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Johnson's Russia List


July 10, 1997   

This Date's Issues:   1029  • 1031

Johnson's Russia List
10 July 1997

[Note from David Johnson
"Bol'shoe spasibo" to all recipients! Izviniti. 
1. Jan-Philipp Goertz: thanks to Mr. Gusev.
2. Stanislav Menshikov: Chubais' response to Izvestiya raises 
new questions.

3. Donald Jensen (RFE/RL): Chubais and His Clan Face Russian 

4. AP: Lebed Courts Russia Intellectuals.
5. Floriana Fossato (RFE/RL): Yeltsin Orders Back Wages Paid By 
Year's End.

6. Reuter: Pleased with new role, Russia tempers NATO stance.

8. AP: Yeltsin Can Serve Entire Term.
9. Reuter: Russian liberal minister campaigns for ally.
10. Los Angeles Times editorial: NATO Plan: Hard Questions Can 
No Longer Be Avoided.

11. Interfax: Lebed: NATO Expansion 'Does Not Threaten Russia's 

12. Christian Science Monitor: No Bears Here: Russia Brings Big 

13. The Times (UK): Michael Evans, Former Soviet bloc states to 
be given top nuclear secrets.]


From: (Jan-Philipp Goertz)
Date: Wed, 9 Jul 1997 16:37:05 -0400 (EDT)

I would like to thank Mr. Gusev for his clarifying words on JRL. 

In several talks with foreign service officers of NATO countries, especially
from the U.S., France and Great Britain, I was always astonished how easily
old clichees stick and become the basis for policy recommendations. There
have also been pieces of that school of thought on the JRL repeatedly. These
ghosts of the past haunt us, telling us that Russia hasn't changed, and maybe
cannot ever.

I find it scary that old memories and judgements should now again serve as
the backbone of a new policy towards Russia. While it is always good and
prudent to be cautious and not to expose oneself to undue dangers, it is on
the other hand ludicrous and stupid to let these ghosts of the past rule the
future. I can understand that many foreign service and military personnel had
negative experiences with Soviet generals and diplomats (the MBFR-talks
always seem to come up as a prime example). I would always heed their advice.

But we cannot allow these warning voices to solely dominate our future
relationship with Russia. This relationship is in dire need of a real spirit
of cooperation, because the future threat emanating from Russia is not the
one of resurrected empire, but one of collapsing society and economy as well
as lawless anarchy. This threat can only be met together with Russia and not
against it. There is also no way to shelter ourselves from the repercussions
of a deterioration of the Russian state.

Instead of interpreting every Russian move towards restoring state-control
and its tools in the light of Western thinking (which itself never seriously
defeated has never detached itself from its territorial dogmata and therefore
) and the geostrategic clamor by some Russians who cannot conceive of the
world as different from yesteryear, we should welcome military reforms in
Russia and actively support them. Russia will not be less of a threat without
organized armed and police forces. Nor is that the proper meaning of civilian
control over the military. Yet this is what some would like to see as proof
of Russia's willingness for peace. Russia will truly be no threat if it
possesses a competent military, controlled by civilians. This is what we need
to let them build. Without reawakening at any opportunity the ghosts of the

I am grateful for contributions in the public discussion that make this point
clear to policy-makers in the West.


Date: Wed, 9 Jul 1997 22:12:16 +0200
From: Stanislav Menshikov <>
Subject: Chubais' response to Izvestiya raises new questions

On July 5, "Izvestiya" carried a letter by Mr. Chubais in response
to an article in the same newspaper on July 1 (earlir posted on JRL) which
referred to some of his alleged financial improprieties. I venture to
provide a full translation of his rebuke. Apart from giving a new
illustration of his style it raises in my mind a few questions which I would
like to pose to JRL subscribers. But first, his letter:

"Dear editors of "Izvestiya!
"I have been reading your paper for many years and consider it one of
the most authoritative among our media. Therefore I was surprised by the
publication of the article "Give a loan or lose". I would not have been in
the least surprised if something similar had appeared in "Sovetskaya
Rossiya" or other publications in its spirit. But I admit, I did not expect
to see such an article in a paper that in the past had an aversion for dirty
information. It is not possible to otherwise describe the interpretation in
that article of well known facts about my work in the Fund "Center for the
Defence of Private Property". I created it after my resignation when neither
the estgeemed journalists, nor myself could suppose that Chubais would
re-enter government service.
"The Fund has indeed undertaken financial activities: we received a
non-interest loan - a fact that is absolutely normal in relations between a
social organisation, such as our Fund, and commercial structures in both
Russia and any democratic country. Despite noises in the Duma and the
"yellow" press, despite political pressure on the Procuracy-General, no
criminal actions were uncovered. As to earnings which I received in that
period, everything is well known about that, too. I did not hide them and
paid the taxes due at the appropriate time. The investigation into that
matter was made to the fullest extent - including subpoenaing documents,
interrogation of witnesses, face-to-face confrontation of witnesses. The
conclusion made by the Procurator-General Yuri Skuratov and investigator
Georgi Chuglazov, has been long made public: all my earnings were legally
"Therefore the story recanted anew by the new members of the
"Izvestiya" staff Krutakov and Kadulin about my alleged special relations
with the "Stolichny" bank is simply an attempt to execute somebody's order.
This "strangely" coincided with the appearance of the "exposure" articles of 
A.B.Korzhakov and his friends in "Pravda-5", the "Profile" magazine,
"Megapolis-Express" and the British paper "Guardian". 
"I do not feel that the editors and readers benefit from the fact
that "Izvestia's" pages have lately become a place for circulating
compromising material. I would not like to think that this is a result of
the conflict between its Editor-in-Chief and its shareholders, LUKOIL and
ONEXIMBANK which unfortunately has exceeded all limits...
"For myself the events in "Izvestiya" are the more disheartening that
in the difficult period when we together fought for its independence from
the Supreme Soviet of the RSFSR we conceived the future of the paper in a
very different light. Yes, at that time the independence of the paper was
virtually at a hairbreadth from being destroyed.
"I hope that those efforts were not in vain...
Respectfully, Anatoly Chubais"


1. Is it not true that the fact of the non-interest loan by
"Stolichny" was first made public by "Izvestiya" on June 1, and that it
created a sensation?

2. Is it true that non-interest loans by banks to non-profit
institutions are "normal" practice in "any democratic country"?

3. Is it true that non-profit institutions can, in those countries,
be involved in short-term speculation in securities markets?

4. Is it also normal that executives of such Funds can legally
deposit the earnings from such speculation on their personal accounts and
treat them as personal income?

5. Is it not true that in "democratic countries" such loans are
considered to be a form of a hidden bribe?

6. Is it not true that Mr. Chubais in the said period was a top
member of the President's campaign headquarters and that he controlled
press-releases that could directly affect the price of government securities
in which he was then speculating?

7. Is it not true that later that same year, Mr. Chubais as head of
the President's administration together with other officials assisted
"Stolichny" bank in acquiring without competition another large bank
formerly belonging to the state?

8. Would not a person in a democratic country who was only suspected
of such activities be excluded from government service, particularly in the
capacity of Minister of Finance?

9. Would it be normal for such a person in a democratic country to
officially represent his government in the International Monetary Fund and
the World Bank?

I would highly appreciate receiving answers to my questions, whether
via the JRL or privately. I have already received quite a few reactions to
my previous piece about Chubais. NONE OF THEM WERE ON THE JRL, ALL WERE
PRIVATE. That is OK, suits me fine. [DJ: BUT NOT SO OK WITH ME!]


RFE/RL NEWSLINE Vol 1, No. 69, Part I, 9 July 1997
Chubais and His Clan Face Russian Reality
by Donald N. Jensen
The author is associate director of RFE/RL's Broadcasting Division.

Yeltsin's recent government shakeup has been widely perceived as a
major step
toward economic reform. In its first 100 days, the new government has improved
tax collection, proposed a simplified tax code, ordered public officials to
disclose their financial holdings, and sought to reassert Kremlin control over
independent-minded regional governors. While those are undoubtedly laudable
goals, the shakeup also marks the continued consolidation of power by the
driving force behind the new government--First Deputy Prime Minister Anatolii
Chubais--and the financial-industrial oligarchy supporting him. That network
includes banks such as Oneksimbank, Most, and Menatep; oil companies such as
Yukos and Sidanko; and national media organs such as NTV, "Segodnya," and
"Komsomolskaya pravda."
The government shakeup follows a year of steadily increasing
influence for
Chubais and his clan and has enabled him to gain the upper hand over other
clans, informal political alliances, economic interest groups, and media
organs that dominate Russian politics. Since the 1996 presidential elections,
Chubais has chalked up several achievements. He was named head of the
Presidential Administration and subsequently used his friendship with
President Boris Yeltsin's daughter to control access to the president and
depose arch-rivals former presidential bodyguard Aleksandr Korzhakov and
former Security Council Secretary Aleksandr Lebed. He took advantage of
Yeltsin's illness last fall to strengthen his relations with key businessmen.
And he used his connections in the West and with international financial
institutions to ensure money flows to the cash-starved government.
Despite those successes, Chubais's preeminence is not unchallenged.
There is
considerable overlapping of interests among elite clans, and alliances are
constantly shifting. Two competing clans, moreover, continue to pose a threat.
On the one hand, Prime Minister Viktor Chernomyrdin's clan favors maintaining
significant state ownership over the country's large natural monopolies--gas,
electricity, and railroads--and rebuilding Russia's high-technology sector.
Key clan members are the Gazprom, Rosneft, and LUKoil companies, the banks
Imperial and Inkombank, and Deputy Prime Minister and Interior Minister
Anatolii Kulikov. On the other hand, Moscow Mayor Yurii Luzhkov's clan favors
increased government financing of the regions and domestic industries. Its
clout rests on the city's interests in virtually every major business and real
estate enterprise in the capital as well as its widespread investment in other
regions in the Russian Federation. Largely because of those ties, Luzhkov has
good relations with other members of the Federation Council, many of whom
oppose Chubais's efforts to reduce the authority of regional leaders.
Chubais is also confronted with other problems that may ensure his
is short-lived. First, divisions may be emerging among his supporters.
Industrialist and Deputy Security Council Secretary Boris Berezovskii and
Oneksimbank President Vladimir Potanin, both firmly in the Chubais camp for
the past year, waged a public battle for control over Sibneft in May. Tensions
are also reported between Berezovskii and media mogul Vladimir Gusinskii,
another Chubais ally. Moreover, Chubais is also not assured of continued
backing by First Deputy Prime Minister Boris Nemtsov, who has presidential
aspirations and an independent political base.
Second, the implementation of Chubais's economic program has run
into stiff
opposition from the natural monopolies. For example, although the government
abolished an agreement giving the Gazprom management a permanent proxy vote on
the state's 40% shareholding and ordered a reorganization of the state
regulatory commission, it has been unable to force Gazprom to yield its
monopoly on pipelines. The new government's rhetoric has already begun to
change: after his mixed success battling with Gazprom, Nemtsov praised the
preservation of the state's role in managing that firm.
Third, as he recovers from his health problems, Yeltsin--whose usual
has been to strike a balance between his lieutenants to prevent any one side
from gaining too much power--has shown signs that he is reserving the right to
rein in Chubais. Chubais's move from the Presidential Administration to the
government, where he is politically exposed, could give Yeltsin the room for
maneuver to reduce Chubais's role should government policies become too
It is very doubtful that the rise of the Chubais clan is an
unalloyed victory
for "reform." In May, the Finance Ministry again requested "competitive" bids
from commercial banks for the right to grant government guaranteed loans to
the state on extremely favorable terms. The winners were banks supporting
Chubais; the rules governing the bidding ensured opponents never had a chance.
Chubais also sided with bankers pressing for permission from the Central Bank
to act as share dealers in 1998, when new stock market regulations go into
For the West, too, there are perils. The recent Harvard aid scandal
how foreign assistance, in this case favoring a group close to Chubais, almost
inevitably becomes entangled in Russia's clan wars. Russian foreign-policy
decisions--such as how to transport Caspian oil--also tend to reflect the
agenda of whatever clan is dominant at any given moment, rather than national
interests. Most important, it is unclear how the growing concentration of
wealth in a few hands, unregulated by the rule of law, will further the
development of a democratic state, which, as Chubais's clan stresses, Russia
so desperately needs.


Lebed Courts Russia Intellectuals
July 9, 1997
MOSCOW (AP) - Russia's once and future presidential candidate,
Alexander Lebed, took to the limelight Wednesday to seek a cure for
the nation's malaise - and, perhaps, for his own sagging
Lebed, a retired general and former national security chief,
invited a group of intellectuals to draw up a program to support
Russian cultural institutions, struggling to survive without
Soviet-era state patronage.
``You propose a program of measures to protect our national
culture, and I will carry it out,'' said Lebed, his gruff bass
filling a conference room.
``I was trained as a paratrooper and can do my job well, but
this isn't my field,'' he said. ``And I need your help to decide
what steps to take.''
Catering to the audience, Lebed described the pitiful state of
Russian culture and arts, plagued by a severe shortage of funds and
facing an invasion of foreign mass culture.
``Moral purity and consciousness always have lain at the
foundation of Russia's spiritual traditions,'' he said, decrying
the growing influence of ``an alien culture filled with sex and
``The dominance of that pseudo-culture threatens our national
security,'' he said.
Lebed specifically targeted Western action movies and foreign
language billboards on Moscow streets, easily winning the sympathy
of a small gathering of artists and actors.
``I like your ideas and I'm ready to support you,'' said Vitaly
Solomin, a top Russian actor.
There were few concrete proposals, however. Like Lebed, most
speakers simply lamented the pitiful state of things and asked for
Lebed finished a strong third in the Russian presidential
election last fall and then struck a deal with Yeltsin before the
crucial second round, casting his support behind the president in
exchange for a top Kremlin job.
He further increased his popularity when he negotiated a peace
deal to end the deeply unpopular 22-month war in Chechnya.
Still, Lebed's ambitious, aggressive manner won him few friends
in the government and Yeltsin ousted him in October after only four
months as security chief. Lebed responded by predicting Yeltsin's
health would force him from office before the next election in
2000, and widely aired his own presidential ambitions.
But Yeltsin has appeared strong and energetic since recovering
from heart surgery earlier this year, leaving Lebed on the
In March, he established his own political movement called the
People's Republican Party, but there has been little mention of it
since its founding congress.
Opinion polls have shown Lebed's popularity falling, as he lost
his long-time lead to Boris Nemtsov, a young and energetic first
deputy premier appointed last March.


Russia: Yeltsin Orders Back Wages Paid By Year's End
By Floriana Fossato

Moscow, 9 July 1997 (RFE/RL) - President Boris Yeltsin has decreed that 
back wages to all state sector workers - totalling over $5 billion - 
should be paid by the end of the year. The action was clearly aimed at 
building on the Russian Government's recently declared success in 
fulfilling its pledge to pay pension arrears by the end of June. 
But Yeltsin's decree on back wages, signed yesterday, still reflects a 
revised payment schedule. Last week, before leaving Moscow for a 
vacation, Yeltsin had promised that all wage arrears would be paid by 
October 1. 
At the time, Yeltsin's remarks created concern among cabinet members in 
charge of economic issues. First deputy Prime Minister Anatoly Chubais 
said on television that the deadline was impossible to meet and asked 
for an extension. Following pressure from other key ministers in his 
reformed cabinet, Yeltsin yesterday signed a decree that partially 
reflects a change in his previous pledge. 
Yeltsin made clear that back wages for servicemen in the demoralized and 
unreformed Russian army are a priority. He decreed that military wages 
should be paid in two months. In another decree, Yeltsin ordered wage 
arrears among other public sector employees, such as teachers, doctors 
and miners to be paid by January 1, 1998. 
Yeltsin's move seems to be related to widespread concern and discontent 
in the military, reflected in an open letter addressed to him last month 
by the chairman of the State Duma's Defense Committee, General Lev 
Rokhlin. The letter severely criticized Yeltsin for not being serious 
about military reform and for being responsible for the lamentable 
situation in Russia's armed forces. 
Yeltsin signed these and other decrees aimed at finding ways to finance 
the operation after meeting First Deputy Prime Minister Boris Nemtsov 
and other top cabinet and Presidential administration members. Nemtsov 
traveled to Karelia in Northern Russia, where Yeltsin is vacationing, to 
submit a detailed plan to fulfill the back-wages decrees. Nemtsov said 
that pressure on the President to change the payment deadline was 
motivated by the wish to "avoid misleading people with unrealistic 
During a news briefing in Moscow today, it was Nemtsov who estimated 
Russia's total debt to public-sector workers at more $5 billion. Nemtsov 
said the figure includes the wage backlog to the armed forces, which 
amounts to some $860 million. 
Nemtsov also said that only in 15 of Russia's 89 regions are salaries 
paid regularly or delayed for no more than a month, while wage delays 
exceed three months in 34 regions. He added that the situation is worst 
in Siberian and Far Eastern regions. He also said that in several 
Siberian regions (Buryatia, Khabarovsk and Chita) public-sector workers 
have not been paid for more than six months. 
Nemtsov's role in coordinating the finding of funds to clear the wage 
arrears is seen as crucial in Moscow. Nemtsov earlier conducted most of 
the negotiations that led Russia's giant gas monopoly Gazprom to pay off 
some $1.5 billion in back taxes last month. Analysts say this money has 
been essential for the payment of back pensions. They note that the 
government's ability to obtain similar sums quickly from other tax 
debtors and from increased revenues will determine its success in 
fulfilling Yeltsin's last decrees. 
Yeltsin said the arrears problem can be solved only through joint 
efforts by his administration, the government, regional authorities and 
banks. He said the joint effort should be aimed at determining how to 
cut spending and increase revenues as well as how to use loans and 
receipts from the sale of property and securities. 
As part of the effort, Deputy Prime Minister and Chairman of the State 
Privatization Committee Alfred Kokh told reporters today that Russia's 
state-controlled utilities monopoly Unified Energy Systems (UES) would 
issue convertible bonds starting in October. Kokh said the UES bond 
issue, worth five percent of the company's shares, would allow the 
government to generate at least $870 million. 
Nemtsov said the money would be used to pay back wages. Yeltsin said the 
government would not resort to inflationary measures suggested by the 
communist and nationalist-dominated State Duma to meet his pledge. He 
said that he would not print more money under any circumstances. 
Nemtsov said funds would likely come from the government's crackdown on 
the largest tax debtors, from privatizing some large companies and from 
developing several projects to attract foreign investment. 
Yeltsin yesterday also signed decrees on production-sharing agreements 
between Russian and foreign firms and a decree on quotas of oil sales. 
Production-sharing accords allow foreign partners to gain profits in the 
form of output on the ventures they invest in. The ventures usually 
involve extraction of oil and other natural resources. 
Nemtsov today said investment in four Far East oil and gas projects 
could generate $47 billion. Two of the projects, Sakhalin-1 and Sakhalin 
-2, involve the development of offshore oil-fields. 
Nemtsov said the realization of the four projects is expected to bring 
Russia more than $90 billion and a one-half of the oil output. He also 
said that the projects would create 160,000 new jobs. 
As Nemtsov was meeting Yeltsin yesterday, Prime Minister Viktor 
Chernomyrdin chaired a session of the Emergency Tax Committee in Moscow. 
He promised to crack down on some 50 big companies, particularly in the 
oil and gas sector, that are not paying their taxes. The State Tax 
service said the sector owes the government some $5 billion. 


Pleased with new role, Russia tempers NATO stance
By Tracey Ober 
MADRID, July 9 (Reuter) - Russia's delegate to the NATO summit in Madrid said
on Wednesday that Moscow was pleased with the new Euro-Atlantic Partnership
Council, but reiterated its opposition to the alliance decision to admit
three new members. 
``This has been a very useful, very helpful meeting and we had a very
constructive exchange of views,'' Deputy Prime Minister Valery Serov told
journalists, adding that Russia had again expressed its opposition to NATO
``Russia does not recognise and does not understand why it was necessary to
expand NATO participation,'' Serov said, referring to the alliance decision
on Tuesday to invite the Czech Republic, Hungary and Poland to become
Russia's President Boris Yeltsin had boycotted the two-day summit to avoid
giving any hint of support for NATO expansion and dispatched the relatively
low-ranking Serov in his place. 
Moscow, prickly over what it sees as a military encroachment on territory
formerly under its communist umbrella, expressed relief that the former
Soviet republics of Lithuania, Latvia and Estonia had not been invited to
``Russia is still categorically opposed to the admission of Baltic states
into NATO,'' Serov said. ``We regard it positively that the question of
admitting the Baltic states was put off until 1999.'' 
He said Russia was prepared to guarantee the security of the Baltic states,
which all have substantial Russian minorities. He hoped that Russia's new,
active relationship with NATO would help ``correct the political course so
the Baltic states will feel no need to seek NATO admission.'' 
Although Russia had been reluctant to participate in any of the events at
NATO (North Atlantic Treaty Organisation) summit, Serov said that in
retrospect it had showed just how much cooperation was possible among former
Cold War enemies. 
Russia still views NATO as a primarily military, rather than political bloc,
but has moved to a more cooperative relationship with the alliance after
signing a new treaty with it in May. 
Servo said Moscow was pleased at the willingness shown by members of the
Euro-Atlantic Partnership Council, which met at summit level for the first
time on Wednesday, to move toward creating a single security system on the
European continent. 
``The greatest threat today is not the military one but the threat posed by
the growth of nationalism, terrorism, drug trafficking and other problems of
that kind,'' the Russian delegate said. 
``These sessions showed that all the leaders think along the same lines that
these specific challenges call for a common approach by all states to address
these issues.'' 


RYABIKIN)--NATO`s expansion will create more new problems but
will not solve the existing ones. The discussion on the
alliance`s enlargement negatively affects the general political
situation in Europe, Russia`s Foreign Ministry spokesman Gennady
Tarasov said at today`s briefing. The resolutions adopted in
Madrid do not conform to the task to create a single security
space in the Euro-Atlantic region, in the boundaries of which it
would be possible to ensure equal security of all states,
irrespective of their belonging to military and political
As Tarasov said, Moscow is concerned over the fact that
states of the Baltic Sea region are mentioned in the Madrid
declaration, though indirectly, however in the context of
further expansion of the alliance. Tarasov said that such a
decision has been and remains unacceptable for Russia. For its
part, Moscow is ready to discuss a system of security guarantees
which could be presented to the Baltic states by Russia and by
other countries.
Tarasov expressed confidence saying there is no need for
discussions on candidates to NATO on the first or on the second
stage but there is a need for efforts to strengthen stability
and security in Europe. That`s why Russia successively advocates
development of a model of general and comprehensive security for
Europe of the XXIst century and of Charter of European
According to Tarasov, NATO`s readiness for work to fulfill
all provisions of the Russia-NATO Founding Act emphasized in
Mardid is a positive moment. The Russian party is ready to start
this work. The parties plan to start activity of the Joint
permanent council Russia-NATO in the near future. A session of
the Joint permanent council at the level of foreign ministers is
scheduled for September. It will be held in New York due to the
session of the U.N. General Assembly. 


Yeltsin Can Serve Entire Term
July 9, 1997
One of Boris Yeltsin's top aides boasted Wednesday that his boss is
more than strong enough to serve out his second term - and suggested doubters
observe the president in the sauna. 
Yeltsin ``can go to a steam bath and flail anyone there three times with
birch branches,'' First Deputy Prime Minister Boris Nemtsov asserted. 
The Interfax news agency, which reported the remarks, noted that feat would
require a good deal of stamina, since Russian bathhouse rituals frequently
last for hours. 
Russian bathhouses combine elements of Finnish saunas and Turkish steam
baths. Bathers traditionally flog each other with birch boughs. 
Nemtsov, the former governor of Nizhny Novgorod, joined Yeltsin's government
in March to mastermind an overhaul of Russia's ailing economy. He met with
Yeltsin earlier this week. 
Unlike the economy, Yeltsin has been in good health recently after
from a heart bypass operation in November and pneumonia last winter. 


Russian liberal minister campaigns for ally
By Oleg Shchedrov 
NIZHNY NOVGOROD, Russia, July 9 (Reuter) - Radical Kremlin economic reformer
Boris Nemtsov warned voters in his home region on Wednesday of big problems
ahead if they chose a communist rather than his liberal ally as their new
Nemtsov, who pioneered bold reforms in Nizhny Novgorod region before being
brought to Moscow in March by President Boris Yeltsin, threw his weight
behind the mayor of the regional centre, Ivan Sklyarov, ahead of a tight
runoff vote on Sunday against a strong communist rival. 
``I don't ask you to love Sklyarov, I ask you to vote for him,'' Nemtsov,
himself a possible future presidential candidate, told hundreds of local
businessmen packing the assembly hall of the city's Chamber of Commerce. 
``I ask you to do this to preserve our achievements and to keep our house in
order,'' the First Deputy Prime Minister said. 
Local analysts say support for Sklyarov and communist Gennady Khodyrev,
former regional Soviet Communist Party boss and now chairman of the Chamber
of Commerce, is about equal. The two led the first round two weeks ago
practically neck-and-neck. 
``It will be too bad if the communists come to power,'' Nemtsov said. 
Nemtsov, recruited to break down resistance to reform in Russia's powerful
state monopolies, added a warning. 
``A communist regional governor will soon find himself at loggerheads with
the liberal mayor of Nizhny Novgorod city. Besides that, he won't find it
easy to deal with the federal authorities.'' 
Nemtsov, appointed governor in 1991, won a sweeping victory in a local
election in 1995 before heading for Moscow. 
He is also seen as brushing up his credentials ahead of the next
election, due in 2000. 
But Nemtsov's departure brought a virtual power vacuum in the central
region. He took the best of his team to Moscow and left no apparent heir. 
Throughout the election race, Nemtsov avoided canvassing in Nizhny Novgorod
for Sklyarov, an ally but not part of his close team, until a victory by
Khodyrev began to loom. 
``Of course, it would be a shame, if after all he (Nemtsov) has done for
people they choose a communist rather than a liberal,'' Vitaly Sinitsyn, a
local schoolteacher, said. 
``If I were Nemtsov, I would not dare show up in the Kremlin if Khodyrev
The turnout will be the biggest problem in the runoff vote. Sixty percent of
voters snubbed the first round and Russia's communists traditionally have
staunch voters in the regions. The smaller the turnout, the bigger proportion
of votes they get. 
``Sklyarov will certainly need a very high turnout to win, not to mention
need to oppose the large-scale communist campaign,'' said a member of his
team who refused to be named. 
The Communist Party, after some initial hesitation caused by doubts about
Khodyrev's ideological purity and some bargaining over post-eletion
relations, pulled out all the stops. 
In unusual development, maverick ultra-nationalist Vladimir Zhirinovsky
teamed up with them to back Khodyrev. 
``There is my Liberal Democratic Party and the Communist Party,''
Zhirinovsky, who is now campaigning in Nizhny Novgorod, told journalists,
playing on the disarray in the liberal camp. ``I cannot see any other serious
political force to deal with.''


Los Angeles Times
9 July 1997
[for personal use only]
NATO Plan: Hard Questions Can No Longer Be Avoided 
Americans need full and quick answers from Washington 

Led by the United States, the 16 members of NATO have agreed to enlarge 
their membership by three, a move that will shift the boundary of the 
military alliance hundreds of miles to the east and impose on it 
significant new responsibilities for European defense. For President 
Clinton, the decision reached in Madrid on Tuesday marked "a very great 
day" for the cause of freedom. For critics of enlarging NATO, including 
the 50 retired ambassadors, senators, generals and arms control experts 
who recently asked the president to reconsider the planned expansion, 
NATO and the United States may be about to make "a policy error of 
historic proportions." A boon to security in Europe or a potential 
political catastrophe? It is within these parameters that the wisdom of 
creating a bigger NATO will be debated. 
     NATO today has become that rare if not unique thing in history, a 
defensive alliance without an identified enemy. The Soviet Union has 
disappeared and the military coalition it organized and controlled, the 
Warsaw Pact, has been dissolved. As a result of the invitation that went 
out this week, the Czech Republic, Hungary and Poland--all former 
members of that pact--will be formally welcomed into NATO's ranks in 
1999, the alliance's 50th-anniversary year. Also at that time, strong 
hints from some alliance members suggest, invitations could be issued to 
other states. 
     Seven years ago the Soviet Union, then approaching its final days, 
agreed that Germany should be reunited. Western foreign ministers in 
turn assured Moscow that there was no intention to move NATO eastward, 
no plan to admit former Warsaw Pact states. The reality today is that a 
NATO that is soon to include Poland will find itself smack up against a 
Russian border, the little enclave of Kaliningrad, which lies between 
Poland and Lithuania on the Baltic Sea. The West may have forgotten its 
assurances in 1990 about not moving NATO closer to the old Soviet Union; 
Russian defense officials and nationalists have not. 
     Is it important what Russians think about NATO's expansion? It is, 
if for no other reason than that the West generally and the United 
States especially have compelling interests in a number of vital areas 
that require Moscow's friendly cooperation. These in- clude implementing 
cuts in strategic weapons and confronting what have become the major 
threats to global security: international terrorism, illicit trafficking 
in unconventional weapons and the drug trade. 
     In a letter to Clinton, a score of senators have asked some of the 
basic questions about NATO's expansion that the administration, for all 
its rhetorical oom-pah-pah, has yet to answer. Just what military threat 
is NATO expansion responding to? How will stability in Europe be 
strengthened by drawing a new line that brings some new countries within 
the NATO fold while continuing to exclude others? Through extension of 
the pledge that an attack on one NATO state will be treated as an attack 
on all, will the United States be at risk of being in the middle of 
ethnic or religious conflicts? To these questions must be added two 
others: What will be the real cost to Americans of upgrading the 
military capabilities of the new members? And is an enlarged NATO worth 
having at the potential risk of a more antagonistic and uncooperative 
     The task of the administration is to respond fully and credibly to 
these concerns. It has yet to make much of a start. 


Lebed: NATO Expansion 'Does Not Threaten Russia's Security' 

MOSCOW, July 8 (Interfax) -- NATO eastward expansion does not threaten
Russia's security, former Russian Security Council Secretary Gen. Aleksandr
Lebed told Interfax.
"I've always regarded calmly the matter of new members joining the
alliance. The rich and the well-fed will never threaten the poor and the
hungry, sooner vice versa," he said.
Regarding the Baltic countries' possibility of joining the alliance,
Lebed said Latvia, Lithuania and Estonia "are unlikely ever to become NATO
Due to Russia's position, Western countries have come to understand
"it is cheaper to help improve things in Russia than to prepare a war with
it," he said.
On the further activity of the Russian People's Republican Party,
which he heads, Lebed said: "The party's main task is to participate in
regional elections to seize power at the grass roots. To come into power
not to govern lying on one's side but to manage."
Lebed expressed satisfaction over the first round of Samara's mayoral
elections. He expressed the hope that Georgiy Limanskiy, the candidate
from the Russian People's Republican Party, would win.
Twelve candidates were put forward for the post of Samara's mayor. 
Two candidates remain in the election run-off. Samara First Deputy Mayor
Anatoliy Afanasyev collected 28% of the votes and Samara regional Duma
Deputy Chairman Limanskiy is supported by 20% of the electorate.
Speaking on the overall situation in Russia, he said "certain present
leaders have acquired control over finances and mass media, they are ready
to fight for enforcement structures. Then the moment of the Duma's
dissolution will come."
Therefore, the general said he did not rule out that "Russian Interior
Minister Anatoliy Kulikov will be dismissed already in summer."
"Nobody is currently dealing with" the conflict settlement in
Chechnya, Lebed said. "(Russian Security Council Deputy Secretary) Boris
Berezovskiy first of all pursued his personal interests in the Chechen
settlement and then the interests of the state," he said.


Christian Science Monitor
10 July 1997
[for personal use only]
No Bears Here: Russia Brings Big Gains 
Lenin would be shocked! 
US investors are raking in the rubles - and dollars - thanks to shrewd 
capitalist investments in Russian companies. 
And according to Richard Hisey, there's a lot more wealth to be created 
by investing in Russia. 

Mr. Hisey should know. He oversees the Lexington Troika Dialog Russia
Fund, whose 77.8 percent total return through June 30 puts it at the 
top of this year's mutual fund heap. And it gained another 9 percent in 
the first three days of July. 
The fund's objective is long-term capital appreciation. And while Hisey 
is careful to note that future returns may not equal the earlier gains, 
he says there is a strong likelihood that Russian economic development 
will continue to yield double-digit returns for the fund well into next 
Not bad for a fund opened only a year ago. 
Lexington Troika Dialog Russia Fund began on July 3, 1996, a "date of 
political significance," Hisey says. That was when the second round of 
voting for Russia's presidential elections occurred - an election that 
returned Boris Yeltsin to office. 
The fund's minimum investment is $5,000 ($250 for an individual 
retirement account). There's no sales load, and annual management 
expenses run about 1.25 percent a year (800-526-0056). 
Typically, funds that invest in emerging markets abroad, especially 
single-country funds such as this one, tend to be highly volatile. They 
can collapse when market conditions suddenly sour. 
Latin American markets, second only to Russia in the past year (see 
chart), are recovering from a big slump in 1994-95. 
Despite the volatility of emerging markets, Hisey is upbeat about 
Lexington's Russia fund for several reasons: 
* Low stock valuations: A blue-chip Russian stock has far more room for 
growth than a comparable US stock, with its much higher valuation 
* A "literate, well-educated work force." 
* Expanding investment by foreign companies, through joint ventures, in 
* An abundance of natural resources. 
* Increasing stability in Russian politics. 
How does Hisey, sitting in Lexington's headquarters in upscale suburban 
New Jersey, manage the fund? 
With lots of help. 
Three specialists in Russia, who work for Troika Dialog Asset 
Management, a Russian financial management firm, scan the portfolio 
daily and choose potential new stocks. Early each week, usually on 
Monday, the Moscow team calls Hisey at Saddle Brook to discuss additions 
and deletions. Hisey says he usually agrees to the Moscow team's 
In Saddle Brook, meanwhile, the fund relies on an advisory panel of 
three Russia specialists. The team consists of Keith Bush, a senior 
associate in Russian and Eurasian affairs at the Center for Strategic 
and International Studies in Washington, Marin Strmecki, once a foreign 
policy consultant to President Nixon, and Hisey. 
Hisey himself speaks fluent Russian and as a college student studied at 
Leningrad State University. 
The three seek to keep the fund on top of political or economic trends 
that could affect performance. 
Of about 1,000 Russian companies in which the fund could invest, says 
Hisey, the portfolio holds 50 securities, with an emphasis on blue-chip 
The fund leans heavily on a few sectors, such as oil and gas, 
telecommunications, and utilities. It includes no companies from former 
Soviet republics. 
About 25 percent of the stock holdings are in ADRs (American depository 
receipts) of Russian companies. These are shares sold directly on 
American exchanges. The portfolio also holds about 25 percent bonds. 
Stock turnover has been high - about 150 percent last year - but will 
probably hover around 40 percent now, he says. 
Can the fund continue to produce whopping returns for investors? 
Hisey admits to an occasional worry about political instability in 
Russia. But he predicts continued gains, because the Russian economy 
seems sure to expand. 
He forecasts economic growth of at least 1 percent this year, rising to 
2 or 3 percent by 1998. "By the year 2000," he says, "growth could be up 
to 5 percent." 


The Times (UK)
10 July 1997
[for personal use only]
Former Soviet bloc states to be given top nuclear secrets 

THE three former members of the Warsaw Pact who are to join Nato in 1999 
will be given access to top-secret intelligence, including nuclear 
targeting details, once they have signed an agreement on exchanging 
The deal on intelligence is one of five practical steps which will have 
to be taken by Poland, Hungary and the Czech Republic before they can 
become full members of Nato's military structure. 
All fully integrated Nato members have access to the most highly 
classified intelligence which is marked Cosmic Top Secret. This could 
include intelligence assessments of the Russian economy. 
There are concerns about this aspect of the deal, largely because there 
are likely to be some links remaining between the intelligence services 
of these three countries and their old spymasters in Moscow. 
A special agreement will have to be drawn up under which the governments 
of Poland, the Czech Republic and Hungary will provide absolute 
guarantees about the security of all intelligence. 
Poland, the Czech Republic and Hungary will now also have to fill in a 
questionnaire, outlining every aspect of their military capabilities and 
force structures. 
Nato will give the countries a guide which will set certain standards 
required. This will include a minimum number of frontline air force 
squadrons, ammunition stocks and training days. Nato will not insist on 
them buying Western equipment immediately, but they will be required to 
upgrade old-generation weapons as far as possible. 
In due time, all three countries will be expected to replace their 
ancient Soviet-built combat aircraft and buy or lease Western planes. 
The three other practical steps required of the three members-elect are: 
to change their communications so that they have a secure voice 
telephone system compatible with the rest of Nato; to agree on their 
share of Nato's common funding budget; and to sign a declaration that 
they will not block other countries from joining the alliance. 
Yesterday, with all the Nato summit leaders still in Madrid, a special 
charter was signed with Ukraine which guarantees a new security 
partnership with the alliance. 


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