Office of the Press Secretary
(Moscow, Russia)

For Immediate Release September 2, 1998


Hotel National
Moscow, Russia

4:55 P.M. (L)

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

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

The location was the presidential study, the same place as yesterday. The setting was the same. And what I'm going to do is just go quickly through the main points that were discussed. This meeting had originally been conceived even when it was a broader format to deal with foreign policy and national security issues.

By the way, I should say in parenthesis that while the two Presidents were meeting, there were counterpart discussions going on parallel. That is Secretary Albright and Minister Primikov were meeting over in one room, one corner of one room; Sandy Berger and Andrei Kokoshin were continuing the good work of their channel over in another part of the same room. There was a lot of kind of mix and match going on there, but a lot of business was being done, including some stuff that relates to the finalization, of course, of the documents that you've now seen.

The following subjects were raised approximately in this order, although they circled back to them a number of times: Kosovo, and there, of course, the main point was the two Presidents agreeing that the humanitarian crisis has the potential of being a humanitarian catastrophe, and President Clinton stressing his concern that if the humanitarian crisis is not addressed promptly, Kosovo has the potential to explode and to be another war of the kind that we had already seen in Bosnia.

Iraq, the unacceptability of the decisions that Saddam Hussein made at the beginning of August to cease cooperation with UNSCOM and the IEA. President Yeltsin responded on that point by saying that he had been very unpleasantly surprised -- that's a paraphrase, not a quote -- by Saddam's decision, that it contradicted assurances that Saddam had given him and that he intends to make his own approach to Saddam to stress the need and the urgency of restoring Iraq to compliance.

They then discussed a number of European security issues, particularly NATO-Russia cooperation. And President Clinton talked about in very broad terms concrete, specific ideas that the U.S. has for putting a little more meat on the bones of NATO-Russia cooperation. And these are going to be pursued in Brussels, and I think they will become evident as we get closer to some NATO-Russia meetings that are going to take place in December of this year.

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

The Caucasus -- this is an issue of both strategic and economic, commercial interest and importance to the United States and indeed to Russia. And here President Clinton used the opportunity to argue against a perception and an occasional complaint that one hears from the Russian press and elsewhere here, and that is that there is a continuation of the great game going on in the Caucasus. President Clinton made the point that the United States wants very much for American firms to have access to markets, to be able to compete fairly and freely, particularly in the energy sector there, but to compete on an equal and fair basis with Russian firms, and also to work with Russia to bring peace to the region. And there was some discussion about the various conflicts that are going on in the Caucasus.

They then talked a bit about the economy, and I think that discussion was pretty well aired in the press conference this afternoon, but once again, it was President Clinton making sure that, A, he understood the various options that the Russian side sees for dealing with the economy, and that the Russian side understands the basic precepts that Gene and David will be in a position to talk about at greater length in a moment.

I'm wrapping up here. President Yeltsin then asked Sergei Yastrzhembskiy for his notes, his talking points that had been prepared for the meeting. He hadn't been using them up until that point, and he kind of flipped through them to make sure that he'd covered all the main issues. And in the end -- and this happened in Birmingham as well -- the Russian side simply turned over their talking points so that we could study them in more detail because we were running out of time.

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

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

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

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

SENIOR ADMINISTRATION OFFICIAL: We're here mostly to take your questions, but let me just sum up by saying that I think that the President had a very clear message that he carried in all his meetings, and members of the economic team carried in our outside meeting, which was that the U.S. wants to be supportive of Russia, wants Russia to succeed, but that such support, such financial support through the IMF or in any other form only makes sense and will only be effective if it's clear that Russia is going forward on reform, with a reform plan that builds the institution and rule of law aspects that will create confidence in investors doing business in Russia; a plan that shows forward movement on fiscal management and fixing the tax system and strengthening the banking system in a way that does not lead to printing money and a surge in inflation.

In all of our conversations, we were struck by the degree that that overall perspective was shared, that the overall focus was on the Russia solutions to this financial crisis. And that was the dominant aspect of our conversations in virtually every forum we were at.

So we're available for your questions. Thanks.

Q Did Boris Berezovskiy also share your overall perspective about not printing money and not bailing out the banks and all the other things you want to do? You said everybody did. Does that include him?

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

People had different solutions, but the focus was very much on the notion that Russia has to come forward with an economic plan that makes sense. People had different political takes on that, different political and economic formulations. But that general focus was one that he and virtually everyone that we spoke with shared. One often has conversations in this context where the focus is overwhelmingly on what is the outside support coming in. That was not the focus here.

Q He shares your prescription for what Russia needs to do?

SENIOR ADMINISTRATION OFFICIAL: Mara, I thought I just made that clear, but I'll try again. When I said that people shared the perspective, they shared the perspective -- I said that they had different ideas for what the actual components of reform were and what the political elements were that would bring on such reform, but that the focus was on what the things Russia had to do. And it was not conversations where the predominant focus was questioning of us as to outside or international aid. The focus of virtually every conversation we had was on Russian economics and Russian politics.

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

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

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

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

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

SENIOR ADMINISTRATION OFFICIAL: We had originally talked about four and the Russians cut it back to three this morning.

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


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

SENIOR ADMINISTRATION OFFICIAL: Well, there were a number of English-speaking people there, including in the meetings and at the press conference, myself included, who felt that he remained thoroughly engaged throughout. So I think we just have a different assessment there.

Q Would you characterize the tone of the discussion on the use of military force? Did they just basically agree to disagree? I mean, it wasn't clear from what they said in the press conference what the final outcome of that dispute was.

SENIOR ADMINISTRATION OFFICIAL: The press conference I think vividly and accurately reflected a couple of points on which the United States and Russia see things differently. And this one, of course, is very relevant to a number of situations that we're dealing with, and the United States and Russia simply do not see the question of use of force in the same way.

The American position, as you know -- and we've had several opportunities to reiterate it, not so much at the presidential level, it didn't come up a whole lot there, but I can assure you that it figured fairly prominently in the much more detailed discussion of both Kosovo and Iraq that Secretary Albright and Foreign Minister Primakov had starting the night before last, if I'm not mistaken.

And the disagreement is this: Our view is that while it may seem paradoxical, in fact, the ability of diplomacy to solve these issues is directly proportional to the credibility of the threat of force. And I think we have seen that proposition borne out any number of times, both in the positive and the negative, I might say. The Russians have a generalized neuralgia to the use of force, particularly when American force is very prominently a part of it, particularly when NATO is very much involved.

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

Another disagreement, of course, which was aired at the press conference, is over NATO enlargement. That's very familiar. We know our positions. There was absolutely no change in our understanding of each other's positions on that, but there is plenty that we can do together and we're moving forward with it.

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

SENIOR ADMINISTRATION OFFICIAL: What was the latter part of the question?

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

SENIOR ADMINISTRATION OFFICIAL: No, it's certainly not a reaction to or a compensation or consolation for. We're not only beyond that, we never got into that. But the NATO-Russia Founding Act specified that over time we would find lots of specific and concrete ways, particularly at the military-to-military level, to work on projects together, to create centers, sort of permanent institutions within the institution of the NATO-Russia relationship. And we have put some ideas forward there, and I don't want to preview them right now because we have more work to do.

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

Secondly, what have you told them, that concrete accomplishment that Russia has to make, the first step before some element of aid begins to flow and is part of that equation either a currency board and our assistance in preparing one, or an emergency foreign exchange stabilization, ESF fund, to sort of get the building blocks together to help the slide --

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

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

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

As to the currency board, I know Deputy Secretary Summers was asked about this in our briefing. Obviously, the currency board has been used in places like Argentina, but it's been done in a situation where there were a variety of fiscal situations that had been put in a lot of conditions that made that effective. I think that certainly in economic circles that is one of the ideas that is being thrown out right now. But I think virtually everyone would think it would be a bit premature to analyze that right now unless you have a sense of what the surrounding economic plan would be.

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

SENIOR ADMINISTRATION OFFICIAL: Again, I think the message has been that there's a conditionality that is implied by us, but just the realities of the market that there isn't much that we can do if there's not confidence that the system is going to be a stable one. When you have a plan that the market believes is effective or can be effective, the outside support can come in and bolster that, provide additional reserves. In a situation where the market has no confidence you almost can't put enough money into a country in this situation.

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

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

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

SENIOR ADMINISTRATION OFFICIAL: First of all, let me just say something about the meeting today, just so you don't think any of us are dodging. The way the meeting happened today was the President spoke, and then after he spoke he kind of met one -- he kind of just talked with different Duma and Federation leaders one on one. I might have been by him through two of those, other people might have been, but I don't think there's any of us who actually was there through each of them. So I don't think anyone but the President really knows exactly what he heard because it was set up so that they could have some privacy as they spoke.

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

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

I think the thing that I thought was reassuring was the degree that virtually everyone talked about not wanting to go back, that in one way or another everyone spoke about the need to go forward with economic reforms, and the degree, as I said initially, that everyone's focus was on Russia and Russia dealing with their solutions themselves. That's not to say that it never came up, what we thought would be the conditions that would lead to resumption of a second IMF tranche. But the overwhelming focus, as it should have been, was on what Russia's solutions to Russia's crisis was going to be.

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

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

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

SENIOR ADMINISTRATION OFFICIAL: Well, let me just say, first of all, that one thing that is worth recognizing is that coming up into '97 there had been some improvements. You had seen inflation, which has been over 202 percent in 1994 had gone down to 11 percent and actually dipped into single digits prior to the problems. The privatization in '97 had been stronger, the auctions had been stronger. Obviously -- and growth had, I believe -- was projected to be slightly positive for the first time.

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

SENIOR ADMINISTRATION OFFICIAL: I think it's very hard to say. One of the reasons why we're not here talking about a particular plan and, in fact, they're not talking about a particular plan, is that right now they're in the process of forming a government and trying to decide how to handle a situation that has deteriorated very sharply. They have banking sector problems, monetary problems and fiscal problems. And I think that there will inevitably be some time before they put themselves put together an approach to handling these and have discussions with the IMF, which we'll be having a mission out here very shortly.

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

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

I don't think that anyone's made any decisions about the IMF money that's slated for late September. I think the question is whether they -- when they develop a program for responding to their problems and whether it's one that can garner support.

Q Did the two Presidents compare notes about their own political problems, the calls in each other's country for resignation? And what was President Yeltsin's reaction to the questions at the news conference today about the Monica Lewinsky affair?

SENIOR ADMINISTRATION OFFICIAL: The answer to your first question is, no. The second to your second question is, I don't know, because basically they said good-bye to each other right after the press conference.

Q There was no reaction? I mean, Yeltsin didn't say -- no comment? He made no comment about the questions that were asked?

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

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

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

Q The President didn't say anything about that?

SENIOR ADMINISTRATION OFFICIAL: We have not gotten a readout -- by the way, it's the Duma and the Federation Council. We all understand that. Anyway, a number of the participants in the meeting I think are feeling less constrained than we are about going into the substance of the conversations and are making public statements. Governor Lebed, for example, was one of the last to leave, and as we were leaving Spaso House he seemed to be holding forth. So there are going to be a lot of comments coming out of the Russian participants. What we're going to be doing is trying to capture for you what President Clinton's purpose was here.

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

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

Q I have two quick questions, one on the Lewinsky issue. The President mentioned that he'd talked to some foreign leaders about the topic and they had urged him to get back to work. Was Yeltsin among them? And do you have any sense of how much he knows or doesn't know about the President's troubles over the last months?

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

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

SENIOR ADMINISTRATION OFFICIAL: Oh, there was a lot of talk about that, and I think that Gene and David and Larry in his earlier sessions with you has gone into considerable detail on that. I think what President Yeltsin said in the press conference today reflected a number of things that we've heard from him and others, and that is an awareness on the part of the Russian leaders that essentially this is a set of problems that they need to deal with through their own decisions. We can help them if they make the right decisions. And we have spent a lot of time on what we would regard a course of action that we could support.


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

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