July 13, 1997   

This Date's Issues:   1039 •1040  1041 1042

Johnson's Russia List
#1040
13 July 1997
djohnson@cdi.org

{Note from David Johnson:
Several people have inquired about "missing" issues of JRL
when they don't receive all of the numbered issues. Let me
remind you that most recipients are on List One and normally
receive two messages each day. Those on List Two receive more
messages. Let me know if you wish to join List Two.
1. John Danzer: Russian Empire Policy.
2. Renfrey Clarke in Moscow: RUSSIA'S KUZBASS: YELTSIN MANOEUVRES 
TO DAMPEN PROTESTS.
3. The Economist: Privatization in Russia: Oh, well. (DJ: Thanks 
to Sarah K. for bringing Economist articles to my attention. If 
you come across items of interest please pass them on to me.)
4. The Economist: A survey of RUSSIA: In search of spring. (An
eight-part series). Part 1: The endless winter of Russian reform.
Part 2: The makings of Molotov cocktail: Is it about to explode?
5. Washington Post: Daniel Williams, `Citizen Kane' on Pushkin 
Square. Rough Politics, Secret Deals End in Corporate Coup at Russia's 
Izvestia Newspaper and De Facto Dismissal of Longtime Editor.
6. The Guardian (UK): Moscow politics of business get rough.]

*******

#1
From: Telos4@aol.com (John Danzer)
Date: Sat, 12 Jul 1997 22:06:37 -0400 (EDT)
Subject: Russian Empire Policy

I have been reading JRL since it began. My opinion, though non-
professional, has been informed by the thousands of pages that have
scrolled on my monitor. Quite a few have actually entered my brain.

I am pleased to see Richard Pipes expressing a healthy pessimism concerning
the FSU. It's true that he doesn't have proof of some specific policy for
the reestablishment of the Soviet Union. But as Yeltsin himself
has said, "The status of a great power was handed down to us as
a legacy, not only as the foundation of our consciousness and our
culture, but as the code of Russia's very state structure." Empire
is automatically implied if you speak about a strong Russia. Does anyone
really
believe that Russia is going to achieve greatness again by the long
route of economic development? Its greatness was primarily a
matter of having a military force that people took seriously. Even
now, if it weren't for its nuclear forces Russia would be allowed
to slide into oblivion.

How far is Russia from again becoming an Empire? The only
thing Russia needs to reestablish its former influence is a
Leader who carries the empire vision in his head and has the
ability to pull the Empire strings in the hearts of the Russian
people. The USSR didn't fall apart because they lost the cold war. 
They lost the cold war because they fell apart. And they fell
apart because of one grudge carrying man, B.N.Yeltsin. The only way
Yeltsin could win his feud with Gorbachev was to dissolve the
Soviet Union. Don't think for a minute that if Yeltsin had been in
Gorbachev's position that he would have been a great democrat
willingly giving up Ukraine, the Baltics etc. Look at the losses
he was willing to sustain to hold onto Chechnya. Yeltsin has been playing 
the role of a democrat because that is the deal he made to
humiliate Gorbachev. In his desire to humiliate
Gorbachev he has humiliated his whole country. His lingering 
depression is no doubt the empty feeling of a shallow victory. 

Statistics vary about how Russians really feel about the loss of
their world status as a great and powerful nation. But common sense
tells you that most Russians look with fondness to the time when
they had some social security and got paid on time. 
China's economic model was well established by the time the Soviet
Union was dissolved by Yeltsin's signature. Yeltsin knew that to
carry out his revenge on Gorbachev he had to act quickly. By
destroying the Soviet Union Yeltsin gave up the possibility of a
rational and gradual transition to free-markets. By alienating and
banning the Communist party Yeltsin lost a valuable tool that would
enable society to hold together through the period of transition. 


Since the Soviet Union's undoing was primarily the act of this one
power hungry man it is easy to see that it would simply require one
power-hungry Hitler type who can speak to the heart of the Russian
people to reestablish what was lost and even add to its territory.
That is the most important idea that I got from Pipes article. 
There IS a strong German parallel that doesn't need any great
insight to discern. The question is what sort of dictator is
finally going to restore the empire?

********

#2
Date: Sun, 13 Jul 1997 12:08:22 +0400 (WSU DST)
From: austgreen@glas.apc.org (Renfrey Clarke)

#RUSSIA'S KUZBASS: YELTSIN MANOEUVRES TO DAMPEN PROTESTS
#By Renfrey Clarke
#MOSCOW - First, Russian President Boris Yeltsin appoints a
communist to govern an economically vital province. Ten days
later the new governor, taking the chance to address an anti-
government protest, calls on the workers of the province to form
detachments, investigate the finances of their firms, and throw
crooked bosses out.
#That, you would have to observe, is already a bizarre train of
events even for Russia.
#Then the mainstream Moscow press, virulently anti-communist and
normally quick with warnings of a red revanche, virtually ignores
these developments. At this point you would have to conclude that
whatever has actually happened, things are definitely not what
they seem.
#And indeed, the period around the beginning of July did not see
Yeltsin bolt impetuously back to the communist camp. Aman Tuleev,
the new governor of Kemerovo Province in Siberia, certainly
delivered a rousing speech to a rally during a province-wide day
of protest on July 11. But the Moscow newspapers were correct to
treat his utterances as something less than a summons to
revolution.
#That left the three million inhabitants of Kemerovo Province,
which includes the heavily industrialised Kuzbass coal basin, to
wonder whether an adept government manoeuvre had not short-
circuited yet another effort to force changes in their
economically blighted region.
#The July 11 protest had been called several months before on the
initiative of the Kuzbass trade unions. The impact of government
policies in the province, union leaders were contending, left
them no choice except to mount the broadest and most militant
industrial and political action of which their forces were
capable. As the liberal Moscow daily <I>Segodnya<D> admitted on
July 11, the average backlog in wage payments to state sector
workers in Kemerovo Province is six to seven months. The region's
industries are in deep depression.
#While the operations of vast enterprises such as the West
Siberian Metallurgical Combine could not be halted without
causing dire losses, the protest organisers hoped that workers in
many smaller plants would call one-day strikes. Rallies and
marches were organised in almost all of the province's 20 main
cities.
#The key demands were for the resignation of the president and
the government; for ``changing the course of the reforms''; and
for the payment of the immense wage debt, put by TASS at 4
trillion rubles (US$693 million), owed to the province's workers.
For a month beforehand, unionists staged pickets almost every
other day in the centre of the provincial capital, Kemerovo.
Union spokespeople predicted that on July 11 as many as 300,000
people would take part in one or another form of protest action.
#Meetings and marches did in fact take place in many cities. But
observance of the strike call was only patchy, and none of the
protest rallies was really massive. On Soviet Square in the
centre of Kemerovo, where organisers had hoped to see tens of
thousands of demonstrators from all over the province, no more
than about 5000 were present.
#In the commentaries on the day of protest, no-one has suggested
that the population stayed away because of a lack of bitterness.
But as various writers noted afterwards, people who have not been
paid have to make sure that they nevertheless eat, and the
rallies and marches had been called for the height of the
gardening season.
#Immediate political factors were also seen as important. The
Yeltsin administration took the threat of a major explosion of
labour protest in the Kuzbass very seriously, and sought
vigorously to cut this process off at the roots.
#As organising for the protests gathered pace Yeltsin sacked
Mikhail Kislyuk, his earlier appointee as governor of Kemerovo
Province, and installed Tuleev. Elections for the governorship
were promised for October.
#A former head of the Kemerovo provincial legislature, Tuleev has
long been a popular and influential figure in the Kuzbass.
Although he has made no secret of his close political alignment
with the Communist Party of the Russian Federation, he was
recruited in August 1996 to serve in the Russian government as
minister in charge of relations with other former republics of
the Soviet Union.
#On becoming governor, Tuleev made no overt moves to try to
dissuade citizens from taking part in the July 11 protests. But
his activity was designed to convince people that the province's
dilemmas were being vigorously tackled, and that protest was
therefore unnecessary. Many of Kislyuk's senior officials were
sacked. Within the local budget, Tuleev found funds that were
immediately sent to pay state sector workers in some of the
province's hardest-hit towns.
#Then came Tuleev's speech to the Kemerovo rally on July 11.
<Pravda<D> next day reported the new governor as urging workers
to form detachments to monitor the spending of enterprise funds
and the flow of raw materials and other goods. Under the old
administration, he asserted, these had been embezzled in vast
quantities. If an enterprise boss worked honestly, Tuleev
declared, he or she should be allowed to continue managing. But
if bosses were swindlers, they should immediately be thrown out.
#Not surprisingly, the demonstrators erupted in cheers. Had
Yeltsin's ploy in appointing Tuleev gone disastrously wrong?
#Minutes later, however, Tuleev signified that his call for the
proletariat to organise itself and impose workers' control, like
so much else in Russian politics, was not quite what it
appeared.<I>Pravda<D> again summarised the governor's words:
#``Aman Gumirovich [Tuleev] summoned the residents of the Kuzbass
to constructive work, to peace and harmony...and urged them not
to leave the enterprises under any circumstances, not to stop the
industry on which the shaky well-being of most Kuzbass
inhabitants was based.''
#Here was the kind of communist Yeltsin could use. And as the
English-language <I>Moscow Tribune<D> remarked, Tuleev made no
reference to the calls for the dismissal of Russia's leaders.
#In naming Tuleev to run the Kuzbass, Yeltsin played his regime's
last strong card in the volatile region. The appointment was a
risky political move. Anxious to be confirmed in his job by a
popular vote in October, Tuleev will not be sparing with
provocative statements. However, Tuleev's statements are the
rhetoric of a single politician, not the program of a party
rooted among the workers and committed to their defence.
#The Kuzbass workers have Russia's richest history of militant
struggle, and a strong tradition of relying on their own
strength. Their experience of creating democratically-run strike
committees has been noted with concern by pro-government
commentators. But the workers lack a developed political
leadership, able to raise demands that expose the omissions and
inconsistencies in the statements of fickle friends with careers
to build.
#In these circumstances, the Moscow press was right not to get
excited about Tuleev's speech on July 11. The Kemerovo governor
will make more such speeches, but will not create the mechanisms
for putting his suggestions into action. His real agenda will be
the opposite of his daring rhetoric. That agenda will run: ``Hold
on tight while the government cuts and privatises!''
#The risk for Yeltsin lies in the fact that the Kuzbass workers
do not need Tuleev in order to study the history of the Russian
working class, or to think through the logic of their social and
economic needs. Meanwhile, if the provincial governor peppers his
speeches with intriguing programmatic ideas, that is not going to
slow down the process through which the miners, steelworkers,
teachers and health staff create their own ``adequate political
instruments''.
#And as ever, the bane of would-be misleaders of the working
class will be the material reality of capitalism. In the Kuzbass,
that includes a huge, simmering corruption scandal at which
<I>Pravda<D> hinted on July 12:
#``At Zapsib [the West Siberian Metallurgical Combine], the
management used `snowdrop' firms to spirit about a trillion
rubles off abroad. The wage debt to its workers is only about a
quarter of this sum.''
#If Yeltsin largely managed to defuse the Kuzbass workers' July
day of action, it follows, that has not guaranteed a quiet
autumn.

********

#3
The Economist 
July 12th - 18th, 1997
[for personal use only]
Privatization in Russia: Oh, well
MOSCOW

The first carve-up of Russia's oil industry in 1995 began as a quiet
affair, mainly because few outside the
charmed circle of buyers and sellers could quite believe what was going on.
By the time public opinion
turned, it was too late: the government had distributed chunks of huge
state-owned firms to its favorites,
mainly private banking groups, by means of rigged auctions. The shares
were classed as security for
"loans', destined never to be repaid.

A second round of privatization is now getting under way. The prizes are
smaller, though by no means
negligible: they are stakes in second-tier oil companies, which together
account for 10-15% of Russian oil
production. Those who aspire to buy one should not get too excited. The
notion of a free and fair auction
is only haltingly catching on in Russia.

Foreigners expected to be barred from the main events, the so-called
"investment tenders' by which
strategic stakes in four of the firms will be allotted. And the government
may exploit the fine print of there
tenders to favor a particular bidder. In the case of Tyumen Oil, the
biggest of the firms on offer, the buyers
of a 40% state from the government must also buy refinery equipment valued
at $40m and owned by the
Alfa Group, an unrelated banking and trading group. Alfa has friends in
high places - but, as yet, no oil
producer to call its own. The original terms of the tender blatantly
favored Alfa; the government, after
criticism, says it will look at them again.

There are signs of one big fight ahead, for Rosneft, a firm not on the
official privatization schedule but
likely to be added soon. Rosneft's mixed bag of assets includes
federal-government states in massive,
long-term Caspian and Siberian projects. Tow of Russia's biggest
financial-industrial groups are sparring
around it. One is the Uneximbank group, led by a former first deputy prime
minister, Vladimir Potanin. 
The other group is controlled by Boris Berezovsky, a tycoon who says he has
distanced himself from
business since taking a job in the Kremlin.

The privatization of Rosneft is being delayed partly by a legal battle.
Sidanko, an oil firm controlled by
Uneximbank , is claiming title to a Rosneft subsidiary called Purneftegaz
belonged to Sidanko; but Rosneft
has at least two levels of appear available. Without Purneftegaz, which
accounts for tow-thirds of its
current oil production, Rosneft would be of mainly speculative attraction.
The long-term projects in which
it holds states may produces big returns, but only after big investments.

With or without Purneftegaz, Rosneft would complement Sidanko; and
Uneximbank seems minded to add
all the assets it can. The week Mr. Potanin said his bank group would
probably bid for a 25% state in a
new national telephone company, Svyazinvest, on sale for about $1.2
billion. Uneximbank has also been
accumulating shares in Gazprom, Russia's huge gas monopoly. It has been
wrangling with Mr. Berezovsky
over a parcel of shares in Sibneft. And it is thought likely to buy full
title to a 38% state in Norilsk Nickel,
the world's biggest nickel firm, which it currently manages on behalf of
the Russian government.

Mr Berezovsky is not a man ot let anything go without a fight, however.
And in the matter of Rosneft he
will have a powerful ally: Rem Vyakhirev, the chairman of Sibneft, who is
also the chief executive of
Gazprom. An epic struggle looms.

Whatever the outcome of these last oil privatisations, the main thing for
Russia is to have done with them. 
The prospect of quick gains from privatization has deterred longer-term
investment in wells and pipelines. 
Industrialists and government officials have colluded to keep foreign oil
firms at bay while ownership has
been cartelised. Meanwhile, the decline in Russian oil output continues
unimpeded; it is now at barely
half its level of a decade ago.

Even if foreigners cannot bid on the tenders they are sure to be courted in
future. The sum needed to turn
the decaying industry around far exceeds the resources of Russia's new oil
men. External financing will be
urgently needed. This will convert the oil firms, en masse, into champions
of foreign investment. And with
luck it will encourage more of the transparent accounting and fair dealing
that foreign investors - and,
increasingly, Russians - ask of the firms into which they put money.

*********

#4
The Economist 
July 12th - 18th, 1997
[for personal use only]
A survey of RUSSIA: In search of spring
1/8 The endless winter of Russian reform

If Russia as a whole is at all like the Arctic towm of Vorkuta, then the
country is in trouble. But, desite the ghastliness, argues John Grimond,
it may yet come right

INSOME ways, Vorkuta, in the Komi republic, is hardly a typical Russian
town. No onion domes interrupt its skyline; no birch trees gird its
outskirts; and, because it lies within the Arctic circle, the surrounding
land is not steppe but tundra, and the old collective farm produces
reindeer, not wheat. But in many respects Vorkuta is unmistakably Russian.
There is the inevitable statue of Lenin, the huge letters bidding long
life to Soviet-Bulgarian friendship,and the bleak familiarity of such
landmarks as the Vorkuta Hotel, built, like so many others across Russia,
to a standard model. This is the face of old Vorkuta, old Russia. Alas,
the face of new Vorkuta is just as grim, and just as typical of new Russia.

Like many another Russian town, Vorkuta depends on one product, in this
case, coal. Mines ring the town, punctuating the horizon with their great
chimneys, from which black smoke belches forth to foul the Arctic air.
Swirling coal dust blackens the ubiquitous snow.

In 1994, the mines began to be privatised. Since then, five have closed.
Vorgashorskaya, said to be the biggest mine in Europe, is still working,
but the number of miners has been cut from 4,500 to 3,500. Like workers
all over Russia, they have not been paid for months. In January, after
four months without wages, a strike was organised, though only a quarter of
the workforce took part. After two months, most of the strikers went back
to work, recognising the hopelessness of their cause. Faute de mieux, the
main union proclaims confidence in the management, which has been changed
by the Moscow-based company that now controls the mine. But the
privatisation has been a complicated and controversial affair, and the
ownership of the mine is disputed. While lawyers argue in court in
Syktyvkar, the capital of the Komi republic, the gossip in Vorkuta is of a
struggle for control between the Moscow mafia and the Syktyvkar mafia.

Virtually no investment is taking place in Vorkuta's mines. The management
says it has no money. Some customers pay for their coal in barter deals
involving cars, office furniture, even Black Sea holidays. And some of the
mines'creditors will take coal instead of roubles. Since the end of last
year, when the authorities realised no cash would be forthcoming, the mines
have been allowed to settle their tax bills in coal. But they do not
produce enough to pay even the tax man. Unless new equipment, promised by
the new management when Vorgashorskaya was first privatised, arrives by the
end of the year, production will begin to plummet.

People went to Vorkuta for the money. In Soviet times, when miners were
typically paid twice as much as professors and service in the Arctic
attracted premium wages, it was a place in which to save before retiring to
a warmer clime. Russians' savings, however, were wiped out in the great
inflation of 1992. Now Vorkutans are trapped. Those who leave are too
poor to buy themselves into better circumstances. Those who stay must go
on working, for nothing, at the coal face.

Survival rations
How do vorkutans survive? Though the elderly may shiver -l ast month the
town was without hot water or heating - at least they have money: pensions
here, unusually for Russia, have been paid on time. The shops boast a
variety of goods unseen ten years ago, but that is no comfort to the
cashless miners. They receive free food at the mine - a brown-paper parcel
containing bread, ointment-coloured meat paste and a hard-boiled egg (taken
home for the children). But most subsist through barter, debt, coupons and
subsidy. As Ivan Kazak, a veteran of the Afghan war and would-be organiser
of a hunger strike, wryly tells his wife, "Even if I wanted a mistress, I
wouldn't have
the 5,000 roubles for a packet of condoms."

To judge by the falling birth rate, sexual activity is anyway on the
decline, in Vorkuta as elsewhere in Russia. To while away the long winter
nights, Vorkutans may go the town's single theatre (if they can afford to),
single night club (frequented by dubious youths) or single smart restaurant
(though the periodic shoot-outs may dull the appetite). For most, the
public baths are the biggest attraction-apart from television and vodka.
And of these perhaps vodka is the most popular of all. As the snow begins
to melt, Vorkuta is revealed to be carpeted in vodka bottles as well as
coal dust. No wonder men die young here.

One other feature of Vorkuta is worth remarking on: the town rests on the
corpses of political prisoners. The people chosen to build it, starting
with just a camp in 1931, were those whohad fallen foul of Stalin. Over
the years, the demand for coal was matched by the supply of prisoners:
criminals, prisoners of war and, above all, political prisoners. No one
knows how many were sent there to labour in the mines; the official figure
is 200,000, but Pavel Negretov, one of the few survivors who still lives in
Vorkuta, believes the real figure could be ten times as high. The town's
population today is 180,000. In 1955, it was 55,000, of whom 5,000 were
free citizens, 8,000 were criminals and the rest were kulaks, dissidents
and other political prisoners. Many, perhaps half of them, died there. In
July and August, during the short interlude when Vorkuta is free of snow,
Vorkutans venture out into the tundra to gather mushrooms. Few come home
without also finding the bones of some of the gulag's semi-buried victims.

Sceptics may say that Vorkuta hardly represents Russia as a whole: just
look at bustling Moscow, with busy streets, bright lights and new buildings
round every corner. But it is Moscow that is exceptional. Russia today is
a land of unpaid wages, unpaid taxes, strikes, subsistence, dubious
privatisation, clapped-out industry, crime, corruption, pollution, poverty.
It is a land of excess vodka and early death. It is a land still
powerfully affected by 70-odd years of communism and the culture of
cynicism and violence that it bred. "In Vorkuta," the locals say, "we have
12 months of winter. The rest is summer." For many Russians, the past
five years of reform have been as summery as a year in Vorkuta.

Vorkuta, like Russia as a whole, voted to re-elect Boris Yeltsin president
last year. It backed him too in 1991, when he led the resistance to the
attempted coup against Mikhail Gorbachev. It would not back him today. Is
reform therefore doomed to fail? This survey will argue that, despite all
the evidence of misery and despair, it is not. It may even succeed.

----------

2/8 The makings of Molotov cocktail
Is it about to explode?

How grave is Russia's plight? Alexander Lebed - the general who helped
secure Mr Yeltsin's electoral victory with his no-nonsense populism last
year, was brought into government and then swiftly dismissed - likens the
situation to that in late 1916, just before the revolution. His chess
playing supporter, Garry Kasparov, is equally apocalyptic; the sees this
government surviving less than a year. Even those with a powerful interest
in it lasting much longer betray their doubts. One businessman who is
prospering mightily has a picture on his desk of his "executive jet": a
Sukhoi-27 ground-attack aircraft. "You never know when you may have to
leave in a hurry,"he says.

Those expecting another revolution might reasonably search for its
beginning s in three aspects of the Russian condition: poverty, outrage and
oppression. Each offers plenty to appal.

Take poverty first. Most statistics in Russia are dubious, but there is
little doubt that Russia's economy has been shrinking. Indeed, the
officially recorded economy has been contracting for eight years in a row,
leaving it at the end of 1996 at about
half its size in 1989-a steeper fall than in America at the time of the
Great Depression (though the
black economy has expanded). Meanwhile prices, unemployment and the tally
of unpaid wages have
been rising. Inflation reached the giddy height of 2,505% in 1992.
Unemployment, on the Interna-
tional Labour Organisation's definition, was up from 5.5% in 1993 to 9.5%
early this year, and many
economists put the true figure much higher. As for the backlog of wage and
other payments, this is how Keith Bush of the Centre for Strategic and
international Studies in Washington puts it:

The government has not been paying its employees, the armed services,
doctors, teachers and scientists. The Ministry of Finance has simply
sequestered budgetary payments to keep the deficit within manageable
limits. Enterprise directors, confronted with tighter money, have
merely stopped paying their suppliers and their employees; in turn, their
customers have stopped paying them. To complete the vicious circle,
increasingly in 1996 enterprises stopped paying their taxes ... overdue
payables, such as wage and tax arrears and arrears to suppliers and
banks, rose to an estimated 21% Of GDP by mid-1996. The ... salaries,
wages and transfer payments of 65m-67m citizens were in arrears at the end
of 1996. A poll in November 1996 found that 62% of respondents had not
been paid on time. For the 36m pensioners ... pensions were not being paid
on time.

What all this adds up to is that 22% of Russians, or 32m people, are living
below the official poverty line (defined as a minimum subsistence level of
394,000 roubles - $70 - a month). Among other things, as Communists like
to point out, this means falling meat and milk consumption: the average
salary buys only about two-thirds as much meat as in Soviet days, and only
about one-third as much milk. And after five years of economic reform,
life expectancy has dropped from 74 years in 1992 to 72 for women, and from
62 years to 58 for men. That places Russia roughly on a par with Kenya.

A matter of outrage

What amplifies the bitterness behind these statistics is the evidence that,
while most Russians have grown poorer since communism collapsed, a few have
grown vastly richer. For all, life may be nasty, brutish and short, but
some at least die rich. These are the most flamboyant and successful of
the "new Russians", the ones who have taken advantage of reform to make
their fortunes and who evidently believe that quiet good taste is a
contradiction in terms. Most have acquired their money through the
privatisation of state enterprises, especially through the shares-for-loans
schemes whereby managers and bankers secured in just a few short months in
1995 an array of enormously valuable state assets for next to nothing.
Prominent among the new tycoons is a group of seven businessmen, almost all
bankers, who control, or so one of them has foolishly boasted, about half
the Russian economy.

Never mind that the claim is exaggerated: many Russians believe it.
Moreover, many Russians be-
lieve that the new rich have acquired their wealth by straight forward and
sometimes violent theft: the transfer of state assets was, after all, a
ferocious, unregulated affair in which bombs, shotguns and
even toxin on tea cups seem to have played as big a part as bids, offers
and due-diligence searches. To this day, doing business in Moscow may mean
passing through metal detectors and meeting behind bullet-proof glass.
Foreign banks may operate from anonymous offices in seedy buildings lest
they draw the attention of those who would offer unwelcome protection. A
visitor to a tycoon's home may find him lurking in a sumptuous apartment
with folded packing cases taped across the windows: the cardboard diffuses
human bodyheat and thus foils the infra-red sights of potential snipers.

Most of this passes ordinary Russians by. Yet ordinary Russians are
frequently affected by mafias of one kind or another, who may control
anything from the supply of food in the market, to the sale of
videocassettes, to the production of minerals. They see the limousines
sweep by, often followed by jeeps packed with bodyguards. They see the
opulent kottedzhi go up-country retreats that outdo the mere dachas of the
not-so rich with the exuberance of their turrets and the grandeur of their
gatehouses. They read of contract killings which almost serve as an index
of business activity: 28 bankers (never mind anyone else) murdered in 1994,
41 in 1995, 49 in the first eight months of 1996. And they hear of, if
they do not actually experience, the shakedowns by racketeers. The
International institute of Strategic Studies in London reckons that
four-fifths of Russian enterprises pay, on average, 10-20% of their profits
as protection money.

There is thus an unhappy elision in the public mind between criminal
activity and business. There is also an association between prominent
businessmen and politics, and especially the politics of reform. In part
this is because the reformers, led by Anatoly Chubais, currently one of two
first deputy prime ministers, were the architects of the privatisation
programme that has produced so many of the new rich. In part it is because
businessmen have not been shy about getting involved in politics. Most
notable are the group of seven with half the economy supposedly at their
command: fearing that a Communist victory in the presidential election last
year would spell disaster-for Russia and for them personally-they decided
to sink their professional differences and work together for Mr Yeltsin's
re-election. They not only spent about $3m on the campaign but ruthlessly
exploited their control of two television channels, a radio station and
several newspapers and magazines. Today, one of them, Boris Berezovsky, is
deputy secretary of the country's Security Council, a top Kremlin job.

Toads beneath the harrow
A necessary ingredient of a good Molotov cocktail has always been a measure
of oppression. Can today's Russia offer that, as well as poverty and excess?

It would be hard to argue that rule in Russia is despotic, as it used to
be, but that does not mean it is quite democratic either. The constitution
allows the president, once elected, to behave much like a traditional
monarch. He has wide latitude to rule by decree. He has his courtiers,
one of whom, in Mr Yeltsin's court, is his daughter, Tatiana Dyachenko, a
considerable influence. Mr Yeltsin has also shown, in Chechnya, that the
president can wage a brutal and unpopular war against his supporters' advice.

The press is voluble, plural and often polemical, but not exactly
independent. Newspapers and magazines have been bought up like other
commodities in the recent scramble for assets. The oil and gas monopolies
have stakes. So do members of the group of seven. Thus Mr Berezovsky has
control of Nezavisimaya Gazeta (he says he has now put all his business
interests aside) and Vladimir Gusinsky, another member of the group, as
Sevodnya. Mr Gusinsky also controls NTV, Russia's only fully private
television station, whose chief executive, Igor Malashenko, was Mr
Yeltsin's main image maker during the election campaign last year.

The dubious uses to which media ownership is often put are hardly likely to
make the masses rise up. More infuriating to the general public is the
relentless corruption of Russian society. It is not just the traffic
police, so poorly paid that they have little choice but to extract bribes
at every turn. It is officialdom of every kind. Palms have constantly to
be greased before permits are granted, and Russia is still a land of
passes, licences and other essential bits of paper. The constitution and
the courts say Russians may now live where they wish, but to live in
Moscow, for instance, a propiska, or residence permit, is necessary. Even
someone with the right qualifications may have to spend $20,000 to get one.
Anyone from Central Asia or the Caucasus will be sent packing - on the
orders of the mayor, Yuri Luzhkov, who runs the city more or less as he likes.

With a corrupt and underpaid judiciary, anyone in business, whatever his
ethnic origins, may sooner or later need the services of a krysha-a fixer,
either in or outside officialdom, who will sort out disputes, if necessary
by striking deals with other kryshas. Resorting to such extra-legal
intermediaries is just one of the ways to survive in a society where rules
count for little. Indeed, it has become almost impossible to do business
honestly, as criminals increasingly invest their ill-gotten gains in
legitimate operations, making offers that wise men cannot refuse.
According to the interior Ministry, criminal gangs now control 40,000
enterprises in Russia, including 500 banks.

So there it is. Five years of reform, and most Russians are far poorer
than they were. A few are far richer, and they are the ones who now seem
to be running the show. It is not that the vulgarians are at the gates;
they are inside them. Corruption is rampant. Alexander Solzhenitsyn says
the gulf between the rulers and the ruled is larger now than in 1917. And
yet revolution is not in the air. Far from it.

*******

#5
Washington Post
13 July 1997
[for personal use only]
`Citizen Kane' on Pushkin Square
Rough Politics, Secret Deals End in Corporate Coup at Russia's Izvestia 
Newspaper and De Facto Dismissal of Longtime Editor
By Daniel Williams
Washington Post Foreign Service

MOSCOW—As the editor of Izvestia, Igor Golembiovsky was arguably the 
most influential newspaperman in Russia. The paper, housed on Pushkin 
Square, had a reputation for probing both the government and the blocs 
of big business that increasingly control Russia's destiny. Golembiovsky 
dreamed of extending the paper's reach by beaming it via satellite to 
printing presses across Russia.
But he was caught in a dilemma: He needed corporate money to finance his 
dream, but he needed not to be accountable to corporate partners. The 
obvious contradiction proved unbridgeable. This month, following a 
bitter power struggle, Izvestia's two biggest corporate shareholders 
joined forces to oust him, advising him to take a "vacation" while they 
arrange the naming of a new editor.
Golembiovsky's downfall is a complex tale -- one in which he was partly 
responsible for his fate through careless publishing of unreliable 
information and, perhaps, naive dealings with heavyweight financiers. It 
is also a tale of mutual suspicion, secret deals and rough politics set 
against the backdrop of Russia's raw, winner-take-all market system -- a 
"Citizen Kane" on Pushkin Square.
His ouster brought relations among the media, business and government 
once again to the fore in Russian political life. Large companies with 
government ties have steadily bought up shares in Russian newspapers and 
television stations, raising questions about how independent the press 
and TV news can be in the new Russia.
Golembiovsky says danger lies ahead. "In Soviet times, the issue was how 
to protect society from authority. Now we are moving to a system aimed 
at protecting authority from society," he said in an interview at his 
Moscow apartment.
Golembiovsky's career spanned both the Soviet era and the creation of 
the new Russia. He worked at Izvestia when it was the mouthpiece of the 
Soviet government and was named deputy managing editor during a brief 
period of liberalization when Yuri Andropov was the Soviet president.
Izvestia emerged as the country's leading newspaper after the collapse 
of the Soviet Union. Golembiovsky was named editor by the staff because 
he opposed the attempted hard-line coup against Mikhail Gorbachev in 
1991.
The two corporations that worked to oust Golembiovsky are treading 
warily. They appear eager not to be known as the businesses that killed 
an independent Russian newspaper.
"We have expansion plans for Izvestia," said Alexander Vassilenko, of 
Lukoil, Russia's biggest petroleum company and a major shareholder in 
Izvestia. "We will not be able to realize them if everyone thinks it is 
just a mouthpiece for Lukoil."
"We believe Izvestia was the best newspaper in Russia before, and we 
want it to be the best in the future," said Michael Kozhokin, an Unexim 
Bank official. The bank controls the majority of Izvestia's shares, and 
Kozhokin is the new chairman of the board at Izvestia.
The last days of Golembiovsky give a glimpse of the hardball style of 
Russian journalism, business and government. In late June, Unexim Bank 
proposed an election to choose Izvestia's president, one of the titles 
held by Golembiovsky.
Before going on vacation, Golembiovsky published a parting shot: a story 
detailing an interest-free bank loan of $3 million to a company started 
by Anatoly Chubais, now first deputy prime minister and finance 
minister, before he was named head of Boris Yeltsin's 1996 presidential 
election campaign.
Izvestia's corporate partners were enraged that Golembiovsky apparently 
slipped the article in, without announcing it at the day's editorial 
meetings. "He was obviously trying to create a scandal all by himself to 
portray his exit as an act of political repression," Kozhokin said.
Chubais responded in a letter to Izvestia that he had done nothing 
illegal and that the article reflected the existence of a political plot 
against him. He also took an indirect shot at the departed editor. "I 
don't think the editorial staff and the readers gain from . . . Izvestia 
recently turning itself into a field for the dissemination of 
compromising material," he wrote. "I trust that Izvestia will overcome 
today's difficulties and regain the respect of those for whom democracy, 
human rights and private property are not empty words."
On July 4, the Izvestia board of directors announced the procedure for 
naming a new editor: The paper's news staff will select three nominees, 
and the board will pick one as editor. Some of the paper's reporters 
predict that Golembiovsky will be among the nominees. On Thursday, 
however, he said he will not be in the running for editor.
The business history of Izvestia is a saga common to many companies 
privatized in Russia in the past few years. Originally, Izvestia shares 
were held largely by employees, who lacked resources to finance 
expansion projects. Individuals began to sell their stock, and the 
ownership became an uneasy amalgamation of minority shareholders. 
Potentially profitable companies frequently end up in the hands of 
powerful banks, or companies engaged in the lucrative energy business.
Lukoil, which is partly government-owned, eventually bought a 41 percent 
share of Izvestia. The company pledged to support a plan to publish the 
paper nationwide. Initially, relations between Lukoil and Golembiovsky, 
who was not only editor but chairman of the board and president of the 
company, were good.
In April, however, Izvestia reprinted an article from the French daily 
Le Monde. It reported that during a U.S. congressional hearing, 
officials had estimated the personal financial worth of Russia's prime 
minister, Viktor Chernomyrdin, at $5 billion. However, Le Monde's report 
was erroneous: A member of Congress had asked whether the figure is 
accurate, but no one confirmed that it is.
Such a mistake was serious enough in journalistic terms, but it also 
apparently had political repercussions. Reports in Russia were that 
Chernomyrdin would punish Lukoil by withholding a valuable drilling 
contract. Lukoil denied that any such punishment was in the works, but 
nonetheless began to move against Golembiovsky.
Lukoil called a shareholders' meeting in April, but Izvestia workers 
physically barred the participants from meeting at their building. 
Meeting elsewhere, the rump group decided to keep Golembiovsky, but 
named new members to the board of directors to oversee the paper.
Golembiovsky searched for an ally in the business world to use as a 
counterweight to Lukoil. He secretly rounded up shares to sell to Unexim 
Bank, one of the country's largest banks. But his invitation to Unexim 
Bank is the move his colleagues regard as naive: Golembiovsky said he 
had a verbal agreement that the bank would make no changes; at a 
subsequent shareholders' meeting, Unexim Bank joined with Lukoil to 
force out Golembiovsky.
Golembiovsky says the Yeltsin government and corporate shareholders of 
media companies are in league to produce "loyal" media in advance of 
elections in 2000, when a successor to Yeltsin will be chosen. But he 
has hopes for Izvestia's future: "Young journalists now recognize the 
opportunity to express themselves freely. They will be hard to control. 
And, possibly, competition will make it hard for owners to simply toe a 
government line." 

**********

#6
The Guardian (UK)
July 12, 1997
[for personal use only] 
Moscow politics of business get rough 

RUSSIAN prosecutors opened a criminal investigation yesterday into the 
suspected disappearance of pounds 150 million of government money 
destined for the company that makes MiG fighter aircraft. 
The move was a blow to the country's biggest financial-industrial group, 
Unexim-MFK, which has been the target of a relentless media campaign. 
The media's behaviour suggests that traditional politics in Russia has 
been replaced by power struggles between a handful of rich tycoons. 
Unexim-MFK, which in five years has established a pounds 2.5 billion 
turnover controlling oil and shipping companies and a big share of the 
world output of rare metals, is headed by former government ministers 
Vladimir Potanin and Andrei Vavilov. 
Prosecutors want to question both men in connection with Unexim-MFK's 
handling of the credit to Mapo, the company that makes MiGs. At the time 
the loan was authorised both men were members of the government. 
Unexim-MFK denies doing anything illegal. It claims it did not profit 
from handling the loan, which it says was approved by President Boris 
Yeltsin and his prime minister, Viktor Chernomyrdin. 
Since the central bank chairman, Sergei Dubinin, first questioned the 
MiG loan in May, the Russian media have been saturated with reports of 
dubious dealings by Mr Potanin's conglomerate. 
But Unexim-MFK claims that the media are now almost entirely controlled 
by members of an elite group of businessmen, most of whom are in direct 
competition with it to buy state property that includes oil companies, 
the Svyazinvest telecoms concern and the state insurance company. 
If in the past it was easy to distinguish genuine news from political 
propaganda in the Russian media, it has become much harder to 
distinguish between news and reports planted to gain a commercial 
advantage or punish competitors. 
One of Mr Potanin's main rivals is a former ally, Boris Berezovsky, who 
is head of the LogoVAZ conglomerate, deputy head of Mr Yeltsin's 
security council, and the owner of significant shares in a newspaper and 
two of the country's television channels. 
Earlier this year Mr Berezovsky admitted that he and the leadership of 
Unexim-MFK, who together played a key role in financing Mr Yeltsin's 
re-election campaign, had fallen out. 
In May the government permitted Mr Berezovsky to organise the auction of 
a controlling package of shares in a Siberian oil company, which he 
himself held in trust. Unexim-MFK's bid was excluded at the last moment 
and Sibneft, which owns an oil refinery and produces 135 million barrels 
of oil a year, was sold to an unknown company, believed linked to Mr 
Berezovsky, for just pounds 70 million. 
Unexim-MFK presents itself as the victim of a smear campaign. Its 
spokesman, Modest Kolerov, said that, on the eve of Mr Dubinin's May 
press conference, journalists had been phoned by Unexim-MFK's rivals, 
who drew their attention not only to which questions correspondents 
would ask but to the answers the central bank chairman would give. 
"Our rivals are afraid that their plans to create a monopoly on contacts 
and co-operation with the state is being obstructed by our attempts to 
create competition," he said. 
Yet Unexim-MFK's own record on press freedom or business competition 
hardly bears examination. It was Mr Potanin who had the idea of the 
controversial shares-for-loans sell-off of prime state industry in 1995: 
as a result, Unexim-MFK gained cheap control of industries such as 
Norilsk Nickel, a polluted Arctic treasure trove of strategic metals, in 
auctions that were anything but open. 
On Thursday Igor Golembiovsky, former editor of the liberal daily 
Izvestiya, accused Unexim-MFK of betrayal after he invited the firm to 
buy stock in the newspaper to fight off attempts by another corporate 
shareholder, the oil company Lukoil, to dictate the paper's editorial 
line. 
Unexim-MFK then changed sides and Mr Golembiovsky was obliged to resign. 
"Izvestiya found itself defenceless before the new owners," he said. "My 
advice to everyone is to be cautious with Russian businessmen." 
Meanwhile, the distinction between the power of Russia's tycoons and 
that of its politicians is becoming increasingly blurred. 
The latest edition of the authoritative weekly Commersant warns that the 
concentration of so much of the national economy in the hands of so few 
people leaves Russia vulnerable. 
"The force that achieves final and unequivocal victory in the war with 
its competitors will be capable of changing presidents," it said. 
"The country's economic course will be dictated not by government 
experts and federal ministries but by the staff of this or that 
commercial bank." 

***********