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

Johnson's Russia List
#1108
1 August 1997
djohnson@cdi.org

[Note from David Johnson:
1. AP: New Pravda Paper Launched in Russia.
2. Laura Belin (RFE/RL): presidential reps.
3. Gordon Hahn (Hoover): A Note for Stephen Blank.
4. The Economist: Russia’s in-the-red army.
5. RIA Novosti: PRESS-SECRETARY OF BORIS NEMTSOV CALLS 
ABSURD AND FALSE SCANDAL REVELATIONS BY NIZHNY NOVGOROD 
ENTREPRENEUR ANDREI KLIMENTIEV ABOUT FIRST VICE-PREMIER 
OF RUSSIAN GOVERNMENT.
6. Sydney Morning Herald: Robyn Dixon, For the boy soldiers of 
Kavkaz, summer is a fight for survival. 
7. Moskovskiye Novosti: Center's, Regions' Roles in Paying 
Off Arrears Viewed.
8. Asia Times: Pavel Ivanov, Fears the China will bite the 
hand that arms it.
9. New York Times: Alessandra Stanley, In Russia's New Market, 
It's the Winners Who Define 'Fair Play.'
10. Reuters: Tycoons Put Pressure on Yeltsin's Liberal 
"Heir."] 

*******

#1
New Pravda Paper Launched in Russia 
August 1, 1997
MOSCOW (AP) -- A third newspaper claiming to be the successor of the
original Pravda hit newsstands today, promising to avoid the hard-line
communism of its predecessor and appeal to a broader audience. 
The newspaper emerged with a front-page editorial titled, ``We're coming
back.'' It joins two other newspapers sporting the Pravda logo and the
Order of Lenin medals that adorned the old Pravda's front page. 
The new weekly was launched by Viktor Linnik, editor in chief of the
original Pravda, the defunct newspaper founded by Lenin that was the
official voice of Soviet communism. 
Linnik was fired in 1992 when the newspaper, struggling under the
fledgling market economy, was taken over by Greek publishers. 
The Greek owners, brothers Christos and Theodoros Giannikos, finally
closed the original Pravda last summer, saying the staunchly hard-line
newspaper was losing money and its journalists were drinking too much. 
Linnik said his newspaper will not adopt the unswerving communist line
of its predecessor as it seeks to win a wider audience, the Moscow Times
newspaper reported. 
The Greek publishers continue to put out a tabloid daily called Pravda
Five, under a separate editorial staff. 
Meanwhile, Viktor Ilyin, chief editor of the old Pravda until it was
closed last summer, has launched a weekly Pravda with the backing of the
Russian Communist Party, the Moscow Times reported. 

********

#2
Date: 1 Aug 1997 17:38:46 U
From: "Laura Belin" <belinl@rferl.org>
Subject: presidential reps

In response to Steven Solnick's inquiry about presidential
representatives who
are responsible for several regions: 
Last December, Yeltsin appointed Petr Marchenko to be his representative in
Stavropol Krai along with the republics of Adygea, Dagestan,
Kabardino-Balkaria, and Karachaevo-Cherkessia. (ITAR-TASS reported this on 30
December 1996.) Marchenko had served as Yeltsin's appointed governor of
Stavropol Krai, but he lost a gubernatorial election there in November.
Regarding some of the other points raised by Solnick: It's hard to
predict how
this decree will be implemented, of course, but it seems that many Russian
Federation subjects will continue to have their own representatives. Several
small regions that are close together might be entrusted to one
representative. But it would be hard for one appointee to effectively
supervise the allocation of federal funds, the behavior of branches of federal
agencies, etc. in several large regions. 
Viktor Kondratov, the FSB general who is Yeltsin's representative in
Primorskii Krai, has already admitted that he is having trouble establishing
control over how federal funds are distributed by krai officials. RFE/RL's
correspondent in Vladivostok reported recently that money intended to pay
state employees in Vladivostok and Nakhodka has been diverted for other
purposes--according to Kondratov, without his consent. (This was covered in
RFE/RL's Newsline on 23 July.) Kondratov has asked First Deputy Prime Minister
Anatolii Chubais to punish the officials responsible (who work in the krai
branch of the Finance Ministry), but Chubais just returned from vacation and
has not yet acted on Kondratov's request, to my knowledge.
It's hard to say how actively the presidential representatives will assert
their newfound authority. I doubt events on this front will develop
systematically across the country. It's possible that the presidential
administration will keep the representatives as a sort of "reserve weapon": if
an economic or political crisis develops in a region --or if a governor votes
too often against the Kremlin's wishes in the Federation Council--then the
appointed representative can be brought in to play a major role. Otherwise
they can be left to cooperate with the governors. 
If the Kremlin wants to lower the boom on an inconvenient governor and the
presidential representative responsible for that region appears to have
reached an "arrangement" with that governor, Yeltsin could simply appoint a
new representative.
Have a good vacation,
Laura

**********

#3
Date: Thu, 31 Jul 1997 23:02:57 -0700
From: Gordon Hahn <hahn@hoover.stanford.edu>
Subject: A Note for Stephen Blank

I would like to respond to the most recent critique of my view that
NATO expansion is straining further Russian civil-military relations. Even
more than in our last episode (the first being the Herspring rejoinder of a
week ago) the chief protaganonist, Stephen Blank, charges that I "could not
be more wrong" and that the present "court politics around tsar Boris whose
regime more and more resembles that of a later Romanov." These is the extent
he argues his point. In other words, he makes an empty assertion backed up
with no supporting argumentation to challenge my points. It seems to me that
JRL deserves better. 
Blank then proceeds to a tirade against the Yeltsin regime,
displaying thereby why it is, apparently, he supports 'Containment II' or
NATO expansion. Apparently, NATO has no qualms with concluding agreements
with the new fearsome Russian empire, so apparently NATO has few qualms
about the lack of a "relevant opposition and democracy" - whatever
'relevant' means. We can be sure that if the opposition had more power or
was more boisterous, the supporters of NATO expansion would be making every
bit of hay out of it they could. It should be added that NATO has no qualms
about cooperation with other post-Soviet states with much fewer democratic
credentials than Russia's - Uzbekistan, Kazakhstan, Kirghiziia. This,
however, does not seem to bother the pro-NATOites either. 
Regarding Blank's claim that there is "no...democracy" in Russia,
one wonders if Russia has held any elections recently (of a president, of a
parliament, of governors, of mayors, regional and city councils). Though
somewhat flawed in their execution do they not count for something more than
nothing. Or perhaps Blank has been studying "modern Russian history" to much
to pay attention to present day Russia to notice? I suspect that by 'modern
Russian history' Blank includes and indeed is consumed with Soviet history,
despite the repeated references to 'Tsar Boris'. (I thought I was reading a
pamphlet of Nina Adreeva's little Bolshevik gang).
To be sure, Russia needs a strong constructive opposition to counter
the ruling groupings to make them play more honestly. However, I find it
curious that those who are so supportive of NATO expansion because, they
argue, of the need to hedge one's bets as to the survivability of Russia's
weak democracy, are usually the same ones arguing that the Yeltsin
administration ought to hand over control over the military to a communist
controled parliament. I think that for all the faults of Yeltsin and his
allies, they are fairly close readers pf 'modern Russian history' as well.
However, they keep in mind the lessons of the Kerensky interregnum, not
those of Boris Godunov or Nikolai II. At present, civilianization of the
military and civilian control over the armed forces should be left under the
competence of the executive branch and its elected president. When a more
responsible opposition appears, it may be possible to beging giving some
oversight powers to the Duma.
However, what is even more odd is that my point and others related
about the straining of civil-military relations due to NATO expansion are
not responded to with fact. I would like to bring some facts to undersocre
my point in the face of the blanks fired by Herspring and... I remember
Herspring (who Blank seconded) arguing that NATO expansion was very low on
the military's agenda - 18th or 19th on the list I believe. This would be
unprofessional indeed, unbelievably so. Alas, it is not so. I took a little
time while reading through the Defense Minstry's newspaper Krasnaya zvezda
and noted that for the month of July 1997 through the 24th of the 13
editions in the Hoover Institution Library, 10 had important articles on
NATO expansion. This hardly seems like something off Arbatskaya Ploshchad's
radar screen; and this at a time when NATO expansion was competing for print
space with the daily turn of events regarding military reform this month.
Finally, to lighten up a bit, I include a little ditty from Krasnaya
zvezda (18 July 1997, p. 3):
BRIEF ON NATO
Some say: With NATO it's necessary to make a combination;
With wondrous NATO, its peaceful goals acknowledged, it's necessary to make
friends.
Others say: With NATO is necessary a sharp confrontation;
Or into the Russian home may climb alien NATO.
Whose is the truth? NATO wants to appropriate cash to us;
Or NATO thirsts to lop off all Rus?

*********

#4
The Economist
August 2, 1997
[for personal use only]
Russia’s in-the-red army 
M O S C O W 
Boris Yeltsin says his country’s crumbling armed forces
can be rescued if they are made a bit smaller. He is
probably wrong 

A CYNIC might say that Russia already has the army best
suited to its needs—one that is huge, impoverished,
ill-equipped, ill-disciplined and largely unaccountable. It
absorbs more than 2m soldiers and civilians who would
otherwise drift towards the unemployment rolls. It pays
them next to nothing, which is all the country can afford. Its
incapacity to fight deters adventures overseas. But individual
commanders can interfere in the affairs of neighbouring
countries, intimidating them in ways that can then be denied.
Should an enemy appear, there are nuclear weapons in reserve. 
Look at it that way and it is easier to see why there has been
so much talk about military reform in Russia, but so little
done. Changing the army for the better will be a hugely
difficult task, perhaps an impossible one while Russia
remains so poor and badly governed. Public opinion has
remained astonishingly indulgent, still rating the army the
most “trusted” of all Russian institutions (see table). So the
civilians running the government have left the generals to
themselves, despite abundant evidence of venality, brutality
and incompetence throughout their command, of which the
lost war in Chechnya has been the central recent exhibit. 
(Table: Russian thoughts war and peace)
[not reporduced here]
In the past fortnight, however, the government has been
goaded into a show of action. President Boris Yeltsin has
issued four decrees proposing all manner of changes to
better the army’s lot. This week he told soldiers that he
wanted to “restore the prestige” of their profession. “You
are tired of hardships,” he said, putting his finger on the
main reason for his change of tack. The patience of
Russia’s junior officers and privates, many bootless and
half-starved, has been immense. But it is not infinite, and
it may now be cracking. 
In June, a retired general turned politician, Lev Rokhlin,
published a ferocious “open letter” in which he accused
Mr Yeltsin of ruining both the army and Russia itself, and
appealed to army officers to “organise” in pursuit of their
“legal rights”. Fortified by expressions of support, Mr
Rokhlin has gone on to launch a political movement in
which he has been joined by General Igor Rodionov, an
old-fashioned soldier whom Mr Yeltsin sacked in May as
minister of defence. 
Mr Rokhlin is a plausible figure, and far from an
extremist. He chairs the defence committee of the Duma,
the lower house of Russia’s parliament; he won his seat
there on a slate headed by Viktor Chernomyrdin, the
prime minister. He seems now to be angling for the
emergence of an all-army assembly capable of presenting
political demands to the government in an orderly
fashion. But even a few simple rallies by soldiers would
be enough to unnerve the Kremlin. Alone in Russia, the
army has the organisation and communications to
co-ordinate a protest movement on a national scale, and
it would attract support from millions of equally
impoverished civilians. 
That prospect seems to have jolted Mr Yeltsin into trying
to regain the initiative, persuading soldiers that he, not Mr
Rokhlin or any other headstrong general, is the man who
understands best the army’s needs. He has a hard job
ahead of him. He and Mr Rokhlin agree that Russia’s
army is too big to be sustained by the defence budget.
But whereas Mr Rokhlin wants a bigger defence budget,
Mr Yeltsin wants a smaller army. He has ordered the
number of people in uniform to be cut in the next 18
months from a nominal 1.7m down to 1.2m. That may,
in fact, be relatively painless to achieve, given that the
official figure of 1.7m probably overstates the armed
forces’ true strength by 10-15%. 
But even 1.2m will be far more than Russia can afford, if
it also wants the “well-equipped” army that Mr Yeltsin
has been promising. Egged on by the economic
reformers in his government, Mr Yeltsin has also ruled
that defence spending must be kept below 3.5% of GDP.
According to Mr Chernomyrdin, this sum is meant to
sustain not only the regular army but Russia’s various
paramilitary forces as well, which add 350,000 or so
men to the total. 
There is some doubt as to how much Russia currently
spends on defence: it may be less than 4% of GDP, as
the government claims, or more than 8%, as some
western analysts suspect. But even at 8% of GDP
Russia’s defence spending would be about $32 billion, or
roughly what Britain’s was in 1995—and Britain kept just
226,000 troops on that money, a seventh of the number
Russia proposes to have after its cuts. 
Mr Yeltsin hopes to save some money by capping the
army’s central administration at 1% of defence
manpower, a decision also designed to undercut the
power of the defence ministry. He has promised more
powers to local commanders in Russia’s eight military
districts—leaving them dangerously unchecked, say
some critics. A plan to “streamline” Russia’s air and
missile forces looks more like a nod to the new defence
minister, General Igor Sergeyev: it shifts resources to the
Strategic Rocket Forces, which Mr Sergeyev used to
run. There is a promise of housing for the army’s
100,000 homeless officers, provided local governments
pick up half the bill. There are hopes, too, of raising
money by selling the army’s notoriously corrupt and
slovenly network of distribution, retailing and catering
businesses, if a buyer can be found. 
But most of this is tinkering. It will go nowhere near
closing the gap between Russia’s ambitions and its
resources. There is little sign of long-range thinking. It
is, at best, a beginning. Either Mr Yeltsin will have to
raise sharply his ceiling for military spending, or he will
have to cut troop numbers much more deeply than he
has so far proposed. Or the Russian army will be a
makeshift affair, growing ever weaker relative to the
West’s forces for years to come. 

**********

#5
PRESS-SECRETARY OF BORIS NEMTSOV CALLS ABSURD AND FALSE 
SCANDAL REVELATIONS BY NIZHNY NOVGOROD ENTREPRENEUR ANDREI
KLIMENTIEV ABOUT FIRST VICE-PREMIER OF RUSSIAN GOVERNMENT 
MOSCOW, AUGUST 1 (RIA NOVOSTI's correspondent Alexander
Shishlo) - The scandalous revelations about ex-governor of
Nizhny Novgorod Boris Nemtsov by Andrei Klimentiev convicted for
stealing and swindling that are disseminated again are absurd
and false, press-secretary of the First Vice-Premier Andrei
Pershin said as he commented on request of RIA Novosti
Klimentiev's statements at today's meeting in Moscow with
journalists. 
According to him the procurator's office and the court will
give a more qualified assessment to the statements by
Klimentiev, better known in Nizhny Novgorod under the nickname
of "Pimple." The press-secretary also said that the respective
instructions have already been given to Nemtsov's lawyers.
Pershin noted that the criminal acting as an unmasker does not
appear in public for the first time; however, he always appears
of the will of experienced puppeteers. This time he was under
the patronage of long-standing opponent of Nemtsov - leader of
the Russian Liberal Democratic Party Vladimir Zhirinovsky. The
party led by him includes a lot of people with criminal past. 
Touching upon the assertion by leader of Liberal Democrats
Vladimir Zhirinovsky which was mentioned at the
press-conference, to the effect that Boris Nemtsov allegedly
planned a contract murder of Vladimir Zhirinovsky, the
press-secretary noted that the investigation of this case "is
not the subject of a lawyer but of a psychiatrist." 
Pershin reminded the press-conference that it was on
Nemtsov's initiative, when he was the governor, that a
commission was set up which revealed abuses and violations in
the activity of Klimentiev. The results of its work were
transferred to the procurator's office to institute criminal
proceedings. 
As far as I know, Pershin went on to say, recently the
Supreme Court of the Russian Federation sent the Klimentiev case
to the regional court for review for due to the unusual leniency
of the verdict for appropriating $2 million. That is why the
current activity of Klimentiev who was convicted twice on the
eve of the review of the case is quite understandable and
explicable.
According to the press-secretary, there is also quite an
obvious desire of the leader of the Liberal Democratic Party
after failure at the governor elections in Nizhny Novgorod of
the common candidate from Liberal Democrats and Communists to
try to make a revanche and discredit Nemtsov who enjoys high
ratings. 
According to Pershin, he has information that the political
foes of the first vice-Premier intend to continue to support the
propagandist campaign aimed at disrupting public trust in Boris
Nemtsov. Similar plans are also being carried out by those
forces which are not satisfied with the actions of the First
Vice-Premier for bringing order to natural monopolies, holding
frequent auctions to sell state property and cleansing the state
apparatus from corrupted officials, said Pershin. 
It was already reported that at the joint press-conference
with Vladimir Zhirinovsky, Andrei Klimentiev accused the First
Vice-Premier of the Russian government of the fact that while he
was the governor of Nizhny Novgorod, Nemtsov and Brevnov (at
that time, the head of one of local commercial banks) were
allegedly involved in the non-target use of part of budgetary
funds designed for the Navashinsky ship-building plant.
Klimentiev also accused Boris Nemtsov of taking bribes and
initiating fabricated criminal proceedings against the
entrepreneur, under which Klimentiev was accused of
"appropriating the plants's millions."

*******

#6
Sydney Morning Herald
August 2, 1997
[for personal use only]
For the boy soldiers of Kavkaz, summer is a fight for survival 
By ROBYN DIXON, Herald Correspondent

There is a nightmarish reality to the games they play at the Kavkaz
summer holiday camp for boys, 120 kilometres south-east of Moscow.
No cry babies or wimpy Boy Scout types here. These are soldiers - aged
nine and up. And the game they play is war. At the centre of the nightmare
is the commander, Captain Gennady Korotayev, a 36-year-old ex-soldier who
takes pleasure in toughening up small boys for the harsh realities of the
Russian Army.
He hasn't seen any combat - he worked in the political indoctrination
section of the army for four years - but he is so addicted to the military
ideal that he volunteers his services as the commander-in-chief of this
silent and listless troop of boy soldiers.
At one side of the camp the helmets, clothes and gas masks are drying in
rows after the morning's exercise - an exhausting crawl in full kit through
a swamp, hauling dummy automatic weapons weighing twice as much as the real
thing.
Given an hour's free time, the worn-out youngsters collapse in their
beds until a siren pierces the air.
"Company! Get up!" bellows one of Captain Korotayev's subordinates.
"Run! Run! Run!" barks another. The boys run silently and line up
wordlessly for their orders.
They will spend their afternoon in knife combat exercises. After an
evening plate of kasha, or wheat porridge, they face another military
training exercise at night.
At one side of the camp of camouflage tents, a small yellow wreath of
marigolds is propped against a tree, a silent testimony of something very
wrong at Camp Kavkaz. The wreath was laid at the place where one young camp
soldier died nine days earlier. He perished "in service", as a written
testament pinned on the camp noticeboard puts it. A large group of the
camp's 43 soldiers were push-starting a truck when supervision went astray
and Valery Logvinov, 16, was crushed.
The parents of 25 boys subsequently retrieved them from the camp.
Valery's mother, who has no husband, is considering suing.
Eighteen boys remain, living out Captain Korotayev's military fantasies.
Leaning back in military fatigues, Captain Korotayev boasts of his boys'
achievements. He says the unit, including boys as young as nine, last year
ran 98 kilometres in 18 hours, successfully evading 120 local militia and
20 counter-intelligence officers. They crossed a river, marked their
military target and returned undetected to the camp. When a group of Dutch
Boy Scouts recently visited the camp they were shocked to see the Russians
jumping out of second-floor windows as part of their exercises. Everywhere
the boys go, they march or run, says Captain Korotayev. And when they march
they sing military songs.
"They do military tactics, drill, combat, first-aid, driving, shooting,
everything they would do in military schools. The only thing we don't do is
ballroom dancing," he says.
"They're physically fit and disciplined. They're quieter than other
children. They're the best of the best."
There are the inevitable weaklings, immature youngsters who baulk at the
demanding program.
"Yes, we get them. But they've got to go through it all," boasts Captain
Korotayev.
In the faces of Captain Korotayev's boy soldiers there is exhaustion.
Roman Kolibilkin, 13, looks tired. "Yes, I am tired. The hardest thing is
carrying the weapon," he says in a low monotone. "It's not like a normal
camp. There's a lot of discipline."
Vova Bukanov, 12, says: "It's all right. The war exercises are the
hardest thing."
Kolya Gavrik, 14, who wants to be a paratrooper, says the worst part is
the punishment - washing and sweeping floors in the canteen.
He says dragging himself on his belly through a swamp is "all right." He
tries to reel off a military slogan heard from his camp commanders: "The
harder the training, the easier the battle." He gets the words mixed up.
The camp is ringed by an electronic alarm, "for self-defence".
Despite that, three boys once escaped. They gathered their things and
fled in the dead of night. Captain Korotayev is dismissive of the incident,
saying the runaways had not even been proper members of his year-round
military club.
"Who needs deserters?" he asks.

********

#7
Center's, Regions' Roles in Paying Off Arrears Viewed 

Moskovskiye Novosti, No. 29
July 20-27, 1997
[translation for personal use only]
Article by Oksana Dmitriyeva, chairman of the State Duma Budget
Subcommittee: "All Quiet on the Main Front"

The reports about the battle with wage arrears which was launched by
the federal center are becoming increasingly reminiscent of reports from
the theater of military operations. The government is showing confidence
in its powers and has made up its mind to win. The issue of the cost of
this victory and its consequences remains outside the picture. As do
certain other issues, incidentally.
For example: Why has the issue of debts to employees of budget-
financed organizations under federal subordination been raised again? 
After all, their wage is a protected article of the budget which did not
come under the knife of harsh sequestration proposed by the government.... 
Or: Can people who are owed money by the federal budget, not directly, but
rather through unpaid state orders (including defense), through investment
programs that fell through because of a lack of money, count on receiving
their wages? Or: Who can slighted teachers and doctors turn to now -- the
president directly, or the local authorities?
The easiest thing to do is to settle up with "federal budget- financed
organizations." Experience in urgently paying off wage arrears has already
been gained during last year's presidential campaign. It turned out that
all it takes is to tighten control over the targeted use of funds allocated
for wages -- and the debts are quickly liquidated. The fact that the
remaining expenses of budget-financed organizations are not financed, and
the accountability for untargeted use of funds is minimal, is another
story. In this situation, the head of, say, a federal clinic has a hard
time fighting the urge to use a part of the "protected" money to pay for
utilities or purchase necessary medication. And where there is the chance
of untargeted spending, there is also the chance of misuse. If this chance
remains, this means that the problem of wage delays will continue to recur.
In order to resolve it, the authorities at least have organizational
mechanisms. But those who suffered as a result of the cuts to investments
and state orders envisaged by the 1997 budget need not count on the Center
at all. These people have become the innocent victims of
government-parliamentary "budget populism": They worked, earned their
wages honestly, and then it turned out that the state did not have the
promised money. And in the future, there will only be one way to reduce
the number of these human victims: not to pass unrealistic budgets.
Today the situation of budget-financed organizations "under local
subordination" is not so hopeless. Most likely by the end of the year the
authorities will settle up with the huge army of health workers and
teachers. The center volunteered to take part in the event on an equal
basis: one "federal" ruble for one "local" ruble. The regions have been
presented with the rules of the game: targeted loans, which, if they are
not repaid (as will most probably happen) will be liquidated through
transfers. But there is no solid legal basis for a game like this. 
According to the law, transfers cannot be targeted, the regions have the
right to decide for themselves how to spend this money. So everything is
based solely on the political accords between the federal and local
authorities.
One thing remains unclear: Do the Russian Government and the
president personally plan to continue paying for other people's loans? If
not, then is there any point in encouraging the dependent mind-frames of
the regional authorities so actively? The governors have already well
learned how to re-address their population's grievances to the Center. 
Along with this, the readiness to demand additional money from the federal
budget is by no means backed by the willingness to share powers, including
financial ones. Moreover, today the federal authorities have practically
lost the chance to control regional and local budget expenditure, not to
mention organizing it somehow. For instance, it is known that the salaries
of deputies and officials of the power organs of many Federation components
are one and a half times higher than the wages of federal state employees. 
In this case, should the Center take responsibility for the fact that there
is not enough money in the local budgets for teachers?
Pumping federal money into the regions, given that they are not under
the control of the Center, is like trying to fill a barrel riddled with
holes. It will be another matter if the Budget Code is passed and takes
effect. This clearly outlines the rules of granting financial support to
the regions. Including the possibility of targeted allocation of funds,
under certain conditions and with subsequent monitoring of the use of this
money.
It is clear that it is important for the executive authorities to
periodically demonstrate to the population their ability to actually
improve the situation. And in fact, no matter what the authorities'
motives may be, the result of their actions in the form of wage and pension
payments is a good thing. The bad thing is that the payment of wages
should not be a campaign, but a normal monthly practice. The success of any
government's activity is assessed by the "final result": the creation of
actual stabilization mechanisms. For now, unfortunately, the actions of
the government in this direction are extremely inconsistent and not always
professional.

********

#8
Asia Times
1 August 1997
[for personal use only]
Fears the China will bite the hand that arms it
By Pavel Ivanov
Pavel Ivanov is a Russian affairs expert based in New York. 

It has been more than a month now since the much-touted visit to Beijing
of Russian Prime Minister Viktor Chernomyrdin, but because several
agreements discussed or entered into during that visit have vast
implications for the future, it is still a hot topic among Moscow's
political elite. 
Chernomyrdin is credited with "reinforcing the strategic partnership"
between Russia and China, primarily due to the announcement of new and
important sales of Russian arms and equipment to China. Moscow is expected
to sell additional Su-27SK jet fighters and the latest Sovremenny (Modern)
class destroyers armed with supersonic cruise missiles. 
Washington has already expressed intense displeasure over the cruise
missile sale. The "Mosquito" missile (or "Sunburn" in NATO terminology) has
a combat range of more than 480km, is capable of carrying a tactical
nuclear payload and is remarkably resistant to existing United States
air-defense systems. Its presence in China's Pacific fleet would seriously
test the superiority of the US naval presence in the East China Sea and
beyond. 
But not everybody in Moscow views the developing Sino-Russian strategic
partnership with admiration. Several Russian military experts view
Chernomyrdin's "historic visit" to Beijing with a cynicism born of
experience. 
Just a few days after the prime minister returned home to praises for
his "breakthrough accomplishments", the Chinese People's Liberation Army
(PLA) marched in force into Hong Kong to mark the formal return to China of
the former-British colony. With Hong Kong safely back in the fold, analysts
in Moscow and elsewhere expect that the PLA will target vigorously
anti-communist Taiwan for reunification with a still more or less
totaltarian and communist China. 
But as a senior Russian military specialist observed: "To project force
over the Taiwan Strait to press Taipei eventually into submission, Beijing
needs greatly enhanced maritime and air power capabilities." And apparently
Russia is able - and completely willing - to provide the Chinese military
with the ultra-modern high tech equipment it desperately needs to modernize
and provide itself with the capability to achieve military objectives
beyond China's shores. 
Forty years ago, when China and the Soviet Union were the closest of
allies, China's entire conventional arms industry was built by the Soviets.
Without modernization, China's arms manufacturing capabilities today are
limited to the manufacture of cloned, old-fashioned, and outdated
Soviet-style arms systems. 
Almost every attempt by Beijing to modernize its defense industries
during the 1980s and early 1990s met with little success. Moreover, after
the notorious suppression of pro-democracy demonstrators in Beijing's
Tiananmen Square in 1989, Western military transfers - and, generally
speaking, China's entire program of military cooperation with the West -
were put on hold. 
According to some Russian and Western experts, immediately after the
Tiananmen crackdown Russian arms dealers reappeared in China after an
absence of nearly 30 years. Those Russian courtiers were soon welcomed in
Beijing as "special guests". To cement their rekindled cooperation, Moscow
accepted barter in the form of Chinese-made clothing, electronics and food.
Three-quarters of the original contract to supply Su-27SK jet fighters and
Kilo-class submarines was paid for by barter shipments from China. 
But now things have changed. Few of the newer arms deals between Russia
and China, especially those involving modern technology transfer and
licensing agreements for indigenous manufacture, have any barter component.
China's fast-growing trade surplus (especially with the US) has freed up
the hard currency necessary to pay its Russian partners in cash. 
Speaking privately, a senior Russian military expert said: "The greatest
source of our success in military cooperation with China is Beijing's trade
balance with the US. Practically speaking, Americans are paying for the
arms we sell to China." 
Military observers in Russia and the West believe that, although Beijing
has invested plenty of money on the purchase of Russian arms, the main
objective is to obtain lucrative licensing deals and the transfer of modern
technology so that indigenous production within Chinese defense industries
can be maximized. China's armed forces want to enter the next century with
up-to-date and competitive armaments and equipment. 
So, at a price of US$450 million, Beijing has finally obtained a licence
for the complete technological processes to produce its own Su-27SK
fighters. Russian military specialists believe that by the beginning of the
next century, China will have up to 300 modern long-range fighter jets
along with several warships armed with the Mosquito missile. They also
believe that Beijing will surely deploy such weapons and equipment as part
of the process of "convincing" Taiwan to reunify with the mainland. 
But some observers go further. Who or what is going to be the next
"priority" for a PLA upgraded with the latest Russian weaponry? Within a
few years China will have the capability to effectively defend its
interests and territorial claims in the South China Sea (the Paracel
Islands, the Spratly Islands) and through the Sea of Japan to the Russian
Far East. The time may not be far off when Chinese naval vessels laden with
the most modern deadly weapons will steam off the coasts of Southeast Asia
and South Asia to protect what Beijing believes to be its "natural national
interests". 
Those experienced skeptics in Moscow believe that Russia has learned few
lessons from its bitter confrontation with China, which lasted nearly 20
years during the Cold War. Several times during that period, both countries
teetered on the brink of full-scale military conflict. Pragmatists need
very few reasons to believe the tables could again change what may now be a
"strategic and close bilateral relationship" into a competitive struggle to
protect individual spheres of influence. 
Although the idea of a Moscow-Beijing partnership now seems popular,
some strategists still feel that the brilliant allure of Chinese gold has
blinded Russia to the realities of an economically powerful China that is
armed to the teeth. 

*********

#9
New York Times
1 August 1997
[for personal use only]
In Russia's New Market, It's the Winners Who Define 'Fair Play'
By ALESSANDRA STANLEY

MOSCOW -- When Russia sold off a 25 percent share of the state's vast
telephone and telecommunications monopoly last week, the government proudly
held up the deal as a model of fair play in the free market. This was
different from previous efforts to privatize huge state assets: the highest
bid ($1.9 billion dollars) actually won the auction. 
The key was a set of new rules of even-handedness. But in the hazily
defined inner workings of Russian privatization, fair play is only in the
eyes of the winner. So rather than give everyone confidence in a
newly-leveled field on which to play out the rough-and-tumble transition
from state socialism, the sale has kindled a raging, vicious debate over
what actually constitutes fairness. 
And the sale of Svyazinvest, the communications monopoly, has turned
into a case study on how the competing oligarchs of Russia's new capitalist
class define and redefine the rules whenever their financial interests
begin to clash. 
In this case, when the auction was over, the winners argued that they
had played by the new rules and won. But the losers said that the winners
had turned out to be the Kremlin's current favorites -- and that the rules
had been hastily rewritten to achieve that very result. 
In fact, both sides in this cat fight have privileged ties to the
Kremlin and both sides were instrumental in helping Yeltsin win re-election
last summer. But only the winners of the Svyazinvest deal feel they have
been paid in full. 
The auction was won by a Russian and Western consortium led by Vladimir
Potanin, a former deputy prime minister who heads Russia's most powerful
bank, Oneksim. First among his Western partners was the financier George
Soros, who put up almost half the money. 
The consortium that lost, with a bid of $1.7 billion, was led by another
bank with Kremlin ties, Alfa Bank. Among its allies, the sorest loser of
all was Vladimir Gusinsky, a well-connected banker and business tycoon who
founded The Most Group, a partner in the consortium. 
On Thursday, a spokesman for Gusinsky announced that the banker was
filing a lawsuit against Potanin for telling reporters that Gusinsky and
his allies had tried to broker a "back-room deal" with First Deputy Prime
Minister Anatoly Chubais before the auction. 
Potanin, who confirmed on Thursday that he and Gusinsky and other
would-be buyers had met with Chubais in Paris before the auction to try and
reach a "compromise," said he was baffled by Gusinsky's rage. He said it
was perfectly "normal" for rival businessmen to meet in a back room with
the government and try to protect their interests. 
"There is nothing strange about it," he said. "But it became clear that
compromise was impossible." He added that Chubais made it clear at the
meeting that he would enforce strict rules to award the sale to the highest
bidder. 
No sooner were the results announced than the losers screamed foul and
the two sides fell into a frenzy of recriminations. Neither side felt the
need to argue the fairness of the deal in court. The antagonists instead
raced to try the case in the pages of the newspapers and on the television
networks they own. 
The news coverage has been biased and brutal, but mainly from the losing
side. The evening newscaster, Sergei Dorenko, of Russia's largest network,
ORT, for example, said that Potanin was the envy of "all conmen at the
Moscow railway stations." He described Soros, who is also a philanthropist,
as a "famous speculator who is paving his way by giving money to scientists
in order to take back all the money later." 
ORT, though state owned, is partly controlled by Logovaz, a media and
oil conglomerate founded by a close ally of Gusinsky. 
Gusinsky's own television network, NTV, and his newspapers have led the
charge to undermine the deal, even though he maintains that his media
division and his banking concerns are separate. 
The Yeltsin administration, which recruited a fresh team of economic
reformers last spring, seems shocked that some of its key financial backers
are resisting its new commitment to virtue. But its protestations of being
insulted seem a bit like those of a chorus girl who marries and suddenly
acts hurt when former patrons still expect to receive her favors. 
The government seems to have forgotten that the bank it says behaved so
honorably in this deal is the same Oneksim Bank that two years ago wrote
very different rules for a series of auctions of oil and mineral companies.
These were so blatantly biased in its favor that some of the losers,
including Alfa Bank, unsuccessfully sued to reverse the auctions. Those
dissatisfied customers wound up seeing Svyazinvest as Chubais's chance to
make up for past losses. Instead, he changed the rules -- to the
even-handed ones -- and shut the door in their faces. 
Perhaps in an effort to appease them again, Chubais on Wednesday
promised that another rash of big privatization sales, including the
fiercely-contested Rosneft oil company, would soon come to auction.
Actually, after 1,000 years of Russian history, in which society was
founded on the principle of privilege for the chosen few, privatization was
never designed to be fair. 
Early on, the government gambled that the only chance of creating a real
free market system was to put as many assets as possible into private
hands, creating overnight a vast new class of property owners with a vested
interest in free market reform. 
The plan didn't entirely fail, but it had an unintended Frankenstein
effect. Soviet-era managers dutifully privatized their factories, pocketed
the profits, and went on working on the same principle of a centralized
economy. Robber barons sucked up the raw materials and oil companies, and
built up vast fortunes. Capital flew to Switzerland and Cyprus instead of
being reinvested in new technology and new businesses. 
The precedent for the Svyazinvest deal was a 1995 scheme called
loans-for-shares. Back then, the cash-starved state made a deal in which a
handful of Kremlin-favored bankers were given the right to loan the
government money in exchange for shares in some of the state's most
desirable oil and minerals companies. 
When large chunks of those companies were ready to be sold, the inside
banks ran the auctions, and, not surprisingly, won them -- usually at a
fraction of their real worth. 
Soon after that, the government was facing the prospect of a communist
victory in presidential elections that could reverse everything. A panicked
Yeltsin reached out again to Chubais. Chubais in turn struck a Faustian
bargain with the bankers and businessmen, who put aside their clashing
business interests and joined forces to turn over their money and media
outlets to keep Yeltsin in place. 
They expected some kind of return for their investment. Arguably, some
obtained it: Gusinsky was allowed to add four cable super-stations to his
media empire, and Boris Berezovsky, another key donor, was rewarded with a
seat on the National Security Council. 
But Berezovsky has not entirely cut himself adrift from his many
business interests and his company clashed -- and won -- in a recent
auction over a large chunk of shares of the oil company Sibneft. In the
current auction, Berezovsky seems to feel he was betrayed by Boris Nemtsov,
whom he had personally coaxed into accepting a high-risk cabinet post. 
Soros, who put up $900 million as his share of the consortium, only
recently became an ardent critic of Russia's financial system, complaining
that an oligarchy set the rules for business and describing it as "robber
capitalism." He has since joined forces with Potanin and says that
Nemtsov's presence in the Cabinet alleviated his concerns. 
Yeltsin, who is on vacation, has not yet said anything about the
Svyazinvest deal. But after a meeting with him on Wednesday, Chubais
informed reporters that the president was fully satisfied with the auction,
and would use some of the money to compensate workers whose salaries have
been delayed for months. 

*********

#10
Tycoons Put Pressure on Yeltsin's Liberal "Heir" 
Reuters
31 July 1997
MOSCOW -- Boris Nemtsov, the 37-year-old boy wonder of Russian liberal
reforms, is undergoing his biggest test in four short months in government
this week as media owned by wealthy government backers have turned their
fire on him. 
He has a good chance of surviving the ordeal with his presidential
ambitions intact, analysts say. But it is too soon to predict the outcome
of the struggle, which could set the course of Russia's economic and
political development for years. 
Since President Boris Yeltsin formed an effectively new government under
veteran Prime Minister Victor Chernomyrdin in March and gave the two key
posts of first deputy prime minister to Nemtsov and Anatoly Chubais, the
Cabinet has scored a number of economic successes and appeared to work in
unity. 
Nemtsov, unlike the unpopular Chubais, has basked in media attention. 
But his detractors gave the clearest sign yet on Thursday they want to
nip in the bud a strategy engineered, according to Kremlin sources by
Chubais, to anoint Nemtsov as the heir apparent to Yeltsin. 
A spokesman for one of Nemtsov's wealthy opponents criticized Yeltsin
for appearing too often on television "fondly stroking the head of his
political grandson" and suggested the head of state should slap down the
young liberals around him. 
Nemtsov, whom Yeltsin tipped as a possible successor even before
summoning him from the provinces to Moscow in March, has been accused of
colluding with the consortium that won a stake in state telecoms company
Svyazinvest at an auction last Friday. 
The first deputy prime minister said the losers in the bidding were
having "hysterics" and accused them of resisting attempts to clean up the
previously murky privatization process. 
Vladimir Gusinsky, one of two businessmen government sources say backed
the losing Svyazinvest bid, denied on Thursday he was involved in the
auction. The other, Boris Berezovsky, who is on secondment to Yeltsin's
Security Council, has not commented. Gusinsky's spokesman Vyacheslav
Kostikov, once Yeltsin's own press secretary, criticized the "scandal" that
followed the sale and urged Chernomyrdin and Yeltsin to act. 
The row marks the final breakdown of an alliance formed last year by
powerful banking and media bosses and Chubais, then Yeltsin's campaign
chief, to ensure the president's re-election. 
In part, money is at the root of it. Some of the tycoons are angry that
Chubais has changed the rules on privatization. But, as Kostikov said, this
concerns politics as much as commerce. 
Nemtsov said this week that the reaction of the losers, whom he branded
"robber capitalists," may lead to their allying with the Communist and
nationalist opposition against the government. 
However, analysts said, the immediate battle lines appeared to be drawn
rather within the government, with stolid, former gas industry boss
Chernomyrdin, 58, on one side and the liberal reformers led by Chubais, 42,
on the other. 
The two men have insisted since Chubais joined the Cabinet from
Yeltsin's office in March that they are working together. Chernomyrdin is
in his fifth year as prime minister and would have the support of many
business leaders to succeed Yeltsin. 
Chubais has been very much in the ascendant, however, this year, helped
by the president's return to health after heart surgery and his stated
determination to see through market reforms before his final term ends in
2000. 
Kremlin sources say Chubais, whose deep unpopularity with voters rules
him out of the succession, has begun to push the telegenic Nemtsov as
Yeltsin's heir. 
Gusinsky and Berezovsky appear to have thrown their weight behind
Chernomyrdin, however, some analysts say. 
Chernomyrdin criticized liberal privatization chief Alfred Kokh last
week and ordered an inquiry into the Svyazinvest deal this week. Kostikov
forecast "experienced" politicians would dissociate themselves from it,
leaving the "activists" isolated. 
But Chernomyrdin has yet to commit himself openly to splitting the
Cabinet and it is far from clear he would do so. 
Kostikov warned darkly that Yeltsin was a man with a record of throwing
out advisers -- he purged a group of close hardline aides last year -- and
said he could react to the present "scandal" by reasserting himself at the
expense of his current inner circle. 
But other commentators said Chubais -- and hence Nemtsov -- was in a
strong position with the 66-year-old Kremlin leader. 
"I would expect Chubais and Yeltsin to clamp down on Chernomyrdin and
Berezovsky," Anders Aslund of the Carnegie Endowment, a former Kremlin
economic adviser, said. 
"Liberal market reforms will continue," he added. 
The liberal weekly Obshchaya Gazeta commented that Chubais was too
skilled a political operator to have left himself exposed to attack and
prone to a change of heart by Yeltsin. 
"The only one who might hurt him is the president. But Yeltsin, no
matter how highly he thinks of Berezovsky and Gusinsky will not sacrifice
at least four deputy premiers for their sake," it said, naming Chubais,
Nemtsov and two others. 
The testing times may be far from over for Nemtsov, however. One Kremlin
source said that Chubais himself planned to see how his popular protégé
coped in the dirtier end of Russian politics. Whether this week's row was
what he had in mind is not at all clear. But it is certainly testing
Nemtsov's nerve.

*********