American Enterprise Institute

July 13, 2006

[Edited transcript from audio tapes]

8:45 a.m.	Registration and Breakfast
9:00		Panel I: China & North Korea
	Panelists:	Randall Schriver, former Deputy Assistant Secretary of State for East Asian and Pacific Affairs
		Nicholas Eberstadt, AEI Jacqueline Newmyer, John F. Kennedy School of Government, Harvard University
	Moderator:	Gary Schmitt, AEI
10:00		Panel II: Russia
	Panelists:	Leon Aron, AEI
		Janusz Bugajski, Center for Strategic and International Studies
		Stephen Sestanovich, Council on Foreign Relations
	Moderator:	Frederick W. Kagan, AEI
11:00		Panel III: Iraq
	Panelists:	Frederick W. Kagan, AEI
		Michael Rubin, AEI
		Judy van Rest, International Republican Institute
	Moderator:	Danielle Pletka, AEI
Noon	Lunch
12:30 p.m.		Panel IV: Iran
	Panelists:	Reuel Marc Gerecht, AEI
		Danielle Pletka, AEI
		Ken Pollack, Brookings Institution
	Moderator:	Michael Rubin, AEI
1:30	Adjournment

Proceedings:

July 13, 2006

[Start Panel I:  China and North Korea]

Gary Schmitt:  Good morning and welcome to AEI.  I’m Gary Schmitt; I’m the Director of the Program on Advanced Strategic Studies.  Welcome to our first panel today.  With the run-up to the G-8 Summit, we thought it was an opportune time to take an overview and assessment of where U.S. foreign policy stands in 2006.  As you can see from the schedule, we are going to try to hit the highlights.  The first panel is going to be on North Korea and China.  Since we only have an hour, I am not going to spend a lot of time introducing our panelists.  You have their biographical information in front of you. 

Let me just introduce them quickly.  First off, addressing North Korea will be Nick Eberstadt, who is the Henry Wendt Scholar on Political Economy at AEI.  As best as I can tell, that means that he is the only social scientist here who can do regression analysis.  Next up will be Jackie Newmyer, a research fellow at the Belfer Center at Harvard University.  Finally, we have Randy Schriver, a founding partner of Armitage International and a former Deputy Assistant Secretary of State for East Asian and Pacific Affairs.  Each speaker will go about 10 to 12 minutes, and then at that point we will open up the floor for questions.  When we do the questions, please introduce yourselves and make it a question.  All right, thanks.  Nick, you are up.

Nicholas Eberstadt:  Thank you very much, Gary.  North Korea has a way of keeping itself in the news.  Usually, when North Korea is in the news, it is not for very happy reasons, at least for those of us who are not in the North Korean leadership.  Part of, I suppose, what we should be asking these days is what the DPRK leadership’s objectives are in promoting this on-going nuclear crisis, and now in expanding its portfolio into an international missile crisis.  I have no security clearances, so I cannot give you any sort of inside information, but I do have a secret way of understanding the North Korean leadership.  I read what they say.  Sometimes it is very interesting to read what people say because sometimes they actually mean it. 

There was this ridiculous little Austrian man in the beer halls in Bavaria in the 1920’s, and he wrote this ridiculous book.  But if you had read that bestseller you would have had a much better sense of what was going to transpire in Europe in the 1930’s and the early 1940’s than if you had listened to the sophisticates who were gathering in the early days of council and foreign relations in other places. 

Let me tell you a little bit about what the North Koreans say they are doing right now.  Since the formal, in effect, coronation, since the official ascension of Kim Jong-Il in September of 1998, the North Korean government has unfurled two banners, two big political banners - Kung Sung Pe Buk [sounds like] and Sung Gon Chong Chi [sounds like], the first being “a powerful and prosperous state,” the second being “military first politics.”  The North Korean government has explained what both of these slogans mean, over and over again. 

The first slogan, building a powerful and prosperous state, means that the country can only be rich when the barrel of the gun is strong.  The country can only be prosperous when the barrel of the gun is strong.  Elaborating upon this theme, military politics is explained in the following way: military industries are key for national development.  Once the defense industry has become self-sufficient, we can advance in agriculture and light industry and people’s living standards. 

Now I ask you, where in the world have you ever seen a defense industrial sector that is self-sufficient?  You can only have a defense industrial sector that is self-sufficient if it earns net profits.  And, of course, the way for the defense sector in the DPRK to earn net profits is to extract free sources from abroad.  The DPRK is engaged in a program of international military extortion, and they have more or less said so.  And this program, I am sorry to report, has worked rather well during both the Clinton years, and now, during the Bush years.  In fact, on George Bush’s watch, North Korea’s extraction of resources from the outside world has steadily increased.  The figures for 2005, as best we can make them out, are about 50% higher for that year than for the last year of Bill Clinton’s presidency. 

Now, if it were only a question of international military extortion that would, I suppose, be bad enough.  But there is more, as they say in game shows.  The North Korean media, the North Korean leadership have indicated this as well.  It may seem absolutely preposterous to all of our gentle friends in this world to imagine that the North Korean government should think it might be able to absorb South Korea unconditionally, that it might be able to unify the Korean Peninsula under the kind and loving care of the Kim family of Pyongyang, but this is still very much a described objective, a high objective explained in North Korea’s media. 

I do not think we really have much reason to doubt the hopes that the North Korean government entertains for an eventual reunification of the Korean Peninsula on its own terms, bizarre as that may sound to all of us.  What would be the first step in moving towards that bizarre world future?  The first step would have to be breaking the U.S.-ROK military alliance and getting the United States security guarantee for South Korea out of the way.  This is where long-range ballistic missiles come in. 

In marrying a long-range ballistic missile designed to hit the United States - and that is what the Pei Pu Dong [sounds like] program is for, developing missiles to hit the United States - in marrying a missile program for the delivery of nuclear warheads to a nuclear weapons program, North Korea is aiming ballistic nuclear weapons at the U.S.-ROK military alliance.  The DPRK is attempting, through this long-term program, to undermine the credibility of the U.S. Defense Guarantee.  If it seems the United States might hesitate, then the guarantee is worthless, and South Korea has to come to different terms with North Korean government. 

I would like to say that we have made some good progress in deterring the DPRK from its nuclear, or its missile, program, but I cannot think of any evidence to affirm that generalization.  DPRK has, over the past four or five years, suffered almost no penalties for its continuing and increasingly provocative nuclear violations.  In the first attempt at a test-run of a penalty for the missiles, we have seen a bit of confusion, I think, we would say, at the UN.  It is not clear to me why it would be bad for American interests to force Russia and China as states to choose about whether they wanted to veto a resolution or not.  The way things seemed to work out, it was mainly bad consequences that fell on the U.S. ally, Japan.  But I think we are likely to see much more unpleasantness in the period ahead.  If the North Korean government is confident enough to begin long-range missile launches, we may be in for a very rocky road.      

Gary Schmitt:  Thanks Nick.  Jackie, you are up.

Jacqueline Newmyer:  So, moving west, I’m Jackie Newmyer, and I was charged with discussing “U.S. Policy in the Light of China’s Rise.”  I think properly addressing this subject requires attention to the perspectives of three sets of actors.  One, the view from Beijing; two, the view from regional capitals, from Tokyo and Seoul to Jakarta and Sydney; and three, lastly, the alternative view from Washington, what America’s goals for East Asia should be, and what America’s policies might look like to reach those goals. 

So, first, on the view from Beijing:  There are some outstanding questions here on how China defines its rise.  It may be typically American-centric of us to see it as primarily directed at the U.S. and, most saliently, involving military capabilities.  It seems that way to us in the U.S. because China is pursuing asymmetric capabilities that seem designed for a confrontation with a super power.  But it may be that, from Beijing’s point of view, there are other actors to be affected by China’s rise, and that China’s rise is relative to Japan as much as, say, Japan’s is relative to the United States. 

We also need to know a bit more about how China measures its progress, what its metrics are for assessing its progress in its rise.  We know that China has a concept called “comprehensive national power.”  This concept involves internal and external factors of power, from economics and diplomacy to internal measures of cohesion.  We need to know a bit more about the weights assigned to the various factors in this comprehensive national power concept, the weights that are assigned to it as it applies to China, and as China applies it to measuring the strength of other powers, including the U.S. 

I was part of the Defense Department summer study that mentioned this as an item for further research, and I still think that is a good idea.  It remains less well-understood than it could be by the U.S., this concept of comprehensive national power.  The mix of internal and external components in the measure of comprehensive national power suggests that there is a connection.  A worthy area of research would be the connection for China between its internal progress, with domestic stability and security, and its external situation. 

There is a simple way of asserting that, to the extent that China feels weak at home, it will be constrained in its foreign policy, but I am not sure that we should be so confident in asserting that simple one-to-one connection.  India, Vietnam, Russia and the American experience in Korea and Vietnam suggest that China has taken action abroad, both when it has been relatively weak at home, or relatively less secure, and when it has been relatively more secure.  So the question of how China understands the interaction between external developments and its internal domestic condition is also an area for study.

 Speaking of India, Russia and Vietnam, Nick just talked very persuasively about the North Korean problem, so I am not going to dwell too much on the view from the region.  But there are at least two important reasons to focus on what regional powers think of China’s rise and how they assess it.  The first reason is some of them have been studying China for longer than we have, and have shared historical experience, or cultural backgrounds, that could be brought to bear on the question.  Some of them are in a better position to empathize, to put themselves in China’s shoes.  For instance, our Japanese interlocutors have suggested that Japan has relevant experience from the last century in rising rapidly as an Asian power and confronting the West with the prospect of eclipsing it.  The second reason to focus on the views from regional capitals is that the regional powers may be involved, may generate or participate in contingencies that could complicate the pursuit of U.S. strategy.  There are destabilizing nascent conflicts, or potential conflicts, in the region.  We need to be aware of these and have it on our radar screen, which brings us to Washington. 

I think that there are almost as many questions about U.S. goals with respect to China and the region as there are about China’s assessment of its progress and its rise.  What is America’s goal with respect to East Asia?  What is its level of engagement?  What is its level of military involvement?  What is its level of basing [sounds like] and alliances that we would be satisfied with, that would think is efficient to meet our security needs in the region? 

I do not think we have thought enough about that issue.  The prospect of China’s rise raises the specter, certainly, of a power transition.  One way of approaching the issue of China’s rise in U.S. policy is to consider that there are three possible outcomes of a nascent power transition.  One is a kind of accession.  The U.S. could be involved in acceding to China’s eclipse of the U.S., at least in East Asia.  The power transition literature suggests that moments of power transition are particularly fraught, and accession in the guise of appeasement does not have a good reputation. 

On the other hand, as a counter-example, we have the example of the U.S.-UK relationship, that power transition at the end of the 19th century.  That was a peaceful transition from the part of the U.S.-UK relations.  Great Britain recognized that America was on the rise, and that it was on the wane, and the transition went relatively smoothly.  On the other hand, at that time, the UK tried to make a similar arrangement with Japan, and that transition did not work as well.  Japan challenged the UK in Asia and it was not a peaceful, smooth power transition in that theatre. 

One lesson might be that the affinity between the U.S. and the UK regimes had a lot to do with the smoothness of the transition, and so we need to consider carefully whether there are enough common points between Beijing and Washington on domestic governance practices, or whether there will be enough common points that an accession goal makes sense.  Another concern is that accession would involve ceding part of America’s guarantees to Taiwan, probably, and concessions on the U.S.-Japan relationship that I am not sure the U.S. would be ready to make. 

So turning to a second option, which would be a kind of partnership or equal relationship.  Again I think the regime issue matters here, not because it might not be optimal and efficient for two great powers to be balanced against each other, but because the reality of the U.S. regime is, if the character of the Chinese regime continues to be the way it is, there will be American constituencies, there will be labor groups who are upset about Chinese labor and wage practices, there will be religious groups, Christian groups who are upset about the religious repression in China, and that could complicate any kind of partnership. 

The other concern is how sustainable and stable such a partnership would be, especially in light of the steps America would have to take, or the concessions it would have to grant to achieve such a partnership.  If we had to renounce our relationship with Taiwan or Japan, would that create a certain momentum that would make it very difficult to sustain a relationship both of equal and balance with Beijing?  Again, I think we need to know more about the view from Beijing and the range of China’s ambitions to be able to address this fully. That would clearly be a concern. 

A third possibility is the maintenance of U.S. preeminence.  Some people think that would necessarily entail actively seeking to weaken China, or undermining it.  I am not sure that is the case.  It may simply require paying more attention to East Asia.  The U.S. has been preoccupied with other regions of the world, of late, for a long time.  It may be time to shift our strategic attention in a serious way to East Asia, the Asian theatre.  One element of pursuing this goal, and a strategy behind it, would be to consider that we have some natural advantages in our pursuit of alliances and cultivation of ties with regional actors, in that relations with the U.S. may be less demanding for those regimes, for those capitals, than relations with China have been. 

A good friend, Josh Kurlantzick, is about to come out with a book that explains that China is already encountering some blowback [sounds like] to its policies, its charm defensive in Asia.  It is not clear that relations with regional powers that are themselves supposed to accede to China’s rise are going to proceed without turbulence.  I guess I can leave it at that. 

Let me just wrap up by saying I think we need to know more about China’s understanding of its rise.  I think serious research needs to go into how the Chinese understand the interaction between foreign developments and their domestic situation.  I think the U.S. needs to think hard about its strategy, what it would be comfortable with, what level of engagement it wants in East Asia, what presence? 

Third, I think, following from those two, we should be careful not to see the outcome of this power transition, or potential power transition, as foreordained.  The literature and our reading of history, maybe, all too often suggests to us that such transitions are predetermined, that their outcome is set.  I think that is not the case.  I think we actually have a major opportunity here to think hard about the character of the future of our position in Asia, and we should seize the opportunity.  Thanks.

Gary Schmitt:  Thanks, Jackie.  Randy, you are up next, but before you do so, I just wanted to tell you how jealous I am.  I was looking through your bio, and it says that you were recently presented with the Order of Propitious Clouds from the President of Taiwan.  I am extremely jealous.  But anyway, go ahead.

Randall Schriver:  I think you, too, could perhaps qualify Gary, but thank you very much.  Well, I was charged to talk about Asia, particularly U.S. policy toward Asia, where we are and where we may be heading.  I very much enjoyed Jacqueline’s presentation and agree with the bulk of it. 

I just want to pivot off that, and talk about where I think the debate within the U.S. Administration and greater policy circles is right now, and what direction it should orient toward.  I think there is a consensus feud that the most important thing happening on our watch is the so-called rise of China, or emergence of China, that this will have tremendous impact on our collective lives in the Asia-Pacific Region.  But I think there is a debate that is ongoing within the Administration which, once resolved, or if resolved, will have implications for how the United States approaches Asia.  It is a very subtle debate, and it goes as follows:  Because China’s rise is the most important thing happening on our watch and because just the sheer size, weight and gravity of China makes it so important, do you get Asia right by getting China right?  Or do you get China right by getting Asia right? 

Now, obviously there are elements of both, and I am presenting a bit of a false choice.  But let me expound on this a little bit and see if I can persuade you that this is a real debate and has real policy implications.  If you think getting Asia right is important, and the way to do that is to get China right, there is a great deal more investment in that bilateral relationship.  There is a sort of preeminence in your interactions with China, as opposed to others in the region, including allies. 

The way you approach problem-solving, whether it be the Korean Peninsula, whether it be economic matters, territorial disputes, et cetera, your first stop is normally Beijing even before your allies, and your emphasis is basically in that direction.  Suddenly, overtime, you may have to make sacrifices in your relationship with your traditional friends and allies.  For a number of reasons you are prioritizing Beijing, but also, there would be a tendency over time to be more responsive to their concerns, things like their concerns over Japan’s position on history, U.S. forces and our alliances in the regions, et cetera. 

If you think, however, in the opposite direction, that getting China right is important, but to do so you need to get Asia right, then I think you orient in a bit of a different way.  This is certainly what I would endorse and what I would support.  We will be coming out with another version of the so-called Armitage Report on the U.S.-Japan alliance, and we will talk about this view, that getting China right, as important as it is, entails more what you do with the rest of the region, and what you do in the region than necessarily your bilateral interactions with China.  If you are persuaded that this is a real debate, and the right orientation is to get China right by getting Asia right, well, then you need to focus intently on the most important relationship we have in Asia, and that is with Japan. 

This is a source of great frustration, I think, to our Chinese interlocutors.  I think they would see their most important relationship in the Asia-Pacific region, if not the world, as the United States.  But for China, they are not even our most important relationship in North-East Asia.  Japan is.  So strengthening the alliance is something that any official would sit here and say, but there are very practical things that need to be done about our military posture, following through with some of the recent agreements is very important, encouraging the right kind of debate in Japan about so-called normalization, I mean that more in a way a U.S. person would use it, rather than through the politically charged way it is used in Japan, but Japan becoming a more normal country, a more active participant in the affairs of Asia, and, although not taking sides, encouraging a constructive debate that will ultimately lead to Japan as a more proactive partner in the region.  And it certainly does not mean undermining our allies. 

There were some concerns over the weekend that Japan had worked very hard to produce a resolution, and all of a sudden many U.S. officials were endorsing Beijing’s diplomacy.  Well, you can do both but it is more difficult to do both when China is criticizing Japan for overreacting, for using the North Korean missile launch for domestic purposes, to garner nationalism, et cetera.  It is more difficult, I think, to embrace Beijing’s diplomacy in that kind of environment without undermining your friends in Tokyo. 

I think the South Korea alliance remains very important.  There are some that have not given up on this alliance.  I tend to think that it is a bit like the music of Wagner, it is better than it sounds, after all, they are still very supportive in the War on Terror and major troop deployments in Iraq.  But there are problems, and I think this places a premium on our FTA negotiations that are getting under way.  I know there is a bit of a bump on the road over the Joint Economic Zone that South Korea has developed with North Korea.  I would really encourage my former colleagues in the U.S. government not necessarily to ignore that or turn away from that, but work hard to find a resolution, because I think this FTA really is critical. 

Australia is extremely important in the future of Asia as a very reliable friend to the United States.  It is a democracy and like-minded country in so many ways and a country that is increasingly interested in trilateral U.S.-Japan-Australia cooperation.  I think there are tremendous opportunities to leverage that trilateral relationship.  And by the way, Australia is interested in bilateral relationships with Japan, which I think should be encouraged.  A recent Australian visiting official pointed out to me something I did not know:  Australia’s trade with Japan is larger than Australia’s trade with China and the United States combined.  Japan is still extremely important to Australia, and they are exploring a variety of ways to strengthen that relationship further bilaterally.  That is good for the United States, in my opinion; even New Zealand. 

My boss and I have written on the record about the potentials in this relationship, not forgetting past problems over the nuclear issue.  We certainly think we should continue to reserve the very fundamental aspects of the ANZUS treaty, hold in abeyance our security obligation to come to New Zealand’s defensive attack.  But certainly we can leverage their interest in the proliferation security initiative, their participation in Afghanistan, the participation that they did have in Iraq, all these things.  There is so much more that can be harvested if we are willing to think a little more creatively how we have a relationship with New Zealand under the constraints of this existing disagreement.  It is unusual that they are for pariah nations in Asia, from Washington’s perspective. 

North Korea, Burma, Taiwan, New Zealand - which two of those do not really fit?  I think it is pretty obvious, but, for one reason or another, we have maneuvered ourselves into a position where this is a fact of our lives, and I think it needs to be addressed.  Vietnam was mentioned.  I think moving forward on PNTR, moving forward with WTO accession is very important at this juncture.  I understand that Dr. Rice will be visiting there on the margins of the ASEAN Regional Forum to prepare for President Bush’s visit in November at APEC.  He is going to extend his visit after the APEC meetings for more bilateral discussions with the Vietnamese.  I think this is an excellent development.  Vietnam, for their own reasons, of course is very wary of China’s rise.  Remember they fought China more recently in a war than we fought with Vietnam in the 1979 Border War.  That was actually already pointed out. 

India is a critical part of this “getting Asia right,” leveraging their low keys [sounds like] policy, what some people call the Asianization of India.  This has to be done subtly.  I do not think our Indian friends want any part of an encirclement or containment strategy, but certainly a strategy that envisages an Asia of growing economies, peace and stability.  Leveraging like-minded democracies is something I think India can sign up for. 

Southeast Asia is, I think, critical at this juncture.  You know the United States is criticized… everybody in this room knows the common criticisms were [indiscernible] we only care about counter-terrorism; we only care about our problems, not their problems.  As a former official in the Bush Administration, I would pound the table and tell you about FTA with Singapore, strategic framework agreement, renewing military ties with Indonesia, the tsunami relief effort, et cetera.  I would walk you through the region and explain to you why I think that it is unfair.  But nonetheless, it is a perception that persists.  In this part of the world, this kind of perception becomes a part of our reality and part of our challenge that I think we need to deal with in a real way.  You have to go to the meetings. 

I am glad Dr. Rice is going to the ASEAN Regional Forum this year.  I think that is important and you have to have sustained attention, as was pointed out earlier, despite what other priorities you have in the world.  Asia is, by almost any objective standard, where the center of gravity of human activity is going to be in this century.  The National Intelligence Council produced a study called 2020: Looking at a Broad Trends.

 Asia will have 56% of the world’s population by 2020, six out of ten of the world’s largest economies, six out of 10 of the world’s largest militaries, four out of five of the largest consumers of energy - this, by the way, is counting the U.S. as an Asia-Pacific nation - and, laterally, the largest producers of greenhouse emissions.  This is where the center of gravity of human activity and existence is moving.  In my view it is, despite the challenges we face in the Middle East, inappropriate that our attention is not focused on this critical region right now. 

I did skip one point.  Let me make it briefly, also to wrap up and then turn it back to the moderator.  There is a lot of discussion about multi-lateral activity in Asia, and particularly China’s role in it.  They are more proactive in these organizations that they are a member of, and we are excluded from.  They are proposing agendas that are anti-U.S.  They are behind creating new multilateral organizations that we are also excluded from. 

I have a proposal, and it is not terribly clever.  I do not pretend to be the kind of strategic thinker that comes up with great ideas, but how about the U.S. call a meeting every once in awhile?  Why do we complain about China’s activities in Asia and complain about China creating new multilateral organizations?  Why don’t we call a meeting?  Why don’t we call a meeting of democracies in Asia?  Why don’t we call a meeting of our treaty allies, plus Singapore, in Asia?  Why don’t we show up to the meetings and participate more proactively in the organizations that do exist and that we are members of?  I think this is very important for the U.S. and our future in Asia.  So with that I will conclude and welcome any questions.

Gary Schmitt:  Thanks Randy, that was great.  Okay, let us turn to questions that you have.  Please wait for a microphone, introduce yourself and make a pretty short question, if you would.  Thanks.  Okay.

Question [Leyta??]:  Hi.  My name is Leyta [indiscernible] with Voice of America.  My question is for Mr. Schriver.  We are talking about getting Asia right by getting China right, or vice versa.  Could you elaborate more on how this debate within the Bush administration applies to North Korea and what the thinking is about how to deal with North Korea now?

Randall Schriver:  I think it applies directly.  I have to be a little careful how I answer this because there are some ongoing activities, and I do still hold the clearance and do still consult for the U.S. government.  Are we going to outsource our approach to this problem through Beijing and be hostage to their willingness to apply greater pressure or their willingness to support U.N. action?  Or are we going to work more closely with the country that is truly like-minded on this, and that is Japan?  We have separate and different equities in a lot of ways from our Japanese friends, but I think consistently over time, there have been two countries that have favored a harder posture towards North Korea, putting more pressure on them versus the more proactive engagement. 

Again, as I said at the outset, I’m setting up a bit of a false choice because it really is not one or the other.  I still think the Six-Party Talks have a future.  It is on, maybe, life-support system but I think it is not completely dead.  Therefore, we definitely need to continue our work with Beijing and the authorities there.  But I do not think we should be hostage to their willingness to be active and put pressure on the regime.  I think we have more leverage working with a like-minded country.  And so, that is the kind of debate that I think is going on.

Question:  Kerry Mitchell [sounds like] from the Mitchell Report.  I am afraid this is a Nick Eberstadt question, but let me frame in any way and see if someone up there wants to take a shot at it.  I think I heard him say that, paraphrasing, North Korea is getting away with something more than it should and that more penalties should be assessed.  My question is what would those penalties be, who would assess them and what might be the anticipated consequences of that action?

Randall Schriver:  Well, I think Nick would be very uncomfortable if I said I was answering for him, so I will not try to do that.  I may have a slightly different view.  But I think you have a self-sanctioning regime.  Coming from the position that we are in the United States, where we already have very, very limited interaction with Pyongyang, our ability to apply further sanctions is somewhat limited, unless we get others to come along.  And even if we get others, I think it is still limited if the others do not include China and South Korea. 

So, it is not pointless, but I think what is happening in the U.N. is very important right now, and it is important that the United States and Japan stand together and work on a tougher resolution.  But it is also important that outside this formal dialogue that is occurring on the margins of the U.N., there be discussions about how to apply more pressure related to the illegal and illicit activities that are keeping this regime afloat. 

The Chinese are not terrible on this.  They were helpful, originally, with the Bank of Macau, and now they have a slightly different view.  But there are ways to crack down on illegal and illicit activities.  Counterfeiting our currency, drug running, human trafficking and such are helping keep this regime afloat.  And that is really far and above what the Chinese are doing with energy and food assistance, and all that.  And that is critical, too, but there are things that we could work on, still.

Gary Schmitt:  Let me say a couple of things.  The first one is I think, again, the weak link in this sanctions area is obviously South Korea.  But I think there is actually some optimism, at least from my end, that the South Koreans are beginning to rethink their current policy of engagement, that it is not paying off the way they thought.  So there is a little bit of leverage to have discussions with South Korea about tightening a little bit on North Korea. 

The other thing that I think is possible from the U.S. and, again, requires international cooperation, is North Korea, ironically, does business in dollars.  If the United States was to push a coalition of the banks to prohibit bank exchanges from North Korea, then now that would have a very, very quick impact on the North Korean economic condition.  I have no evidence the U.S. Government is headed that way, but it is a weak link in North Korea’s situation. 

And then finally, this is not a sanction but again it is good news. [Indiscernible] both the United States and, I think, in South Korea the issue of human rights, and North Korea has been steadily increased.  And that is not a sanction, but on the other hand, by talking about human rights in particular, it makes it easier to work with our allies too.  In fact, sanction North Korea. 

Kim Dowgy:  Kim Dowgy [sounds like], [indiscernible] with Georgetown.  Randy, if you could just follow through… I think you mentioned about the debate within the Administration on how you could contextualize your China and Japan policy. I see it actually as positive.  I will tell you why.  As I’m sure you know, in the 70’s, Japan, with the successive Nixon shocks, when Nixon goes to China with only Kissinger knowing and allies do not understand it, it has a quite of serious impact.  Go up to Clinton and Bush, I think you would have that network-based kind of policy. 

If you have somebody like Strobe Talbott who goes to Russia, and then, Japan being ignored - I think it is good that network, long-standing relations, personal relations, then the issues are becoming more important so that you are naturally kind of being confronted with contextualizing a debate within the Administration which might seem confusing.  But I think for those of us out in the region, it is actually a positive kind of debate, because you are really debating about the issues.  Of course, it is confusing, but could you be a bit more, if you could kindly be more frank, about how you like to see the policy evolve with respect to China?  And are you leaning more towards Japan?  Which I feel like… 

Mike is a Japan expert at CSI, so I am wondering how you would like to see the relations evolve, and if there is about the role of… importance of Korea, if there is any.

Randall Schriver:  Yes, of course, we should lean to Japan.  I hear some people around town say, “Well, the worst thing we can do is have to choose between China and Japan”.  And I say, “Wait a minute, we have already chosen.  This is our treaty ally and we have invested a great deal in this alliance”.  But let me be clear of what that does not mean.  That does not mean that I do not support engagement of China.  I do.  It does not mean Japan should not engage China and have a comprehensive relationship with China.  I think that it should.  And by the way, we have got no alternative at this point because, particularly, our economies are so integrated. 

We have said before on the record that this is an economic mutually assured destruction situation between the United States and China. Probably Japan is included in that, as well.  So, leaning on Japan is no other good alternative, but that does not mean, necessarily, that you do not engage China in positive ways.  The U.S. and Japan can engage China together in positive ways.  I would favor more transparency on our alliance with China.  They have a number of concerns about what we are doing with revealing our force posture and what these various moves mean for them. It is right for them to ask us.  The United States should go to Beijing with Japan and talk to them about how we see the future of our alliance developing and what these moves mean. 

Korea, again, is a critical piece of how we are postured in Asia because there is a danger.  I do not see Korea necessarily going into the fold of China.  This is a specter that people raise of a quasi-alliance.  But prolonged difficulties that lead to deterioration in the alliance and closer economic integration and political coordination between Beijing and Korea are a possibility that we need to avoid.  And I do think there are possibilities. 

The FTA, as I said, is critical and can be a pivot point for further work.  We cannot continue on a path of the U.S. resoundingly expressing no confidence in decisions that South Korea makes.  That is what Seoul sees right now on our posture and our position towards Korea.  It is a huge vote of no confidence in what they are trying to achieve.  The United States could be more supportive of South Korean engagement of North Korea, as long as it is part of a comprehensive strategy to see that this regime, if not false, then changes and changes its behavior.  South Korea’s engagement can be a part of that, and we have lost that.

Gary Schmitt:  Let me just add one further thing on this issue of context.  Jackie can respond, and Randy can respond as well.  You remind me, when you raised the question, when I was in Asia a month ago.  I was in Tokyo and then Beijing.  One of the most striking things to me was the degree to which… coming from Washington, you tend to think of how our relations with Japan or China are working out, but the degree of tension between Tokyo and Beijing these days is really quite remarkable.  It is something in that the U.S. policy maker has to pay more attention to because it is not just what we are doing but in fact how they are relating to each other in the region that is really quite striking.  I would go so far as to say the relations between the two are as bad as they have been since World War II. 

Ironically when I was there, it was precisely the time when the figures came out that showed Japan’s trade relations with China had never been greater.  So, the politics of these rising powers [indiscernible] is really quite on display.  We are running out of time, so if I can get somebody else…

Mitch [indiscernible]:  Thank you.  My name is Mitch [indiscernible] Cato Institute.  My question is about North Korea.  It is not addressed specifically to anyone of the panelist but I would be happy to hear comments from all of you.  There is no denying that North Korea maintains one of the largest armies in the world and channels the bulk of its meager resources into the military.  This country’s nuclear ambitions, along with its Army First Policy, can only raise our concerns about this country’s ulterior motives.  However, the North Korean military is overwhelmingly involved in civilian projects, most notably construction and agriculture.  I am wondering, can this fact possibly have any effect on our assessment of the real militarist threat coming from North Korea?  Thank you.

Jacqueline Newmyer:  Hi!  Thanks!  I think the North Korean military’s engagement in civilian activities does suggest that there may be competence issues, or that it might detract from competence, especially on conventional mobilization in that dimension.  On the other hand, that is not really our main concern.  Our main concern is North Korea’s ability to transfer weapons, deliver weapons of mass distraction, and engage in illicit international trade.  I think Nick called it an international military extortion activity, or scheme. 

To the extent that this is our main concern - just to follow-up on the Gary Mitchell question - I think we have actually some pretty important options.  I fully endorse Randy’s idea of continuing to think about options related to crackdowns on banks.  The Macau Bank story is a good one.  Gary is right that South Korea is coming around.  That presents some opportunities.  There is also the China card.  We have said that China could become a stakeholder in the international system and that would be an important step.  Fly-over rights allowing Pyongyang to continue to engage in this illicit activity with respect to weapons is not the behavior of a stakeholder power. 

To the extent that we continue to look the other way, we are sending the wrong message.  There are many more opportunities to do crackdowns of the sort that we executed in Macau, with the right intelligence.  So, I think we should be thinking further along those lines.

Stephanie Ho:  Hi!  I am Stephanie Ho with Voice of America.  I just want to ask a question about the upcoming G-8 meeting.  I wondered if there was anything that will come out of the meeting that you are expecting that could have an effect on the North Korea situation.  And then I also wanted to ask why there seems to be so much more attention on the nuclear program in Iran?  Thanks.

Randy Schriver:  Well, I think with North Korea it is highly fluid, and it will be sort of calling [indiscernible] even though we are at the eve of this meeting.  The leaders will monitor what is happening in New York and Chris Hill’s activities in Beijing.  I think this will be a topic of discussion, but to know what might be possible, this is really day-by-day, if not hour-by-hour.  The question is why is there so much attention in Iran?  Well, I think Iran is everything we said Iraq was - sponsors of terror, aggressively pursuing weapons of mass distraction, already possessing weapons of mass distraction, a threat to neighbors, a threat to Israel, and I think this was heightened.  Obviously this is not new.  The President was criticized for including Iran in the Axis of Evil.  This has been on the President’s mind for a while, but I think, clearly, when the new Iranian President came in and offered us choice remarks like wiping Israel off the face of the earth, this did make it all the more salient.  

Stephanie Ho:  But is it a more serious concern than North Korea, the nuclear program in Iran?

Randy Schriver:  They are both very serious.  Right now, North Korea is a bit more isolated, and their ability to do things outside their own borders is a little more constrained than Iran’s.  Iran’s influence in the region is growing.  We have seen their activities in Iraq across the border, with the Shiite communities gaining a lot of leverage in the future of Iraq.  The activities over the last 48 hours by Hezbollah, having Syrian and Iranian connections as they do, suggests that Iran at this point probably is a bit of a more serious challenge than North Korea.  But we are talking about two very bad situations.

Gary Schmitt:  Yes, the only thing else I would add is that, I agree totally with Randy.  Options for dealing with North Korea for are a little bit more limited, whereas we have more leverage and possibilities of leverage with Iran.  So in some ways the concentration on Iran is precisely because we can do a little bit more about it, whereas the North Korean problem is probably here to stay for a long time.

Christian Leighten:  Hi!  I am Christian Leighton [sounds like] from the State Department.  I am just curious what the panel thinks about keeping U.S. ground forces in South Korea, whether that is still in that positive foreign interest or whether it has become in that negative.  Some have said that it actually ties our options in dealing with North Korea, that it contributes to anti-Americanism, and that 50 years after the war South Korea is a thriving market economy.  It ought to be, and in fact can, defend itself.  So I was just curious if you think that those forces, or the capability represented by those forces, should be moved elsewhere in the region or whether it should remain. 

Jacqueline Newmyer:  I think that is a very important question and a complicated one, in so far as the movement to downsize our presence in South Korea was originally, in part, a response to South Korean objections to our presence there, and now obviously there is a bit of an outcry about it.  But, in general, I think this goes back to the point about American alliances and their character.  We tend to be relatively more lenient, more laissez faire, less involved in the internal activities and even the military establishments of our allies than, maybe some powers of our size historically have been. 

So to the extent that we are enabling the South Koreans to take responsibility for their own security by downsizing our presence, with the caveat that we need to maintain the ability to do operations in the theatre, then that the downsizing makes sense, and to the extent that we can say that we were responding to South Korean concerns, that is very important.  As South Korea continues to have to confront the reality of the North Korean threat, I think they will continue, as Gary suggested, to come around to our way of seeing the importance of continuing to squeeze Pyongyang. 

Randall Schriver:  I agree with that, but I would say very clearly that it is a net positive.  But alliances take work, and they take work on our part.  They cannot just be on autopilot.  I will not quote them because I do not want to be quoted saying this, but I recall a former boss of mine coming back from particularly difficult alliance negotiations.  He was extremely frustrated, and said, “You know, at the end of the session I just said we are going to start seeing other countries.  I was expecting a better life than that.” 

They do require a lot of work, and they require investment on the part of the United States.  They cannot just be adrift on autopilot.  What we did, as Jacqueline mentioned, was responsive to the South Korean concerns about our footprint.  That is the kind of active dialogue that needs to be sustained, not just one-offs [sounds like].

Gary Schmitt:  Well, with that we are going to wrap up this first panel.  I want to thank the panelists for their excellent presentations, and thank you for excellent questions.  We will be taking a short break for five minutes, and then our Russia panel will be up here now.

[End Panel I:  China and North Korea]

[Start Panel II:  Russia]

Frederick Kagan:  Ladies and gentlemen, if you could take your seats.  Thank you.  Ladies and gentlemen, it is my pleasure to introduce to you the next panel in our discussion of events surrounding American foreign policy at this important juncture in world affairs.  My name is Fred Kagan.  I’m a resident scholar here at AEI.  I was formerly a Russian and Soviet military historian.  That is my background and training.  I’m a [indiscernible].  I have not been tracking on Russian history or Russian current affairs for some time, but it is a pleasure to get back to discussing an issue that really is extremely important and frequently flies a little bit under the radar, which is astonishing for those of us who trained in the 1980s as Russian experts. 

Certainly, Russia flying under the radar in 2006 is not something that we would ever have expected.  In many respects, it is a good development heralding, as it does, the Cold War and the end of the Cold War, and the ushering of a new era in Russian affairs but there is, of course, much still to be unsettled about.  Russia has always held an ambivalent and ambiguous position in the world ever since Peter the Great first forced it, rather roughly, into a European focused state from what it had been.  Russians themselves are frequently somewhat ambivalent about whether they are simply a European power or something more than that. 

The Europeans are ambivalent about Russia’s role in Europe, and we as Americans unfortunately have had to become increasingly ambivalent about Russia as a burgeoning democracy, and that has also led to a certain degree of ambivalence about Russia as a partner in the war on terror.  I think all of this ambivalence is unfortunate.  I think there were many opportunities for real strategic partnership with Russia.  But they do not depend entirely on what the United States does.  They also depend heavily on what is going in Russia. 

I think we have a very distinguished panel today to discuss these issues and many others relating to American policy toward Russia.  Leon Aron is a resident scholar here at AEI.  Also, he is the Director of Russian Studies here.  He has a long and distinguished career tracking Russia.  He has written a lengthy and insightful biography of Boris Yeltsin and written numerous fora about contemporary Russian affairs.  Janusz Bugajski is Director of East European Studies at CSIS and has also spent a lifetime tracking developments in Russia and Eastern Europe, advising and consulting with a number of American governmental associations and writing for an absolutely amazing number of American and foreign publications. 

And Ambassador Stephen Sestanovich, who is now the George F. Kennan Senior Fellow for Russian and Eurasian Studies at the Council on Foreign Relations and a professor at Columbia University.  Ambassador Sestanovich worked as ambassador-at-large and special adviser to the Secretary of State for the newly independent states, has worked at the National Security Council, and has worked for Carnegie Endowment for International Peace.  He has sort of been making the rounds of the major think-tanks in fact, and we are delighted to have him here. 

So we will begin with Leon Aron.

Leon Aron:  Thank you very much, Fred.  The present dynamic in the U.S.-Russian relation is shaped by the increasing divergence in the strategic agendas of both countries and will continue to be shaped by, I think, to at least 2009 and very possibly quite beyond that.  The 9/11 agenda in the U.S. is predicated on an activist foreign policy that seeks, at least in principle if not always in reality, to transcend the status quo by advancing democratization as America’s best long-term defense against terrorism.  It is a very ideological policy in the sense that it is informed by deeply held and intensely felt ideas and moral imperatives.  It is also ideological in the sense that it is explicitly billed as a very lengthy and difficult slog towards a distant but very desirable prize. 

Now Russia’s foreign policy today is almost exactly the opposite.  Following the changes in the domestic priorities of the regime some time around the second half of 2003, the integration of Russia into the family of western liberal democracies, which the Russians used to call the civilized world, is no longer accepted even as a distant goal by this regime, even as a vector.  Hence, many of the policies of the 1990s that were aimed at bringing Russia’s domestic and external behavior in line with this objective have been discontinued. 

Today, Russia’s foreign policy is not linked, even on the rhetorical level, to democracy or liberty or human values or the common European home, which were the principles adopted in the late 1980s and at least paid court to in the 1990s.  Instead, the policy is supremely pragmatic, aimed at achieving maximum international prestige and economic benefits today.  The long-term results are far less important for the current regime than the role that Russia arrogates for itself in the process and the dividends that accrue today.  The political character of the regimes that Russia deals with, no longer matters.  What matters is leveraging its comparative advantages - first of all nuclear technology, conventional weapons, and, of course, energy.  Russia also seems to cherish the opportunity for diplomatic arbitrage between conflicting actors in international affairs. 

Again, the substantive merits of the opposing sides’ cases are unimportant, and the goal is to establish Moscow as an indispensable agent in the resolution of major conflicts.  And so in this Realpolitik for instance, the delivery of tactical surface-to-air missiles to Syria is viewed in the Kremlin as a means of restoring its influence in the Middle East after the collapse of the Soviet Union; the visit of the Hamas leadership, which with whom Putin declined to meet was an attempt at diplomatic arbitrage. 

But, of course, the sort of locus classicus of this Realpolitik is Moscow’s policy towards Iran, which combines a number of objectives all rather neatly folded into the outline that I just mentioned.  Mind you, money plays a role, of course, but with the hard currency reserves approaching $300 billion in Moscow today, it is not the primary objective, nor is Russia driven by some sort of implacable ideological opposition to the U.S. and Israel.  In fact, last April, a Russian rocket launched from the Russian cosmodrome [indiscernible] in the Far East and carried into orbit an Israeli spy satellite, which is very likely to monitor that same “peaceful” - in Moscow’s description - nuclear program of Iran that Moscow defended so much. 

Instead, the present Iranian policy in the Kremlin is an instance of the same over-arching purpose, the enhancement of Russia’s role in the world today.  A leading expert on Iran expressed what seems to be the guiding principle of the Kremlin’s policy toward Tehran when he said that Russia has a unique and historic chance to return to the world arena once again as a key player and as a reborn superpower.  If Russia firmly stands by Iran in this conflict, Russia will immediately regain its lost prestige in the Muslim world and in the global arena at large.  And no lucrative proposals from the United States can change the situation strategically. 

Now on the territory of the former Soviet Union, Russia seeks to have friendly, or better yet facile regimes on its borders, just like other great continental powers have done for the past 25 centuries, from ancient Babylon, China, Persia to Rome and to the U.S. and Central and South America, at least until the 1970s.  And since in today’s Kremlin any pro-Western democratic regime is automatically seen as anti-Russian, and by the sheer virtue of example, also subversive, they support their own sons of bitches, to recall FDR’s famous characterization of Somosa, for example, in Minsk or Tashkent. 

Now in other times, such policy may have caused less serious complications in their relations with Washington because after all, we did get used to, although not without some major irritation, to the policy of France, for example, which also tried to compensate for the loss of the superpower status by practicing a similar pragmatism and arbitrage in its relations between the conflicting blocks during the Cold War.  But in the post-9/11 foreign policy of the United States in which the promotion of liberty and democracy is the means of assuring America’s security and, therefore, which concerns itself with the domestic nature of America’s partners on the world scene, this policy of Russia cannot but be increasingly at odds with the Kremlin’s post-imperial restoration, the essence of which is political and economic recentralization at home and Realpolitik abroad, which I just tried to outline. 

So this is the background against which America and Russia deal with each other today and against this background, one cannot possibly be terribly cheerful or even particularly hopeful until one side or both sides decide to modify their ideology, a rather distant notion today and something that, if it happens at all, is more likely to happen in Russia if the regime changes in 2009.  In the meantime, we can only hope to manage their relations with Moscow rather than advance it or much less, not to mention celebrate it.  It is a hard and perhaps harsh reality not softened by at least some instances of ideological closeness that was obtained in the 1990s.  So with Russia, we are pretty much at the point described by de Gaulle when he said that countries have no friends, only interests.  There is no time to go over these interests and assets that each of the sides offers the other.  They are listed in the paper that you should have in your folders. 

Let me mention only that while virtually all the strategic assets of one side have been seriously eroded in the estimation of the other, they are still quite formidable, and so are our mutual interests and concerns that these assets and interests generate.  Much as it upsets and irritates us today, Russia does not have - I should say yet, yet is becoming a very important word now in our looking at Russia.  It does not yet have an ideology that would make into the existential threat that the Soviet Union posed to the U.S. around the world, nor – and again, I should say yet – is it a revisionist power, which is ready to re-conquer Poland or seize Ukraine. 

The Freedom House notwithstanding domestically, it is nowhere near the same level of repression as obtained in Sudan, North Korea, Cuba, or Libya, with which the freedom house experts will lump it.  So there will be no Cold War II, but the agendas of both countries will clash more and more frequently and more and more loudly, and the U.S. diplomacy will have to engage more often than before in an intricate weighing and balancing of various interests that we simultaneously pursue with Russia and despite her.  Thanks.

Janusz Bugajski:  Thanks very much for inviting me.  I think I’m going to be a little bit more combative than Leon.  Such is my nature.  I’ll try and be as brief as possible but rather than looking back at the successes and shortcomings of U.S. policy towards Putin’s Russia, which, in a way, I was asked to speak about, I’ll briefly look ahead at three areas where I think a more effective and determined American approach is needed in dealing with a more assertive Russia.  These are areas where I think there will be increasing collision in our foreign policies in the years ahead. 

First is the West’s Eastern dimension, just as a background, following up to what Leon was saying but maybe a little bit more strongly.  I think the reintegration of the often-cited “post-Soviet space” is a priority under Putin, as it does elevate Russia’s claims to be a great power if not a global power, at least a great regional power, continental power or dual continental power.  Moscow, I think, is intent on deflating NATO and EU capabilities in its western and southern neighborhoods, while deepening its dominance over its near neighbors and some of its former satellites. 

The degree of that control, that dependence, that dominance varies.  The closer you get to Moscow, one could say the greater it is or the greater they would like it to be.  This area, I think the Kremlin does view as a strategic extension of Russian territory.  Putin’s administration, I believe, is focused on controlling the foreign policies and security orientations of nearby states and preventing their merger into the institutional West.  Although it is no simple ideological goal in furthering the political makeup of any state along its borders, it clearly prefers to support reliable dictators rather than unpredictable democrats, thus contradicting stated U.S. objectives. 

I think the allies – when I say the allies, the U.S. and its European allies in particular – must prepare for a long struggle if it wants to ensure that Moscow’s neighbors can become partners of America and Europe, with close political economic and security ties, and become factors of regional stability, regional security in the zones they occupy.  In particular - I’ll go into a little bit of detail, there is not much time, I will not say too much - I think a more sustained support for Ukraine is necessary.  I know it does not look great with the current coalition.  How long it will last, I do not know, but I think the advantages of democratic consolidation need to be clearly pointed out to Ukraine.  We have a long way to go, but I think this struggle over the Ukraine will continue for many, many years. 

In the longer term, I have not given up on Belarus, what everyone calls Lukashenka.  There are better terms but I suppose it is good enough.  I think there is some element of Belarusian civic society, and even I would say within the establishment itself, I think forces me to be encouraged that may not see Lukashenka as a good long-term prospect.  I think also, a more activist policy needs to pursued to reintegrate the divided Moldovan and Georgian states, combat criminal networks, and give both of these countries the prospect of a solid alliance with the United States. 

Washington also, I think, needs more durable engagements with other Caucasian/Centro-Asian states by offering each the prospect of close security and political cooperation.  I think this will also help prevent the Moscow-dominated Collective Security Treaty Organization, this new or revived organization, which exists on paper but I’m not sure they will amount to more than CAS but we will see, from becoming a rival to NATO and the U.S. and a new source of threat in various regions. 

Secondly, greater Europe’s energy security in terms of U.S. policy looking into the future:  Russia does view itself as an energy superpower and uses its primary resources to strengthen its position in Europe’s and Asia’s energy markets.  Devoid of significant military might, ideological messianism, or direct political control, Moscow’s primary tool for expansion in its border lands is energy, which can be used as a vehicle for developing regional monopolies, economic dependence, and political subservience. 

The Europeans, particularly in the eastern part of the continent, are most vulnerable to Russian pressure as we witnessed early this year in Ukraine and Moldova, and are focusing their attention on alternative energy sources.  Russia, of course, is also trying to diversify.  Its version of diversification is to construct different routes for its sources or to control the energy sources emanating from Central Asia.  So we are witnessing a lot of buy-ups of infrastructure, planned new pipelines, for example, across the Baltic Sea, and I think this has created a lot of concern, to put it mildly, in Central and Eastern Europe. 

I think it is important for the U.S. and the EU - and this is now where I think the transatlantic partnership can work closely together - to try and coordinate their energy policy as a common strategic security interest.  Russian control over energy routes from the trans-Caspian region will undermine American interests throughout the Middle East, Central Asia, and Eastern Europe by giving Moscow a strong political leverage within these states.  Some kind of trans-Atlantic energy security strategy can direct more substantial investment towards alternative routes from the Caspian basin and can oblige members of the NATO and the EU to pull resources during a crisis.  This will lessen dependence and potential future conflict with Russia. 

Not much time, let me go into the third part, which I think is very important and I have not seen anybody really talking about this, so let me try.  I think the future of Russia itself needs to be looked up more closely.  I think Washington does need to draw up some contingencies for a potentially unstable post-Putin era.  I do not think we can assume that Putinism has created a stable form of authoritarianism that will last indefinitely.  Russia does face several looming crises; the impact and extent is yet to be seen, but I do not think they should be underestimated. 

Let me mention a few:  Demographics, with the declining population of productive age, ethnic and potentially religious, especially in the North Caucasus; economic, with over-reliance in primary resources; social, as the stifling of democracy restricts flexibility, adaptability, modernization; and political, as power struggles may become manifest between the new Kremlin oligarchs and security chiefs who have gained control over large sectors of the economy.  Although Washington, as we know, has few tools to influence Russia’s internal development, it must plan to use its economic, diplomatic, military, and other capabilities to contain any potential instabilities emanating from Russian territory, whether these are deliberately engineered or a consequence of turmoil within the Russian Federation itself, a turmoil that could challenge the security of various neighbors. 

In sum, I would say the U.S. cannot lose Russia as it has never won Russia, but it can help win many of Russia’s neighbors.  Regardless of Russia’s zero-sum calculations, which I believe they are, progress towards stable states and more secure democracies, or at least regimes moving in that direction in a widening Europe and across the Caspian Basin, is in America’s national interest and its stated strategic goals.  That is it.  Thanks.

Stephen Sestanovich:  Thank you.  Before turning to this big question that is before us - the nature of the relationship with Russia - I want to make a brief commercial announcement and then a public service announcement, and then turn to our regular programming.  The commercial announcement, Fred’s wisecrack about making the rounds of Washington think-tanks, requires me to at least make a plug for the one I’m associated with.  Right now, I commend to you the report of the Council on Foreign Relations Task Force on Russia called Russia’s Wrong Direction, chaired by Jack Kemp and John Edwards.  All of the gaps that have been unaddressed in the comments of my co-panelists and in my own comments are treated here. 

A public service announcement, on the eve of the G-8 meeting, we are going to hear about the size of various economies and you are going to hear a lot of pundits observe that Russia’s economy is no larger than the Netherlands.  This is one of those old facts that everybody knows that is not true.  I think I’ll just clarify briefly.  The cumulative growth for the Russian economy has, I’m sorry for any Dutch friends here, left the Netherlands in the dust.  If you look at the IMF ranking of 2006 GDPs, they put Russia at 50 percent above the Netherlands and, actually, only a couple of years’ growth away from Canada.  Canada is number 8, according to IMF rankings, followed by Spain and Brazil and Russia in the 11th spot.  The Netherlands, number 16.  Incidentally, the World Bank has more or less the same rankings, although it puts the Russian economy – this was last year – at over 30 percent larger than the Netherlands, but not 50 percent. 

So just for all of you who are going to be pundits this weekend, get the GDP magnitudes right.  Now about the Russian-American relationship or Russia’s place in the world.  There are many different ways that are coming out of this issue, which remains very complex and multidimensional.  In fact, relations with Russia engaged many of the different interests and elements of American national security strategy.  Counter-terrorism, the democracy agenda, energy security, non-proliferation, the future of NATO, the rise of China, you name it.  It is hard to believe that Russia has actually become a mini-factor again in Latin American regional politics, with arms sales to Chavez and a budding friendship between him and Putin. 

Now, how do all these parts interact?  A Russian friend of mine asked me this question recently for the purposes of giving me his answer, and I will share it with you and we can think about it a little bit.  He said, “What is it that the United States really seeks from Russia now?  What is it prepared to pay?  What can it pay and what will it pay?”  He said, “What does it seek, really, one thing above all else?”  A lot of these other issues that make it sound like a really rich agenda are peripheral or secondary to the goal-getting Russian cooperation dealing with Iran. 

Now what is the United States prepared to pay?  I would buy Russian cooperation.  My Russian friend said, “Well, it is a little hard for an American president to really downplay democracy or the way in which the United States is going to interact with Russia’s neighbors, particularly the question of whether they deserve a place in NATO if they wanted.  For domestic reasons, that is hard to do.  Praising Putin is just no longer the public relations winner that it used to be.  Even though these might be concessions that Putin would be very interested in, it is hard for the United States to offer them. So, what you get instead is the United States trying to buy cooperation through economic incentives, and so you see that in fact we are close to a deal in the WTO, there is a deal on nuclear cooperation, there is some talk of energy security and so forth - downplaying the politics, upgrading the economics in order to deal with the security issues.  The advantage of this explanation, true or not, is that it seems to account for what we are seeing, at least in the very short term.  It has the appeal of a certain kind of shrewdness and cynicism that you get from Russian geopolitical analysts, and I think it is not completely off base. 

I think Americans would probably frame the question a little differently.  They might say, “What is the right balance?”  And in fact, I have been asked this question by reporters this week.  What is the right balance between different elements of the relationship?  Can the United States, for example, successfully keep talking about its concerns about democracy and expect cooperation on Iran, or is there a trade off?  Is the walking in chewing gum strategy viable, or does the United States have to look coldly at its objectives and decide what really matters to it?  And in fact, one heard this theme, particularly after Vice President Cheney’s speech in Vilnius [sounds like] where a lot of people said, “Oh my, it is not good to talk about this sort of thing at the very moment that we want Russian cooperation on Iran.”  We got the balance wrong.  Are we downplaying or jeopardizing a security interest for the sake of an ideological interest? 

Now I do not see much evidence.  I think this is a very appropriate question to ask because if at the end of the day, President Bush had to… you know, we are obliged to acknowledge that by talking up democracy, he had jeopardized a deal on Iran, there would be a lot of criticism.  But I do not see much evidence, in fact, that there is in the way the Russians approach this question, that kind of trade-off.  I think Americans are likely to think, and I think correctly, that for the Russians, if they see cooperating on Iran is in their interest, they will cooperate.  And if they do not see it as in their interest, they will not cooperate.  And they are not going to be induced to cooperate by pretending that they are a democracy, nor will they be less inclined to cooperate if we correct the point that they are becoming a less and less of one. 

And I think one could make the point more broadly, trying to manipulate this issue for the sake of security cooperation is confusing to the Russians.  It is a hard deal to negotiate and it is confusing and undermines some other American objectives because it seems to me that the question that the Administration has actually been rather committed to keeping both of these themes in play in the Russian-American relationship.  But the question is, is it doing so in a way that suggests that its concerns about Russia’s political evolution are just perfunctory, or that they really will affect the kind of place that Russia has in the world and our relationship with Russia?  If the United States is not making these concerns credible, are there problems that flow from that? 

I would say there is a risk that in the current environment, there has been a kind of not a backing away from this thing because as I said, and as my Russian friend said earlier, that is not politically viable, but a risk that this message is being treated by Russians as only for domestic consumption.  You see a lot of Russian commentators saying this, and Russian officials, I think, believe that this is not a real issue in Russian-American relations.  It is only an issue in American domestic politics.  Is there a reason to worry if that is the way the Russians see it?  And I think there are four reasons to worry if that is the way they see it: one short-term, two medium-term, and one long-term. 

Let me explain very briefly what I mean by these and then subside.  First, the short-term reason.  If American concerns about Russia’s domestic evolution are not taken seriously here or in Russia, then I think the Administration is going to face a much more difficulty in getting its deal with Russia on the WTO accepted by Congress.  What the Congress wants to know, in graduating Russia from the Jackson-Vanik amendment and voting for permanent normal trading relations, is that the Administration has some other way of dealing credibly and effectively with its democracy agenda as applied to Russia.  I think it is extremely important when the Congress votes on PNTR for the Administration to be able to say how it intends to address this issue in the future, and there will be a lot of criticism that it has perhaps backed away from the issue. 

Two - medium-term considerations, one of them having to do with the Russian political transition in 2008, and the other having to do with Russia’s relations with its neighbors.  It is important I think… the way in which their Administration has talked about Russia’s internal evolution has been the focus mainly on NGOs and free media instead of the electoral process, which is actually far more closely linked to the legitimate standing of Russia’s leadership internationally.  I think you have the prospect as a result that in 2008, the political transition in Russia will be broadly seen to be not particularly legitimate, that challengers to Putin will be kept off the ballot, parties will be kept from registering, that a whole series of tests of the integrity of the electoral process will be seen not to have been met.  And the focus on the non-electoral elements of Russia’s domestic transition, I think, allows the Russians to pay less attention to that issue, a second medium-term consideration. 

The Russian government actually - and here I may disagree, depending on whether I heard Leon and Janusz correctly - continues to view the democratic evolution of neighboring states, former Soviet states, as a problem for its own stability and not just to regard that as a kind of placeholder for geopolitics.  It really does not like the idea that you can actually have a popular challenge to elections.  That is bad for business.  It is bad for politics.  It is bad for Russian political stability.  And yet, unless one focuses on that issue, I think it has become more and more a kind of an obsession of the Russian political leadership. 

Finally, a long-term consideration:  Here I would like to pick up on a theme that Janusz sounded.  I think the strength of the Russian constitutional pluralist order that the Putin regime and its stability are questionable because the institutions of a pluralist order have not been strengthened under Putin because the main source of legitimacy is this kind of glorification of a corrupt state because there is a lot of flirting with xenophobia and anti-Westernism almost for its own sake.  I think Russian politics is more vulnerable to a challenge from outside the existing political system, and we can talk about how that might play out, but vulnerable to a challenge based on a kind of anti-democratic, anti-Western, anti-constitutionalist ideology.  And that, it seems to me, is quite bad for the West.  If that happens, it will be pretty hard to keep treating Russia as a member in good standing of the G-8 club.  Thank you.

Frederick Kagan:  I would like to thank all of the panelists for their very insightful remarks, and without further ado turn it over to questions.  Please wait for the microphone, identify yourself, and ask a brief question.

Vladimir:  Thank you, Mr. Kagan.  Vladimir [indiscernible last name] with RTVI Television Russia.  A question for Ambassador Sestanovich.  You spoke at length about the American concerns about Russian anti-democratic development.  Do you expect any of the G-7 leaders to actually speak about it properly in St. Petersburg this weekend?  Secondly, you talked about the focus on electoral process.  What do you think the U.S. can and should do around the time of the next year’s Duma elections and 2008 presidential elections in Russia?  And finally, could you tell us a little bit, obviously what you can, about your meeting with President Bush a couple of weeks ago, what was discussed at that, at the end of June?  Thank you.

Stephen Sestanovich:  I would be kind of surprised if the G-7 leaders addressed these questions around the G-8 table.  It may be that some of them in bilateral discussions with President Putin will raise their concerns but I do not think they will be presented as a G-7 concern, and I think administration officials have made pretty clear that this is separate from the question, whether it is public or private because the G-8 meetings themselves are private.  But what the Bush administration has made clear is that they want to treat these concerns as part of a bilateral discussion and not in the G-8 framework. 

About electoral issues, for a couple of years the Russian government has been on a tear about the question of whether the electoral standards of the OSCE are ones that should apply to them, or whether they are applied fairly in evaluating the elections that are held in post-Soviet states.  I think this is an issue that needs to be taken on a little more squarely.  It is kind of shocking but the Russian foreign ministers actually said that OSCE election monitoring is destabilizing.  That is not a good thing to be saying, and I think, more specifically, I think that the kinds of tests – this is a recommendation made in the task force report, which I’ll plug again – that the G-7 needs to be more explicit about the kind of electoral criteria that they will apply in judging whether or not you have a legitimate electoral transition. 

And finally, the meeting of Russian experts with President Bush covered many different topics, and not any of it would surprise you but what officials say at the end of a meeting like that, “It has been great to have you.  It would surely be nice to have you back,” meaning I do not expect it to be cited in particularly elaborate detail in a large group like this.

Anita:  My question is to the entire panel.  My name is Anita [indiscernible last name] and I’m from Georgetown University.  The U.S.-Russian relations remind me of a conversation between deaf people.  It seems to me that a strong Russian lobby here in Washington might ease things up for the Russian government.  So, what prevents the Russian government from building a strong Russian lobby here in Washington DC?

Leon Aron:  As a representative of the Russian government, Stephen…

Stephen Sestanovich:  Can I tell you?  Nothing in the sense that it might be a surprise to President Putin but it is very easy for foreign governments to sponsor NGOs, to endow chairs.  It is very easy for foreigners to own newspapers to do all kinds of things.  It is not that there is no level playing field.  The difficulty, I think, has more to do with the way in which the case is presented and the unwillingness to take on some concerns and to take them at face value. 

There is a kind of disinclination in the Russian elite right now to try to address substantively the kinds of things that are being said about Russia and to treat them as just simply unfair or as a reflection of resentment at the rise of Russian power.  This is maybe the single most common theme you hear in Russian commentary these days is, “We are only being criticized because people do not like the idea that Russia is back, and that Russia is now 50 percent bigger in its GDP than the Netherlands.”  And I think that, if the PR advisers that the Russian government has hired do not tell them that that is a loser, and you need to come to grips with more substantive issues, and stop kidding yourselves about the nature of Western concern - now I think those PR firms are not doing their job.

Leon Aron:  I think Steve touched on something very important here when he linked this issue with the substance of the Russian regime and how it views the outside world and how it views the outside world’s opinion of it.  Like all restorationist regimes, this one is very cynical, and its time horizons are extremely short.  If you look at the classic restorations regimes, you had Charles II and Napoleon III.  In fact, some of my Russian friends said, “We are re-reading 18 Brumaire by Marx and everything is there about what is happening in Russia today.”  And so it is the “Après moi le deluge” type of regime.

Stephen Sestanovich:  If you like the phrase “first there is tragedy, then it is…”

Leon Aron:  I have to pursue that.  But first of all, there is a lot of competition for that money that it would cost a big public relations [indiscernible] cost. 

Secondly, why bother if it is all a consequence of some plot?  Continuing with the theme of Steve’s, some of them not only say it is a plot but they actually point to Berezovsky and Brusinsky [sounds like] and everybody else.  This is who forms U.S. public opinion.  So that is again, this set of rather primitive, cynical attitude towards the formation of public opinion. 

And finally, there is almost, from what I read and hear and see at meetings in Moscow, there is almost that complete… in the paper that you have in front of you, I said that there is almost a complete amnesia about what happened in their own country 20 years ago.  They simply do not believe that there could be a genuine, unpaid-for-from-outside public opinion that would take very strong positions, vis-à-vis this or that aspect of this or that political regime.  They view their own opposition, they view the Ukrainian Orange Revolution, Georgian Revolution of Roses as a political technological operation paid for by so-and-so from outside and there is simply no appreciation of public opinion.  And if public opinion does not matter, then why engage in costly operations to mold it?

Janusz Bugajski:  If I could just briefly add, I agree with what my colleagues have said.  I would just argue that there is a certain arrogance involved, I think, with Russian officials.  I have attended many conferences.  Maybe for them, Central and Eastern Europe does not figure that highly on the map as far as Europe.  But [there have been] many conferences to which Russian officials or advisers to Putin in various capacities have been invited and have not shown a particular interest to come.  I do not know whether it is a fear of being contradicted or being criticized, best to avoid so then you are not highlighted that much, or a sort of arrogance that it does not really matter anyway, that we are a big player now. 

We are growing economically.  We are projecting our power.  We are a power that matters.  We do not really have to argue our position if opposition is there.  It is a pity.  I personally would welcome some sort of Russian lobby in Washington.  We can have some great debates here and I do not mean the Russian democrats; I mean the Putinists.  I would love to debate these guys anywhere in Europe, anywhere in America, and I’m sure Stephen and Aron [indiscernible].

Frederick Kagan:  I cannot resist putting in a plug for even a more historical view than this of part of the problem that we are dealing with here.  If you are going to do PR, well, you have to believe it, or you have to be willing to believe it to some extent.  The problem is that Russia is accustomed to seeing itself as a superpower.  It has been accustomed to seeing itself as a superpower since 1815 at the latest and probably for longer than that.  This is not a Soviet thing.  This is not a Cold War thing.  This is Russia’s view of itself. 

So, you are talking about a state, which has to adjust to the fact that it is no longer a superpower in the world in the same way.  There are a number of ways that it can do that.  One is by just smoothly sort of slipping itself into the slipstream of democratic.  Well, the Russians are not going to do that. 

Another is by trying to regain superpower status.  Hopefully, they are not going to pursue that route, at least not quickly.  But the other way is to be a spoiler and to acquire this sort of prestige and dignity that you get because people deal with you because they have to deal with you because you are being a spoiler.  It is the way that former states – and there are models that shall remain nameless for the moment – try to regain their status in the world when they do not really have the power to support it anymore. 

I think we need to keep this longer view in mind and not imagine that this is not something that is uniquely Putin-esque.  I think whoever was in charge in the Kremlin was going to have to wrestle with these issues.  Could have done it better, could have done it worse, but this is something that Russians are going to have to resolve over time, and I have a suspicion we are not going to be very pleased with the way that happens.

Catherine:  My name is Catherine [indiscernible last name], I’m from UNIC Washington.  This is referencing Mr. Aron’s comments but it is a question for the entire panel.  You mentioned that Russia’s policy, both foreign and domestic, are currently pragmatic and also, for the short-term, not overtly ideological.  The benefit of ideology, not benefit, but for better or for worse ideology at least informs a long-term view, so I was wondering if anyone thought that there was any way to encourage Russia to adopt or to play for the long haul while not necessarily promoting an overt ideology.

Leon Aron:  People who have been engaged in Russia for at least 10, 15 years have watched with, I do not know, I guess some sort of wry amusement.  The search for national ideology, which was actually a big deal under Yeltsin and, as Fred said, I think it was Momsen [phonetic] that when Italy was finally united, he asked his Italian friend, “Well, what great plans do you have, because you cannot be in Rome and not have great plans?” 

And the question for Russia is precisely the one that Fred posed, which is what sort of ideology can we adopt?  And it was not resolved and it is still not resolved, I think precisely because the answer is not known.  Are we going to be a revisionist power?  In other words, is our ideology better oriented towards regaining what we lost or towards adjusting to what we lost and becoming an … again, it sounds like it was centuries ago but it was only 15 years ago when becoming a normal state was on the banners, first of Chevernadze and Gorbachev, and then Yeltsin.  Are we becoming a normal non-superpower democratic state like many others, or do we still pursue our uniqueness and therefore feel better about ourselves by being either spoilers or going some other route that would regain us the former position? 

I think that is the reason why that national ideology, which was searched high and low for in the Yeltsin years, has never been adopted.  There are some signs that the spoilership is becoming a temporary substitute for this ideology, but it is only temporary because the regime, I’m convinced, is temporary and because the regime views itself as very temporary, that hence its rapaciousness in that regard.

Frederick Kagan:  I’m afraid that we are on a very tight schedule today and the next panel will start at 11:00, so we will need to end this one at this moment.  I would like to thank our panelists for a very thoughtful discussion and question-and-answer period.  We will take about a five-minute break and we will reconvene at 11:00.

[End Panel II:  Russia]

[Start Panel III: Iraq]

Danielle Pletka:  Ladies and gentlemen, hello.  Good afternoon and welcome to our third panel in this conference.  I’m Danielle Pletka.  I’m the Vice President for Foreign and Defense Policy Studies here at the American Enterprise Institute. 

I asked my colleagues why we are talking about Iraq at our G-8 event.  I suppose the truthful answer to that is that the question of Iraq’s success, or failure, and the continuation of the battle to win in Iraq is really so much a part of the world scene.  It is the underpinning, it is the background, and it hovers over all international discussions.  It will inform how people begin to look at the question of Iran, which we will talk about in our next session.  It will inform assessments about American power and how other countries prognosticate about what the United States will do.  It has informed, perhaps incorrectly, how a lot of our opponents look at American power in confronting new challenges in North Korea, Iran, rising China and so much else.  We should probably also take a moment at some point to talk about the current situation in the Middle East. 

I’m not quite sure how we are going to work that in but it is something that we, maybe, can talk about in the question and answer session - how Hezbollah and Hamas are reading the state of play and how that may well affect what happens this weekend at the G-8 Summit.  We have here three terrific panelists who are probably very well-known to our audience.  Our first speaker is going to be Judy Van Rest.  Judy is a good friend and serves as the Executive Vice President of the International Republican Institute and has been in that job since August of 2004.  She was also for a year, between 2003 and 2004, a Senior Adviser for Governance to the Coalition Provisional Authority in Baghdad.  She also served as the CPA’s Director of the Office of the Democratic Initiatives.  Judy is going to talk a little bit about democracy building, remind us about the reality of the world. 

Then we are going to hear from Michael Rubin who is going to talk about what is at stake for the United States in Iraq.  A great deal would be the summary of what Michael is going to be saying. 

And finally, batting clean-up for us is another resident scholar at the American Enterprise Institute, Frederick Kagan.  Fred has written a great deal about the military situation in Iraq, particularly about the insurgency and how to win.  He was one of the very few briefers who were at Camp David talking to the President about new ideas and new initiatives from Iraq, and it looks like they may actually have been listening.  We will hear a little bit more about that. 

Without further ado, let me turn to Judy for our first presentation and take questions afterwards.  Please do make sure your cell phones are off as a courtesy to our speakers. 

 Judy Van Rest:  Thank you, Danielle.  And thank you to AEI for this opportunity.  As Danielle told you I spent 14 months in Iraq in the early days.  Things have changed a great way, and I do have a pretty good basis for watching how things have changed.  I had been asked to talk about the changing U.S. role.  Is there any positive news?   Everyone, I’m sure, understands that the role of the U.S. has changed, certainly from the beginning of the time that we were in Iraq in 2003 and 2004 with the Coalition Provisional Authority, and that Iraq has increasingly taken on more and more responsibility for what has been happening in this country. 

I know that is very hard to see.  It took a long time for the government to form.  It was very discouraging at some points, but we are now at a stage where there are increasing signs that the Iraqi government and its leaders are taking more and more responsibility.  So our role as the U.S. is to support and provide advice.  That is the way, I believe, that we should continue in that role, helping them, advising them, giving them support, providing training to help them at some point to be able to stand on their own two feet without us, but it is not going to happen overnight. 

In this country there is a great deal of impatience.  We see on the news the increasing sectarian violence, and, of course, that is a huge concern.  We want to get our troops out.  The polls show that Americans increasingly want to leave.  We have several of our leaders in Congress wanting us to set timetables and to accelerate the U.S. leaving.  I believe that would be a disaster if we moved precipitously.  While the Iraqi military and police are increasing and becoming more effective, there are intractable problems right now.  We have a responsibility to Iraq to continue to give them our full support. 

Bright spots and positive news, I believe there really is.  On the one hand, I hear from the field that the new Iraq Council of Representatives is not doing terrific, that the body is relatively weak, that the speaker is very disorganized.  As a result there have been some rules changes that have taken away some of his powers.  In the meantime, other factions are filling that vacuum, and it is taking three times as long to make decisions on certain things.  That is not necessarily good news.  On the other hand, we have to recognize that these people have never governed before; they are very inexperienced.  It is the view of our colleagues at the National Democratic Institute and others to work with them and help them increase their skills.  We are doing that but there has to be this understanding that they have a long way to go. 

The bright news, I believe, is that the executive branch is showing great promise.  The Prime Minister and other Ministers have been chosen.  They appeared to be very well qualified and moving forward on doing some positive things within their ministries.  The previous Ministers really did not do much.  They were just basically treading water.  We are also seeing signs of pretty wide-ranging acceptance of the Prime Minister’s national reconciliation plan, which indicates a good prognosis for seeing it through.  There has been some indication, I understand, from our staff that the economy, while not getting better, certainly has not gotten worse.  There are some indicators with regard to inflation, exchange rates, and things like that. 

We also know from our work that there are hundreds of civil society organizations who, in the face of great security risks, are continuing to help bring Iraqis into the process to educate them.  We now have civil society organizations working on national reconciliation programs to get people to start thinking about that and to be prepared to join those kinds of discussions in the future. 

I will close by saying that, while in many ways there had been a lot of mistakes, U.S. policy has provided invaluable advice and support to the formation of this new government.  And while it seemed in some quarters that it might have been too much interference, I do think that it would have taken a lot longer to get a unity government in place.  As I said before, we have a lot of challenges to face with helping Iraqis, and they have a lot of challenges as well, but we have to understand that democracy just does not happen overnight. 

I feel like I’m always the one who is sitting with rose-colored glasses constantly saying that, but we have to keep in mind that this country that not been in existence very long, and it is going take time for the leadership to acquire skills.  I think that is a very important role for the United States.

 Michael Rubin:  Thank you very much.  When I used to work in government, people used to joke that Power Point was the work of the devil.  But I was hearing a protester outside the AEI one day who was insisting that Satan worked in this very building, so I’m going take an opportunity a