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Johnson's Russia List


August 1, 1997  
This Date's Issues: 1107 1108 1109  

Johnson's Russia List
1 August 1997

[Note from David Johnson:
1. Nikst in Moscow: re contest.
2. Vinay Shukla in Moscow transmits a poem by Barry Jones,
3. Max Smetannikov (Bloomberg): Re Balzer/Svyazinvest.
4. Steven Solnick (Columbia/Hoover): Presidential 

5. Mike McKeever (Armstrong University): Economic Analysis.
6. Reuter: Sour grapes need not spoil Russia Svyazinvest sale.
7. Christian Science Monitor: Peter Ford, Crime-Wary Russians
Get Their Guns.

8. Gemini News: Kester Kenn Klomegah, SCREAMS FALL ON DEAF EARS 

9. Interfax: Russian Population Declines in First Half of 1997.
10. Interfax: Second Svyazinvest Auction To Be Held in Fall in 

11. Itar-Tass: Chernomyrdin Says Land To Become 'Key Issue.'
12. Moskovskiye Novosti: State Property Auction Said To Herald 
No Investment Boom.

13. Moskovskiy Komsomolets: Sovershenno Sekretno Expected To 
Relaunch Pravda.

14. Reuter: Soros financed Russian government between Eurobonds.
15. Itar-Tass: Nemtsov: Economy Must Transfer to Cash 

16. Itar-Tass: Tripartite Commission To Consider Improving Law
on Religion.]


From: "nikst" <>
Subject: Re: contest
Date: Fri, 1 Aug 1997 02:34:47 +0400

Dear David,
Thanks for the "contest"!
Frankly, I hope to have some good sleep, which I didn't have almost during
one year.
And also to take a bath, if they'll provide us with some hot water ;-).
Relax, have a good rest and do forget about us all (during the vacation)!
Best wishes! Be happy, healthy (as sound as a roach) and do sleep well!

Sincerely yours, NikSt


Date: Thu, 31 Jul 1997
From: PTI MOSCOW <> 
Subject: A bit strange piece for your Russia List

Dear David ,
Before you leave for your vacations I am sending you a poetical piece 
from my friend for your list.
Have a nice time and hope to hear you after a week.
Warmest regards,
Vinay Shukla

Following is the piece written by Barry Jones, from Britain, who has 
translated hundreds of books from Russian into English during is about 20 
year stay in Russia.









From: "max smetannikov" <>
Organization: Bloomberg News Washington D.C.
Date: Thu, 31 Jul 1997 17:58:44 GMT-0500
Subject: Re: 1105-Balzer/Svyazinvest,

Dear David,

The Svyazinvest deal discussed is really rather simple. Twenty five 
percent of the company were sold to the highest bidder, 24 percent 
more will be sold at a subsequent auction. We can speculate until we 
are blue in the face how much the highest bid will be. It is likely 
it will be in the same range, though.
As in many other emerging markets, Russian assests are ``undervalued,'' that is 
their market price often is lower than company's value after it 
receives a bit of investment. The interest in buying Svyazinvest 
shares from the Potanin and Soros, thus, will be huge. I think it 
would be accurate to say that people who went into this deal and 
invested a bit of money are likely to profit from the sale of their 
share in the company, should they choose to do that.
The following story was published by Bloomberg this morning.

Moscow, July 31 (Bloomberg) -- Mustcom Ltd., the group including
George Soros which bought a quarter of the Russian state
telecommunications holding company Friday, will keep its shares for
two years, said the leader of the group.
Vladimir Potanin, head of the Unexim-MFK Group, said Mustcom
agreed not to sell its shares in RAO Svyazinvest for two years in
a plan to boost the value of those shares.
Svyazinvest holds controlling shareholdings in 85 of Russia's 87
regional telecommunications providers as well as in RAO
Rostelecom, the long-distance and international
telecommunications giant.
``We finally got what we dreamed about, both our bank and the
whole consortium consider this investment to be strategic,''
Potanin said at a press conference. ``For at least two years we
won't sell our shares.'' Mustcom Ltd., a venture bringing
together the Unexim-MFK Group, Soros and Deutsche Morgan
Grenfell, paid $1.88 billion for 25 percent of Svyazinvest plus
one share. The shareholding gives the consortium the power to
block changes to Svyazinvest's company charter, which require a
75 percent vote. It also gives Mustcom at least two seats on
Svyazinvest's nine-seat board of directors, Potanin said.

Bidding Again

Potanin said Uneximbank, the commercial banking arm of the group
he heads, is considering bidding for the government's coming
investment tender for more Svyazinvest shares. This autumn the
government will sell 24 percent of Svyazinvest minus one share in
an ``investment tender'' which will require the winning bidder to
invest in Svyazinvest. ``We'll look at the possibility of
participating'' in the sale, Potanin said. ``Our investment is
strategic, (so) we're planning to participate.'' The Unexim-MFK
Group is already one of Russia's biggest business families. It
controls AO Sidanko, Russia's fifth-biggest oil producer. The
group also manages a majority stake in RAO Norilsk Nickel, one of
the world's major producers of nickel and platinum group metals,
for the government. It bid in this week's auction for ownership
of that controlling stake, Potanin said. The result of that share
sale will be announced Tuesday. The MFK arm of the group, known
as International Company for Finance and Investment, owns 17.5
percent of AO Novolipetsk Metallurgical Combine, one of Europe's
biggest steel producers. of 3
And in January it will merge with Moscow brokerage Renaissance
The group is also a major shareholder in Komsomolskaya Pravda,
one of Russia's biggest newspapers.

Keep Growing

The Unexim-MFK Group wants to keep growing.
Potanin said it is considering bidding in the government's sale
this autumn of 51 percent of RAO Rosneft, the last state- owned
integrated oil company in Russia. Rosneft has oil businesses
ranging from the rights to some of Russia's biggest untapped
wells to a network of gas stations across Russia's 11 time zones.
``Rosneft is an attractive objective,'' Potanin said. ``We need
to decide what to do.''
Mustcom's plan to boost the value of Svyazinvest shares got a
boost from Svyazinvest chairman Nail Ismailov, who told a press
conference that the company's 85 regional telecommunications
providers would begin selling shares next year to raise money to
finance investment.
``We are already preparing projects for (share) issues,''
Ismailov told a press conference. ``In 1998 we'll begin plans for
subsidiaries' issues.'' Svyazinvest's announcement could point to
plans to sell shares to U.S. investors in the form of American
depositary receipts, analysts said. ``Ismailov could be talking
about ADRs, and that would be fantastic news,'' said James
Fenkner, head of research at CentreInvest Securities in Moscow.
``You'd double the price of a telecoms company when you do

--John Ryan in the Moscow bureau 


From: "Steven Solnick" <>
Subject: Presidential representatives
Date: Thu, 31 Jul 1997 14:53:41 -0400

An observation that may be of interest to The List:

In recent weeks, there has been some discussion in the Russian press, and
carried on JRL, concerning Yeltsin's decree elevating the status of
presidential representatives in the regions. The decree came in the wake of
the Kondratov-Nazdratenko affair in Primore, and was generally interpreted as
a move by Yeltsin to undercut the powers of governors. It gives presidential
reps more direct power to coordinate activities of regional branches of
federal agencies, including the power to oversee expenditures and coordinate
all appointments. Anton Fedorov, the official who oversees presidential
reps, commented disingenuously that it would "relieve the burden on
governors." (Rossiiskie vesti 7/16/97, also quoted in OMRI Daily Digest).

Having finally gotten a look at the text of the Ukaz 696 (thanks to the
fabulous "Infobase-Inforis" on-line legal server in Nizhnii Novgorod), I'm
starting to think the discussion to date may have missed one key element of
the decree. The very first point of the main Ukaz gets to the heart of it:
the office of "Presidential Representative in the subjects of the federation"
will now be called the "Presidential Representative in the regions of the
federation." This semantic trifle conceals a major substantive innovation.

For some time now, the Presidential administration has been debating a move
to disassociate presidential reps from specific regions and place them over
groups of regions instead. One Russian official from Tver told me recently
that this had already happened in the South--that the Presidential rep in
Stavropol now had responsibility for several neighboring ethnic republics as
well (I'd be grateful if any JRL readers could confirm or deny this). The
language of the new decree, including subsequent references to "subject
(subjects) of the federation" indicates that a super-territorial
reorganization may indeed be in the works. The Ukaz calls for the RF
government to devise a reorganization scheme, but it doesn't seem to me that
the document suggests what that scheme will look like.

The consequences are significant. If each federation subject continues to
have its own presidential rep (polpred), then the concentration of federal
power in their hands may actually amount to a major devolution of power. 
Rather than hierarchical controls extending from federal officials in the
region all the way back to dozens of ministers back in Moscow, those lines of
authority will all pass through the polpred. If the governor and polpred
reach an...arrangement...then the governors' power may actually grow. Even
if the polpred remains independent of the governor, the new scheme would
achieve the goals of reasserting central control ONLY if the organizational
controls over the presidential reps are effective, and they certainly haven't
been to date. (That's why the Kondratov appointment in Primore was a Big
Deal: Kondratov would represent the Kremlin's interests not because of his
subservience to Anton Fedorov, but rather because of the effective
organizational controls within the FSB.)

Now, if the polpreds are superterritorially based, the odds of "capture" by
any singly regional administration are greatly diminished. The smaller
number of polpreds would also be easier to control, and the result might
actually be re-centralization rather than devolution. Of course, it's quite
possible that SOME regions will have their own polpreds while others will be
part of a super-territorial scheme (several have been appointed recently,
incl. Komi and Cheliabinsk, with no mention of other regions). The fact that
the Ukaz makes superterritoriality possible doesn't mean that provision will
be implemented. The other shoe may or may not drop.

Any insight JRL readers might have into how this new scheme will be put into
force would be most illuminating. Thanks.

Steven Solnick
Assistant Professor of Political Science, Columbia University
Hoover National Fellow, 1996-97
Hoover Institution
Stanford University
Stanford, CA 94305
415-723-1972; Fax: 415-723-1687


From: mckeever <>
Subject: Economic Analysis
Date: Thu, 31 Jul 1997 20:07:42 -0700

Dave: I would appreciate it a lot if you would let your readers know that
they may read an analysis of Russia's economy as compared to a list of 33
economic policies that was prepared by a Russian student studying in
California. The student's family is active in provincial government and the
analysis has an insider's perspective. 

The analysis is at:

Any comments by your readers addressed to the student will be appreciated,
whether they appear on your list or are posted directly to me.

Enjoy your well-earned vacation.

Mike P. McKeever
Assistant Professor, Economics and Business
Director, Graduate School of Business Administration
Armstrong University, Oakland, CA


Sour grapes need not spoil Russia Svyazinvest sale
By Mike Collett-White 
MOSCOW, July 31 (Reuter) - The bitter row over
Russia's biggest ever privatisation is little more than sour grapes on the
part of the losers, and should not detract from the vintage quality of the
Svyazinvest sale, economists said on Thursday. 
Foreign investors will be more encouraged by Westerners taking part in the
winning consortium than discouraged by the ensuing mud slinging being played
out in the Russian media. 
"There is no controversy. There is embitterment among the losers, which is
natural enough," said Tom Balestrery, director of research at Creditanstalt
Investment Bank in Moscow. 
"This was Russia's first fair privatisation. In no way does this deal
threaten to derail foreign investment." 
The auction winner, Uneximbank chief Vladimir Potanin, has also described the
criticism as sour grapes on the part of Russian business tycoons Vladimir
Gusinsky and Boris Berezovsky, both of whom own substantial stakes in the
Potanin and the Russian media have named Gusinsky and Berezovsky as
participants in the losing consortium, although Gusinsky denied on Thursday
he had taken part. 
Berezovsky says he has dropped his business links since taking a high-level
Kremlin post. 
The only officially known participant in the losing group was Spain's
Telefonica <TEF.MC>. 
The media organisations of Gusinsky and Berezovsky have launched a bitter
attack on the Svyazinvest deal, saying it was a murky transaction between the
winning consortium, led by rival commercial bank Uneximbank, and state
But Western economists have a different view. While not completely
transparent, the 25 percent plus one share in telecoms holding company
Svyazinvest at least went to the highest bidder. 
"The winner offered more money and has foreigners taking part. This says
something for Russia," said James Fenkner, director of research at
CentreInvest Securities in Moscow. 
"The state gets more money and rids itself of the perception of insider
deals. Finally Russia is moving to the 20th Century way of doing business." 
The winning consortium includes Deutsche Bank's Deutsche Morgan Grenfell
<DBKG.F>, Morgan Stanley Asset Management, and U.S. financier George Soros.
It bid $1.875 billion against the losing consortium's bid of $1.71 billion. 
Analysts said the Svyazinvest sale could represent a turning point for
Russian privatisation. 
Arguably the world's biggest property sell-off has been dogged by accusations
of insider deals and jobs for the boys. 
Powerful bankers and businessmen who backed Boris Yeltsin's presidential
campaign last year have done especially well. 
"This sale sets a precedent for more open tenders," Balestrery said. 
The next big test of the so-called new open era is the sale of a controlling
stake in mining giant Norilsk Nickel <NKEL.RTS>, due to be announced on
Tuesday, followed by state oil company Rosneft in September. 
The Norilsk tender promises to trigger another wave of media protest. The
victor is again widely tipped to be Uneximbank, which has had control of the
stake after winning it in a shares-for-loans scheme in 1995. 
But economists are treating this as the last hangover from the bad old days
of cheap sell-offs, and are looking to Rosneft as the real litmus test for
the future. 
"Hopefully we will see the same conditions in the Rosneft tender as we did in
Svyazinvest," Fenkner said. 
But that is not to say the public row over Svyazinvest is without
repercussions altogether. 
For one thing, the sale of a further 24 percent in the company due to be held
later this year looks set to be another ugly affair, and most likely a very
public one. The auction is open to Russian bidders only. 
And shifting allegiances between Russian tycoons could have a knock-on effect
at the highest level. Top bankers and businessmen were once united in backing
President Boris Yeltsin's reelection campaign last year, but the days of
unity now appear to be over. 
"This row does show there are shifting sands and allegiances," said one
senior Western analyst. 
"Politics and money make strange bedfellows. It is strange to see Gusinsky
and Berezovsky singing from the same score sheet," he said. "On another issue
you could well see Gusinsky and Berezovsky hugging Potanin." 
Potanin was a first deputy prime minister until he was ousted in a cabinet
reshuffle in March. 
In a country where commercial power and political clout are concentrated in
the hands of 20 to 30 big organisations, politicians will have to keep an eye
on who is courting whom. 
First Deputy Prime Minister Boris Nemtsov, the darling of Russian politics,
may be more vulnerable to attack than his counterpart Anatoly Chubais,
because he has yet to consolidate his position with any particular clan,
analysts said. 


Christian Science Monitor
1 August 1997
[for personal use only]
Crime-Wary Russians Get Their Guns 
By Peter Ford, Staff writer of The Christian Science Monitor 

MOSCOW -- A broad-horned elk's head, mounted on the wall, stares down 
morosely at customers inspecting the weaponry for sale at "The Hunter," 
one of several firearms stores in central Moscow. Similar trophies - a 
bear, a wolf, and a hare - line the shelves.
But not all the customers who squint down the barrels of the hunting 
rifles here have wildlife in their sights. Under a new law that bucks a 
worldwide trend toward stricter gun controls, Russians are now allowed 
to buy rifles for self defense, so long as they promise to keep them at 
The law, which has just come into force, is a blunt admission that crime 
in post-Soviet Russia has shot out of the control of the police.
"The state today is unable to defend its citizens," acknowledges Lt. 
Col. Yelena Shelkovnikova, a police lawyer. "Until the police are paid 
properly, the problem of armed crime is not going to be solved, and 
citizens will have to defend themselves."
Debate over the gun law split the Russian parliament along lines that 
might surprise Americans. Liberal democrats were the fiercest proponents 
of wider gun ownership, arguing that personal freedoms should include 
the right to bear arms.
Russia's conservatives, on the other hand, who are strongest among the 
Communist and Agrarian parties, favored stricter gun control, saying it 
is government's duty to ensure law and order and that wider gun 
ownership will lead to more violence.
In a country where drunkenness has reached epidemic proportions, where 
spouse abuse is common, and where economic hardships have increased 
social tensions to the snapping point, the dangers of allowing almost 
anybody to keep a rifle at hand seem obvious. Under the new law, only 
the insane, drug addicts, and convicted criminals may not own a gun.
"The law means that guns will be used in everyday quarrels," worries 
Nikolai Kharitonov, leader of the Agrarian Party in the Duma (lower 
house of parliament). "And it will create a situation where people will 
settle accounts between themselves without law or judge. Then no sheriff 
will be able to do anything."
These sorts of concerns, though, were outweighed by public anxiety about 
the wave of lawlessness that has gripped the country since totalitarian 
controls imposed by Soviet authorities were relaxed. 
The number of crimes involving firearms rose more than fourfold, from 
3,401 in the entire Soviet Union in 1986 to 12,150 in Russia alone in 
1995, according to official figures, which police privately say 
underestimate the real scale of the problem.
"Criminals are armed to the teeth," says Mikhail Myen, a liberal Duma 
deputy who voted for the bill. "And if when God created us, He created 
us different, Mr. Colt made us equal," he said, paraphrasing the famous 
gun-manufacturer's slogan.
"I personally oppose the idea of any civilian except a hunter owning a 
gun," explains Sergei Chuganov, a Duma aide who helped draft the law. 
"But on the other hand, when official organizations are unable to 
protect, ... private individuals must have the right to defend 
themselves," Mr. Chuganov says.
Chuganov, himself a former state prosecutor, prefers to point to another 
main aim of the legislation, tightening up on the number of military 
handguns and automatic weapons in circulation.
In Russia, with the right connections you can buy almost any weapon from 
corrupt Army officers, whether a simple Makarov pistol, a 
rocket-propelled grenade launcher, or a land mine. All these weapons, 
and more, have been used by hit-men in the past. Hardly a week goes by 
without news of another contract murder as Mafia gangs fight over 
business turf in the newly privatized Russian economy.
At the same time, previous legislation allowed registered bodyguards to 
carry military arms. The Interior Ministry has no exact figures on how 
many such weapons are in legal circulation, but they are known to number 
in the tens of thousands. Under the new law, bodyguards are required to 
hand in their Army-issue guns, deemed offensive weapons, in exchange for 
less powerful models regarded as merely defensive.
The factories that make these guns stand to benefit from the new law, as 
do other Russian weapons producers. While limiting the import of some 
foreign guns, "The law is also designed to defend Russian arms 
manufacturers by stimulating demand," Chuganov explains. "Liberalized 
access to guns will create jobs."
Demand is set to rise even further if another draft law currently before 
parliament wins passage. That bill, drawing its inspiration from 
America's Wild West past, would certainly set the "Wild East" seal on 
post-Soviet Russia's reputation.
Taking the concept of citizens' self defense to the maximum, the bill 
would legalize the formation of volunteer posses of armed vigilantes.


>From Gemini News
Domestic violence is a worldwide problem, but recent research work in Russia
has uncovered particularly worrying figures. And, as Gemini News Service
reports, the country is only slowly waking up to the menace.
About the Author: KESTER KENN KLOMEGAH is a Ghanaian journalist and
researcher based in Moscow.
4 July 1997,

Up to half of all murders in Russia are committed by husbands against
their wives, according to a study of high levels of domestic violence in the
But despite the shocking findings, people who work with abused women say
little is being done to help them.
Legislation to toughen the laws against domestic violence received its
first reading in parliament in April after two years of drafting. But lack
of social awareness remains the biggest hurdle to overcome.
"In Russia, the problem has not even been defined, so women don't even
recognise it as a social problem," says Lisa Hoffman, an American consultant
on domestic violence.
The annual number of women killed by their husbands has grown in recent
years to more than 15,000 by the mid-1990s - roughly half of all murders,
according to research work by the Russian Association of Crisis Centres, a
grassroots coalition.
These deaths receive far less publicity than the sensational gang-style
murders which claimed about 200 lives in Russia last year.
There are no official figures for wife-beating, but the association's
study suggests that almost 54,000 women reported being injured by their
husbands in 1994. The extent of the abuse may actually be much greater. In a
report to the 1995 women's world conference in Beijing, researchers
estimated that only two per cent of battered wives in Russia filed charges.
Meanwhile, 81 per cent of women surveyed said they believed that physical
violence in the family was widespread.
The survey also found that many people - both men and women - tended to
blame the victim. Nearly half of all respondents believed that women
provoked the violence. A quarter of men questioned thought women "secretly
want to be raped".
High levels of alcoholism and the economic hardships of recent years have
done nothing to lessen the problem of domestic violence.
In principle, a wife is legally protected from her husband's battering by
Russia's criminal code. But in reality, it is up to the police to take
action. Often they dissuade victims from pressing charges. A commonly held
view is that punishing the man will hurt the whole family. 
Many women say they would rather tolerate blows than leave their husbands.
Lena, for example, endured nearly a decade of violence before escaping.
"Divorce is always difficult," she says. "It seems easier to endure periodic
battles than to accept a destroyed marriage. But at a certain moment you
either go crazy or you realise that you have to leave."
Staff at the Moscow Crisis Centre for Women - which launched Russia's
first helpline dealing with domestic physical and sexual abuse - say many
women do not understand they are being victimised. 
"Some battered wives call in feeling depressed, and they don't understand
why," says Marina Pisklakova, who founded the crisis centre almost four
years ago. 
Many women have to cross a series of psychological borders before they
make the transition from marital harmony to abuse, says Pisklakova, an
economist and postgraduate research student. "One woman caller said: 'OK, my
husband beats me in front of the children, but how can this be?' "
A volunteer at the helpline says that "only after talking through their
problems do we begin to hear some understanding in their voice".
Since the centre was opened four years ago, staff have responded to
thousands of calls. About 70 per cent involve wife-beating. Nearly 20
similar centres have opened across the Russian Federation in recent years.
But support for abused women seldom extends beyond their doors.
Many people are reluctant to become involved in what is perceived as a
family's personal affairs. Violence in Russian homes is often cloaked in
cultural terms, equated with passion, which is then excused as a domestic
activity as normal as bickering over household chores.
Dmitry Shestakov, a professor of family criminology at St Petersburg
University, explains that Russians see themselves as an emotional people:
"We usually perceive love as an elemental force: terrible, uncontrollable
and irresistible."
Women's low social status is another factor in the general overlooking of
the problem. Not only do women comprise more than 70 per cent of Russia's
unemployed, but their earning power is dropping. A recent study by the
Moscow Centre for Gender Studies found that women's wages now average only
40 per cent of men's compared with 70 per cent during the Soviet era.
Many abused wives are economically dependent on their violent husbands
and have no alternative but to live with the suffering. Lena found both the
courage to leave and the means to support herself. By the time she divorced
her husband, she had managed to find a place to live and was earning a
reasonable salary.
But she has found it difficult being a single mother. "I can't say I'm
thrilled that my son is being raised without a father," she says.
Russia is a patriarchal society, and a woman without a man is viewed with
suspicion. A strong and independent woman faces social hostility.
"Either you endure violence in the family or face societal aggression -
there is no other choice," says Lena. "In this country, men and women have
never had equal rights, and I doubt very much that will ever change." -


Russian Population Declines in First Half of 1997 

MOSCOW, July 30 (Interfax) -- The Russian population on 1 June 1997,
totaled 147.3 million, down 227,000 or 0.15 percent since the beginning of
the year. It shrank by 475,000 in 1996, according to an estimate published
by the State Statistics Committee.
The excess of deaths over births is the chief cause of the decline,
which is one third larger than the excess of immigration over emigration,
the committee says.
Births in January through May totaled 533,100, while deaths totaled
888,100, a natural decline of 355,000. The decline in the same period of
1996 was 380,500.
The birth rate in Russia is now one of the lowest in Europe and nearly
40 percent below what is needed to keep the population level constant, the
committee reports.
The number of young families is declining. A total of 290,800
marriages were registered in the first five months of 1997, compared to
294,900 in the same period last year. Out of every 1,000 marriages, 768
fail, with a third of all divorcees married for less than five years.
The death rate was nearly 15 per 1,000 a year, the highest in Europe. 
On the other hand, the number of deaths fell by 46,000, or 5 percent, on
the January-May 1996 period.


Second Svyazinvest Auction To Be Held in Fall in Russia 

MOSCOW, July 30 (Interfax-FIA) -- The date for trading Svyazinvest's
second, 24% stake, has not been fixed yet, sources in Russia's State
Property Committee told Interfax Wednesday, although they said the auction
was likely to be held in the fall, possibly in October.
Unlike the first auction to trade the company's 25% plus one share
stake, the second stake will be sold on investment terms which are still
being developed, the sources said.
The first auction to sell 25% plus one share in Svyazinvest was held
on July 25. Its winner, the Cyprus-registered company Mustcom, was
established specially for taking part in the auction on behalf of Russian
and foreign investors and on the initiative of Unexim Bank and Deutsche
Mustcom won the auction by making the highest bid of $1.875 billion
for the Svyazinvest stake, the starting price being $1.18 billion at the
Central Bank's exchange rate as of the payment day.


Chernomyrdin Says Land To Become 'Key Issue' 

MINERALNYE VODY, July 30 (Itar-Tass)--The question of land, which has
not been settled, shall become "the key issue." This shall be understood by
both the government and the lawmakers, Russian Prime Minister Viktor
Chernomyrdin told journalists on Tuesday. The premier is on a working trip
to the Krasnodar and Stavropol territories.
He said assistance to the countryside will primarily require solution
of financial problems. "I make certain once again everything must be done
to put the bank credit in motion. Although the rate was lowered to 24
percent, commercial banks still do not lower it more than to 40 percent,"
the premier said with regret.
The Government is considering lowering of rates to 12 percent which
will launch the credit mechanism and enable countryside residents to get
rather cheap credits.
The countryside also needs machinery "of a very good quality, which,
unfortunately, Russia is so far lacking," Chernomyrdin said. He is sure
these problems must be primarily solved by the government, which is to
tackle organisational issues and supply countryside residents with
everything necessary.


State Property Auction Said To Herald No Investment Boom 

Moskovskiye Novosti, No. 30
July 27-August 3, 1997
[translation for personal use only]
Article by Andrey Denisov under the "Economics, Business" rubric: 
"'Bad' Money?"

Russia's privatization drive has somehow gotten out of shape over the
last few years. After the odious GKI [State Committee for the Management
of State Property] chairman Polevanov was forced to resign, all his
successors reiterated the same thing like an incantation: It is time for
sales "by the piece" at an appropriate (that is, high) price. But they
never managed to. In 1995, the government made a miscalculation about the
loans-for- shares auctions, in which banks gave small credits in exchange
for large blocks of shares. In 1996, only two major sales were envisaged
-- 8.5 percent of the YeES (Unified Energy System) Russian Joint-Stock
Company, and a quarter of Svyazinvest. The shares of the energy people
were sold only last January, with difficulty at that, while there was a
"misunderstanding" about the telecom people [Svyazinvest] -- the Italians
who won refused to play by our rules.
But now it has come to pass. Over two weeks, the government sold two
blocks of shares at prices fantastic for Russian privatization. The Alfa
Group managed to accumulate $810 million to acquire a 40- percent stake in
the Tyumen Oil Company; this was six times greater than the starting price.
And last week the difficult deal involving Svyazinvest was at last struck,
with the government, having asked for $1.18 billion, getting half as much
It would seem that the government deserves applause and praise: Not
only has it learned to sell expensively, but the budget-funded people and
the army will not be left without money. But far from it. It turns out
that now the question is different: not how much will they pay, but who
pays and with what. This is not an idle question. So much so that after
the summing up of the results of the auction, Vice Premier Vladimir Bulgak
asked Vice Premier Alfred Kokh: "Would you at least explain to me who has
won." And if one remembers that Russian banks are not too well-placed in
terms of investment funds, it will become clear that foreign money is
involved. By the way, while Uneximbank has made its cooperation with
Deutsche Bank public, Alfa has not so far disclosed whose financial might
is behind the 810-million figure.
And nevertheless: These two deals alone point to the fact that money
has started coming into Russia, money of a fundamentally different scale
than before (the GKI earned less during the whole of last year than it did
on Svyazinvest alone).
And here it is apposite to ask one more question: Is it by chance
that foreigners have made such hefty investments in Russia, or is it the
beginning of an investment boom? Alas, the answer to just that question is
known. You only have to turn on the television and glance at the front
pages of the papers. What appears before your eyes can hardly be called
the echoes of competition -- what we have is a competitive fight in the
most direct sense. Both sides who took part in the auction have gotten
hold of suitcases full of "compromising material" and are chucking it
haphazardly at the airwaves and the newspapers. And so the answer is: In
such an atmosphere, better forget about foreign investments. How is
Deutsche Bank feeling?


Sovershenno Sekretno Expected To Relaunch Pravda 

Moskovskiy Komsomolets
July 26, 1997
[translation for personal use only]

The newspaper Pravda has been an unshakable bastion of communist
thought for 85 years. But starvation rations will make even a dog start to
meow. According to reliable sources, the newspaper will shortly join the
Sovershenno Sekretno consortium, which recently achieved notoriety. It is
well known that a change of management is already taking place in Pravda.
About six weeks ago the Moscow Court of Arbitration pronounced a judgment
transferring publishing rights to the newspaper Pravda and the right to use
the world-famous logo of the country's former main newspaper to a
closed-type joint-stock company called "Redaktsiya Gazety Pravda"
["Editorial Office of the Newspaper Pravda"]. The old Pravda international
affairs specialist Sergey Filatov plays the part of its general director. 
In the next few days a large block of Pravda shares will pass into the
hands of investors, after which the newspaper will at last resume
It is rumored that the new Pravda will no longer be a radical
opposition publication, but will start working in the style of Sovershenno
Sekretno. Mounting the hobbyhorse of investigative journalism and
sensational expos_s, it is getting ready to turn the life of today's
Russian elite inside out, neither more nor less. The gamble on the once
famous, well-promoted newspaper is also perfectly understandable. A
project for its reorientation and revival was already examined a couple of
months ago by journalists from the newspaper Segodnya who were forced to
leave the editorial staff when the publication changed management. 
However, the deal fell through. Now Sovershenno Sekretno will use Pravda
to try to strengthen its positions on the media market. Especially since,
according to expert opinion, a certain redistribution of the Russian media
publishing market lies ahead in the near future.
It would seem that the Sovershenno Sekretno people have started
serious preparations for the war of the media worlds. Even now, besides
the newspaper and television company of that name and the magazine Litsa
["Faces"] which specializes in looking through keyholes, two book
publishers and a series of regional publications belong to the consortium. 
It is not ruled out that Pravda is by no means the last fish to fall into
Sovershenno Sekretno's nets. There are rumors that an attempt will be made
to drive yet another daily that was popular in the recent past into those
nets in the near future. Additionally, a joint megaproject has been
launched with the television company TV-Tsentr, whose head is now Anatoliy
Lysenko, chairman of the Moscow Committee on Media and Telecommunications. 
Of course, all this needs considerable resources, which have already been
promised to the publishers by foreign investors. Rupert Murdoch's News
Corp company has been named among them.
Why has the West suddenly had a fit of generosity and started to
invest in the formation of our public opinion? It is all a matter of
image. You know, foreigners want to look like such all-around nice guys,
with white-toothed smiles, on the pages of our press organs and on our
television screens. But no, nothing doing. Just take the recent scandal
over the experts of the Russian Federal Commission on Securities who were
working within the framework of the USAID program, when the Americans were
caught using official information for their private purposes. But
influencing the formation of one's own respectable face in the media is
becoming more and more difficult since the mass media market has
effectively been divided between Russian corporations. It would seem that
the sharks of world capitalism have decided to exert pressure on our minds
through the popular Russian media.


Soros financed Russian government between Eurobonds

MOSCOW, July 31 (Reuter) - Billionaire financier George Soros funded Russian
government budget shortfalls on several occasions, in particular in the
interval between recent Eurobond issues, a former top government official
said on Thursday. 
"There were instances of (Soros) giving credits to the government this year
in the interim between various operations, for example, the Eurobond issues,"
former first deputy prime minister Vladimir Potanin told a news conference. 
Russia issued a $1 billion Eurobond in November, a two billion German mark
Eurobond in March and a $2 billion Eurobond in June. 
Potanin, now the president of Uneximbank, did not make clear if he meant that
Soros himself or his funds, which Soros has said sometimes takes decisions he
does not agree with, had provided the credit. 
Soros is part of a consortium led by Uneximbank, which last week won a tender
for a quarter stake in telecoms holding company Svyazinvest with a bid of
$1.875 billion. 


Nemtsov: Economy Must Transfer to Cash Settlements 

KIROV, July 30 (Itar-Tass) -- Russian First Deputy Prime Minister
Boris Nemtsov on Wednesday told a meeting of businessmen of the Kirov
region that the strategic development of the Russian economy today means
the transfer from barter deals to cash settlements.
According to him, "the barter economy is akin to banditry," since in
each deal the producer loses honestly gained money. As an example, Nemtsov
cited the recent situation around the Unified Energy System, when until the
recent change in the management, the company had around 300 mediators, who
"spiraled" prices for electric energy making profit through the system of
barters and mutual settlements.
"(We) managed to quit these practices by considerably lowering the
prices for electric energy for those consumers who pay in cash," Nemtsov
A similar scheme is used at the railway transport where the rate of
barter deals lowered from 80 to 40 percent since March.
Nemtsov also said that to make credit resources accessible for
businessmen is one of the main state tasks today. Much has been done in
this direction, he said. Over one year, credit rates lowered two times,
and later they should be lowered to 20 percent.
In addition, the state deliberately reduced profitability of state
securities, and today, according to Nemtsov, banks can maximally earn 18
percent annual interest on T-bills. That is why the finances will go to
the real economic programmes, he believes. The problem is that bankers
should learn to work with industrial entrepreneurs, he said.


Tripartite Commission To Consider Improving Law on Religion 

MOSCOW, July 30 (Itar-Tass) -- A tripartite commission of
representatives from the Russian presidential administration and both
houses of the parliament will be set up in the near future with the aim to
work out a new improved variant of the law on religious associations, which
was adopted by the Russian parliament but rejected by the president.
The commission will consist of State Duma and Federation Council
members and officials of the presidential administration's legal
department. They are expected to work out a variant of the federal law
acceptable for both the president and the parliament, Mikhail Gutseriyev,
Duma deputy chairman, told Itar-Tass on Wednesday. Gutseriyev is in charge
of affairs of public and religious organisations.
The legislator noted that the president and the parliament realised
how important it was to look for a compromise variant of the bill which was
supported by both parliament houses, but turned down by the president who
saw violations of the Russian Constitution in the document.
In this connection, when working out a new variant, the main accent is
likely to be put on protection of human rights, freedom of worship and
equality of main religions. At the same time, very important is a clear
legal regulation for activities of foreign religious communities in Russia
in order to protect citizens of the country from actions of radical
totalitarian sects. The danger of such sects for Russian security is
realised by parliament members and Boris Yeltsin who said about this in his
recent radio address to the nation.
Gutseriyev expressed confidence that after a final variant was agreed,
a majority in the Duma and the Federation Council would approve it, and the
president would sign it.
In this case, the work of a great number of professionals who prepared
the bill will not be fruitless, and Russia will have an acceptable and
world-recognised legislation in the field of religious rights protection
and civil freedoms, the legislator stressed.


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