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Johnson's Russia List
 

 

July 19, 1997   

This Date's Issues:   1062  1063  


Johnson's Russia List
#1062
19 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. RIA Novosti: CIS'S MAIN ACHIEVEMENT OVER PAST FIVE YEARS 
IS THAT FORMER SOVIET REPUBLICS DID NOT FOLLOW YUGOSLAV PATTERN 
OF EVENTS, BELIEVES VALERY SEROV.

2. Gordon Hahn (Hoover Institution): 'Reform', 'Reformers', 
i tak dalee.

3. Renfrey Clarke in Moscow: Reform or counterrevolution?
4. Henrietta Thomas: Re Duckworth/Thomas and Religion Law.
5. Reuter: U.S. wants to keep Russia aid despite religion bill.
6. The Financial Post (Canada): `World's last great emerging 
market' back in favor.

7. Argumenty i Fakty: IN WHO WE TRUST? (Public opinion poll).
8. RIA Novosti: POCHINOK: EVERYTHING IS CORRECT IN DECLARATIONS 
ON INCOMES OF TOP OFFICIALS.

9. Zavtra: Chubays Said To Plan Meetings With U.S. Banks, 
Intelligence.

10. Dow Jones: Scandal Cast a Cloud Over Russian Central-Bank 
Chief's Status.

11. The Independent (UK): Rupert Cornwell, Spirit of old Russia 
reclaims new Moscow.

12. Federal News Service: UNIKOMBANK: INVESTIGATION CLEARS 
EMBEZZLEMENT CHARGES.

13. Delovoy Mir: Government's Post-Vacation Tasks Viewed.]

*********

#1
CIS'S MAIN ACHIEVEMENT OVER PAST FIVE YEARS IS THAT FORMER
SOVIET REPUBLICS DID NOT FOLLOW YUGOSLAV PATTERN OF EVENTS,
BELIEVES VALERY SEROV
By RIA Novosti correspondent Regina Lukashina
MOSCOW, JULY 17, RIA NOVOSTI - The CIS is "a qualitatively
new association of states, not known in history before," Deputy
Prime Minister Valery Serov said today, speaking live on Mayak
radio. 
The main achievement of the commonwealth's five years of
existence is, according to him, the fact that "the republics of
the former Soviet Union did not follow the Yugoslav pattern of
events".
The Deputy Prime Minister disagrees that the hopes pinned
on the CIS were not justified. 
He emphasised that now "states of the former Soviet Union
are realising the need for each other" and as proof of
correctness of his point of view he cited the record of the
Inter-State Economic Committee, whose work "is confirming the
necessity of economic integration".
In Serov's view, "a normal civilised entry of CIS states
into the world economic community" is only possible on condition
of their effective economic development.
This can be achieved, stressed the Deputy Prime Minister,
only by "supplementing each other". 
Serov recalled remarks made in Madrid by Georgia's
President Eduard Shevardnadze that the world had now seen "an
entirely new Russia" and the words by Russian President Boris
Yeltsin that there are gains that cannot be seen, "but are
needed as breath for your nostrils". 
These gains, according to the Deputy Prime Minister, are
freedoms won by the Russians since 1991. 
He also predicted a leap in Russia's economic development
and urged all citizens, in view of that, "be patient and endure
temporary difficulties in a worthy way", because "the
change-over from one economic formation to another has been
unprecedented, considering Russia's dimensions". 

***********

#2
Date: Fri, 18 Jul 1997 
From: Gordon Hahn <hahn@hoover.stanford.edu> 
Subject: 'Reform', 'Reformers', i tak dalee

Dear D.J.:
It seems that the question - "whether these elections or last year's
presidential election are accurately described as revolving around pro- and
anti-reform points of view - is not a "combative" one, nor simply academic.
It also has important implications for the election strategies taken up by
different candidates and parties in Russia. Michael McFaul, accurately I
think, has argued that the electoral behavior Russians is determined by a
voter's position regarding this fundamental question: Was it necessary to
begin reform (putting aside what kind of reforms) in the late 1980s or was
the Soviet order basically acceptable with perhaps some minor tinkering
along the lined envisioned by an Andropov or Ligachev? The fact that many
voters make little distinction, particularly those opposed to reforms,
between the Gorbachev and Yeltsin regimes is a case in point. Here,
theoretically, there is a choice between reformist democratic socialism
(where Gorbachev appeared to be heading by mid-1991) and an albeit flawed
at present democratic capitalism (delegative democracy + oligarchical state
capitalism). Indeed, among supporters of reform, even among the political
elite, there is very limited support for democratic socialism, excluding a
few politician-intelligenty like Aleksandr Yakovlev, Gavriil Popov and
others. SD parties, not surprisingly, have failed miserably, confirming
Aleksandr Tsipko's suspicion that those (in particular, Gorbachev) who
placed their bets on socialism were bound to lose in the struggle for power
in Russia.
However, the alternative that Tsipko supported while in Gorbachev's
circle, a return to Russia, if not Russian nationalism, and an abandonment
of socialist internationalism, was the path taken by Gorbachev opponents:
the democrats stood for the independence and economic prosperity of Russia,
anti-reformers supported a Russian national revival throughout the USSR.
Hence, the democrats, put 'reform' and Russia on an equal plane.
Anti-reformers put Russian state power (domestically and abroad), culture,
and uniqueness above westernizing reforms. In other words, the dichotomy
'reform/antireform' is really a synonym for 'westernizers/slavophiles'.
Herein lies the democrats' vulnerability in having ceded everything
'Russian' to the communists (of all people) and the nationalists. The
difficulty in bridging this divide is reflected very well in the
wide-ranging and contradictory stances taken by Aleksandr Lebed, whose real
modus vivendi is a lust for power and revenge against civilian politicians
and, unfortunately, not a well thought out synthesis of democracy and
Russian traditions as a basis for continuing reform. 
All the above suggests that the Russian political spectrum is one far more
complex than simply a dual between reformers and antireformers, democrats
and hardliners, westernizers and Slavophiles. Nash Dom Rossiya is clearly
an oligarchical state capitalist grouping. Yabloko is a non-classical
liberal democratic party and stands in opposition to the present
government; so obviously all critics are not anti-reform. Gaidar and
Chubais, rhetorically at least, are more oc the classic liberal ilk. At one
time, Gaidar was in 'constructive opposition' to the Chernomyrdin
government and obviously not opposed to reforms. Earlier, Arkadii Volskii's
Civic Union and All-Russian Union 'Renewal' were in constructive opposition
to the Gaidar government, but they were not opposed to reforms as long as
there was maintained a role for the state and where there was to be none
(or less) control of property was handed over to them, the enterprise
directors. 
However, the word 'reform' clearly does have a different connotation among
the average citizen than among the political elite. For the Russian public,
it tends either to have a negative connotation, no connotation at all, or a
slightly positive one. Surely, most Russians, like most Americans judge any
label or political tendency, party or figure according to the perceived
effect said has had on one's wallet. Herein lies the objective meaning of
the word 'reform' for the sectors of the population who have been
impoverished by the reforms: change, even dismantling of an economic order
that ensured them employment, housing, and medicine from birth through the
more frightening older years. Therefore, we can expect that depending on
how it is implemented, the word 'reform' prefaced by the adjective
'housing' will have a negative connotation for the average-to-poor Russian.
If this reform is not handled properly, then Chubais and perhaps Nemtsov
may pay the price paid by Gaidar and now being paid by Chernomyrdin for
associating themselves with the word reform and its negative consequences.
In this sense, 'reform' also seems to conjure up in the Russian mind
economics, more so than politics, reflecting the less controversial nature
of political reform and the generally broad support for elections, even
among communists.
Public opinion since the Gorbachev period has, despite the difficulties of
economic reform, supported it as well and at a fairly steady barometer. The
presidential election through the Nizhnii Novgorod election supports the
continuity thesis with Sklyarov's victory over Khodyrev approximating the
percentages of the Yeltsin-Zyuganov runoff. On the other hand, the victory
of Lebed's man in Samara reflects Russians' impatience with the failure of
democratic and centrist 'reformers' to stop the contraction of the economy
as well as the more complex profile of post-communist Russia's rather wide
political spectrum.

Gordon M. Hahn
Hoover Institution
Stanford University 

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

#3
Date: Fri, 18 Jul 1997 
From: austgreen@glas.apc.org (Renfrey Clarke) 
Subject: Reform or counterrevolution?

David,

Stephen Shenfield (JRL 16 July) articulated thoughts on reform
and revolution in contemporary Russia that first struck me, as I
recall, during the days of the "500 Day Plan" at the beginning of the
decade. To use the term "reform" to describe the events in this
country during the years since then is as absurd as using it to refer
to the developments here between, say, 1917 and 1930.
To proclaim your policies as "reforms" is not to understate
their virtues. And the person who succeeds in imposing a loaded
terminology, notoriously, has the argument half won. Would Yeltsin's
"reforms" have commanded the tolerance they have enjoyed over the
past five or six years if they had been referred to routinely in the
media as "capitalist counterrevolution", a technically accurate
description that avoids fawning on the authors of the measures
concerned?
When emotive terminology is used, much of the purpose is usually
to stifle reasoned debate. Who would criticise reforms except people
with a stake in the abuses of the past! And when reforms have to be
enacted and made irreversible at all costs, who but a self-interested
reactionary would query the wisdom of Thatcherite neo-liberalism,
applied mechanically in an economy marked by structures and processes
almost unimaginably different from those of the West?
Later, when the strategy of "reform" remains substantially
unchanged despite having produced not prosperity but catastrophe, who
but a totalitarian relic of the past would suggest that the choice of
policies was dictated by something other than scientific rigour
(class interests perhaps)?
There is unlikely to be much lucidity in journalistic and
scholarly writing on Russia until the people involved start calling
social processes by their right names, or at least, not flagrantly
misrepresenting them. My own practice has been to keep the Russian
"reforms" tightly within inverted commas. Others might do the same.

**********

#4 
Date: Fri, 18 Jul 1997 
From: Henrietta Thomas <hkt@wwa.com>
Subject: Re: #1061: Duckworth/Thomas and Religion Law

>Date: Fri, 18 Jul 97 1:37:01 RST
>From: "Kenneth C. Duckworth" <kduckworth@usaid.gov>
>Subject: Re: Henrietta Thomas/Spheres of Influence
> I must respond to Henrietta Thomas's remarks regarding the Law "On 
>Religious Association and Freedom of Conscience."
> I fail to see how Ambassador Collins' remarks regarding this law amount
>to interference in Russia's internal affairs. The U.S. and Russia are two 
>countries with bi-lateral relations, and the United States has every right 
>as a to inform Russia of its objections to or support for specific 
>policies and to inform Russia of the consequences certain policy choices 
>may have for those relations. Russia is free to choose that policy if it
>so chooses. 

Not if Russia wants to remain on good terms with the United States. That
is the message of Mr. Collins' remarks. And it was confirmed shortly
after by the Senate vote to deny aid to Russia if Yeltsin signs the law.
I call that blackmail.

>The United States is not telling Russia that it cannot restore its own 
>historical religious traditions. What the United States is saying is that 
>that restoration, if we accept the democratic values of individual 
>liberty and freedom of conscience, should not occur at the expense of any
>religious group. 

This is not about individual liberty and freedom of conscience; it is
about the right of _new_ religious groups to go into Russia and preach
their own version of the gospel at the expense of Russia's traditional
religious faiths, which include both Western and Eastern Christianity,
Judaism, and Islam.

>I am sympathetic to arguments that Orthodoxy is just getting back 
>on its feet after seventy years of oppression and feels threatened by the 
>influx of missionary organizations from abroad. However, it is no worse 
>a position than any other religious institution that was persecuted in
>Russia during Soviet rule. Its activities were as tightly restricted as
>those of other religious organizations in Russia.

Then any "liberation" which occurs should apply only to those religious
groups which were present in Russia _before_ the revolution and which
suffered the same restrictions during the Soviet years. 

>What the Russian Orthodox Church hierarchy is engaged in now is a 
>cynical political game to shut out other religious organizations,
>including other Orthodox churches with whom it disagrees. The argument
>that because you are Russian you are therefore Orthodox is false. Russia 
>is and always has been a multi-cultural and mult--national country with 
>a number of religions and religious traditions. Orthodoxy has, of course, 
>made strong contributions to Russian national identity and culture, but 
>this does not therefore place it in a position to crowd out other
>religious traditions. 

I do not see an intention to "crowd out" anyone. It is my understanding that
the law provides for the restoration of Russia's traditional religious
faiths: Orthodoxy, Western Christianity, Judaism, and Islam. What more do
you want? To give equal rights to Jimmy Swaggert or the Hare Krishna?

>There is an old Russian proverb: "Poka grom ne granet', muzhik ne 
>perekrestitsa," which roughly translated means one remembers God only 
>when he is in trouble. Russia today is in a deep economic and social 
>crisis, and people are naturally turning to religion for solace. Most 
>Russians that I know are nominally Orthodox. They identify with the 
>Orthodox Church because of their cultural connection, but few really 
>know what it means to be an Orthodox Christian. Church leaders do not
>seem to be taking any initiative in starting educational programs or
>catechism classes that would inform Russian Orthodox Christians more 
>about their own beliefs and traditions. Rather than giving people the
>opportunity to come to know and understand their religious heritage 
>and traditions, the simply seem to believe that they can win souls by
>default. When times get better, they will find their flock once again
>greatly reduced. 

That is perhaps a chance they are willing to take. But I would disagree
with your assertion that the church is doing nothing to teach Russian
Christians about the Orthodox faith. The April 1996 issue of Russian
Life carried an excellent article on how the church was beginning to
rebuild itself, physically and spiritually. This article included
some discussion of the Spiritual Educational Center in Murom where a
young lady was attending a Sunday School Bible class. I rather suspect
this is not the only place in Russia where a person can ask questions
and learn about the Russian Orthodox faith.

If we really want to help Russia, we should get off her back and let
the Russian people make their own decisions in matters of morals and
faith.

*********

#5
U.S. wants to keep Russia aid despite religion bill
WASHINGTON, July 18 (Reuter) - The Clinton administration said Friday it was
trying to persuade Congress not to cut U.S. aid to Russia despite sharing the
concerns of lawmakers over a Russian bill restricting religious minorities. 
The Senate voted Wednesday to cut off aid to Russia if President Boris
Yeltsin signed the bill, which would give a few major religions, such as
Orthodox Christianity, Islam, Judaism and Buddhism, strong advantages over
minority faiths. 
The State Department said it had told Moscow it believed the bill was
discriminatory and did not wish it to pass, but spokesman Nicholas Burns said
this was a matter that Russia's government needed to work out with its
parliament, the Duma. 
Burns told a news briefing the administration had also made clear to Congress
that ``it is not in the U.S. national interest to totally cut off, curtail
American assistance to Russia because of one bill by the Russian Duma.'' 
He said the United States had ``a multiplicity of interests'' in Russia,
including prevention of nuclear accidents or war, maintaining stability in
Central Europe and developing military relations through a NATO-Russia
charter. 
``So why would we pick one law, and because of our unhappiness with that
law...therefore cut off all that's important and positive in our
relationship?'' he said. 
The threatened curb on new assistance was approved as an amendment to a $13.2
billion foreign aid bill now moving through the Senate. The bill contains
about $200 million in funds for Russia. 
The House of Representatives has not yet considered its version of the
foreign aid bill but several lawmakers have expressed the same strong
concerns regarding the religious legislation, which has also been opposed by
the Vatican. 
Burns said the administration hoped that when the Senate and House came to
blend their versions of the bill the amendment on religion would be dropped
and U.S. aid to Russia would go forward. 
The bill ``On Freedom of Conscience and Religious Association'' was passed by
the Duma July 4 and the constitution gives Yeltsin 14 days to sign or veto
it. 
As the deadline expired Friday and foreign pressure mounted, the Russian
Foreign Ministry issued a statement saying he would sign it only if legal
experts ruled that it tallied with the constitution and human rights rules. 

*********

#6
The Financial Post (Canada)
July 18, 1997 
[for personal use only]
`World's last great emerging market' back in favor 

Russian intellectuals, partial to bemoaning the fate of their country,
are fond of quoting the poet Pyotr Tyutchev: ``You cannot understand Russia
with your mind. You cannot measure it by a normal yardstick. Russia has its
own unique character. One can only believe in it.'' 
Such sentiments appear to have suffused the Russian equity market. Share
prices have surged 155% this year as fund managers panic lest they miss out
on the ``world's last great emerging market.'' 
There is now renewed faith that Russia will develop into a normal market
economy, in which giant corporations, boasting prodigious assets, will
generate exceptional returns for their shareholders. 
Some individual stocks appear to have been swept up in the enthusiasm.
For example, Unified Energy Systems, the dominant electricity generator, has
seen its shares rise almost sevenfold this year, giving it a market value of
about US$19 billion. 
Within four years of its creation, the market's total value has risen to
about US$100 billion. Analysts argue soberly about whether it will rise a
further five or six times by the end of the decade. 
Yet it is hard to see what has changed to justify such euphoria. Overall
investment is still falling, a non-payments crisis bedevils industry, and,
if anything, barter trade appears to be proliferating. Ministers predict the
economy may contract again in 1997, its eighth consecutive year of decline,
and they expect it to grow only modestly next year. 
There are few yardsticks by which to measure the true value of Russian
assets, increasing the dangers of a speculative bubble. No stockbroker can
provide satisfactory price-earnings estimates for more than a handful of
companies, let alone the market, because of the opacity of Russian accounts.
Few companies pay out meaningful dividends providing any yield support. 
The market, it seems, has not so much moved ahead of the fundamentals; it
has simply chosen to ignore them. 
Alex Knaster, head of investment banking at Credit Suisse in Moscow, says
the market surge has been fuelled by two factors. 
First, some big foreign fund management groups have entered the Russian
market for the first time, chiefly through buying the American Depositary
Receipts of the few giant companies, such as UES, Lukoil, Rostelekom, and
Mosenergo, which account for more than half the market's total capitalization. 
Second, Russian banks have begun to switch funds from the government
treasury bill market into equities now that yields have fallen to about 18%. 
Knaster suggests the market has run way ahead of itself and is likely to
cool over the summer. 
``It is tough to predict when the correction will come but there is
clearly reason to expect one,'' he says. 
Some analysts, though, argue that even if the market does fall, fresh
investors will only view this as a buying opportunity. 
Julia Dawson, head of Russian equity research at ING Baring (U.S.)
Holdings, argues that Russia's forthcoming inclusion in the benchmark
emerging markets investable indexes compiled by the International Finance
Corp. and Morgan Stanley & Co. will suck in more money in the fourth quarter. 
``When a fund manager sees a market going up by 160% in six months they
do not want to explain to their boss why they are not in there,'' she says. 
Moreover, there is still good value among second-tier stocks. 
``Investors who are used to other emerging markets are looking at the
regional telecom companies, for example, and saying that a valuation of
US$660 a line looks cheap.'' 
But John Paul Smith, Russia market analyst at Morgan Stanley, argues that
the critical factor for investors should be a company's ability to generate
cash. 
``If you start trying to value companies on the basis of cash flow, you
become much less optimistic,'' he says. ``Many enterprises out there are
technically bankrupt, but it is both politically and legally impossible to
administer the coup de grace. 
``Calling the top of this market is a mug's game. But the more it goes up
the more it is going to fall,'' he says. 

**********

#7
>From RIA Novosti
Argumenty i Fakty, No 29
July 1997
IN WHO WE TRUST?

The Institute of Sociology of Parliamentarism directed by
Nugzar Betaneli conducted on July 1 through 5 a public opinion
poll to an order from this newspaper. It probed the opinions of
6,000 randomly chosen respondents in 62 RF members in all
twelve economic regions of this country, Moscow included. The margin
of error is believed to be plus or minus 2%.
The institute probed the level of trust and mistrust that
people feel in the various institutions of legislative and
executive authority plus the Orthodox Church. 
The situation seems paradoxical, at first glance. The RF
Cabinet has repeatedly changed its composition in the past few
years. President Yeltsin has admitted that the style of his
Presidency has been changed. Nevertheless, the people seem to
feel approximately the same level of trust in these
institutions.
Thus, in August 1994, 12% of respondents in a similar poll
said they trusted the RF Government, in August 1995, the figure
went down somewhat to 11%; in August 1994, 11% of the polled
trusted the RF parliament as a whole, etc.
Some analysts are apt to explain this by the "traditional"
negation of the authority. But, on the other hand, people tend
to
have appreciable trust in such state structures as the Armed
Forces and the Federal Security Service (FSB), plus the
Orthodox
Church. 

Trusts and Mistrusts (% of the polled):
---------------------------------------------------------------
Trust Mistrust Know Nothing of Hard to say
---------------------------------------------------------------
RF President 11 61 9 19
RF Cabinet 12 61 13 14
State Duma 10 55 15 20
Armed Forces 48 21 14 17
FSB 29 27 27 17
Orthodox Church 44 20 16 20
---------------------------------------------------------------

In other words, the problem is not "genetic" social
negativism; rather, it looks as if the President, the Cabinet
and the State Duma do not live up to popular expectations in their
activities. Many a problem lingers for years. 
Thus, a majority of the voters are highly concerned, just
like a year before, by wage arrears (45%), and personal safety
and that of the family and kin (38%). As many as 58% of the
polled admit that they are poor or "living below the poverty
line."
At the same time, popular concerns over the political
situation in the country have been ameliorated somewhat: 24% in
June 1996 and 17% in July 1997. 
Against the background of unresolved problems, people are
fast changing their vision of political parties, movements and
unions. The respondents were offered to consider a list of ten
political parties which had the largest number of votes (included
into the federal lists) at the 1995 elections to the State
Duma.
Question: If you were asked to elect State Duma members
from among representatives of the same parties, movements and unions
as in 1995, who would you vote for today?

---------------------------------------------------------------
17 Dec. 1995 July 1-5 1997
Elections Poll
(data by Central Electoral (% of potential
Commission) voters)
---------------------------------------------------------------
RF Communist Party 22.3 34.73
Liberal Democratic Party 11.18 6.0
Our Home Is Russia 10.13 8.73
Yabloko 6.89 15.11
Women of Russia 4.61 4.98
Communists - Working Russia 4.53 1.0
Congress of Russian Communities 4.31 8.53
Party of Workers' Self-Rule 3.98 2.7

Democratic Choice of Russia -
United Democrats 3.86 1.8
Agrarian Party 3.78 1.53
Other unions, parties 19.75 3.78
Against all 2.77 11.1
---------------------------------------------------------------

**********

#8
POCHINOK: EVERYTHING IS CORRECT IN DECLARATIONS ON INCOMES OF TOP OFFICIALS
MOSCOW, JULY 17 (RIA NOVOSTI CORRESPONDENT). The
declarations on the incomes of Russia`s top-ranking officials,
the president, prime minister, first deputy prime ministers for
1996 have been verified and no discrepancies have been found in
them, head of Russia`s State Tax Service Alexander Pochinok said
life on air in the Ekho Moskvy radio.
According to Pochinok, "Anatoly Chubais leads in gross
property, he is on the first place, Boris Yeltsin and Viktor
Chernomyrdin lose him. Kalmykian President Kirsan Ilyumzhinov
has the highest in the country salary and payments of income
taxes."
As Pochinok reported, the tax service received 3.3 million
declarations on incomes for 1996. These are people with several
sources of income. More than 30,000 people are verifying
declarations the overwhelming majority of which "are pure,"
according to Pochinok. He also said that "the greater part of
the State Duma deputies have handed over declarations on incomes
for 1996 but have not filled in new declarations on incomes and
property." 

**********

#9
Chubays Said To Plan Meetings With U.S. Banks, Intelligence 

Zavtra, No. 27
July 1997 

Unattributed, untitled report from the "Scoreboard" column of "Den
Security Service Agents' Dispatches"

According to sources from Zurich bank circles, a secret visit from A.
Chubays, who is scheduled to conduct a series of consultations with members
of the biggest United States financial groups, is expected there in the
near future. The assumption is that the consultations may be continued in
the United States with an appearance by the first vice premier before the
true leaders of the financial and political establishment (primarily the
Boston group). That was the true reason for his supposed "holiday in
Scandinavia." However, there is also another version of how events might
develop, whereby Chubays will really show up in Copenhagen to cash his own
and some other bank accounts, with the aim of consolidating financial
resources for the autumn privatization campaign in the Russian Federation,
where "photocopier boxes" will obviously not be enough. Here he will
supposedly conduct meetings with the heads of local United States and
British intelligence on questions of the development of a "new line."
Whether a trip to the United States will be undertaken depends on what
suggestions Chubays brings to Zurich and whether they are considered worthy
of the attention of the United States "super- elite," which is increasingly
dissatisfied with the failures of Chubays' current operations and the
strengthening of the pro-German grouping in the "party of power"....

**********

#10
Scandal Cast a Cloud Over Russian Central-Bank Chief's Status
July 18, 1997
[for personal use only]
MOSCOW -(Dow Jones)- As a lull set in Friday in what looks to be Russia's
worst financial scandal in recent memory, uncertainty grew about the future
of Central Bank Chairman Sergei Dubinin, who first brought the charges of
diversion of more than $500 million in government funds against a former
official and a leading bank. 
"The central bank's reputation has been seriously undermined," said Pavel
Teplukhin at Moscow brokerage Troika Dialog. 
The verdict on the truth of the accusations isn't likely to come out until
prosecutors complete their investigation in several months. 
But said Christopher Granville, head of research at United City Bank, a
Moscow investment house, "this is a side issue compared to the stability of
the central bank and the importance of that to the markets." 
"It's vital that Dubinin's accusations be shown to have substance so as to
stabilize his position," Granville added. 
Financial markets so far aren't showing signs of nervousness about Dubinin's
fate, but analysts warn that his resignation could send both debt and equity
prices lower. "The stakes are potentially quite high," Granville said. 
Since taking office in late 1995, Dubinin has turned Russia's central bank
from one of the main sources of inflation - through huge credits issued by
his predecessors to cover the budget deficit - into a stalwart of monetary
stability. "His role in stabilization was quite large," said Teplukhin. 
An academic economist by profession, Dubinin has won the respect of the
International Monetary Fund and other lenders for his commitment to
strengthening the ruble, fighting inflation and stabilizing the banking
system. 
Reformers have come and gone in the government, but Dubinin has held his
post, turning the central bank into a strong, independent institution. 
But Dubinin this week put his job on the line, issuing a public statement
accusing Unikombank, one of the country's largest banks, and Andrei Vavilov,
formerly first deputy finance minister and now president of bank MFK, of
diverting $512 million in government funds in two separate deals in 1996 and
early 1997. 
Vavilov denied the accusations, as did Unikombank. Both said Dubinin's public
statement was hasty and hinted it might have had more to do with a
behind-the-scenes effort to remove him. 
Unikombank's chief executive officer, Nina Galanicheva, Thursday held a news
conference to announce that the central bank's audit was complete and had
found nothing more than "technical" violations. 
Several Russian newspapers interpreted Galanicheva's assertions as evidence
Dubinin had jumped the gun in making his charges and began predicting his
imminent resignation. Dubinin hasn't spoken publicly since his initial
statement, and a central-bank spokesman refused to comment on the Unikombank
audit. 
But the spokesman, Alexei Sitnin, noted that a relatively clean bill of
health from the central bank doesn't mean Dubinin's accusations were
unfounded. "Stealing government money isn't a violation of banking laws,"
Sitnin said. "The criminal aspect is a question for the prosecutor." 
Law-enforcement officials refused to comment on the substance of their
criminal investigation, but confirmed Friday that it is continuing.
"Investigations like this one take a long time, the end is months away,"
Senior Prosecutor Alexander Bobrinyov told Dow Jones. 
Such a long delay would mean a tense period of waiting for Dubinin amid
increasing signs of competition among Russia's financial elite. Early this
month, Dubinin noted darkly that he was aware of efforts under way in
parliament to force him to resign. 
Russian media have reported that several leading financial groups,
potentially with the support of First Deputy Prime Minister Anatoly Chubais,
were looking to remove Dubinin, who has long been associated with Prime
Minister Viktor Chernomyrdin and the giant gas company he used to run, RAO
Gazprom. 

*********

#11
The Independent (UK)
19 July 1997
[for personal use only]
Spirit of old Russia reclaims new Moscow
By Rupert Cornwell in Moscow 

Could this be Moscow, the child asked, his face pressed to the window, 
eyes staring with disbelief, as the night-time city flashed by, a stream 
of lights, bustle and abundance where once all was drabness? 
The child was me, returning with a Labour Foreign Secretary after six 
years to the city I left during the death throes of Communism. That much 
was obvious then, even to a child. 
But this new jumble of first impressions was stunning. Karl Marx seemed 
to have surrendered to Marlboro Man, dirty snow ploughs to a forest of 
cranes over a renascent city. Far more important, albeit slowly and not 
without discomfort, a world view is shifting too. 
The monuments of central Moscow, touchstones of the national mood, tell 
their own story. Where once stood an all-year heated swimming pool there 
is now a gilded entrance to heaven itself. Stalin knocked down the 
Cathedral of Christ Saviour in the Thirties and wanted to replace it 
with a gigantic Palace of the Soviets. But the marshy ground could not 
stand the weight and Josef Vissarionavich's poor subjects had to make do 
with a pool. 
Now, just like the merchant classes who dotted medieval Europe with 
cathedrals, Moscow's new elite, in the shape of mayor Yuri Luzhkov and a 
clutch of supporting financiers, have built their monument to the 
Almighty - a replica, only larger, of the former church. 
Mr Luzhkov is a wonderful, disorienting example of the old's seamless 
metamorphosis into the new. Watch him holding court this week for the 
visiting dignitary, and the Soviet Union might not have died: the same 
configuration of delegations confronting each other across a long table 
in an even longer room, the same furnishings - even Mr Luzhkov himself, 
a hugely popular entrepreneur now as he tarts up the city for its 850th 
anniversary later this year, but in looks and demeanour every inch the 
apparatchik. 
Only the portrait at the end of the room is different. Ten years ago, a 
Foreign Secretary would have been contemplating Lenin. Today, none other 
than Peter I stares down on proceedings: yes, Peter the Great, adorning 
the mayor's office in a city whose superstitious, semi-Asiatic ways he 
loathed so much he built a new capital 300 miles to the north, on 
Russia's one maritime outlet to Europe. 
And Russia's most determined Europeaniser has been grounds for another 
Luzhkov spectacular, a hideous 150ft tall monument consisting of a 
statue of the Tsar balancing precariously on a pile of ships' hulls. It 
is meant to commemorate the 300th anniversary of the foundation by Peter 
of the Russian navy - though what, one might ask, has Moscow to do with 
that? A few days ago, Communist extremists threatened to blow the thing 
up in reprisal for plans to remove Lenin's body from his mausoleum, but 
they subsequently backed down. 
So as the Communist tundra melts, and Moscow at last races into the late 
20th century, it is to the late 17th century that it looks for 
inspiration. And thus is confusion piled upon confusion. The Russia of 
the General Secretaries lives on not only at City Hall, but in a host of 
other ways. Red stars still adorn Kremlin towers and the statue of Lenin 
rampant still bestrides Oktyabr'skaya Square. And even though the 
embankment where the British embassy stands has returned to its 
pre-revolutionary name of Sofiiskaya, a marble plaque reminds that until 
lately, for 30 years, it was called Moriza Toreza, after the postwar 
French Communist leader Maurice Thorez. 
Listen to politicians and academics here however, and for many of them, 
too, history's downsizing still jars. "Mercifully we have stopped being 
a superpower," one Duma deputy told me. "We are learning to be a 
European power." But it was very dangerous, he warned, "to put Russia in 
a position where it perceives that others see it as weak. Russia will 
have no choice but to go its own way. Not against Europe, but not with 
Europe." 
This was no Zhirinovsky speaking, but a member of the liberal and 
Westernised Yabloko faction, on the issue of Nato enlargement. The 
ministerial press conference provided a similar cameo. Sitting next to 
our Foreign Secretary was his Russian counterpart Yevgeny Primakov, 
adviser to defunct politburos, apologist for Saddam Hussein and living 
relic of Soviet superpowerdom. Then Robin Cook began his setpiece 
statement: "Russia . largest of all the European nations." 
The point could not have been clearer. And Europe surely it must be. 
Forget Mongol hordes and Russia beyond the Urals. The future is the 
European landmass where 85 per cent of the Russian population lives, the 
Europe of fast foods and mobile phones, and one day, who knows, 
membership of the European Union. 
But a moment later you wonder. Just along the street from the British 
embassy is an ornate entrance way facing the Kremlin. It leads into a 
courtyard. Inside is a rusting red ZIM limousine, precursors of the 
sleek black ZIL which ferried Robin Cook around Moscow. It must be 40 
years old, and surely untouched for the last 20 of them. 
Beyond is a smaller, half derelict church used for theological studies. 
The cracked windows have been repaired with boards and pieces of cloth, 
saplings sprout from its roof. All around are piles of discarded 
household junk, and the unkempt vegetation of the Moscow high summer. 
The scene is neither communist nor capitalist, neither European nor 
Asiatic. Just unalterably, eternally Russian. It would have driven Peter 
mad. 

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

#12
Fns Summary 
Federal News Service 
July 18, 1997 
UNIKOMBANK: INVESTIGATION CLEARS EMBEZZLEMENT CHARGES 

MOSCOW (FNS) -- Top officials from Russia's scandal-tainted Unikombank 
on Friday refuted charges of embezzlement and corruption that surfaced 
last week, saying an investigation by the Central Bank has cleared its 
name. 
Documents leaked by the Central Bank allege misuse of funds totaling 
some $500 million by the bank and one of its affiliates in two deals. 
Unikom's chair of the board, Nina Galanicheva, told reporters that both 
transactions were perfectly legal, and the funds involved in each were 
not mishandled or misappropriated. 
"Unikombank has been working and continues to work strictly in our 
clients' interests. There have been no machinations or abuses with any 
assets on the part of Unikombank. We have never concluded any 
transactions to the amounts that you have written about so much," she 
told reporters. 
Inspectors from the Central Bank completed an audit of Unikom on 
Thursday, and according to Galanicheva the only misdeeds discovered were 
of a "technical" nature. "All the mistakes mentioned by the Central Bank 
in its conclusions concern day-to-day banking work," she said. "I 
assume...that all banks which deal with such amounts of money and with 
such a number of customers...make such mistakes." 
Galanicheva refused to divulge more details about the audit, saying the 
report was now the property of the Central Bank and was confidential. 

***********

#13
Government's Post-Vacation Tasks Viewed 

Delovoy Mir 
July 15, 1997
[translation for personal use only]
Article by "Strategic Analysis and Forecasting Center" under the
"Prognosis" Rubric: "Chernomyrdin Will Guarantee the Country a Quiet
Summer"

In the coming weeks V. Chernomyrdin will become the key figure in
Russia when he is left "in charge" while B. Yeltsin, A. Chubays, and B.
Nemtsov take their vacations.
We should hardly expect any brilliant public actions from the premier.
The vacation period will be a sort of "neutral strip" for weeding out the
unsuccessful or openly disastrous initiatives of the "new team." So, for
example, the subject of Nemtsov's automobile auctions should gradually be
"forgotten." After their vacations, the new generation in the government
will most likely be faced with the need to change its tactics: No longer
can anything be achieved by means of a road roller; the period of "cavalry
charges" is over.
To all appearances, the country will enter the fall and then the
winter with a paradoxical system of interpersonal relations. On the one
hand, the president himself will try to convince the population that the
"new team" is performing successfully. On the other hand, the actual depth
of the economic crisis should already become evident in the near future. 
The increasingly sharp contradictions between the two "Chs" -- A. Chubays
and V. Chernomyrdin -- are objectively coming to a head. But the
omnivorous nature of the premier, who gets on easily with all partners in
the government, could break all records. Here B. Yeltsin is appearing as a
"friend of paradoxes": Only he, provided he is in good shape, can combine
the differing interests of his comrades in arms so as to put them to work
for the common cause. Will the president be able to continue this much
longer? That is the main question for the medium-term future.
The configuration of the main political and economic institutions of
the state will continue to erode. By independently sequestering the
budget, the government was in fact declaring that the law on the budget had
gone outside the limits, and in so doing it laid the basis for a new
constitutional crisis. June set a significant precedent: This was
probably the first time that an important issue such as this had been
resolved unilaterally. The Duma, in essence, did not assess this fact
adequately. And this circumstance could hereafter lead to the practice of
"Duma functions'" being transferred to a number of functional government
structures.
The most important will be the problem of governing the country. And
here the "young reformers" have no choice but to make government work at
any cost. Otherwise they will simply be swept away. The strategy of
"controlled disorganization," which at one time was the practice of the
USSR, and then Russia, recently lost its first component --
controllability. Behind this stand major geopolitical hazards, which will
have to be overcome by A. Chubays, B. Nemtsov and others.
A lull should be expected in the power structures, because for now
there are no preconditions for sudden moves. Nonetheless, the tension in
and around the Army will grow stronger.
For members of various political and economic elites, the main
question will be the expediency of maintaining the current relative
political stability. Each group will have to determine for itself the
price of this stability.
Paradoxical as it may be, the investment tenders for the sale of state
blocks of shares of oil companies were scheduled for precisely the period
of the political lull and vacations. To all appearances, they will result
in the further stratification of the economic elites and the
intensification of inter-elite contradictions. Along with this, there is
reason to assume that in many elite groups the period of dynamic activity
will be followed by a period of reflection. There are more than enough
things to ponder. We have failed to force the country to start working in
a new way. The new reform acts are encountering greater resistance. The
gap between the elite and the rest of society is growing. The need is
building to explain to the population what is happening and where the
country is headed. However, the members of the already formed elites are
themselves not ready to satisfy this need.
The situation that is developing is one where the local elites are
faced with the opportunity to begin actively using the "Nazdratenko model."
Regional leaders will be trying to break away from a certain part of the
central political elite. The arsenal of the separatist methods is quite
large: from "emission separation" (one of the methods being Euro-loans) to
political pressure on specific political and economic persons in Moscow.
Nonetheless, the institution of presidential representatives will
continue to multiply on increasingly lower levels, down to rayon and city.
The socioeconomic and political apathy will remain a determining
factor in the mood of most of the population. It is clear that there is no
avoiding individual initiatives, but it does not look as though things will
reach the point of major political action on the transregional, let alone
the federal level.

*********

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