China, Russia, and the Politics of Manic-Depression
 

             Summary :

             Over the past few weeks, Russia and China have engaged in
             intense, manic-depressive foreign policy, shifting between sullen
             quiet, to near war-frenzy, to friendly cooperation.  Before one
             prescribes medications, this behavior should be seen as the
             natural, terminal maneuvers of powers that are trying to get the
             West's attention and are not quite sure what to do with that
             attention once they get it.  It is not that the behavior is not
             ominous.  It represents the process of great powers going into
             opposition to a super-power.  But the behavior is the symptom,
             not the problem itself.  The problem is that the structure of the
             international system dictates an anti-American Russo-Chinese
             alliance, and very little can stop that.

             Analysis

             It has been fascinating over the past two weeks to observe the
             gyrations of China and Russia, as they carry out their terminal
             maneuvers on the way to an anti-American, anti-Western
             alliance.  Right after the bombing of Kosovo began Russia went
             ballistic, in its more extreme moments even threatening the
             United States with nuclear war.  China remained sullen but
             relatively quiet.  Then Russia turned mellow, trying to work with
             the West while China went ballistic over the bombing of the
             Embassy and a host of other issues.  It is amazing the extremes
             at which both countries are operating their foreign policies at the
             moment.

             The intense mood swings are, of course, calculated and have
             rational goals.  Russia and China individually are trying to
             achieve three things.  First, they want to get the attention and
             concern of the United States and the major powers linked to the
             United States, like Germany and Japan.  Second, they want to
             generate a substantial level of concern within the United States
             concerning the direction of relations with each of them.  Russia
             and China both hope to increase their leverage within the
             relationship and ideally extract political and, more important,
             financial concessions from a concerned United States that is
             hoping to appease them and avoid a new Cold War.  Finally,
             they hope to create serious fear among America's allies, like
             Japan and Germany, concerning trends in U.S. foreign policy, in
             the hope of being able to split the American alliance, further
             weakening the United States.

             Thus, periodically, each generates a major confrontation with the
             United States in which it appears that a catastrophic collision is
             about to take place.  They then allow themselves to be placated
             by the United States and its allies, extracting economic
             concessions in return for politico-military quiescence.  The trick
             for each is to recreate the image of the Cold War as a reminder
             of the bad old days.  The Russian announcement that the Black
             Sea Fleet would sortie, and mobs of Chinese hurling stones at
             the U.S. Embassy in Beijing, all served to remind everyone how
             bad things could get.  That set the stage for the next phase,
             which was bargaining on the price for not letting things get that
             bad.

             We do not believe that Russia and China are cooperating on
             this.  Quite the contrary.  In a certain sense, they are now
             competitors for the West's limited attentions.  Particularly in
             Washington, where the ability to handle multiple foreign policy
             issues is at a historical low point, getting priority treatment
             requires threats of nuclear war and riots in front of embassies.
             The similarity in Russia's and China's behavior has much more
             to do with the similarity of their strategic and economic positions
             relative to the United States than it does to do with conspiracy.
             Both need the same thing from the United States and the West:
             financial help and collaboration.  Neither will get as much as they
             want and need, based strictly on economic considerations.  Each
             needs to find levers to extract more.  Thus, in an odd sense, they
             are competitors, posturing intensely to try to get attention and
             help.

             Consider Russia's maneuvering.  Immediately after the beginning
             of the Serbian war, it appeared that Primakov's Russia was
             about to launch a new Cold War.  Yeltsin brilliantly allowed
             Primakov to position Russia in complete and hostile opposition
             to NATO.  He then brought Chernomyrdin out of retirement.
             Chernomyrdin, an old stalwart of the reform days, appeared to
             be a dinosaur out of the past.  Chernomyrdin delivered two
             messages.  The first was that there was still a chance at reform in
             Russia.  The second was that Russia would help NATO in
             Kosovo in return for financial aid.  Suddenly, $4.5 billion was
             shaken loose; not enough to bring Milosevic to the peace table,
             but enough to cause Yeltsin to dump Primakov and appoint a
             new Prime Minister of ambiguous ideology.  Outmaneuvering the
             communists in the Duma by getting Zhironovsky to double cross
             them (the price for that is not yet clear), Yeltsin is now in a
             position to bargain with the West.  Indeed, Michael Camdessus,
             head of the IMF, said on Sunday that the IMF was now ready
             to work with Russia on additional funding.

             Of course, Camdessus also said that Russia would have to
             institute new reforms in order to get that money. The new Prime
             Minister said on Sunday "Everything is simple here.  Once the
             Duma passes legislation and endorses the new government,
             loans will start coming."   Stepashin, of course, is still euphoric at
             the prospect of becoming Prime Minister, and he is not thinking
             as clearly as he should.  Obviously, the Duma must pass new
             legislation in order to get the IMF to grant new loans.  But that
             legislation will include massive austerity in an already
             impoverished Russia, as well as a battle for taxes with oligarchs
             busy shipping money to the West.  If it were really that easy, it
             would have been done months ago.

             This is the problem with all of this maneuvering.  It is pointless.
             No matter how much money the West provides, Russia cannot
             recover from its problems because those problems are deeply
             rooted structural and cultural defects in the Russian system that
             make it impossible for it to, if you will, metabolize money
             effectively.  Put differently, if it doesn't turn into capital, it
             doesn't become productive.  Money sent to Russia remains
             money to be spent on imported luxuries, used to bribe
             opposition politicians, or stolen.  It does not create economic
             growth.  Thus, the maneuvering gets the West's attention
             followed by ineffective assistance, inertia, and the return to the
             crisis stage.

             China is a similar case, albeit far from as hopeless economically.
             Nevertheless, after a series of entirely unsatisfactory bilateral
             meetings at several levels, tremendous criticism from the United
             States on human rights, the investigation of Chinese financial aid
             to Bill Clinton, the espionage scandal and a general decline in
             relations, the Chinese saw the bombing of their embassy as a
             marvelous opportunity to redefine their relations with the United
             States.  Taking a page from Moscow's book, they recreated the
             world prior to the rise of Deng Xiaping, complete with howling
             mobs and resolutions condemning American hegemonism.  The
             bombing of the Embassy, had it happened in 1991 in Baghdad,
             would have been managed with a harsh protest and an apology.
             In 1999, it was turned into opera by a China hoping to make its
             point.

             That got the U.S.'s attention but, as with Russia, it was not clear
             what the Chinese wanted that the U.S. and the West could give
             them.  Everyone rushed forward to see what could be done
             about World Trade Organization membership for China.
             However, given the structural dynamics of 1999 as opposed to
             1995 and given China's unofficial economic crisis, it was not
             clear what WTO membership would do for China.  It was also
             unclear what else could be rationally offered.  Massive new
             investments on the order of the earlier years of the decade are
             hardly likely when the U.S. economy is so attractive and
             investors in China are merely hoping to break even at some
             point.

             Nevertheless, China's Cold War posturing is every bit as
             impressive as was Russia's.  For example, the May 13 South
             China Morning Post reported that China is abandoning the low-
             key foreign policy established by Deng Xiaoping and moving
             toward a more aggressive approach.  The shift in policy,
             unnamed sources said in the report, was made following the
             NATO bombing of the Chinese Embassy in Belgrade.  It was
             partially in response to student demonstrations against the U.S.
             Embassy in China.  The source said, "In internal talks, Politburo
             members expressed fears that the students would next stage
             protests against a 'weak central Government' unless Beijing
             counters threats to national security."  The idea that China would
             take a knee-jerk decision in reaction to a group of students
             throwing rocks at a foreign embassy and totally reverse a foreign
             policy that has stood for ten years is unlikely.  Instead, China is
             using the opportunity presented by the anti-American
             demonstrations to declare to the world that the U.S. and NATO
             are forcing China into a new role, despite the fact that it has
             already been pursuing this new policy for some time.

             In response to China's overstated warnings of being forced by
             its own citizens into a more aggressive stance, the U.S. is
             planning to send in a former admiral as the new ambassador to
             China.  The choice of a military man to take the position reflects
             the administration's view of the potential Chinese threat.  More
             importantly, the prospective nominee for ambassador to China is
             Admiral Joseph Prueher, commander of the U.S. Pacific Force
             from 1996 to March 1999.  While Prueher was instrumental in
             expanding Chinese-U.S. military cooperation and exchanges, he
             was also in charge in 1996 when the U.S. sent carriers into the
             Taiwan Strait to demonstrate U.S. resolve vis--vis Chinese
             interference in Taiwan's elections.  This makes Prueher a prime
             candidate in dealing with China who is unlikely to be strenuously
             opposed by the Republican-dominated Congress.

             The real danger here is that during these periodic, ritual chest-
             thumping episodes, the situation might genuinely get out of hand.
             Yeltsin skillfully reigned in the anti-Western forces he helped
             unleash.  The old fox never ceases to amaze us.  However, he
             will go to the well one time too many, and unleash forces that
             even he can't control.  The same is true in China.  The
             leadership can whip up anti-American frenzy on demand.  It is
             not clear that they will always be able to control it.   In the end, it
             won't matter.  The tendency toward anti-Americanism and
             therefore to some form of alliance is, we believe, irreversible.
             The path toward that end, however, is twisted and quite noisy.
             The noise, whether from Moscow or Beijing, is not the real
             issue.  There is lightning behind the thunder.