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Johnson's Russia List


July 17, 1997   

This Date's Issues:   1056  1057  

Johnson's Russia List
17 July 1997

[Note from David Johnson:
1. Reuter: Yeltsin fires army, tax rockets from holiday home.
2. Henrietta Thomas: Spheres of influence.
3. Stanislav Menshikov: Chubais in Denmark and Norway.
4. Reuter: Senate threatens Russian aid cut over religion.
5. Newsday: Gregory Treverton (RAND), NATO Expansion Is a 
Sensible Move.

6. Obshchaya Gazeta: Viktor Kremenyuk (deputy director of the 
United States and Canada Institute), "NATO Enlargement: 
Augmentation of Strength or a New Headache."

7. Moskovskiy Komsomolets: Aleksandr Budberg, "Chubays in the 
Absence of Chubays. A Moskovskiy Komsomolets Newsman Reports From 
the Office of the First Vice Premier." (DJ: A fun read.)

8. Financial Times (UK): Russia: GDP continues to shrink.
9. St. Petersburg Times: Pavel Felgenhauer, Russia Too Busy Arming 
China To Care About Consequences.

10. Reuter: Timothy Heritage, Yeltsin tries to tighten control 
over regions.

11. Interfax: Yasin Says Russia Must Cultivate Pro-Investor Image.]


Yeltsin fires army, tax rockes from holiday home
By Alastair Macdonald 
MOSCOW, July 16 (Reuter) - President Boris Yeltsin
may be on holiday but he left no doubt who was running Russia on Wednesday
when he fired off a salvo of commands that should mean a big shake-up in the
army and trouble for corporate tax-dodgers. 
Briefing Russian media after meeting Prime Minister Viktor Chernomyrdin at
the presidential fishing retreat near the Finnish border, Yeltsin confirmed
plans to slash half a million soldiers from the armed forces and rein in
military spending. 
And he had harsh words for the big corporate bosses he has already
accused of
holding back billions of dollars in unpaid wages to their workers and unpaid
taxes to the state. 
"We should first take 50 or so big firms and the government should
talk it over with them and say, 'That's it, either you're sacked or this firm
goes bankrupt or somehow you pay up, understand, loans, taxes to the state
and the wages that are due," Yeltsin said in remarks broadcast on NTV
"Hearing that, hundreds of managers are probably shaking," 
NTV commented. "But hundreds of generals should probably shake even more,
when they find out all the details of the...decrees. 
The president has decided he can no longer treat the army with a course of
medication and has gone for the scalpel." 
Separately, the Kremlin newspaper Rossiiskaya Gazeta published a degree and
orders to presidential emissaries in Russia's regions that reveal a clear bid
to tighten Yeltsin's control over unruly provincial leaders and their
Yeltsin also signed a string of decrees to reorganise and reform the armed
forces. Details were not immediately available, but Russian media quoted
Yeltsin as saying the reorganisation covered the land forces, missile units
and air defence forces. 
He confirmed plans to trim the armed forces to 1.2 million by cutting
half a
million service jobs, as well as cutting civilian posts in the military and
holding down Defence Ministry administration costs to one percent of the
military budget. 
The 66-year-old Kremlin leader, enjoying a return to apparently rude health
after many months of illness, is eager to reform the military as a way of
making the once-mighty but now cash-strapped and demoralised armed forces
more efficient. 
He plans to scrap conscription and build a professional force, although
will certainly cost more in the short run. 
Yeltsin said the strategic missile forces and the space defence forces --
which are independent entities now -- would be united and "simply called
missile forces." Air force and anti-aircraft defence forces would also be
The president said he was dissatisfied with tax collection in the first
of July, which had dropped 20 percent compared to June, and he demanded a
tougher approach, Russian media said. 
Poor collection of taxes has led to a vicious circle of non-payments
which is
strangling the Russian economy. An improvement is vital for the government to
keep a promise to pay off all back wages to public employees by early next
Before this month, tax collection had nudged up under pressure from a
reshuffled government led by youthful reformers. 
Itar-Tass news agency quoted Yeltsin firing a tax broadside at the
opposition-dominated parliament, saying that unlike him and his ministers,
not a single legislator had filed a public statement of wealth, despite many
of them owning several houses. 
Yeltsin was quoted telling Chernomyrdin to inform European Union leaders in
Brussels this week of his displeasure at continued EU anti-dumping measures
against Russian exports. 
Interfax news agency quoted Yeltsin saying he would leave Karelia on Friday
after nearly two weeks fishing among the northwestern forests. He will travel
to the southern Volga River region where he previously said he would stay
near Samara.


Date: Wed, 16 Jul 1997
From: Henrietta Thomas <> 
Subject: Spheres of influence

>Former Soviet Union: U.S. Senate Stresses Equality For Republics
>By Sonia Winter
>Washington, 16 July 1997 (RFE/RL) - U.S. Senators inquiring into State
>Department nominees for top jobs dealing with Russia and other countries 
>in the region have expressed concern that non-Russian states get fair
>treatment from the United States.
> Senator Gordon Smith (R-Oregon) said Tuesday that U.S. foreign policy
>does not properly support the independence and sovereignty of every state
>that has emerged from the break-up of the Soviet Union.
> He attributed this in part to a historical habit of viewing events
>through Moscow's perspective and said an effort must be made to change 
>the U.S. approach. "Our policies must first and foremost emphasize the 
>right of every state to retain its independence and the right to reject 
>efforts by larger states to extend a sphere of influence," Gordon said.

How do we prevent the United States from extending its own sphere of
influence in the region?


> Asked about a religious bill recently approved by the Russian 
>parliament and sent to president Boris Yeltsin for consideration, 
>Collins condemned it, saying "it would be a step backward for Russia... 
>amd would have negative consequences for our relations."
> He said the U.S. supports expanding freedoms in Russia and other
>countries in the region. The bill places severe restrictions on all
>religious groups except the Russian Orthodox Church.
> Collins said the U.S. is trying to ensure that all in Russia who have 
>a voice in the matter understand the negative consequences for freedom 
>of religion and expression of passing this law.
> Smith, who presided over the hearing, said Committee members are in 
>full accord with this approach.

Here is a case in point of US interference in Russia's internal affairs.
It is not our business to tell Russia how to write its own laws so as
to retain the affections of our government leaders. After Poland was
freed, the Roman Catholic church was restored to its previous position.
I did not hear any protests from the United States. I think Russia should
have the same right to restore its own historical religious traditions 
as Poland or any other nation.


Date: Wed, 16 Jul 1997 14:48:41 -0400
From: Stanislav Menshikov <> 
Subject: Chubais in Denmark and Norway

Today's evening news programme on RFL ("Liberty Live" at 20.00
Moscow time) carried an item from its Danish correspondent in which he told
about a scandal raied in Norway's papers in connection with Mr. Chubais's
alledged prolonged visit to the yacht of one Bonde-Nielsen, a businessman
formerly sentenced in Denmark for fraud, wanted on similar charges in the UK
and now residing in Norway. He also has business contacts with Russia.
Norway newspapers have printed photographs of those meeting taken from a
Could colleagues from the RFL provide us with a transcript of that
news item? Or could subscribers from Denmark and Norway conribute with
excerpts from local papers covering the matter?


Senate threatens Russian aid cut over religion
WASHINGTON, July 16 (Reuter) - The Senate on Wednesday voted nearly
unanimously to cut off U.S. aid to Russia if President Boris Yeltsin signs
into law a measure to curb the rights of minority religions. 
The Senate voted 95-4 to cut U.S. foreign aid in reaction to passage by the
Russian Duma of a measure that would deny legal status to new religious
groups for 15 years. 
It would give higher legal status to those religious organisations that
been in existence in Russia for 50 years, a definition that encompasses the
Russian Orthodox church, Judaism, Islam and Buddhism. It also would impose
new curbs on religious activities by foreign groups. 
The threatened curb on new assistance was approved as an amendment to the
$13.2 billion foreign aid bill now moving through the Senate. The bill
contains about $200 million in funds for Russia. 
Sen. Tim Hutchinson, an Arkansas Republican, praised Yeltsin's refusal to
sign a similar law four years ago. 
During Senate debate he said the Duma action was ``a misguided effort to
protect the orthodox Russian church.'' Hutchinson was one of a group of U.S.
lawmakers who met with the speaker of the Russian Duma at a conference in
Poland last week. 
``This is potentially the greatest retreat on religious freedom and human
rights since the fall of the Soviet Union and it is an ominous sign about the
future of that republic,'' he said. 
The amendment was sponsored by Sen. Gordon Smith, an Oregon Republican. 
The House has not yet considered its version of the foreign aid bill but
several lawmakers have expressed the same strong concerns regarding the
religious legislation. 


16 July 1997
[for personal use only]
NATO Expansion Is a Sensible Move

By Gregory F. Treverton. Gregory F. Treverton directs political and
strategic research for RAND. He is on the board of the U.S. Committee to
Expand NATO.

THE CASE for admitting Poland, the Czech Republic and Hungary to NATO is
compelling. To see why, imagine the opposite: Suppose NATO were to shut the
door on them.
Here are countries, historically part of Europe's center, that felt
communism's yoke most heavily. Having made real progress in establishing
democratic governments and free markets, they seek to professionalize their
military establishments. On what grounds would NATO deny them membership in
its security community of peace-loving democracies?
To be sure, the new members do not face an imminent threat to their
security, and it would have been better if they could first have joined
Europe's top table economically and politically - the European Union (EU).
But the EU is not yet up to the task. The new members' reasons for joining
NATO are akin to Spain's a decade ago - not because they are threatened now
but so they won't be in the future. Membership will provide them the
assurance of committed partners as they forge their way. That is what
"stability," that favorite buzz word of government officials, really means.
Joining NATO won't be free, either for the new members or for NATO. For
both new and old members, though, it will provide incentive to do what they
need to do in any case. For the new members, that means dramatically
shrinking their armed forces while modernizing them to be compatible with
NATO's and to better participate in peacekeeping operations.
The armies of existing NATO members in western Europe were structured to
defend territory that is no longer threatened. Those armies need to be
reshaped as they too are shrunk, so that they can protect new members,
Europe's fringes or beyond, wherever common interests are threatened.
Since American forces already are designed for rapid deployment anywhere
in the world, the United States has less to do, and so its share of the
total enlargement package will be noticeable but not large - a few hundred
million dollars a year over 10 years.
Another cost is less tangible. That is the cost of undertaking
commitments to defend additional countries under NATO's Article 5. Those
commitments are real and not to be lightly taken. But they are very
different now. In the Cold War, the Soviet threat was concrete and
extensive, and NATO feared it would have to resort to nuclear weapons if
its conventional defenses failed. Today, there is no visible threat akin to
the Soviet Union, and it would take decades for a new one that size to be
reconstituted. NATO will have lots of time to respond. Meanwhile, its
conventional forces are plenty good enough to banish the nuclear option to
the realm of the theoretical.
Two other concerns do merit discussion, and both will receive it when
the U.S. Senate examines the accession agreements some months hence. One is
Russia. Watching its erstwhile Warsaw Pact allies join the former enemy
alliance was never going to be easy for Russia. But NATO has taken pains,
through the so-called Founding Act on relations between NATO and Russia
signed last May and in unilateral actions, to assure Russia that expansion
will not be a military threat to it.
Russian polls support what recent Russian elections indicate: NATO
expansion is mostly an issue inside Moscow's ring road, its "Washington
beltway." Most Russians are preoccupied with matters closer to home, their
economic condition in particular. How Russia fits into the global economy
matters far more than NATO to Russia's future. Meanwhile, the Founding Act
will let Russia become a constructive partner of NATO if it chooses. Nato's
agreement with Ukraine will let that country do the same.
Finally, there is the question of the "wannabes," those states that
wanted to join this time around but were not admitted. Expansion's
opponents argue that the three new members don't face security threats
while those who do, such as the Baltic nations, were shut out.
On that score, admitting three new members was a decent compromise, if
one engineered a little clumsily by American diplomacy. Admitting the
Baltics now - states that were part of the Soviet Union even if the United
States never formally recognized their annexation - would have been too
provocative to Moscow. But to let in five or six states excluding the
Baltics (Romania and Slovenia were the final betting favorites) would have
risked signaling that expansion was a one-time affair.
As it is, taking in three countries clearly bespeaks what NATO has
promised: Its door will remain open to other new members as they prove they
are ready. 


NATO Expansion Set To Create More Problems 

Obshchaya Gazeta, No. 27
July 10-16, 1997
[translation for personal use only]
Article by Viktor Kremenyuk, deputy director of the United States
and Canada Institute: "NATO Enlargement: Augmentation of Strength or a New

At the latest NATO Council session in Madrid, the bloc member
countries invited several former socialist East European States -- Poland,
the Czech Republic, and Hungary -- into their ranks. Exceptional
importance is being attached to the admission of the new members: In this
case democracy will triumph in Europe, and the not too bright Russians, who
simply cannot be convinced that NATO enlargement portends only additional
good for them, will be disgraced by their stubborn opposition to this great
expansion. In this connection it is necessary to analyze what the United
States and the West as a whole intend to achieve, and what it [the West]
can really expect from NATO enlargement.
We will begin with purely domestic U.S. problems. In the first place,
the first approximate calculations have been done as to how much expanding
the number of the bloc's members will cost the U.S. budget. Those speaking
in favor of the expansion, in particular U.S. Secretary of State Madeleine
Albright, are citing figures of $1-$2 billion per year, assuming that the
main part of the expenses connected with integrating newcomers into NATO's
structures will be paid for either by the newcomers themselves or by the
West Europeans. Skeptics are citing figures of $10-$12 billion, realizing
that neither the West Europeans, nor the new members of NATO can bear such
high expenses, and that the United States will have to pay for everything.
Second, the admission of new members and paying for their military
"modernization" will become not only a financial, but also a political
problem for the United States. How do you convince American legislators,
who have for several years been engaged in reducing the budget deficit by
reducing the expenditure side (and who have therefore encroached even upon
social programs), that gigantic sums must be allocated to modernizing the
armies of countries who, at the present moment, are not facing threats from
anyone? How do you convince voters that they must sacrifice their funds to
help states that many of them have not even heard of?
Without a doubt, the U.S. Administration is creating problems for
itself that it will have to answer for fairly soon -- in the year 2000 at
the next presidential elections. And while this is no threat at all to
President Clinton himself, since he will complete his second and last term
in office at the White House, for the Democratic Party and its potential
new candidate for the presidential elections -- for example A. Gore -- it
carries a threat of total failure.
If we consider what the West can expect in terms of foreign policy,
here too we should not expect a cloudless life. The decision about NATO's
eastward expansion will hardly serve to strengthen the unity of its ranks. 
First, different members of the bloc have different preferences about who
to accept into the North Atlantic Alliance and how: Some agree with the
United States, that first it is necessary to invite three countries --
Poland, Hungary, and the Czech Republic -- whereas others are trying, and
rather actively, to include Romania and Slovenia on this list. There are
also intercessors in favor of the Baltic countries. In a word, a battle is
in store over the numbers and identity of countries that will be invited to
join NATO. Second, blackmail on the part of individual allies is possible.
Turkey, for example, warned a couple of months ago that it could
completely oppose the expansion of the North Atlantic Alliance if it
continues to be slighted in the European Union. Consequently, the very act
of making a decision, and especially the subsequent period of its
ratification by the parliaments of the participant countries of the bloc,
could, instead of cementing unity, work against it and undermine the
integrity of the system. Moreover, there is the fact that NATO does not
have a real enemy, there is no sense in expecting an attack from anywhere
against its component countries, and an increasing number of skeptics are
asking: Why keep this obsolete structure from the times of the Cold War at
Now for the problems that the United States and the entire NATO bloc
can expect in their relations with Russia. Moscow has already, on more
than one occasion, warned that even having signed the Founding Act, it is
not changing its attitude to the idea of expanding the bloc to the east. 
Of course the signing of the act somewhat softened the harshness of the
dispute between NATO and Russia. But in any case, unless NATO takes care
to somehow compensate Russia's well-founded displeasure at the military
bloc's approach toward its borders, a flare-up of tension on the continent
is inevitable.
Apparently the U.S. Administration is planning on winning all- round
approval and gratitude in the countries favored with an invitation to join
NATO. Celebrations over this event are indeed expected there. But it is
no accident that not one of the countries that are dying to join NATO has
risked holding a referendum on this issue. This was only done by Slovakia,
which has no great desire to be included in the bloc. In all the rest of
the states the governments preferred to do without a national expression of
will, so as not to be embarrassed if it turns out that a significant
proportion of their citizens either have no desire whatsoever to become a
zone of conflict in the event of a hypothetical war, or are rather
indifferent to membership in NATO. And many of those who want NATO
membership see it mainly as a channel for receiving American aid.
It seems that the supporters of NATO enlargement have forgotten the
golden rule of the science of management -- problems must be resolved in
such a way as not to create new ones. It is possible that having decided,
in Madrid, to invite the new states, the NATO leaders will resolve some
problems, albeit not entirely clear ones. But it appears absolutely
indisputable that in doing so they are creating infinitely more problems in
terms of quantity, and more complex ones in terms of quality, both within
their own countries, and within the bloc, and in Europe as a whole.


Chubays Profile Based on Staff's Accounts 

Moskovskiy Komsomolets
July 9, 1997
[translation for personal use only]
Article by Aleksandr Budberg under the "Keyhole" rubric: "Chubays in
the Absence of Chubays. A Moskovskiy Komsomolets Newsman Reports From the
Office of the First Vice Premier"

[passage omitted] Moskovskiy Komsomolets's correspondents had spent
nine months trying to force the press service of, first, the chief of the
Presidential Staff, and subsequently the first vice premier [Chubays], into
at least some degree of openness. In the event Anatoliy Borisovich himself
declined a meeting, but gave us permission to "raid" his own office and
question his staffers anonymously. The operation was launched immediately
after he departed on leave.
The Office [subhead]
Thus, at precisely 1645 [on 4 July] a team of "investigators" from
Moskovskiy Komsomolets entered one of the country's best protected offices.
[passage omitted]
Anatoliy Borisovich forbids his secretariat to arrange the "papers for
signature" according to any criteria. He thinks that all these "nice
arrangements" are an effective method for the apparatus to pressure its
boss in order to obtain a specific decision on some matter. They bring him
the folders of documents all in a heap -- sometimes there are so many that
a tea trolley has to be used. To confirm this, secretariat workers
immediately cited a whole heap of figures. Since March, 2,546 documents
have come in for Chubays (634 in June). Chubays issued 1,900 instructions
himself (530 in June) and sent 140 letters to various departments. In June
alone he initialed 52 decrees. And these letters, decrees, and documents
are sometimes several tens of pages long.
Chubays reads very quickly, "not by syllables, but by pages," they
say. Every day the work on documents takes several hours. Sometimes they
even have to be looked at in the elevator. But he never takes them home
with him.
In general, Chubays's working day is planned by the minute. In the
laptop computer that ABCh [Anatoliy Borisovich Chubays] never parts with,
there is a skeleton work schedule for a couple of months in advance. He
begins his working day at 0900, when he arrives from his dacha in
Arkhangelskoye for a briefing in the Finance Ministry. Every day there are
several conferences. Every day he meets with governors and the heads of
large enterprises. On average he receives 8-12 governors a week. He ends
his working day anywhere from 2300 to 0130. The secretariat workers know
this, because they cannot leave as long as the chief is working. ABCh
switches from one problem to another very quickly. If, during
[presentation of] a report, someone calls on the "direct line" (for
example, Deputy Finance Minister Kudrin has this right), the vice premier
can immediately start tackling the matter at hand, giving a couple of
instructions over the telephone himself, there and then. But he will
resume talking to the visitor with the exact word that he finished with
before the call.
In all there are now 20 people in Chubays's apparatus (six vacancies
remain unoccupied). The average age of ABCh's staffers is 43 years. 
Certainly, Chubays is an authoritarian boss and demands unconditional and
strict subordination. He does not maintain any kind of informal
relationships with staffers. This Moskovskiy Komsomolets correspondent got
the impression that this rule has spread throughout the entire apparatus. 
They usually say "vy" [formal form of address], observing caution and
subordination. They explain that this is so that "informal relationships
do not get in the way of work or lower the high standards." Chubays himself
rarely scolds people, does not raise his voice, and certainly does not bang
his fist on the table. But all the indications are that calm words from
him like "poor," "outrageous," and "you did not complete the job" are
capable of shaking a subordinate out of his complacency for some time. 
With the security guards the first deputy has markedly polite relations,
but without any familiarities. In the opinion of one staffer, Chubays is
more energetic that he can allow himself to be. Therefore, he constantly
has to restrain himself. This is often visible even physically. For
example, the all-powerful minister's legs (especially when he is seated)
live a life apart from him. The fact that Chubays usually restrains
himself is also confirmed by the fact that he relates very emotionally to
his friends or political opponents. He regards them as literally enemies
and often uses varied but obscene language in regard to them. But then he
reconciles himself to being unable to tear the scoundrel's head off yet. 
He can even work with such people -- it's business, nothing personal. 
Chubays respects some opponents -- Lukashenka, for example. Others he does
not -- thus, for "Bublik" ["Bagel"] (Korzhakov), they say, he has nothing
but contempt.
People usually end up working for Chubays through recommendations. 
The boss is "functional" in his attitude toward them: If a person can do
the job required -- he stays; if not -- well.... In spite of the enormous
workload and the lack of a certain warmth in relations with the boss,
people rarely leave Chubays. They remember that when he was removed in
1996, Chubays himself was surprised at how well his subordinates spoke of
him. At the last meeting he even said that he was sorry that he had
associated with them so little in a less official atmosphere. But when he
returned, again there was no time, strength, or desire for "personal
conversations." But ABCh is certainly considered a team player. People
have confidence in him. And they do not expect him to betray them.
More than that, when subordinates speak of Chubays, they even feel a
certain pride in their boss. I was shown two documents issued on the last
day before the vacation. The first was a decree on ceasing the operation
of the economically favored zone of Ingushetiya. The second was an
agreement on the settlement of inter-budget relations between Sakha-Yakutia
and the federal center. (This paper was the object of controversy for
several years. Yakutia did not want to give up anything to Moscow,
supposing with good reason that it would live well on diamonds.) "Can you
imagine how hard and smart you have to be to achieve this! Nobody but him
could have done it. Now only Tataria and Bashkiria still have special
"But is not Chechnya still a black hole?"
"Not with this man, it isn't."
The Recreation Room [Subhead]
The recreation room reflects the master's personality even less than
the office. There is another photograph [there was a photo of Yeltsin in
the office]: ABCh together with the president, and written on the side in
capital letters: "Forward again, Anatoliy Borisovich. Yeltsin." In the
corner an old [suit] jacket is stretched on a hanger -- dark with white
dots. ABCh has already been wearing it for three years or so. The staffer
escorting us agreed that suits do not really become the boss, but parried
this by saying that he [Chubays] does not like them either. If he had his
choice, he would walk around in jeans, tennis shoes, and short jackets. 
Incidentally, this is in contrast to the premier, who has loved suits
almost since childhood.
We were able to learn that ABCh mostly wears dark blue or gray suits
with subdued ties. He avoids white shirts. He does not like soft, silky
fabrics, and therefore prefers cotton and tweed to silk and cashmere. He
is indifferent to cuff links, watches, and tie pins, and equally to
He has put on weight in the past few years. "Improper eating habits. 
Sandwiches at night have their effect," the escort explained. The boss
dines in the recreation room, where they bring him food from the special
buffet for VIPs. He likes meat, smoked fish, and fried potatoes with
mushrooms. In terms of strong spirits he prefers vodka or whisky. They
claim that Chubays has good reflexes. He likes fast kinds of sport --
downhill and water skiing, and table tennis. He really likes to drive cars
and takes pride in the fact that he can diagnose and repair any breakdown.
Until lately, besides his personal Mercedes, he had an old, model 5 Zhiguli
that he brought from Leningrad. There are a lot of stories involving that
Zhiguli. Its accelerator constantly broke down, and out in Arkhangelskoye
the personal Mercedes often had to tow the little Zhiguli to make it start.
On weekends Chubays liked and still likes driving to the city himself. 
Once, when the car stalled near the School of Contemporary Drama theater,
Chubays got hold of some coveralls and dived under the hood himself. 
People passing by were extremely surprised at how much the mechanic
resembled the vice premier, with his extremely characteristic appearance. 
This year ABCh bought himself a Suzuki jeep, and the old faithful Zhiguli
is becoming overgrown with grass in Arkhangelskoye. (Still, Chubays is not
an enterprising person. His beat-up compact car certainly could have been
sold as new.)
Besides cars, Chubays likes all sorts of gadgets: new models of
computer, communications technology, information networks, etc., etc. As
he said, it was the car, the computer, and the mobile telephone which
changed the life of his generation. He putters around with his computers
and creates directory trees for data bases himself. He really likes to
master the new capabilities of his computer, which is his favorite toy. 
Thus, in Denver he was amazed that the Internet could be browsed on regular
television screens in the hotel. But then again, any distractions from
work have becoming fewer and fewer recently. Therefore, he took a very
responsible attitude toward the opportunity for a vacation without security
guards or aides, behind the wheel of a car in a country where no one knows
his face. He chose Norway and Denmark, since he generally likes the North
more than the South. More precisely, he physically cannot stand the
southern sea, sun, well laid out beaches, saunas, massages, and pools.
The Master of the Office [Subhead]
Naturally, the staffers spoke very sparingly about Anatoliy Borisovich
the man, his habits, friends, and inclinations. He likes the theater, does
not like painting. He goes to concerts. In the past he was a great hiker
and a lover of popular songs. That is probably all....
Only one staffer spoke in a little more detail. He is of the opinion
that Chubays, strange as it may sound, values public opinion a great deal. 
It matters very much to him what the people he respects say about his
actions: his father, who lived through the whole war; Yegor Gaydar, who
remains a kind of leader; the opinion of Bulat Okudzhava, whose songs he
had known since childhood and whom he was very proud of socializing with
even after becoming a leader of the country, was very important. So as not
to disgrace himself and so as to act in accordance with his inner moral
principles, Chubays can take risks and literally put everything at stake. 
The speaker had witnessed this himself, but would not go into detail about
his memories.
He characterizes him as a pragmatist who "knows what should be done,
but does what is possible." Effectiveness and results are the main
criteria. He admits mistakes, but does not break his heart over them. In
critical situations he never panics.
But then, this last point was clear anyway. Even Korzhakov and his
team can confirm this. In our country, everyone has his own idea of
Chubays. It is quite possible that the opinion of those he works with does
not coincide with that of the majority. There are people who simply
despise him and consider him to be the one to blame for all their
misfortunes (sometimes with reason -- in Korzhakov's case, for instance.) 
[passage omitted]


Financial Times (UK)
July 17, 1997
[for personal use only]
Russia: GDP continues to shrink
By Chrystia Freeland in Moscow

The Russian economy continued to shrink in the first half of this year, 
defying Kremlin promises of growth. According to official figures 
released this week by the State Statistics Committee, gross domestic 
product contracted by 0.2 per cent from January to June, continuing a 
negative trend which has seen the economy shrink by 39 per cent since 
The figures cast doubt on the triumphant announcements of senior Russian 
leaders earlier this month that the economy had begun to grow. Mr Victor 
Chernomyrdin, the prime minister, said at the beginning of the month 
that GDP had bounced back by 1 per cent in the first half of the year.
His optimism was picked up by President Boris Yeltsin, who assured 
Russians a few days later that the country's economic collapse had 
Economists said the disappointing figures reflected continued structural 
barriers to growth, including prohibitive taxes and regulations. But 
they also pointed out that the official statistics might be understating 
activity in the real economy.
"Borrowing is still very expensive, and the tax system and regulation 
are very serious problems," said Mr Anders Aslund, an economist at the 
Carnegie Endowment. "I think we are at the beginning of a recovery, but 
I would expect it to be quite slow, given the structural problems."
However, Mr Aslund also said official statistics might be overstating 
the severity of Russia's problems, in part because of the difficulties 
of fully capturing developments in the country's huge shadow economy.
After fiercely contested presidential elections last year and the 
stabilisation of Russia's currency and inflation rate, western and 
Russian officials have taken to predicting that the economy is on the 
verge of a period of buoyant growth.
These optimistic expectations are one factor behind a raging bull market 
in securities, with foreigners pouring as much as $1bn a month into 
Russian stocks.
But, according to Mr Al Breach, a Moscow-based economist at the Russian 
European Centre for Economic Policy, an EU-funded think tank, the 
economic pickup has been slower than expected, in part because of the 
continued reluctance of Russian banks to invest in the real economy.
In an effort to stimulate investment, the government has waged an 
aggressive campaign to force down once sky-high interest rates on 
government securities. The effort has brought rates down to under 20 per 
cent a year, but that change has not yet prompted significant 


St. Petersburg Times
JULY 14-20, 1997
Russia Too Busy Arming China To Care About Consequences 
By Pavel Felgenhauer
Pavel Felgenhauer is defense and national security affairs editor for the
Moscow-based daily Segodnya. 

LATE last month, Russian Prime Minister Viktor Chernomyrdin visited
Beijing to "reinforce strategic partnership" with the People's Republic of
China and to announce new important arms deals that will provide the
Chinese People's Liberation Army, or PLA, with additional Su-27SK fighter
jets and Sovremenny-class destroyers with Sunburn cruise missiles. Several
days later, the PLA marched in force into Hong Kong, returning the former
British colony to Beijing's control. 
The next main objective of PLA-led unification of China under Beijing's
communist rule can only be the fiercely anticommunist Republic of China.
But to project force over the Taiwan Straits to press Taipei into
submission, Beijing needs much enhanced maritime and air power
capabilities. And, apparently, only Russia is able and willing to provide
the outdated Chinese military with the required modern technologies.
China and the Soviet Union were very close communist allies in the '50s
and joined forces to support North Korea in the Korean War. The entire
Chinese conventional defense industry was built with Soviet help and
equipment. Even today Chinese industry is producing cloned old-fashioned,
Soviet-style arms systems.
Attempts to Westernize the Chinese defense industry in the '80s were not
very successful, and after the vicious suppression of the pro-democracy
movement in 1989 by the Beijing authorities, Western military transfers
were stopped. So when Russian arms traders and arms makers reappeared the
same year in Beijing after 30 years of absence, they soon became very
welcome guests: Moscow was also ready to take part of the payment in the
form of "barter" shipments of Chinese-made, low-quality clothing,
electronics and food.
Three quarters of the first contracts to supply Su-27SK jet fighters and
Kilo-class submarines were covered by barter, which helped the People's
Republic to economize on hard currency. Later Moscow managed to rewrite the
submarine contract to get only 50 percent paid by barter.
Today almost none of the new arms deals with China, especially modern
technology transfers under licensing agreements, have any "barter"
component. China's growing trading surplus (especially with the United
States) has allowed Beijing to be more liberal with its hard currency
reserves and to pay Russian defense contractors in dollars. Beijing has
invested substantial amounts of money, but the main goal - technology
transfers and lucrative licensing deals that should boost Chinese defense
industry and armed forces into the next century - has been clogged up for
years by the Moscow bureaucracy.
The agreement that was announced last week to transfer know-how and
equipment to China, enabling it to build 200 Su-27SK fighters under license
was actually finalized in 1994 in Beijing after fierce bargaining over the
price between Chinese officials and a Russian delegation led by the then
general director of Russian arms exporter Rosvooruzheniye, Viktor Samoilov,
and the head of the Sukhoi aircraft company, Mikhail Simonov. Moscow first
asked for $1.6 billion, the Chinese offered ten times less, and the final
price of the Su-27SK license is reported to be $450 million. 
By the beginning of the next century, China will have up to 300 modern
long-range Su-27SK fighters as well as warships armed with the world's most
vicious supersonic anti-ship cruise missile - the Mosquito, or "Sunburn" as
it is known in the West - to deploy against Taiwan. The forceful
reunification of Taiwan could become as "inevitable" as the reunification
of Hong Kong has been for the past few years.


Yeltsin tries to tighten control over regions
By Timothy Heritage 
MOSCOW, July 16 (Reuter) - President Boris Yeltsin is trying to tighten
control over Russia's unruly regions and how they spend state funds by
increasing the powers of his personal representatives across the country. 
Yeltsin's plans were contained in a decree and a new set of instructions
his emissaries published by the presidential administration's newspaper,
Rossiiskaya Gazeta, on Wednesday. 
The decree and instructions outlined plans to give presidential
representatives more powers to ensure the Kremlin's policy is adhered to in
the regions. 
The decision showed the Kremlin's concern at the increasing independence of
Russia's 89 regions and the relative impotence of the personal
representatives who serve as Yeltsin's eyes and ears in most regions outside
Many areas are now in the hands of Yeltsin's foes after a series of
for regional governors whose cooperation is vital for the smooth
implementation of economic reforms. Before 1996 most regional leaders were
appointed by the president rather than elected. 
``The decree should guarantee efficient cooperation between the centre and
the regions in what we think are the three most important problems,'' Kremlin
aide Anton Fyodorov wrote in a commentary explaining the decree and
Two of the problems were control of federal property and getting the best
personnel to work for federal executive bodies outside Moscow. But there was
no doubt about the top priority. 
``First (the aim is to) tighten control in carrying out the the federal
budget,'' wrote Fyodorov, head of the Kremlin department coordinating the
work of Yeltsin's emissaries. 
Trillions of roubles (billions of dollars) are allocated from the state
budget to the regions each year. 
Moscow complains that some funds transferred for specific reasons,
paying huge wage arrears to public sector workers such as doctors and
teachers, have been used for other purposes once they reached the regions. 
The Kremlin's frustration mounted this summer when it tried to oust Yevgeny
Nazdratenko, the rebellious governor of the Primorsky Krai region in Russia's
Far East, but failed when the regional parliament defied demands to call an
early election. 
The defeat was a bad omen for economic reform chief Anatoly Chubais. He
the regions' support to implement policy and has been trying for months to
tighten central control over them. 
All the regional leaders have pledged to cooperate with the Kremlin. But
also want the reforms shaped to the particular needs of their individual
regions and have the power to block or slow down changes in their areas. 
``The Kremlin's need for tougher controls over the regions is clear and
decree is useful for this purpose,'' said Sergei Markov, a political analyst
at the Moscow office of the Carnegie Endowment for International Peace
``But only time will show how useful it is. The regions want reforms but
will fight for the kind of reforms they want.'' 
The regions' ability to rebel is limited by their dependence on Moscow for
The Kremlin's hands are also tied. It could punish rebellious regions by
witholding state funds intended for them, but cutting off the financial
umbilical cord would carry the risk of inciting social unrest in those
Yeltsin is partly a victim of his own generosity. He gave the regions more
freedom in 1991 in an effort to diminish the Soviet authorities's grip on
Russia, and in 1996 when he needed regional leaders' support to be
Demands for more independence from Moscow have posed problems for the
for years, and were behind the dispute which culminated in 21 months of
warfare in Chechnya. 
Some regions' demands have been appeased by power-sharing treaties
with the Kremlin. But elections in the last few months mean all regions
except Kemerovo in western Siberia now have elected governors, many of them
from the opposition.


Yasin Says Russia Must Cultivate Pro-Investor Image 

MOSCOW, July 15 (Interfax)--The sharp tightening of competition for
investments in world markets requires that Russia pay more attention to its
image as an investor-friendly country, Russian Minister without portfolio
Yevgeniy Yasin told Interfax Tuesday.
Following a session of an image task force of the government's Council
for Foreign Investments, Yasin said: "Though Russia has made certain
progress in this sphere, our competitors, in particular from Eastern
Europe, have gone further, offering investors better terms."
"We must get used to the fact that the competition for foreign
investments is always tough and sometimes has no rules," Yasin said.
"We should pay special attention to the removal of our internal
barriers" hindering foreign investors. Among them he named the
insufficient protection of property rights and the lack of transparency in
the tax system.
"We have done much to remove such barriers, but the process is too
slow," he said.


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