The Business Of Russia Is Biznes And That Could Mean Trouble

When President Boris N. Yeltsin invited Japanese Prime Minister Ryutaro Hashimoto fishing on Russia's Yenisei River on Nov. 1, he was angling for a bigger catch than sturgeon. In return for offers to increase investment in Russia by the likes of Tokyo Gas Co. and Japan National Oil, Yeltsin pledged to sign a peace treaty with Japan by 2000. Next, he will fly to Beijing, hoping to sign $3.2 billion worth of deals.

A year after his open-heart surgery, Boris is back with a vengeance. Together with Foreign Minister Yevgeny M. Primakov, an old Mideast hand, he is forging a new Russian foreign policy. It is now more pragmatic and a lot less ideological, after lurching from cold war anti-Americanism to starry-eyed faith in democracy. Its aim is to promote Russia's own national and, above all, economic interests. On the eve of the 80th anniversary of the Bolshevik Revolution, biznes is Russia's guiding light. "The major priority of Russian foreign policy is to make Russia part of the global economy," says Vyacheslav A. Nikonov, president of the Polity Foundation, a Moscow think tank.

DEALS WITH PARIAHS. The change isn't entirely benign. It brings gains for the U.S., as Russia accepts the West's rules by joining its institutions. Yeltsin is inordinately proud that the Group of Seven is becoming the G-8 as Russia joins the club of the world's leading industrial nations. But Russia's relentless pursuit of biznes risks collisions with U.S. goals.

Deals with U.S.-designated pariah states such as Iran and Libya are the potential flashpoints. Russia's Gazprom is involved in a controversial $2 billion plan with France's Total oil company to develop gas fields in Iran. The deal was too good to pass up. Apart from yielding fat profits to Gazprom, it gives Russia more influence over oil and gas development in the rich Caspian Sea region. Says Nikolai V. Kruchin, an editor at the Moscow weekly Novaya Vremya: "It's a case of pursuing Russia's interests."

Russia got an almost immediate payoff. On Oct. 30, corporate chieftains accompanying French Prime Minister Lionel Jospin to Moscow signed contracts worth $680 million. Auto maker Renault will invest $350 million in a joint venture to produce its Megane Classic model in Moscow.

But the U.S. is preparing to strike back. Senate Banking Committee Chairman Alfonse M. D'Amato (R-N.Y.) is mulling efforts to block Goldman, Sachs & Co. from underwriting a $1 billion Gazprom bond issue. The U.S. Export-Import Bank is reviewing loan guarantees to Gazprom, which could be denied by the Clinton Administration.

The row could turn nastier. Israeli officials say Russian companies are selling arms technology to Iran--an allegation denied by Primakov, a bugaboo of the American Right because of his friendship with Iraqi strongman Saddam Hussein. But there's no dispute that Russian companies are exporting nuclear power equipment to Iran. Tehran says it is for peaceful uses, but Senator Mitch McConnell (R-Ky.) warns: "We know Iran is aggressively pursuing a nuclear weapons program." Russia is raising the ante. On Oct. 22, it said it will supply spare parts for Libya's Tajura nuclear reactor. It also plans to cooperate in oil and natural-gas extraction in Libya and build pipelines once U.N. sanctions end.

On the plus side, Russia is mending fences with neighbors such as Ukraine and offering a security pact to the Baltic States. In former Soviet republics, it is promoting peace rather than more civil and ethnic strife. But old rivalries, such as those with the U.S., die hard. Russia is struggling to cope with its loss of face and clout as a superpower--and it's likely to be a bumpy ride.

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