July 10, 1997   

This Date's Issues:   1029  • 1031

Johnson's Russia List
#1031
10 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. Wendell Solomons: Toasting an independent press.
2. Time magazine: Doug Waller, HOW CLINTON DECIDED ON NATO 
EXPANSION.
3. Kuranty: Viktor Bondarev, "The Salvo at Kulikov: Bang Bang... 
Missed!" 
4. The Globe and Mail (Canada): Geoffrey York, Regional rulers 
ignore Kremlin. Russian government cannot dictate to Primorsky's 
powerful governor.
5. RIA Novosti: IN AUTUMN EXECUTIVE POWER WILL MAKE AN ATTEMPT 
"TO REACH AGREEMENT" WITH THE DUMA, GEORGY SATAROV STATED.
6. Chicago Tribune: Colin McMahon, FACED WITH EAST-WEST LOVE
FEST AT NATO SUMMIT, RUSSIANS SHRUG.
7. Excerpt from July 9 press conference of President Clinton.
(Re Isolating Russia and control of nuclear weapons).
8. New York Time letter: Not NATO. The Empire! 
9. St. Petersburg Times: Stephanie Baker-Said, Once-Sickly Ruble 
Suddenly Strong.
10. Interfax: Russian Govt Owes Armed Forces 8.1 Tln Rubles In
Back Wages.
11. Houston Chronicle: Cragg Hines, NATO, Russia heading for 
confrontation over Baltic nations' status.]

********

#1
Date: Thu, 10 Jul 1997 16:50:44 +0600 (GMT+0600)
From: "Wendell W. Solomons" <solomons@slt.lk>
Subject: Toasting an independent press

NTV 
July 3, 1997
>From the "Segodnya" newscast, Moscow.
_____Businessmen Accuse Western Press of Creating Negative Image
How to fight the extremely gloomy picture of Russia as a whole and
Russian business in particular now being painted in the West -- that was
the main theme discussed at the latest meeting of the Council on Foreign
and Defense Policy [SVOP] today. 
<snip>
A number of magazines and newspapers that permit themselves such
articles more often than others were named at the meeting. These include
The Washington Times, Forbes magazine, and Le Monde.
<snip>
[Begin recording] [Oleg Kiselev, SVOP member] Believe me, we're fed up
reading the dirt, the defamation which is spattered out over the pages of a
number of publications in the preliminary knowledge that this defamation is
well paid for in hard cash by our competitors.

--------

>From Wendell W. Solomons:

There is a time to reap, and a time to sow. In between, children become
grown-ups. Newspapers are not without infantiles. Meanwhile
you realize that Russia's population is decreasing by 1 million people
a year.

What a fairy story led to this. How it was unconscionably sold to
Russia and the American tax-payer by the people controlling media
firms like Buston-Marstellar, the same story-spinner in Bhopal, the
Valdez oil spill disaster!

Was this the idea? To fold up the Gosplan umbrella of industrial linkages
between the raw material supplier, the factory and the shop in 500 days,
400 days or 300 days? But that's all Thousand and One Nights! Create a
new economy instantly? Notice, Buston-Marstellar did not get a TV, radio,
newspaper public-relations contract for China on the tax-payers' money
via USAID.

Now the chickens have come home to roost. If only the Chief Economist IBRD,
The Times in London and Moscow News had listened when in 1993 I spoke
of a breakdown in Russia if the enactment of a fairy story was tried!
Five years later I am sad that this campaign of mine, in what I call
the Mayflower Project, has since 1st May 1997 has required the posting
of messages to the Internet to warn of loose nukes in a free-for-all
in Moscow.

Like Dr. Spock-marked children, we have Dr. Friedman-marked children. It
is time to leave his comic-book of anarchism and take up other volumes.
For instance, TIME magazine has positively assessed Michael Novak's
"The Spirit of Democratic Capitalism." Dr. Friedman's comics blinded
its followers to the legal, preventive, and tax-based infrastructure
essential to Novak's picture of a peaceful marketplace to mitigate the
influence of business and corporate fraud mentioned at the Internet
site below.

The price of freedom is eternal vigilance. 

**********

#2
Time magazine
JULY 14, 1997
HOW CLINTON DECIDED ON NATO EXPANSION 
BY DOUGLAS WALLER 

Clinton administration officials will soon fan out across the U.S. to 
convince Americans that NATO should be expanded. But left out of the 
sales pitch will be the fact that the President's proposal was one his 
aides fought over bitterly in the beginning. 
The idea was first planted with Clinton in April 1993 during a 
Washington ceremony to open the Holocaust Museum. With time on their 
hands before the speechmaking, Vaclav Havel and Lech Walesa, the 
Presidents of the Czech Republic and Poland, cornered Clinton to urge 
that NATO admit East European countries. Havel and Walesa had got 
nowhere with George Bush on the idea, but Clinton, in office only three 
months, was intrigued. 
At that point National Security Adviser Anthony Lake and Secretary of 
State Warren Christopher also favored expansion. But the Pentagon wanted 
no part of a larger, more costly alliance, and Strobe Talbott, 
Christopher's top Russia expert and now Deputy Secretary of State, 
feared that a rush to admit new members would anger Moscow. After months 
of wrangling, the advisers agreed to proceed cautiously, and Clinton 
announced in a Prague speech in January 1994 that the question was no 
longer if NATO would expand but when. 
The Pentagon instead pushed a plan called Partnership for Peace, which 
allowed East European nations to join in NATO military exercises but not 
be full members. Finally, in September 1994, senior Defense officials 
gathered in Assistant Secretary of State Richard Holbrooke's office for 
what turned into a shouting match. "The President has made the decision, 
and you're being insubordinate!" Holbrooke accused them. The Pentagon 
eventually fell into line. 
Ethnic lobbying groups such as the Polish American Congress had already 
begun flooding the White House and Capitol Hill with telegrams demanding 
that NATO enlarge. Bob Dole and the House Republican Contract with 
America backed expansion. But White House polls during the 1996 campaign 
showed that enlargement wasn't a litmus test for the 21 million 
Americans of East European descent. The poll Clinton paid more attention 
to showed that foreign policy successes improved his re-election 
chances. "The idea that Reagan brought down the Berlin Wall, Bush 
unified Germany, and Clinton will unite Europe sounded good at 1600 
Pennsylvania Avenue," says an aide. 
--With reporting by J.F.O. McAllister/Washington 

***********

#3
Purposeful Campaign' Against Kulikov Eyed 

Kuranty, No. 26
Jyly 2-8, 1997
[translation for personal use only]
Article by Viktor Bondarev under the "Politics" rubric: "The Salvo
at Kulikov: Bang Bang... Missed!"

An intriguing detail in Russian policy recently: Whatever new scandal
begins, in the end the name of MVD [Internal Affairs Ministry] head Kulikov
starts to be mentioned more and more often in connection with it. He is in
everybody's way over Chechnya, and he is involved in the dissemination of
anonymous letters intended to provoke a split in the government. Now, in
the case of Justice Minister Kovalev, first a naked government functionary
was shown, and then the Russian electronic mass media began all at once to
talk about "the hand of Kulikov." The view has taken root that it was the
MVD that was interested in discrediting the Justice Ministry, since that
institution has laid claim to some of its powers.
Obviously, a purposeful campaign is being conducted against Kulikov. 
There are enough reasons for it. The army thinks, not without reason, that
it was the internal troops who lost the war in Chechnya, but for some
reason the armed forces got all of the disgrace. More than that, the army
leadership is periodically disbanded, but Kulikov was promoted after the
defeat and became vice premier. In the Defense Ministry they are also
extremely unhappy that the level of material support for the MVD now is
incomparably higher.
But the main reason for the attack on the minister, of course, is
different -- in the government today it is Kulikov who is the leader of
those who oppose the present economic course, and he scarcely hides his
position. He is the only vice premier who regularly criticizes
privatization (in the Duma recently one of his deputies joined [communist]
Ilyukhin in criticizing GKI [State Committee for the Management of State
Property] chairman Kokh) and its results, and fights for strengthening
government regulation of the economy. The communist opposition openly
sympathizes with the minister -- in the past six years, probably not one
active "power" minister has enjoyed such sympathy from the opposition. For
Chubays, Kulikov is an enemy, and a very dangerous enemy: Kulikov controls
the real military force that is best adapted to intervene in political
struggles. If people in presidential and government circles today are
scared of the emergence of a dictator, it is Kulikov who they consider to
be the main contender for this role. Quite naturally, therefore, rumors
sprang up of the amalgamation of the FSB [Federal Security Service], FAPSI
[Federal Government Communications and Information Agency], border guard
service, and other former KGB structures. It is a question of creating a
power counterweight that could be depended on in a fight with Kulikov. In
reality, however, the mood in the FSB is strongly pro-communist, and the
present-day chekists are not very suited to the role of the bulwark of
democracy. The liberal wing of the party of power has been trying to get
rid of the all-powerful internal affairs minister for some time. At one
time the dashing Lebed took part in this battle; however, to everyone's
surprise, Kulikov, who lost the Chechen war, overcame this hero and
peacemaker with no losses to himself. For approximately a year now the
liberals, with help from the mass media, have been trying to get the
president to part with his main power minister. He is portrayed as "the
leader of the party of war," and as an unlucky fighter against crime who is
in no way able to achieve any significant results. Now Kulikov is
regularly described as a schemer dealing in petty provocation. It is no
coincidence that on NTV's "Kukly" [TV show with puppets representing
politicians], the general is presented as the most negative character every
week. In short, the Grachev story is repeating itself -- the mass media
has been firing at the minister point blank for months, but Yeltsin does
not react. Even the repeated spreading of information on the communists'
support for Kulikov has not worked. Why is the president so unwilling to
part with a minister who is clearly in conflict with the "young reformers"
and the press that supports them? The general impression is that Kulikov
impresses him as a dashing warrior with a doctorate who gives him the truth
straight from the shoulder but at the same time always follows orders. 
Clearly, this emotional basis for Yeltsin's enduring patience is not the
most important factor. What is more important is that the president needs
at least one effective power structure: The economic crisis continues and
the communists' hopes for a "hot fall" are not unfounded. In such a
situation, reliable internal troops are a must. The question remains: How
reliable is a minister who is so liked by the communists? After all, given
such a turn of events the Constitution might have to be violated, but
Kulikov has repeatedly sworn that he does not intend to break the Basic Law
for political reasons.
It may be assumed that Kulikov's fate will depend on the president's
strategy. There is considerable evidence that Yeltsin is prepared to move
on toward a harsh confrontation with the opposition -- that is, first and
foremost, the Duma. This is confirmed by the declaration of the necessity
to bury Lenin, and the information leak about how the presidential team
intends to change the electoral legislation so that there is not such a
number of communists in the new Duma. If things head in that direction,
Chubays will probably manage to get the minister replaced.
However, another possibility should not be ruled out. Let us assume
the worst -- the reforms that have now begun fizzle out by the fall and the
economic situation in the country does not improve. In these conditions,
instead of a harsh battle with the opposition, Yeltsin could move for a
compromise with it. Then by winter he will have to "surrender" not only
Chubays, but perhaps Chernomyrdin as well. In that event, Kulikov could be
useful to him as a premier who will be loyal to the president and at the
same time be totally acceptable to the Duma's communist majority. Boris
Nikolayevich [Yeltsin] has no better candidate to cover his retreat: 
Kulikov has become more skillful both in public politics and in backstage
infighting, and has recently acquired work experience in the government
too. The possibility of such a development is not inspiring, of course,
but who could break up the parliament now as it was done in 1993? Yeltsin
does not have that kind of people now.

**********

#4
The Globe and Mail (Canada)
10 July 1997
[for personal use only]
Regional rulers ignore Kremlin 
Russian government cannot dictate to Primorsky's powerful governor 
By Geoffrey York 
Moscow Bureau 

With his bullhorn voice and his bulldog manner, Yevgeny Nazdratenko has 
ruled as the undisputed czar of the Russian Far East for the past four 
years. 
His enemies have included some of the highest-ranking officials of the 
Russian government. So far, nobody has bested him -- and his defiance 
has become a symbol of the rising independence of Russia's regional 
bosses. 
Last month, Mr. Nazdratenko became the first target of President Boris 
Yeltsin's attempted crackdown on the chieftains of Russia's rebellious 
regions. But now it is the Far Eastern governor who is crowing in 
triumph. 
"Beyond any doubt, it is me who has the power, just as I had before," 
Mr. Nazdratenko declared in an interview. "They thought they could make 
me surrender and drive me mad. But I think that those who started this 
will be driven mad." 
Mr. Yeltsin, faced with the steady decline of federal power and the 
rapid growth of regional autonomy, has tried to halt the trend by making 
an example of Mr. Nazdratenko. 
In a move intended as a warning to all the independent-minded governors, 
Mr. Yeltsin decreed last month that Mr. Nazdratenko should be stripped 
of his control of key sectors of the Primorsky region, the strategically 
important Pacific coast territory where Mr. Nazdratenko has ruled with 
an iron fist since 1993. 
"I know there are a lot of bosses who got big powers and immediately 
opened up their own big pockets," Mr. Yeltsin said. "They think they are 
far away from Moscow and there will be no control over them. They are 
wrong. We will . . . slap their hands to teach them a lesson." 
Mr. Yeltsin threatened to use his emergency powers to sack Mr. 
Nazdratenko. And he appointed one of the region's toughest characters, 
Lieutenant-General Viktor Kondratov -- the local chief of the Federal 
Security Service, the domestic successor to the KGB -- to be his 
personal representative in his battle with the governor. 
In Moscow's political circles, Gen. Kondratov was portrayed as the new 
boss of the Primorsky region. Within days of his appointment, he flexed 
his muscles by raiding one of the governor's offices and seizing 
confidential documents. 
But a month later, the federal crackdown has fizzled. Even his enemies 
have conceded that Mr. Nazdratenko is still the boss. 
"Nazdratenko hasn't lost any part of his power, and he may have actually 
increased it," said Vladivostok mayor Viktor Cherepkov, who has feuded 
with the governor for years. 
"He still has all the wheels of power that he had before. And now he has 
a chance to blame someone else for all the problems here. The 
President's decree was just empty words, without any mechanism to put it 
into effect." 
Mr. Nazdratenko, a former miner with close connections to Vladivostok's 
most powerful business circles, gave a convincing demonstration of his 
authority last month when Moscow sent its latest budget funds to pay the 
wages of the region's doctors and teachers. He took control of the 
money, allocated it where he wanted and refused to give any to 
Vladivostok, run by his rival Mr. Cherepkov. 
Mr. Nazdratenko, who won almost 70 per cent of the vote in the last 
regional election, has maintained his popularity by attacking Moscow and 
blaming it for the region's disastrous economic problems, including an 
energy crisis and an epidemic of unpaid wages. 
In the past few months, almost all of Russia's 89 regions have held 
gubernatorial elections. The previously appointed governors now have a 
popular mandate for the first time, increasing their political strength 
and their independence from Moscow. 
At the same time, federal budget cuts have slashed the flow of money 
from Moscow to the regions. This, too, has weakened Moscow's control of 
the regions. 
"Moscow has neither carrots nor sticks," said a Western diplomat based 
in Vladivostok said. "Now that the governors are elected, Moscow cannot 
remove them from office. Moscow has lost its ultimate whip. It has much 
less power over the regions. The central government is amazingly weak, 
and the governors are like little gods in their fiefdoms." 
The shift of power can be seen in Mr. Nazdratenko's travel schedule. 
When he was first appointed governor by the Kremlin in 1993, he bragged 
of his high-ranking friends in Moscow and made frequent trips to the 
capital to lobby for money and privileges. These days, he makes fewer 
trips to Moscow, openly defies the Kremlin's orders and scores political 
points by bashing Moscow. 
While the governor is ensconced in his rural estate in a forested suburb 
of Vladivostok, it is the Russian officials who must endure the 
nine-hour airplane journey to the Far East to see him. "I am the 
governor and you are the guest here," he lectured a Kremlin official who 
travelled to Vladivostok last month to confront him. 
When the Kremlin threatened to remove him from office last month, Mr. 
Nazdratenko responded by threatening to call an election, which he would 
almost certainly win. 
Although the local economic crisis has eroded his support, the governor 
would probably win 50 to 55 per cent of the vote if an election is held 
in the near future, the Western diplomat said. "He's had his wrists 
slapped by Moscow, but it just seems to add to his popularity." 
For most of the past year, Moscow has been trying to rein in the regions 
with presidential decrees and other threats. Worried that the 
decentralization is reinforcing the danger of separatism, the Kremlin 
complained that the regions had violated federal laws on more than 
240,000 occasions in 1996 alone. 
At least 19 regions have adopted constitutions that Moscow regards as 
illegal. Some regions have claimed the right to declare independence, 
raise armies, sign international treaties and declare war on foreign 
states. 
The rising influence of governors such as Mr. Nazdratenko reflects 
several realities of the post-Soviet world. First, the Russian business 
sector has evolved into a powerful oligopoly, where a handful of big 
corporations -- usually with close links to the regional government -- 
are the dominant players in each region. In Vladivostok, four major 
corporations control 60 per cent of employment. All four are closely 
tied to the governor and they have little incentive to obey officials in 
Moscow, almost 10,000 kilometres to the west. 
Federally controlled sectors in the Primorsky region, including the 
Pacific navy fleet and the defence industry, are seeing a rapid decline 
in their influence. Most cannot even pay their wages without a delay of 
many months. 
Second, the federal government is often gridlocked and paralyzed by 
struggles among competing interests. The regions, by contrast, tend to 
be autocracies, with a single dominant leader who can control all the 
levers of power. Most of the key government sectors -- including police, 
tax authorities, customs, courts and prosecutors -- are controlled by 
regional authorities. 
Third, the governors usually have tight control of the regional media. 
Mr. Nazdratenko, for example, controls most newspapers and television 
newscasts in his region. His press service has a team of camera 
operators producing flattering stories about the governor, and their 
reports are presented as objective news on television newscasts. When a 
newspaper began attacking the governor, its electricity was switched off 
and it was shut down for three months on legal charges. 
Finally, most federal money for regional purposes is still transferred 
directly by Moscow into the bank accounts of the regional governments, 
which decide how to allocate the money. "The budget has become a feeding 
trough for regional officials," said Mr. Cherepkov, the Vladivostok 
mayor. "Even the money sent specifically to the city is not reaching us. 
It stays in regional pockets. These regional officials have become so 
deeply involved in this that they have joined the criminal world." 
If the Kremlin's campaign against Mr. Nazdratenko was an attempt to 
intimidate the Russian regional bosses, it has been a dismal failure. 
"They wanted to teach a lesson to other governors and say to them: 'You 
will all be brought to your knees and you'll all get the same,' " Mr. 
Nazdratenko said. "There was a lot of fuss in the media. But nothing has 
really changed. Gen. Kondratov got no special rights in reality. He got 
nothing." 
The Federation Council, the upper house of Russia's parliament, has 
voted to give strong support to Mr. Nazdratenko in his battle against 
the Kremlin. The council, which includes all governors and other key 
regional officials, backed the Far Eastern governor by a vote of 113-0 
last week.

***********

#5
IN AUTUMN EXECUTIVE POWER WILL MAKE AN ATTEMPT "TO REACH AGREEMENT" WITH 
THE DUMA, GEORGY SATAROV STATED
MOSCOW, JULY 10. RIA NOVOSTI CORRESPONDENT MARIANNA
SHATIKHINA - The government of Russia intends to convince the
State Duma to adopt the Tax Code, the Law on Sequestration and a
package of social draft laws as soon as possible. As Georgy
Satarov, an aide to the President of Russia, stated in an
interview with the RIA Novosti correspondent, in autumn
executive power will make an attempt "to reach agreement" with
the lower chamber of parliament. According to him, a search for
"compromise variants" is now under way so that right after the
parliamentary vacation the deputies would start considering them
without delay. Satarov emphasized that it is necessary to set a
"tough timeframe for the State Duma so that it would tackle
pressing issues instead of wasting time on adoption of laws
which are not so topical, and of its own resolutions".
The President's aide holds the view that dissolution of
parliament "is ineffective from the standpoint of the
accomplishment of the tasks set by Boris Yeltsin in the Message
to the Federal Assembly, since in this case for three months
there will be nobody to adopt laws". In his opinion, the head of
the state demonstrated precisely such a "pragmatic approach" in
his latest radio address, stating that it is necessary to work
together with the State Duma. 

********

#6
Chicago Tribune
10 July 1997
[for personal use only]
By Colin McMahon, Tribune Staff Writer
Dateline: MOSCOW 
FACED WITH EAST-WEST LOVE FEST AT NATO SUMMIT, RUSSIANS SHRUG 

Ukraine signs a security agreement with NATO. The leaders of three former
Soviet satellites, already invited into the Western military alliance, pledge
to help bring along their friends from the Baltics. The NATO summit in Madrid
blossoms into an East-West love fest.
What does Russia do? Pretty much just shrugs.
Moscow's reaction to the two-day NATO summit in Spain was noteworthy
Wednesday in that no one really said much of anything.
Well, not quite no one. A pro-Communist newspaper said that July 8, when
Poland, Hungary and the Czech Republic were invited to join NATO, would "go
down forever as a day of national shame."
Likewise, a few federal legislators sounded off about the sorry state of
Russia's military.
More significant was that President Boris Yeltsin was off on a fishing
vacation, his senior aides ignored the issue, and only a low-level diplomat
was in Madrid to represent Russia--a way to snub NATO and dismiss the
summit's importance at the same time.
Even Alexander Lebed, the former national security director who appeals to
many Russian nationalists, expressed resignation over NATO's eastward crawl.
"I've always regarded calmly the matter of new members joining the
alliance," said Lebed.
"The rich and the well-fed will never threaten the poor and the hungry."
To be sure, Russia had some time to get accustomed to the once
unthinkable, that former Soviet Bloc allies would be invited into NATO. After
months of testy negotiations, Yeltsin and NATO leaders in May signed a deal
that allows Moscow some voice in NATO policy in exchange for its acquiescence
on expansion.
That deal does not stop the Kremlin from taking occasional shots at NATO.
As the summit convened, Foreign Minister Yevgeny Primakov called expansion "a
great mistake, maybe the greatest mistake since the end of the Cold War."
And Moscow still rejects any proposals for NATO to bring in the Baltic
states--Latvia, Lithuania and Estonia--because they lie along Russia's
strategic northwest frontier. NATO membership for the Baltics "has been
unacceptable for Russia and will remain so," said Gennady Tarasov of the
Foreign Ministry.
But Russian officials praised NATO's decision in Madrid to put off the
Baltic question for at least two more years. They are also keen to present
the Founding Act, as the Russia-NATO deal is called, as a diplomatic victory
of sorts.
Publicly, at least, the Russian reaction was so muted that the sight
Wednesday of the Ukrainian president signing a deal with NATO failed to cause
a stir. That was remarkable given that Ukraine remains squarely on the prime
invasion path from Europe to Moscow chosen by Napoleon and Hitler.
Madrid "will go down in history as a city where European division lines
were eliminated," President Leonid Kuchma said after signing a partnership
charter that gives his Ukraine the right to consult with NATO if it feels
threatened.
In exchange, Kiev promises to continue its military reforms and to respect
international borders.
Kuchma also made a point of mentioning its giant neighbor, with whom Kiev
signed a treaty in May aimed at resolving bitter disputes that have raged
since Ukraine broke away from the Soviet Union in 1991.
"The important thing is that Russia and Ukraine are cooperating with NATO
and signed political and legal documents to this effect," Kuchma said.
Scores of people, mostly elderly, protested outside Kuchma's house
Wednesday in Kiev, shouting: "NATO is a hangman's noose!" and "Tanks will
roll!"
In Moscow, meanwhile, the anti-NATO faction of the national parliament
issued a statement blaming NATO expansion on Russia's military weakness.

**********

#7
Excerpt
THE WHITE HOUSE
Office of the Press Secretary
(Madrid, Spain)
July 9, 1997
PRESS CONFERENCE BY PRESIDENT CLINTON

Q: Mr. President, NATO expansion has critics in the United States and
not only on the grounds of costs; some say it risks isolating Russia
or weakening and diluting the Western Alliance. Do you feel the need
to launch a public relations campaign in the United States on behalf
of this initiative, and if so, what will you do?

THE PRESIDENT: Well, I think a lot of our campaign has already begun.
Because of the widespread awareness at home because all of you are
here and telling them at home what we just did, I think that a lot of
the work has begun. But I do think, yes, that we all have a job to do,
as Senator Roth said yesterday, but I and our administration have a
job to do with the American people and with the United States
Congress.

I disagree that we are isolating Russia. You can only believe we're
isolating Russia if you believe that the great power, territorial
politics of the 20th century will dominate the 21st century; and if
you believe that NATO is inherently antagonistic to Russia's interest
and that Russia inherently will have to try to exercise greater
territorial domination in the next few years than it has in the last
few. I dispute that.

I believe that enlightened self-interest, as well as shared values,
will compel countries to define their greatness in more constructive
ways. And the threats that we will share that will be genuine threats
to our security will compel us to cooperate in more constructive ways.
Therefore, I think the fact that we had the NATO-Russia agreement
first, that I went to Helsinki to see President Yeltsin before we
actually even went -- finalized where we were going with this -- we
got that done first and we met in Paris and signed the agreement --
shows that NATO wants a constructive partnership with Russia as with
all other democratic countries.

Q: Mr. President, the recent arrest in Miami of three Lithuanian
nationals accused of offering to smuggle nuclear weapons to U.S.
Customs agents, unbeknownst to them at the time, has raised new
questions about the security and stability of the nuclear holdings of
the former Soviet Union. What is your analysis of it, especially in
light of the decisions that have been taken here over the past couple
of days? How secure, how stable are the nuclear holdings of the former
Soviet Union?

THE PRESIDENT: I think on balance, they have made great progress in
the last few years. You know this because we've talked about it a lot
over the last few years, but we have spent a lot of time working with
the Russians both to try to bring all the nuclear weapons and
materials into a more concentrated area and get them out of the other
republics of the former Soviet Union, and also to try to increase the
safety of the materials. And the Russians have been quite constructive
in our cooperation, and we've made a lot of progress.

The first thing I asked when I saw that story about the arrest was
whether or not they could have delivered the goods they were
promising, which we don't know. Keep in mind, we have -- our European
friends, and Germany especially, a few years ago made a lot of arrests
of people who were coming out of Russia with what they thought were
nuclear materials, but none of them, as far as I know, could have been
converted into weapons. That is, they were nuclear-related materials
from sites that people got away with, but the actual material that
could be turned into a weapon was under sufficient security control
that it wasn't out.

We may not live in a zero-risk world, but I do believe we're doing
well. And we will have to investigate this thoroughly to try to trace
it back if there was a breakdown somewhere and, if so, what we have to
do about it. But let me say, you just made the case for why I believe
that we need to view our national interests in the same way.
Obviously, the Russians and we here have the same interest. The
Lithuanians have the same interest. Nobody wants this to be done. This
is a violation of every nation's self-interest.

**********

#8
New York Time
July 10, 1997
[for personal use only]
Letter
Not NATO. The Empire!

To the Editor: 
Rather than entering NATO (front page, July 9), Poland and Hungary 
should be admitted to the Holy Roman Empire. The Empire is more relevant 
to current European security problems than is NATO. 
For the foreseeable future, the threats to continental stability from 
ethnic discord and Islamic fundamentalism exceed any risk of Russian 
expansionism. The Holy Roman Empire, a multinational entity that 
combated Muslim autocracies, would be better suited to manage these 
problems than an alliance whose raison d'ętre was to contain Russia. 
If today's problems must be solved by the institutions of the past, why 
not go all the way? 
BENJAMIN ROSS
Bethesda, Md., July 9, 1997 

*********

#9
St. Petersburg Times
JULY 7-13, 1997
Once-Sickly Ruble Suddenly Strong 
By Stephanie Baker-Said
STAFF WRITER

Gone are the days when the dollar was the only game in town, when the 
Central Bank had to step in to rescue the ruble from a free fall. Now 
rubles are back in fashion.

The ruble has remained virtually unchanged at 5,782 to the dollar since 
June 16, the longest period of stability in almost two years.

And while the ruble may have edged down from 5,570 since the start of 
the year, it has fallen much less than inflation: The currency has 
actually appreciated in real terms, that is taking into account 
inflation, by 2.8 percent.

Indeed, the ruble is so buoyant that the Central Bank is having to 
intervene to stop the currency rising against the dollar.

The reasons for the new demand for the ruble are unclear, either growing 
confidence is encouraging Russians to invest at home or the government's 
tax drive is forcing Russian companies to turn dollars into rubles or 
else a flood of foreign investment is washing into Russia.

But Central Bank Chairman Sergei Dubinin this week hailed the ruble's 
strength as a sign of the success of the government's reform program. 
"Demand for rubles is outstripping supply as inflationary expectations 
diminish," he said.

For economists, the clue to the ruble's strength is data which shows 
Russia's gold and hard currency reserves had jumped to $23.8 billion 
from $15.3 in January.

The Central Bank has made much of the $8.5 billion by selling rubles on 
the foreign exchange market. Ordinarily this would drive the value of 
the ruble down but demand for the currency has been so strong that the 
exchange rate hmarket. Ordinarily this would dr

The reasons for the enriched reserves are many, but most believe it 
signals an increased confidence in the ruble and a return of flight 
capital that left the country.

"Right now there is a surge of dollar inflows from abroad, which presses 
the exchange rate towards appreciation," said Yaroslav Lissovolik, an 
economist with the Russian European Center for Economic Policy.

The ruble's strength has been powered in part by the crackdown on tax 
deadbeats. Many enterprises, such as energy giant Gazprom, are 
exchanging dollars for rubles to pay billions in overdue taxes to the 
federal budget.

It is also linked to the government's aggressive borrowing. "In 
particular it is caused by the government borrowing on international 
markets and the foreign capital inflow to the [government securities] 
market," said Yevgeny Yuzefovich of the Finance Ministry's Economic 
Expert Group.

How the Central Bank decides to handle the inflows of hard currency and 
the growing demand for rubles is unclear. 

By keeping the exchange rate more or less the same since mid-June it has 
created the appearance of sitting on the fence.

In fact, the Central Bank faces two choices. It could allow the ruble to 
appreciate, that is rise in value, or else continue its current policy 
of selling rubles to meet demand and drive the ruble down.

"The Central Bank is facing a dilemma, of whether it will permit the 
ruble under these circumstances to appreciate, or whether it will 
intervene," said Lissovolik.

Allowing a significant appreciation of the ruble could undermine 
Russia's precious exports, which channeled $87 billion into the economy 
last year.

"The Central Bank would be constrained by exporters whose margins would 
be hurt by a significant real appreciation of the ruble," said 
Lissovolik.

But the current policy of selling rubles also has pitfalls. 

The rubles sold by the Central Bank on the foreign exchange market 
eventually end up in the real economy where they could fuel inflation.

Most analysts predicted that the Central Bank would probably resume its 
policy of slowly depreciating the ruble, but said it is unlikely the 
ruble would depreciate as rapidly as it had in the first three months of 
the year, when it lost almost three rubles a day against the dollar.

"There will be a slight nominal depreciation of the ruble over the next 
six months," said Yuzefovich. But he said this would result in a slight 
real appreciation of the ruble.

Monetary authorities have followed a so-called crawling corridor 
exchange rate regime, which allows the ruble to steadily depreciate 
within the upper and lower limits of the band. Under the Central Bank's 
policy, the ruble should be between 5,750 and 6,350 per dollar by the 
end of the year. 

***********

#10
Russian Govt Owes Armed Forces 8.1 Tln Rubles In Back Wages

MOSCOW, July 10 (Interfax) - State debt on wages to military servicemen 
and civil employees in the Russian Armed Forces currently stands at 8.1 
trillion rubles, the head of the Chief Military Budget and Finance 
Department at the Defense Ministry, Georgy Oleinik, told a news 
conference in Moscow Thursday. 

In line with President *Boris Yeltsin's* July 8 decree on the repayment 
of this debt, the ministry will receive 4.6 trillion rubles in July and 
the remaining 3.5 trillion rubles in August 1997, he said. 

Russian government representatives said earlier that the armed forces 
were owed 4.5 trillion rubles in overdue wages. Asked why the figures 
were different, Oleinik said: "Everyone has his own calculation 
methods." He said his figures were correct. 

The July 8 presidential decree envisages clearing all debts on wages to 
the armed forces before September 1. 

Oleinik said that after the July 7 session at the Finance Ministry he 
was confident that the decree would be implemented in full. 

To prevent possible delays in the repayment of late wages, the Defense 
Ministry plans to simplify the procedure for transferring money to 
military units, he said. 

Unlike under the current financing procedure via the chief command 
offices of the groups of the armed forces, the money for wages will be 
handed over directly to military districts and naval units, Oleinik 
said. 

Since the beginning of the year the Defense Ministry has received about 
22 trillion rubles out of the federal budget, or some 33% of overall 
military expenses envisaged by the budget taking into account the 
planned budget sequestration, he said. Some 16 trillion rubles out of 
this sum has been spent on clearing wage arrears, Oleinik said. 

At the same time, the Defense Ministry currently owes its suppliers 42 
trillion rubles, he said. 

**********

#11
Houston Chronicle
10 July 1998
[for personal use only]
NATO, Russia heading for confrontation over Baltic nations' status 
By CRAGG HINES

MADRID -- When the fog of NATO's historic expansion battle cleared 
Wednesday, a longstanding but little understood geopolitical sore point 
emerged as the focus of the alliance's continued fight over enlargement. 

A decision on whether to admit the three Baltic nations -- Estonia, 
Latvia and Lithuania -- looms as a test of the alliance's dedication to 
spreading its political and military umbrella without regard to the 
fervent protests of Russia. 

If the fancy footwork at the NATO summit in the Spanish capital is any 
guide, the Baltic nations' intense desire to be brought into the 
alliance is likely to spark another prolonged, heated debate that could 
drag well past the turn of the century. 

President Clinton will almost certainly face increased European 
opposition to poking Russia in the eye by adding the former Soviet 
territory in NATO, despite the president's contention that any European 
democracy -- even Russia itself -- remains eligible for NATO membership. 


NATO agreed to the first wave of expansion Tuesday, asking Poland, 
Hungary and the Czech Republic to complete admission procedures. The 
leaders of the alliance's 16 member nations also put Slovenia and 
Romania at the front of the line for a subsequent enlargement, which 
could come in two years. 

Those are relatively easy decisions, as a majority of NATO nations were 
ready to admit all five nations this time around but bowed to Clinton's 
insistence that only three be taken in the first round. 

At U.S. insistence, the NATO summit communique recognized "states in the 
Baltic region which are also aspiring members." Some European members 
objected to more definitive specific references to the countries 
individually, a diplomatic source said, but there was no doubt to whom 
the leaders' statement referred. 

The Baltic nations, which have long been pawns in European power 
struggles, were handed over to the Soviet Union by Germany in the 
notorious Molotov-von Ribbentrop pact of 1939. The three nations never 
assented to their forced incorporation into the Kremlin's orbit, a move 
never recognized by the United States. 

Russian President Boris Yeltsin has warned that NATO expansion to any 
former Soviet republics, including the Baltic states, could prompt 
abrogation of Russia's new, untested consultative agreement with the 
Western alliance. 

Baltic historian Anatol Lieven said Yeltsin clearly means that admission 
of the Baltic nations to NATO would "risk . . . a complete breakdown of 
Russia's relations with the West. In this he undoubtedly has the support 
of the overwhelming majority of Russian public opinion, whether liberal, 
Communist-conservative or nationalist." 

"I cannot see at present how NATO can square this particular circle," 
said Lieven, now an Eastern European correspondent with the Financial 
Times. "Since many West Europeans are also strongly opposed -- though, 
so far, in private -- to seeking confrontation with Russia over this 
issue, expansion to the Baltic states also risks dividing, not 
strengthening NATO." 

Although a number of NATO members appear ready for a hiatus in 
expansion, at least after the first five, former State Department 
official Jonathan Dean believes "there is not much chance for such a 
pause." 

"The three Baltic governments will not stop pressing their candidacy -- 
visibly and noisily -- until they are admitted," Dean, a European 
security specialist now with the Union of Concerned Scientists, said 
recently. 

The Baltic nations, Dean noted, have rejected a consultative arrangement 
with NATO like the one set up with Russia in May and with Ukraine during 
the alliance summit's final day Wednesday. 

"They want only the real thing -- NATO membership," Dean said. 

Latvian President Guntis Ulmanis made that clear Wednesday after further 
discussion with NATO leaders. 

The Baltic states ``have decided we must not name a date" for 
membership, Ulmanis said, "but this will not be in the distant future. I 
am sure we will be members of NATO ... in five or seven years." 

Lithuanian President Algirdas Brazauskas said his nation "will closely 
watch" progress of the three nations that have been invited in "and will 
apply these lessons to Lithuania." 

Ulmanis said he expected Poland, Hungary and the Czech Republic "to 
become advocates" of the Baltic states' membership aspirations. 

Dean said the Baltic nations' desire is "wholly understandable." 

"They are seeking at any cost to assure their own security in the face 
of Russian political opinion that barely concedes their independent 
existence," Dean said. 

Relations of the Baltic nations with Russia remain cool, and neither 
side trusts the other. 

Estonian Foreign Minister Toomas Ilves said last year that "if Russia 
didn't threaten us, we'd have better things to do" than seek NATO 
membership. 

Lieven, who lived in the Baltic region as the Soviet Union was 
collapsing, said the story is not one-sided. 

"Leaders of the national movements in all three states stressed 
repeatedly in public that when these states achieved their independence 
they would be neutral, non-aligned states," Lieven said. "Now we may all 
understand and sympathize with the reasons which have led the Balts 
subsequently to change their position on these questions. I think, 
however, that in all fairness we must also recognize that the Russians 
have some reason to feel cheated and aggrieved both by the Balts 
themselves and by their Western backers." 

Given the Baltics' representation in the United States' ethnic mix -- 
particularly in the key industrial states of the Northeast and Midwest, 
Dean foresees the question of Baltic entrance into the alliance as a 
possible issue in the next presidential election. 

"It is no secret that the White House in exploring the Baltic security 
pact has in mind a domestic constituency (as much as) a foreign policy 
strategy," said Amos Perlmutter, a political scientist at The American 
University in Washington. 

************