Press Briefing By Senior Administration Officials

Office of the Press Secretary
(Moscow, Russia)

For Immediate Release September 2, 1998


Hotel National
Moscow, Russia

4:55 P.M. (L)

SENIOR ADMINISTRATION OFFICIAL: I thought what I would doisgive you a little bit more of a sense than would be appropriate on therecordof the meeting between the Presidents this morning.

This was originally conceived as a somewhat expandedmeeting;that is the two Presidents, minister, Secretary of State, Sandy Berger andsome others. Shortly before President Clinton went over to the Kremlin,theword came from the Russian side that President Yeltsin would like to startina one-on-one format, similar to the one that made up part of yesterday'smeeting. And it ended up that that was the main meeting. That was thewholemeeting. It ate up the time, in other words, that had been set aside fortheexpanded meeting. It was a lot more than 15 minutes. It was an hour plus.And maybe we can check and get you some more exact time.

The location was the presidential study, the same place asyesterday. The setting was the same. And what I'm going to do is just goquickly through the main points that were discussed. This meeting hadoriginally been conceived even when it was a broader format to deal withforeign policy and national security issues.

By the way, I should say in parenthesis that while the twoPresidents were meeting, there were counterpart discussions going onparallel.That is Secretary Albright and Minister Primikov were meeting over in oneroom, one corner of one room; Sandy Berger and Andrei Kokoshin werecontinuingthe good work of their channel over in another part of the same room.Therewas a lot of kind of mix and match going on there, but alot of business was being done, including some stuff that relatesto the finalization, of course, of the documents that you've nowseen.

The following subjects were raised approximately inthis order, although they circled back to them a number of times:Kosovo, and there, of course, the main point was the twoPresidents agreeing that the humanitarian crisis has thepotential of being a humanitarian catastrophe, and PresidentClinton stressing his concern that if the humanitarian crisis isnot addressed promptly, Kosovo has the potential to explode andto be another war of the kind that we had already seen in Bosnia.

Iraq, the unacceptability of the decisions thatSaddam Hussein made at the beginning of August to ceasecooperation with UNSCOM and the IEA. President Yeltsin respondedon that point by saying that he had been very unpleasantlysurprised -- that's a paraphrase, not a quote -- by Saddam'sdecision, that it contradicted assurances that Saddam had givenhim and that he intends to make his own approach to Saddam tostress the need and the urgency of restoring Iraq to compliance.

They then discussed a number of European securityissues, particularly NATO-Russia cooperation. And PresidentClinton talked about in very broad terms concrete, specific ideasthat the U.S. has for putting a little more meat on the bones ofNATO-Russia cooperation. And these are going to be pursued inBrussels, and I think they will become evident as we get closerto some NATO-Russia meetings that are going to take place inDecember of this year.

Terrorism -- again, a little bit more concretediscussion than yesterday about ways in which the United Statesand Russia can work together to combat the threat of terrorism.

The Caucasus -- this is an issue of both strategicand economic, commercial interest and importance to the UnitedStates and indeed to Russia. And here President Clinton used theopportunity to argue against a perception and an occasionalcomplaint that one hears from the Russian press and elsewherehere, and that is that there is a continuation of the great gamegoing on in the Caucasus. President Clinton made the point thatthe United States wants very much for American firms to haveaccess to markets, to be able to compete fairly and freely,particularly in the energy sector there, but to compete on anequal and fair basis with Russian firms, and also to work withRussia to bring peace to the region. And there was somediscussion about the various conflicts that are going on in theCaucasus.

They then talked a bit about the economy, and Ithink that discussion was pretty well aired in the pressconference this afternoon, but once again, it was PresidentClinton making sure that, A, he understood the various optionsthat the Russian side sees for dealing with the economy, and thatthe Russian side understands the basic precepts that Gene andDavid will be in a position to talk about at greater length in amoment.

I'm wrapping up here. President Yeltsin then askedSergei Yastrzhembskiy for his notes, his talking points that hadbeen prepared for the meeting. He hadn't been using them upuntil that point, and he kind of flipped through them to makesure that he'd covered all the main issues. And in the end --and this happened in Birmingham as well -- theRussian side simply turned over their talking points so that wecould study them in more detail because we were running out oftime.

Oh, yes, I'm sorry, there was one other thing.President Yeltsin did at the very end of this meeting produce apiece of paper, a kind of a non-paper, that made the proposal fora joint U.S.-Russian center located on Russian territory to helpimplement the shared early warning initiative that is, of course,now been publicized. And my colleague has just showed me anumber of factsheets, that you will be getting all that. Butthat was a last minute suggestion and the paper was sent out towork with our Department of Defense and NSC colleagues to makesure that the proposal was acceptable to us. It is. And, ofcourse, President Yeltsin announced it.

I think that's about all I've got, although I dohave -- yes, I'm not going to forget. I don't know if any of youare veterans of the January 1994 -- somebody is nodding -- youremember muslips? Barry Schweid it was, not even a Time Magazinereporter, asked me for a little color in the dinner in January1994, and there was much interest in the delicacy of muslips,which was on the agenda there. Muslips are back. Muslip soupwas served at the head table last night at the state dinner. AndI cannot comment on the taste. I will tell you that MinisterPrimikov was sitting next to Secretary Albright and when the dishwas served, Primikov said to Secretary Albright, don't ask mewhat that is until after you've finished it.

Of course, we then went to Spaso House. I thinkyou've all -- some of you may know more about what went on therethan I do because I was off in a corner with a number of theguests myself. But the bottom line and in general, PresidentClinton wanted to use the occasion to meet with as broad aspectrum of Russian political figures as possible. He's made apoint of doing that every time that he's come here.

His message was, I would say, a more personalvariant of what you have heard him say publicly on the subject ofRussian politics, and he also wanted to use the occasion to do alot of listening and to get their perspective and theirpredictions on what's going on here and what's going to happen.And the responses were varied.

SENIOR ADMINISTRATION OFFICIAL: We're here mostlyto take your questions, but let me just sum up by saying that Ithink that the President had a very clear message that he carriedin all his meetings, and members of the economic team carried inour outside meeting, which was that the U.S. wants to besupportive of Russia, wants Russia to succeed, but that suchsupport, such financial support through the IMF or in any otherform only makes sense and will only be effective if it's clearthat Russia is going forward on reform, with a reform plan thatbuilds the institution and rule of law aspects that will createconfidence in investors doing business in Russia; a plan thatshows forward movement on fiscal management and fixing the taxsystem and strengthening the banking system in a way that doesnot lead to printing money and a surge in inflation.

In all of our conversations, we were struck by thedegree that that overall perspective was shared, that the overallfocus was on the Russia solutions to this financial crisis. Andthat was the dominant aspect of our conversations in virtuallyevery forum we were at.

So we're available for your questions. Thanks.

Q Did Boris Berezovskiy also share your overallperspective about not printing money and not bailing out thebanks and all the other things you want to do? You saideverybody did. Does that include him?

SENIOR ADMINISTRATION OFFICIAL: Let me say that,obviously, people had different aspects as to what wouldconstitute reform, but what I meant by "sharing the perspective"was that these were not meetings we had where we came in andpeople wanted to talk to us, ask us 10, 15 questions in a rowabout the IMF. They were talking about what Russia had to do.

People had different solutions, but the focus wasvery much on the notion that Russia has to come forward with aneconomic plan that makes sense. People had different politicaltakes on that, different political and economic formulations.But that general focus was one that he and virtually everyonethat we spoke with shared. One often has conversations in thiscontext where the focus is overwhelmingly on what is the outsidesupport coming in. That was not the focus here.

Q He shares your prescription for what Russianeeds to do?

SENIOR ADMINISTRATION OFFICIAL: Mara, I thought Ijust made that clear, but I'll try again. When I said thatpeople shared the perspective, they shared the perspective -- Isaid that they had different ideas for what the actual componentsof reform were and what the political elements were that wouldbring on such reform, but that the focus was on what the thingsRussia had to do. And it was not conversations where thepredominant focus was questioning of us as to outside orinternational aid. The focus of virtually every conversation wehad was on Russian economics and Russian politics.

Q President Yeltsin seemed to run out of gas atthe end of the press conference, after just three questions fromeach side. In your assessment, was that physical fatigue, mentalfatigue or had he just had as much fun as he could stand?(Laughter.)

SENIOR ADMINISTRATION OFFICIAL: None of the above.I don't share your assessment. I assume you mean in his --

Q Well, he gave a very curt, off-handed answer tothe last question and then basically ended the press conference.

SENIOR ADMINISTRATION OFFICIAL: Well, I don't knowwhat the ground rules were in advance on the number of questions,but it sounds like that was a per pre-agreement. It was veryclear to me that he didn't want to answer the question. And Ithink that he made that very, very clear, that he did not want toaddress questions having to do with his short-, or for thatmatter, middle- and long-term intentions on the Russian politicalcrisis.

Q Was it a Russian proposal that there only bethree questions per side?

SENIOR ADMINISTRATION OFFICIAL: We had originallytalked about four and the Russians cut it back to three thismorning.

Q Yesterday we were told that Yeltsin was veryengaged in the meetings. And that is not what seemed to be ondisplay at the press conference at all. The Russian people whowe've talked to on the street were struck with how they thoughthe was very incoherent at times --


Q -- and he certainly did not impress theEnglish-speaking people there that he seemed engaged.

SENIOR ADMINISTRATION OFFICIAL: Well, there were anumber of English-speaking people there, including in themeetings and at the press conference, myself included, who feltthat he remained thoroughly engaged throughout. So I think wejust have a different assessment there.

Q Would you characterize the tone of thediscussion on the use of military force? Did they just basicallyagree to disagree? I mean, it wasn't clear from what they saidin the press conference what the final outcome of that disputewas.

SENIOR ADMINISTRATION OFFICIAL: The pressconference I think vividly and accurately reflected a couple ofpoints on which the United States and Russia see thingsdifferently. And this one, of course, is very relevant to anumber of situations that we're dealing with, and the UnitedStates and Russia simply do not see the question of use of forcein the same way.

The American position, as you know -- and we've hadseveral opportunities to reiterate it, not so much at thepresidential level, it didn't come up a whole lot there, but Ican assure you that it figured fairly prominently in the muchmore detailed discussion of both Kosovo and Iraq that SecretaryAlbright and Foreign Minister Primakov had starting the nightbefore last, if I'm not mistaken.

And the disagreement is this: Our view is thatwhile it may seem paradoxical, in fact, the ability of diplomacyto solve these issues is directly proportional to the credibilityof the threat of force. And I think we have seen thatproposition borne out any number of times, both in the positiveand the negative, I might say. The Russians have a generalizedneuralgia to the use of force, particularly when American forceis very prominently a part of it, particularly when NATO is verymuch involved.

That has not stopped us from cooperatingdiplomatically on a number of these issues. You're going to seea joint statement on Kosovo today, which we hope will be of someuse. It also figures into the issue of Iraq. But there are somebasic principles on which we agree.

Another disagreement, of course, which was aired atthe press conference, is over NATO enlargement. That's veryfamiliar. We know our positions. There was absolutely no changein our understanding of each other's positions on that, but thereis plenty that we can do together and we're moving forward withit.

Q You mentioned some U.S. ideas for putting moremeat on the bones of NATO-Russian partnership. Can you give somemore of an idea of what the U.S. thinking is? And does it reactto Russia's problems with NATO expansion? Is it a concession --

SENIOR ADMINISTRATION OFFICIAL: What was the latterpart of the question?

Q The ideas that you put forward today, is itsome sort of reaction or concession to Russia --

SENIOR ADMINISTRATION OFFICIAL: No, it's certainlynot a reaction to or a compensation or consolation for. We'renot only beyond that, we never got into that. But theNATO-Russia Founding Act specified that over time we would findlots of specific and concrete ways, particularly at themilitary-to-military level, to work on projects together, tocreate centers, sort of permanent institutions within theinstitution of the NATO-Russia relationship. And we have putsome ideas forward there, and I don't want to preview them rightnow because we havemore work to do.

Q This is sort of two parts. One is, we've beenhearing about -- Russian officials have made a number of promisesover the years in exchange for IMF aid and have never complied.That's why we're in the situation where we are today. Whatspecific promises or what is leading you to believe that thistime will be different?

Secondly, what have you told them, that concreteaccomplishment that Russia has to make, the first step beforesome element of aid begins to flow and is part of that equationeither a currency board and our assistance in preparing one, oran emergency foreign exchange stabilization, ESF fund, to sort ofget the building blocks together to help the slide --

SENIOR ADMINISTRATION OFFICIAL: Well, first of all,I think your question was, what have we seen that would lead usto believe things were different now, or what we've heard. Ithink that what we've tried to express is that this is a pointwhere actions are all that's going to really matter. And so Ithink that our focus is going to be -- while it is reassuring,and there have been a lot of reassuring comments made, I thinkthat the focus of the IMF, as well as ourselves, will be on theactions that are taken.

And I think that there have been pretty directthings that I think the IMF Director has spoken about.Certainly, the warning against going to a way of fixing the banksby simply printing money and leading to hyper-inflation. I thinkthat the IMF Director has been clear that he believes that wouldjust lead to capital flight and therefore could not justify goingforward with the second IMF tranche. I think that people willwant to know that they had signed on to an ambitious deficitreduction to actually bring their deficit as a percentage of GDPdown to 2.8 percent. Certainly, there will be -- I'm sure theIMF will take into account new conditions, but I'm sure they willwant to see that there is an actual commitment to bringing thedeficit down as a percentage of GDP.

But these are judgments that the IMF will make,obviously. David Lipton and Larry Summers and Bob Rubin, as theyadvise and work on them, will analyze, express, but again, we'reat a point, as we've said all along, where there is not aneconomic team officially in place with a particular plan. And sothat really goes to what the core of what we've tried to do,which is to set the overall parameters of what we think will beeffective. And really the test is what will be effective ingiving investors confidence. If there's not confidence, then, aswe've seen, putting money into a country -- the IMF putting moneyin a country where the private sector has not decided theybelieve will be a stable situation is not effective, the moneywill not do much good.

As to the currency board, I know Deputy SecretarySummers was asked about this in our briefing. Obviously, thecurrency board has been used in places like Argentina, but it'sbeen done in a situation where there were a variety of fiscalsituations that had been put in a lot of conditions that madethat effective. I think that certainly in economic circles thatis one of the ideas that is being thrown out right now. But Ithink virtually everyone would think it would be a bit prematureto analyze that right now unless you have a sense of what thesurrounding economic plan would be.

Q If Russia is of so great importancestrategically, economically in the world -- I mean I know thereare no quick fixes, but in order to keep things together here,does the United States have any bandage or band-aid for shortterm to keep things from getting worse?

SENIOR ADMINISTRATION OFFICIAL: Again, I think themessage has been that there's a conditionality that is implied byus, but just the realities of the market that there isn't muchthat we can do if there's not confidence that the system is goingto be a stable one. When you have a plan that the marketbelieves is effective or can be effective, the outside supportcan come in and bolster that, provide additional reserves. In asituation where the market has no confidence you almost can't putenough money into a country in this situation.

So the ball I think is very much in their court. Wedo not have any new or additional aid or plan in our pocket. Ithink the first order of business for Russia is clearly going tobe putting forward a plan that would lead to the resumption ofthe current IMF package and the resumption of their secondtranche and I think that has to be their overwhelming focus.

What the President did say today in his comments wasthat he has very strong conviction that if they do the rightthings he's going to be very active, or we will be active, inworking through the International Monetary Fund or -- I can'tpredict what other type of things; I don't think that we canpossibly know. I think what he's trying to express is a highlevel of conviction to help if the right things are done and ifthere's a plan that is capable of being help with outside IMF orother support.

Q The President said he came also to listen, aswell as to speak. Based on what you guys have seen and heard,including the discussion with the Duma today are you more or lessoptimistic now than you were before you left Washington that theRussian government will be able to muster the political will todo the proper steps the President is urging --

SENIOR ADMINISTRATION OFFICIAL: First of all, letme just say something about the meeting today, just so you don'tthink any of us are dodging. The way the meeting happened todaywas the President spoke, and then after he spoke he kind of metone -- he kind of just talked with different Duma and Federationleaders one on one. I might have been by him through two ofthose, other people might have been, but I don't think there'sany of us who actually was there through each of them. So Idon't think anyone but the President really knows exactly what heheard because it was set up so that they could have some privacyas they spoke.

I think he was listening. He clearly was there tolisten and he started out by giving very much the same message tothem on the economic reforms and in the conversations I heard hedid that privately. But he was also asking them for their readon the overall situation and listening.

I don't want to speculate -- I think trying tospeculate on what the exact political situation is, whetheryou're more optimistic or not optimistic, I just don't know if Iwould feel competent, or I'm not sure anyone honestly could feelcompetent making that.

I think the thing that I thought was reassuring wasthe degree that virtually everyone talked about not wanting to goback, that in one way or another everyone spoke about the need togo forward with economic reforms, and the degree, as I saidinitially, that everyone's focus was on Russia and Russia dealingwith their solutions themselves. That's not to say that it nevercame up, what we thought would be the conditions that would leadto resumption of a second IMF tranche. But the overwhelmingfocus, as it should have been, was on what Russia's solutions toRussia's crisis was going to be.

But you asked the right question, which is even ifyou have the right plan, is there a right plan and political willto get it done. And I think that's obviously a question forthoughtful journalists to write about.

Q If there is another -- at the moment to givethe Russians more money, clearly it's going to make the immediateeconomic situation worse in the short-term, and in themedium-term. What's your latest assessment for growth for Russiain the coming year?

And the second question relates to whether you haveany evidence one way or another that the Central Bank isproducing money to bail out the banks at this moment?

SENIOR ADMINISTRATION OFFICIAL: Well, let me justsay, first of all, that one thing that is worth recognizing isthat coming up into '97 there had been some improvements. Youhad seen inflation, which has been over 202 percent in 1994 hadgone down to 11 percent and actually dipped into single digitsprior to the problems. The privatization in '97 had beenstronger, the auctions had been stronger. Obviously -- andgrowth had, I believe -- was projected to be slightly positivefor the first time.

But let me -- do you want to comment? Why don't Ihave my colleague comment on the overall projections and thediscussions of the Central Bank.

SENIOR ADMINISTRATION OFFICIAL: I think it's veryhard to say. One of the reasons why we're not here talking abouta particular plan and, in fact, they're not talking about aparticular plan, is that right now they're in the process offorming a government and trying to decide how to handle asituation that has deteriorated very sharply. They have bankingsector problems, monetary problems and fiscal problems. And Ithink that there will inevitably be some time before they putthemselves put together an approach to handling these and havediscussions with the IMF, which we'll be having a mission outhere very shortly.

I don't know of any evidence that the money supplyhas expanded terribly quickly. They do have the problem of somewithdrawals from banks, including the State Savings Bank. But Idon't know of evidence of large infusions of liquidity to banks.But they are grappling with the question of how to handle thefinancial problems that banks are facing.

I think until they choose a policy course, it's hardto make projections about growth. I think that the message thatwe've been trying to convey and that the President conveyed isthat continuing the process of reform and restabilizing thecountry is an important priority, and if they go down that road,they'll find the international community willing to providesupport for that.

I don't think that anyone's made any decisions aboutthe IMF money that's slated for late September. I think thequestion is whether they -- when they develop a program forresponding to their problems and whether it's one that can garnersupport.

Q Did the two Presidents compare notes abouttheir own political problems, the calls in each other's countryfor resignation? And what was President Yeltsin's reaction tothe questions at the news conference today about the MonicaLewinsky affair?

SENIOR ADMINISTRATION OFFICIAL: The answer to yourfirst question is, no. The second to your second question is, Idon't know, because basically they said good-bye to each otherright after the press conference.

Q There was no reaction? I mean, Yeltsin didn'tsay -- no comment? He made no comment about the questions thatwere asked?

SENIOR ADMINISTRATION OFFICIAL: President Yeltsinmade no comment that I know of about the questions asked of thePresident at the press conference. What happened was,immediately after the press conference they went into the nextroom, gathered their advisors around, and basically shook handsand said good-bye. President Yeltsin said he was sorry PresidentClinton hadn't had more time and hoped he could come back, andthat was it.

Q Just wanted to go back to the question of themeeting of the President with the opposition and with the leadersof the Duma. What has been said is that it's everyone's hope togo forward. So that means that also Zyuganov is taking on thechallenge of globalization? We have to read that into it. Arewe reassured in that sense?

SENIOR ADMINISTRATION OFFICIAL: I said in all ofour discussions, the economic folks, that's what people said. Ialso said that in the President's conversation he was usuallytalking one on one. So while I may have listened to one or two,I did not listen to that one. I don't know if anybody does knowwhat each particular person said.

Q The President didn't say anything about that?

SENIOR ADMINISTRATION OFFICIAL: We have not gottena readout -- by the way, it's the Duma and the FederationCouncil. We all understand that. Anyway, a number of theparticipants in the meeting I think are feeling less constrainedthan we are about going into the substance of the conversationsand are making public statements. Governor Lebed, for example,was one of the last to leave, and as we were leaving Spaso Househe seemed to be holding forth. So there are going to be a lot ofcomments coming out of the Russian participants. What we'regoing to be doing is trying to capture for you what PresidentClinton's purpose was here.

Q Did the issue of the space station come up atany level of discussion?

SENIOR ADMINISTRATION OFFICIAL: Yes, very, verybriefly, at the very end of the one on one. And it wasessentially remanded to experts. NSC has been working on it, andthat's one of the points -- yes, I'm certain of this -- that'sone of the points that was included in the talking points thathad been prepared for President Yeltsin that were handed over tous. And we're hoping to get back to them on that and some other-- particularly some commercial issues that they raised with us.

Q I have two quick questions, one on the Lewinskyissue. The President mentioned that he'd talked to some foreignleaders about the topic and they had urged him to get back towork. Was Yeltsin among them? And do you have any sense of howmuch he knows or doesn't know about the President's troubles overthe last months?

SENIOR ADMINISTRATION OFFICIAL: He certainly seemsgenerally well-informed, but as I said in answer to the earlierquestion, it simply did not come up.

Q And the other question is about what seemed tobe some defiance on the part of Yeltsin when he was talking abouthow he's not looking for handouts. He wanted to stress that hewasn't asking for lots of money, that's not why the summit wastaking place. He told us not to go writing that. Did thatreflect his attitude in talks and other people's attitude, or wasthere some real nuts and bolts talk about how it could -- how theUnited States can support --

SENIOR ADMINISTRATION OFFICIAL: Oh, there was a lotof talk about that, and I think that Gene and David and Larry inhis earlier sessions with you has gone into considerable detailon that. I think what President Yeltsin said in the pressconference today reflected a number of things that we've heardfrom him and others, and that is an awareness on the part of theRussian leaders that essentially this is a set of problems thatthey need to deal with through their own decisions. We can helpthem if they make the right decisions. And we have spent a lotof time on what we would regard a course of action that we couldsupport.


SENIOR ADMINISTRATION OFFICIAL: Let me credit,while my colleague is still here, his wry observation aboutPrimakov's concern about the soup course and his concern aboutthe welfare of Secretary of State Albright was clearly due tothat well-known adage that moose lips sink dips. It was betterwhen I heard it in the original.

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