August 27, 1997  
This Date's Issues: 1151 •1152  •

Johnson's Russia List [list two]
#1152
27 August 1997
djohnson@cdi.org

[Note from David Johnson:
1. Voice of America's Peter Heinlein on US visa lottery and 
Russian immigrants.
2. John Helmer: Trade Defense Becomes A New Kremlin 
Priority.
3. Rossiyskaya Gazeta (Biznes v Rossii Supplement): Valeriy 
Zenkov, "Incomes Fall Into the 'Shadows.' But They Are Increasingly 
Difficult To Hide From the Tax Police Inspectors."
4. New York Times: Michael Gordon, Russians Are Left With 
One Less Reason to Smile.
5. Voice of Russia World Service: Moscow Criticizes 
US Official's Remarks on Caucasus.
6. Reuter: Caspian oil context a commercial, political 
tangle.
7. Expert: Interview with Prime Minister Chernomyrdin.
("ECONOMIC GROWTH IN RUSSIA IS A SERIOUS CHALLENGE.")] 

********

#1
DATE=8/26/97
TITLE=RUSSIA / VISA LOTTERY (L ONLY)
BYLINE=PETER HEINLEIN
DATELINE=MOSCOW

INTRO: THE U-S STATE DEPARTMENT HAS ANNOUNCED WHAT IT CALLS ITS 
1998 GREEN CARD LOTTERY, GIVING 55-THOUSAND PEOPLE WORLDWIDE A 
CHANCE TO WIN AN IMMIGRANT VISA. BUT AS VOA MOSCOW CORRESPONDENT
PETER HEINLEIN REPORTS, THE LOTTERY ALSO ATTRACTS A HOST OF 
UNSCRUPULOUS OPERATORS HOPING TO CASH IN ON OTHER PEOPLE'S 
DREAMS.

TEXT: A MOSCOW NEWSPAPER NAMED "THE FOREIGNER" RECENTLY RAN AN 
AD FOR THE "AMERICAN DREAM LOTTERY". FIRST PRIZE, ONE MILLION 
DOLLARS. AMONG OTHER PRIZES: 18-THOUSAND PERMITS FOR PERMANENT 
RESIDENCE IN THE UNITED STATES, KNOWN AS "GREEN CARDS."

THE AD SAID THE LOTTERY WAS ORGANIZED BY THE INTERNATIONAL 
HUMANITARIAN AID FOUNDATION "WINGS OF CHARITY". IT SAID THREE 
MILLION DOLLARS OF THE PROCEEDS WOULD BE USED TO PURCHASE 
MEDICINE FOR NEEDY PEOPLE AROUND THE WORLD.

TO MANY RESPONDENTS, "WINGS OF CHARITY" APPEARED LEGITIMATE. 
REPRESENTATIVES PRODUCED A RAFFLE LICENSE ISSUED BY THE 
CHARITABLE GAMES COMMISSION OF THE STATES OF NEW YORK, NEW JERSEY
AND CONNECTICUT. 

MANY RUSSIANS PAID THE EQUIVALENT OF TEN DOLLARS APIECE FOR 
LOTTERY TICKETS. BUT AS CONSULAR OFFICER DON WELLS OF THE 
AMERICAN EMBASSY IN MOSCOW EXPLAINS, THE WHOLE OPERATION WAS A 
HOAX.
///WELLS ACT///
THE LICENSE IS FALSE. WE'VE CHECKED IT OUT. THERE'S NO 
SUCH COMMISSION AT ALL THAT THEORETICALLY ISSUED THIS 
LICENSE. PRESUMABLY IT'S SUPPOSED TO WORK LIKE ANY 
LOTTERY -- YOU BUY A TICKET AND YOU GET A CHANCE ON ONE 
OF THE PRIZES. HOWEVER, IT IS TOTALLY IMPOSSIBLE FOR A 
PRIVATE COMPANY TO OFFER AMERICAN GREEN CARDS TO ANYONE,
OF COURSE.
///END ACT///
MR. WELLS SAID CRIMINALS WHO OPERATE SUCH VISA SCAMS ARE HARD TO 
CATCH, PARTLY BECAUSE VICTIMS RARELY COMPLAIN. HE SAID THE 
AMERICAN DREAM LOTTERY WAS DISCOVERED BY A MOSCOW REPORTER WHO 
SAW THE AD AND BECAME SUSPICIOUS.

NEWSPAPER SPOKESWOMAN IRINA POLYASNAYA SAID THE AD WAS CANCELLED 
WHEN EMBASSY OFFICIALS NOTIFIED THEM IT WAS A FRAUD.
///POLYASNAYA ACT UP, THEN FADE TO...///
SHE SAID THE PAPER IS CONDUCTING AN INVESTIGATION INTO THE 
COMPANY THAT PLACED THE AD. SHE ADDED THAT MOSCOW POLICE WERE 
ALSO LOOKING INTO THE AFFAIR, BUT NO ARRESTS HAVE BEEN MADE.

//REST OPT// CONSULAR OFFICER DON WELLS CAUTIONS PEOPLE WANTING 
GREEN CARDS TO AVOID OFFERS THAT SOUND TOO GOOD TO BE TRUE. 
///SECOND WELLS ACT///
THERE IS A WONDERFUL SAYING. LET THE BUYER BEWARE. I'M 
AFRAID THAT'S VERY MUCH THE TRUTH WITH ALL OF THESE 
THINGS PEOPLE HEAR ABOUT FOR VISAS. PEOPLE OFFERING VISA
SERVICES FROM THIS RAFFLE THROUGH SETTING UP PAPER 
CORPORATIONS IN THE UNITED STATES, AND IT PAYS FOR 
PEOPLE TO CHECK THESE OUT.
///END ACT///
MR. WELLS SAYS ONE THING TO KEEP IN MIND IS THAT ENTERING THE 
LEGITIMATE GREEN CARD LOTTERY IS FREE. THERE IS NO APPLICATION 
FEE OR FORM TO FILL OUT. HE URGED THOSE WITH DOUBTS OR QUESTIONS 
ABOUT ANY VISA OFFER TO CONTACT AN AMERICAN EMBASSY OR CONSULATE.

********

#2
Russia: Trade Defense Becomes A New Kremlin Priority
By John Helmer

Moscow, 27 August 1997 (RFE/RL) - The first priority in Russia's foreign
policy is now to defend export trade flows, President Boris Yeltsin's
foreign policy advisor, Sergei Prikhodko, announced this week. "Nobody will
deny the special importance of our state's integration into European and
world economic structures," said the former diplomat who recently took over
his Kremlin post, replacing Yeltsin's long-time advisor, Dmitri Ryurikov.
"We are flatly against the infringement on the interests of Russian
exporters and commodity producers," Prikhodko said.
At the Denver, Colorado, meeting of the G-7 in June, President Yeltsin
claimed support from the G-7 leaders for accelerating Russia's accession to
the World Trade Organization (WTO). This is not likely to occur before the
end of 1998, First Deputy Trade Minister, Georgy Gabounia, tells RFE/RL.
In New York after the Yeltsin visit, Prime Minister Viktor Chernomyrdin
called on the Clinton Administration not to impose penalty duties in an
anti-dumping case involving Russia's largest steelmaker, Severstal. A
recommendation on this by the U.S. International Trade Commission is
expected shortly. Gabounia's ministry has already rejected a proposal from
the U.S. Department of Commerce to set a combination of quota and price
limits on Russian steel imports.
A month ago in Bangkok, Foreign Minister Yevgeny Primakov took the Thai
government to task for imposing penalty duties on Russian steel imports.
Primakov told Prime Minister Chavalit Yongchaiyut the Thai action was
discriminatory, and urged the replacement of the anti-dumping duties with
an across-the-board tariff. Russian and Thai officials acknowledge that,
because of the new duties, the flow of Russian steel has now come to a
virtual halt. Russian steelmakers, which depend on exports to sustain their
operating cashflow, are facing losses due to trade penalties around the
world of at least 1,000-million dollars this year.
Rather than risk Russian retaliation against imports of televisions and
cars, the South Korean government, with whom Primakov also had talks on his
Asian tour, has agreed to exempt Russian steel from anti-dumping penalties,
so long as the Russian exporter keeps to a minimum price agreement.
In Moscow, officials say options for trade retaliation are limited in
most cases; especially so, Gabounia says, because the Russian parliament
has yet to enact appropriate trade legislation, and because members of the
WTO have pressed for a standstill in Russian tariffs, while negotiations on
joining the organization continue.
Deputy Prime Minister Anatoly Chubais, who has claimed he is in charge
of the WTO talks, has yet to join the government's chorus of complaint
against Russia's trade partners. His colleague, First Deputy Prime Minister
Boris Nemtsov, has been scathing in attacks on European Union trade limits
on Russian steel and textiles. Gabounia says that, if the European Union
does not relax limits on Russian textiles, the government will retaliate;
most likely, it will raise tariffs on Belgian carpet imports.
Prikhodko's remark from the Kremlin - his first public statement since
his appointment - comes as government ministries in Moscow attempt to
improve their strategy in the steel trade battles. A meeting last week
appointed a committee headed by Leonid Shevelev of the Ministry of Economy,
and Alexei Ruzhin, the dispute's negotiator for the Ministry of Foreign
Economic Relations.
According to Ruzhin, "the U.S. and Europe are applying a discriminatory
regime. This leads to very high anti-dumping duties. We are being shut out
of steel markets all over the world."
Top officials like Ruzhin also believe the International Monetary Fund
(IMF) is discriminating against Russian trade, applying one standard to
Moscow, and another elsewhere. Ruzhin said he has heard nothing to indicate
that, when the Thai government recently negotiated an emergency bailout
with the IMF, any commitment to lower trade tariffs was either sought or
given.
"We prefer the IMF treat equally, without discrimination, all countries
under its programs," Ruzhin said. "In the case of Russia and Thailand, this
appears to be different." 

*********

#3
Efforts To Identify Tax Evaders 

Rossiyskaya Gazeta (Biznes v Rossii Supplement)
July 26, 1997
[for personal use only]
Article by Valeriy Zenkov: "Incomes Fall Into the 'Shadows.' But They
Are Increasingly Difficult To Hide From the Tax Police Inspectors"

One of the consequences of the liberalization of the economy was the
growth of the shadow sector, where economic activity is carried out beyond
the legal realm. Inspections conducted by the Tax Police show that incomes
at enterprises with mixed ownership and also those that conduct foreign
economic activity are disappearing into the "tax shadows" on an ever
greater scale.
While, say, in 1995, upon inspecting 123 enterprises with joint
Russian and foreign capital, the Tax Police discovered almost 76 billion
rubles [R] to be paid to the treasury, last year 194 enterprises were
forced to pay a total of more than R204 billion. The amount of additional
payments per one inspection almost doubled. The dynamics are approximately
the same today.

If There Are No Exports They Have To Be Invented

The Tax Police encountered an interesting pattern when investigating
enterprises engaging in foreign economic activity: Producers of products
for which there is a demand can barely make ends meet while those who
dispose of the products earn fantastic money and conceal their real incomes
from taxation.
The Tax Police along with workers of the State Tax Inspectorate of
Yaroslav Oblast conducted an inspection of the diesel plant OAO [public
joint-stock company] Rybinskiye Motori. They were interested in how the
enterprise applied benefits for value added tax and the special tax. They
discovered some curious details.
The plant's director, A. Yegorov, concluded a contract with the Irish
firm MOIKTON, according to which, through the Moscow intermediary firm AO
[joint-stock company] Obshchemasheksport, the enterprise was to have
delivered diesel engines valued at a total of more than $732,000 to
Ireland. The engines were dispatched but they went not to Ireland but to
Ukraine, to the Dnepropetrovsk PO [production association] Yuzhnyy
Mashinostroitelnyy Zavod, where they were used as batching items. In a
word, nothing was exported. Let us recall that enterprises engaged in
export operations are exempt from the value added tax and the special tax.
The Yaroslav "specialists" grabbed onto this without resorting to any
special trickery. They issued false documents, particularly freight customs
declarations, which indicated that the cargo had been sent abroad from
Dnepropetrovsk through the Ilichevsk Customs Station. The overall amount of
the transaction was about $2 million.
That same diesel engine plant concluded a contract with the Czech
company ChSA. But during settlement tax benefits had been unjustifiably
applied. As a result, in addition to the fines, the enterprise will have to
pay to the state budget more than $700,000 and more than R3 trillion.

On the Advantage of Long Legs, Long Arms

But the Tax Police do not always manage to return what has been stolen
from the treasury. For example, the joint venture Leon-Market Ltd., headed
by a former Krasnodar resident who is now a citizen of Israel, Leon
Garibyan, having received loans from six Krasnodar commercial banks for a
total of more than $2 million, sent this money abroad. The goods for which
the credit was taken out, naturally, never made it to our country.
And there is the Libyan firm Randala S.A.R.L., which built a
commercial bank building in Krasnodar but did not register with the state
tax inspectorate at all. The firm owes the budget about R4 billion in
addition to fines, but its leaders have "grown legs"—they have fled
to their homeland, Libya. Now the Tax Police are trying to figure out how
to collect the money from the gentlemen on the other side of the border.
As of the present day the Tax Police have about 50 international
investigation cases. Productive work is being impeded by the lack of signed
and ratified bilateral and multilateral interdepartmental agreements for
cooperation. In turn, it is possible to sign agreements only on the basis
of the inclusion of Russia in the international agreements of the anticrime
bloc concluded within the framework of the Council of Europe, above all the
European Convention on Turning Over Legal Violators of 1957 and the
additional protocols of 1975 and 1978, the European Convention on Mutual
Legal Assistance in Criminal Cases with the additional protocol of 1978,
and the Convention on Laundering, Disclosing, Removing, and Confiscating
Incomes From Criminal Activity of 1990. The fact that Russia is not
included in these agreements in the majority of cases leads to negative
responses to international investigatory inquiries by the FSNP [Federal Tax
Police Service] of Russia which are sent within the framework of criminal
cases. But even in spite of this situation Russian Tax Police have managed
to establish fairly good contacts with their colleagues from Norway,
Sweden, France, and Italy.
These contacts sometimes help to catch the fugitives abroad as well.
Here is an example. In St. Petersburg on a corner of Nevskiy Prospect there
was a small store which sold photographic equipment. The trade was brisk
but the store owner, a citizen of Finland, Samolaynen, did not show income
in his reports. All his proceeds were converted into foreign currency and
sent out of Russia. But by the time the Tax Police had discovered the
tricks of the visiting salesman, he himself was no longer in St.
Petersburg—he had gone into hiding in Finland.
The FSNP director for St. Petersburg requested that the Central Crime
Police find the Finnish citizen and convince him of the need for a meeting.
When the Tax Police workers arrived in Helsinki Mr. Samolaynen, the tax
evader, was already waiting for them in the staff headquarters of the
Central Crime Police. Here he was familiarized with the decree on
collecting arrears from the store's property and signed the necessary
documents. Thus because of the interaction between the Finnish and St.
Petersburg police more than R200 million were returned to Russia's budget.
Let us note that this occurred even before the signing of the agreement for
cooperation with Finland.

Chinese Alumina, Bratsk Aluminum, Swiss Bank....

In spite of the fact that Russian legislation has established
extremely strict conditions for legal transfer of capital out of the
country in the form of foreign exchange, products, and raw material,
illegal shipment is still attractive. Various means are used for this. The
Tax Police are quite familiar with them.
But most frequently very simple ones are used. For instance, some
entrepreneurs have completed a transaction, received the money, and there
is not a word about it in the bookkeeping report. Or: A transaction has
taken place and the foreign currency is not transferred into accounts in
authorized banks and the deadlines for receiving it have passed. And here
is another one from the arsenal: Money or products are sent to foreign
partners under false contracts. This, of course, is not a complete list of
all the loopholes through which capital seeps abroad. But to cut off even
these completely would be significant.
Unfortunately, it is a difficult and labor-intensive job. Judge just
this fact.... The Tax Police of Maritime Kray brought criminal charges for
concealment from taxation of foreign exchange revenues in an amount of $2.6
million against the TOO [limited liability partnership] Dalso Co. Ltd. The
investigation established that the firm's president, A. Voropayev, in order
to conceal from taxation the income the TOO received from shipping silica
for the Bratsk Aluminum Plant to the port of Radzhin, which is in the DPRK
[Democratic People's Republic of Korea], founded in Geneva, with the
participation of citizens of Switzerland, the Dalzhen Company for
subsequent transfer of the foreign exchange revenues to this company's
account in the Swiss bank Kredit Swiss. Voropayev, on behalf of the TOO
Dalso Co. Ltd., signed an agreement for joint activity with the Bratsk
Aluminum Plant, according to which the plant was to pay in dollars for the
shipment of the alumina and transfer it to the Dalzhen account. For two
years imported silica was shipped through the Radzhin port by the TOO Dalso
Co. Ltd., after which it was transported to the Bratsk Aluminum Plant for
processing. The aluminum was sold by the Moscow AO Raznoimport, which, in
turn, settled with the TOO Dalso Co. Ltd. This was done by transferring
funds in foreign currency to the account of the Dalzhen Company in Geneva.
A total of $2.6 million was transferred this way. The foreign currency
revenues received in violation of the instructions from the Central Bank of
Russia were not deposited in accounts of authorized banks and were not
reflected in the bookkeeping reports of the TOO Dalso Co. Ltd. As a result,
the enterprise's income amounting to $1.9 million was concealed from
taxation. But A. Voropayev disappeared.

Corporate Interests--Above All?

There is another problem which will have to be solved if we want to
effectively stop tax evasion with international economic cooperation. This
has to do with commercial and banking secrets. The fierce conflict between
state and corporate interests requires that the secrets be regulated.
Making them absolute at one time contributed to the establishment of
entrepreneurship. But today this is being transformed into its opposite,
which creates a threat for both the domestic and the world economic
community.
The danger of taking advantage of the fact that private
entrepreneurial structures are traditionally hidden from external control
for purposes of concealing and legalizing incomes from their activity,
including criminal activity, like the need for adopting concrete legal and
organizational measures for fighting against this threat, has been
recognized at the international level in the majority of developed
countries. Societies of entrepreneurs in these countries are arranging
contacts with national law enforcement agencies.
They have an excellent understanding of the need for this cooperation
in order to provide both for their own safety and the safety of the entire
economic system. But so far domestic legislation does not provide for this
cooperation in the necessary degree. Worse than that is that the movement
is proceeding in exactly the opposite direction. For example, the new
redaction of the federal law "On Banks and Banking Activity," enacted at
the beginning of 1996, imposed tougher conditions for access to information
that is a banking secret, even as compared to the previous redaction. For
instance, according to Article 26 of this law, even the procurator may not
have access to information that is a bank secret.

*********

#4
New York Times
27 August 1997
[for personal use only]
Russians Are Left With One Less Reason to Smile
By MICHAEL R. GORDON

MOSCOW -- The most compelling event for Russians this year is not the
drama aboard the Mir space station. It is the death of a humble clown
turned actor. 
For two days, thousands of Russians have shuffled past a cordon of
stern-eyed troops on Tsvetnoy Boulevard to pay their respects to Yuri
Nikulin, who lay in state in the ring of his Moscow Circus. 
His was a hard death. This gritty and cynical capital kept vigil for
weeks as Nikulin suffered heart failure, lapsed into unconsciousness and
died on Thursday at the age of 75. 
But the photograph above his coffin depicted the impish smile of the man
who gently poked fun at the system through decades of Soviet tyranny and
the raucous democracy that has followed. 
This is much more than nostalgia. Russia's brutal Communist past and its
ruthless brand of capitalism have made it a land with many powerful men but
few commanding moral figures. To many Russians, Nikulin was one of a
vanishing breed: a genuine talent who endured his country's worst periods
while maintaining his dignity, incorruptibility and selflessness. 
"He was dear to me as a person because he was decent and good and
honest," said Rosa, a 65-year-old pensioner who declined to give her last
name. "He was close to the people and on the side of the truth." 
Nikulin loved to crack a joke, but he was always more than a comic.
After serving in World War II, he initially planned to enroll in a
theatrical institute. He got his start as a circus clown, then became a
comic actor as well as a famous circus director. A man of many talents, he
also performed as a tragic actor. He was a Russian Charlie Chaplin. 
Nikulin's typical comic character was an amiable fool, a sort of Russian
Everyman. The characters' foibles and ordinariness had enormous appeal for
Russians in Soviet times, who had more than their fill of propaganda about
heroic workers building a new socialist state. 
"Every year since the early 1960s is noteworthy for what Nikulin was
doing," observed Viktor Yakovlev, 46, who works in a theater in Pskov, an
old Russian town near Estonia. "Back in those days there weren't that many
movies that we could see, and we would all look forward to his new movies.
He was a wonderful actor." 
Though he was never a dissident, Nikulin's comedy gave him a precious
measure of freedom during Soviet days. 
"Yuri Nikulin was the first to win the triumphant and official right to
amuse the country while simultaneously laughing at the regime," Anatoly
Korolyov, a writer, wrote in The Moscow Times. 
In the post-Soviet era he was generally above partisan politics. Though
he supported President Boris Yeltsin, he continued to display his
independence. 
In one of Nikulin's last jokes, Yeltsin marvels how Russian scientists
go to work each day even though they have not been paid for months and
their working conditions are deplorable. 
"Maybe we should charge them admission," Anatoly Chubais, Yeltsin's
pro-capitalist aide, replies. 
Nikulin's humor was one of the few common points for Muscovites, divided
by age, politics and a widening income gap. Drivers of Mercedes-Benzes and
cheap Russian Zhigulis could talk to each other about the jokes without
their usual enmity, the newspaper Moskovsky Komsomolets observed. 
Nikulin also tapped the dark vein of Russian fatalism. His favorite
anecdote involved two trains headed for a disastrous collision that somehow
never meet. 
"Why?" Nikulin asks. "It wasn't meant to be." 
From Yeltsin on down, all Moscow seemed to be saying its farewell.
Yeltsin paid his respects at the circus and delivered a teary eulogy on
national television. Top Kremlin aides and would-be presidential candidates
also sought to demonstrate their grief and associate themselves with
Nikulin's memory. Average Russians genuinely mourned him. 
"He knew life," said Ivan Mironov, 72, as he left Nikulin's circus. "He
himself went through the war. What was in him is in the simple people of
this country." 
Yelena Krochka, 49, who was visiting Moscow from Ukraine, added: "My
heart pulled me here. He always had a smile on his face, and he made others
smile. If there were more people like him, it would be easier to live in
this world." 
After a memorial ceremony, Nikulin's coffin was carried out of the
circus, as a crowd gave the performer his last applause. 
Then a solemn procession bore Nikulin along Moscow's Ring Road.
Saleswomen left their shops to watch the black-draped cars go by. Drivers
on the opposite side of the avenue beeped their horns in tribute. The
procession headed to the cemetery at the Novodevichy Monastery, where many
of Russia's leading national and cultural figures are buried. 
Nikulin often said he found life so interesting that he wanted to live
to be 100. The writer Zoya Boguslavskaya observed that Nikulin had died too
soon and that Russians should have been entertained by him for at least
another 10 years. 
But evoking Nikulin's favorite moral, she noted that fate had other
plans. "It wasn't meant to be," she said.

*******

#5
Moscow Criticizes US Official's Remarks on Caucasus 

Voice of Russia World Service in Persian
August 21, 1997
[translation for presonal use only]
Commentary by Vladimir Kazyakov, from "The World Today" Feature

The reaction by U.S. State Department spokesman James Rubin to the
remarks of Russian President Boris Yeltsin, regarding Russia's concern over
the increase of U.S. influence in the Caucasus, was very strange. Instead
of displaying an understanding of Moscow's stance on this issue, this U.S.
State Department official tried to provide assurance that the United States
does not believe in the existence of spheres of influence of the United
States or of any other country.
However, Washington's policy on the international level is testimony
of a completely different approach. The United States has frequently
declared various parts of the world as areas critical to its national
interests and on the pretext of the defense of these areas, it has carried
out various actions including military interference.
In the Cold War years, various regions under the command of the U.S.
Department of Defense had been created for the defense of the other
interests of the country. These regions encompassed most of the
independent European, Asian, African, and Latin American countries. At
present in Washington, the Caucasus is frequently referred to as a region
in which the United States is interested in expanding its influence.
It is worth stating that in the remarks by the U.S. State Department
spokesman, the Caucasus was mentioned by name, even though some members of
the Russian Federation, that is, the autonomous republics of the
Federation, are independent countries within that region. Is Washington
inclined to consider the territory of these republics in the sphere of its
influence?
As is known, the objective of the policy of boosting the U.S.
leadership role in (?this region), which has been officially announced,
elicited the attention of U.S. allies in NATO. For example, U.S. Assistant
Secretary of State John Kornblum, who has now been appointed ambassador to
Germany, said that the cooperation between the United States and Germany in
the next century will assist in protecting U.S. interests on the
international scene.
It is unlikely that the evolution of international relations can be
based on reducing or bolstering the interests of a particular country in
various parts of the world. Every country has its distinctive legal rights
and interests. Therefore, it is improbable that efforts by U.S.
politicians for increasing their influence and interference in the affairs
of other countries located far from U.S. shores would not generate
apprehension. It is obvious that such claims pertain to Russia and other
countries of the Caucasian region.

*********

#6
Caspian oil context a commercial, political tangle
By Lynnley Browning 

MOSCOW, Aug 27 (Reuter) - The stakes in the race for control over Caspian oil
are high, but the rules shaping the contest are unclear. 
The jockeying for leverage in the region is one of the late 20th century's
more complex commercial and political tangles, involving oil majors from
Texas to Tokyo, the wounded pride of fallen empires and the varied interests
of superpowers and the world's newest states. 
At the same time, there is growing uncertainty over how various
companies and
countries, each with their own agenda and budget, will cooperate to bring
Caspian oil to world markets. 
The uncertainty reflects the complexity of a struggle for trillions of
dollars' worth of oil -- a struggle which those involved say is entering a
pivotal stage. 
``It's not just hegemony-building and it's not just the interest of
states,''
said Laurent Ruseckas, a Caspian specialist at Cambridge Energy Research
Associates in Boston. ``It's the difference between the mid-19th century and
the 20th century, and this time, the companies are playing the leading
role.'' 

PIPELINES -- THE MISSING LINK 

In a sign that profits, not politics, may be the dominant force shaping the
Caspian contest, U.S., British, Japanese, Russian and other oil firms are
widening their search for export routes for the oil they will produce in the
region. 
Caspian oil reserves may, by some reckonings, total up to 200 billion
barrels, an amount second only to those in the Middle East and a key source
of energy for the next millennium. 
Several multi-billion-dollar pipelines will be needed once output in the
region peaks next century. Everybody from Washington to Moscow to the oil
majors has ideas about how the landlocked crude should be exported. 
The routes of the new pipelines are the focus of intense lobbying on the
part
of all the companies and countries in the region, making consensus difficult.
By some accounts, there are at least 30 possible routes, each of which
could
traverse diverse and often unstable areas. 
The United States, mindful that 60 percent of its oil imports could come
from
the Middle East by 2010 without Caspian supplies, wants multiple routes so no
one has a stranglehold on supply. It especially wants to ensure that Iran,
which it excoriates for terrorism, never becomes an export option. 
``Our particular concern has been the growing reliance on the Persian Gulf,
and we think that with the development of the Caspian area, this will add
another major source to the total world supply of oil which will add to
everybody's security needs,'' U.S. Energy Secretary Federico Pena said in a
recent interview in Moscow. 
Russia, still upset at the loss of its Soviet jurisdiction over much of the
Caspian's oil, would like to reclaim its power by having most new pipelines
travel through its territory to the Black Sea -- an option that upsets
Turkey, which is worried about the traffic through the narrow and crowded
Bosphorus. 
``The Russians want the ability to control oil,'' said a U.S. oil source. 
But companies investing in the Caspian seem to be balking at paying large
amounts of money to build pipelines which may appeal more to governments than
to shareholders. And even in Russia, there are disagreements between the
Foreign Ministry and domestic oil firms over strategy in the region. 
``The interest is in making money,'' said the U.S. source. ``Right now,
none
of the companies is too keen to put $2-$4 billion into a pipeline through
Turkey.'' 
That is leading to what analysts and executives say is a deeper scrutiny of
the commercial viability of potential routes. 
Contendors include routes through Georgia to Turkey and down to the
Mediterranean; to Russia's Black Sea port of Novorossiisk and out through the
Bosphorus; and through Iran to the Gulf. 
Other options include hooking into the Druzhba pipeline, the old
Soviet-Eastern Europe link that is now half empty; transporting oil from
Novorossiisk to the Greek outlet of Alexandroupolis via Bulgaria; or using
Romania's port of Constanta. 
Pipelines could go through Russia, under the Caspian, or avoid Russia
altogether. They could stand alone or be used in conjunction with rail and
sea tankers. 
In the past, many oil executives spoke of a route via Georgia, across
Turkey
and down to the Mediterranean as the top contendor. But that could be more
costly than others and is leading to a widening of the search, some oil men
say. 
``The most obvious route is to the Persian Gulf,'' said the U.S. source.
``Who knows what might happen in a couple of years -- there are hints of
change. But there's also a feeling so much of the world's oil shouldn't flow
through the Strait of Hormuz.'' 
Anxiety over who will control the Caspian's flow has reached a new pitch,
with U.S. executives racing to Baku to lobby for the interests of oil firms
and presidents from Azerbaijan, Georgia and Turkmenistan visiting Washington.
``It's not just the superpowers vying for control over countries which have
no influence,'' said Julian Lee of the Centre for Global Energy Studies in
London. ``The countries have a lot more control over their destinies, and
this is something the great powers are coming round to see.'' 
Whichever way it goes, Caspian oil will have to travel through more
countries, many rocked by regional violence, ethnic wars and banditry, than
any other crude before reaching markets. 

WATER AND OIL DON'T MIX? 

Development of the region's oil has proceeded despite disagreement among
the
five Caspian cousins -- Azerbaijan, Russia, Iran, Kazakhstan and Turkmenistan
-- over who owns its resources. 
Russia and Iran say the oil belongs to all five littoral states, while the
other three countries have divided the Caspian into sections and proceeded to
develop their own areas. 
Azerbaijan has blazed a trail, sealing around half a dozen major,
multi-billion dollar deals and close to signing more. 
But Moscow, in its latest gambit, is encouraging Turkmenistan to contest
the
dividing lines of those sectors. President Boris Yeltsin recently annulled a
billion-dollar commercial deal in the Azeri sector involving Russian oil
companies after Turkmenistan claimed the oil as its own. 
``The landscape there is changing,'' said a senior Western oil source.
``The
story is one of the incredible difficulty in building any kind of consensus
in that region.'' 

********

#7
INTERVIEW WITH PRIME MINISTER VIKTOR CHERNOMYRDIN
EXPERT
AUGUST 25, 1997) 
[for personal use only]
"ECONOMIC GROWTH IN RUSSIA IS A SERIOUS CHALLENGE" 

Q: Our magazine is more than two years old. During this time some
significant changes have taken place in the Russian economy. It can be said
to have acquired a new quality. What are the new features? And what do you
expect from 1998? 

A: With your permission I will first say something about your magazine. I
would like to congratulate your staff and readers on the publication of the
100th issue. I think this jubilee is convincing proof that you are a
serious and reliable publication, highly professional and, also every
important, that you are competitive in the media market. I for one
regularly look through Expert. And I read some items closely, especially
those which have to do with the government, profiles of Russian banks,
financial groups, companies and, of course, management and managers. I
often find a lot of useful things. So, as an interested person I wish you
success in implementing your projects and a wider readership. 
Now about the economy. You are right that its quality is changing. The
numbers and statistics show that economic decline has virtually stopped.
One can argue whether industrial production is growing. One or two percent
is, according to experts, within the statistical error margin. But still,
it's an argument of a different nature than even a year ago. You should add
a substantial slowdown in price growth (indeed, in the first half of August
there was zero growth), a tangible drop in GKO yields, and a reduction in
the prices of commercial credits. Obviously, prerequisites and conditions
are building up for a large-scale flow of capital into the production sector. 
We will change the ruble denomination as of January 1, 1998. 

Q: Many regard this as a watershed, a milestone. 

A: That is true. It sums up the qualitative changes in the economy. It's
an indicator of a stable national currency and the government's ability to
fully control money circulation. By striking three zeros off our money we
draw the line under the high inflation era. This is the important factor in
many ways, including psychological. And besides, we see a new quality in
the very exchange of money. This is not a surprise confiscation measure but
a prolonged, perfectly transparent process of gradual replacement of old
banknotes with new ones announced well in advance. There will be no
increase in the amount of money and prices will not grow. There are
limitations of demand in the consumer market. Besides, we will regulate the
prices and tariffs of the natural monopolies. 
So, the state, perhaps for the first time in decades, is not reaching
into the pockets of its citizens but, on the contrary, guarantees the
preservation of the purchasing power of their wages, pensions, allowances
and savings. 

Q: What other qualitative changes are worthy of note? 

A: We witness a change in the behavior of goods providers and other market
agents. There are many instances to show that restructuring in the
production sector is for real. The questions of marketing, market study and
cost reduction are taken seriously. Those who have adapted themselves to
the new conditions give top priority to making their products competitive. 
I often go to the regions. One of my observations is that enterprises
are thinking in terms of development strategy. This is a sign of a new
state of the economy. I think it has something to do with greater stability
of the ground rules established by the state, the higher quality of the
legal environment and new accents in economic policy as a whole. 
One may argue whether the 1997 budget is realistic. But we are
scrupulously adhering to the budget cuts decided upon, even with some extra
margin as regards spending. We are repaying our debts to the
budget-supported enterprises on schedule. We started a complex of
structural reform in the housing and utilities and social sectors and are
toughening the regulation of natural monopolies. And think of the military
reform and transformations in the defense sector. Transformations in the
aviation industry and the coal industry. 
To be sure, things are not going without a hitch. Some of our decisions
have misfired and we have made some mistakes. I am often reproached of
being too optimistic. People suggest that Chernomyrdin is obsessed with
making promises of economic growth. 
But actually I am not making any promises. I am just saying that the
objective parameters of our economy and the main areas of government are
such that we have a chance to develop the 1998 budget that would give us at
least two percent growth of GDP next year. I think it is a realistic goal. 

Q: What about external factors? Sustained growth implies breaking into
world markets and getting a higher credit rating for our country and much
else. All this reflects the changing role of our renewed economy in the
world. Could you comment on these aspects? 

A: Above all, our economy is becoming more competitive. The times of
financial assistance and international loans for survival are over. The
conditions are now different, the challenges facing us are different. To
put it in a nutshell, the challenge is to establish full-fledged
partnership relations. We like to say that Russia is a vast potential
market. But our would-be partners answer politely that though this may be
true, the environment raises some questions. What about the investment
climate, the legal framework, safety of businessmen, crime and corruption? 
I am convinced that our new economic role in the world begins with
answers to these questions. The main common denominator of change here is
that Russia is becoming a more attractive destination for investors. 
Last year we set the target of doubling foreign investment each year
until the year 2000. So far we have met the target. Another side to the
problem is the issue of Eurobonds initiated this year. The international
financial markets reacted to them with some confidence. This is only the
beginning. We will actively pursue Euroloans. They are cheaper than GKOs. 
But you are right when you speak about access to world markets. An open
economy has "revolving doors", flows are in both directions. I am fully
aware that economic growth in Russia is a serious challenge which ties up
considerable external resources. Many of our partners will have to get used
to it. 
So, we are stepping up our efforts to join the international economic
organizations, the WTO, OECD and others. 
We are seeking the recognition of Russia as a market economy and a
repeal of many artificial discriminatory restrictions on trade. 
We will encourage the development of domestic export-oriented industries
while at the same time protecting certain segments of the internal market.
We will not be hidebound by dogma. But flexible reaction in every area is
our right and our duty. 
We attach particular significance to integration processes. The
priorities there are the CIS, the Common European economic space and the
Asia-Pacific Region. In every area, from the development of mutual trade to
major global-level projects, especially in energy and transport. 
I believe that a balanced a steady development of the world economy is
impossible without Russia. We must become one of the pillars of the new
world economic order and we are preparing ourselves for this role. 

Q: You have mentioned competitiveness. But it depends on the new captains
of industry and managers. Do we have them? 

A: Let me put it this way. We already have some and new ones are
appearing. I can let you have a look at the memorandum on the reform of
enterprises in the Krasnoyarsk territory. It's instructive in many ways.
Perhaps you will find some examples interesting (we will give a detailed
account of these examples in the following issues -- Expert). 
But more generally, Russia is poised for a veritable "revolution of
management." It is a key resource for our national and not just economic
growth. From my observations, Expert is confidently exploring this theme.
Keep it up. It is a noble and promising project. 

Q: Could I take you back to the question of Russia' competitiveness in the
context of the government's economic policy? What are going to be the
government's priorities in the near future? 

A: The main thing is to keep up the pace, not to pest the logic of the new
stage of reform. It means we should bring the financial sphere in order.
The top priority there is to adopt a realistic budget for 1998. Much hinges
on that: liquidation of budget debts, financial relations with the
provinces, a more rational budgetary process and finally, the tax reform
without which economic growth is like a bird in the sky. 
The draft budget is a timetable for the government's actions, a road map
of economic and social policy. It is perfectly clear to me that structural
reforms are the other side of the implementation of the budget. A lot has
been said and written about them. 
But we didn't really start until this year. It is still a high priority.
We are talking about changing entire sectors in the economy, most of which
are very expensive for the budget. 
It has often been suggested that the government regulation in the
economy is excessive. That may be true if one thinks in terms of budgetary
allocations and even more so of expectations and claims laid to the budget.
On the other hand, the government's presence is too small when it comes to
establishing sound and workable rules of the game and monitoring compliance
with the rules. How can you replace budget financing with normal commercial
credits to agriculture without passing legislation that would make land
relations part of relations in the sphere of immovable property? We will
never have mortgage or pledge without it. Without it, financing agriculture
is a pipe dream. 
How do you go about introducing market relations in the social sphere if
a hundred million of our fellow citizens enjoy various kinds of privileges?
Legislation is needed to resolve the problem. 
So, stabilization of finances in the broad sense of the word (and that
implies solving the crisis of debt arrears and enterprise liquidity) and
structural reforms call for much more work in the legal field. These are
the top priorities because they are directly linked to growth and
competitiveness and contribute to a new economic behavior of enterprises.
And this spells the need for new standards in management. Not as a dream
but as the most pressing exigency. 

Q: From what you said it is clear that one of the government's top
priorities is to strengthen the legal framework and guarantees of the
market economy in Russia. Aren't you afraid that legislators will trip you
up? 

A: Frankly, I try to chase these fears away. On the one hand, as you
people say, to be afraid of the Duma is to be afraid of reform. 
And on the other hand, the Duma itself is changing. It is showing
greater understanding and responsibility. The Duma deputies are learning to
listen to each other. 
As for the government I can say that we are preparing for the fall
session of parliament very thoroughly and very seriously. We will give the
deputies plenty to do. That I can promise. And I hope that together we will
achieve tangible results. (Interviewed by Nikita Kirichenko and Alexander
Privalov)

*********