|For Immediate Release||September 1, 1998|
MR. MCCURRY: Good evening. Let me explain what we'regoingto do. Deputy Secretary Talbott, who participated in all the sessions thatPresident Clinton had with President Yeltsin and Acting Prime MinisterChernomyrdin today, needs to depart, so we're going to do this briefing instages. I expect Deputy Secretary of the Treasury Larry Summers to be herebriefly, and I also expect Senator Pete Domenici, Republican from NewMexico,who is with us here as part of the President's delegation, who specificallywanted the opportunity to talk about the plutonium agreement that webriefedyou on earlier -- he will be here at some point, too. So we will staggerthese folks in and out.
But we'll start with what I think is the principal readoutofthe President's meetings with President Yeltsin and Prime MinisterChernomyrdin -- Deputy Secretary Talbott.
DEPUTY SECRETARY TALBOTT: Thank you, Mike. Goodafternoon,everybody. Let me start with a very brief chronology. The President roadinto town with Acting Prime Minister Chernomyrdin who had come out to theairport to meet him, so they had about 35 minutes together in the car. And Iwill touch a little bit on the discussion there in just a moment.
There's one other conversation that is very relevant totoday's activities, and that is the working dinner thatSecretary Albright and Foreign Minister Primikov had last nightwhich served to advance and set up for the Presidents a number ofthe foreign policy issues.
Then after the wreath-laying ceremony at theKremlin, the President went into what was originally scheduled asa one-on-one meeting just with interpreters and notetakers,originally scheduled to be a little less than an hour. It endedup running nearly an hour and a half, cutting into the time thathad been set aside for an expanded discussion of economics andsome other issues. So that discussion then took place over aworking lunch there in the Kremlin, and in the working lunch thetwo Presidents were joined -- this is the American side -- bySecretary Albright, Secretary Daley, Mr. Berger, Larry Summers,Gene Sperling, and Ambassador Collins.
Now, in the conversation that President Clinton hadwith the Acting Prime Minister and also in the session that hehad this morning with President Yeltsin, obviously, the Russianpolitical and economic situation loomed very large. On his part,President Clinton stressed the importance for the United Statesand for the rest of the world that Russia recover from itscurrent economic crisis. There was some fairly detaileddiscussion, both with the acting Prime Minister and also withPresident Yeltsin about what constituted sound and promisingprinciples of economic management, and also the very relevantquestion, of course, of how to pursue those in an extremelyactive parliamentary and democratic political setting.
President Clinton stressed the need for policies,practices, and laws that will restore investor confidence inRussia, the key point being that policies that will bringinvestment back into Russia and stop and reverse the flight ofmoney out of Russia are absolutely essential if Russia is goingto succeed in turning the situation around.
I don't think I'm your best source for anelaboration on all of this because Larry Summers will be hereshortly, and he will be able to give you a bit more on thediscussion that took place largely on economics over lunch.
On the Russian political situation, PresidentClinton has now had a chance to hear both from President Yeltsinand from the Acting Prime Minister about how they see the stateof play. Now, the state of play, of course, is dynamic, and it'suncertain, so there is not a great deal that I can give you byway of detail into that situation, except to say that PresidentYeltsin and, for that matter, the Acting Prime Minister,confirmed their staunch commitment to reform and vowed that therewould be no retreat.
Let me touch, if I could, on just a couple offoreign policy questions and then I'd be happy to take yourquestions.
As I mentioned, the two Presidents were building onthe work that that Foreign Minister and Secretary Albright didover dinner last night. They had covered in that working dinnerquite a number of issues, but they focused on a couple of issuesthat are urgent and where the United States and Russia need to domore, and they need to do it faster because of dangerous regionalconflicts elsewhere in the world -- the first being Kosovo, andthe need here is to address an extremely serious humanitariantragedy and to address it in a way that guarantees unimpededaccess for humanitarian organizations and allows refugees anddisplaced people to return to their homes. They also talkedabout the need to address the root political cause of thehumanitarian and refugee crisis in Kosovo, and that means by theUnited States and Russia working together to help bring about anegotiation on an interim solution to the Kosovo problem.
The other urgent situation that they had discussedboth at the ministerial and the presidential level was Iraq andthe need to press Saddam Hussein to comply with Iraq'scommitments to the United Nations Security Council. As invirtually all meetings, both at the presidential level and at theministerial level going back now more than a year and a half, thesubject of Iran was discussed, and especially the need tostrengthen the work that has already taken place between theUnited States and Russia to stop the flow of dangerous andillicit technology to the Iranian ballistic missile program.
Why don't I go to your questions.
Q There's a lot of controversy over him. Is theU.S. position that that's an internal affair of the RussianFederation, or, in an effort to try to help President Yeltsinrestore stability, would we like to see Chernomyrdin confirmed?
DEPUTY SECRETARY TALBOTT: Sam, your first answer isthe one I will associate myself with. This is strictly aninternal matter for Russia to work out. What the United Statescan appropriately do is explain, affirm, elaborate on what itstands for by way of principles, as opposed to taking sides onquestions of personality.
That said, Prime Minister Chernomyrdin is obviouslysomebody that President Clinton knows very well from his earlierservice in the Russian government through the Gore-ChernomyrdinCommission. But the President and everybody else on our side istaking great care to let the Russian political situation play outby its own lights. And what we will do is make clear where westand, how we can help, when we can help and what Russianpolicies we can support.
Q The President made four points in hisUniversity speech, for example, the collection of taxes and notprinting money to get themselves out of these difficulties. Didhe make all four of those points to Yeltsin personally?
DEPUTY SECRETARY TALBOTT: Yes. Larry will be hereshortly and can tell you a bit more about the way in whichPresident Clinton's economic message was elaborated during thelunch. And I might add that President Clinton also had a chanceto talk about the fundamental economic issues in the car comingin with the acting Prime Minister.
Q But, to be clear, the President, Mr. Clinton,elaborated on all four of those points to Mr. Yeltsin face toface?
DEPUTY SECRETARY TALBOTT: He touched on our basiceconomic message.
Q I wonder how, given the dynamic and uncertainnature of Russian politics today, the President can be so certainas he was today to say that democracy is Russia's destiny.
DEPUTY SECRETARY TALBOTT: Well, the uncertaintiesof the immediate situation here do not change a couple of pointsabout the past and a couple of points about the future. Withrespect to the past, seven years plus a number of days ago,Russia made a fundamental choice, and that means the reformistleaders of Russia at the time, very prominently including BorisYeltsin, and it means the people of Russia, and that was toembrace democracy.
They had no illusions -- I don't think anybody elsehad any illusions -- that the transition from a totalitariansystem and a communist Soviet system was going to be smooth oreasy, or, for that matter, that it was going to proceed in astraight line. But they've stayed with that course for sevenyears. We have heard a wide array of voices across the spectrumin Russian politics say that they are in favor of staying on ademocratic course. Obviously, there are very basic disagreementsabout what that means in practice, particularly in terms ofeconomic policy.
I don't think there is any question that there isfundamental support for democracy on the part of the Russianpeople. We're going through a, to put it mildly, interesting anduncertain and difficult episode right now, but we have not heardanything while we have been here that calls into question thatdemocracy is the path to which this country is committed. It'sgoing to undergo -- it's going to continue to undergo a greatdeal of strain, but that in many ways is to be expected, giventhe magnitude of the problems that they face.
Q One of the purposes of this visit was to get afirsthand view of how Yeltsin is doing, both politically andhealth-wise. What is your assessment of that? How did he seem,and how was the encounter between the Presidents?
DEPUTY SECRETARY TALBOTT: The 90-minute meeting,followed by a very intense discussion over lunch that PresidentClinton had with President Yeltsin today showed President Yeltsinto be vigorous, very much engaged, very much on top of theextremely difficult situation that he is trying to deal with.Obviously, President Clinton came here not just to deliver amessage, but also to listen carefully. And he did a good deal oflistening in the car with the Acting Prime Minister, and a gooddeal of listening in the one-on-one session that he had with thePresident. And he, of course, is going to think about what hehas heard. But nothing that he has heard cuts across thecommitment that you all have heard as well, both from Mr. Yeltsinand from Mr. Chernomyrdin, that they are determined to keepreform on track.
Q To follow up on that, that is what they heardfrom both Chernomyrdin and Yeltsin, that Russia is committed tomaking reforms?
DEPUTY SECRETARY TALBOTT: Absolutely. They alsoheard a lot, including in some detail, about what is a verycomplicated and quite contentious political struggle that's goingon. And as I think is apparent to everybody here, there are lotsof other players in this whole drama, and it is not over, to putit mildly. And we all think that the most appropriate thing forus to do is understand what's going on; make certain that the keypeople on the Russian side -- and, of course, President Clintonwill be meeting with a number of other Russian political figurestomorrow -- that they understand what American policy is, whatAmerican interest is, why it's in the American interest thatRussian reform continue and succeed; and at the same time, tohear them out so we can have the best possible understanding ofwhat it is that we need to adjust to as time goes by.
Q Did Mr. Yeltsin and Mr. Chernomyrdin make aplea for IMF funds to be released at the end of the month? Andif so, what was the reply?
DEPUTY SECRETARY TALBOTT: Larry can touch on that abit more. Clearly, the Russian government understands that theability of the United States and the international financialinstitutions to support Russian economic reform depends onRussian policies. And there was a good deal of discussion. Atthe same time, clearly, they want the IMF and other IFFI supportto go forward. And they are trying to -- they're grappling withsome tensions and contradictions, I would say, between economicimperatives and what they understand to be some politicalcomplications, and we have had a chance today to both hear andsee them trying to come to terms with that. And it's notfinished yet.
Q Was the President asked for his personalintervention on that matter in the meetings this morning?
DEPUTY SECRETARY TALBOTT: Not in so many words.I'm sure you'll have a chance to hear from Russian spokesmen anauthoritative readout on their perspective on this. There's noquestion in our mind that President Yeltsin and the Acting PrimeMinister want to see IFFI support continue, and we have had avery good opportunity today to reenforce and explain what isrequired for that support to go forward.
Q I wanted to know if the communists could bebrought into the idea of reform. What are the chances that theywill follow into that path, and do you think that they would bereliable as a counterpart in order to build a stable coalitionthat would move into reform in Russia?
DEPUTY SECRETARY TALBOTT: It's a good question, notan appropriate one, however, for me to answer. I don't thinkit's either appropriate or helpful for me to stand up here in mycapacity and serve as a commentator on Russian internal politics.There are lots of other people, including some people in thisroom, who can play that function. We have assiduously maintainedour respect for the sovereignty of the Russian democraticpolitical system and I've already made clear what we think is theappropriate use to put this meeting to and that's not it.
Q But given the relationship of the past 50years, we would not want to see communism return to control thiscountry, would we?
DEPUTY SECRETARY TALBOTT: I think the President, inhis speech at the Institute, laid out in some very carefullychosen words exactly what we would want to say on that subject.We're not going to pick and choose among Russian individualpolitical figures, Russia's parties, factions in the current Duma-- not least, Sam, to be very honest with you, because I'm notsure it would be helpful to those we wanted to help for us tocreate a hierarchy of whose policies with think most promising.
The President said very clearly today in his speechat the Institute that he hoped and believed that Russia wouldkeep moving forward and not go back and try policies that have soclearly and dramatically and disastrously failed in the past.And I think it's on that basis that we should address questionsof that kind.
Q What's the administration prepared to do now,beyond the next chunk of IMF money, to bolster the Russianeconomy here, based on what the President has heard?
DEPUTY SECRETARY TALBOTT: Why don't you save thatone for Larry, who will be here in a moment.
Q Since the President mentioned several timesduring his speech that Russia needs to play by the rules,particularly international economic rules, do you think thatmessage hit home today when the President was talking to theRussian leader?
DEPUTY SECRETARY TALBOTT: They certainly listenedcarefully to a very detailed and carefully laid out explanationof exactly that point.
And by the way, speaking of rules, I want to makeone other point about Russian politics. There are a lot ofthings, of course, that have caused concern, notably here, aroundthe world as well, about the difficult past through which Russianpolitics have been going. But so far at least -- and we've heardnothing to suggest that this will change -- Russia is playing bythe rules of its own constitution, which is to say, for all ofthe differences and disagreement and, indeed, the word that weheard used several times today was "struggle" that's going onhere, it is a struggle that is taking place within aconstitutional framework. That in itself is something quite newfor this country and, therefore, all the more positive,particularly if, as we hope and expect, it can hold.
I think I now have an opportunity to turn the podiumover to a representative of the other branch of ourconstitutional government, if I'm not mistaken, and I do so withpleasure. Anyway, we'll have a chance to give you more tomorrowand Larry should be here before too long. Thanks.
MR. MCCURRY: I just wanted to remind you, those ofyou who did not hear the briefing earlier today, that we'redelighted to have as a member of the President's delegation oneof the foremost authorities in the United States Senate on U.S.relations with the Russian Federation, Senator Pete Domenici ofNew Mexico.
I think some of you heard Gary Samore from the NSCdescribe earlier today what a leading role Senator Domenici hasplayed on fissile materials generally, and his interestparticularly in the plutonium disposition agreement announcedtoday. And the Senator we asked to say a few words about that.
SENATOR DOMENICI: Thank you very much. I won'ttake much of your time, but I will tell you I came on this tripbecause I understand that the President of our country andPresident Yeltsin will sign at least a joint statement ofprinciples on a very important subject, and that has to do withthe fact that both our nations have a very huge excess supply ofweapons-grade plutonium. Both have agreed that they ought to getrid of 50 tons of it, that 50 tons ought to be rendered --changed so that it's no longer usable in nuclear weapons.
A lot of us have been working on that. I came herein July to meet with various Russian leaders because the Congresswill be involved in this in some way or another. And I'm verypleased to note that tomorrow afternoon -- for those who havebeen skeptical about what might come out of this summit, this isone very positive thing that will come out, because both nationsare going to agree to set themselves on a path to take 50 tons ofweapons-grade plutonium, to put it into safekeeping in a mannerthat will be safeguarded and protected by internationalagreements, so that it will not just be their word and our word,but it will be internationally -- international agencies willmake sure we're controlling it properly.
It will be changed in form, and then over a 10-yearperiod some effort will be made to reuse it or substantially useit up. In any event the agreement is such that 50 tons will nolonger be available for weapons use. Now, that's ratherhistoric. It will take a while to implement it, but I think withour scientists, their scientists, and some good judgment and somethings we already know, that this could be the beginning of arather formidable new relationship with reference to the wholearsenal of nuclear weapons and all of the material, fissilematerial and the like that are related to it.
And I'm very pleased to have been part of it. Iwill be one who will try to convince members of Congress thatwhere we have to do something to help the Russians move in theright direction, even with some resources, for this accord, thatwe ought to do that.
In the President's budget, there is already money onour side to start the two main aspects of moving us in the rightdirection. One is to begin the storage of plutonium in one oftwo places in the United States. And the other is to build a MOXplant, a very large plant to convert some of our weapons-gradeplutonium into material that can be used in light-water breederreactors, which is a very giant first step for America. We havenot done that since we entered the atomic and nuclear age.
That's a rather big decision on our part. I hope wecan get it done. It will be controversial. But it's in thebudget, I've appropriated it, and we'll be started on that pathat home.
I'll be glad to take any questions on that subject.
Q Senator, you're the Chairman of the SenateBudget Committee --
SENATOR DOMENICI: Yes, sir.
Q Does it concern you that in the last threesessions of the market the Dow has dropped 1,100 points, and aswe speak this morning it's in negative territory again?
SENATOR DOMENICI: Of course it concerns me. Idon't think it's anything that we ought to be frightened aboutyet. Obviously, the American economy, as far as its basics, areactually in rather fantastic shape. What's happening to theAmerican stock market is it's suffering because countries likeRussia and other nations are having problems with their sovereigncapability to see to it that foreign debt is in some way going tobe repaid. And once Russia began defaulting, Central Americanand South American stock began to be put in jeopardy for the samekind of reason -- just a fear that finally it happened and maybeit can happen elsewhere.
I do believe if some positive things come out ofthis summit, and if they can turn some of their things aroundhere just slightly so that the world can look at it and seethere's a chance, then I believe things are going to rightthemselves in the United States with reference to that and Idon't think it has any effect on our budget or fiscal policy yet.
Q Are tax cuts necessary at this point to try --
SENATOR DOMENICI: I don't think we need tostimulate anything yet. We have as low of interest rates aspossible in the United States. In fact, there's one ratherinteresting fact, we have a lower Treasury bond rates than we doshort-term rates overnight by the Fed. That's kind of somethingwe don't usually have. I don't think the Fed is going to doanything about that, I don't think they're going to change theirconduct with reference to interest and money supply. I thinkthey're going to sit pat for a while and see what happens. Ithink we'll come out of it and be back on a very positive notesoon.
Q Fifty tons -- what does that mean in terms ofmissiles, say? How many tons of fissile material is there in anSS-18?
SENATOR DOMENICI: Well, I think I can say withoutworrying about classified information, we claim we've got about100; they claim they've got about 160 tons. So it's a prettyhealthy start, looking at both arsenals.
We couldn't get rid of 50 tons, we couldn't convertit the way we have to convert it much quicker than we're planningunder this statement of principles. Fifty tons is a very, verybig chunk, to go from nothing to that. If it works we ought toproceed with more. And please understand, in the United Stateswe are not fearful that this plutonium is going anywhere, but itstill would be good to send a signal to the world that we want toget it out of circulation. In Russia they seem to be willing toenter into an agreement which will assure the world that 50 tonsisn't going anywhere either. It will be supervisedinternationally and that's one of the commitments they made, theyactually brought that up in one of the sessions we had. Sothat's kind of a healthy sign, it seems to me.
Q Senator, the President, during his remarks atMoscow State University mentioned some doubters back home don'tthink he should have come. What's your message to yourcolleagues back home who have raised questions about thePresident coming to Russia at this point, dealing with the issuesyou're talking about?
SENATOR DOMENICI: Look, I believe the speech was agood speech also -- I guess, from my own personal standpoint, abit long. (Laughter.)
Q Nothing new there.
SENATOR DOMENICI: But perhaps even from hisstandpoint it was a bit long. But in any event, frankly, Ibelieve the point he made, if not once, a number of times, wasthat we are friends. And I believe that when they have the kindof problems they have the best thing you can do is give them somekind of assurance, the best you can give that we are friends,that we're concerned about their problems.
I will tell you, we can't fix the Russian economy.The United States can do very little now. They've got to makesome very bold and positive decisions and the world will know itwhen they do. And then I think the speech tonight and theconcern of the world will probably bring more internationalcooperation and partnerships into play.
I would tell you with reference to the IMF, I thinkthe United States Congress will replenish the IMF before weleave. But I think there will be reforms made, and those reformswill have to do with better assurance that the banks that are inthe countries we're going to help have the right kind oftransparency so that everybody can look at their books, we willknow there is not cronyism blatant in the future and otherreforms before we pass it, but I believe we will.
Nonetheless, the money to Russia under IMF is notdependent upon our replenishment, there is adequate resourcesthere. We shouldn't continue the flow of money either under theIMF's existing commitment until Russia does some things that areof major significance, as indicated by a number of people.
Thank you all very much.
MR. MCCURRY: Thank you, Senator.
Now joined in progress by Deputy Secretary of theTreasury Larry Summers, and the President's National EconomicAdvisor Gene Sperling. And you were heavily promoted by yourcolleague from the State Department, Mr. Talbott. He said youwould answer all the questions.
DEPUTY SECRETARY SUMMERS: Let me begin by saying Ihave enormous admiration for my colleague from the StateDepartment. Let me just provide a brief readout on the lunchdiscussion between -- there was about seven officials on our sideand seven officials on their side. The discussion focusedheavily on the economic issues with, of course, President Clintonand President Yeltsin leading the discussion with Prime MinisterChernomyrdin being a very active participant on the Russian side.
In the discussions we stressed the kinds of pointsthat President Clinton made in his speech today, emphasizing theimportance at a very difficult moment of sound policies thataddressed the difficulties in the banking system, that addressedthe need to avoid excessive money creation that could lead tovery serious problems; the need to maintain satisfactoryrelations with creditors -- international creditors -- and theneed, above all to establish a framework in which capitalism andmarket forces can operate and the underlying economic energy ofRussia can be capped.
The point was made that there's a very large stock,perhaps $40 billion of dollar bills, that are held in Russia, andthat the best way for that money to not be held in a sterile way,but invested in the Russian economy is to create a system basedon financial stability and, above all, the rule of law.
President Yeltsin and Prime Minister Chernomyrdin,in discussing these issues, made it clear that they did not wantand were determined not to see any kind of return to thecommunist system. And they recognized in their comments theimportance of addressing the problems in the banking system, ofmaintaining sound policies. They also recognized that it was forRussia to formulate a government, to formulate an economic plan,and to shape its economic destiny, while they of course welcomedthe advice and support from the West.
And so I think it was a good discussion. It was afrank discussion that recognized the economic difficulties thatRussia faces, both in terms of inflationary pressures and interms of strains in the -- various kinds of strains in thefinancial and banking systems. But it was a discussion in whichit was recognized that these were problems that had to beaddressed. Again, without a Russia formed at this point, orwithout a Russian economic plan, it wasn't possible to go furtherthan discussing these general principles.
Let me stop there and take questions.
Q Larry, Strobe Talbott spoke about the powerstruggle going on in Russia right now. I wonder if you come awayfrom these discussions validating that in the end of the dayYeltsin and Chernomyrdin are so committed to those reforms thatthey would not cut a deal with the communists to undercut them.Or do you still come away right now believing that that's still apossibility?
DEPUTY SECRETARY SUMMERS: I can never remember wellenough to repeat it precisely the Churchill comment about Russia,which I think applies to internal politics in most places, aboutan enigma inside an enigma, or whatever it is.
Q You're right, you can't remember it.
DEPUTY SECRETARY SUMMERS: Right, I've justdemonstrated that I don't remember it properly. I don't think atthis point that I'm prepared to make a judgment or to try to makea prediction. I think that things are very much in flux. It'sclear that there is a lot of discussion back and forth about thecourse that will be followed, and I think it's clear that thereare enormous stakes both for Russia and the United States in theoutcome. But I wouldn't want to be in the position of hazardinga prediction at this point.
Q The President and you and other U.S. officialshave stressed for some time that this dislocation in worldmarkets in Asia and elsewhere could come home to roost. Is thatwhat we're seeing in the U.S. stock markets in the last three orfour sessions? Are we now beginning to be sucked into aworldwide recession?
DEPUTY SECRETARY SUMMERS: Sam, let me first saythat the fundamentals of the American economy are strong, and wehave a sound economic strategy -- a strategy based on promotingexports, a strategy based on maintaining a high level ofinvestment and capacity creation, a strategy based critically onfiscal discipline. And with that strategy in place, I don't seeany reason why these market developments should interfere withthe basic momentum of economic expansion, although they will --obviously, they will have effects on certain sectors of theeconomy.
I do think that market developments in the UnitedStates are in part a reflection of theinternational forces and strains in other markets around theworld, and that really speaks to what I think has been a crucialkiller of our policy for the last year, the recognition that theUnited States has a very strong interest in providing support tocountries as they seek to contain these financial problems. And
that is not out of any motivation of charity or comity, butbecause it is very much in our national interest -- in jobs, inmarkets, in security -- to see these problems contained. Andthat's one of the reasons why it is so crucial that, as SenatorDomenici said, the IMF legislation pass this week -- pass as soonas possible.
Q Is it fair to say the United States didn'tbring anything to the table today in terms of financial aid or aguarantee of help in getting the IMF money moving by the end ofthe month? There wasn't a lot the United States could offer thismorning.
DEPUTY SECRETARY SUMMERS: I think it was a veryuseful discussion in which I think the strength of the U.S.commitment to reform in Russia was very clear. And I think therewas a shared recognition that the way it is and the way it shouldbe is that Russia will chart its economic destiny and that therewill clearly be a willingness of the international community torespond as appropriate to Russia's economic plans.
Q But we didn't offer them concrete help fortheir economic emergency today, correct?
DEPUTY SECRETARY SUMMERS: Yes.
Q I'm just wondering, based on -- obviously theyknew your position going in, so what assessment did they give youthat the chances of them remaining loyal to this idea are strong?I mean, are they going to wind up in another week or two havingto compromise, go some other route?
DEPUTY SECRETARY SUMMERS: I think that in thediscussions in which I participated I think they made clear theirunderstanding that what was important was to go forward and notto go backwards. I think that they conveyed that very clearly.But how a very complex political process involving both anexecutive and a legislative will play out is something that Ithink, as Strobe Talbott said, is something that's in flux andnot something I would want to predict.
Q You spoke about continuing sound measures.Does that mean that you're assessing what they've done up untilnow as being sound economic policy? And if not, how would youassess where they are today? There's lots of criticism flyingaround the city about who's at fault for the crisis.
DEPUTY SECRETARY SUMMERS: I did not mean -- well,clearly, Russia is a very different country than it was fiveyears ago -- an open society that has had elections; that has 70percent of its people in the private sector; that has items, notempty signs, in store windows. I certainly didn't mean tosuggest that there are not very important issues in Russianeconomic policy that have to be addressed going forward. And Ithink those go crucially to the question, above all, of the ruleof law and the protection of property rights, the protection ofcontracts and the ability to basically carry on business in alaw-based way.
They also go to strengthening basic publicinstitutions, the ability to collect taxes that are owed in alaw-based way, rather than based on discretion; the ability tomaintain adequate regulation of a financial system and so forth.So I think that there are obviously issues that have to beaddressed in each of the areas that the President talked about inhis speech going forward.
Q As Russia tries to form a government, thecommunists are calling for the very measures that PresidentClinton criticized -- increasing the money supply, taking overbanks, perhaps nationalizing key industries. Did Chernomyrdin orPresident Yeltsin say that they expected perhaps a temporaryrollback or implementation of these reforms in order to get agovernment established here in Russia, and then, once things havesettled down, would they continue on the free market path?
DEPUTY SECRETARY SUMMERS: No, that was notsomething that figured in the discussions. And I think that itwould be very problematic for Russia to move backwards ratherthan forwards in any of those areas.
Q The Russians are saying that Mr. Yeltsin toldthe President that there would have to be some tacticaladjustments that could mean enlarging the state's role in theeconomy. Is that, in fact, what he told the President?
DEPUTY SECRETARY SUMMERS: I think there was -- Ithink the point was made that there were crucial governmentfunctions, the provision of social safety nets addressingproblems of arrearage, improving the quality of regulation,achieving development in depressed areas. And that those areimportant issues that Russia will want to see addressed goingforward. But I hope in conformity with the basic principle ofmoving forward towards a market system.
But, again, you're asking questions trying to parsewords, and what is really going to be important here is notwords, but it is going to be the actions that are taken in thecoming days, weeks, and months.
Q Let me follow that. You didn't get a sensethat the Russians are saying that they will have to revert to alittle more state control over the economy? That is not what youunderstood them to say?
DEPUTY SECRETARY SUMMERS: I don't think that's whatI said. I think what I said was that they indicated a number ofareas in which they felt more active state involvement wasappropriate, but the way in which they did -- the areas theyindicated were appropriate did not necessarily mean -- a moreeffective collection of taxation, for example, means more stateinvolvement, but it certainly would not mean a going backwardstowards communism.
So I think in order to evaluate this, what we'regoing to just have to do is wait and see what kind of plan theRussians come up with and what kind of actions they take, becauseit's the actions that are ultimately going to be important.
Q So it sounds like you're saying the reformdoesn't have to be completely pure. In other words, there mightbe some return to perhaps keep a higher budget deficit in orderto solve some of these short-term social problems, and that isn'tincompatible with the reform that you want. Is that how weshould understand you?
DEPUTY SECRETARY SUMMERS: I don't think so. Thisisn't about ideology; this is about constructive economicstrategy that can provide for stability, that can provide foropportunity for Russian workers and for Russian families. Thereare obviously a whole set of choices that a government has toface and they can be made in different ways that are consistentwith a framework that promotes that. It's not for us to dictatewhat specific choices that Russia makes.
We are -- and I think it was conveyed -- very muchconcerned that whatever path is followed be one that isfinancially responsible in the sense of not leading to high ratesof inflation, not leading to problems in the payment system,allowing businesses to flourish. And that's what is important.One has to look at a complex set of calculations to make any kindof judgment about any particular plan and what kind of deficit ispermissible. We're just not at a stage where that can beaddressed.
Q Just to nail this down then, and taking whatyou said at face value, barring further Russian action, the U.S.view is they get no international aid?
DEPUTY SECRETARY SUMMERS: The U.S. view is that atthis point there is not a plan and a set of actions embarked on.When there is a government and when there is a plan we want verymuch for that to be a plan that can usefully be supported byassistance and will provide assistance, with the internationalcommunity will, through the international financial institutions,will provide assistance in the context of the plan.
But at this point we're waiting to see the plan andthe actions, which is what will determine what happens -- mostimportantly, what happens to Russia's economy and secondarilywill obviously influence how much support can fruitfully beprovided.
Q Is it fair to say that can't happen by the endof the month?
DEPUTY SECRETARY SUMMERS: I would not want to judgeor rule anything in or our in terms of the schedule. But clearlythere are a number of steps, there are a number of steps thathave to be taken in Russia in discussion with the internationalfinancial institutions. But I wouldn't want to set a timetable.
Q Just stepping back to the U.S. stock marketfor a moment, you said that U.S. economics are fundamentallysound. Does that mean that there's no policy actions that areappropriate, that any -- policymakers, even Congress, the WhiteHouse or maybe in the Fed should take at this point?
DEPUTY SECRETARY SUMMERS: Gene Sperling may want toadd something to this answer. No, I don't think -- I thinkobviously we continue to monitor the situation in financialmarkets and in the economy. But ultimately what is important isthe real economy, not market fluctuations. And we think we havea basically sound strategy that has proven itself with respect tothe real economy.
It is important for the global economy, whicheffects our economy very directly, that we be in a position torespond to these financial problems and that's why congressionalsupport for the IMF increase is so crucial, and we hope that itwill happen as soon as possible.
MR. SPERLING: I just wanted to refer anyone back tothe President's State of the Union where back in January thePresident laid out that while out economy was strong and ourprospects remained sound that the Asian financial crisis wouldhave its effects on every country, no country would be completelyimmune. And certainly I think a lot of the support we have inthe Senate for the IMF, the bipartisan support, reflect the factthat in many rural communities over the past several monthsexports have been hurt because of this and that it's been agrowing support for the IMF because of that. We've also saidthat a strong IMF itself would be a pro-stabilizing factor, and Ithink you're seeing in more of your reports people mentioningthat.
So I think the time is long past due where we pulltogether and have the bipartisan support for the IMF. And I knowwe throw around "the fundamentals are strong" so you just hear"the fundamentals" but it is worth taking the step below us towhat those are. Unemployment is 4.5 percent. When we came intooffice, I don't think any of us necessarily expected in ourlifetimes to see unemployment for a sustained period of time atthat level. You've had inflation at 30 year lows. Investment --productive investment has been over double digit five years in arow. I don't know if that's happened this century. And thatmeans not only has our economic plan worked in terms that deficitreduction has brought down investment and spurred productiveinvestment, but five years in a row of having productiveinvestment grow at 10 percent each year is building theproductive capacity of the economy.
So that is not an empty phrase. Those fundamentalsare the very simple things that make up the underlying economyand right now, those do remain strong. And it is our belief thatover the long run, the market will follow fundamentals. There'sno question there's some nervousness and uncertainty and, asLarry has said, reduced appetite for risk in some investors inemerging markets. But in the long run, we do believe thatfundamentals will determine how markets respond. And that's whythe actions that Larry Summers and Bob Rubin have worked so hardwith is to make sure that each country that is taking the propersteps in trying to reform itself and get their fundamentalsstrong has the kind of international support, because in the longrun we think that will make the difference. Markets will gothrough cycles.
Q But you've said two things, haven't you? Yousaid that the Asian crisis you warned -- you said the Presidentwarned -- would affect us and is now affecting us; then you sayU.S. fundamentals are strong and in the long run that's what willcontrol. Don't you mean in the long run it's the worldwidefundamentals that control and they seem, in many sectors, to begoing south?
MR. SPERLING: Look, when I say no one is immune, Imean -- Michael Jordan was sick in one of playoff games a coupleof years ago and he still was pretty strong. Illness affectshim, he's still the best ball player. The U.S. economy isstrong. It would probably be in a stronger place if it was notfor the effect, and it's clearly -- of the Asian financial crisis-- and its clearly had its effect on several rural regions in ourcountry and the farm exports. So I don't think it's inconsistentto acknowledge that the fundamentals are strong and the economyis strong, yet which doesn't mean that we haven't been affectedsomewhat and it doesn't mean that some of the nervousness is nothaving some effect.
Q What do you say to investors who are seeingtheir -- a least their paper profits all evaporate and maybe morethan that in the last three or four stock market sessions?
MR. SPERLING: You have to give us credit, we'vealways been disciplined about not commenting day by day about themarket. We've been disciplined about saying that our focus wasthe fundamentals. The stock market was at 3200 when we came intooffice. It's still been a decent place for people to put theirinvestment.
Q -- I asked for a prediction. What do you thinkpeople should do?
MR. SUMMERS: Sam, I have a prediction to make aboutthe stock market. It will fluctuate. You were ahead of me. Idon't think it's appropriate for us to try to judge which way themarket will go. And, obviously, these are significant eventsthat are taking place in markets, but I think the best thing thatwe can do is to monitor these situations, to assure that thepayment system is functioning properly, and to keep our eye onthe main ball, which is the strength of the American economy andthe strength of the global economy, because that's so importantfor us.
Q Larry, can I just ask you a quick question?Did any Russian official outline a ballpark for additionalforeign assistance that they would now like to see?
DEPUTY SECRETARY SUMMERS: That was notsomething that figured in the discussions.
Q Didn't come up.
MR. MCCURRY: Okay. Anything else? Terry, you wereanxious to end this briefing.
Q I was looking for more briefers. (Laughter)
MR. MCCURRY: We got some more out here.
Q So there is no plan that the President has inthe back of his mind that if things continue to be bad he mightcut short his trip?
MR. MCCURRY: No need to do that, given themonitoring mechanisms that are in place back in Washington thatwe have been fully in touch with throughout the day.
Q Anything else for tonight?
MR. MCCURRY: There is a state dinner tonight andthe toasts are public, right?
MR. LOCKHART: No, it's a closed event.
MR. MCCURRY: We'll see if we can pass some color onto the pool, but besides color coming from the pool, I don'tanticipate anything else. We are keeping an eye on otherdevelopments. I don't think we've got a lid on just yet in termsof here, but as soon as we can get one we'll let you know. We'rechecking back with Washington to see what other kind of paperwe've got coming from back home.
Briefings - Sept 1st
1st Press Briefing at Hotel National in Moscow, Russia
2nd Press Briefing at Hotel National in Moscow, Russia
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