July 22, 1997   

This Date's Issues:   1075  •1076 •1077  1078

Johnson's Russia List
#1076
23 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. AP: Yeltsin Rejects Religion Bill.
2. Linda Cook (Brown University): McFaul's article.
3. Theodore Karasik (UCLA): Comments on Williams, McFaul, 
Talbott.
4. Moskovskiy Komsomolets: Aleksandr Tumanov and Steve Kreyn, 
"Secret Battle: Anatoliy Chubays Versus Boris Yeltsin."
5. International Herald Tribune: Russian Economy Picking Up.
6. Steve Blank (US Army): Chubais.
7. The Hindu: Vladimir Radyuhin, RUSSIA TARGETS TRADE BARS.
8. Christian Science Monitor: Lee Hamilton, Toward Peace in 
the Caucasus.
9. NTV: Poll Shows Lebed, Nemtsov, Zyuganov Favorite 
'Contenders.'
10. Reuter: Russia central bank limits scandal-hit bank.
11. Journal of Commerce: John Helmer, Russians take their 
hats off to Madison Ave. Sales pitch on dandruff seen imparting 
growth.
12. The Independent (UK): Phil Reeves, Not waving but drowning 
in Moscow.]

********

#1
Yeltsin Rejects Religion Bill
July 22, 1997
By MAURA REYNOLDS
MOSCOW (AP) - President Boris Yeltsin rejected a bill Tuesday
that would have placed tight restrictions on many religious groups
in Russia, including evangelical Christians and Roman Catholics.
The bill had drawn strong opposition from the Vatican and the
U.S. Senate, which threatened to cut off aid to Russia if it became
law.
Yeltsin's action sends the bill back to parliament, which can
overhaul it or let it lapse.
``This was a very difficult decision,'' Yeltsin said in a
written statement, noting that the measure was supported by a large
majority of Russian lawmakers and the powerful Russian Orthodox
Church.
``But many provisions of the law infringe on constitutional
rights and freedoms of individuals and citizens, establish
inequality between different confessions, and violate Russia's
international obligations,'' Yeltsin said.
The law would have officially recognized the central role of the
Orthodox Church in Russian history and culture, and pledged
``respect'' to Islam, Buddhism, Judaism and other ``traditional''
religions.
But it would have imposed rigid curbs on other religions and
cults, forcing them to register with the government and barring
them from owning property or conducting public worship for 15 years
after registration.
``Thank God,'' said Maria Varzaruk, a spokeswoman for the Union
of Christians of Evangelical Faith in Russia. ``Now we can freely
serve God.''
In his statement, Yeltsin acknowledged the controversy over the
bill, and asked parliament members to support his decision.
``We can't have a democratic society if we violate the
constitution and fail to defend the interests of any minority of
our citizens,'' Yeltsin said.
Russia's 1993 constitution guarantees freedom of worship.
The bill had strong support from the Russian Orthodox Church,
which resents an influx into Russia of what it considers
``foreign'' religions. Those include evangelical Christians,
Mormons and Roman Catholics as well as less mainstream groups such
as Japan's Aum Shinri Kyo cult.

********

#2
Date: Tue, 22 Jul 1997
From: "Linda Cook, Ph. D." <ljc@world.std.com> 
Subject: McFaul's article

Dear Mr. Johnson,
I agree with Michael McFaul's assessment that the Communists have been a 
weak opposition in Russia, backward-looking, reactive, and largely 
ineffective. They are further hampered by the fiscal crisis of the 
Russian state, and by the Yeltsin administration's growing penchant for 
ignoring even legally-binding Duma decisions. Unless the Communists and 
their allies are willing to challenge the government and face the threat 
of dissolution, they will become further discredited. A few points:
1)The Communists have delivered a little to their supporters. Since 
January 1996 they have repeatedly passed legislation to raise minimum 
pensions, wages, and the calculated poverty level. These measures have 
faced frequent vetoes by the Federation Council and Yeltsin, but have had 
some modest effect.
2)As to budgets, when the 1997 budget was presented to the Duma parties 
across the spectrum responded that the revenue side, particularly 
projected tax revenues, were unrealistic because of the government's 
notoriously weak taxing capacities. The Communists could have pushed for 
higher deficits to fund more social spending, but they could probably not 
have made the government spend the money. A significant part of the 
funds allocated in the 1996 budget went unspent by the Finance Ministry 
in order to keep the deficit down. The Communists might have been able 
to force more monetary emissions, as some in the party proposed, but this 
would fuel inflation and hurt their core constituency - pensioners. It's 
not clear what they could have accomplished in a fight over the budget, 
and they did demand some conditions for approval - including a parallel 
'development budget' which seems to have gone largely unfunded. 
3)The government's recent spate of proposals - to gain the Duma's 
approval for a 20% sequester of the 1997 budget, transfer costs of 
housing and municipal services to users, and reform (with substantial 
cuts) the system of social support - constitute a direct challenge to the 
Communists, who have promised to defend social protections. While some 
of these changes are surely necessary, if the Communists cave in to this 
gutting of the welfare state in the face of continuing wage arrears and a 
still-declining economy, they will be further discredited, but ditto if 
the government moves ahead without their consent, as it threatens to do. 

I don't know if McFaul is right about the beneficiaries, but the 
Communists, cowed by the threat of dissolution of the Duma, seem 
unwilling even to seriously challenge the government.

Linda J. Cook
Associate Professor
Brown University

***********

#3
Date: Tue, 22 Jul 1997
From: Theodore Karasik <tkarasik@ucla.edu> 
Subject: Comments on Williams, McFaul, Talbott

The following comments are several quick responses I have to some items JRL
has been running of late:

1) Carol Williams' articles in the Los Angeles Times (LAT) seems to
represent the first time the LAT has accurately reported what is happening
in Russia. It is a good series!!! But, ever since I started reading LAT in
1987, I have been disturbed by the poor reporting and analysis from Moscow
especially during the Gorbachev period and, later, the actions of the
Yeltsin administration. On several occasions in the past 10 years, I called
the editor responsible for Russia-related stories to try to explain how LAT
reporters mislabeled or misunderstood the personalities and political
processess in the Soviet Union and Post-Soviet Russia. Perhaps the LAT is
finally beginning to get the picture straight by getting out into the
provinces! 

2) Professor Michael McFaul's op-ed piece is a first look at a potential
group of opposition represented by the likes of Lebed, Rokhlin, and Luzhkov.
Frankly, I was surprised at the ominous nature of McFaul's conclusion of
potential authoritarianism given his previous writings and editorials which
painted a much rosier Russian future most of the time. But, let's leave
that issue alone and instead turn to the personalities he mentioned. Lebed,
Rokhlin, and Luzhkov may represent a harsher Russia in the future, but in
today's Russia, politicians can rise and fall rapidly given the pace, scope,
and fluidity of Russia's attempts at socio-economic transition. Is Lebed
really still capturing the attention he once had across Russian society?
How about Rokhlin? He did establish an impressive group of "have-beens" but
will it amount to anything? Is Yeltsin & CO really taking his threats
seriously (seems to me that they are not)? How about Luzhkov? Of the
three, Luzhkov seems to be in pretty good shape based on his performance in
Moscow and ties with other leaders within the Federation Council. But as
the 2000 presidential race gets closer, will Luzhkov (or Lebed for that
matter) be able to defend himself against potential "corruption charges"
made by political enemies (the 1990s version of the 1930s' *chistki*)? Will
corporate interests --both internal and abroad-- really support him if he
keeps the nationalist rhetoric going? So, perhaps, Professor McFaul has
jumped the gun a bit by trying to fit these folks in a puzzle that has
several steps to go to become a serious threat. The possibility exists but
it remains hypothetical. Time will tell....

3) Deputy Secretary of State Strobe Talbott's speech on the Caucasus and
Central Asia comes several years late. As early as 1992 --at least in my
reading and analyses of the FSU at that time-- energy issues had already
emerged as a major, potential flashpoint not only between and within the
Caucasus and Central Asia, but also regional neighbors such as Iran (i.e.
stability of Tehran's Northern Tier). In 1992, these states were already
searching for alternatives away from Russia that the U.S. simply ignored
because of it's concentration on supporting Yeltsin and the CIS (reminds me
of the British policy towards the Ottomans to keep the empire intact). But,
in 1997, energy politics are en vogue. The United States is becoming more
involved in the region because allies such as Turkey can't sustain the
economic push that Washington supported for the past four years. And the
more recent interests of Pakistan, India, Iran, China, and Japan may have
also pushed U.S. policymakers to recognize the geopolitical importance of
the region (Great Game time again?). As for the conversion to democracy in
the Caucasus and Central Asia, U.S. monies may help the process along but
the obstacle of the centuries-old "clan and fief" behavioral patterns in
Azerbaijan, Kazakstan, and Turkmenistan might render that aid useless. 

**********

#4
U.S. Seen Backing Chubays Against Yeltsin 

Moskovskiy Komsomolets
July 14, 1997
[translation for personal use only]
Article by Aleksandr Tumanov and Steve Kreyn (name as transliterated)
under the "Rumors" rubric: "Secret Battle: Anatoliy Chubays Versus Boris
Yeltsin"

The fact that Washington has long and seriously been seeking a
possible successor to Boris Yeltsin, who has largely exhausted his
political potential and who is suffering from a physical ailment, has been
known for a long time. All kinds of candidates have been considered --
from the left political wing to the right. For instance, even the
candidacy of Aleksandr Lebed was actively examined when he was at the
height of his popularity. It was with this aim that he was invited to the
United States, where he was tactfully worked on in this regard. Lebed made
it clear that he was not averse to taking over the Russian throne with
American support, and indirectly that he was ready to make a deal. 
However, American analysts and psychologists wound up rejecting the general
as unbalanced, un-self-critical, having an overstated opinion of himself,
uncivilized, lacking political education, and so on.
In the end, the choice was made in favor of Anatoliy Chubays, who has
always been seen as a reliable partner in the United States. In the
opinion of American experts, Chubays has all the qualities to take over the
Kremlin: [He is] ambitious, calculating, cynical, clever, educated,
pro-West oriented, Jewish on his mother's side.... It was from this moment
that Chubays's second ascent to the Olympus of power began. If Boris
Yeltsin strains his memory, he will probably recall who it was who
persistently advised him to move Chubays up the ladder of power, and what
arguments were put forward. The main one was that the West would give
[Russia] money "with Chubays as security." It was also taken into account
that Yeltsin cannot stand even distant potential rivals. The Russian
president was reassured: Chubays is too unpopular with the people to
aspire to a top role even in the distant future. Superficially, everything
looked convincing, and Yeltsin took the spoon-bait.
From this point on, events began developing very dynamically. Chubays
started pursuing an active personnel policy, placing his people in many key
posts and financial and political areas, and forming the so-called
"Petersburg clan" under his command. After this he began using the banks
he controlled to enlist a number of mass media. He enlisted the support of
Vladimir Gusinskiy (who, for his part, had been put in the picture
beforehand by influential American bankers), who owns the big MOST-media
propaganda concern.
Where Did the "Firewood" Come From? [Subhead; quote from Russian poem]
American analysts, experts, and image-makers are no longer
disconcerted about the fact that Chubays is unpopular with Russians. Having
carefully analyzed the sociopolitical situation in Russia, they came to
conclusions that were optimistic from their point of view. Any social
psychologist knows that in a critical social situation, when the question
of the survival of a significant part of the population arises, it is much
easier to manipulate public opinion than [when one has] to convince
well-fed and well-off citizens of something. In these conditions, the one
who gives alms seems a benefactor. In this connection, a document that was
given to the editorial office by American journalists, and which we publish
in abridged form, looks very curious. "(...) U.S. banks have allotted $4
billion to pay for the services of the British company Tim Bell, which
received the order to design a new image for A. Chubays, who has taken on a
key position in the Russian government. CIA employees and highly qualified
experts on organizing election campaigns who worked in Russia during the
1996 presidential election have come to Moscow. Some of them have taken up
residence at the President Hotel, and others at the American Embassy. The
funds for the support of A. Chubays are coordinated through D. Macey [as
transliterated], a former adviser of the Russian Government, who is
connected to the American special services. According to some sources, D.
Macey has already received approval for the allocation of about $1 billion
by rich Arab 'sponsors' toward these aims. However, it is planned to obtain
the bulk of the funds in the form of additional loans from international
credit establishments controlled by the United States. (...) According to
the American special services' assessment, A. Chubays, contrary to
widespread opinion, can radically improve his image in the eyes of the
Russian population if he uses the secret currency credits received from the
West to quickly resolve the problem of paying out wage and pension arrears
while simultaneously a skillful and flexible propaganda campaign is
conducted on his behalf. The controlled media should form a steady
socio-psychological algorithm: It is Chubays who has solved the problems
of nonpayments of social benefits. It is necessary to create the image of
a politician who is capable of saving the population from poverty. 
"Measurements" of public opinion conducted in a number of regions of Russia
have shown that most potential voters assess the activity of politicians
strictly on the grounds of actual improvement or worsening of their own
material position. This creates the opportunity very quickly to change the
attitude of the public toward them through financial manipulations. It is
very important that today A. Chubays is already being associated with the
beginning of pension and wage payments in a number of Russian regions,
including several regions of the Kuzbass. Against this backdrop it is
important neatly, on a subconscious level, to push Boris Yeltsin into the
political shadows as a leader who has lost touch with real life and who
does not understand his people's vital problems. (...) Tim Bell, credited
with the successful organization of the election campaigns of M. Thatcher
and
Clinton, is considered to be one of the world's best at creating an
attractive image for politicians. In 1996 the company worked out a
detailed scenario of the election campaign for Russia Is Our Home for $2.5
million: A scenario which, according to the company experts themselves,
'was tossed into the garbage pail by incompetent government bureaucrats who
preferred traditional schemes, and, as a result, failed in the elections.' 
(...) Tim Bell is being placed at Chubays's disposal under pressure from
influential American businessmen and politicians. Nick Tvil [as
transliterated], a close friend of the son of ex-U.S. President G. Bush and
a 'hard-line anti-Communist' who is closely connected with American banking
and business circles, has already played a key role in this."
Is the Boss No Longer Needed? [Subhead]
It looks like they have indeed started to subtly discredit Boris
Yeltsin. More and more often blatant banalities, not to say stupidities,
are being put into his mouth. His regular radio addresses are being
written in the style of the later Brezhnev, who did not have a very good
idea of what world he was in and what problems the country was facing. 
Persistent reports about the president's health underline, as it were, the
fact that Yeltsin has not recovered after his operation. In this
connection, the idea, which has now been realized, of appointing Yeltsin's
daughter Tatyana Dyachenko, whom the people are increasingly comparing to
Brezhnev's daughter, Galina, to the post of president's aide, looks like a
very good move. In the provinces the reaction to this is simple: In the
Kremlin they are going crazy with too much good living. Even the fact that
the president has gone on vacation is being actively used against him. 
Television frequently shows the splendidly renovated residence where
Yeltsin is idling in luxury, and where, for his vacation, they even bought
and urgently installed the finest tennis court in Europe at fantastic cost.
This court, in turn, is shown standing empty, emphasizing that the ailing
president is no longer able to compete for the "Big Hat" [tennis prize]
like before. But he is successfully occupied with a "pensioner's hobby"
-- fishing, and reports about the fish caught are served up as the
main political event in this dramatic situation. Against the backdrop of
social cataclysms, it is being dinned into the public: That is what he is
like, this Yeltsin, while you are starving and waiting for your pensions
and wages, he and his family are living off the fat of the land. He does
not care about your problems. Chubays, however, is shown as being actively
concerned about the population. According to some reports, this campaign
is being conducted on Chubays' initiative and was legalized, so to say,
through Tatyana Dyachenko, who is not very experienced in such matters and,
to put it mildly, not very perspicacious, but who is simply obsessed with
self-assertion in politics without having the objective talents or
abilities for it. In the meantime, Chubays himself, in order to secure a
political alibi for himself just in case, has gone on vacation, apparently
figuring that the assignment will be carried out by his comrade-in-arms,
the head of Russian Television, Nikolay Svanidze. However, Svanidze, who
is well-versed in such intrigues, also went on vacation after Chubays,
leaving his younger colleague Mikhail Ponomarev in the firing line.
It should be noted that Anatoliy Chubays went on vacation abroad
without the steps dictated by protocol or the expected security guards, who
protect not only his personal safety but also the safety of the interests
of the state. This is an unprecedented case in international practice. It
is no secret that such a high-ranking state official as this automatically
becomes an object of interest and influence of professionals in the foreign
special services. One of the Security Council deputy secretaries put
forward the suggestion that by doing this Chubays got rid of the informers
in the shape of security guards so as to conduct a series of confidential
working meetings with foreign partners; moreover, he needs to carry out a
number of transactions with his currency accounts in foreign banks, for
which his personal presence is necessary.
Considering Anatoliy Chubays's [political] grip, his outstanding
talent for the battle behind the scenes, his powerful financial- political
team, and foreign capital's support for him, it cannot be ruled out that
changes will take place on the Russian throne before the year 2000. One
way or another, the political winter, when social problems will become
aggravated in the extreme, promises to be a hot one in Russia.

***********

#5
International Herald Tribune
July 23, 1997
[for personal use only]
Russian Economy Picking Up
IMF to Find More Currency Reserves and Tax Receipts
Reuters

MOSCOW - An International Monetary Fund mission arriving in Moscow on 
Tuesday will find the economy in better shape than previous delegations 
have, analysts said. 
Currency reserves are up, the ruble is steady and inflation is 
continuing to slow. More important, taxes are flowing into government 
coffers as a new team of reform-minded ministers is putting pressure on 
big corporations to pay up and restructure monopolies.
The payoff in unambiguous economic growth is still to come, and millions 
of ordinary Russians have yet to benefit from the improvements. But with 
Russian markets at or near record levels, foreign investors are taking 
advantage of the improvement.
''The IMF is arriving in particularly positive circumstances,'' said 
Thomas Balastrery, director of research at Austria's Creditanstalt 
Investment Bank in Moscow.
Over the last 12 months, the fund, in hopes of encouraging Moscow to 
mend its ways, has repeatedly delayed payments of its $10 billion 
three-year credit because revenue was running below budgeted levels, 
undermining fiscal policy. 
But in June tax revenue was running at 30 trillion to 34 trillion rubles 
($5.19 billion to $5.88 billion), the amount that had been budgeted for 
the year, and was double January's receipts of 14.5 trillion, Mr. 
Balastrery said.
''There's no reason for the IMF not to release the money,'' since 
''inflation and money supply are on target,'' said Per Maelstrom, 
director of research at the brokerage Brunswick.
The team from the monetary fund is conducting a quarterly review of the 
Russian economy to decide whether to pay out a $700 million tranche of 
its loan.
The government paid off 22 trillion rubles in pension arrears last 
month, and President Boris Yeltsin has also vowed to pay off 
public-sector wage arrears by next year. Many workers have not been paid 
for months. The federal government owes 7.7 trillion rubles and has 
promised to help out regional governments, which owe 25.6 trillion.
Inflation slowed to 14.5 percent year-on-year in June. The year-on-year 
rate has dropped every month since mid-1995, when it was 225 percent.
The improved climate enabled Russia to raise 10-year funds on the 
international market when it issued its third Eurobond last month. 
Ministers say improved tax revenue may enable Russia to shelve plans for 
a further bond issue this year.
But obvious black spots remain: privatization is being conducted in 
murky conditions, and gross domestic product is not growing.

**********

#6
Date: Tue, 22 Jul 1997 
From: blanks@carlisle-emh2.army.mil (Steve Blank) 
Subject: Chubais

The Press Dept's refusal to comment on the stories on Chubais sums up 
pretty well what we are dealing with here, i.e. another, if very 
able, crook. But I do have a question. If he has not been accused of 
anything other than lunching with bad company how can he sue for 
restoration of his honor or are we back to duels and seconds, now 
caried out in the press, like Korzhakov's "violation of male honor."

**********

#7
Date: Tue, 22 Jul 1997 
From: VLADIMIR RADYUHIN <hindu@com2com.ru> 
Subject: trade protectionism

The Hindu
Foreign desk
RUSSIA TARGETS TRADE BARS
From Vladimir Radyuhin
Moscow, July 23.
Signalling a tougher stand on its trade disputes with the West, Moscow has
threatened to curb imports from Western Europe if the European Union does
not lift sanctions against Russian goods.
On a visit to Brussels over the weekend, the Russian Prime Minister, Mr.
Viktor Chernomyrdin, told the European Commission President, Mr. Jacques
Santer, that Russia could clamp curbs on imports from the European Union if
the latter did not lift what he said were unfair anti-dumping duties on
Russian exports.
Mr. Chernomyrdin's warning came a month after his first deputy, Mr. Boris
Nemtsov, snubbed the visiting EC Deputy President, Mr. Leon Brittan, by
cancelling a meeting with him in protest against European protectionism
against Russian exports. 
Moscow's outrage is understandable. While encouraging Russia to borrow
billions of dollars in foreign loans, thereby increasing its dependence on
the West, Western governments would not open up their markets for Russian
exports. 
The Russian Trade Ministry has estimated that the country loses $1 billion
annually because of anti-dumping duties imposed on Russian goods.
The restrictions are especially damaging because exports have been one of
the few sources of revenue for Russia's nose-diving economy. With domestic
demand shrinking like lambskin, Russian producers have turned to exports to
stay on their feet. Russian exports have nearly doubled over the past three
years, totalling $87 billion last year. 
The EU is Russia's largest trading partner, accounting for about 40 per
cent of Russia's foreign trade, and Russia has been hard hit by
restrictions on the imports of its textiles, iron, steel, steel pipes and
other products into the EU. The US has also imposed protectionist duties
and quotes on Russian uranium, steel and other exports. 
Moscow's main complaint is that the West still treats Russia as a
non-market economy and rejects its calculations of production costs as
distorted. This enables Western governments to institute anti-dumping
procedures against Russian imports whenever their domestic industries feel
threatened.
"It is time to recognise that the Russian economy is a market
economy as the private sector represents 70 per cent," Mr. Chernomyrdin
argued in Brussels. 
The Russian Prime Minister explained that Russia did have a competitive
advantage in a number of areas thanks to rich energy resources, abundance
of raw materials and access to cheap labour.
"Our natural advantages must not be used as a pretext to raise barriers for
Russian products entering the European market," he said.
However, the talks in Brussels failed to produce a breakthrough, Russia's
First Deputy Minister for Foreign Economic and Trade Relations, Mr. Georgy
Gabunia, told the Interfax news agency. 
The European Union takes a stand that it will regard Russia as a market
economy once it joins the World Trade Organisation. However, the talks on
Russia's admission, which resumed on July 22, are likely to be long and
difficult as Moscow has flatly rejected the EU demand that it freezes
import tariffs for the duration of the talks. 
The Kremlin finds the demand absurd. In case of textiles, for example,
Russian producers suffer a double disadvantage of rigid import quotas on
their exports to EU and low tariffs on Western imports to Russia. As a
result, EU textiles take up an estimated 30 per cent of the Russian market,
while some Russian textile exports to EU have virtually halted this year. 
If that is the West's idea of assisting Russian reforms, than right are
Kremlin opponents who argue that the West is out to destroy Russian industry 
and reduce Russia into a mere quarry for raw materials. 

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

#8
Christian Science Monitor
July 23, 1997 
[for personal use only]
Toward Peace in the Caucasus 
By Lee H. Hamilton 
Lee H. Hamilton (D) of Indiana is the ranking Democrat on the House 
International Relations Committee.

Why should the United States care about faraway Armenia and Azerbaijan? 
The answer is that we have important interests there.
We have long-standing ties of friendship and kinship with the Armenian 
people. We want to help end the nine-year-old conflict between Armenia 
and Azerbaijan, which has devastated both countries. We want them to 
concentrate their energies on economic and political reform. We want to 
limit the pressure of Russia and Iran on both countries, and help insure 
Western access to oil from the Caspian basin. Unfortunately, our policy 
is falling short. We need a better approach to protect and promote US 
interests. 
There has been a cease-fire between Armenia and Azerbaijan since 1994, 
but the war isn't over; it is only frozen. Armenia continues to control 
the predominantly Armenian enclave of Nagorno-Karabakh in Azerbaijan, as 
well as nearly 20 percent of that country. Military confrontation has 
blocked the transit of goods from Azerbaijan to Armenia, causing 
considerable suffering among the Armenian people.
Because of this conflict, Congress decided in 1992 to include, as part 
of the Freedom Support Act authorizing assistance to the former Soviet 
Union, a provision barring aid to the government of Azerbaijan until it 
"takes demonstrable steps to cease the blockade and other uses of force 
against the people of Armenia and Nagorno-Karabakh." I supported this 
provision. I thought it was the right course. But after five years, this 
decision deserves reappraisal. At the urging of both Armenia and 
Azerbaijan, the US has now assumed the role of one of three co-chairs of 
the Minsk peace talks, along with Russia and France. For the first time, 
the US has a direct and public role in the peace process. 
A problem for our diplomacy is the continuing ban on US assistance to 
the government of Azerbaijan. It limits our ability to be an effective 
intermediary. So long as this aid ban remains in place, we lack 
flexibility and leverage. For several reasons, achieving a peace 
settlement between Armenia and Azerbaijan is the key to promoting US 
interests in the region.
First, a peace settlement is the most direct way to relieve the 
suffering of the Armenian people. It is also the best way to help the 
780,000 displaced persons in Azerbaijan.
Second, a peace settlement will help shore up the sovereignty and 
independence of both Armenia and Azerbaijan, and lessen the pressure on 
them from Russia and Iran. 
Third, a peace settlement would enable both Armenia and Azerbaijan to 
concentrate on improving the lives of their citizens. I have supported 
generous US assistance to Armenia. Once there is peace, that assistance 
can be used more effectively in support of democratic and market reform. 
In Azerbaijan, we should have no illusions. Under President Heidar 
Aliev, Azerbaijan has an authoritarian regime with a poor human rights 
record. It has made little progress on reform. Yet the United States 
should be allowed to help it, because in the long run the development of 
a free, democratic, and stable Azerbaijan is in the interest of the 
entire region. 
Fourth, peace will allow for the development of the region's energy 
resources. Azerbaijan's 34 billion barrels of proved and probable oil 
reserves are roughly equal to those of Kuwait or the United States.
Our new co-chairmanship of the Minsk peace talks gives us a unique 
opportunity to move the peace process forward. Congress should lift the 
ban on Azerbaijan to give us maximum leverage on behalf of peace. A 
better relationship with Azerbaijan serves the US national interest, the 
interest of peace, and the long-term interests of Armenia as well. 

********

#9
Poll Shows Lebed, Nemtsov, Zyuganov Favorite 'Contenders' 

NTV 
July 20, 1997
[translation for personal use only]
>From the "Itogi" newscast

Three years are left before the next presidential elections. And
everything might change many times. Nevertheless, even today sociologists
are following very carefully the ratings of possible contenders for the
president's seat. According to the Public Opinion Foundation, which carries
out nationwide surveys every week, there are three clear favorites. These
are Aleksandr Lebed, Communist leader Gennadiy Zyuganov, and First Deputy
Prime Minister Boris Nemtsov. According to the latest poll, if the
presidential election had been held today, 12 percent would vote for Lebed,
18 percent for Nemtsov, and 19 percent for Zyuganov. The response to the
question "Who would you nominate for the post of president" was quite
similar, with a slight difference: 13 percent named Lebed, 17 percent
Zyuganov, and 18 percent Nemtsov.

********

#10
Russia central bank limits scandal-hit bank
By Peter Henderson 

MOSCOW, July 22 (Reuter) - Russia's central bank said on Tuesday it had
imposed some limits on the activity of the medium-sized commercial bank
Unikombank. 
The move by the central bank appears to be the latest development in a
scandal involving half a billion dollars and -- potentially -- some top
government officials. 
``Depositary and trust operations are limited since an audit discovered some
serious infringements by the bank in this sphere of activity,'' a spokesman
said, adding that the central bank had asked Unikombank to remove its chief
executive. 
Other activities of Unikombank, majority-owned by Moscow region, were not
limited. There was no immediate comment from the bank. 
The central bank spokesman did not mention the charges made by its chairman,
Sergei Dubinin, who accused Unikombank last week of misappropriating half a
billion dollars in government money, including $275 million to Moscow region
and $237 million to MAPO-MiG, manufacturer of MiG fighter aircraft. 
During a supervisory check, the central bank found Unikombank was one in a
chain of banks through which the Finance Ministry forwarded state funds in
the form of government MinFin bonds to Moscow region and MAPO-MiG, he said. 
When Unikombank received the bonds, it sold them and kept the proceeds,
Dubinin charged. The bank then dismissed his charges as ``absurd.'' 
A Moscow region spokeswoman said on Tuesday it had no outstanding claims on
Unikombank. 
But the commercial director of MAPO-MiG, deputy chief executive officer
Vladimir Truderung, said the company had not received government funds of
around $230 million. 
``So far we have not received the money,'' Truderung said. 
It was not clear what next step the central bank would take and whether the
issue would grow, as some of the Russian media have said, into a huge
financial and political scandal. President Boris Yeltsin and the government
have not commented. 
Dubinin also said last week that former first deputy finance minister Andrei
Vavilov, removed from the government in a reshuffle four months ago, had
approved certain payments but did not accuse him of being directly involved. 
Vavilov, who began work in the ministry in 1992 and had seen five finance
ministers in that time, was in charge of its hard currency department,
foreign debt and public relations. 
He denied any wrongdoings last week, saying he had followed government
regulations and adding top state officials had known about the contracts with
MAPO-MiG and Moscow region. 
Vavilov now heads a commercial bank affiliated to the huge and powerful
Uneximbank group, which is headed by former first deputy prime minister
Vladimir Potanin. 
He also said that during his time at the ministry he considered a number of
banks had been earning ``too high profits'' on operations with cash
surrogates and he had passed a formal request to the prosecutors to look into
such cases. 
He named some of the banks and companies, all of which belong to financial
and industrial empires outside Uneximbank, but made no specific criminal
allegations them. 
The swirling allegations and denials, involving some of the top names in
Russia's business and political elite, have sparked talk of a struggle among
the financial barons who banded together to bankroll Yeltsin's re-election
last year. 
Some of them are pitted against each other in competing for lucrative assets
which the state is offering in the latest wave of privatisation. 

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#11
Journal of Commerce
23 July 1997
[for personal use only]
Russians take their hats off to Madison Ave. 
Sales pitch on dandruff seen imparting growth 
BY JOHN HELMER
JOURNAL OF COMMERCE SPECIAL

MOSCOW -- This may be the year, according to President Boris Yeltsin, 
when the Russian economy starts growing from the grassroots.
It's already the year in which Russians have been sold on an idea they 
never had before about the hair-roots on their heads. The idea is that a 
healthy head of hair shouldn't suffer from dandruff.
Selling that to Russians, who have never thought of dandruff as a 
problem, are two U.S. corporate giants, Johnson & Johnson and Procter & 
Gamble.
How they are managing to create a multi-million dollar market 
opportunity from scratch illustrates what one Western marketing 
executive in Moscow calls "the uniqueness of Russian consumer demand 
that rewards marketing ingenuity, if you've got it."
The case also provides lessons for other exporters of consumer products 
targeting the Russian market, including the profit to be engendered by 
introducing newer technologies and marketing Western images while 
sidestepping the pitfalls of ignoring Russian tradition. 

Home cures

Russians know their word "perkhot" means the white scalp flakes that 
everyone can recognize in hair -- and on collars and coats.
If they didn't ignore it, Russians used to massage their scalps with 
slices of black bread or home concoctions of egg-yolks and fermented 
milk. Soviet-produced shampoos were available by the bucketful, with a 
big selling-point being the naturalness of the ingredients. Market 
research conducted for both Johnson & Johnson and Procter & Gamble last 
year showed that, while Russians recognized dandruff, they didn't think 
it was a problem that warranted spending money to solve.
"That's not quite true," says Tatiana Turitsina, an actress whose 
waist-length tresses are a vital part of her professional equipment.
"I tried Russian shampoos, and they never helped. Our dermatologists 
didn't know how to deal with dandruff." Ms. Turitsina says she now uses 
a Procter & Gamble product. 

The hair-raising truth

Johnson & Johnson and others estimate that Russian demand for hair-care 
products currently creates one of the least satisfied, fastest-growing 
shampoo markets in Europe, valued at about $50 million a year. Stephen 
Cruty, a director of the Russian Market Research Company, has 
interviewed Russian consumers and found their preferences parts the 
hair-care market into roughly four segments.
There is the traditional consumer's preference for natural ingredients, 
which tends also to lead these Russians to suspect Western imports of 
containing potentially damaging chemicals, dyes and drugs. Schwarzkopf, 
the German manufacturer, has a shampoo competing in this part of the 
market.
Another segment focuses on the feminine qualities of the product. 
Colgate-Palmolive of the United States is doing well, market surveys 
indicate, with Palmolive-branded products with this appeal.
A third segment of the market looks for shampoos that promise hair will 
look luxurious and Western in style. Vidal Sassoon, Elsevier and Wella 
are the brands capitalizing best on this demand at the moment.
Finally, Mr. Cruty's research identified a segment of the market that 
both suffers from dandruff and is willing to spend relatively large sums 
to get rid of it. 

Staying ahead of competition

Related products set to hit the Russian market include Nizoral, from 
Johnson & Johnson, and Head & Shoulders, from Procter & Gamble.
A marketer from Saatchi & Saatchi acknowledges there is always the risk 
that in stimulating demand for a new product, Procter & Gamble would 
open the market to a string of lower-cost competitors.
P&G is spending millions of dollars on television commercials, and, by 
the latest count, there are 15 imports widely available in Moscow.
Anton Andreyev, a brand manager for P&G in Moscow, concedes that before 
his company came along, most Russians didn't think of buying shampoo to 
cure dandruff.
Although company spokesman Yury Molozhatov declined to say how much 
Procter & Gamble is spending on its Russian campaign, he did say, and 
his competitors agree, that Head & Shoulders is, well, head and 
shoulders ahead of its competitors.
Johnson & Johnson brand manager Yekaterina Leparskaya acknowledges this 
lead but claims that while his company's Nizoral is a medication, P&G 
markets a cosmetic. 

Touchy client base

Until now, there has been little control over such distinctions in 
advertising. But new legislation to tighten standards regarding medicine 
currently await President Yeltsin's signature.
Market researchers and brand managers say consumers are intensely 
curious about trying new products, especially imports, but are also 
quick to grow suspicious and react negatively.
Ms. Leparskaya says Procter & Gamble may have erred in using popular 
entertainment stars to promote the curative properties of its 
anti-dandruff product. Johnson & Johnson says the big buyers of 
hair-care products -- and the most amenable to imports -- are the 
20-somethings who "are more concerned with how they look."
Johnson & Johnson is betting, though, that young Russians can be just as 
suspicious as their elders, especially when it comes to rock stars 
acting as dermatologists. 

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

#12
The Independent (UK)
23 July 1997
[for personal use only]
Not waving but drowning in Moscow
Phil Reeves in Moscow 

Take any capital city and make a guess: how many people do you think 
drown there in an average summer month? Ten, perhaps? Twelve? Even 20 
does not sound implausible. So what on earth is going on in Moscow? 
An incredible 116 people drowned after plunging into Moscow's rivers, 
lakes and ponds between June and the end of the first week of July 
according to the city's ambulance service. 
There were no collapsing road bridges, no sinking passenger ferries, no 
packed trains plunging into lakes. Just one death after another, and 
another. The figure is another contributor to a demographic crisis that 
last year saw Russia's population decrease by 430,000 - the equivalent 
of a city the size of Edinburgh - setting the average life expectancy 
for a male at a mere 59 years. 
It comes as no surprise to the Russians. While about 750 people drown 
every year in the United Kingdom, Russia regularly overtakes that figure 
within one summer month. 
The population of 147 million is nearly three times that of Britain, but 
the number of drownings is 22 times higher. By contrast, an average of 
just over six Londoners drowned each month last year. The picture is the 
same throughout Russia, where 16,157 people last year went to a watery 
grave according to government statistics. 
That figure, though horrifying, was lower than the carnage of 1995 when 
a record 20,458 drowned, more than a third of the total number of 
Americans who died in the Vietnam War in a decade. This heavy toll 
partly reflects the Russian tradition of spending summer weekends 
picnicking on the banks of rivers and lakes. Add to that a lack of 
public swimming baths, poor rescue services, dismal safety education, a 
population that has no money for other leisure activities, and some 
notoriously treacherous waterways, and the dimensions of the problem 
become clearer. 
The figures for winter are also surprisingly high: 215 people drowned 
throughout Russia in January, including a sizeable number of fishermen 
who fell through ice. 
Alcohol abuse also plays a terrible role. Last month's list of the dead 
only included seven children; the rest were adults, of whom a large 
number were intoxicated. 
According to Ivan Zelentsov, spokesman for Moscow's Civil Defence 
service, just under one third of those who drown in his area are drunk 
(an estimate which many Russians will consider conservative). "People 
are irresponsible. They try to swim in every possible lake or pond," he 
said. 
A collapsed health care system, smoking, bad diet, pollution, and 
general economic decline bear much of the blame for Russia's shrinking 
population. Some demographers expect it to drop to 123 million over the 
next 33 years. 
But accidents are also proving to be a huge killer. In 1995, a quarter 
of the Russian male deaths were the results of accidents and alcohol 
poisoning. The average age of the victims was 42 years, which suggests 
that Russia is losing manpower at a catastrophic rate. 
One leading demographer, Sergei Yermakov, claims the country lost 
2,000,000 working years in 1995 because of premature deaths, depriving 
the economy of potential earnings of $20bn. 
And if those statistics aren't bad enough, then there's more bad news. 
Muscovites who persist in braving the treacherous waterways in the city 
face a new peril: traces of cholera have been detected in the water in 
five separate places. 

*********