July 30, 1997  
This Date's Issues: 1099 •1100  •1101  1102

Johnson's Russia List
#1102
30 July 1997
djohnson@cdi.org

[Note from David Johnson:
1. Fred Weir in Moscow (back from vacation!) on conflict 
between Yeltsin and the Duma.
2. RIA Novosti: OFFICIALS SIGN AGREEMENT ON PURCHASE AND SALE 
OF SVYAZINVEST COMPANY.
3. RIA Novosti: PRESIDENT BORIS YELTSIN MEETS WITH FIRST 
DEPUTY PRIME MINISTER, FINANCE MINISTER ANATOLY CHUBAIS.
4. Vladivostok News: Trans-Siberian revival plans derailed.
5. RIA Novosti: THE PROCESS OF SELLING AT THE AUCTIONS THE 
SHARES OF RUSSIAN ENTERPRISES SHOULD BE "ABSOLUTELY 
TRANSPARENT", SAID THE RUSSIAN PREMIER.
6. RIA Novosti: KOKH SAYS SVYAZINVEST DOES NOT CONTROL 
TRANSMISSION OF TV SIGNALS IN RUSSIA.
7. Reuters: Ethnic Tension Grows in Caucasus.
8. MSNBC: Ruth Wedgwood, West should have Georgia on its mind.
9. Washington Post: Daniel Williams, `Clans' Feud in Sale of Russian 
Assets.
10. AP: Greg Myre, Russia's Business Titans Squabble.
11. Boston Globe: David Filipov, Russia's capitalist press war.
12. RIA Novosti: TAX PERFORMANCE THIS HALF OF THE YEAR IS 
1.5 TIMES BETTER THAN LAST YEAR.
13. RIA Novosti: KOKH EXPRESSES OPTIMISM REGARDING THE DEAL 
ON SVYAZINVEST.
14. Excerpt from July 29 Moscow press conference dealing
with computers in Russia.
15. Press summaries from Russia Today.] 

*******

#1
From: fweir.ncade@rex.iasnet.ru
Date: Wed, 30 Jul 1997 18:52:56 (MSK)
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT) -- Leaders of Russia's powerful Communist Party
accuse President Boris Yeltsin of undermining the country's
fragile democracy by refusing to sign laws that have been passed
by parliament and they threaten to counter with a wave of anti-
government demonstrations and strikes this autumn.
"The President has made it clear that he will do whatever he
wishes, even in contradiction to constitutionally-binding
parliamentary decisions," says Alexei Podberyozkin, a close
adviser to Communist Party leader Gennady Zyuganov.
"So it's time to ask the people to express their will in
peaceful but forceful ways. There will be actions and strikes
this autumn, they will be on a very serious level and highly
organized," he says.
Mr. Podberyozkin says Mr. Yeltsin's veto of a new law
regulating religious institutions in Russia is a case in point.
The United States Congress has threatened to cut off economic aid
to Russia if Mr. Yeltsin signs the law, which grants status and
privileges to Russia's founding religions -- Orthodoxy, Islam,
Judaism and Buddhism -- but would make it difficult for "non-
Russian" confessions, such as the Roman Catholic Church, to
operate in Russia.
"All of Russia's religious leaders support the law, as does
the parliament and society," Mr. Podberyozkin says. "But Yeltsin
considers it more important to obey the Americans."
President Yeltsin, who wields vast powers under Russia's
1993 Constitution, has clashed repeatedly with the Communist-
dominated State Duma, the lower house of parliament, over laws
that he disagrees with.
In June the Duma, which is responsible for approving the
state budget, rejected Kremlin plans to compensate for chronic
shortfalls in revenue by slashing social spending and investment
by 20 per cent. First Deputy Prime Minister Anatoly Chubais, Mr.
Yeltsin's top lieutenant, told journalists that the government
would go ahead and implement the cuts without parliamentary
approval.
Mr. Yeltsin has also refused to sign a law passed last
Spring that would restrict the return of art works seized by
Soviet forces in Germany during World War Two to their original
owners. Both the lower and upper houses of parliament mustered
the constitutionally-required two-thirds majorities to overturn
Mr. Yeltsin's veto, but the law remains unsigned.
"There is a continuing pattern of unconstitutional behaviour
on the part of the Kremlin, and this is the main source of the
political crisis in Russia," says Mr. Podberyozkin. 
A similar deadlock between president and parliament in 1993
ended in gunfire, but few believe such an outcome is likely
today.
"The old parliament that Yeltsin dissolved and then
dispersed with force had real constitutional power. The president
needed to physically remove it in order to go on with his own
program," says Nikolai Zyubov, an independent analyst. "The
present Duma is the parliament Yeltsin created according to his
own design. It has little actual power, and he can safely ignore
it."
Last week Mr. Yeltsin indicated he would do just that.
Speaking to journalists in Samara, where he was vacationing,the
president said he could no longer work with the current
parliament and therefore would not allow it to make any important
decisions.
"The government should tackle 80 percent of issues on its
own, without referring to parliament, and in future only 20 per
cent of measures should be referred to parliament for approval,"
ITAR-Tass quoted him as saying. 
Communist leaders say the government's economic strategy,
which has led to mass impoverishment, is the main issue. Earlier
this year Mr. Yeltsin appointed a new cabinet of young market
reformers, who have forged ahead with tough new measures that
would sharply increase the cost of living for average Russians.
They say the government's refusal to debate alternatives and
fashion compromises -- which is the heart of the parliamentary
process -- leaves them little alternative but to shift to extra-
parliamentary forms of opposition.
"The Communist party and its allies in the National
Patriotic Union of Russia are now considering a plan to carry out
in the autumn a general protest action against Yeltsin's program,
which is ruinous for the country," Communist Party leader Mr.
Zyuganov told journalists this week. 
Russia's 50-million member Federation of Independent Trade
Unions says it is preparing to stage a national strike in
November over the 60-trillion rouble ($10-billion) backlog of
unpaid wages, which affects millions of workers. But a union
spokesman said the action was not connected with the Communist
Party's plans.
"There will be strikes and unrest this autumn," says Sergei
Markov, an analyst with the Carnegie Endowment in Moscow. "But
they will happen because tensions are high and the economic
picture in many parts of the country is grim, not because the
Communists are calling for it."
But if serious social upheaval should coincide with
political instability in Moscow, it could spell trouble for
President Yeltsin's new reform program.
A clash with parliament is one recipe for political crisis.
Strife within Russia's ruling elite is another. In recent days
the country's leading bankers have been slamming each other --
through media outlets they separately control -- with angry
charges of corruption and malfeasance over recent privatizations
of juicy state assets.
Deputy prime minister Boris Nemtsov, one of Mr. Yeltsin's
top "young reformers", warned this week that they might be sowing
the whirlwind.
"A new configuration is forming that did not exist even a
few weeks ago," he said. "Right now the situation is fairly
dangerous, although from the outside, things look calm. Most
likely the problems will surface in the Fall." 

*******

#2
OFFICIALS SIGN AGREEMENT ON PURCHASE AND SALE 
OF SVYAZINVEST COMPANY
MOSCOW, JULY 30 (FROM RIA NOVOSTI CORRESPONDENT) -- The
agreement on purchase and sale of 25 percent of shares of the
Svyazinvest company was signed today in the Russian Fund of
Federal Property (RFFP). The document was signed by Igor Lipkin,
RFFP Chairman who was seller of the actions on behalf of the
Russian Federation, and representative of the Cyprus company
Mastcom Ltd. Rozhetsky, a top-ranking source in the Russian Fund
of Federal Property reported to a RIA NOVOSTI correspondent.
In line with the signed agreement, the company which has
won at the auction pledges to pay $1,875,040,000. The text of
the agreement will be published in Russian mass media on Monday.

******

#3
PRESIDENT BORIS YELTSIN MEETS WITH FIRST DEPUTY PRIME 
MINISTER, FINANCE MINISTER ANATOLY CHUBAIS
'VOLZHSKY CLIFF' SANATORIUM /SAMARA REGION/, JULY 30 /FROM
RIA NOVOSTI CORRESPONDENT ALEXANDER KRYLOVICH/--An approximately
90 minute meeting was held today between president Boris Yeltsin
and first deputy prime minister, finance minister Anatoly
Chubais. As the journalists learnt after the meeting, the
president and the first deputy prime minister discussed issues
connected to current budget revenues and settlement of
obligations before budgetary sphere employees. According to the
first deputy prime minister, the most pressing issue here is
the back pays of debts to the army. The president requested to
obtain a report reflecting the data on debt settlement for July
and August. On the whole the president is pleased that pay-offs
are carried out as scheduled but the next month will show
exactly how successive the government is in fulfilling its
promises, noted Chubais.
Also the first deputy prime minister informed the head of
the state on he situation with back pays of wage arrears and
drafting of the 1998 budget. The meeting covered a wide range of
other issues, for example the situation around the Law 'On
Freedom of Conscience and Religious Associations', the detention
of Russia's ORT TV journalists in Byelorussia and some
international issues, added the finance minister. 
Anatoly Chubais gave the president a detailed information
on the results of the auction on selling of the 25 percent stake
of the Svyazinvest joint stock company. The president was
satisfied over the fact that the auction had been held in strict
compliance with the set rules, said the first deputy prime
minister.
The first deputy prime minister reported to the president
on the implementation of the programme aimed at receiving 
additional budget revenues within the next six month period.
With this in mind Anatoly Chubais emphasised that the recent
Svyazinvest auction helped fulfil half of the above
programme--federal coffers received 10 out of 20 trillion
roubles, projected by the programme. This proves that the
programme aimed at receiving additional budget revenues will be
fulfilled which will allow to completely back pay wage arrears.

*********

#4
Vladivostok News
July 24, 1997
Trans-Siberian revival plans derailed
By Nonna Chernyakova

The revival of the Trans Siberian railway, announced by the Russian 
government a month ago, faces serious hardships and leaves experts 
involved pessimistic.
“It is impossible to revive the dead,” said Svetlana Kotelnikova, the 
head of the cargo department of the Far Eastern Railway.
Now there is only one cargo train per hour, while before perestroika it 
was every six minutes. Kotelnikova thinks that reducing tariffs for 
transit cargos by 10 percent, introduced July 1, makes the railway even 
less profitable than before. Of the total tariffs placed on one 
container that is being shipped to Europe, less than 18 percent is 
imposed by the railroad. The rest are port and customs tariffs.
Nevertheless, the officials plan to increase the traffic density by 25 
percent by the end of this year. According to Gennady Nesov, head of the 
Department for Shipping, Ports, and Transport with the krai 
administration, the krai plans to deliver from six to eight million tons 
of coal from China to Primorye ports for shipment to power stations in 
Japan. Japan is also very interested in sending cargo to Europe and 
back, said Japanese consul in Vladivostok Kiyoshi Matsuzaki.
“We send very little cargo now because of the high tariffs,” he said. 
Reducing the tariff is not the only thing the government is doing to 
attract additional foreign cargo.
As a result of privatization, all the companies involved, excluding the 
railroad itself, became separated, and each has its own policy.
“In the meantime we spend a lot of effort to coordinate work of 
different participants of the chain,” Nesov said in an interview on 
Mestnoye Vremya television program.
The ports are reducing their fees up to 50 percent, each cargo train 
will have a team of armed guards. Customs will work 24 hours a day, and 
the paper work will be simplified. Now cargo waits five or six days for 
customs clearing.
Victor Goncharenko, head of Vladivostok’s customs office refused to 
comment on proposals that his office work around the clock.
“We follow the customs code, which is approved by Moscow,” he said.
Grigory Artamonov, head of cargo delivery company Fetexim, said, “We 
won’t achieve anything until customs has a strict timetable, which 
everybody knows: 30 minutes for search, an hour for a forwarding 
company.
“If a cargo is held longer, the guilty ones, including customs, should 
be punished.” 

******** 

#5
THE PROCESS OF SELLING AT THE AUCTIONS THE SHARES 
OF RUSSIAN ENTERPRISES SHOULD BE "ABSOLUTELY 
TRANSPARENT", SAID THE RUSSIAN PREMIER
STAVROPOL, JULY 30 (FROM RIA NOVOSTI CORRESPONDENT
ALEXANDER SHISHLO) -- The process of selling at the auctions the
shares of Russian enterprises should be "absolutely
transparent", chairman of the government Viktor Chernomyrdin
told journalists. He is now visiting the southern regions of
Russia and is going to come to the Krasnodar Territory.
Answering the question concerning his attitude to the
commentaries in Vremya (Time) TV programme by journalist Sergei
Dorenko on the results of the auction for selling the shares of
Svyazinvest holding, Chernomyrdin said that he had not heard
these commentaries so far, but is going to become familiar with
them soon. In any case, the premier said, the statement of
Dorenko will not lead to changes in the ORT board of directors.
He characterised the journalist as a "sharp man and analyst".
"First we should examine the matter," said Chernomyrdin and
added that he had already given instructions.
According to the premier, "such a major and thought out
deal as the selling of Svyazinvest shares was carried out for
the first time in Russia's history." The auctions are being
carried out with certain difficulties and if "we make mistakes
in the course of their holding, we will correct them," said
Chernomyrdin.
He stressed that "there should be no reservations and
vagueness -- the auctions should be held in accordance with the
law. It is necessary that all should understand who is going to
participate in the auction, whence money has appeared and whom
it belongs to." 

********

#6
KOKH SAYS SVYAZINVEST DOES NOT CONTROL TRANSMISSION OF 
TV SIGNALS IN RUSSIA
MOSCOW, JULY 30 (FROM RIA NOVOSTI CORRESPONDENT REGINA
LUKASHINA) -- Russia`s Deputy Prime Minister Alfred Kokh has
refuted assertions of State Duma Chairman Gennady Seleznyov who
said that "the Svyazinvest company is allegedly in control of
transmissions of television signals throughout Russia`s
territory." That`s why, Seleznyov said, the sale of a large
block of shares of this company poses threat to the security of
the Russian state.
Alfred Kokh told journalists today that Svyazinvest is busy
only with "distribution of telephone signals" and possesses only
automatic telephone stations, wires and several radio
frequencies to transfer special information. The Svyazinvest
company "has neither equipment, nor opportunities" to transmit
television signals, he said. 

*********

#7
Reuters
30 July 1997
Ethnic Tension Grows in Caucasus 
MOSCOW -- Ethnic tension between Russia's volatile regions of Ingushetia
and North Ossetia has escalated and at least one person has died in a spate
of attacks, a Russian Interior Ministry spokesman said on Wednesday 
The Moscow-based spokesman said an angry group of about 150 North
Ossetians on Tuesday evening attacked an Ingushetian refugee camp in the
Prigorodny district of North Ossetia, beating up a number of Ingushetians
and burning down two of their trailers. 
The spokesman added, however, that the attack was preceded by two mine
explosions in the district, in which two cars were blown up, killing one
North Ossetian policeman and wounding six local residents. 
"After the two explosions, the situation in the district started getting
very tense with North Ossetians, some of them armed, grouping around the
refugee camp, showing their indignation. They attacked the camp and burned
down two trailers," he said. 
The refugees were among tens of thousands forced to flee their homes in
the disputed Prigorodny district during a bloody conflict five years ago,
and were returning to the still-disputed area. 
The spokesman said Interior Ministry troops had been called in to
restore order. 
He added that early on Wednesday unknown gunmen fired shots at North
Ossetian police posts from the Ingushetian side in two separate incidents.
Two local residents were wounded. 
Itar-Tass news agency quoted Ingushetian President Ruslan Aushev as
saying he again called on Russian leader Boris Yeltsin to impose direct
presidential rule in Prigorodny district to avoid ethnic fighting between
the two small nations. 
Earlier this month 17 people were injured in an attack on a bus carrying
Muslim Ingush refugees in Christian North Ossetia, fueling concerns that
the ancient conflict would revive. 
Kremlin security officials then called for restraint but said they
opposed the idea of a direct presidential rule as this could deepen the
conflict. 
Nearly 200 people were killed in 1992 in the first major ethnic clashes
within post-Soviet Russia in fighting over the district. The district,
which lies close to the Ossetian capital of Vladikavkaz, used to belong to
Ingushetia. 
Soviet dictator Josef Stalin deported the Ingushetians en masse to the
Kazakh steppes in 1944, along with the Chechens, for allegedly
collaborating with the invading German army. Some Ingushetian territory,
including Prigorodny, was given to the Ossetians. 
The Ingushetians were allowed to return to their lands in the late 1950s
after Stalin's death, but Prigorodny is still controlled by Ossetia. 

*********

#8
MSNBC
http://www.msnbc.com
West should have Georgia on its mind 
Analysis 
By Ruth Wedgwood 
THE CHRISTIAN SCIENCE MONITOR
Ruth Wedgwood, a senior fellow at the Council on Foreign Relations and
professor of law at Yale University, recently returned from Tbilisi and
Abkhazia.

Georgian President Eduard Shevardnadze visited Washington last week
to win help for his country's struggling economy. The West's stake is
self-evident. Georgia's Black Sea port of Supsa is the terminus of a new
pipeline that will give access to the vast oil and gas reserves of
Kazakhstan and Azerbaijan by a route that skirts the Russian Federation.
Georgia is also a pacesetter for political and economic reform in the
former Soviet Union. 
But to help Shevardnadze, the West must reclaim a diplomatic role
in ending a destructive civil conflict on the northern Black Sea coast — a
violent five-year war between Georgians and Abkhaz. This conflict is
destabilizing Georgian politics, discouraging private investment and
permitting Russia to continue as a wild card in Georgia's future.
The Abkhaz are a north Caucasus people with bad memories of their
larger neighbors. Russia absorbed them in the 19th century. A brief period
of independence after the 1917 Revolution ended when Stalin folded the
Abkhaz into Georgia in 1931.
Most Abkhaz and Georgians now prefer to look West, rather than
East. A rich portfolio of Western constitutional arrangements, economic
reconstruction and some Western diplomatic topspin could help the Georgians
and Abkhaz find a way out of current theological debates over how to
structure a future relationship — "autonomy" vs. "confederative union." 
The Abkhaz war didn't play on CNN, but its destructiveness is searing.
Some 250,000 refugees, including Georgians, Armenians and Greeks, were
forced to flee Abkhaz territory. Many are in the Georgian capital of
Tbilisi, others in Moscow. Shevardnadze faces the constant goading of
parliamentary opponents to resettle the refugees — even to take military
action to recapture Abkhazia's southern Gali region.
The Abkhaz are also bitter after a war in which ill-disciplined
paramilitaries ravaged civilians on both sides. Georgian forces advanced
northward in 1992, capturing Abkhazia's elegant capital city of Sukhumi, a
key Black Sea port. The Abkhaz national library and archives were burned to
the ground.
There is no trust here. The Abkhaz broke a cease-fire in 1993 to
drive scaled-down Georgian forces south of the Inguri River. Since 1994,
Russian troops, acting as peacekeepers, have separated the sides, but the
Georgians complain that, as in Cyprus, the peacekeeping creates an
artificial border guarding Abkhazia's de facto independence. 
The southern Gali region is a no-man's land. Its tea plantations
were booby-trapped in the war. Georgian nationalists have killed more than
50 Russian peacekeepers with land mines. The Russians are undermanned and
rarely paid. They don't venture far afield. U.N. military observers had to
wait a year for the delivery of mine-resistant "Mamba" vehicles from South
Africa in order to conduct patrols. These unarmed observers, including four
American officers, still lack South African mine-clearing equipment or a
helicopter for medical evacuation. A new hydroelectric plant on the Inguri
River stands idle. The 50,000 Georgians who cross the Inguri to tend their
fields are largely on their own, facing violence from Abkhaz irregulars.
The analogy to Bosnia is uncomfortably clear. Peacekeepers deter
large-scale combat, but they can't guarantee refugee return. Refugees are a
political counterweight, tipping any referendum on a political future.
Neither Georgians nor Abkhaz will rely on the Russians. Russians
helped the Abkhaz early in the fighting with munitions, money and air
support. Since the debacle in Chechnya, Russia has wanted stability in the
Caucasus and now enforces an economic blockade to push Abkhazia toward a
settlement. Abkhaz leaders retort that a ruined local economy can't
reintegrate refugees.
Georgian leaders say they may demand the withdrawal of Russian
peacekeepers when the current mandate expires Thursday. This could have
explosive results. Georgia wants a multinational peacekeeping force, but
that is unrealistic in light of the casualties suffered by the Russians, a
financially strapped U.N., and the international community's reluctance to
affront Russia.
A more practical Georgian suggestion is to reopen a diplomatic
track in the West, with sustained negotiations in Geneva through the
"friends of the secretary-general" — the United States, Germany, France,
Britain and Russia. Secretary-General Kofi Annan has appointed a new
special representative, a former Romanian dissident named Liviu Bota, who
could help jump-start negotiations.
There is a window of opportunity for revived diplomacy. The
missing element is Western attention and elbow grease. The economic and
strategic importance of Georgia — and the destabilizing prospect of a
renewed campaign to crush the Abkhaz — make this a diplomatic track worth
pursuing.

*********

#9
Washington Post
30 July 1997
[for personal use only]
`Clans' Feud in Sale of Russian Assets
Losers in Telecommunications Bidding Assail Government, Rivals
By Daniel Williams
Washington Post Foreign Service

MOSCOW, July 29—When President Boris Yeltsin ran for reelection last year,
Russia's powerful new industrialists pooled their resources and used their
clout to help him beat the Communist opposition. Now those same tycoons are
feuding bitterly with one another -- and some have angrily turned on the
government they helped install.
At issue is the partial privatization of one of Russia's most coveted
government-owned assets, the Svyazinvest telecommunications company. Losers
in the bidding are crying foul.
The winners say it's just sour grapes.
Merits of the various positions aside, the rift sheds light on the
evident focal point of political struggle in contemporary Russia. If
politics here a year ago was perceived as a battle between Communists and
Yeltsin's economic reformers, now it seems to be a battle among big
business groups known here as clans -- all nominally Yeltsin supporters --
in pursuit of government property.
Vast resources and potentially valuable businesses still owned by the
government are at stake, with oil fields and telecommunications franchises
potentially among the most profitable. During the Svyazinvest sale, the
competition has been on full display. 
"Our politics is simply based on a clash of economic interests. This
latest controversy is about a war of clans within the party in power. They
may or may not still be friends of Yeltsin, but they are certainly not
friends of each other," said Andrei Piontkovsky, an analyst at the
Institute for Strategic Studies here. 
The uproar began late last week when the Yeltsin government announced
that an investment group headed by Russia's Uneximbank had won a 25 percent
stake in Svyazinvest. The winning bid was about $1.9 billion. Uneximbank
officials said the group included not only Germany's Deutsche Bank but also
U.S. financier George Soros, who provided about half the money.
Uneximbank is headed by Vladimir Potanin, a former deputy prime minister
in the Yeltsin government. Its holdings include an oil company and a share
in Izvestia, Russia's most influential newspaper; most of the economic
clans control media outlets, which they use to get Yeltsin's ear and attack
their enemies. The group's bid was about $700 million above the minimum
asking price; the government touted the sum as a sign that the deal was
well handled.
Rivals to Potanin did not see it that way. On Saturday, ORT television
broadcast a 20-minute attack on the deal. The government controls 51
percent of ORT stock, but Boris Berezovsky, an automobile and oil magnate
and a top official in Yeltsin's government, is also a major shareholder,
and, according to reports here, Berezovsky was among the bidders for
Svyazinvest.
ORT's leading newscaster, Sergei Dorenko, alleged that Uneximbank's
group will do nothing to improve Russian communications because the
consortium includes "seasoned speculators who have never in a moment been
professionally involved in telecommunications."
Dorenko said Potanin was unfairly favored by top privatization official
Alfred Kokh. Dorenko offered no corroboration for his allegations.
Some observers regarded the attack as merely a warning shot in advance
of an even bigger contest between Berezovsky and Potanin: a bid for some of
the last big Russian oil companies.
Meanwhile, the Sevodnya newspaper, owned by media and banking tycoon
Vladimir Gusinsky, published an article on Monday headlined "The Money
Stank." The article suggests that Uneximbank's winning bid may have been
bolstered by money that government prosecutors claim was embezzled in a jet
airplane sale scam.
Gusinsky's NTV television station also attacked the sale. NTV
newscasters spoke darkly of the "doubtful" source of Soros's money.
The Russian press said Gusinsky was among the losing bidders for
Svyazinvest. The group included Russia's Alfa Bank, Spain's Telefonica de
Espana telecommunications company and the First Boston investment banking
firm, government officials said.
The government quickly struck back at its critics. Tass, the official
news agency, issued an attack that seemed right out of a Soviet smear
campaign. According to Tass, a well-informed Kremlin official said
representatives of "big capital" wish to privatize "according to their own
criminal rules."
Boris Nemtsov, a young reformist politician whom Yeltsin recently
brought into his administration and assigned to clean up corruption, said,
"Some individuals thought they would be given the country's
telecommunications free of charge."
Instead, Nemtsov said, "The side that paid more won. The loser is going
into hysterics on TV."
Russia's five-year-old privatization drive has seen sweetheart deals in
which banks provided with government money devoured state property at
cut-rate prices. Critics, including some in government, charged that bids
were frequently rigged to benefit favored clients of the Yeltsin
government. In what appeared to be a slap at past Yeltsin practices,
Nemtsov promised change. "Contests will be won by those who pay more than
the others, immediately, in cash," he said. "From a bandit-like amassing of
capital, the country is moving to a more or less civilized regime."
Soros's plunge into the telecommunications deal was a surprise in part
because of his recent harsh comments about "robber capitalism" in Russia. 

*******

#10
Russia's Business Titans Squabble 
By Greg Myre 
Associated Press Writer 
July 30, 1997 
MOSCOW (AP) -- While Russia's richest business moguls feuded among
themselves, the government today ordered an inquiry into what sparked the
battle -- last week's privatization of a giant telecommunications company. 
``I've ordered the government to figure out what's going on around this
deal,'' Russian Prime Minister Viktor Chernomyrdin was quoted as saying by
Russian news agencies. ``There probably are problems that need to be
resolved.'' 
The $1.875 billion deal, the largest in the history of Russian
privatization, was announced Friday after a sealed auction. A group of
investors led by Oneximbank, one of the country's largest and most
influential commercial banks, submitted the winning bid. 
But for the past several days, the bank and its president, Vladimir
Potanin, have come under a barrage of criticism from Russian media with
ties to the losing bidders. The national television network ORT, among
others, said Potanin and other investors were speculators of dubious
reputation. 
The dispute is widely seen as part of an increasingly bitter battle
among the business titans that have emerged in post-Soviet Russia. 
The group was united in supporting Yeltsin in his 1996 tough re-election
campaign against a communist challenger. But now the moguls are competing
fiercely among themselves as they seek to gain control of large state
enterprises that are being sold off. 
The group includes Potanin, as well as Vladimir Gusinsky, a media and
banking tycoon, and Boris Berezovsky, a financier who is also a senior
government official. 
The business moguls have not publicly criticized Potanin themselves, but
Gusinsky and Berezovsky both have extensive television and newspaper
holdings, and those organizations have attacked the deal. 
Kommersant, a respected financial daily, reported today that Gusinsky
and Berezovsky were threatening to wage a full-scale media attack to
discredit the deal. 
The business tycoons have close contacts with the government. Berezovsky
has been the deputy chief of the National Security Council; Potanin was
first deputy prime minister until he was ousted in a government shakeup in
March. 
Critics say the tycoons have parlayed their political ties into
sweetheart deals with the government, which previously has sold off many
state enterprises at bargain-basement prices. 
Some analysts have said the losing bidders are simply whining because
they had expected to win the shares at a much lower price. 
Last week's winning bid for a 25 percent stake in the telecommunications
company AO Svyazinvest was well above the minimum bid of $1.18 billion. 
Gusinsky's Most Group was among the losing bidders. Berezovsky was not
involved in the deal, but is widely viewed as a fierce rival of Potanin and
Oneximbank. 
Top government officials, led by reformist First Deputy Prime Ministers
Anatoly Chubais and Boris Nemtsov, have defended the sale as a model of the
government's new policy of open, competitive privatization. 
Nemtsov said that before the tender there was a major effort to change
the rules by bidders offering far less. 
``There was unprecedented thuggish pressure put on the authorities. Of
course, the pressure wasn't visible. There was blackmail, including from
the media. There were constant threats,'' Nemtsov said in an interview
published Tuesday. 
Chubais said Tuesday that the government will not review the deal,
despite the criticism. However, Chernomyrdin's comments today appeared to
contradict him. 

********

#11
Boston Globe
30 July 1997
[for personal use only]
Russia's capitalist press war 
Firms buy media groups to sling mud at one another, and at Kremlin
By David Filipov, Globe Staff

MOSCOW - When he sailed to reelection a year ago, President Boris N.
Yeltsin relied on an alliance of powerful businessmen who bankrolled his
campaign, and he made sure the press blanketed the country with coverage
that discredited the communist challenger. 
Now, after a disputed sale of a chunk of the state telephone monopoly,
the tycoons have turned on one another through the media they run, engaging
in a free-for-all that could tear apart the government. 
For four days, newspapers and television stations run by rival groups
have accused one another's owners, and senior Yeltsin Cabinet members, of
conspiracy and corruption in the sale of state-owned assets. 
``It looks like a war,'' a Kremlin official said on condition of
anonymity. ``It has gotten to the point where Yeltsin has to get involved.''
The back-and-forth allegations of sleaze have underscored the extent to
which freedom of the press in today's Russia is contingent on the whims of
a handful of moguls. They also have exposed the new battle lines that
define the political scene since Yeltsin's defeat of his communist
challenger: No longer are political wars here clear-cut battles between
pro-market democrats and hardline communist throwbacks. 
``The lines in the political struggles in today's Russia are not drawn
by such designations as `communist' and `reformer,' but by allegiance to
... groups,'' said Dmitry Pinsker, a commentator for Itogi weekly. 
The war of words was touched off by the sale Saturday of 25 percent of
Svyazinvest, the holding company that runs Russia's notoriously crackly
phone lines. The winning bid was made by a group that included the US
financier George Soros, who put up nearly half of the money, but was led by
Uneximbank chairman Vladimir O. Potanin, a former deputy prime minister
with close ties to Yeltsin's current Cabinet. 
A rival consortium, led by Vladimir I. Gusinsky, a media mogul, and
Boris A. Berezovsky, the deputy chief of Russia's Security Council and the
founder of a business empire of his own, backed the losing bid. 
Russian government officials praised the tender, which netted more than
$1.9 billion for the cash-starved federal budget. 
A prominent ORT television host, Sergei Dorenko, opened the media
attacks on the Svyazinvest sale on Saturday, alleging that Potanin had
illegally transferred budget funds during his tenure in the Cabinet last
year, and charging that Uneximbank had unfairly acquired other state
holdings. 
On Monday, Komsomolskaya Pravda, recently acquired by Potanin's
Uneximbank, responded with a front-page interview with the first deputy
prime minister, Boris Y. Nemtsov, a popular former governor with a
reputation for honesty. Nemtsov declared that the Svyazinvest auction was
Russia's first fair one. 
When he was appointed by Yeltsin in March, Nemtsov pledged to end the
Kremlin's dubious practice of handing out lucrative state assets to its
business allies at cheap prices in return for political support, a goal he
said the auction had met. 
``From a sort of bandit-like amassing of capital, the country is moving
to a more or less normal civilized regime,'' Nemtsov, 37, said in comments
aimed at Gusinsky and Berezovsky. 
NTV television, also part of Gusinsky's empire, responded by accusing
unspecified bankers of using government contacts to accrue funds for a
Nemtsov presidential bid in 2000. 
``Money in Russia is not going into the economy, but into the hands of
politicians,'' the station said. 
Moscow News had a different conclusion: ``If at the beginning of
reforms, journalists were essential to protect the public from the
authorities, now the authorities need them only to defend themselves from
the public.''

*********

#12
TAX PERFORMANCE THIS HALF OF THE YEAR IS 1.5 TIMES 
BETTER THAN LAST YEAR
MOSCOW, JULY 30 /FROM RIA NOVOSTI CORRESPONDENT ALEXANDRA
AKAEVA/ -- In the first six months of 1997, the federal budget
was built up with 123.9 trillion roubles worth of tax payments,
which is 1.5 times more than over the same period last year,
Alexander Pochinok, chief of the State Tax Service, said at the
enlarged session of the STS board. Thus, the
Finance-Ministry-established targets for the budget's tax
collection in the first half of the year have been executed 87.4
percent by the State Tax Service as against 78 percent in the
first half of 1996. However, Pochinok sees no reason for being
optimistic as the situation remains very tense.
Despite the fact that the tax revenues last June grew 33
percent in comparison with the previous month, the shortfalls in
taxes over the past half of the year amount to 9 trillion
roubles, which makes the arrears over the same period go up 16
trillion roubles. In all, as of July 1, 1997, the back tax
payments to the consolidated budget of the Russian Federation
amount to 159.7 trillion roubles, including 80.8 trillion
roubles to the federal budget. Pochinok suggests a crack-down on
tax-dodgers.
According to the STS, three fourths of tax incomings are
the contribution of state-run companies, the chief tax-payers
being the industry, transport and the construction sphere
constituting a 76-percent share.
As to tax collection in various Russian Federation
jurisdictions, more than a half of the general sum has been
provided by seven of them: Moscow, St.Petersburg, the
Khanty-Mansi and Yamalo-Nenetsk autonomous districts, the
regions of Moscow, Samara and Nizhny Novgorod. About one third
of the regions execute the budgetary targets 80 percent while 11
districts less than 50 percent. The latter account for over 40
trillion roubles, that is 50 percent of the entire sum of the
arrears. 

********

#13
KOKH EXPRESSES OPTIMISM REGARDING THE DEAL ON SVYAZINVEST
MOSCOW, JULY 30 (FROM RIA NOVOSTI CORRESPONDENT REGINA
LUKASHINA) -- The sum of money received after the sale of a
block of shares of the Svyazinvest joint stock company "is
serious and adequate," Russia`s Deputy Prime Minister Alfred
Kokh told journalists today. "The $400 million deposit of the
company which has won at the auction was already received by the
federal budget through the system of the federal treasury." The
remained sum of money will be transferred after the signing of
an agreement between the Russian government represented by the
Federal Property Fund and the Mastcom company which has won at
the auction. In addition, Kokh hopes that the Svyazinvest "will
work in the future in such a way that people will have more
telephones. The company`s capitalization will grow."
Speaking of the assertions stating that the Italian STET
concern offered more money for the Svyazinvest company in 1995,
Alfred Kokh described them as "inconstructive." He said that the
budget could receive not more than $400 million from this deal.
The STET concern planned to invest the remained money "in the
company, primarily by means of technical equipment." Kokh
reminded that the STET company did not pay the money and
disrupted the deal.
He specially spoke of the organization of the auction
saying it was "extremely good." That fact that "the final prices
exceeded the initial ones by 4 trillion rubles testifies to
this," he said. Kokh pointed out that international experts who,
in particular, represented the World Bank, determined the
starting price of the block of shares in the range of $1 to 1.2
billion.
It is important that in this case Russia was selling "not
an operator but a financial holding. The block of shares was far
from the control one," he said. Kokh also reported that the
winner of the auction will receive two to three out of nine
seats in the Directors Board of the Svyazinvest company. 

*********

#14
Excerpt
Press Conference with Vice Premier Vladimir Bulgak (BALCHUG-KEMPINSKY
Hotel, July 29, 1997) 
July 29 1997 

Alexander Krupnov (chairman of the State Committee for Communications and
Information):
According to our information, today we have two-three PCs per 100
people in Russia. We are badly behind. As for our closest neighbors, the
figure for Finland is 35-38, the US about 40, and in three years the US is
going to have around 55 PCs per 100 people. The figure for Europe today is
14-16. A major political conference took place in Bonn a month ago. It was
attended by all ministers, the EC Commission, and also economists and
financiers. They all agreed and released a declaration on the establishment
of a global information infrastructure.... 

Bulgak: I believe that by the end of the year we will be able to present to
our public the program with the working name like "A computer to every
Russian family," which will demonstrate the encouraging role of society and
the state as regards the purchase and use of home PCs and their
introduction in the mentality of our people of all ages. 
There are several ideas as regards the speedy development of the Russian
Internet. These are very important ideas as well, which by the end of the
year can ultimately take shape from the point of view of technology,
organization and finances. Russia will thus become a full- fledged
organizer and co-participant in the work to develop Internet as it will
have its own sector of work. 

*********

#15
Press summaries from Russia Today
http://www.russiatoday.com
July 29, 1997 newspapers

Segodnya
Vremya Penetrated into Uneximbank
A POLITICAL SCANDAL WITH UNDERLYING ECONOMIC REASONS 
Summary
On ORT's popular Saturday news program Vremya, host Sergei Dorenko
discussed Uneximbank's acquisition of the Cherepovets plant "Nitrogen"
through privatization and accused the bank of illegally transferring abroad
the money promised to Nitrogen as investment. 
Uneximbank, which recently won a tender for a 25 percent plus one stake
in the state telecommunications monopoly Svyazinvest, is headed former
First Deputy Premier Vladimir Potanin. 
In characterizing Potanin, Dorenko said: "He will get away with
everything, even with the fact that at the time of his work in the
government (1996-97), he did not solve a single problem except passing
two-thirds of the budget money into his group." 
The daily said federal authorities' reaction to this was hardly
adequate. Although Dorenko hardly mentioned the Svyazinvest deal in his
program, First Deputy Premier Boris Nemtsov immediately reacted from
Novosibirsk: "The one who paid more has won. But the loser is staging
hysterics on TV instead of reacting calmly. " 
State powers have even demanded statutory papers from ORT, thus
reminding it that 51 percent of its shares still belong to the state.
Dismissals at ORT leadership are expected to follow the scandal. 

Nezavisimaya Gazeta
Vremya Openly Attacked Vladimir Potanin 
SERGEI DORENKO'S CHARGES AGAINST UNEXIMBANK MIGHT RESULT IN A LEADERSHIP
RESHUFFLE AT ORT -- AND, MAYBE, IN THE GOVERNMENT 
Summary
The daily published details of the scandal which followed Sergei
Dorenko's attack against Uneximbank on ORT's Vremya television news program. 
The popular television host, speaking about the Svyazinvest deal to Ekho
Moskvy radio on Monday, said: "Mr. Kokh (head of the State Property
Committee) does not know to whom he sold his motherland. He would do better
to sell shares of the (Svyazinvest) monopoly to the Medellin cartel, which
would invest real laundered money and not empty promises, as Uneximbank
does." 
Dorenko also supposed that First Deputy Premier Boris Nemtsov entered
into the polemics with ORT after Potanin's people showed him a videotape
that portrayed Nemtsov relaxing in a sauna. 
Dorenko also recalled Prime Minister Victor Chernomyrdin's accusation at
the last government meeting, during which he told Kokh: "Every auction
turns into a scandal with you." 
The daily wrote that the fate of Dorenko and ORT will show to what
extent power in Russia belongs to the oligarchy, and if society is prepared
to be rid of the current pluralism of the media. 
RUSSIA TODAY Notes:
Recently Uneximbank bought out two of the most influential dailies,
Izvestia and Komsomolka. Neither of them wrote about the scandal involving
Dorenko and Uneximbank. Nezavisimaya and the ORT channel are controlled by
the group of Boris Berezovsky, Security Council deputy secretary and an
obvious competitor of Vladimir Potanin in the industrial and the media
markets. 

Komsomolskaya Pravda
Boris Nemtsov: We Have Had Enough of Bandit Capitalism 
Summary
First Deputy Premier Boris Nemtsov, meeting with Komsomolka journalists,
spoke about the greatest deal in the history of privatization in Russia –
the $1.875 billion gained from the sale of the government's 25 percent
stake in telecom holding Svyazinvest. 
"A fair auction took place," Nemtsov said. "Let us remember what
preceded this. In April the government promised it would implement one set
of rules for the distribution of budget money. Then I met with some bankers
and told them, 'Guys! This is all. Enough. Let us live honestly.' And
everyone answered: 'We will'." 
Nemtsov said the recent privatization of the Tyumen Oil Company was the
first great victory of the new Cabinet. The situation with Svyazinvest was
much tougher. Unprecedented pressure was exercised on the government in
this case, followed by direct blackmail, he said. But the government
managed to gain a massive sum of money, and the deal's success proves that
the country is passing from semi-bandits accumulating capital to a more or
less civilized regime. 
Nemtsov attributed the recent negative publications about the
Svyazinvest deal to the unwillingness of certain banks that control the
media to play a fair game. 
RUSSIA TODAY Notes:
Analysts doubt that the gain for Svayzinvest was actually enough, because
it comprised only $700 per individual phone line, which is much lower than
it costs elsewhere in the world. They also question whether Uneximbank will
be able to pay the promised $1.872 billion by September. 

S A N K T - P E T E R B U R G S K Y E V E D O M O S T I 
In America There Is a Service That Will Find Old Friends for You 
Summary
America has become so rich that people are alienated from each other,
said the daily. 
Their wealth becomes so important that they forget about their friends.
Many year's ago America used to produce a television show called "This Is
Your Life." The producers put the "hero" of the show on stage and then
brought in old friends, acquaintances and other people in the person's life
who had made a difference. 
Back then, said the daily, American society was a little warmer, and
probably even warmer than the present Russian capitalistic society. 
Now in the state of California there is a service that will find your
old friends. It might be pleasant to see them, said the daily, but when
meeting friends becomes a form of business and not based on personal
feelings, something is certainly wrong. 
Maybe those who have all the material things they want will one day wake
up and see that the only thing they lack is joy. Only the joy of seeing
ones friends can keep them together. 
RUSSIA TODAY Notes:
This patriotic daily often prints articles that emphasize the negative side
of life in America, or which are critical of American ideas and actions. 

********