic reorientation during the period o f 1991-1996. 295 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and policy outcomes, as theorized earlier in this study (see chapter 2). It may well be that the sovereignty variable captures the domestic structures variable that was employed for spelling out the effects of strength of national identity on the ex-Soviet republics’ foreign economic policies. It may simply correlate with the strength of national identity, a suggestion that seems reasonable, since the sovereignty effort may very well be tied to the republics’ structural and historical national identity characteristics. To clarify the issue, one needs to explore more fully the merits of the national identity hypothesis, to which we now turn. The domestic political reform variable seems to point in the same direction: if all of the newly independent nations, having emerged out of the same empire, inherited domestic institutions that were essentially an imperial product and therefore did not vary enough, then it seems only logical to look at the republics’ underlying set of longitudinal historical orientations typically captured with the words “culture” and “national identity.” The national identity explanation This section tentatively evaluates the merits of explanations from the strength of national identity. As with economic and political explanations, national identity is very rich in content and cannot be captured completely through a single indicator. Consistent with the theoretical framework offered in this study (chapter 2), five variables were identified and tested in a preliminary fashion. These five may be seen as being responsible for creating necessary ideational and institutional conditions for a political nation’s emergence and development as a unit. These five shape a nation’s identity by 296 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. establishing its cohesiveness and differentiating it from the outside world. For post imperial nations, national identities would vary depending on how strongly people in those nations identify themselves with the nation as a non-imperial entity and view the ex-metropole as threatening their independent existence. One can then hypothesize that a new nation endowed with a relatively stronger national identity should be able to challenge the institutional legacies o f the former empire in a relatively more efficient way and so assume control over its policies including foreign economic policies. Other things being equal, the stronger a country's national identity, the more likely the country will be to perceive economic cooperation with the former hegemon as being a threat to its security and the more likely that its policy will run counter to the old, empire- initiated economic pattern. Hypotheses Length o f experience with independence One appealing way to operationalize national identity effects on policy making is to look at the republics’ experience with independent nationhood before their incorporation into the empire. Those with longer experience with independence should be able to preserve a stronger memory of this experience through the period as part of the empire and to reactivate this memory in the nation-building process once the opportunity arises. The fourteen republics fall into three distinct groups in terms of their experience with national independence.1 5 Baltic nations exemplify nations with relatively strong 1 5 In constructing my classification, I found useful typologies of Soviet and post-Soviet nations offered in the following works: Rakowska-Harmstone 1974; Armstrong 1988; Szporluk 1992; Suny 1993; 297 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. identities. All enjoyed a quarter-century period of independent statehood before they were incorporated into the Soviet empire in 1939, thus allowing them to maintain a sense of independent identity even during the Soviet occupation and despite Soviet efforts to incorporate them culturally in addition to politico-economic incorporation. These republics are coded 2 (significant experience with independence). At the other extreme are Belarus, Kazakhstan, Moldova, and the four Central Asian nations. While different in many dimensions, these nations are similar in not having experience with independent statehood before their incorporation into the Soviet empire (coded 0). Finally, Armenia, Azerbaijan, Georgia, and Ukraine would fall somewhere in between those two poles. As compared to the Baltics, the experience with national independence was rather short-lived and fragmented for these nations, but it proved sufficient to develop and retain—even through the period of Soviet empire—a set of historical myths glorifying the idea of national independence. For these reasons, these nations, along with the Baltics, are sometimes referred to as “historic nations.”1 6 They were coded as 1 (some experience with independence).1 7 Dawisha and Parrott 1994; RFE/RL RR, 1993-95; Chinn and Kaiser 1996; Bremmer and Taras 1997; Brzezinski 1997. 1 6 Brzezinski 1997, 128. For the argument about Ukraine as a historic nation, see Bilinsky 1992; Burant 1995. 1 7 The “0 to 2” scale was chosen instead of years o f independence because there is no agreement among scholars regarding the exact length of experience with independence among the former Soviet republics during the 20th century, let alone during the entire period o f several centuries since the emergence of modem concepts o f the sovereign nation and nationhood as proclaimed by the Peace o f Westphalia. Some consensus seems to have been established, however, that the Baltic nations represent a separate group due to their interwar independence and that Central Asian republics, along with Moldova and Belarus, had minimal or no experience with independence at least since the 17th century (Dawisha and Parrott 1994; Prazauskas 1994; Chinn and Kaiser 1996). Most scholars also seem to agree that Georgia, Armenia, Ukraine, and, to an extent, Azerbaijan had some experience with independence before and after 298 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Territoriality Another way to capture some aspects of national identity strength is to look at the stability of nations’ geopolitical borders. Territoriality, or relative stability of geopolitical borders, is often seen as fostering people’s emotional attachment and sense of unity relevant to national identity formation. It can be measured by tracing whether, over a hundred year period, a nation lived within essentially the same geopolitical borders or those borders were relatively fluid. In the latter case, the borders might have been established anew as a result of imperial policies or imperial expansion. As a result of these rearrangements, a new combination of ethnic groups would emerge, thereby delaying the process of (sub)political identity formation. In the USSR, this happened with Central Asian republics, which were essentially created ‘from above’ in the 1930s, as well as Ukraine, Moldova, and Belarus (which were reunited as subpolitical entities within Soviet territory under the Molotov-Ribbentrop pact). Relative stability of political borders, or territorial unity, was coded as 1 and border change for the size of one third or more as 0.1 8 Cultural distinctness (laneuaee and religion) Nations’ primordial characteristics may also be relevant for making comparisons in terms of national identity strength. Political elites may choose to emphasize their nation’s distinctness in cultural features such as religion, language, customs, and racial appearance, particularly the 1917 Russian revolution (Brzezinski 1990; Dawisha and Parrott 1994; RFE/RL Research Report 1994-1995; Chinn and Kaiser 1996). 1 8 Again, this measurement was selected in an attempt to avoid involvement in a more nuanced discussion about the nature and the amount o f territorial changes among the republics. What we need to consider is whether or not such changes existed in principle. The chosen “0 to I” scale seems satisfactory in serving this purpose. 299 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. if these nations are relatively homogeneous on these dimensions. Therefore, while cultural features in themselves do not constitute the sense of a nation’s identity, they can play an important consolidating role in the nation-building process.1 9 Relatively strong cultural distinctness and homogeneity can reinforce peripheral nationalism and contribute to the process of economic reorientation away from the metropole. This study proposes two ways of measuring nations’ distinctness from the metropole on a primordial culture dimension. One measurement has to do with ethnicity, capturing the republics’ linguistic differences from the ex-metropole. The other has to do with religion, capturing whether or not a republic is different from the ex-metropole on this dimension. Those newly emerged nations that differ from Russia in its mainstream religious denomination (that is, non-Orthodox) can be coded as 1, and those not differing from Russia (Orthodox) coded as 0. As a result of summing up the republics’ linguistic and religious distinctness from the metropole, one can identify two groups of nations: those differing from Russia on both dimensions (coded as 2) and those differing on one of the two dimensions (coded as 1). Cultural resistance Our final measurement captures the degree to which a nation was capable of resisting assimilation pressures from the metropole, or the degree of cultural resistance. Presumably, nations with a stronger sense of identity should have been more successful in preserving their religious and linguistic authenticity. Various figures on the ex- Soviet republics’ linguistic Russification may be a reasonable way of capturing their degrees 1 9 For the argument about importance of ethnicity and cultural unity for understanding the consequences o f Ottoman, Habsburg, Russian and Soviet empire and imperial break-up, see Barkey 1997. 300 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. of cultural resistance. For the purpose of this analysis, I look at the percentage of indigenous population switching from their native language to Russian during the Soviet period. Evidence The results of the tests (as reported in table 7.3) suggest that national identity variables have strong explanatory power. The regression coefficients for all variables other than cultural resistance are positive as expected. All of the variables are statistically significant at the .05 or .0025 level, with national independence experience having the greatest explanatory power (R2 = .52). Although each of the selected measurements, when taken separately, can be perceived as insufficient in capturing the strength of national identity,2 0 as a group they do imply that the national identity dimension should not be ignored by those interested in explaining the republics’ international policies. The results may be also interpreted as indicating the difficulty of separating national identity variables from political variables. In the previous subsection discussing the impact of political variables, we identified eagerness for sovereignty as the variable with the strongest explanatory power and speculated that this may have been due to this variable’s relation to national identity. The sovereignty variable correlates with the strength of national identity, particularly when operationalized as the republics’ length of historical experience with independence (coefficient of correlation 2 0 For example, the republics can be coded differently with regard to their experience with independent statehood. Those with some experience can be coded 1, while those without it as 0. Or degree o f primordial distinctness can be measured in a different way, producing different results in terms of relationships between national identity and foreign economic policies. 301 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. is .87), and the two variables account for a similar percent of the variance (56 and 52 percent, respectively). It thus appears that the reason why sovereignty, a political variable, turned out to be such strong a predictor has to do with its being tied to national identity, a variable cultural in nature. This further strengthens the previous suggestion that the sovereignty variable seems helpful in spelling out the causal effects of national identity by loosely capturing the domestic structures variable. This conclusion is consistent with the causal chain identified above (see chapter 2) and suggests that the foreign economic policies of the post-imperial nations may indeed be caused by the strength of national identity reflected in domestic political struggle, among other factors. The Limitations of the National Identity Explanation National identity is not the only dimension that shapes foreign economic orientations, and the behavior of some of the ex-Soviet republics cannot be satisfactorily explained on the basis of national identity strength and must be studied separately. This section discusses the limitations of this explanation by constructing the composite index of national identity strength. Armenia and Turkmenistan illustrate other influences that can override national identity. The composite index o f national identity strength To a certain degree, constructing a composite index is always an arbitrary process, first, because there is a variety of techniques, each with its own limitations, and second, because a scholar makes choices from a wealth of available measurements. For 302 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. all these reasons, it is important to make explicit rules for constructing the index of national identity strength. In constructing the index, I take the following steps: First, I select different dimensions of national identity strength. Second, I rank these using the same technique consistently. Third, I prioritize these selected dimensions and so assign higher scores to some and lower to others. Fourth, I sum the ranks of all dimensions. For constructing the index, I selected five different indicators (dimensions), each representing historical, geographic, economic, and cultural aspects of national identity formation. These five are already familiar: a nation’s historical experience with independence before its incorporation into the empire, the presence or absence of stable geopolitical borders (territoriality), the degree of economic integration, cultural distinctness, and cultural resistance to assimilation pressures. The measurement of most of these are available and were summarized in table 7.2. To rank these five, I propose a simple technique. All five will be estimated on a scale “low-medium-significant” and coded as 0, 1, and 2, respectively. Each indicator yields itself to this kind of ranking. National independence experience of the republics can be classified as “no experience,” “some experience,” and “significant experience.” Territoriality dimension has two values, relatively stable geopolitical borders (coded as 1) and relatively unstable geopolitical borders over a one hundred year period (coded as 0). The degree of economic integration2 1 can be coded as 2 (“significant”)and as 1 2 1 The economic integration dimension is relevant for national identity formation as it was discussed in chapter 2. A more developed economy fosters a nation-wide sense of unity and 'belongness,' and undercuts purely local or ethnic ties (Gurr and Harff 1994, 91; Coleman 1995, 12), and a nation’ s identity may gain strength in the process o f a country’s economic modernization and integration. A 303 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. (“medium”). No “low” ranking will be used here, as even the less integrated republics, such as Tajikistan and Kyrgizstan, could boast 32 and 38% levels of urbanization, respectively. With regard to cultural distinctness, the ex-Soviet nations can be coded as 2 when they are different from the metropole on both language and religious dimensions, and as 1 when they differ on only one of these dimensions (typically, language). Finally, the degree of cultural resistance to assimilation can be operationalized as relatively high (coded as 2) and relatively low (coded as 1). That Ukraine and Belarus display particularly large proportions of natives switching to the Russian language may be seen as susceptible to the relatively high degree of assimilation relative to the rest of the republics. The results of the ranking are summarized in table 7.4. The selected five indicators are not, however, equal in terms of their effects on national identity strength and must therefore be prioritized. In so doing, I follow the earlier- developed points about the logic of identity formation (see chapter 2) and assume the primary significance of historical practices in establishing national identity of the post imperial nations. It is through historical practices that the new meaning of sovereign statehood emerged and eventually became a part of domestic political discourse capable of challenging the traditional imperial practices and authority structures. Institutions, however significant, are assumed to have secondary importance—they provide a space for meaning variety o f more and less aggregated variables can be used for measuring the level o f nations' economic development. For the purposes of this chapter, level o f urbanization, an aggregate indicator of economic development, is proposed as a way to capture variation in the republics’ degrees o f economic integration. 304 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 7.4. The Ex-Soviet Republics: Selected National Identity Strength Indicators, Their Ranking and Score Indicators Score 1 2 3 4 5 Armenia 4 I 2 1 1 9 Azerbaijan 4 1 1 2 1 9 Belarus 0 0 2 1 0 3 Estonia 8 1 2 2 1 14 Georgia 4 1 2 1 1 9 Kazakhstan 0 0 2 2 1 5 Kyrgyzstan 0 0 1 2 1 4 Latvia 8 1 2 2 1 14 Lithuania 8 1 2 2 1 14 Moldova 0 0 1 1 1 3 Tajikistan 0 0 1 2 1 4 Turkmenistan 0 0 1 2 1 4 Ukraine 4 0 2 1 0 7 Uzbekistan 0 0 2 2 1 5 1 Independence experience 2 Territoriality 3 National economic integration* 4 Cultural distinctness 5 Cultural resistance * as level of country’s urbanization (%), 1989 (Bradshaw 1990, 8) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 7.5. Bivariate Regression of the Ex-Republics’ Foreign Economic Policy on Hypothesized National Identity Determinant (as measured by national identity strength score) Coefficient R2 NATIONAL IDENTITY STRENGTH 0.2107*" .53 Note: Number of Cases is 14. Entries are unstandardized regression coefficients * " p < 0.001 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. C O ■ > c o c o 0 ) 6 o 8 L U B c S’ So O ) ^ ■<U ■— .P 0 ) U L Q ) I CM Q ) w 3 O ) IT U * a ^ » 2 ^ ? f «•<£ ;t .r t» « ^ « v £ £ r » * i'.M r £ S .••* :•.* » “ •*»?.-* .•:* & ^ a tfttr' CD a. ^ UL C M 4- O — f- c o + C D 3 5 * H ■ a c o 4 - C M C M -r- O •*- C M CO i i i 7 uoijejuauo oiuiouoog uSiajoj 307 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. distribution, but they do not produce meanings on their own. History and historical practices do. This assumption suggests that national independence experience should be at least as important in defining the strength of national identity as the other four institutional characteristics taken together. This yields ranking the national independence dimension as 0,4, and 8, instead of the above-suggested 0, 1, and 2 for “low,” “medium,” and “significant”, respectively. Ranking the five indicators in terms of their relative significance allows us to preserve the above-identified explanatory power of a nation’s historical experience with independence. A summary of the above-suggested rankings of national identity dimensions yields the composite score of the republics’ national identity strength (table 7.4). How much is explained? How much is left out? The constructed composite index of national identity strength also suggests the importance of the variable for explaining the ex-Soviet republics’ foreign economic orientations. As is summarized in table 7.5, the variable turned out to be highly statistically significant, and its overall explanatory power (judging by the percentage of explained variance) is relatively high (R2 = 0.53). Yet almost half of the variance is left unexplained, indicating that the explanation from national identity strength should in no way be considered sufficient and needs to be supplemented by other explanations if we are to understand the foreign economic policies of the ex-Soviet republics in their full complexity. 308 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. As tentative and approximate as a single measurement of national identity strength can be, it does allow us to visually inspect the relations between the ex-Soviet republics’ national identities and their foreign economic orientations. This can be accomplished by simply plotting the scores of foreign economic orientations and national identity strength against each other, as presented in tables 7.1 and 7.4. Figure 7.2 emerges as a result of the exercise. A visual inspection of the relations between the ex-republics’ national identity strength and their foreign economic policies further suggests the possibility of existing causal relations between the variables. What figure 7.2 demonstrates can be deemed a modestly good fit, as Moldova, Tajikistan, Kazakhstan, Kyrgyzstan, Uzbekistan, Ukraine, Azerbaijan, Georgia, and the Baltics fell relatively close to the trendline, or the line of best fit." Yet the figure also clearly demonstrates the outliers, the presence of which did not allow us to go beyond explaining fifty percent of the variance. A separate account of the outliers behavior is needed to make the analysis more complete. Ouliers and possible explanations o f their behavior The most extreme outliers are Turkmenistan, Armenia, and Belarus. Their deviation from the line of best fit is too significant to be attributed to any type of measurement error and left with no further attention. In what follows, I first offer a brief reflection about possible reasons for the three’s deviant behavior. The next and final section returns to these cases and analyzes two of them—Armenia and Turkmenistan—in somewhat greater detail. 22 By dropping the main outliers— Turkmenistan, Armenia, and Belarus— from the data set, an R2 as high as 0.81 can be obtained. 309 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. It is clear from figure 7.2 that the outliers can be divided into two main groups, those that fell above the trendline and those below it The former—-judging stricdy by the hypothesized relations between national identity and foreign economic policy—are deviant in the sense that they should have been less aggressive in their foreign economic reorientation efforts. Turkmenistan is the strongest representative of this group. Despite its relatively weak national identity status, Turkmenistan’s foreign economic policy score is higher than that of Ukraine and similar to that of Azerbaijan, with both being countries with stronger national identities. Turkmenistan’s relatively aggressive foreign economic policy stance vis-a-vis Russia can in part be explained by its close geographic location to an alternative trading partner (Iran) and a rich endowment of mineral resources, particularly oil and gas. As table 7.3 indicates, Turkmenistan has the strongest energy potential in the region (with the exception of Russia), which put it in a relatively favorable position of succeeding in reorienting its economic activities away from Russia/CIS and toward countries capable of paying hard currency for Turkmenistan’s oil and gas exports. Due to these comparative advantages, one can speculate that Turkmenistan chose to be more aggressive in its policy of economic reorientation than the strength of its national identity would allow. 310 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Below the line of best fit are Belarus and Armenia. Judging on the basis of their national identity strength, these two should have been more aggressive in their foreign economic reorientation policies.2 3 Belarus, while fairly weak on national identity dimension, does possesses some attributes of it, such as (sub)political institutions, a relatively high degree of economic integration, and relative ethnic homogeneity. After the disintegration of the USSR, Belarus, like many other newly emerged nations, expressed an interest in finding new economic partners beyond the former Soviet region, as well as in building state institutions appropriate for joining the world community of sovereign nations. Admittedly, societal support for these policies was weaker than in, say, Ukraine or the Baltics. Yet the chances are that it would have stayed on the track of continued nation building and strengthening relations with the outside world if not for the election of Lukashenka as Belarus’ first president in 1995. Arguably, it was the “Lukashenka factor” that greatly contributed to Belarus’ losing interest in anything other than economic and political reintegration with Russia. And, quite symptomatically, 2 3 Georgia and Kazakhstan also fall within the group, although to lesser extent. One possible cause o f Kazakhstan’s deviant behavior is the number of ethnic Russians residing in Kazakhstan (which is about equal to the amount o f indigenous people), thus severely limiting republic’s options and further undermining the sense of Kazak national identity. Georgia’s deviant behavior can be attributed to Russian geopolitical interests requiring a stronger dependence of Georgia on Russia than might have been otherwise. At earlier stages o f its post-Soviet development, Georgia was indeed far less interested in preserving close economic and security ties with Russia than it was in the later period. For example, it did not join the Russia-initiated Commonwealth o f Independent States until the Spring of 1994. The reason why it eventually did was believed by many to be the decision of Shevardnadze to strike a Faustian bargain with Russia, one that would require Georgian membership in the CIS and Russian troops to remain in Georgia in exchange for Russia’s help in setding the military conflict with Abkhazia (The Washington Post, June 6, 1994, A13). 311 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Lukashenka demanded that Minsk be Moscow’s equal in any union, something that might eventually elevate his position to leader of a super-state.2 4 One possible reason for Armenia’s deviant behavior is its close proximity to Turkey and Azerbaijan, both of which are often viewed by Armenia as potential threats to its freedom and independence. Historically, Armenia relied on Russian security protection from a culturally alien Turkey. The notion of a threat from Turkey goes back to at least 1915, when some one million Armenians were executed or died during forced marches across Turkey to the deserts of present-day Syria. The next section of this chapter expands on this point. A Closer Look At Two Deviant Cases In this final section, I offer a somewhat more detailed qualitative analysis of two of the deviant cases as they were identified in the statistical analysis conducted above. The section further argues that the national identity explanation is not very helpful in explaining the foreign economic policies of Armenia and Turkmenistan and that other variables, mainly geopolitical and economic in nature, are better suited to the task. Armenia Armenia pursued a significantly less aggressive foreign economic policy than might have been expected on the basis of its national identity strength. Its deviant behavior can be better explained by its historically rooted perception that neighboring Muslim countries (specifically, Turkey and Azerbaijan) represent a threat to Armenian 2 4 Markus 1997, 56. 2 5 See Dudwick 1997, 473, 475. 312 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. security and that Russia, on the contrary, can be seen as an ally in neutralizing this threat. Foreign economic policy Armenia can be seen as representing an intermediate case in terms of its national identity strength. If this argument and conceptualization have any merits, we should expect Armenian foreign economic policy to follow a pattern of medium deviation from its traditional partners in the former Soviet area. Specifically, Armenian economic orientation should be similar with those of other republics with moderately strong national identities, such as Azerbaijan, Georgia, and Ukraine: restrained cooperation with the CIS and Russia and a relatively active search for external economic partners. Yet this is hardly an accurate description of Armenian foreign economic policy. Table 7.6 summarizes the discrepancy between the expected and actual international economic policies of Armenia. Despite the expectations, Armenia appeared to do little to restructure its trade away from Russia and the CIS area. It emerged as a relatively active participant in CIS economic affairs by signing most major agreements, of which the Economic Union and Payment Union agreements were most prominent. This was in accord with the attitudes of Armenia’s key policy makers vis-a-vis the CIS. Prime Minister Hrant Bagratian, for example, was cited as viewing CIS economic integration as a means of repairing economic ties severed with the break-up of the Soviet internal market.2 6 The exception was the Customs Union agreement, 2 6 Webber 1997,21. 313 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 7.6. Armenia’s Expected and Actual Foreign Economic Policies Expected policy Actual policy Moderately aggressive reorientation • Restrained participation in the CIS; • restrained cooperation with Russia; • relatively active search for external partners beyond the former Soviet area. Moderately passive reorientation • Relatively active participation in the CIS; • close bilateral cooperation with Russia; • relatively active search for external partners. 314 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. which Armenian leadership considered joining, but upon reflection decided it would be “neither wise nor advantageous” for Armenia to do at the moment.2 7 In its currency policy, Armenia tried hard to stay in the ruble zone. Even after the Russian Central Bank announced the withdrawal of old rubles from circulation, Armenia did not follow the route of introducing independent currencies, as Azerbaijan, Georgia, and Turkmenistan opted. Instead, it joined Belarus, Kazakhstan, Tajikistan, and Uzbekistan in asking Russia to create a ‘ruble zone of a new type7 and only introduced its currency in November 1994, when the new ruble zone had also collapsed.2 8 Armenian trade policy toward Russia also demonstrated its willingness to preserve old economic ties. While not entering into the Customs Union, Armenia secured its relations with the ex-hegemon by signing a free trade treaty (September 1992) and a number o f deal-specific agreements.2 9 As a result, it retained a relatively high degree of trade dependence on Russia after the Soviet disintegration.3 0 Beyond the former USSR, Armenian economic policy appeared to be more dynamic. This indicates that Armenia did want to find alternative economic partners even given its limited options. In 1992, it joined the Black Sea Economic Co-operation 2 7 RFEJRL Daily Report, “Armenian President Snubs Seleznev,” 1996, May 9. Under the influence of the process o f Russo-Belarusian integration, even the idea o f joining the Russia-Belarus union was entertained and found considerable support in Armenian society, although it was never seriously considered by policy makers (Danielyan 1998). 2 8 Webber 1997, 52-53. 2 9 Moyiseiev 1997, 87. 3 0 Its exports to and imports from Russia comprised 52.7 and 48.8 percent, respectively (Menon 1998). 315 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. project, although the actual benefits of this were rather low.3 1 It also demonstrated its willingness to develop relations with European countries by trying to gain membership in the Council of Europe and the World Trade Organization, as well as holding regular consultations with the European Union. Armenian leaders also developed dynamic trade relations with Iran, which helped Armenia to survive the economic blockade Azerbaijan and Turkey imposed on it as a as a consequence of the decade-long conflict over Nagorno-Karabakh.3 2 Explaining Armenian policy Armenian foreign economic policy cannot be adequately explained on the basis of a national identity perspective; Armenia behaved more like republics with weak national identities while its own identity can hardly fit such classification. In our own classification (see chapter 2), Armenia should be placed somewhere in between republics with strong national identities represented by Baltic states and those with weak identities, such as Belarus, Moldova, and the Central Asian nations.3 3 There is ample evidence indicating that Armenian identity is stronger than that of a nation with the said economic policy outcomes. First, Armenia as a nation did have, albeit briefly, an experience with national independence in the aftermath of the Bolshevik revolution (1917-1921). Second, it had a preserved memory of relative cultural and territorial 3 1 RFEJRL Daily Report, ‘Turkey Hosts Black Sea Regional Conference," 1992, February 4; Webber 1996, 312. 3 2 Danielyan 1998. 3 3 Scholars are generally in agreement that Armenian identity cannot be accurately classified as weak and, conversely, often characterize it as ‘strong’ or relatively well developed (Diuk and Karatnycky 1993, 157; Webber 1997, 19). 316 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. autonomy going as early back as far as the fifth and sixth centuries before it had been divided between the Ottoman and Persian empires and, later, became a Russian protectorate.3 4 Third, it has been consistently well developed economically (in relative terms), both before and after the Socialist revolution. Finally, Armenia has been a remarkably culturally homogeneous, with up to 95 percent of its population composed of ethnic Armenians. All these factors helped to create a persistent sense of distinct national self in Armenia, and this was preserved during the Soviet period and became evident with the imperial decline. The Armenian National Movement was created relatively early and began to press for a more pronounced independence within the USSR.3 5 In 1990, in a relatively free and fair election, Armenian nationalists won a majority of seats in the national legislature, thereby ending the long-term dominance of the Communist Party. Although the support given to them was not as strong as in the Baltic nations,3 6 the mood was essentially anti-communist and pro-nationalist. Levon Ter-Petrossyan, chairman of the Armenian National Movement and a former dissident, was soon elected president.3 7 This is the picture of national identity development that reminds us— if a parallel may be drawn— of the Baltic republics rather than of Belarus and Central Asia. 3 4 Hovannisian 1994, 239; Dudwick 1997a, 472. 3 5 Armenia was one o f the first to initiate the process o f secession and claim independence from Moscow (Bamer-Barry and Hody 1995,209). While interested in economic ties to the Soviet Union, Armenia also resisted the Gorbachev-initiated new union treaty as coming too late (Brown 1992, 104). 36 In the Baltic republics’ 1990 elections, communists were effectively marginalized and gained only a handful o f votes, whereas in Armenia communists received about 25 percent of the vote and remained one o f two the largest parties (Dudwick 1997b, 81, 87). 3 7 Dudwick 1997a, 489. 317 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Nor can Armenian foreign economic policy be satisfactory explained on the basis of its economic resource endowment. It is true that Armenia, relative to republics like Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan, is rather poor in natural resources3 8 and therefore might have been expected to be passive in its reorientation away from resource-rich Russia. Yet the Armenian resource situation is generally similar to that of the Baltic nations and Ukraine, with these latter nations having pursued much more aggressive policies of economic reorientation. Something else must have determined Armenian foreign economic choice. One particularly prominent factor makes Armenia special in the list of all other ex-colonial nations of the former Soviet area and may therefore be helpful in explaining its deviant economic policy behavior. In particular, Armenia was the only of these nations with a relatively pronounced national identity that perceived its historically close relations with Russia, the ex-metropole, as beneficial rather than threatening to its national well-being. This perception of Russia as an ally is intimately related with perceiving another powerful neighbor, Turkey, as a threat to Armenia’s security and very existence, a fear which can be traced at least to the 1915 Turkish genocide of Armenians. For decades following the genocide in Ottoman Turkey and the loss what were considered historically Armenian territories in eastern Anatolia, Armenians looked to Russia and/or Soviet Union as the guarantor of their security. Armenia is a small country sandwiched between Russia, on the one hand, and Turkey and Iran, on the other, 3 8 Before the war with Azerbaijan, Armenia was receiving most of its energy, 80 percent of gas in particular, from this Azerbaijan (Dawishaand Parrott 1994, 190; Bamer-Barry and Hody 1995, 222). 318 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and it had little choice but to rely on one of its powerful neighbors for aid and geopolitical protection. With the end of the USSR, the perception of Turkey as a source of threat to Armenian interests was reinforced by Armenia’s conflict with Azerbaijan over Nagorno-Karabakh, in which Turkey on number of occasions demonstrated its support for Azerbaijan.3 9 In the words of a scholar o f Armenian foreign policy, “History has shown that Russia, with all its vacillation, remains a vital factor in Armenia’s security and future.”40 The factor of threat perception helps to explain the choices Armenia made in its foreign economic orientations. Armenian leadership viewed foreign economic relations through a broader security lens and made a deliberate decision to cooperate with Russia. Such a decision did not mean Armenia’s readiness to abandon its ties with external partners and reintegrate with Russia, as happened to be the case with Belarus. With their relatively developed sense of national self, Armenians were willing to compromise their sovereignty in order to protect it, but not to abandon it entirely. Such a strategy included a selective approach to joining Russia-initiated economic initiatives. For instance, Armenian leadership saw Armenia as forming— along with Russia, Kazakhstan, and Belarus— the “nucleus of the Commonwealth” and had full intention to maintain its active participation in the organization 4 1 On the other hand, both President Ter-Petrossyan and Prime Minister Hrant Bagratyan specified on several occasions that 3 9 Hovannisian 1994, 254; Adalian 1995, 332. 40 Ibid., 266. 4 1 F8IS-SOV-93-093, “Ter-Petrosyan Comments on Conflicts,” 1993, May 17, 1. 319 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. such participation would not involve joining the CIS Customs Union, let alone the Russia-Belarus reintegration process.42 Yet the choice of such a strategy did contain the seeds of potential reabsorption into Russia, particularly in the light of Armenia’s chosen commitments to tight security relations with the ex-metropole 4 3 Unsurprisingly, the economic policy choice did not come easy to Armenian leadership. In 1989-1991, Armenians were quite critical of Gorbachev’s attempts to revive the Union and even viewed—if erroneously—the Soviet leadership as siding with Azerbaijan over Nagorno-Karabakh.44 Accordingly, Armenia’s primary foreign policy objective was defined as rapid integration into the world community. Russia and other former Soviet republics were included, but only as a second-tier of priority nations; the first tier originally included Armenia’s immediate neighbors (Azerbaijan, Georgia, Iran, and Turkey).45 With the Soviet disintegration, however, the original foreign policy design underwent a dramatic transformation— economic and security dependence on the ex-metropole made Armenian leaders reconsider their views and rely on ties with Russia significantly more than had been planned. With a formal declaration of independence adopted, the Armenian president drew a clear distinction, however, between political and economic independence,4 6 and 42 RFE/RL Daily Report, “Armenian President Snubs Seleznev,” 1996, May 9; Fuller 1996, 30; Danielyan 1998. 4 3 Adalian 1995, 319-320; Fuller 1996, 29-30. 4 4 Fuller 1996, 29. 4 5 Adalian 1995, 312, 315; Danielyan 1998. 4 6 Fuller 1992, 47. 320 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Armenia pursued the policy of close cooperation with Russia and the CIS. Characteristically, one observer described this transformation as a “ 180-degree turn.”4 7 The foreign economic policy eventually chosen was basically supported by Armenian society. Whereas many other post-Soviet nationalist-oriented movements demonstrated high degrees of animosity towards Russia, Armenian nationalists were different. From the beginning of their activities, their main goal was to settle the Nagorno-Karabakh issue and neutralize the threat from Turkey, not to establish independence from Russia.48 Not surprisingly, most opposition parties and the population at large share the Armenian leadership’s perception of Russia. As the Reverend Husik Lazaryan, chairman of the Armenian National Movement, put it, “Russia was and remains our No. 1 partner in all spheres.”49 Turkmenistan Foreign economic policy Turkmenistan’s foreign economic policy also cannot be satisfactory explained on the basis of a national identity perspective as developed in this study. On this basis, Turkmenistan falls within the group of post-imperial republics with weak national identities5 0 and, therefore, it should have pursued the policy of passive reorientation away from its traditional partners. More specifically, it should have been an active participant in CIS economic initiatives; it should have cooperated closely with Russia at 4 7 Adalian 1995,319. 4 8 Brown 1992, 102; Dudwick 1997b, 82. 4 9 Fuller 1996, 29. 321 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. a bilateral level; and it should have been relatively passive in its search for external economic partners. These expectations are misplaced and not matched with reality to a degree that seems to be even higher than in the case of Armenia (see table 7.7). The actual policy of Turkmenistan can be better described as a moderately aggressive reorientation. In CIS affairs, Turkmenistan’s participation can be fairly characterized as passive. The closest analogy that comes to mind is Ukraine. Like Ukraine, Turkmenistan opted in favor of becoming a CIS member, but abstained from signing the major CIS agreements. It did not sign the CIS charter in Minsk in January 1993,5 1 nor was it originally willing to participate in the CIS Economic and Payment Union arrangements,52 let alone the Customs Union and the integration agreement between Russia and Belarus. Such a detached policy toward the CIS firmly rested on Turkmenistan’s attitude that the CIS should be nothing more than a consultative body, while concrete agreements should be bilateral. Very much in line with Ukraine’s leadership, Turkmenistan’s leaders felt that the purpose of the CIS should have been to 5 0 For other scholastic evaluations o f Turkmenistan’s national identity as weak, see Szporluk 1992, 110; Webber 1997, 25. 5 1 RFE/RL Daily Report, “Seven States Sign CIS Charter,” 1993, January 25. 5 2 RFE/RL Daily Report, “Economic Union Treaty Signed,” 1993, September 27; Brown 1994, 59; Zagorskii 1997, 64. Some sources indicate, however, that Turkmenistan did join the Economic Union (Moiseyev 1997, 28; Zagorskii 1997, 64) and even the Payment Union treaty at a later stage (Webber 1997, 70). 322 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table 7.7. Turm enistan’s Expected and Actual Foreign Econom ic Policies Expected policy Actual policy Passive reorientation • Active participation in the CIS; • active cooperation with Russia; • relatively passive search for external partners beyond the former Soviet area. Moderately aggressive reorientation • Passive participation in the CIS; • restrained cooperation with Russia; • relatively active search for external partners. 323 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. divide up the former USSR among its successors in a civilized way, not to rebuild the old relationship or integrate their economies.5 3 Turkmenistan’s bilateral cooperation with Russia was likewise more restrained than might have been expected, although Turkmenistan’s president, Saparmurat Niyzov, declared a preference for building foreign economic relations on a bilateral basis. In the monetary realm, Turkmenistan was not among those republics asking Russia to create a new ruble zone after Russia’s Central Bank announced in July 1993 its decision to withdraw the old rubles from circulation. Instead, it accelerated its plans to introduce its own currency, the manat, hoping to survive outside the “ruble zone.”54 In other aspects of economic relations with Russia, Turkmenistan has been more cooperative, often being pressured with the tough realities of survival. For example, it was dependent on Russia for its gas export needs— because the pipeline to Europe traversed Russia’s territory—and, therefore, must have cooperated with the ex-hegemon in the area of transport and communication. Responding to various economic dependencies, Turkmenistan signed a number of cooperation agreements with Russia.5 5 Unlike some republics, however, Turkmenistan did not sign a free trade agreement with Russia, fearing a drain of commodities from domestic market. Instead, export restrictions and state orders were imposed.56 As a result of these policies, the share of 5 3 Niyazov 1995, 1998a; Freitag-Wirminghaus 1997, 75. 5 4 Maillet 1995, 45-47; RFE/RL Daily Report, “Turkmenistan to Introduce Its Own Currency in October,” 1993, July 28; “Turkmenistan Introduces Its Own Currency,” 1993, November 2; FBIS-SOV- 93-222, “Niyazov Discusses Ties With Russia, New Currency,” 1993, November 19, p. 58. 5 5 Moiseyev 1997, 216-17; FBIS-SOV-95, ‘Trade, Cooperation Agreements Signed With Russia,” 1995, May 11, 92; “Economics Minister on Trade Pact With Russia,” 1995, August 9, 70. 5 6 Webber 1997, 54. At a later stage, a free trade agreement with Russia was signed, but with a list o f goods-exceptions subjected to tariffs (El’anov and Ushakova 1997, 95). 324 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Turkmenistan’s trade with Russia decreased from about 45 percent in 1990 to only 6.6 percent in 1996.5 7 Finally, Turkmenistan has been notably active in developing economic ties with external partners. Iran and Turkey emerged as the most important partners of Turkmenistan, particularly in the area of transport and gas pipelines, one of the surest rf t ways to lessen dependence on Russia. Turkmenistan possesses natural gas reserves over 30 percent of the world stock, and its leader proclaimed the country soon to become a “second Kuwait.” 5 9 Turkmenistan signed a number of deal-specific bilateral agreements with Iran and Turkey and even joined the multilateral Economic Cooperation Organization (ECO), a preferential arrangement launched in 1992 with the two and some other countries as participants.6 0 The interest was mutual. Turkey was by far the biggest and most important provider of technical and financial support to Turkmenistan,6 1 and Iran proved to be particularly interested in developing a pipeline link with the country. From the outset, behind Turkmenistan’s efforts to cooperate with the two countries was the idea of constructing a transcontinental pipeline to Europe from Turkmenistan, via Iran and Turkey.62 One of the first results of Turkmenistan’s 5 7 Bradshaw 1993, 27; El’anov and Ushakova 1997, 90. 58 These two were usually listed by the president as the country’s most important external partners, whereas their presidents were referred to as “brothers” (Rotar’ 1995). 5 9 Niyazov 1995, 41; FBIS-USR, ‘Turkmenistan’s Dream of Becoming ‘Second Kuwait,” 1994, June 2, p. 71. 60 Trade policy 1996, 189-93; Webber 1997, 59. 6 1 Freitag-Wirminghaus 1997, 77. 62 The expected maximum capacity o f the pipeline is thirty-one billion cubic meters per year (Mesbahi 1994, 222; Freitag-Wirminghaus 1997, 78). Other ideas of Turkmenistan’s leaders included a 8,000 kilometer pipeline from Turkmenistan through Uzbekistan, Kyrgyzstan, and China to Japan and a 1,700 kilometer route through Afghanistan to Pakistan’s Arabian Sea ports (Menon 1998). 325 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. cooperation with its southern neighbors was the opening of the 125-mile pipeline to Iran, one with the capacity to transport some 12 billion cubic feet of natural gas per year.6 3 Explaining Turkmenistan’s policy For pursuing such a policy, Turkmenistan should have possessed a relatively developed sense of national identity, but this is not in accord with reality. While differing from the ex-metropole culturally—that is, linguistically and religiously— Turkmenistan does not qualify as having a developed sense of national self in all other dimensions: it does not have any historical experience with independence prior to 1991; its territoriality was only established with its incorporation into the Soviet Union; and it remained an underdeveloped and primarily agrarian society, with predominantly tribal and clan-based identities. Unsurprisingly, no overarching sense of nation has been built in Turkmenistan, which helps to explain why “the nationalist, democratic groups that arose in the late 1980s in Turkmenistan, unlike other former Soviet republics, never became mass movements, never came close to taking or even influencing power, and are today isolated and marginalized or exiled.”6 4 The lack of nationalist pressures led to the absence of resistance to the new Union treaties before the Soviet disintegration. For 6 3 The opening o f the pipeline was characterized by a Western expert as a victory for Turkmenistan, “because it’s the first to get its reserves to market through a non-Russian pipeline” {Washington Post, 1997, December 30, A5). 64 Oschs 1997, 313. See similar observations in Szporluk 1992, 110; Dawisha and Parrott 1994, 51; Freitag-Wirminghaus 1997,67, 69. One observer even has suggested that Turkmenistan, due to the 326 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Turkmenistan’s leadership, as well as for the leaders of other Central Asian republics, the fall of the USSR was a tragic event, something for which it was not prepared psychologically, politically, or economically.6 5 An economic resources perspective alone cannot satisfactorily explain the Turkmenistan’s policy. Certainly Turkmenistan possesses more than enough natural resource to survive on its own, and it would only be logical to expect that it would pursue an active export policy. Yet there is hardly anything predetermined about such policy being directed away from Russia and other CIS members and toward partners like Iran and Turkey. Kazakhstan, for example, is another resource-rich country south of Russia, which nevertheless opted in favor of maintaining much closer ties with Russia and the CIS. Thus, an economic resources explanation, while useful, must be complimented by other explanations to obtain a more adequate picture. Our understanding of Turkmenistan’s foreign economic policy will be more complete if we add another structural factor—geographic location—to consideration. One look at the map will immediately tell us that geography is indispensable for explaining the Turkmenistan’s policy. Turkmenistan has no common borders with Russia, but it does have a long common border with Iran and sits in close proximity to Turkey.6 6 The two structural factors (natural resources and geography), combined with the strategic calculations of Turkmenistan’s leader, Saparmurat Niyazov, should help us durability of its tribal ties, was “the least nationalistic o f all the Central Asian republics” (Rezun 1992, 128). 65 Brown 1992, 25. 66 Nissman 1995. 327 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. to obtain a more complete picture of the driving forces behind the country’s economic policy. In 1991, when the push and pull between the Kremlin and the republics was about to reach its peak, Turkmenistan was rediscovering that it was respected member of the international community in its own right. Despite the country’s structural incompleteness, infrastructural deficiencies, and the lack of qualified labor,6 7 Western economic experts considered Turkmenistan to be the Central Asian country with the greatest chance of economic success (with the possible exception of Kazakhstan). Apparently, this potential spurred Niyazov’s own calculations and expectations. In 1992, for example, being carried away with the image of a new era of prosperity coming and a “new Kuwait” emerging, the government abolished heating and electricity fees, only to reconstitute them in the end-1993 when the propaganda wave came to an end.6 9 Realizing the need for foreign investment for developing Turkmenistan’s advantages in gas, oil, and natural resources, Niyazov proclaimed an “open door” policy.7 0 In order to offset the influences from Russia and other CIS states on its foreign economic course, he also formulated the concept of “positive neutrality.” The concept emphasized bilateral relations and the necessity of avoiding alliances with more powerful neighbors that could threaten Turkmenistan’s independence, while still maintaining the maximum 67 Hunter 1996, 66-71; Freitag-Wirminghaus 1997, 72. 68 Brown 1992, 34-35. 6 9 In the words of one observer, the slogan ‘ten years of prosperity’ was changed to ‘ten years o f stability’ (Freitag-Wirminghaus 1997, 71). 7 0 Islam 1994, 169. 328 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. freedom of policy maneuverability.7 1 Clearly, Turkmenistan’s leadership was determined to take advantage of the country’s geoeconomic position. Turkmenistan, however, was not hostile toward Russia so long as the latter did not interfere with the defined foreign economic course. In addition to the above- mentioned dependence on the Russian-owned pipeline to Europe, Turkmenistan was pressed by a lack of qualified labor and, for that reason, wanted to keep the more educated Russian minority within the country. “ Finally, military defense considerations also played a role in the country’s relations with Russia. In 1992, the Turkmen foreign minister granted, for example, that “if it weren’t for Russia, we would have confronted great problems in our defense policy. It’s become a geographic reality that we are defending Russia’s southern borders.”7 3 All these considerations help to explain Turkmenistan’s careful relations with Russia, relatively close bilateral ties, and its gradual reorientation toward countries beyond the ex-USSR. The country’s weak national identity was no obstacle to Niyazov’s plans of economic reorientation. Whereas in Belarus and, to a certain extent, in eastern Ukraine the leadership was confronted with strong empire-saving pressures, Turkmenistan’s moderately aggressive reorientation did not face any social resistance. In the words of one scholar, “Niyazov, the former First Secretary of Turkmenistan’s Communist Party, 7 1 Ochs 1997, 313-14; Niyazov 1995. 7 2 This was in part the reason why Turkmenistan, alone o f the region’s countries, chose to sign a dual citizenship treaty for ethnic Russians, who make up 7 percent o f its population (Pannier and Rutland 1996, 28). 7 3 Dawisha and Parrott 1994, 220. In July 1992, Turkmenistan signed a bilateral agreement with Russia that established a joint military command between the two countries (Clark 1994, 193). 329 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. does seem to enjoy full backing from almost the entire population. Calling himself Turkmenbashi, ‘Leader of the Turkmens’, he has the strongest support in the country, all ethnic and tribal difference notwithstanding.”74 There appear to be two major reasons for this. The first has to do with Turkmens’ peculiar identity. Turkmens are culturally much more distinct than Russia’s “Slav brothers” in Ukraine and Belarus.7 5 They could not have been Russified in such a high proportion and did not identify themselves with the ex-metropole to the extent that Belarus and eastern Ukraine did. A second reason is the authoritarianism of the Turkmenistan leader, who eliminated opposition by banning political parties and practices extremely tight control on the country’s political life.7 6 Conclusions The exercise undertaken in this chapter generally confirms the merits of the earlier-derived hypothesis that, in post-imperial nations, the strength of national identity may be causally related to their international economic policies. A bivariate statistical technique allowed us to explore the relative significance of various economic, political, and national identity explanations and indicated that the strength of national identities, especially when combined with the analysis of domestic structures, is indeed the strongest predictor of the post-imperial nations’ foreign economic behavior. It thus cannot be ignored by D PE scholars of the post-Soviet region. 74 Freitag-Wirminghaus 1997, 68. 75 As a Russian prominent expert of Central Asia put it, “Russia and Central Asia belong to different civilizations” (Maiashenko 1998, 162). 76 Ochs 1997. 330 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. This is not to say that the strength of national identity is some sort of a single explanation, the application of which should provide us with all the sought answers about the post-Soviet nations’ behavior. The chapter’s results should be treated with caution, in part because, by its nature, any statistical analysis, especially a bivariate one, is far from precise and complete. But also because even the strongest national identity indicator, historical experience with independent statehood, was able to capture only about half of the variance. The analysis suggests a number of cases with deviant behavior, an avenue for further research of the issue. Two deviant cases— Armenia and Turkmenistan—were analyzed in more detail, qualitatively suggesting the significance of geopolitical and geoeconomic considerations in understanding the ex-Soviet republics’ economic behavior. This reinforces the conclusion that a whole range of various factors—including the economic and political characteristics of the NIS, and their leaders’ personal agendas and skills—need to be considered in obtaining an adequate picture of what is shaping up in this and other post-imperial, post-colonial parts of the world. 331 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. CHAPTER 8. CONCLUSIONS AND IMPLICATIONS This final chapter summarizes the study’s overall findings and draws the implications for theory. Specifically, it addresses the question how various sub-fields of International Relations and Comparative Politics could benefit from integrating the national identity perspective into their research programs. Finally, it highlights some policy making implications of the analysis. The Main Results The main purpose of this study was to formulate and test in a preliminary way an additional national identity hypothesis for studying foreign economic policy. I do not mean to suggest that other factors, such as market and power considerations, do not figure in understanding the ex-Soviet republics’ foreign economic behavior. Rather, by selecting for analysis the region where cultural influences on state policy making are very palpable and explicit, I sought to demonstrate the limits of more conventional accounts and illustrate the possible explanatory opportunities of bringing cultural variables into international political economy. Unlike industrially developed Western societies, in which culture and identity have been formed and articulated through the process of nation-building during the 19th century and the first quarter of the 20th century, the ex-Soviet nations are at the beginning of a long and painful road toward shaping their future institutions. These nations are emerging out of empire and entering the world community with a very different set of ideas about this community and their own place in it. Their policies cannot be adequately understood without paying close 332 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. attention to these ideas, to the new nations’ varying historical memories and perceptions of the outside world. A combination of qualitative and statistical (bivariate regression) comparisons has been undertaken in the present study. The national identity hypothesis was formulated and refined through a detailed analysis of Latvian, Ukrainian, and Belarusian foreign economic strategies. The three matched case studies provided an illustration of how the causal process takes place and how national identity is transformed into economic policy making. Immediately after the Soviet break-up, the three republics in question pursued distinctive policies of restructuring their respective economic patterns. Latvia, among other Baltic nations, decided against joining the CIS and chose to deal with Russia and other CIS members on strictly bilateral bases. To compensate for this lack of cooperation with traditional partners, Latvia prepared itself domestically for diversifying its economic activities and entered preferential arrangements with countries beyond the former Soviet region. Ukraine chose an intermediate course. Unlike the Baltic nations, it entered the CIS and even participated in its establishment, but has never been supportive of the organization’s major initiatives and, too, advocated the development of bilateral ties with CIS members. Sincel993, the country’s leaders have consistently advocated closer relations with Russia, but on a strategic level Ukraine, like the Baltics, was determined to “go West.” The reorientation, however, has been slow and much less successful— close economic ties with European partners remain a remote prospect. 333 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Finally, Belarus pursued efforts to reintegrate with Russia and, more broadly, the CIS at the expense of developing ties with European countries. These policies are poorly explained by conventional international political economy perspectives. According to the power perspective, these nations should have taken advantage of a period of relative international calm to pursue similarly aggressive policies of switching their trade away from Russia/CIS. In fact, this is not in accord with reality. The market perspective would also predict a similarity in the three republics’ economic behavior and thus is inadequate for understanding stark variations in policy. According to this perspective, the republics should have adopted similar economic policies because they are similar in size, natural resource endowment, economic structure, and geographic location— as is widely recognized by experts on the former Soviet economy. Additional alternatives (see chapter 6) are also insufficient for explaining the observed policy variation. The study indicates that the main reason for Latvia’s, Ukraine’s and Belarus’ varying behavior has to do with different perceptions of external threats to their security and national autonomy. These perceptions were predominantly cultural in nature and grew out of the nations’ historical experience with their immediate neighbors. Depending on such experience, the ex-Soviet republics developed different national identities, or images of themselves and of the external environment and therefore behaved differently vis-a-vis Russia (the metropole) after the empire fell apart. 334 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The Baltic republics had a significant experience with national independence before they were incorporated into the empire and ‘ joined’ the USSR with a clear sense of being different. A historical sense of national distinctness was reinforced by established geopolitical borders, cultural differences, the presence o f (sub)political institutions, and economic modernization. As a result, with the end of USSR, nationalists figured most prominently in national debates in the Baltic republics and managed to mobilize society around their demands. In 1989, the leaders of Popular Front stated the goal of total economic independence. Anticipating the difficulties of negotiations with Moscow and sensing the possibility of Moscow ordering an economic blockade against them, they nonetheless urged a continuation of the independence drive as a way to eventual salvation. Apart from Moscow, the empire savers’ voices were weak, and the republic stood by the chosen path of gaining distance from Moscow. It was these nationalist beliefs that found their reflection in the Baltic nations’ economic policies of reorientation away from Russia and the Russia-initiated CIS. Ukraine serves as an example of a country with a moderate degree of national identity strength. Although it had some historical experience of independence and some memory of it, particularly in its western lands, such experience never had a chance to be consolidated. This made it difficult to create a strong, overarching sense of “Ukrainian” overcoming the sense of relatively pro-Russian east and relatively pro-Western west of Ukraine and, as a result, Ukrainian nationalism could not provide Ukrainian leadership with firm social support for implementing its policies. It briefly gained prominence 335 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. when the old communist ideas were discredited in the course of Gorbachev’s reforms and the so-called party o f power decided to abandon them. The triumph of the nationalists, however, proved to be rather short-lived. After 1992, with economic recession and a decline of living standards, the ruling elite became less receptive to nationalist ideas and somewhat more sympathetic to the empire savers’ demands. This duality of national identity and domestic political debate found its reflection in Ukraine’s dualistic foreign economic policy. Finally, Belarus had relatively weak national identity, which led to its essentially pro-Russian policies. Unlike Baltics and some other ex-Soviet republics, Belarus’ people did not have their own state for almost their entire history and have long suffered under the domination of neighboring powers. Its very boundaries and legitimate ethno- territory and the capital (Minsk) were established only in 1939, and the crucial difference between Belarus and the two other cases was that it alone was incorporated into the Soviet empire without possessing a clear sense of being different. As a result of this weak identity, Belarus’ nationalists could not command the support of wide sectors of the population and proved to be incapable o f competing with the empire-savers or the old political elite. The parliament was dominated by conservative politicians whose mindset was formed during the Soviet era, and the empire-savers thus remained in control of the policy making process. The study confirmed and extended to IPE a key finding that has already been established in other sub-fields of international studies according to which national 336 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. identity, as a cultural norm, exerts both constitutive and regulative effects on state actors.1 The constitutive effect revealed itself in the fact that in Latvia, Ukraine, and Belarus the economic considerations and security dilemmas were framed in culturally different, sometimes mutually exclusive terms. The degree of national identity development in the nations that emerged from the empire helps us to understand the cultural context in which the decision making process of these nations was taking place. To Latvian policy makers, getting away from the ex-metropole and “going West” for new economic relations made perfect sense, as their minds were preoccupied with the idea of strengthening national independence. The same idea, although not as firmly socially established, dominated the minds of Ukrainian politicians. Of the three republics, escaping the ex-imperial area made the least sense to Belarus. Unlike Latvian and Ukrainian leaders, Belarus’ policy makers did not seem overly concerned with consolidating their acquired sovereignty. Whereas both Latvia and Ukraine were prepared to suffer if necessary in order to firmly establish their independence, in Belarus national independence was overwhelmingly viewed as an abstract concept worthy of sacrificing for the sake of achieving economic survival. The second phase of this project aimed to confirm the existence of regulative effects of national identity on state behavior and included a statistical test of the national identity hypothesis, as refined during the first phase. Compensating for the relative shortcomings of small-n analysis, this phase employed additional empirical evidence 1 This finding is now commonplace in constructivist empirical research (Finnemore 1996; Hudson 1996; Katzenstein 1996). 337 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and helped to strengthen the causal inferences of the research. A bivariate statistical technique allowed us to explore the relative significance of various economic, political, and cultural explanations and suggested that national identity strength based especially on the NIS’ historical experience with independent statehood is the most prominent variable in further investigations of their international economic policies. A systematic analysis of all fourteen ex-republics added support to the originally-formulated hypothesis and demonstrated that not only does culture matter in explaining varieties of economic policies, it seems to be the single strongest predictor of the newly emerged nations’ economic behavior, relative to explanations of an economic and/or political nature. The analysis suggests a high probability that the ex-Soviet republics’ foreign economic orientations may indeed be causally determined by the strength o f their national identities. This is not to say that the strength of national identity is some sort of a universal explanation application which should provide us with all the desired answers about the post-Soviet nations’ behavior. The study’s conclusions should, of course, be treated with caution. Even a composite index of national identity strength managed to capture only about half of the variance, suggesting that while national identity strength cannot be ignored by IPE scholars, it should not be viewed as an universal explanation. As argued in chapter 7, there are a number of cases of deviant behavior that should be explained with the help of variables other than those advanced in this paper. Economic and political characteristics of the NIS, their leaders personal agendas and skills-all of 338 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. these need to be when seeking a sufficient picture of what is shaping up in this and other post-imperial, post-colonial parts of the world. But at least in these parts of the world, as this study has argued, culture and identity should become prominent explanatory variables. To summarize, the study’s results imply that culture remains an important motivation in nation economic decision-making and that cultural, idea-based influences should be treated as significant in their own right, and not merely subsumed as interest- based phenomena.2 By selecting for examination a region where cultural influences on state policy making are explicit, this study reminds IPE scholars of the relevance of those influences world-wide and opens itself to further empirical investigations beyond the former Soviet region. The conceptual universe of cases is potentially rich and includes, in addition to the former USSR, eastern European countries— former members of the Soviet block—and post-imperial nations in general. Implications for Theory The issue of national identity remains far from being satisfactorily investigated through contemporary mainstream IR approaches. This section addresses the question of how the national identity hypothesis can be useful in understanding issues others than nation foreign economic policy. It suggests that various branches of Political Science could benefit from integrating the national identity perspective into their research and it briefly outlines some possible means of integrating the perspective into sub-fields of 2 See Weber 1958, 280. 339 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. International Studies and Comparative Politics. While formulated out of the experience of the former Soviet republics, the perspective has wider applications and can be helpful in understanding nation behavior in general. International Political Economy In IPE, integration of the national identity perspective can shed some new light on issues of economic security, nation economic viability, and international/regional economic cooperation. To begin with, the national identity hypothesis suggests some illuminating ways of looking at economic security dilemmas in world politics. International Relations scholars are quite familiar with the neorealist/neoliberal debate, which views economic security problems primarily in terms of political struggles to acquire absolute and relative gains in the course of states’ interactions. States will cooperate, it is assumed, insofar as they continue maximizing their national autonomy and economic benefits. It is wealth and power that figure as the most prominent goals that states pursue in the process of their interactions.3 The national identity perspective does not dispute the accomplishments of the “absolute versus relative gains” school in solving some empirical puzzles, but it does imply that economic security cannot always be taken as a static concept, with fixed meanings attached to it. Bringing a cross-national comparative perspective into the analysis, as this study does, immediately suggests that economic security can be viewed 3 Baldwin 1993. 340 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. by different nations in different, sometimes mutually exclusive ways and that, in at least some cases, such differences are the product of nations’ varying cultural perceptions. Our study has demonstrated, for example, that some of the ex-Soviet republics faced similar dilemmas in their economic relations with Russia, but their responses and the very definition of these dilemmas were fundamentally different. What was seen as strategically important to Latvia had relatively low significance in Belarus, and vice- versa. The national identity perspective helps us to understand why this has been the case, and suggests that culture-based explanations can further expand our knowledge about nations’ economic interactions. The national identity perspective can also contribute to our knowledge about nation economic viability and competitiveness in the world political economy. Some prominent researchers have already demonstrated that state ability to compete in the world market is not just about economic resources— it has much to do with state institutional capacity, without which adequate international adjustment would be impossible.4 The national identity perspective reinforces this conclusion and expands the notion of institutions by adding a cultural dimension to it. It suggests, in particular, that culture and identity remain valuable assets in the process of international economic adjustment. However paradoxical it may sound, a strong sense of national self can allow more flexibility in state adaptation to a rapidly changing international environment. 4 Katzenstein 1985; Ikenberry 1986; Weiss 1998. 341 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In IPE, the study of regional economic cooperation and regionalism can also benefit from integrating a national identity perspective. Our study indicates that the process of reshaping post-communist Eurasia cannot be adequately understood without a recognition of the republics’ historical pasts and their images of national selves. In particular, it shows that a development of regional economic ties can be successful and relatively advanced only when appropriate cultural preconditions are in place and the participants are free from any fear of losing their identity as a result of such a development. Regional economic cooperation can be even more productive when the parties are culturally predisposed toward each other, and are not merely culturally tolerant. A product of history, and religious and linguistic similarity, such compatibility in national cultures can serve as a powerful incentive for building a pattern of regional cooperation. To summarize, making room for cultural variables in the study of the EU, NAFTA, or ASEAN, and integrating these variables in the body of still predominantly economic and/or political explanations of regionalism,5 can bring some important payoffs to the IPE scholars. Security Studies The national identity perspective developed in this study can also enhance our knowledge about security issues in world politics.6 This section briefly reviews how the national identity hypothesis can shed additional light on issues of state sovereignty, nationalism, and military alliances. 5 Mansfield and Milner 1997. 6 Neumann 1992; Katzenstein 1996. 342 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The problematique of state sovereignty and autonomy has been receiving considerable attention since the end of the Cold War. With the emergence of the new states in Eurasia, Europe, and elsewhere, and the extension to them of an externally- recognized right to exercise final authority over their own affairs,7 scholars must revisit the issue and ask to what extent (if any) the newly bom nations and states are able to exercise the “final authority.” The experience of the post-communist nations suggests, among other things, the difficulty of analyzing state institutional forms without acknowledging the existence of close dialectical relations between sovereignty (the right to exercise final authority) and autonomy (the ability to exercise final authority). Can these nations be called sovereign if anywhere they have a difficult time in handling their internal, let alone external, problems? Can a state still remain sovereign if it is barely able to maintain autonomy over its domestic and external policy decisions? The post communist nations face some fundamental economic and political challenges simultaneously, and it remains to be seen whether meeting these challenges won’t cost these states their survival as sovereign entities. Traditional approaches are not fully satisfactory in addressing the sovereignty dilemmas of the newly emerged nations. Legal and realist accounts typically pay little attention to the internal aspects of sovereignty, and interdependence and dependence assessments, while revealing economic factors affecting sovereignty, maintain a 7 This is how sovereignty if often defined (Keohane 1993, 93; Biersteker and Weber 1996, 12). 343 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. similarly low interest in its social and cultural dimensions.8 The national identity perspective can compensate for this weakness and point to additional cultural factors capable of compromising (or, alternatively, strengthening) the sovereignty of the newly independent states. By focusing on the relationships between a nation’s social/cultural characteristics and its political/legal institutions, such a perspective may offer some new ways of studying state institutional forms. For example, it may lead to a somewhat paradoxical conclusion that, with possible exception of the Baltic nations, none of the newly emerged post-Soviet states possesses the identity of a sovereign nation. It may therefore suggest that the institutional forms of the recently emerged nations must be problematized rather than assumed a priori as being sovereign. When applied, the national identity perspective may suggest that it makes more sense to classify the newly independent nations as sovereign, semi-sovereign, and semi-colonial rather than to lump them together in one analytical category. As advanced in this study, the national identity perspective can also assist in understanding the nature and intensity of post-imperial nationalism. A comparative analysis of Latvian, Ukrainian, and Belarusian policies and societies indicates that the nature and varying intensity of the republics’ nationalist feelings had a lot to do with their historically-established national self-images. In its nature, post-Soviet nationalism has been unmistakably anti-Russian, a result of Russia’s historical status as the metropole and of the absence of perceived external threats from elsewhere after the 8 Thomas J. Biersteker and Cynthia Weber’s edited volume (1996) made a strong case for the need to rethink traditional approaches to national sovereignty by drawing on material o f wide historical 344 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Soviet disintegration.9 Some of the republics had joined the empire voluntarily and benefited from staying in it, but readily took the historical opportunity to secede and (re)establish their national identity. Those with a historically stronger sense of national identity managed to produce nationalist movements that were better organized and able to mobilize the public around a nationalist policy agenda. Conversely, in Belarus or the Central Asian societies, the bona fide nationalists, those that emerged outside the nomenklatura, eventually became marginalized and unable to influence state policies. Both the nature and intensity of post-imperial nationalism were not fully captured by existing perspectives. The systemic perspective pointed out that the rise of nationalism had to do with changing conditions in the international system,1 0 but paid relatively little attention to varying domestic perceptions of international change. The supporters of economic explanations1 1 tend to miss the fact that nationalism varied not only across more and less advanced republics, but also— and significandy— within these groups. Finally, approaches emphasizing nationalist demands for religious and linguistic authenticity1 2 underestimate that both religious and linguistic compositions of a country’s population are a product of history and, therefore, are hardly independent in their effects on the nature and intensity of nationalism. For example, one cannot assume that a more linguistically or religiously heterogeneous society should necessarily pursue relatively more nationalistic policies; Latvia and Estonia were notoriously and geographical scope. 9 An exception is Armenia, the case addressed in chapter 7. 1 0 Posen 1993. 1 1 Snyder and Ballentine 1996; Treisman 1997. 345 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. different from Ukraine and Kazakhstan in their state policies. The linguistic and religious data then will start making sense only when placed in the relevant socio- historical context. Finally, scholars of military alliances/alignments can also benefit from a close study of the cultural characteristics of those nations that choose to participate in a military arrangement in various forms or abstain from it. Our present approach suggests, along with some other recently published studies,1 3 that in number of cases, the military alignment’s puzzle cannot be adequately solved without addressing the issue of the parties’ perception of each other. The “balance o f threat” way of doing so1 4 is insufficient, as it does not fully spell out the sources of the parties’ various perceptions of each other. In the realist spirit, the argument assumes nation independent military and security posture and therefore cannot explain why some o f the republics, such as Belarus, decide to ally with the ex-metropole, thereby weakening their military status, while others abstained from such an alliance. In at least some cases, the national identity perspective can help to address domestic sources of various security perceptions by suggesting that the ex-imperial republics’ varying perceptions of the metropole may be cultural, rather than merely political, in nature. Comparative Politics My final illustration of the potential of the national identity hypothesis to advance empirical knowledge concerns some of the issues traditionally addressed by 1 2 Van Evera 1994; Juergensmeyer 1996. 1 3 Barnett 1996; Risse-Kappen 1996. 346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. scholars of Comparative Politics. I suggest that application of the national identity perspective can improve our understanding of how states/societies move to changing their economic and political systems and adopt more market- and democracy-based institutions. Let us first consider the issue of economic transition. Studies devoted to the issue can be briefly summarized as pursuing three lines of reasoning as to why the transition was more successful for some countries than for others. Social scientists underline various structural economic and social factors,1 5 politico-institutional conditions,1 6 and leaders’ personal agendas, qualities, and commitments to economic reform1 7 as explanatory variables. In answering questions about economic transitions, as yet much less attention has been paid to cultural factors, not least because of 18 difficulties in finding an appropriate way of measuring and operationalizing them. Our study suggests a means of doing so by looking at the post-imperial states’ experience with national independence, as well as at some other indicators. The fact that Latvia turned out to be a fast reformer, Ukraine a slow reformer, and Belarus even tried counter-reform undoubtedly had to do with various factors of economic, political, and psychological natures. Cultural factors, too, played their part: the Baltic states, for example, were well aware of their cultural proximity to Europe and were socially 1 4 Walt 1987. 1 5 Desai 1996; Burawoy 1997; Millar 1998. 1 6 Brudny 1997; Heilman 1997; Fish 1998. 1 7 Aslund 1995; Sachs and Pistor 1997. 347 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. prepared to adopt a shock therapy approach for the sake of their economic development.1 9 On the other hand, the Central Asian states (barring Kyrgyzstan) and Belarus proceeded in a slow manner or remained essentially non-market economies. A full explanation of why some countries choose to reform rapidly, whereas others moved slowly and still others went with no reform, must not be formulated at the expense of culture-based factors. The challenge is to bring them into the study of economic transition and to attribute them an appropriate place, while neither exaggerating nor underestimating their significance. The same point can be made about political reform. Integrating cultural perspective into studies of democratization, as Valerie Bunce has argued," may become a more coherent way of capturing the special nature of countries in transition and reducing any ethnocentric bias of the still predominantly Western scholarship on the issue. As with economic reform, one can identify at least three different outcomes of political transition in the post-communist region. Some countries have moved toward consolidating their now fairly well established democratic institutions; others, such as Russia, remain an awkward hybrid of democratic and authoritarian elements, with no <) i guarantees that the next move will be toward democracy rather than authoritarian rule." 1 8 For example, Steven Fish (1998), in his otherwise ambitious and penetrating study, chooses to look at religious tradition as an indicator of societies’ cultural preparedness for economic reform, a variable long criticized as reflecting a given scholar’s personal ethnocentric biases. 1 9 The same, o f course, can be said about Poland and some other members of the former Soviet bloc. 2 0 Bunce 1995. -l In fact, a number o f scholars argue that a special type of democracy, non-liberal or ‘delegative democracy,’ has taken shape in Russia and some other post-communist nations (O’Donnell 1994; Kubicek 1994; Brudny 1997; Tsygankov 1998). 348 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Still others remain predominantly authoritarian, with no promises of adopting even some components of democracy. The fact that Russia, Belarus, and a number of Central Asian nations have so far demonstrated less promise to become democratic than Poland, Czech Republic, Ukraine, and the Baltic republics may have to do with their lack of national independence experience, as well as their generally minor historical familiarity with the institutions composing the Modernity project—sovereign statehood, inclusive citizenship, political democracy, and market economy. Some Implications for Policy Making That economic development is an uneven process and assumes multiple paths is old news. What is less well known is how exactly this process unfolds and what are the forces determining the variety o f development paths in this increasingly globalized world. This is an area of considerable debate. This study has argued that cultural forces, particularly the strength of national identity, are capable of contributing greatly to shaping foreign economic policies of the newly bom nations. In addition to acquiring knowledge about these nations’ economic and political characteristics, policy makers will do well to take into account the cultural norms these nations are largely based upon and, therefore, are committed to reproducing in their everyday practices. An informed decision concerning ways of developing economic and political relations with the newly independent states—or providing them with various kinds of external assistance—is impossible if it is rooted in ignorance about these nations’ cultural origins. The 349 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. experience of the post-Soviet nations, as analyzed in this study, suggests two lessons for policy makers within and outside the region: 1 .Acknowledging the variety o f culture-sensitive paths in human development ought to become the basic assumption and starting point when designing an economic strategy. Our study revealed three different patterns of international economic behavior that emerged after the Soviet disintegration and represented by Baltic states, Ukraine, and Belarus, respectively. In fact, the wide variety of national cultures suggests a variety of nuanced culture-sensitive development strategies, which in no way can be reduced to a fixed number. It is important to be aware that in addition to comparative economic advantages, nations may have comparative cultural advantages in developing economic relations with one nation/group of nations at the expense of the other. In economic issues, as in every other issue of world politics, policy makers should be aware of the full spectrum of resources at their disposal. Allowing choices and being sensitive toward nations’ cultural origins is therefore something an informed policy decision must start with. No reformer—within or outside of the NIS— must be motivated by some sort of “universal” economic recommendation toward stability and prosperity. What brings stability in one country may bring destabilization in others; what works under some conditions won’t work under others, and not merely out of differences in countries’ economic characteristics. Culture, too, makes a difference. Latvia’s pro-Westem strategy, for example, could only have succeeded with the support given it by basic sectors of Latvian nationally- 350 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. oriented population—the outcome would have been different should the memory of the country’s inter-war independence and cultural affinity with the West have been weaker. For the same cultural reasons, Belarus, while similar to Latvia in its economic potential, could have not failed to orient itself toward Russia and the CIS rather than countries outside the ex-Soviet area. The course chosen by Alexander Lukashenka was not inevitable, of course. However, even if leading Belarus’ nationalist Zyanon Paznyak— by virtue of some peculiar circumstances—had become Belarus’ president, he would have almost certainly failed in attempting to accomplish what has been accomplished by Latvia. By offering a more sophisticated understanding of the former Soviet republics' economic behavior, this study warns against the still common, simplified perception that all the NIS will soon become a part of the "free-market" world, especially those NIS that are strategically located and richly endowed with natural resources. This project indicates that because national identity is involved, the question of "joining" the community of Western developed nations is actually much more complicated than one might think. At the same time, it warns against expectations that all former Soviet republics will return to their traditional trading area sooner or later, that only the political ambitions of their leaders are currently driving them away from establishing some sort of customs union on the territory of the Soviet Union. Again, the issue is more complicated, and some of the NIS, while being relatively weak as economic entities, are still likely to pursue an aggressive policy of restructuring their trade pattern 351 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. and thereby of "joining" the West. This project suggests that this process is likely to occur in those NIS that possess a relatively strong sense of nationhood and therefore perceive trade with the former metropole as threatening to their national identity. 2. Viewing culture as an opportunity and a constraint in developing economic ties. The above-formulated point leads to the simple conclusion that, under some circumstances, what states can accomplish is limited. Culturally, and not just economically, they are constrained in their time-specific policy design and policy actions. Yet in other circumstances, some states may find themselves in a better position to accomplish their economic goals because of certain cultural advantages. It would not make sense to ignore that, in the medium-run, some countries are closer to others simply by the virtue of their cultural similarity. For Belarus and Russia, for example, the policy challenge is to find a mutually acceptable form of economic union, and not to adopt separate paths of development. The drive toward each other is culturally predetermined, has impressive public support, and must not be overlooked by the countries’ politicians. For Latvia and other Baltic nations, the reverse is true: they are culturally closer to Europe and are likely to continue following the path of integration with European economic and political institutions. For Ukraine, a culturally- torn country, the challenge is to preserve a balance in its foreign policy vis-a-vis Russia/CIS, on the one hand, and the West, on the other. On the other hand, it is no less important to identify cultural barriers on the way to far-reaching international economic cooperation among some countries and reduce, 352 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. when feasible, their possible negative effects by means of economic and political diplomacy. For Russia, for example, this suggests some strategic limits in developing relations with Latvia and other Baltic nations, though it in no way restricts attempts to normalize these relations and avoid further cuts in still significant links to its Baltic neighbors. For the West, the awareness of cultural affinities in world politics should suggest a fair degree o f open-mindedness about the strengthening of Belarus-Russia economic and political ties and assisting, when possible, in finding an appropriate form for their unity. Such unity, if accomplished voluntarily and with respect for the two nations’ economic and political interests, may assist its participants in adjusting to a more global international environment by making the process of adjustment smother than it might otherwise have been. Armed with such understanding, the West has a number of policy levers to make processes of integration, as well as diversification, in the post-Soviet Eurasia take forms that are most civilized and beneficial for world peace and prosperity. 353 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. References Abdelal, Rawi. 1999. Economic Nationalism After Empire. A Comparative Perspective on Nation, Economy, and Security in Post-Soviet Eurasia. Ph.D. Dissertation, Cornell University. Adalian, Rouben Paul. 1995. Armenia’s Foreign Policy. Defining Priorities and Coping with Conflict. 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Creator Tsygankov, Andrei Pavel (author)

Core Title Farewell to the empire? National identity, domestic structures, and foreign economic policies of the post -Soviet states

School Graduate School

Degree Doctor of Philosophy

Degree Program International Relations

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Tag economics, general,OAI-PMH Harvest,political science, international law and relations,sociology, ethnic and racial studies,sociology, social structure and development

Language English

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Advisor Odell, John S. (committee chair), Korbonski, Andrzej (committee member), Nugent, Jeffrey B. (committee member), Tickner, Judith Ann (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c16-68965

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