Alexander Host Foundation Dinner

Monday, November 19, 1990

This is a rather unusual group. It's the only fundraiser I have been where no funds are being raised. There is only my ____ on the guilty conscience of the people that attend, but make no other effort. It's a unique way of proceeding.

You know, whether one predicted what would happen or not really depends very much on what time of the year one spoke during the past year. If we had had this meeting, say, 14 months ago, before the Berlin Wall came down I probably would have predicted that German unification could not have occurred, probably not even in our lifetime. I don't know anybody who predicted what would happen last year. Maybe by the time we meet again I will have convinced myself that I predicted it all. I must tell you, nobody predicted it, least of all Mikhail Gorbachev, because about the middle of October, 1989, Gorbachev visited East Berlin in order to celebrate the 40th anniversary of the founding of the East German State. You can bet your last cent that he would not have gone there had he known that there would never be a 41st.

Events have moved very rapidly, and they have confronted the United States with an extraordinary dilemma. We have achieved one of the biggest successes that I know of in diplomatic history. If

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you compare what Americans said in 1950, (should have [said]) -
- America and their democratic allies, and what in fact has
happened, there's an almost total correspondence. We wanted the
collapse of communism in Eastern Europe. We wanted to unify
Europe. We said we wanted to unify Germany, whether we meant it
or not. We wanted a restoration of capitalism and market economies
on a global basis, and all of this has happened. But now the
question is what we do we do for an encore? In fact, how do
Americans think about international affairs in the new environment?

I was asked at my table whether I was writing, and I am sort of
fitfully attacking away at a book. I've got it all in my mind,
and my problem generally is (finding) the time to write it. What
this book intends to do is to describe national attitudes toward
foreign policy, because it is really extremely interesting to see
how certain basic themes are repeated in the foreign policy of
nations, of Britain, of France, of China, Japan, of what is today
the Soviet Union. The two nations that have no great theme of
foreign policy are the United States and Germany. We have a theme,
but it isn't foreign policy, it is moral philosophy. Germany,
because it didn't get unified until 1871 and it has spent in its
history more of its effort getting unified than asking itself what
to do as a nation, and the United States because the themes that
have characterized the American approach to foreign policy can be
summed up as follows. If you read what American presidents have

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said, from Woodrow Wilson to Ronald Reagan, with one exception they have all said more or less the same thing. Other nations have interests; America has principles. Other nations are concerned with the balance of power; the United States is concerned with collective security. Other nations balance rewards and penalties; America applies international law. In fact, many of you listening to this may think that all sounds very sensible.

The only president who had a different view, who thought more in European terms, was Richard Nixon. He was very concerned with analyzing what the fundamental interests of various nations might be, and how to balance them, and he managed to create a coalition of liberals and conservatives against it. The liberals argued that he was too power-oriented, and the conservatives argued that he was too relativistic.

I go through this now only to indicate that we have a real problem in thinking about foreign policy in the world that is now emerging. The world that is now emerging will have many power centers: Europe, Japan, China, if the Soviet Union recovers, the Soviet Union, and the United States. We're not strong enough to dominate it, but we're still the strongest single country. But in fact, if you study history, there are only two ways you have peace, either by domination or by equilibrium. I know no other way. It has never been achieved.

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Now how are we supposed to think of the world that is emerging?
We see it right now in the Gulf. There is a compulsive
disinclination to state an American national interest. We are
resisting agression. We are asserting the principle of collective
security. Saddam Hussein is worse than Hitler, forgetting that to
some Arabs Hitler doesn't appear like such an awful character...

[Inaudible quip]

But be that as it may -- we state our objectives in extremely
general terms, as if we are reluctant to say what the specific
American national interest there might be. Why is this agression,
in this area, raising a particular challenge to the United States?
In fact, if we forgot our interest to the extreme, you would have
to say that we have a duty to intervene anywhere, at any moment,
against anybody that we consider morally unacceptable, and that
would go beyond our capacities. I say this as somebody who
fundamentally agrees with what we are trying to do. So this is our
fundamental question.

One classic expression was in 1936 when the Germans reoccupied the Rhineland. What that reoccupation meant was this: Germany was surrounded in the East by small countries. As long as the Rhineland was demilitarized, the French could reoccupy the Rhineland and go into the Ruhr if the Germans moved into the east.

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Once the Rhineland was fortified, the geopolitical situation changed. France, even if it attacked, would take longer to succeed in the Rhineland than it took the Germans to overrun Eastern Europe, and therefore Eastern Europe was lost once the Rhineland was fortified. President Roosevelt sent a message to the State Department asking what does the occupation of the Rhineland mean? The State Department wrote him a three-page memorandum explaining all of the treaties that Germany had broken in going into the Rhineland, but it added, not one of them was signed by the United States. Therefore, it said, there is no concern (??) (by Cordell Hull, or whoever drafted the memorandum). No American interest was involved here. In other words, the conception of foreign policy as a purely legal problem. When something arises, you don't ask for the interest, you get your lawyers, and you find out what the legal obligation is.

I'm going through this whole philosophical debate because we are now up against an extraordinary situation. Germany is unified. Eastern Europe is non-communist. The Warsaw Pact has disintegrated, and what nobody expected, the Soviet Union is in the process of disintegration. All communist countries are facing three problems: their economy isn't working, their political system is looking for legitimacy, and in the Soviet Union there is a particular problem. The empire created by the czars for 300 years, and continued by the communists, is unravelling. Nobody expected that, least of all Gorbachev.

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Now the economy we've talked about previously, and it faces this
fundamental problem: many market economies have been turned into
central planning. No centrally planned economy has ever turned
into a market economy. As some Polish writer wrote the other day,
it's the difference between an aquarium and fish soup. You can
make fish soup out of an aquarium, but you cannot make an aquarium
out of fish soup. Nobody has yet travelled that route for a number
of reasons.

First of all, in these command economies there are no prices.
Nobody knows what anything costs. The other day I talked to a
European CEO who was doing a joint venture in the Soviet Union, and
he went to talk to the minister who was responsible. The Soviet
contribution was going to be a factory building and some land. The
CEO said, "what is this worth?" The minister said, "forget about
it; we'll give it to you for nothing." The CEO said, "I can't take
it for nothing. I've got to get it on the books with some value,
and I've got to depreciate it." Of course, the concept of
depreciation had not yet reached that minister.

But at any rate, after dialogue, he agreed (the CEO could) "come
back in a week, and I'll give you a figure." The fellow got back
in a week, and was given a totally obscene figure. He said, "How
can it be that last week you gave it to me for nothing, and now
you're asking for an absurd price? How did you establish the

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price?" (The minister) said, "There is no price in the Soviet Union, so we went to our Embassy in Tokyo, and asked them what a piece of land with a building would cost -- this is a true story! - and then we wrote to our Embassy in London and asked them what a piece of land with a building would cost there, and then we split the difference." But anybody here who has done business in the Soviet Union will know how bizarre it is when nobody owns anything, when all prices are fixed, and when for an indefinite period nobody has really had to do any cost accounting, or has the foggiest idea of depreciation or any other mechanisms of a market economy. On top of it, all of the workers have more or less lost the habit of working.

The first thing that has to happen is price reform. One of the characteristics of communism is that there is a lot of money around because you can't spend it on anything. There are huge quantities of money, and no consumer goods. You introduce price reform, and the wild inflation immediately starts, which is the fundamental reason for the upheaval in China last year, even though China is the only communist country that has made any progress towards market economics. I could go on and on and on talking about the economic front.

The fundamental point I want to make is that the only way that you get from here to there is with a political system which has a moral right to ask for sacrifice. In Eastern Europe, in Poland, in

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Czechoslovakia, in Hungary, that sort of a system more or less exists, because the leaders led the struggle for independence from the Soviet Union, and they have the credit of having destroyed communism. It still leaves a huge technical problem in all countries, except East Germany where the West Germans must get them back up to the West German standard or they will all move to West Germany. So East Germany will certainly succeed.

Poland, Czechoslovakia, Hungary, Romania, and Bulgaria had a terrible time, but nothing like the Soviet Union. In the Soviet Union, in the government for 70 years the leaders have been murdering each other. Every loser in every power struggle has been described as a traitor. Gorbachev attempted to get around this by setting up an electoral system to undermine the Communist Party, and to give himself full power. And he's succeeded in undermining the Communist Party only to find that no power was left for anybody. He had set up a system of elections of extreme complexity, in which every institution can elect a few members to a 4,000 member parliament, which then elects a 700-member party and it leads to a highly chaotic situation except for something that he did not foresee, which is that once elections started, parties were not permitted -- every factory of any size, every institution, every university, every ministry could elect a few members to the Central Party. So the Central Party has no prestige at all, but in the 15 republics these bodies developed a considerable legitimacy, and the result is that for the first time in Russian

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history, the various republics are governed by local people.

You have to understand the structure of the Soviet State. The
Soviet State began in the 17th century when the Romanoffs became
czars. At that time Russia was the area around Moscow. The Polish
frontier was at the very outskirts of what is today Kiev, but 1000
miles from the Polish border today. The Baltic States were
Swedish. The area around the Black Sea was Turkish. The area
around northern Iran was independent. In the next 300 years, the
Russians inextricably expanded east, west, and so on, with the
result that about half of the population is now non-Russian. Of
the 15 republics, only three are Slavic, and the Russian republic
is the largest one -- it has about half the population. Each of
these republics has passed laws according to which the orders of
the center are valid only if their own parliament passed it. Many
of them, in fact most of them, have introduced their national
language as the official language with the result that the Russian
officials who are there don't understand what is being said. In
many of them, in the Baltic states, in Moldavia, in Azerbaijan,
the alphabet is Latin. The Russians can't even read the language.
In the Turkish part the language for the script is Arabic.

A friend of mine visited Uzbekistan last year, where they
introduced Uzbek as the individual language, and he said "I
understand that most of you don't understand it" to a local
magistrate (??). And she said, "that's right, but to us the

10

determining thing is that the Russians don't understand it."

The other day I had dinner with the deputy Prime Minister of the
Soviet Union, a great reformer -- allegedly a great reformer -- and
I said to him, I know there's a Gorbachev plan, I know there's a
Yeltsin plan -- what happens? Who obeys whom? How does anybody
know what to carry out? And the weird sense -- for example, in the
Ukraine of 60 million people, they have just introduced script
money. You can still use Soviet money, but unless it's accompanied
by a Ukrainian coupon, you can't buy anything with it. The result
is that nobody from a non-Ukrainian republic can buy anything in
the Ukraine, so it is extremely chaotic.

I asked him, "how do you do it?"

"Oh," he said, "Easy -- by negotiating."

"How many issues do you have outstanding?"

"Oh," he said, "about 3000."

I said, "How many do you have settled?"

He said, "three."

I said, "How do you do it? Give me the examples."

So he went through the three they had settled, and it is perfectly
clear that nobody has a right to do anything, that every issue
turns into a power struggle, and it's quite unpredictable. He
explained to me the one issue they had settled, and you'll see in
a minute that they didn't settle it at all.

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There was a dispute whether there should be a central bank, a
national central bank, or whether each of the republics could have
its own bank. They settled it by saying that both exist. Each of
the republics can have its own bank, and there'll be a national
bank. How is the national bank run? By a board of directors
composed of the chiefs of all the local central banks. In other
words, they just redefined the issue.

I could go on and on, but my point here is not the Soviet internal
structure but a different one. When we read the American press,
Gorbachev is a great hero. The question is always how long can he
stay? In my view, there are only two things that keep him in
office. One is that he is too weak to bother anybody domestically.
He is Soviet foreign minister; he isn't running everything inside
the Soviet Union yet. And secondly, because if they got rid of
him, there would be no known way by which a substitute could be
sent in, so that if you want a unified center, they've got to keep
Gorbachev. We in the West are living from a misconception. It
doesn't make a great deal of difference whether Gorbachev stays or
leaves.

Secondly, when you read our media you think the Soviet Union is
headed for market economics, pluralistic democracy, universal
peace, and God knows what else. Approaching the state of Iowa.

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I don't know what is going to happen, but that is the least likely
of happenings. At this moment, their distribution system is broken
down. I talked to a high-ranking Soviet diplomat last week, and
he said "I only pray that the Germans are not giving us any money,
because it will disappear into a rat-hole. The only way the
Germans can help us is to come in and do it themselves."

This had to do with housing for the army. Their army is in a
precarious position. Those of you who read German should read what
is printed in German newspapers about the behavior of the Soviet
Army in East Germany. The first Russians in 70 years are getting
paid in a currency with which you can buy something. It's not
funny -- they are being paid in West German marks, and they are
going crazy. They sell everything -- their uniforms, their rifles,
their tanks, their armored personnel carriers.... in fact they have
set up PXes outside the airport because if they don't .... There
was a long article with a headline called "An Army is Dissolving
Itself." They've got to get them out of there, because if they
see what happens with East Germany being transformed into
capitalism, they'll be a revolutionary force when they get home.
But they don't have housing at home.

So, these are their dilemmas. They still have 30,000 nuclear
weapons. My view is that you're going to see chaos. You may see
civil war, and we will see attempts at repression. But I can't
believe that a nation that has acted in a certain way for 400 years

13

will just abdicate from this without somebody making an attempt to reverse it. In fact, that's how Gorbachev talks. Now, will he succeed? Or will somebody else succeed? This I don't know. But that is what we will see.

I have sketched all this to explain to you one fundamental point, which is that America is emotionally and conceptually unprepared to deal with this world. What are we going to do?

The other day I spoke to the Foreign Minister of Russia, the twelfth republic. (??) He said, "I know what Gorbachev's up to. He wants to give up the four islands to Japan and get himself 15 billion dollars for the four islands, but," he said, "what Gorbachev doesn't realize is they belong to me." And they'll never agree to it.

Now, I don't know what happens if Gorbachev sells the islands, and Yeltsin says "the hell with you", or what happens if the Ukraine takes the next step and makes itself independent and Russian armies march in there, if there are any left, or if civil war breaks out between Georgia and Armenia, which is very likely. Or what happens when Azerbaijan tries to reunite with its brethren in Iran. What is the American national interest? Are we for the independence of the Ukraine, or against the independence of the Ukraine? How do we think of it? I tell you frankly, I haven't fully made up my own mind what I think of all of these issues. On the one hand,

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America is the only nation that I know that believes you're better off by strengthening your adversaries -- a new approach in international policy. So from the point of view that a weaker adversary causes you less trouble than a stronger one, for which I think there is a lot of support in history, I would have migraines if the Soviet Union started retreating. On the other hand, when I see all these nations reverting ... I also want to know, how do you think they're analyzing it at the State Department?

Yugoslavia is going through exactly the same process. The other day the president of Croatia came to see me. He asked for an appointment; I said, "Why don't you do it through the Yugoslav Embassy?" He nearly blew his stack. He was not happy with that. He immediately said "The Yugoslav Embassy? I'm the president of Croatia," and -- he actually was a student of mine, which I don't forget (??) --

QUESTION FROM THE AUDIENCE: "What did he want?"

He wanted a visit as a state guest, I know, not as a Yugoslav.

They want to be a state, Croatia and Slovenia. In other words, the Catholic part of the old Austrian-Hungarian Empire, and he says, "Serbia and Montenegro can go together." That's the Turkish part of Yugoslavia. So the Austrians are on one side, the Turks are on

15

the other. So I said, "What about Bosnia and Herzegovina?" "Oh,"
he said, "they belong to us, of course." It belongs to them, and
so everybody admits that when this thing starts falling apart --
as it probably will -- they'll start fighting about what's near
Herzegovina.

Now my former leader, Richard Nixon, used to say -- he used a two
syllable word; he believed in words of one syllable -- he used to
say "the American people will think this is a soft drink, a soda.
Can you imagine what the American people will think when you say
Bosnia and Herzegovina?"

Now Bosnia and Herzegovina; the capital of it is Sarajevo. This
is exactly where World War I started, on exactly this issue. Now
I'm not arguing now a specific solution. I'm saying there is
nothing in our State Department, in our way of thinking of the
[issue of collective security??] .... collective security means
that every nation of the world looks at every part of it the same
way, and comes to the same conclusion, and acts to its foreign
policy like the Supreme Court acts towards a case. There is no
historical evidence that this has ever happened, but on most of the
issues that I have described it cannot possibly happen.

So, I give you three conceivable outcomes, but there are many
permutations. One: the Soviet Union breaks into 15 states. Then
you have a big state in the Russian Republic, and a medium sized

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state in the Ukraine, and 13 little ones who haven't been independent in 200 years. You don't have to worry about the Baltic States, who can relate themselves to Scandinavia and Germany and Poland, and Moldavia will join Romania. But that still leaves you 8 or 9 others, and how they will arrange their relations with each other is very difficult to foresee, except it would be murderous.

Possibly within two years (?) -- the Solzhenitsyn solution -- Russia keeps the Ukraine, Belorussia, and Kazakhstan, and lets everything else go. Incidentally, the 15 republic solution would almost certainly lead to internal conflict between the Ukraine and Russia, because Russia will not accept the independence of the Ukraine. It will never accept that. At best, it would be like India and Pakistan. But, assuming the Solzhenitsyn solution works, then you have core Russia, you have where it all started, you'll be at the beginning of the 19th century. I think that sort of state will be a constant pressure on its neighbors, as it will have two additional features. Feature one is it will be forced to become a major Middle East country. When I was in government, and the __ was in government, Russia was interested in the Middle East as a great power. It did not have to get involved in every issue. But, when its southern border is sort of an open wound, then what happens in Iran and Pakistan and Soviet Asia affects its day-to-day existence, and it will become a daily Middle East player. Third, the state that's reached of these territories will

17

be Asia, and that is the area where Russia will then contest with
China and Japan for a local equilibrium, something in which in fact
we have a positive interest, provided we can ever get the concept
of equilibrium into our national thinking. You may remember last
year I was castigated for not wanting to push China away. My
reason was my concern about the situation that will certainly
emerge within the next 3 or 4 years. The third possibility is
repression, and if there's repression, we'll be right back where
we came in. The outside world will be outside, the Russians will
be suspicious and the pattern of history will begin to give
us...(inaudible)

I don't know which of these three possibilities will emerge. All
I'm saying is that none of them is consistent with this notion that
now we have here nice Midwestern Americans running the Kremlin that
are concerned with legal norms in the Middle East, in working with
us on collective security. Not at all. They can't contest us in
the Middle East right now. They need our economic help. There
are 500 good reasons why they're not contesting us, all of them
respectable, incidentally. There's no law that says you have to
be altruistic in foreign policy. But it's also absurd to think
that the Russians are going to pull our bacon out of the fire in
the Middle East. For 300 years they've been pushing into that
area; stopped first by Britain, then by us. Now they're supposed
to cooperate with us in Iraq to achieve our objectives? It is
impossible.

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Apparently Gorbachev has today indicated they wouldn't support a U.N. resolution in Arabia (??) I don't know exactly what he said, but it was naive of us to ever expect to get Soviet support. We won't get Chinese support either. I asked a ranking American diplomat last week, "How long do you think it will take us to get a clean resolution -- that is, a resolution which enables us to do what we may want to do?" He said, "Would you accept forever as a working _________?"

That's our problem in the Gulf. What exactly are we trying to do there? What is our objective? Iraq annexed a neighbor.

(THIS IS GARBLED, SOUNDS LIKE:) If a third of all the borders in the region were illegitimate, which meant it was therefore precedent for everything else, for an assault on everybody else

END OF TAPE, SIDE ONE

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BEGINNING OF TAPE, SIDE TWO

So this would be a fundamental challenge to American interests.

It could easily lead to a collapse of the moderate states in the Gulf, and in other moderate regimes, culminating either in an Arab civil war, or almost certainly in an Arab-Israeli war, which would confront us with exactly the same problem under even worse circumstances.

Now how one goes about resisting a situation like this is ... and we've been told, we've been reluctant to state an American national interest. Every time somebody says oil, all hell breaks loose, as if the welfare of our economy, and of the economy of the industrial world, is an impermissible interest. Moreover, when people say the oil has to be sold anyhow so there will be a market price, that may be true, but the allocation of the oil... In the first place, it isn't exactly true, because demand is highly inelastic, and oil prices have more than doubled, twice now within 10 years, without reducing demand immediately in any significant way ....

And secondly, the allocation of the oil resources within the Gulf is of great importance because if Iraq gains the preponderent amount they can increase their military capacity even more. It is

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after all a country that has six neighbors. It attacked Iran, it annexed Kuwait, it's in mortal conflict with Syria, and if you get a holy war with Saudi Arabia, for which you can assume a certain proclivity. It's not a matter of ______ how strong they are.

Now, the United States has a characteristic that is unique among nations in the world. We specialize in putting 500,000 troops someplace and afterwards debate why they should be there. We will not accept the fact that whatever you may think about the marginal advantages or disadvantages of a certain course of action, the presence of these troops creates a national interest and a problem of national credibility. I could have conceived that we put 50,000 troops there and said, "If you cross the line into Saudi Arabia, there will be war. In the meantime, we will engage in a blockade." I could imagine that we did that, plus air raids on Iraq to reduce its military threat to its neighbors, or I could imagine we did what we did, but what I can't imagine is that we now start debating whether 400,000 troops are defensive or offensive.

In fact, I will tell you frankly that I am very worried about the impact on the minds of the Arabs. Until we showed up, they thought of Iraq as another Arab country -- a little stronger, a little more aggressive. Then Iraq does something aggressive. First thing they note is that we show up with 250,000 troops, which is more than they have ever seen. Who would have thought it possible that you

21

could move troops that fast? Then we say that isn't enough; we
need another 250,000. Now we are there with a larger Army than
anybody has ever seen, and now we start debating whether we have
a right to use it.

I tell you that when we start withdrawing without having achieved
our objectives, our friends in the Middle East will be in the
deepest jeopardy, and I don't think any moderate government can
survive that. They will all think we've been backstopped (or
backstabbed??), and that is a national interest from Egypt to
Turkey.

I personally am violently opposed to a large ground attack on 45
positions. But I don't want to face down ______________ on any
essentially technical discussion.

The basic point I want to make here, and that's why I spent so much
time on the Soviet Union, is that we've had a huge success. If it
weren't for the Gulf Situation, we could be celebrating now. The
fundamental problems that I've described would still be with us,
except it would take longer to unravel because we have not yet
talked through how we position ourselves between China, Japan, and
Russia, between Europe, Eastern Europe and Russia, or whatever
emerges there.

22

Arms control, about which we've been talking forever, is almost irrelevant in this present debate. Today they signed an agreement which is not our fault; it's absurd. It doesn't do any damage, but that agreement was negotiated when the dividing line was in the center of Europe. It gives each side, I think, 50,000 tanks on both sides of the Alpen (??) 13,000 East European tanks are counted with the Russian. The whole thing is absurd. We are not going to achieve the number of tanks in Germany. We've already pulled 3/5 of our tanks out and sent them to the Middle East, and they'll never go back there. The Russians have sent 17,000 tanks to Siberia where they're outside the area. My major point is we've got to think this whole thing through again.

I don't want to leave you in a sad frame of mind because if you think the problems there are difficult, it's OK.... compared with the Arabs. Everything I've described to you -- on our side it's conception. We have to think it through. In time we will think it through. Then we can act on what we can do. The Soviets can't even decide who's in charge. They don't even know what the borders of their state are. They don't know how to organize or define the national interest. So I don't want you to misunderstand me. The one problem we have now is the Gulf. If we fall on our face, we will have an economic crisis, and we will have within five years a major Mid-East war. What not falling on our face means I don't want to specify in detail except one requirement is that the Iraqi military capability has to be somehow reduced, and secondly,

a nation that takes 8,000 hostages must come out worse than it came in.

You cannot treat them as if this is something you shall (ignore??)
or no American travelling will ever be safe again. Now how you
achieve this, if there were methods I will be glad to give you my
views, but I'm not arguing my tactic. I'm arguing an approach.

Stig -- I was supposed to go 40 minutes, I've talked an hour. You
owe me.

(garbled)

And now let me take 15-20 minutes of questions.

/lmt, 12/17/90

Monday, November 19, 1990

2

3

4

[Inaudible quip]

[Y]

5

6

[Y]

First of all, in these command economies there are no prices.
Nobody knows what anything costs. The other day I talked to a
European CEO who was doing a joint venture in the Soviet Union, and
he went to talk to the Minister who was responsible. The Soviet
contribution was going to be a factory building and some land. The
CEO said, "what is this worth?" The minister said, "forget about
it; we'll give it to you for nothing." The CEO said, "I can't take
it for nothing. I've got to get it on the books with some value,
and I've got to depreciate it." Of course, the concept of
depreciation had not yet reached that Minister.

7

price?" (The Minister) said, "There is no price in the Soviet Union, so we went to our Embassy in Tokyo, and asked them what a piece of land with a building would cost -- this is a true story! - and then we wrote to our Embassy in London and asked them what a piece of land with a building would cost there, and then we split the difference." But anybody here who has done business in the Soviet Union will know how bizarre it is when nobody owns anything, when all prices are fixed, and when for an indefinite period nobody has really had to do any cost accounting, or has the foggiest idea of depreciation or any other mechanisms of a market economy. On top of it, all of the workers have more or less lost the habit of working.

8

9

10

11

12

13

14

15

16

Possibly within two years (?) -- the Solzhenitsyn solution -- Russia keeps the Ukraine, Belorussia, and Kazakhstan, and lets everything else go. Incidentally, the 15 republic solution would almost certainly lead to internal conflict between the Ukraine and Russia, because Russia will not accept the independence of the Ukraine. It will never accept that. At best, it would be like India and Pakistan. But, assuming the Solzhenitsyn solution works, then you have core Russia, you have where it all started, you'll be at the beginning of the 19th century. I think that sort of state will be a constant pressure on its neighbors, as it will have two additional features. Feature one is it will be forced to become a major Middle East country. When I was in government, and the ___ was in government, Russia was interested in the Middle East as a great power. It did not have to get involved in every issue. But, when its southern border is sort of an open wound, then what happens in Iran and Pakistan and Soviet Asia affects its day-to-day existence, and it will become a daily Middle East player. Third, the state that's reached of these territories will

17

18

[Y]

Apparently Gorbachev has today indicated they wouldn't support a U.N. resolution in Arabia (??) I don't know exactly what he said, but it was naive of us to ever expect to get Soviet support. We won't get Chinese support either. I asked a ranking American diplomat last week, "How long do you think it will take us to get a clean resolution -- that is, a resolution which enables us to do what we may want to do?" He said, "Would you accept forever as a working _______?"

END OF TAPE, SIDE ONE

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BEGINNING OF TAPE, SIDE TWO

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21

I personally am violently opposed to a large ground attack on 45
positions. But I don't want to face down _______________ on any
essentially technical discussion.

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23

(garbled)

/lmt, 12/17/90