Analysts: Summit Vows 'Symbolic'

Russia and America sang the right tune on economic issues at last week's Helsinki summit, but making real progress will be more of a challenge than their leaders acknowledged, analysts said Monday.

U.S. President Bill Clinton promised to expand economic ties and speed Russia's integration into international bodies such as the World Trade Organization, while Boris Yeltsin pledged to improve the climate for both foreign and domestic investors by revamping the government's legal and tax regimes.

"You can say sugar 20 times but it won't become sweeter," said Yevgeny Volk, director of the Moscow office of the Heritage Foundation, a Washington-based think tank. He called Clinton's economic initiatives "symbolic" and aimed at soothing Moscow on NATO expansion.

Yeltsin and Clinton said in a joint statement that they would work toward full Russian membership in the Paris Club of creditor nations this year and in the World Trade Organization in 1998, if Russia meets standard conditions.

Russia also would join most of the economic discussions at the Denver summit of the Group of Seven leading industrialized nations in June, and the presidents foresaw "considerable progress" in Moscow's accession the Organization for Economic Cooperation and Development.

But while Russian hopes for economic acceptance on the international stage are nothing new, investors are taking stock of Yeltsin's vow to address tax and investment issues.

"It's environment and perception of the environment that's critical," said Karl Johansson, managing partner at Ernst & Young accountancy. "If the Russian government will take initiative in those areas it makes a big difference.

"We're guardedly optimistic about progress," added Johansson, a Foreign Investment Advisory Council member.

One area that foreign investors have highlighted is the need for arbitration mechanisms to resolve disputes over tax liability without resorting to the courts. Here, the presidential communique offered encouragement, stating: "Russia will act to pass a new tax administration law that clarifies authorities, responsibilities, fines and the ability to resolve disputes."

Such a law could be separate from the revised tax code the government hopes to bring into effect next year. Analysts said the code is a vast improvement on the current system, though in the short run its complexities could prove overwhelming.

Yeltsin surprised observers Saturday by saying, without elaboration, that Russia is "also prepared to join the European Union." Most diplomats see full Russian membership as a distant prospect at best, and an EU spokesman said merely that the 15-nation trading bloc -- to which most Central and East European countries aspire -- took note of Yeltsin's remarks.

Even joining the WTO next year is likely "only if trade liberalization is made a focal point of the reform effort," which it does not appear to be at present, said David Boren, emerging markets strategist at Salomon Brothers investment bank in London.

Russia would have to slash tariffs and harmonize its cumbersome trade laws with international norms before it can be accepted into the WTO.

Membership of the Paris Club of creditor nations this year -- which officials have said could boost budget revenues by up to $2 billion -- is a more realistic prospect if Russia continues to make progress in resolving its foreign debt burden. Boren said, however, that debtors to Russia such as Cuba and Mongolia are hard-pressed for cash.