August 28, 1997  
This Date's Issues: 1153 •1154  •

Johnson's Russia List
#1154
28 August 1997
djohnson@cdi.org

[Note from David Johnson:
1. St. Petersburg Times: Jeanne Whalen, Russian Computer Market Lags.
2. New York Times: Alessandra Stanley, Sex-Slave Case Underscores 
Low Status of Women in Russia.
3. Paul Goble (RFE/RL): Overcoming Communism.
4. Stanislav Menshikov: IMENO analysis of economic crisis.
(Commentary of #5).
5. Nezavisimaya Gazeta: INVESTMENT POLICY IN RUSSIA. 
IMEMO Scientists See Main Reason for Economic Crisis in
Inadequate and Incomplete Reforms.
6. Washington Times: Bill Gertz, Russia suspected of 
nuclear testing.
7. RIA Novosti: PASSING DRAFT 1998 BUDGET AIN'T GONNA 
BE EASY, YEGOR STROYEV. (sic)
8. Rossiiskaya Gazeta: V. Kucherenko, PRIVATIZATION PROGRAMME 
FOR 1998: MORE OPENNESS.]

********

#1
St. Petersburg Times
August 25-31, 1997
Russian Computer Market Lags 
By Jeanne Whalen
STAFF WRITER

MOSCOW - Russians and Eastern Europeans are lagging far behind Asian
countries in adoption of computers and other information technologies, a
Western technology executive said Thursday.
While use of personal computers in Thailand, Vietnam and the Philippines
is growing 50 percent to 60 percent a year, use in Russia is growing only
16.5 percent a year, said Hans Geyer, vice president and general manager of
Europe, the Middle East and Africa for Intel Corp., the U.S. company
producing Pentium brand microprocessors. Geyer addressed journalists at a
press conference during one of his regular trips to Moscow.
Intel, of course, has a vested interest in seeing the Russian market
flourish. The company's microprocessor chips were used in 85 percent to 90
percent of the 1.5 million computers sold in Russia last year.
"The European post-communist countries are growing more quickly than
mature markets but far more slowly than Asian markets," Geyer said. "This
should be a concern for everyone."
Promoting Intel's speedy processors in a flashy multi-media
demonstration, Geyer warned the audience that the coming decade will bring
paperless offices and borderless, computerized trade, requiring
"shopkeepers, factory workers and brain surgeons" to be computer literate. 
The majority of computers sold in Russia are sold to businesses and only
120,000 were sold to households last year, Geyer said, citing data from IDC
Research. Interestingly, Russian computer manufacturers produce 75 percent
of all computers sold in Russia, beating out big Western names like IBM and
Compaq, he said.
The biggest Russian computer maker is a company called Vist, founded in
1992 by nine Russian engineers. Vist holds a 17 percent share of the market.
Vist sales director Gennady Bespalov said half the company's sales last
year were to households, pointing out that Vist's prices are about 30
percent less than prices of foreign brand computers. The company's
computers cost $750 to $2,000, a price not out of reach for urban Russians,
he added.
"This is a normal price for someone who lives in Moscow, St. Petersburg
or Nizhny Novgorod," Bespalov said, although he added a computer can
represent up to half a year's salary for a middle class Russian. 
Vist installs Intel processors in all its computers.
Bespalov's assessment of computer use in Russian households didn't quite
match the lofty, high-tech uses described by Intel's Geyer.
"Most people use them for games," Bespalov said. Internet connection is
another population use.
Vist expects 1997 sales to grow 15 percent to $400 million, Bespalov
said. Intel's sales in Russia last year were $200 million.
Intel spends about $10 million on advertising each year in Russia to
raise awareness of its brand. The company gives roughly $8 million of that
to Russian computer manufacturers to include the Intel name in their brand
advertising, Geyer said.
Intel also plugs its products directly by consulting Russian businesses
and government bodies on their information technology systems, Geyer said. 

********

#2
New York Times
28 August 1997
[for personal use only]
Sex-Slave Case Underscores Low Status of Women in Russia
By ALESSANDRA STANLEY

VYATSKIYE POLYANY, Russia -- When the Soviet Union collapsed in 1991, some
of the luckier residents of this town got a chance to own their garages.
Most used the metal shacks to store car-parts, farm equipment, and
potatoes. Alexander Komin, 44, an electrician, used his to dig himself an
underground colony for female slaves. 
By his own admission, Komin lured homeless women and kept them chained
in a 100-square-foot bunker buried 40 feet deep. He starved, beat, and had
sex with his captives. By the time he was arrested on July 21, two men and
two women had been murdered. Two of the three women who survived had the
word "slave" crudely tatooed on their foreheads. 
Komin had a utilitarian streak: he installed three sewing machines and
put his captives to work stitching underwear, flowered housecoats, and oven
mitts that he sold all over town. 
Everyone in Vyatskiye Polyany, an industrial town of 40,000 people 600
miles east of Moscow, was horrified by the secret life of Komin, who was
well liked. But few expressed much pity for his captives. 
"A normal woman would never have survived such conditions," Nadezhda
Kamskaya explained tartly. "A normal woman would either have died or killed
the man." 
Almost all the victims had a trail of broken marriages and abandoned
children, and at least one has a prison record. 
Mrs. Kamskaya's view is widely shared. Russia is a society untouched by
contemporary notions of women's solidarity and victims' rights. Like
thousands of provincial towns in the former Soviet Union, Vyatskiye Polyany
is a tight-knit community in surly decline. Half the workers at the local
armaments factory have been laid off; the other half get their wages -- $50
a month -- months late. Almost everybody in town is struggling to stay
even. There is little sympathy for the neighbors who slip through the cracks. 
When Tatyana Melnikova, 37, and Tatyana Kozikova, 38, first showed their
tattooed faces on local television, the municipal authorities opened bank
accounts for them so viewers could donate the $400 it will cost to get the
tattoos removed. So far, not a single ruble has been deposited on their
behalf. 
Both women, and the third survivor, Irina Ganushina, 23, have returned
to a so-called normal life. Mrs. Ganushina, who was lured to Komin's garage
on March 1, spent three months in the bunker until Komin decided to marry
her. He brought her back up above ground, settled her in his apartment, and
bought her a wedding dress. When she found a chance to get away from him,
she went to the police. 
She now lives with her mother and her 3-year-old daughter. Mrs.
Melnikova and Mrs. Kozikova camp together in one room of a communal
apartment belonging to Mrs. Melnikova's mother. 
Komin sits in an iron cage in a cell in a police office a quarter of a
mile away, awaiting trial on murder and kidnapping charges. Russia has put
a moratorium on the death penalty, so he faces 25 years to life in prison. 
Komin and his captives alike recount their stories without much emotion.
A small, wiry man with an engaging smile and bright blue eyes, Komin sat
calmly in his cell wearing brown sneakers with the laces removed and
expressed no remorse. 
"I am sorry that I didn't get a chance to marry Irina or finish my
underground dream," he said -- to expand his bunker by adding several more
rooms and a real bathroom. 
He also said he felt he was doing his victims a favor. "These were
unemployed, homeless women," he said. "I gave them a place to live and a
steady job." 
Komin said he had felt weighed down by the responsibility of keeping his
underground workshop going. "Every day," he said, "I had to think about
them, think about feeding them." 
He said the beatings and tattoos were necessary: "When they tried to
escape, they had to be punished. After that, I guess they did fear me." 
Komin, who spent three years in jail for hooliganism in the early 1970s
and learned the sewing trade in prison, does not think he is insane. "Of
course, such a crazy idea would not come to a normal man," he said. "But
still, I think I am normal." 
His dream dwelling consisted of two tiny, cramped, damp, and filthy
rooms -- three bunks in one, and a television set and three sewing machines
in the other. When Komin arrived each morning, a light would go on -- a
signal for his slaves to put metal wires attached to the wall around their
necks, lock them, and place the key where he could see it. 
Mostly, the decor suggests Komin's odd fantasies. Pornographic pinups
adorn most walls, alongside hand-sewn crosses and icons. On the wall above
the lowest bunk bed, the victims had pasted their own sources of
inspiration: pictures of the Madonna and Child and photographs of Harrison
Ford and Barry Manilow. 
Three trapdoors separated the bunker from freedom, the sturdiest stolen
from a military base. The steel ladder to the floor of his garage was
electrified to prevent escape. 
It took Komin and an accomplice, Alexander Mikheyev, four years to dig
the bunker and shaft. Mikheyev, 30, a local security guard, is also under
arrest. 
The first victim was a neighbor, Vera Tolpayeva, who came to the bunker
in the summer of 1995 after a drinking bout with Komin. She helped him lure
an acquaintance, Tatyana Melnikova, and her boyfriend, Nikolai Malykh, both
experienced tailors, to the bunker. Malykh was poisoned, his body dumped in
a nearby field. Later, Mrs. Tolpayeva fell from favor and was forced to
choose either to drink antifreeze or have it injected in her veins. She
chose the former, and died as the two Tatyanas looked on. 
Tatyana Kozikova, a cook from Ulyanovsk, had served two years in jail
there, and in July 1995 eagerly accepted Komin's offer of a drink and a job. 
Yet another woman, Tatyana Nazimova, 28, known as Oksana, was picked up
in a railway station in 1996, but she turned out to have leukemia and no
work ethic. She, too, died of antifreeze poisoning. Yevgeny Shishov, a
former paratrooper whom Komin recruited to help him expand the bunker, was
later electrocuted. Their bodies, like Malykh's, were dumped in abandoned
fields. The police initially assumed all the victims died of alcohol
poisoning from moonshine vodka, a common cause of death in the provinces. 
Mrs. Kozikova is angry at Komin, not just for what he did, but for what
he now tells reporters and police officers. "He is trying to convince
people that we wanted to be there, that we liked it," she said indignantly.
"I hated him." 
She said they begged him for better food than potatoes and bread -- she
personally craved a slice of cake -- but he refused. She said he did once
offer to cut up Mrs. Nazimova's body and let them eat a part of it. 
The only kindness she could recall was that he once brought her a book
she asked for, a romantic biography of Napoleon and Josephine. 
Mrs. Kozikova said she didn't fall apart when the police took her back
into the bunker during their investigation. "I didn't feel like crying,"
she said. "I just could not believe that I lived there for two years." 

********

#3
Eastern Europe: Analysis From Washington--Overcoming Communism
By Paul Goble

Washington, 27 August 1997 (RFE/RL) - Countries seeking to overcome their
communist pasts are finding that task far longer and more difficult than
they and their supporters had expected. 
On Monday, a German court convicted former East German Communist leader
Egon Krenz of manslaughter for his role in the shooting deaths of those who
attempted to flee to the West during the Cold War. 
Also this week, Polish officials began to enforce a new law which
requires candidates for parliament to declare in writing whether they ever
collaborated with the secret police of the communist regime. 
And this month, Hungary also launched a campaign to expose those,
especially elected officials, who had collaborated with the secret police
during communist times. 
All three of these actions are part of the more general effort across
the post-communist world at lustration or screening designed to weed out of
public life those who committed crimes of one sort or another under
communism. 
But all these efforts have run into legal, practical, and political
difficulties that underscore both the unique features of the communist
system and the problems all the successor states have in moving toward
democracy. 
Legally, efforts to try those who served the communist regimes under the
laws of the post-communist states raise many questions. In the Krenz case,
for example, the former leader argued that he "wasn't convicted because of
a crime" but because of his past position. 
Given the general prohibition in Western democracies against judging
people by laws they were not then living under, many democrats both in
these countries and in the former communist states are reluctant to use the
law in this way. 
Practically, all these countries are discovering that the police files
from communist times are extremely difficult to use. These files have gaps,
make false claims and contain fabrications, all of which were designed to
entrap people then and now. 
The courts in the post-communist states thus face the daunting task of
trying to determine who is telling the truth. Moreover, they must do this
even as some politicians in these countries use charges of past
collaboration to advance their own political careers. 
And politically, these efforts to screen out those who committed the
worst offenses in the past have run into a number of serious obstacles.
Where should the post-communist countries draw the line in prosecuting
those who engaged in evil actions in the past? 
How should these governments deal with those who committed these acts
but subsequently changed their political position and have made significant
contributions to the emergence of democracy? 
And what should be the statute of limitations on such crimes? Should
people who acted according to communist dictates always be at risk of
exposure and condemnation by the state authorities? 
Because of these problems, many in the West have opposed such screening.
They sharply criticized the Czechoslovak parliament in 1991 for its law on
lustration and urged other post-communist countries not to follow the
example of Prague. 
But the problem of coming to terms with the communist past and the
continuing role in public life of those who served the communist regimes
will not go away for at least a generation either in these countries or as
a problem for the international community. 
The many victims of communist regimes in these countries will certainly
continue to demand justice. And few of them are likely to be satisfied with
a ritualistic denunciation of the past, especially when they see their past
tormentors in positions of power today. 
Such demands pose a difficult problem for the international community as
well. In many cases, the people in the post-communist states will be
seeking vengeance rather than justice and that could sow the seeds of a new
authoritarianism, something no one in the West wants to see. 
But the Western democracies have few models on which to draw for giving
advice. Their only previous experience with overcoming totalitarianism --
rooting out fascism in Germany and Japan following World War II -- does not
seem applicable in the current situation. 
The post-communist states of Eastern Europe did not come into existence
as a result of military defeat and foreign occupation. Rather these states
emerged when their peoples and even leaders liberated themselves from
communist totalitarianism. That very different pattern will inevitably
affect how they go about the task of overcoming communism. 
But this difference does nothing to change the nature of the
totalitarian evil of the past. And consequently, unless these countries are
successful in overcoming that past, they are likely to face a very
difficult future. 

******

#4
Date: Thu, 28 Aug 1997 14:10:13 +0200
From: Stanislav Menshikov <menshivok@globalxs.nl>
Subject: IMENO analysis of economic crisis

The IMEMO analysis of the extent and causes of the continuing deep
investment crisis in Russia is basically sound. It rightly points to the
absence of interested owner control in most Russian enterprises, an
outrageous tax system, restrictive monetary policies and some other crucial
factors. The main point is that IMEMO, similarly to other research
institutes of the Russian Academy of Sciences, is very critical of current
government economic policies and is taking basically the same line as the
Academy Report on the Economy which was posted on the JRL in late June-early
July in seven instalments. Because I happened to belong to the IMEMO some 30
years ago as deputy-director I am particularly glad that it is maintaining its
high standard of research in the present unfavorable economic and political
conditions.

I have only a few observations to make. First, it is doubtful that
the presence of large owners will necessarily solve the problem. Even at the
first stage of privatisation in Russia a number of large plants came under
the effective control of large outside investors. Two well known examples
are the ZIL-AMO truck company in Moscow and the Uralmash heavy machinery
company in Ekaterinburg. Neither owner (trading concern "Mikrodin" in the
first case and Mr. Bendukidze, a medium sized tycoon, in the second case)
chose to invest in their newly acquired plants. After struggling with old
equipment and unsaleable products for three years, "Mikrodin" finally sold
its share to the government of Moscow which is trying hard to keep that
large job in the capital city provider afloat. Bendukidze is still holding
on to his share in "Uralmash" but the latter continues its luckluster
existence.

The principal reason for these unsatisfactory results is that the
economy is severely depressed all around and that aggregate demand is 50%
down from where it was in 1989-1990. Investing in these circumstances is
bordering on adventurism. A recent study of conditions in some 100 medium to
large size enterprises made by Dr. Igor Gurkov of the High Economic School
in Moscow shows that the main factor for success (where he could find it) is
the favourable condition in a particular market or industry. For instance,
bakeries in the generally depressed central European region of Russia found
it possible to invest into modernizing their plant with imported equipment
while plants in some other industries are severely depressed. The
explanation is simple. Consumers having lost in real incomes, keep buying
bread or even buying more of it to supplement calories from their otherwise
inadequate diets.

At the second stage of privatisation the government had great
difficulty attracting big investors to some newly privatized properties.
The loans-for-shares scheme (1995) was aimed at bringing the bigger banks
in. In one outstanding example, "Norilsk Nickel" which came under the
control of Potanin's ONEXIMBANK (for some reason it is continuously
misspelt in the West as UNEXIMBANK) failed to invest in modernizing the
plant despite the fact that there is no problem in finding markets for
nickel, copper and the other metals it produces. All the efforts of the bank
are concentrated on raising the profitability of "Norilsk Nickel" by getting
rid of its "social infrastructure" (housing, medical and cultural
facilities) which is expensive but inevitable in that God forbidden place,
if the company will continue, at all. Neither the municipality, nor the
central government is in a position to finance this infrastructure. There
are no positive examples of a successful management by other banks of their
newly acquired plants.

One successful example is the aluminum industry which largely came
under the control of a London centered metals trading group acting in
concert with the Chorny brothers, allegedly Russian organize crime figures.
Their success is based on ready access to the London market in aluminum and
tolling operations which bring bauxite into Russia for re-export in the form
of aluminum ingots. Tolling is not subject to import taxes or excise taxes.

The latest auctions of big chunks of government property are not
going to change the situation quickly enough. For one, the proceeds from the
sales of these properties (the notorious "Sviazinvest" deal, among others)
will not be used for investment purposes but in order to pay wage arrears to
the Army and civilian government employees. This is not a good example of
rational investment behaviour on the part of the federal government. For
another, There is doubt that Messrs. Potanin, Soros, Aven, Berezovsky and
others will really start investing in the properties they have bought. After
buying them for a price much lower then their value in real assets, it is
only logical to sell them at a profit within a few months or years, after
the stock market brings the share prices up.

What it all amounts to is that the government will have to first
significantly help restore aggregate demand which will then trigger capital
investment. At the moment there is no lack in funds for financing investment
in Russia. According to a recent analysis by the EU Russian Centre for
Economic Policy (RECAP) in Moscow, business saving amounted to 26.5% of GDP
in 1996 while private business capital investment was only 16%. Most of the
difference was accounted for by investing into short-term government bonds
and by capital flight (estimated to be 2% of GDP, at the minimum). 

Another reason is that the commercial banks are not adequately
performing their main macroeconomic functions in the Russian economy. One of
these functions is to channel business and household savings into those
areas of the real economy where they are mostly needed. In 1996 the increase
of their assets was not unsubstantial, amounting to 7.5% of GDP. However,
3.9%, or more than half of that, went into loans to the general government
(federal and local) while only 1% of GDP was channeled to the private
sector. Even more than that (1.2%of GDP) was invested into foreign assets.

Another function of banks is to facilitate payments between business
firms and individuals. But the share of barter in the total sales Russian
industrial enterprises runs as high as 40% while money surrogates and
foreign currency account for another 30%. A typical plant manager is lucky
if he gets 20% or more of his sales paid in rubles (either cash or via bank
transfers). Because banks not only charge high interest rates and exorbitant
rates for other services, but also are notoriously overdue in transferring
money payments, plants try to minimise their use of banking facilities.

This is one of the reasons for the general non-payments crisis
between enterprises. When cash flow is so low, little of it, if any will be
used for investment purposes.

Summing up, capital investment is not about to recover unless:

- the government discontinues its restrictive budget and monetary
policies;

- a banking reform is urgently effected in order to induce the banks
to perform their principal macroeconomic functions;

- the non-payment problem is resolved on a priority basis.

I have suggested ways of resolving these problems in previous
contributions to the JRL. Perhaps, I will have to look into the possibility
of translating (perhaps in concise form) a recent lengthy article of mine
published to that effect in the "Voprosy ekonomiki" #6, 1997 for the benefit
of JRL readers.

**********

#5
>From RIA Novosti
Nezavisimaya Gazeta
August 26, 1997
INVESTMENT POLICY IN RUSSIA 
IMEMO Scientists See Main Reason for Economic Crisis in
Inadequate and Incomplete Reforms

Assessment
A team of scientists from the Institute of World
Economics and International Relations, of the Russian Academy
of Sciences, led by first deputy director Alexander Dynkin,
has prepared a report on: "Russia's Investment Policy: Current
State of Affairs, Foreign Experience, Prospects." 
The work was sponsored by the Society for Global Social
and Economic Integration, in Britain, and partly by the
Russian Humanitarian Scientific Foundation. The Nezavisimaya
Gazeta editors, acknowledging the significance of the problem
considered, carry a shortened version of the report. 

The present state of affairs in the investment process in
the country can be viewed as a profound investment crisis that
has hit the entire economy. This is the sad conclusion reached
by scientists from IMEMO (Institute of World Economics and
International Relations) of the Russian Academy of Sciences.
According to them, total investments in 1995 were 25 per cent
of the 1990 level. Investments are particularly rapidly
dropping in industries that are essential for restructuring of
material production. 
The report's authors see the main reason for the
investment crisis in the incomplete state of the market
reforms. Reformers have concentrated on the stabilising of 
macroeconomic indicators, while in the course of reforms at
the micro-level--that of enterprises--they failed to produce
an effective owner and a strategic investor more concerned in
production development rather than consumption.
As a result of the privatisation carried out posthaste in
1992-1993, nearly 70 per cent of property is without genuine
owners. It is here, in the authors' view, that the interests
of the state, normal business, unrecorded economy and criminal
structures have become interwoven in an incomprehensible way.
So the reform of property, that is the privatisation, must be
brought to its conclusion: society should know who actually
owns what property, who is the founder of a given structure,
and who must pay debts to the state and wages to the workers. 
The best way out is either to transform mixed property
into private, or to go over to purely state property, where
complete conversion of an enterprise into private ownership is
impossible. 
There is an urgent need to cardinally transform
enterprises at the managerial and organisational level. One of
the principal reasons for poor management of enterprises is
the ossified managerial system. In the West they have long
come to see that investments in human capital and qualitative
management are more effective than in new plant and equipment,
since the era of mass and faceless production of ordinary
output is past. 
An important instrument for restructuring enterprises,
assisting them in the search for a market niche and making
production more competitive, the report authors believe, must
be the law on bankruptcies. It goes without saying that
combining the bankruptcy procedure with investment tenders,
which can produce a strategic investor, can become a major
element of the transformation of the old structures and their
management system. 
The current fiscal and credit policy, believe the
authors, does not guarantee normal conditions for the
reproduction of fixed capital stock and investment activity.
The exceedingly high yields on short-term government
bonds (GKO) draining financial resources away from the
production sector of the economy. In the industrialised
countries the main source of financing is internal receipts
(profits and depreciation), which account for up to 70 per
cent (55 to 60 per cent on average) of all investments. On the
other hand, the proportion of external sources is 40 to 50 per
cent, with bank credits accounting for 35-45 per cent, and
share capital, for two to three per cent. 
In the developing countries the external sources

predominate: their proportion in capital investment in India
is over 60 per cent, and in South Korea as much as 87 per
cent. In Russia, however, according to polls conducted at
medium-sized and large enterprises, the proportion of internal
sources of financing is as high as 91 per cent. This structure
of the financing sources makes enterprises very vulnerable to
the state's unpredictable tax policy. 
Stiff monetary policy of the government and lack of
external sources of financing result in depreciation charges
being more often than not used for alternative purposes. The
report's authors point out that the government's decision "On
Using the Mechanism of the Accelerated Depreciation and
Re-Assessment of the Fixed Assets" has been used by plant
managements not as a major source of financing, but merely as
a way of evading the payment of part of the taxes, and as a
way of making current payments, including wages. 
The report analyses the main limitations involved in
making investment decisions. The financial restrictions are
due to high-interest credit. A tendency to invest is thwarted
by uncertainty and an incomplete mechanism for redistribution
of property rights. As a result, Russian enterprises suffer
from an explosive growth of transaction costs, a slower
reduction of manpower compared with production volumes, and a
growth of material and power consumption per unit of output in
practically all branches of the national economy.
Finally, readiness to make investments is determined by
the availability of suitable projects and manpower with 
appropriate skills. And the scientists conclude that at the
moment most of the Russian enterprises fail to meet the basic
requirements set to a favourable investment climate. 
Solution of the problem of restructuring property at
major enterprises in world practice has two models of
corporate control. The so-called Anglo-Saxon model presupposes
external control over the corporation on the part of
investors--individuals and financial institutions that possess
shares as agents for third parties. Such shareholders account
for 80 to 90 per cent of the shares. Understandably, the main
condition for effective functioning of this model is a high
degree of transparency of the market and the dependability of
information supplied. 
The corporate control model, which is mainly widespread
in Germany and Japan, is a model for internal control of the
corporation's investment activity on the part of financial
institutions and commercial banks as owners of corporations
(in Germany) or as their principal creditors (Japan). In
different sectors of the economy, depending on investment
activity of the companies, either model can be used with
success.
The experience of property restructuring in the former
GDR argues for the possibility of using as an alternative to
external control direct state management via holding companies
or involving commercial banks in the monitoring of management.
In this case the main problem that had cropped up was one of a
shortage of well-trained managerial personnel. 
Germany was a simple case--the country's western regions
had powerful companies with extensive experience of operation
in market conditions, strong financial institutions, and
sufficient numbers of highly educated managers.
Unfortunately, this is what Russia is lacking. What is
more, the inadequate legislation on the shared form of
property and economic activity of enterprises prevents the
establishment of classic forms of company management. 
The report authors see the role of state regulation in
investment activity not only in world trends: adaptation and
direct protection of individual elements of the national
economy in connection with integration into the world economy
but also attraction of foreign capital and personnel to make
production more efficient and quality of output better through
the use of national resources and comparative advantages. 
The focus of state policy, believe the authors, must at
this stage be on a package of measures aimed at forming and
invigorating a competitive environment as a major incentive
for investment, implementing anti-trust legislation and
legislation on bankruptcy, and support for small businesses.
The state must exert maximum efforts to form investment
resources through cardinally changing the tax laws and
business practices, creating a system of state guarantees for
investment credits, and mobilising the population's savings. 
Forms of state regulation of investment processes in
countries with a market economy that are successfully
developing are diverse, ranging from directive to indicative
ones. In Russia, they are practically non-existent, while, in
the scientists' opinion, in a state-regulated country they are
doubly needed: the private sector is weak, most of the
advanced technologies belong to the military-industrial
complex, the industrial infrastructure needs far-reaching
modernisation, fundamental and applied research depends to a
large extent on state support. 
The uneven pattern of fall in investment activity across
the regions is shown in Table 2. With an average country-wide
decline of 18 per cent the maximum drop is recorded in the Far
Eastern and North regions--34 per cent. There are no grounds
yet for saying that the country has any emerging territorial
zones or pockets of investment growth as pre-conditions for
overall economic recovery. Regional problems of shaping up an
investment process are closely tied up with capital
investments in the leading economic sectors, the investment
situation in which has been examined in the report: power,
metallurgy, the timber, defence and transport complexes,
telecommunications, consumer services, and the housing sector.
The authors are well aware of the basic problem--where to
get funds. Their recommendations call for radical changes in
the financial, credit and tax policy of the government. Faced
with a severe shortage in financial resources, the government
is unlikely to reduce the tax burden and increase state
regulation.

Table 1
Investment Dynamics in 1991-1996 as % of 1990 

Indicators 1991 1992 1993 1994 1995 1996

Fixed capital stock
investment 85 51 45 34 31 25

Contract construction
work 98 63 58 44 40 36

Housing and enterprises
and organisations of all
forms of ownership 
commissioned 80 67 68 64 67 56

General educational
schools commissioned
(number of places) 76.8 58.8 57.5 37.7 42.3 29

Hospitals commissioned
(number of beds) 79.8 37.6 65.6 56.8 47.2 39.9

Construction materials 
and equipment:

-- cement 100 93.4 74.3 60.1 44.8 33.5
-- building bricks 100 96.7 88.6 77.5 60.0 47.3
-- prefabricated
reinforced 
concrete 100 94.6 73.8 63.5 41.6 29.5
-- excavators 100 91.3 66.7 54.5 28.1 -
-- bulldozers 100 87.9 86.5 46.1 15.6 -
-- tower cranes 100 90.5 45.0 21.2 7.3 -

Table 2
Breakdown of Russian Regions by Investment 

1996 investments as Number of regions % of total
% of 1995 number 

up to 60 15 19
61-75 31 39
76-85 19 24
86-95 9 12
96-99 1 1 
over 100 4 5

*********

#6
Washington Times
28 August 1997
[for personal use only]
Russia suspected of nuclear testing
By Bill Gertz
THE WASHINGTON TIMES
-
Russia is suspected of setting off an underground nuclear explosion at a
remote arctic test site 12 days ago, although Moscow denies breaching a
self-imposed testing moratorium, Clinton administration officials said
yesterday. 
The suspected nuclear blast was detected Aug. 16 near the island of
Novaya Zemlya, a test facility that was closed after the collapse of the
Soviet Union and reopened by Russian President Boris Yeltsin in 1992.
Russia announced it was halting nuclear tests that year.
"We do have information that a seismic event with explosive
characteristics occurred in the vicinity of the Russian nuclear test range
at Novaya Zemlya on August 16," said Ralph Alewine, director of the
Pentagon's nuclear treaty programs office.
"The information is still under review, and we are discussing this with
other countries including Russia," Mr. Alewine told The Washington Times.
Information about the suspected test is lacking because a key monitoring
station in Norway was closed for repairs at the time of the test, a
Pentagon official said.
Also, two Russian seismic stations that monitored the suspected test
have yet to be outfitted with special equipment that could spot any data
tampering by the Russians, said the official, speaking on the condition of
anonymity.
The U.S. government, through the U.S. Embassy in Moscow, sent a
diplomatic note Thursday seeking an explanation for the activity, and the
Russian government denied conducting a nuclear test, officials said. Moscow
claimed instead the detected activity was an underwater earthquake.
The United States was not satisfied with the Russian denial.
"We are seeking a clarification from Moscow," said Bob Waters, a
spokesman for the U.S. Arms Control and Disarmament Agency.
A Russian Embassy spokesman had no immediate comment.
The suspected test was detected by a series of more than 40 monitoring
sites around the world that are being set up under the Comprehensive Test
Ban Treaty. Officials familiar with the network said it is designed to
filter out earthquakes.
"This doesn't pass the rules for saying it was a natural event" such as
an earthquake, said the official. "It could be due to anomalies in the
system, or it could be it was an explosion."
The Pentagon official said monitoring equipment also indicated the depth
of the suspected test was zero -- which does not fit with an underwater
earthquake.
No conclusion has been reached, he said.
The August incident is the second time Russia is suspected of conducting
a low-level nuclear test. In January 1996, the Pentagon detected similar
activity that U.S. officials were unable to prove was a nuclear test at
Novaya Zemlya.
The Comprehensive Test Ban Treaty has been signed by more than 140
nations but has not entered into force. The Clinton administration plans to
submit the treaty for Senate ratification sometime after Labor Day.
If the suspected nuclear test is confirmed, it could fuel efforts by
Senate Republicans critical of the treaty to block its ratification. Sen.
Jesse Helms, North Carolina Republican and chairman of the Senate Foreign
Relations Committee, is skeptical about the treaty but currently is
uncommitted on ratification, a Senate aide said.
"The committee is extremely concerned about this [suspected test] and is
looking into the matter because this relates directly to the treaty," the
aide said.
The Pentagon official explained that the explosive characteristics were
based on seismic signals that created "very sharp" waves on detection
equipment. Waves associated with an earthquake "do not appear quite so
suddenly."
Data so far show that the epicenter of the suspected test was about 37
to 43 miles from the Russian test facility on Novaya Zemlya.
Another administration official said the initial conclusion that the
suspected blast occurred very near the test site was later revised to place
its center miles offshore, after data from the Russian monitoring stations
were analyzed further.
According to Pentagon officials, initial data on the event produced
"high confidence" that the activity detected was a nuclear test equivalent
to between 100 tons and 1,000 tons of TNT.
The relatively small size would be consistent with tests used to
determine the reliability of a nuclear weapon, one military officer said.
Spy satellite photographs of the Russian test facility prior to Aug. 16
also indicated the movement of trucks and other activities that in the past
were seen prior to nuclear test explosions, the officer said.
One nuclear test expert said the low yield could be an indication of a
very small nuclear test, such as a scaled-down test of warhead primer.
Analysts suspected the seismic activity was a nuclear test based on
comparisons with seismic signatures detected during nuclear tests carried
out by the Russians in 1990.
A National Security Council group is expected to meet shortly to
consider the analysis of the suspected test.
The military officer said the uncertainty surrounding the suspected test
shows that either the Russians have violated their pledge not to conduct
nuclear tests or that determining if low-yield nuclear tests were carried
out cannot be verified under the Comprehensive Test Ban Treaty.
"I don't have an opinion one way or another. I just think this should be
part of the public debate," the officer said.
* Ernest Blazar contributed to this report.

********

#7
PASSING DRAFT 1998 BUDGET AIN'T GONNA BE EASY, YEGOR STROYEV
MOSCOW, AUGUST 28. /FROM RIA NOVOSTI CORRESPONDENT VIKTOR
BEZBREZHNY/. To pass the draft 1998 federal budget through the
parliament will be not easy. This was stated by Yegor Stroyev,
chairman of the Upper Chamber of the Russian parliament -
Federation Council, in a RIA Novosti interview today.
Stroyev reported that he already discussed the problems of
budget and tax code with President of Russia Boris Yeltsin, and
intends to meet with the chairman of the Lower House, Gennady
Seleznyov, specially on this issues.
Yegor Stroyev believes that the forthcoming debates over
these documents in the both Chambers of the Russian parliament
will be difficult since 'they /the drafts/ do not relieve tax
burden on Russian producer, leaving it the same and even worse.'
And this, according to the speaker, 'does not allow for the
further development of production.' Among other drawbacks of the
two bills Stroyev called 'a much slimmer possibility given to
Russia's regions in using their resources.'
However, the chairman of the Upper House expressed a hope
that both the Duma and the Federation Council along with the
Russian Cabinet via conciliatory commissions will be able to
reach a compromise 'by not cancelling but specifying some
regulations' of the two drafts. "We will no doubt have them
adopt, but we want them [drafts] to be reasonable and balanced
so that they could improve the life of our people," stressed
Yegor Stroyev. 

*********

#8
>From RIA Novosti
Rossiiskaya Gazeta
August 28, 1997
PRIVATIZATION PROGRAMME FOR 1998: MORE OPENNESS 
By V. Kucherenko

Vice-Premier M.Boiko has presented a draft of the state
privatization programme which will then be presented to the
legislators together with the draft budget for 1998.
* * * 
The State Property Management Committee of the Russian
Federation faces the task of securing the inflow to the
treasury of 6.1 billion new roubles. This means that blocks of
shares will have to be sold at least at a quintuple price
compared to the one that was originally contemplated. For the
first time the programme has a forecast list of open
joint-stock companies attached to it, the federal blocks of
shares of which are going to be sold.
These include such pearls as Svyazinvest (25% minus two
shares) with the anticipated starting price of 8.9 billion
roubles (or 8.9 trillion in old money). Or, 59.93 per cent of
the shares of Slavneft with a starting price of 1.2 billion
roubles. The auction for 6.6 per cent of LUKOIL's shares is
expected to fetch at least 6 billion roubles.
The juiciest pieces, though, are the Transneft and
Transnefteproduct pipeline companies which will both auction
off 50 per cent of their shares minus one share (starting
prices 3.6 and 3.1 billion roubles). Rosneft, too, which
participates in very promising international projects and
which controls more than two billion tons of the explored oil
reserves is to be 96% sold off (starting price - 5.4 billion
"new" roubles).
Buyers will also be offered such treasures as the
Aeroflot-Russian Airlines company (51 per cent for a minimum
of 1.2 billion roubles, with only the "golden share" to be
retained by the state, 100 per cent of the Sheremetyevo
airport shares, a quarter of the shares of the Energiya space
corporation (3 billion), 14.3 per cent of the shares of the
magnificent West Siberian Metallurgical Works (300 million). A
special mention should be given to the plan of privatization
of 26 per cent of the world-famous Izhmash arms works, the
auction for which will be held with a starting price of 520
million new roubles. Altogether, there are 29 major
joint-stock companies on the forecast list. 
There is also a separate list of another 37 enterprises
which are to be converted into joint-stock companies. Most of
these enterprises are from the defence industry system.
Presenting the programme, M. Boiko said that he will seek
the approval by the State Duma of a still broader list of
structures for privatization, for the budget revenue
assignment is very tall indeed. He will also seek a decision
by the Duma to grant maximum freedom to the State Property
Management Committee for the sake of collection of maximum
profits. He firmly believes that he will be able to find 226
supporters in the Duma.
Among the specific features of the new programme one
should mention the practically total disappearance of
privileges for work collectives. The only exception will be
the workers (and members of their families) of the enterprises
to be withdrawn from the arms services structure, and this
will be done in order to speed up the military reform. The
granting procedure and the size of such privileges which are
not envisaged by the law will be determined by the government.
There is a special chapter in the law concerning the
protection of privatization agency officials, and this is done
in connection with the assassination of the head of the St.
Petersburg property management committee, M. Manevich. There
is also a section providing for information support for the
Privatization-98 programme.
"We intend to carry out privatization in a honest and
open manner and with good results, too," said M. Boiko.

*********