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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

October 21, 1997   
This Date's Issues: 1299  1300  1301


Johnson's Russia List [list two]
#1301
21 October 1997
davidjohnson@erols.com

[Note from David Johnson:
1. Rossiiskiye Vesti: WHAT DO RUSSIANS THINK ABOUT THE 
CURRENT POLITICAL SITUATION? (Public opinion poll).

2. Vek: Interview with national Security Council Secretary Ivan 
RYBKIN. 

3. Interfaks-AiF: Material prepared by experts of the Interfax 
Agency's Center for Economic Analysis, "No Real Prerequisites for 
Economic Growth in Russia."

4. Rossiyskiye Vesti: Nadezhda Popova, "World Renowned Scientists
Behind Barbed Wire."

5. Floriana Fossato (RFE/RL): Ekaterinburg Tries To Attract 
Foreign Investment.]


*******

#1
>From RIA Novosti
Rossiiskiye Vesti
October 21, 1997 
WHAT DO RUSSIANS THINK ABOUT THE CURRENT POLITICAL SITUATION?

Acting together with the Presidential Administration's
experts, Rossiiskiye Vesti conducted a special survey on the
eve of the quadripartite meeting in the Kremlin. It was
intended to find out all about various changes in Russian
citizens' attitude toward the State Duma's activities
(depending on its decisions as regards vitally important bills
now being discussed by the parliament's lower house).
Opinion polls show that most Russians (53 percent as
opposed to 19 percent) have a negative opinion of the State
Duma's record. Besides, 66 percent of respondents think that
the Duma doesn't reflect the interests of its electorate.
At the same time, the number of respondents, who
positively assess the Duma's work, has increased somewhat--from
10 percent in May to 19 percent in September. This is seen as a
rather important development.

The Tax Code And the Draft Federal Budget
Part of all Russians are quite interested in reports about
the discussion of the draft 1998 federal budget, the new tax
code and the state privatization program at the lower
parliament house.
About one-third of all respondents (32 percent) take a
lively interest in issues pertaining to the tax system's
reorganization. Nearly 40 percent of all citizens pay attention
to all reports dealing with the elaboration and discussion of
the draft 1998 federal budget. And the rest are either
disinterested in such issues or don't receive any information
on that score.
The perception of complicated issues within the framework
of the tax reform and the budget-endorsement process by the
public at large apparently constitutes a rather serious
problem. More than 50 percent of respondents say that they
don't understand the gist of reports dealing with tax-related
issues. The majority of all pollees don't have any clear idea
about the essence of the current tax system, as well as the
future reform's concrete directions. Besides, the population
doesn't always understand mass-media reports concerning the
elaboration of the new budget (In fact, 50 percent of
respondents admit that they don't get the essence of such
reports).
Therefore the people of Russia are not very well-versed in
complicated tax-reform issues and those pertaining to the
elaboration of the 1998 federal budget. An overwhelming
majority of respondents regard such issues as something
irrelevant, thinking that the latter have little in common with
their everyday life. All these factors exert a considerable
influence on Russian citizens' attitude toward the discussion
of the afore-said issues at the lower parliament house.
Public opinion expresses a restrained and largely negative
attitude to the present-day tax system. Most Russians (54
percent) believe that such a system is unfair. People are
discontent with the existing tax system; and such discontent
explains their readiness to approve projected tax-reform plans.
Nearly 50 percent of all respondents (48 percent, to be more
exact) approve of the Government's intentions to enact the new
tax code, with only 7 percent regarding such plans in a guarded
manner. Quite a few respondents (31 percent) have not yet
defined their attitude toward the tax reform.
Quite possibly, the positive attitude of most Russian
citizens to specific tax-reform plans has something to do with
their firm conviction to the effect that the reform won't
directly affect them (This opinion is shared by 45 percent of
respondents--Ed.). Only 15 percent of all citizens regard such
a reform with alarm; this category of respondents believes that
the enactment of the new tax code will increase their tax
burden.
At any rate the approval or the rejection of the new tax
code is highly unlikely to affect the State Duma's popularity
to a great extent. By all looks, the people of Russia are going
to display a similar attitude toward the adoption of the new
draft federal budget. Most people don't have any concrete
opinion about the budget's nature and specifics; nor do they

know a lot about all sorts of alternative draft budgets.
Consequently, the budgetary stand-off between the Parliament
and the Government is highly unlikely to drastically influence
the popularity of both sides.
The following statistics are quite interesting in this
connection. It's an open secret that, among other things, the
1997 budgetary discussion centers on specific budget-revenue
sources. The Public Opinion fund had conducted its own poll
this past September, thus learning what the public thinks on
such issues.
Russia's citizens are ready to support those particular 
draft budgets and tax codes, which would scale down the
corporate tax burden (43 percent of all respondents). Another
alternative is as follows--rich people should pay more taxes
(45 percent of respondents). In this connection, we would like
to note that public opinion reacts quite positively to all
kinds of tough measures called upon to establish law and order
in this sphere. For example, an overwhelming majority of
Russian citizens (80 percent this past June) would approve
tougher state control over private individuals' incomes and
cash-income sources.
Some other vital measures to facilitate an economic
recovery are listed below. For instance, all monies now
circulating inside the financial sector should be channelled
into the federal budget. Some 27 percent of respondents think
that the nation's banks should contribute more money into the
budget. Another 26 percent suggest "repatriating" all monies
that had been "salted away" to other countries of the world. 20
percent of respondents demand that the Cabinet make short work
of all enterprises failing to make the appropriate budgetary
payments; among other things, bankruptcy proceedings should be
instituted against such entities.
Indicatively enough, no pro-inflation options making it
possible to swell federal revenues are suggested at this stage.
Tax proceeds are definitely seen as the main source of
replenishing the budget's revenues. Only 7 percent of
respondents suggest that the Government print more money. In
the meantime opinion-poll respondents don't support such
actions as the sale of Russian enterprises at auctions (with
the express purpose of obtaining as much money as possible).
Nor are they very happy about foreign-bank and
foreign-government loans. The pollees don't support specific
plans for axing social appropriations and for channelling the
sums thus derived into production-expansion projects.
Most of the above-said popular preferences don't directly
contradict the Government's intentions that are contained
inside the draft budget. Therefore one has some doubts about
the fact that the Duma will manage to suggest an alternative
federal-budget version that would be more readily accepted by
society (thus drastically boosting the popularity of the
parliament and its partisan-political forces) during its
budgetary confrontation with the Cabinet.

On the Privatization Program
As distinct from tax and budgetary issues, in
privatization issues the people of Russia will, most likely,
sympathize with the State Duma, which is renowned for its
die-hard criticism of the Government's actions in the given
sphere.
Society keeps voicing a negative opinion of privatization.
As many as 54 percent of respondents negatively assess the sale
of state property to private individuals, with only 26 percent
viewing this as something positive. Part of all respondents
have either failed to define their attitude toward this process
(9 percent) or view privatization with indifference (11
percent). The people of Russia are particularly opposed to the
privatization of major industrial enterprises. Only 5-7 percent
of respondents approve of the privatization of major production
facilities and mining-industry entities over the last 5 years;
60 percent of the pollees view such sectoral privatization as
something negative. Society also rejects the organization of
auctions aiming to sell away the shares of major industrial
enterprises. Most Russians (54 percent) are sure that such
auctions have violated the relevant legal proceedings,
suggesting that the above-mentioned enterprises either be
nationalized, or that new auctions should take place (65
percent). Consequently, the discussion of such issues by the
State Duma is regarded with understanding by society; as a
result, the Duma has every chance of becoming more popular.
However, the opposing side, i.e. the Russian Federation's
Government, still has some arguments on this issue; such
arguments will be heard by this country's citizens, eventually
"softening" their stand on the privatization issue.
First of all, the people of Russia are quite happy about
the results of the so-called "smaller" privatization, i.e. the
privatization of housing, small-time production facilities,
stores, service centers, etc.
Obviously, the denationalization of this sector, whose
operation directly affects most of the population, usually
meets with approval.
Second, society has already come to understand that
private property is more effective than state property (despite
the fact that the population negatively assesses the practical
implementation of the privatization program). Quite a few
Russians (41 percent) are inclined to think that those specific
enterprises belonging to one or several owners perform better
today. Their opponents constitute the minority; only 15 percent
of respondents are positive that state-run entities are more
effective than the rest. The confidence of most Russians to the
effect that private property is more effective might serve as a
basis for legalizing the entire privatization process.
However, the adoption of various resolutions on those
particular bills that are now being discussed will hardly alter
society's attitude toward the lower parliament house and its
political forces. Relations between the two branches of state
power will be largely affected by their rather low respective
popularity.
The following results of nationwide opinion polls enable
one to gain an insight into possible popular sympathies in case
of sharply aggravated relations between the two branches of
power, as well as our people's attitude toward the
government-parliament relationship.

On Relations Between Russia's Powers-That-Be
Opinion-poll results seem to prove that most Russians
support the settlement of specific contradictions between the
President and his Cabinet, on one side, and the Federal
Assembly, on the other side, by means of compromise.
Any government actions leading to aggravated relations
with the State Duma would hardly meet with all-out popular
support. For example, 37 percent of respondents believe that
the Cabinet should avoid conflicts, while dealing with the
State Duma, and that it should also make concessions. At the
same time, many respondents (31 percent) advocate a tough
government stand with regard to the State Duma.
Quite a few Russians would not approve of the
executive-power branch's confrontationist moves. However, the
Duma's unconstructive tactics would meet with even greater
condemnation. 65 percent of respondents think that the Duma
should aspire for constructive work with the President and the
Cabinet, searching for compromises. Only 21 percent of the
pollees think otherwise, stressing that the Duma should stick
to its positions, even if it has to aggravate relations with
the executive-power branch.
The Russian public at large apparently doesn't support
various ideas pertaining to the revision of parliamentary and
presidential constitutional prerogatives. This attests to the
fact that society would like to preserve the status-quo in the
current line-up of forces.
According to the September 1997 nationwide opinion poll's
results, society is divided over the parliamentary opposition's
demands on curbing presidential powers and expanding those of
the Federal Assembly. Over one-third of respondents (31
percent) suggest amending the Constitution accordingly.
Meanwhile a lot of respondents (36 percent) voice diametrically
opposite views. Another 34 percent remain undecided.
Most Russians support compromise tactics in relations
between the two state-power branches. One should also keep in
mind that society is coming to reject various confrontationist
steps on the part of the Duma and this country's President.

The State Duma's Possible Dissolution
Despite the fact that many Russians negatively assess the
State Duma's activities and are inclined to support the
Government's tough anti-Duma line, public opinion doesn't
support the Duma's possible dissolution by the President. 52
percent of the pollees (as opposed to 25 percent) would react
negatively to such a decision by the President. Yeltsin's
supporters, Moscow and St. Petersburg residents (35 percent),
as well as young people, are ready to approve the Duma's
dissolution. On the other hand, the Communist Party's
electorate, rural and small-town dwellers would react
negatively to such a move.
This poll shows that society has become more opposed to
the Duma's possible dissolution over the last six months. From
May to September 1997 the number of Russians, who would oppose
such a decision by Boris Yeltsin increased from 45 percent to
53 percent, and the number of those, who would approve such a
decision, plunged from 34 percent to 25 percent.

No-Confidence Motion
The people of Russia would be more willing to support the
Duma's no-confidence vote in the nation's Government than the
Duma's dissolution by the President. (The State Duma has the
right to pass a no-confidence vote on the Russian Cabinet--Ed.)
Some 38 percent of respondents would approve such a
no-confidence motion, what with another 39 percent opposing
such action on the Duma's part. 23 percent of the pollees are
still undecided on this score; the same number of respondents
has no opinion on the Duma-dissolution issue. The older
generation, as well as relatively uneducated people, rural
dwellers and the Communist Party's supporters are more inclined
to approve the no-confidence motion. Conversely, well-to-do
respondents, people living in Moscow and St. Petersburg, as
well as the electorate of Boris Yeltsin, Boris Nemtsov and
Grigori Yavlinsky, would object to such State-Duma actions.
Just like the Duma-dissolution issue, possible
confrontationist moves on the Duma's part have come to enjoy
less substantial support over the last six months. The number
of respondents, who would approve the no-confidence motion, has
declined from 45 percent to 38 percent throughout the
May-September 1997 period, with more and more respondents
opposing such a move (from 28 percent to 39 percent).
Summing up, various radical measures that might be taken
by both sides, i.e. the no-confidence vote in the Cabinet, as
well as the State Duma's dissolution, don't fit into the
Russian population's compromise strategy pertaining to
relations between two levels of state power and therefore are
highly unlikely to promote any substantial increases in their
popularity.

**********

#2
>From RIA Novosti
Vek, No. 39
October 1997
IVAN RYBKIN GIVES INTERVIEW
Following below is an interview with national Security
Council Secretary Ivan RYBKIN. 

QUESTION: The Soviet people used to fear world
imperialism. And what should the people of Russia fear today?
ANSWER: At present we have renounced our intention to
confront the entire world. Only those delirious people, who
keep suffering from this disorder in spring and fall-time, can
conjure all sorts of enemies that allegedly threaten us. Russia
constitutes one of the multi-polar world's centers. The bloc
system has outlived itself. We need a Europe devoid of any
demarcation lines whatsoever. Besides, Russia is seen as the
"buckle" of the sprawling Vancouver-Vladivostok "peace belt".
That belt can't do without such a buckle. This can become the
subject of our national pride, which should be nurtured
accordingly.
QUESTION: Does this mean that Russia faces domestic
threats alone?
ANSWER: To a considerable extent, yes. We are also
threatened with local conflicts and border-line clashes, as
well as a rebellion. By the way, our legislation says nothing
about rebellions; that's why we must fill in this gap. Russia,
which is now experiencing a crisis, has started to weather such
a crisis little by little. What we need is consolidated action.
QUESTION: Hostage-taking in exchange for ransom is now
seen as the most profitable business in Chechnya. How do you
and the Security Council intend to tackle this problem?
ANSWER: We had established a commission responsible for
locating all missing persons after the war ended. That
commission has worked all this time, freeing 784 people.
However, more than 1,400 persons are still listed as missing.
The Rostov-based forensic-medicine lab has the remains of 600
dead servicemen at its disposal. That lab's equipment makes it
possible to compile a data bank listing all dead people. We
would like the relatives of such dead persons to send in their
genetic codes for identification purposes. There is a special
cemetery in Rostov; all those relatives, who have identified
their near and dear, can subsequently take their remains and
bury them in their home parts. Chechnya demands that its
doctors alone work at 100 burial sites containing the remains
of another 600 soldiers, or so. The Chechen doctors have
completed a special training course in Rostov, having received
the appropriate equipment from Russia. Consequently, not more
than 200 missing persons still remain to be found. Some
people don't want to go back to Russia just because they have
become Moslems (assuming new names, too). However, we estimate
that over 100 persons will have to be released. This problem is
compounded by new hostage-taking outrages and certain
inadvertent publications.
QUESTION: Chechnya persistently defends its independence.
Can such persistence lead the talks into a blind alley? 
ANSWER: I always tell them that Chechnya should receive as
many powers as it can digest. Right now, they are unable to
cope with their current powers. For example, this concerns the
1997 federal budget's social appropriations--1 trillion and 27
billion roubles. Starting with April 1997, Chechnya keeps
receiving 40 billion roubles in terms of pensions each month.
Or take social benefits to children. The fund for supporting
small-time business gets 1.8 billion roubles. The repayment of
debts to Chechen affiliates of Russian construction
organizations entails 276 billion roubles. Cattle-wintering
programs and the spring-time sowing campaign require 80 billion
and 60 billion roubles, respectively. The Chechen-Auto-Dor
department annually gets 205 billion roubles for the upkeep of
the Caucasus-Rostov-Baku highway. As of July 1, 1997, it had
received 105.3 billion roubles. Another 80 billion roubles are
being channelled in order to maintain intra-Chechen roads. Plus
the repayment of 1996 debts. All in all, that organization
alone gets 250 million roubles. In real life, the sum total
exceeds the one-trillion rouble mark a great deal.
The most terrible thing is that Chechen economic
transformations lag behind similar Russian reforms by 7-8
years. The current legislation is filled with discrepancies.
Aslan Maskhadov has issued the privatization decree only now.
That document is a bit unusual because it allocates 0.6
hectares of land to all resistance fighters. Chechen leaders
want to keep a lot, if not everything, inside the public
sector. They are playing it tough. Chechnya is now being
prompted by quite a few countries of the world, including Saudi
Arabia, Jordan and Turkey. Great Britain and the United States
of America also have their own regional interests.
Incidentally, America regards the Caucasus as a zone of its
strategic aspirations.

(Transcript by Larisa AIDINOVA and Inna MURAVIEVA.) 

*******

#3
No Real Economic Growth Signs Seen 

Interfaks-AiF, No. 36
September 15-21, 1997
[translation for personal use only]
Material prepared by experts of the Interfax Agency"s
Center for Economic Analysis: "No Real Prerequisites for Economic
Growth in Russia"

Against the background of the happy remarks of officials to
the effect that the downturn that has lasted for the past 10 years
and the country"s economy are about to start to grow, experts"
forecasts paint an entirely different picture. It should for fairness"
sake be noted that there are also bright spots in what is, as a
whole, a gloomy picture....

Not All Is That Bad

The final month of summer did not, just as Interfax experts
had forecast, make fundamental changes to the trends that had taken
shape in the period January-July of this year. According to the
data of official statistics, the GDP of Russia from January through
July 1997 declined only slightly compared with the corresponding
period of last year. In the sphere of industrial production, on
whose development the situation in the Russian economy as a whole
depends to an increasingly decisive extent, growth was recorded
in microbiological, medical, and printing industry, in the nonferrous
metallurgy and machine-building and chemical and petrochemical branches,
and in timber, wood-processing, and pulp and paper industry. The
possibilities of obtaining inflationary profits acquired from an
increase in the price of goods and services have been limited consistently
and in practically all spheres of the economy (although these possibilities
are not entirely exhausted in services).
In the period January-July of this year real disposable personal
monetary income grew 4.6 percent, and real per capita monthly pay,
2.6 percent.
According to the data of official statistics, foreign investments
in the Russian economy continued to grow in the first half of 1997:
Over $6.6 billion was received in the first six months, which was
3.3 times more than in the corresponding period of last year. True,
65.3 percent of these were so-called miscellaneous investments (mainly
commercial credit and bank deposits), the amount of which grew threefold.
Direct investments amounted to 32.7 percent of the total and increased
slightly less than fourfold compared with last year"s level.
As of 1 July 1997, accumulated foreign capital in Russia"s
economy constituted $17.8 billion.
And, finally, some pleasant news: In August the consumer price
index, which is taken here as the main inflation indicator, constituted
99.9 percent. That is, as last year also, August was characterized
by a decline in prices of 0.1 percent. In September, estimates show,
prices will have grown only 0.3-0.4 percent. This cannot appreciably
alter the relatively steady trend of attenuation of the price dynamics.
The overall monthly consumer price index for the year as a whole
is forecast at the 1-1.2 percent level. This, perhaps, exhausts
the optimistic tints in the picture of the Russian economy.

Everything Else Is Far Worse

The downturn in the investment sphere remains relatively steep.
Without a change in the negative trends here all the talk about
economic growth is the height of speculation. Total investments
in eight months of 1997 amounted to approximately R210 trillion,
which was 8 percent less than the level of the corresponding period
of last year. The dynamics of investment in housing construction
compared with last year continue the extremely negative trend. Enterprises
and organizations of all forms of ownership built on the territory
of Russia in January-July a total area of 11.7 million square meters
of well-appointed apartments, which was 15.5 percent less than in
the same period of 1996.
There is every reason to believe that the steady rate of investment
decline will persist in the immediate future. Investments from all
sources of financing in January-September are forecast at the level
of R235-240 trillion or approximately 93 percent of the corresponding
period of 1996.

Adaptation Means Merely Survival

The revitalization observed in individual branches of industry
testifies to some extent that a number of economic agents is adapting
to the current reforms. It is hard to say to what extent this corresponds
to politicians" hopes for a stabilization of the Russian
economy. This adaptation still has clearly expressed features of
"survival" strategy.
The production of consumer goods continues to decline. One
reason is the acute competition on the part of imports, which are
satisfying demand to a considerable extent today.
According to the data of official statistics, Russia"s
foreign trade turnover in January-July declined almost 3 percent.
Exports here, 2 percent, and imports, 4.2 percent. And although
there continues to be a surplus trade balance, the amount of which
is in excess of $13 billion, this trend may be characterized as
negative, on the whole. Russia"s foreign trade turnover
is declining against the background of the preservation of the
predominantly
fuel and raw material structure of Russian exports. Fuel and energy
resources accounted in the first half for 51 percent of total exports,
and metals accounted for 17 percent, whereas machinery and equipment,
for only 8.7 percent.
Under the current conditions the influence of the foreign
economic sector on the development of the Russian economy as a whole
is diminishing. And it was foreign trade to a large extent that
mitigated the seriousness of the crisis phenomena in recent years.
In other words, quite an adverse situation, on whose development
implementation of the government"s plan to secure economic
growth will depend to a considerable extent, is shaping up. After
all, the decline in activity in foreign trade should be compensated
by an appreciable expansion of the supply of goods and services
on the domestic market. And this, in turn, is hardly possible, considering
the unenviable financial position of the majority of Russia"s
commodity producers. The dimensions of the segment of the economy
where a real growth of the production of goods and services is observed
cannot cover the totality of demand on the home market. Thus the
President"s spring "Buy Russian!" appeal is barely feasible
from the purely economic viewpoint. Even were all Russians in a
patriotic fervor to renounce what are now customary imports and
to decide to switch exclusively to Russian goods and services, this
could only be done merely after the formation once again of humiliating
lines for goods in short supply.

Five Percent Inflation? Unlikely

The situation will continue to deteriorate if the proclaimed
goals of a further decline in inflation are accompanied by a new
deterioration in enterprises" financial position, primarily
as a result of reduced profits. If all these processes occur, and,
experts believe, this is highly likely, economic growth in 1998
may at best be regarded merely as a potential possibility.
A considerable excess of monetary income over expenditure,
which had come about by the start of the second half of 1997, is
noticeable in the sphere of personal income. In January-July this
excess amounted to R28 trillion compared with R16.3 trillion in
the same period of 1996. In July-August deposit balances constituted
approximately 54 of personal savings, cash balances, approximately
39 percent, and savings in securities, 8 percent.
All these processes together with the redenomination announced
for the start of 1998 contain a certain inflationary potential,
which will make it extremely difficult to achieve next year a level
of inflation of 5 percent, which is at the present time seen as
a principal goal of economic policy and a condition of execution
of the federal budget.

The Nonstate Economy Is Moving Underground

The nonstate sector of the economy accounts for almost 85
percent of accounts payable past due. This testifies to serious
deformations in the financial sphere. Essentially, the sector of
the Russian economy whose development is the most dynamic and which
is based on market principles of the correlation of supply and demand
is increasingly moving underground, drawing off onto itself material,
financial, and labor resources and not making the necessary contribution
to the formation of public finances. As a result, all the attempts
to increase tax receipts are lying as an extra tax burden on the
part of the economy that is having difficulty emerging from the
crisis as it is.
In January-September 1997 total accounts payable past due
are forecast at the level of approximately R695-700 trillion in
current prices, including approximately R15-150 trillion in tax
arrears. The growth of the debt in the disbursement of pay has been
partially arrested: By the end of September it could constitute
approximately R56-57 trillion.

Better the Bitter Truth...

An analysis of the processes occurring in the country"s
economy shows unequivocally that the real prerequisites for pronounced
economic growth to begin in the immediate future are not yet discernible.
The country remains disorganized, and, as before, no one is offering
specific action for a way out of the crisis.

Summary

Indicators of Russia"s Economic DevelopmentIndicators
Jan-Aug 1997 (estimate)
Jan-Sep
1997 (forecast)

Gross domestic product, trillions of rubles
1,676-1,693
1,909-1,948

as percentage of the corresponding period of
last year
99-101
98-102

Industrial output

as a percentage of the corresponding period of
last year
101-103
101-105

Same for large and medium-sized enterprises
97-99
97-101

Agricultural output

as a percentage of the corresponding period of
last year
93-95
93-96

Capital investments, trillions of rubles
201-210
230-245

Retail commodity turnover, trillions of rubles
536-558
600-637

Consumer prices:

as a percentage of the previous month
99.9-100
99.8-100.4

as a percentage of December of last year
109.3-109.4
109.2-109.8

Industrial producer prices:

as a percentage of the previous month
100.5-100.6
100.2-100.8

as a percentage of December of last year
106.8-107
107.1-107.7

Exchange rate of the dollar (monthly average),
rubles per $1
5,815
5,866

as a percentage of the previous month
100.5
100.9

as a percentage of December of last year
105
105.9

Total accounts payable past due, trillions of
rubles
687.2
696.3

including tax arrears, trillions of rubles
148.4
148.9

Pay disbursement arrears (at the end of the month),
billions of rubles
55,407
56,960

Provision of crediting, trillions of rubles
341.5
341.4

Average monthly per capita income, thousands
of rubles
885.3
878.6

as a percent of December of last year
113.2
112.4

Per capita subsistence level, thousands of rubles
per month
408.1
408

Total unemployed, thousands
6,921
6,953

as a percentage of the economically active population
9.9
9.9

as a percentage of the corresponding period of
last year
103.6
103.8

Numbers
of officially registered unemployed as a percentage of the economically
active population
3.1
3

*********

#4
Shady Operators Exloit Law on Closed Cities 

Rossiyskiye Vesti 
October 16, 1997
[translation for personal use only]
Article by Nadezhda Popova under the "Investigation" rubric:
"World Renowned Scientists Behind Barbed Wire"

Arzamas-16-Moscow -- Odd things are happening in the zone behind
barbed wire, where the Federal Nuclear Center, better known as Arzamas-16,
or Sarov, is situated.... And as a consequence, accidents happen there and
people perish. Some people can hardly make ends meet: Wages in cities
situated behind barbed wire have long been paid [only] two or three times a
year! It is true, though, that some people just don't care: Their wallets
are always tightly packed.... Such people look for and find loopholes in
laws. The Law on Closed Territorial Administrative Entities is far from
being perfect. Ivan Nikitchuk, a State Duma deputy, who is a nuclear
physicist by profession and calling, has came out with an initiative,
namely -- on introducing an important amendment into the Law on Closed
Territorial Administrative Entities to ensure that the flow of money ceases
to run into the pockets of swindlers. Let this money be used for the good
of Russia's federal nuclear centers and at least somehow alleviate the
misery in which world renowned scientists live today in closed cities, and
besides, not scientists alone but ordinary residents as well.... [Passage
omitted on Sarov's history dating back to 1946 when it was founded on
Beria's order; secrecy surrounding it]
It is true that today nobody refers to the city as a "zone."
[Reference to the fact that installation was orginally built using penal
colony labor] Perhaps, because over the last five or six years, and
especially over the last two years, Russia's Federal Nuclear Center -- this
is today yet another name for Arzamas-16 -- has virtually ceased to differ
in any way from its big brother -- the city of Arzamas, where Arkadiy
Golikov (alias Gaydar [Soviet writer, grandfather of Russia's Democratic
Choice leader Yegor Gaydar]) once lived and worked. Moreover, today
Arzamas-16 is increasingly turning into a small provincial town, in which,
like everywhere in Russia, there are lots of problems: Buildings fall into
decay, roads develop cracks, and unemployment affects hundreds of people
and not just a few individuals.... And the most terrible thing is that the
All-Russia Scientific Research Institute of Experimental Physics [VNIIEF]
is becoming unserviceable. Just think of how many laboratories that once
used to be in the lead have simply been closed down. How many doctoral and
candidate theses have gone undefended. How many nuclear scientists have
gotten themselves jobs in banks or private firms, or have even simply
decided to become "shuttle traders" in order to be able to somehow provide
for their families. Nobody in the city keeps record of such statistics
either. Everybody ekes out their survival on his own. Or is trying to. 
Like nuclear physicist Aleksandr Zakharov, who perished recently, had
tried. As has now become known, he was doing contract work for Americans. 
On that tragic day it was their assignment that he was fulfilling in a
bunker. It was formulated like this: "Determination of Chain Reaction
Constants." At least two more scientists should have been present during
the fulfillment of that sort of work in the bunker where physicist Zakharov
was, because the experiment required the use of six hands and not just two.
A. Zakharov accidentally dropped the casing [obolochka] with which he was
working, and in addition to everything else, he had mounted the deflector
screen [ekran-otrazhatel] incorrectly. Uncontrolled nuclear fission
occurred. And the scientist was inadvertently exposed to powerful X-ray
radiation in the bunker. [Passage omitted detailing Zakharov's death,
pittance paid by the United States to Russian scientists, possibility that
other scientists may be tempted to work for similar sums paid by Americans
in light of fact their russian wages have not ben paid for several months
and themselves become casualties.]
What has changed since Zakharov's death? A few heads have rolled. 
And that was that. No tough measures have been taken this time too. And
who cares, if the people constantly rack their brains over one question
only: How to earn their living?
In the chase for pots of easy money, smart alecks come up with such
decisions that, in all likelihood, academicians Sakharov and Khariton must
be turning in their graves. Recently a dynamic and enterprising gentleman,
who had hardly any proper idea of what the nuclear industry is all about --
the gentleman's name is Sergey Krysov -- decided to set up the production
of stable isotopes at Arzamas-16. Establish it he did. However, he did
not think about working conditions or safety measures. What was the
result? An accident. At facility 21 (that facility can be seen from my
parents' window). A group of mathematicians was poisoned with cadmium. 
Everybody was saved by medics and nobody died. But cadmium poisoning is
not like a spoilt hamburger eaten in the canteen. The aftermath of cadmium
poisoning can crop up at any stage of one's life. When Mr. Krysov set up
the production of stable isotopes (the comrade had hoped so much that he
would be getting good profits), he did not even think about ventilation
arrangements. And fortunately, it was not a work day when the accident
occurred -- the hard-working mathematicians alone were in the building, but
what would have happened if the accident had occurred on Monday or
Wednesday? How many people would have been poisoned? And if you think
that Mr. Krysov was punished in some way, you are mistaken. Nothing of the
kind.
The life of Russia's Federal Nuclear Center today is hard and arduous.
At that same facility 21, where the accident took place, physicists are
getting food... on credit in the local canteen. For this a special debt
ledger has been opened. You have had your lunch
-- so write down what precisely you ate and drank. On the pay-day you
will have to pay. Such debt ledgers have also been introduced at other
facilities. Bread, butter, sugar, and matches are today sold on credit in
Arzamas-16.... All these things can, perhaps, be bought with $12 [this
money was, allegedly, paid by the Americans to Zakharov on a monthly
basis].
But nevertheless long ago there appeared people in the city who ride
in foreign-made cars, jingle their gold chains, and share out spheres of
influence. It is they who look for loopholes in the law, so as to be able
to earn money. And much money at that. Inside the zone. Especially
inside an investment zone, because the current Federal Law on Closed
Territorial Administrative Entities provides for all taxes (federal,
regional, local, and others) to remain inside closed territorial
administrative entities (in the city budget). This means that all types of
taxes have, as it were, been converted to the rank of local ones. 
Initially, this was done on purpose. The state went for such a measure
taking into account the importance and significance of the defense problems
tackled at closed territorial administrative entities. As is well known,
local authorities deal with local taxes. And they are authorized to grant
tax privileges too. It is precisely from these two circumstances that the
idea of the "investment zone" was born. Some people immediately figured
out: If somebody else's enterprises, situated outside the "barbed wire"
get registered within closed territorial administrative enities, this can
yield quite good "dough." How to entice them? Of course, by tax
privileges.... Thus, a huge queue lined up to get registered in the
Arzamas-16 Closed Territorial Administrative Entity. Reputable firms from
Moscow, St. Petersburg, and Nizhniy Novgorod. By now, over 60 of them have
been registered. They trade in oil, cars, and spare parts. Their visible
"contribution" has come to 29 billion rubles [R]. A total of R90 billion
has become invisible. In whose pockets has this much money settled? This
is money of a different order than the $12 for which nuclear physicist
Zakharov perished.
"All this is a cause for great apprehension," Ivan Ignatyevich
[Nikitchuk] said. "And you will agree that the question of whom to
register and whom not to register or to whom to grant benefits has got to
be discussed at federal level. The government should work out special
regulations on how, precisely, enterprises should be registered within or
outside the territories of closed territorial administrative entities. The
Russian Federation Finance Ministry, Ministry of Atomic Energy, and Defense
Ministry should have their say."
"I myself worked in a closed city for over 30 years," deputy I.
Nikitchuk continued, "I know its problems, both big and small."
That is why Ivan Ignatyevich has come out with the initiative to
introduce an amendment to the Law on Closed Territorial Administrative
Entities. The deputy has already received support at Russia's Ministry of
Atomic Energy and at the FSB [Federal Security Service] At the end of
October the amendment has to be discussed in the State Duma. Ivan
Ignatyevich hopes that State Duma deputies will treat the amendment in a
most responsible manner.... 
At the same time many heads of closed cities are sharply opposed to
Ivan Ignatyevich's initiative. Yet, there is nothing odd about this. The
R90 billion that has circumvented the state pocket has ended up somewhere
after all.... And nobody even blushed. The barbed wire behind which closed
cities are situated has so far been used as an excuse in many shady
affairs. But this is only so far, right?...

********

#5
Russia: Ekaterinburg Tries To Attract Foreign Investment 
By Floriana Fossato

Ekaterinburg, 21 October 1997 (RFE/RL) -- Ekaterinburg -- a regional center
in the Urals and home town of Russia's President Boris Yeltsin -- is busy
trying to attract foreign investment for the troubled economy of its
Sverdlovsk region, once a pillar of the Soviet military industry. 
However, observers say that, despite the impressive list of visitors
arriving and expected in this region located two time zones east of Moscow,
investment activity is not yet following the encouraging trends of other
Russian regional centers, such as Samara or Nizhny Novgorod. 
Regional Governor Eduard Rossel, presenting the 1998 draft regional
budget to the local legislative assembly last week, said optimistically
that the Sverdlovsk region's economic performance will start improving next
year. However, in the same speech, Rossel forecast a regional budget
deficit reaching 25 percent of the overall expenditure. Regional
legislators, in remarks broadcasted by local television stations, called
the figure "surprising" and complained that revenues, expenditures and
deficit figures would not mark an improvement from this year. However,
commentators in Ekaterinburg noted that, despite the "bad general opinion"
expressed by local deputies, Rossel is well in control in the region. 
According to Sverdlovsk regional officials, the region is planning an
issue of Eurobonds for "as much as $500 million." The first release of
$100-$150 million is planned for next month. However, the Eurobonds issue
may take place only following the consent of Russia's Central Bank, and a
Presidential decree. To date, Yeltsin has authorized only Moscow, St.
Petersburg, and Nizhny Novgorod to issue such bonds, but Rossel and
regional officials are confident. 
Rossel seems sure Yeltsin will support his former power-base. And
Ekaterinburg is scheduled to become the unexpected venue of a tri-lateral
summit of heads-of-states of Russia, France and Germany, that was announced
recently during the Council of Europe in Strasbourg, France, that Yeltsin
attended. Some observers have said the announcement was dreamed-up more for
domestic consumption, in an attempt to help Yeltsin and Chirac win
favorable headlines. 
The first such summit is to take place next year in Russia. More
precisely, after a meeting between Yeltsin and Rossel, it was announced
that the summit will take place in September, 1998, in Ekaterinburg.
Sverdlovsk's regional press last week reported extensively on Rossel's
comment that the summit will "play a key role for the future development"
of the Sverdlovsk region. 
American financier and philanthropist, George Soros, has just completed
a two-week tour of the Federation, which included Ekaterinburg. Soros
yesterday announced plans to pour up to $500 million in philanthropic aid
into Russia. He said his focus will be on health and military reform, and
other areas the central government is unable to fund adequately. Soros
announced plans to fund major programs to improve maternal and child
health, to combat Russia's serious tuberculosis problem, and to augment the
government's military reform plans by training officers and retraining
those who leave a shrinking army. 
The Soros Foundation is also providing $100 million to create Internet
centers to 33 Russian higher-education institutions. Ekaterinburg
University, whose modern Internet center was opened in August this year, is
the tenth such establishment to take advantage of the program, while some
300 local scientists and scholars have received grants from the Foundation. 
A Western economist based in Ekaterinburg says there is interest in the
region among foreign investors, but to date no major projects can be
mentioned that could represent a real "success story," following the lines
of ventures in Moscow and a few other Russian regions. The economist told
our correspondent that investors have flocked to the Sverdlovsk region in
the past year, because "they realize there is potential and a big
investment need" to convert the factories belonging to the former Soviet
military-industrial complex, and to develop the regional rare-metals
extraction industry. 
But, for a number of reasons, including the lack of a legislative and
tax climate that investors could consider favorable, major projects are
proceeding with difficulty. According to the economist, one of the
exceptions is Coca Cola, which is building a bottling facility in the
region. Coca Cola has now 12 bottling plants in Russia and has invested
about $600 million in the country's economy. 
Governor Rossel last month visited Japan in hopes of stimulating trade,
and announced a special tax holiday for large investors. Rossel said that,
over the next two years, the tax on profits will be reduced to eleven
percent from 22 for investors spending more than ten-million dollars in
regional projects - and could further be reduced to five percent for larger
projects. 
The issue of tax collection is central to the tax-and-budget debate
taking place in Moscow at the moment. Yeltsin said last month that
companies will pay regional taxes based on where their plants are located,
rather then where they are registered. The move is seen as a major
concession to regional leaders, aimed at obtaining their support for the
approval of a new tax code, considered essential for Russia's economy.
Since many companies are registered in Moscow, the capital has so far
benefited from the tax revenues generated. 
Rossel, who has been a strong critic of Yeltsin and an advocate of
regional independence, is apparently opting for a more flexible approach to
Moscow. And, this, in turn, is helping the region gain international
visibility. 
(Moscow correspondent Floriana Fossato has just returned from a
week-long assignment in Ekaterinburg.) 

*******

 

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