December 6, 1997  
This Date's Issues: 1412  •  •

Johnson's Russia List
#1412
6 December 1997
davidjohnson@erols.com

[Note from David Johnson:
1. Robert Hughes: On Tim McDaniel's "Agony of the Russian 
Idea" and Chubais' financial pickle.
2. G.F. Bain: Re Johnson/Resignation.
3. April Stines: Re 1411-Filipov/Gorby.
4. Reuters: Russian leaders boosted by budget vote.
5. The Electronic Telegraph (UK): Alan Philps, Yeltsin's pleas 
avert 'black Friday.'
6. Robert Lyle (RFE/RL): Russia: IMF Prepares To Prevent Collapse.
7. Rossiyskaya Gazeta: Boris Fedorov (member of the Duma),
"Capital Flight Is in Full Swing."
8. The Journal of Commerce: John Helmer, Yeltsin takes heat for 
blaming trade turmoil on minister.
9. RIA Novosti: RYBKIN MEETS U.S. STRATEGICAL STABILITY DELEGATES.
10. RIA Novosti: RUSSIAN DIPLOMAT COMPLACENT ON IRAQI ARMS THREAT.
11. Itar-Tass: Zyuganov--Russian Left 'Does Not Fear' Duma 
Dissolution.
12. Reuters: No unilateral nuclear arms cuts--Russia defense 
minister.
13. AP: Czar's Bones Resting Place in Doubt.
14. AFP: Russian economy returns to growth, but massive problems 
remain: OECD.
15. MSNBC: Bob Reynolds, Russia's young drug addicts.
16. Moskovskiy Komsomolets: Yana Yurova & Natalya Shipitsyna,
"A Specter Is Abroad in Russia. It Is Called the Collapse of the Whole 
Financial System."
16. Business Week: Patricia Kranz, ASIAN BACKWASH HITS RUSSIA.]

********

#1
Date: Fri, 05 Dec 1997
From: "Lt Col Robert W. Hughes" <RWHughes@Compuserve.com> 
Subject: On Tim McDaniel's "Agony of the Russian Idea" and
Chubais'financial pickle

As always, it is a pleasure for me to peruse JRL--the quantity
and quality of information is quite satisfying. 
I would like to share a few thoughts on Robert Thurston's
review of Tim McDaniel's Agony of the Russian Idea (JRL 1404)
and on the financial hole Chubais has managed to dig.
Thurston's analysis of McDaniel's book was quite thought
provoking. The Russian idea that the Western path can/should
be avoided in the name of a harmonious and egalitarian society
based on a higher form of belief is succinct and quite apropos. 
It is reminiscent of the credo, "Orthodoxy, autocracy, and
nationality" first promulgated by Count Serge Uvarov (President
of the Academy of Sciences and Minister of Education
1833-1849) and espoused by Nicholas I. Nicholas V.
Riasanovsky discusses the profound effect this credo had on
Russian society in his 1959 UC Berkeley treatise, Nicholas I and
Official Nationality in Russia 1825-1855. I commend this
outstanding book to your readers for a fascinating read and
profound insight. Although focused on a period long past,
Rianovsky's conclusions shed a great deal of light on the
behavior of Tsar Boris I, the current Tsarovich, Boris
Yefimovich, and that of the unruly Boyars'.
Which brings me to the topic of money. I found it hugely
amusing to read how Glavniy Chef, Boyar Anatoliy Chubais
went out, hat in hand, to buddy Boris Jordan's bank--Credit
Suisse First Boston, to buddy Vladimir Potanin's good friends at
Deutsche Morgan Grenfeld, Salomon Bro's, and Chase
Manhattan for a $ 2 Bil bail out. 
Good ole Boyar-in-waiting Vladimir must have done some pretty
fancy foot work to convince Anatoliy to press his luck once
more with his loans-for-Rosneft shares scheme...and with an
interesting constellation of stellar performers. 
Seems that a short six months ago, Deutsche Morgan-Grenfeld
(along with Soros' Quantum Fund, and Morgan Stanley Asset
Mgt) dumped a considerable amount into Potanin's
Oneksimbank successful bid on Svyazinvest. Now they were
being called on again. Interesting. 
But what about the mysterious re-appearance of Chase
Manhattan, who only last month disappeared as one of the 11
major banks with which Russia stopped doing business? I
hardly think the Russian Gov't would blackball a major bank just
to call on it again for a financial favor without some sort of
major enticement. 
The Tsar must be more than a little nervous as his Boyars in
this little financial game must certainly be stretched. 
As the saying goes--when you behold an elephant in a cage
bearing a sign, 'Beware of the Tiger!', don't believe your eyes. 

******

#2
Date: Fri, 05 Dec 1997 
From: G.F. Bain <Gfbain@aol.com> 
Subject: Re: Johnson/Resignation

Right on!! about Yeltsin. In addition to your 6 guidelines I'd add a 7th - The
creation of a legal regime guaranteeing property and individual rights
administeredby a non-political judiciary. 
Whew! When I read "Resignation" I thought that YOU were going to resign. 

*******

#3
Date: Fri, 05 Dec 1997 
From: 4ns8stinesa@vmsb.csd.mu.edu (April Stines)
Subject: Re: 1411-Filipov/Gorby

What is with all of the Gorby bashing? I believe that some of the 
partcipants in the list (Filipov) need to understand that Mikhail 
Gorbachev is one of the greatest figures of the twentieth century and to 
stop degrading him as a has been. The fact that he is doing a commercial 
to sustain his worthy foundation shows his toughness to survive in a 
system such as Russia's.

April Stines
Marquette University

*******

#4
Russian leaders boosted by budget vote
By Timothy Heritage 

MOSCOW, Dec 6 (Reuters) - Russian leaders, relieved at winning initial
parliamentary approval for the draft 1998 budget, say hope is growing for the
battered economy after weeks of uncertainty. 
President Boris Yeltsin declared himself satisfied on Friday after
personally
urging the opposition-dominated State Duma, the lower house of parliament, to
vote for the spending plan. 
"Can you imagine what impression it would have made on the whole world
(if the
Duma had not approved the budget)," Yeltsin, 66, said after a rare visit to
what is widely regarded as the enemy's camp. 
"They would say Russia is unstable, that it is not worth doing business with.
That's why I decided to support it a bit." 
The budget, an important part of the government's market reform programme,
still has to be passed in three other readings in the Duma and must go to the
upper chamber of parliament for approval before Yeltsin can sign it into law. 
But rejection on Friday would have threatened a new showdown between Yeltsin
and the Duma, deepening economic and political uncertainty. 
The economy, put under pressure by the turmoil on global financial markets,
may not be out of the water yet. Some experts fear fundamental weaknesses and
nervousness about emerging markets in general could still threaten recovery. 
But the experts detect signs that foreign investors are looking at Russia
more
positively again. Rising equities, falling interest rates and moves by
Russia's central bank this week helped restore some optimism. 
"There are signs of stabilisation," Alexander Livshits, Yeltsin's top
economic
adviser, said in a television interview. 
"If you compare the situation at the end of last week and at the end of this
week, there are hopeful signs. Let's see how next week goes and how it all
unfolds." 
The Paris-based Organisation for Economic Cooperation and Development also
gave Moscow a boost. It forecast the Russian economy would grow slightly in
1997 and speed ahead three percent next year to its first year of strong
growth since 1989. 
One unexpected problem will not have pleased the Kremlin on Friday. 
The United States protested against spying charges brought against an
American
businessman detained in the southern city of Rostov-on-Don and said the
matter could harm efforts to encourage investment in Russia. 
A State Department spokesman said Vice President Al Gore had made the U.S.
position clear in a telephone call with Russian Prime Minister Viktor
Chernomyrdin. 
Russia charged Richard Bliss, a 29-year-old U.S. telephone technician, with
espionage on Friday in what officials say is the first such case involving an
American since the end of the Cold War. Bliss, who was detained on November
25, denies spying.

*******

#5
The Electronic Telegraph (UK)
6 December 1997
[for personal use only]
Yeltsin's pleas avert 'black Friday'
By Alan Philps in Moscow 

RUSSIAN MPs could barely believe their eyes yesterday when President 
Yeltsin, who reduced the previous parliament to a smoking ruin with tank 
fire in 1993, suddenly appeared before them to beg for votes. 
Mr Yeltsin had never addressed the parliament before and usually treats 
it with ill-disguised disdain. But, faced with a looming financial 
crisis, he abandoned his pride and strode into the assembly to plead for 
his government's budget. Dec 5 has long been inscribed in Moscow 
bankers' calendars as financial meltdown day. It was feared that 
foreigners, worried about global financial turmoil, would pull their 
money out of Russia, sending the rouble into free-fall and provoking a 
banking crisis. 
It was the day when the State Duma, the lower house of parliament, was 
to vote on the budget. In Russia, budgets are pious hopes rather than 
spending plans, since the taxman never raises enough money to pay for 
all the expenditure. But the all-important foreign investors, staring at 
their screens in London and New York, would have seen a rejection of the 
budget as a sign that Russia was more than usually out of control. So Mr 
Yeltsin decided to beg. 
"Can you imagine what impression it would have made on the whole world," 
the president said, referring to the possibility of the budget being 
rejected. "They would say Russia was unstable, was not worth doing 
business with. That is why I decided to lend a hand." Addressing the 
house from the podium, he said the world financial system was "in 
fever", adding: "The whole world is waiting the Duma's decision."
* Overwhelmed that the president had deigned to cross Red Square and visit 
them, the MPs voted 231 to 136 in favour of the draft. The Communists, 
the biggest party in the Duma, had sworn to vote unanimously against the 
budget, but more than a fifth of them were swayed to vote in favour, 
thus helping to get Mr Yeltsin off his capitalist hook. 
Prices of Russian bonds immediately started rising and it appeared that 
Russia had escaped a Black Friday. Confidence has also been boosted by 
the government's apparently successful efforts to raise an emergency 
loan of £950 million to £1.3 billion from four foreign banks. The battle 
over the budget is not over yet, but Mr Yeltsin's intervention shows he 
still knows how to dominate the political scene.
Rumours of his wrath make grown men tremble. At a recent Kremlin 
meeting, when the president was in particularly fiery form, the Prime 
Minister, Viktor Chernomyrdin, dropped his briefcase, while the 
Communist Speaker of parliament, Gennady Seleznyov, did not dare to 
demand a cabinet reshuffle. 
The Communists have once again proved to be paper tigers - as they might 
have put it when in power - more keen on a quiet life than provoking a 
crisis which might threaten their comfortable seats in parliament.

******

#6
Russia: IMF Prepares To Prevent Collapse
By Robert Lyle

Washington, 5 December 1997 (RFE/RL) -- The head of the International
Monetary Fund says Russia's financial situation, while difficult, is not at
a crisis point.
IMF Managing Director Michel Camdessus told reporters in Tokyo Thursday
that those expecting Russia to join the Asian financial crisis were looking
in the wrong place.
"We are not panicking at all," he said. "I don't see the crisis in Asia
as the most pressing problem for Russia."
Camdessus was answering in a sense what has become the question around
the global financial community -- will Russia be the next country needing an
international financial rescue package?
No one can say for sure, of course, but Camdessus reiterated that if
Moscow should face such a crisis, the IMF would be there helping as needed.
But Russia's financial leadership, officials of the IMF and the World
Bank, commercial bankers, and financial leaders of the world's major
industrial nations -- the G-7 -- are quietly working behind the scenes to
assure that Russia is not the next nation to have to cry help.
This is the scenario as pulled together by our economics correspondent
after talking with a wide range of sources directly involved:
While Russian Central Bank Governor Sergei Dubinin has been rallying the
country's bankers to work together to deal with the decline in reserves,
First Deputy Prime Minister Anatoly Chubais has been talking with western
commercial banks about possible loans of around $2 billion. The money is
needed to ease the country through a period when it is trying to pay off
huge wage arrears while suffering from the effects of foreign investors
pulling their money out of Russian government bonds and notes.
Russia has had a serious problem with tax collections, leaving revenues
for the government far below projected levels. It was because of Moscow's
failure to get the tax system reformed that the IMF in October delayed
release of the expected $700 million tranche from Russia's three-year $10.1
billion loan.
The IMF review team told Russian officials that if they got tax reforms
moving by the end of the year, the fund would consider releasing that
tranche next February.
The timing was tough for Russia, however, since it came just before the
Asian financial crisis sent ripples around the world, causing foreign
investors to back away from emerging markets, such as Russia's. That has not
only raised markedly the cost of borrowing for Moscow, but left the country
short of reserves.
Under quiet pressure from the G-7 countries -- the U.S., Japan, Germany,
France, Great Britain, Italy and Canada -- the IMF received two senior
Russian financial officials in Washington last week.
The officials told IMF officials that they could put together additional
measures to deal with tax shortfalls if the fund would be willing to
consider releasing the delayed $700 million drawing before the end of the year.
Fund officials agreed, but insisted that the IMF would not relax its
standards just because Russia was running short of cash. Moscow would have
to come up with "significant additional measures" in the fiscal area before
the tranche could be considered this month.
The only bending to the political pressure from the G-7 nations seems to
be that the fund agreed to consider whether the additional measures now
being proposed by Russian authorities "go far enough to justify any change
in timing," according to monetary sources. They will not insist on waiting
to see if they work.
Meantime, the World Bank was able to push ahead two major loans that have
long been under development so that they should be ready by mid-month. The
two loans -- one a general structural adjustment credit and the other a
second loan to push reform of the coal industry -- will total about $1.6
billion. 
If everything falls into place, say bank sources, the two loans should go
to the bank's board for final approval December 18th, and the first drawings
should be released to Russia within hours.
They aren't announcing it publicly, but the international institutions,
the G-7 nations and the commercial banks are trying to forestall Russia
becoming the next crisis. Private stock and bond analysts in the U.S. on
Thursday said the strategy appeared to be working. 

*******

#7
Duma Deputy Fedorov on Capital Flight 

Rossiyskaya Gazeta
19 November 1997
[translation for personal use only]
Article by Boris Fedorov, member of the State Duma: "Capital Flight
Is in Full Swing"

The incitement of political passions in Russia has reached a level at
which it is impossible to switch on the television or open a newspaper
without encountering the latest details of this action or scandal or the
other. This is very sad. The government's personnel losses clearly do not
strengthen it since nothing has yet been announced about worthy
replacements.
It is perfectly obvious that, following last week's events,
parliamentary passage of the tax code and the budget becomes even more
problematical. Understandably, the communists and some other factions are
not passing up the chance to drive the "final nail" into A. Chubays. One
more "hot" week may be expected, therefore, and on no account will this
help the economy and the situation on the financial markets.
Meanwhile Russia's financial crisis has approached its apogee, and
many billions of dollars have already left Russia. Ye. Gaydar is speaking
of the danger of a future flight of capital (from the bond market, for
example), but it has long been in full swing, and the "protective" actions
of the authorities are only spurring it on. This has to be seen. Western
investors see the rise in interest rates as a failure of Russia's economic
policy and are taking to their heels.
Remember how our bond market has been organized. The authorities are
still pursuing the flawed policy of limitation of the income of
nonresidents, thereby maintaining excessively high interest rates on the
"domestic" market. But the artificial separation of nonresidents has, as a
result, made them an independent problem, which has been manifested
negatively in recent days.
Does the Central Bank not understand that it is by some of its actions
essentially intensifying the crisis? It is no secret that hundreds of banks
here are in a difficult financial position. Let us take a look at recent
events. First, the banks are losing on the collapse on the stock market.
Then they are losing on the collapse of the bond market and the market of
other government securities. And now they are being finished off by the
increase in reserve requirements and interest rates.
Since currency deposit reserve requirements have to be paid in rubles,
a risk of exchange rate losses arises. Under present conditions it needs to
be insured, or you'll be going belly up. But insurance is very expensive.
Aside from hitting the stock market, the rise in interest rates is
undermining the liquidity of banks maintained by the short-term interbank
market. From the viewpoint of normal monetary policy here the meaning of
these measures is highly dubious.
If we go on like this, S.K. Dubinin will have a big banking crisis on
his hands, which could not fail to have dire consequences for the whole of
the rest of the economy also. The failure of hundreds of commercial banks
would help no one. We need to stop pursuing actions that are inadequate to
the situation.
The government's personnel losses are very palpable, and it is
essential to find as quickly as possible a replacement that can inspire the
financial markets with the confidence that the worst is behind us.
Questions of the compensation of government officials are on the
agenda once again. Anyone who is familiar with prices in Moscow and the
circles in which ministers move understands that the latter feel poor and
are forced to count, at best, on their travel expenses on trips abroad and
on honest fees for lectures or books.
There is the question of corruption also. Following the sorry and
conclusive failure of Nemtsov's initiatives in regard to declarations of
assets, first fiddle is being played by parliament, which is pushing
through quite a strange law on the fight against corruption. But specific
measures, specific actions are, in fact, needed, not the writing of another
draft or the announcement of another political campaign.
The young reformers made a big mistake in attempting to collect money
for the generally good cause of support of liberal ideas in a very strange
way. The president made a strict assessment of these methods, and everyone
needs to draw the conclusions.
The consolidation of all democratic and reform forces is needed in
this situation more than ever. The situation is highly reminiscent of fall
1994. The correct conclusions were not drawn at that time. The government
has not yet taken the right steps today either.

*******

#8
The Journal of Commerce
December 8, 1997
[for personal use only]
Yeltsin takes heat for blaming trade turmoil on minister 
BY JOHN HELMER
JOURNAL OF COMMERCE SPECIAL

MOSCOW -- Russia's Ministry of Foreign Economic Relations is in turmoil 
as exports and trade with the former Soviet states tumble.
All attention is turning to a planned meeting between President Boris 
Yeltsin and his ministers, at which Foreign Economic Relations Minister 
Mikhail Fradkov reportedly will be ousted.
To the astonishment of many, Mr. Yeltsin during a televised meeting last 
month with Mr. Fradkov chastised the minister.
Many argue that instead of making Mr. Fradkov a scapegoat for the 
country's trade woes, the government should be doing more to dismantle 
customs barriers to trade with the former Soviet allies -- now 
associated in the Commonwealth of Independent States -- and more to 
accelerate Russia's accession to the World Trade Organization.
Official figures put trade revenue between Jan. 1 and July 31 at $74 
billion, down 3.4% from the same period in 1996 and marking an 11% 
decline with commonwealth states. Imports, which declined 4% overall, 
fell 20% from commonwealth states.
Export industry leaders say the blame for a 3% decline in exports, and 
the slowness of the WTO membership talks, lies with First Deputy Prime 
Minister Anatoly Chubais.
"He placed himself in charge of this problem months ago and he has done 
nothing since," said one official, who declined to be named.
Mr. Chubais is widely viewed as favoring foreign importers at the 
expense of domestic producers and defending the ruble at a level that 
has undermined Russia's export competitiveness.
Serafim Afonin, head of Russia's Metal Exporters Association and a 
former Cabinet minister, faults Mr. Chubais for failing to defend 
Russian steel from anti-dumping claims and trade cuts in the United 
States, Canada, Western Europe and Asia.
"We are not particularly impressed with the way the federal government 
is assisting (the metal exporters)," Mr. Afonin said.
Unsaid, even by officials who insist on anonymity, is blame for Mr. 
Yeltsin himself for attempting to make junior ministers scapegoats, 
while refusing to remove Mr. Chubais.
The officials cite press reports from Mr. Yeltsin's sometime incoherent 
performance in Sweden this week.
"A man who is not well," reported the Swedish daily Dagens Nyheter, 
quoting "people" (Mr. Yeltsin) met.
Mr. Yeltsin has told the press he won't remove Mr. Chubais from the 
government, at least not now. Vladimir Potanin, Mr Chubais' friend and 
head of Uneximbank, told associates last week that Mr. Chubais will go 
within a few weeks.
The government shake-up that is predicted when Mr. Yeltsin meets his 
ministers is due within days, officials say. 

******

#9
RYBKIN MEETS U.S. STRATEGICAL STABILITY DELEGATES

MOSCOW, DECEMBER 5, RIA NOVOSTI - Ivan Rybkin, federal
Security Council Secretary, today received US delegates of the
Russian-American non-governmental group for strategical
stability, reports the Security Council press service.
Prominent on the delegation were William Perry, former
Secretary of Defence; General John Shalikashvili, Rtd., former
Chief of the Joint Chiefs-of-Staff; and Ashton Carter, former
Defence Secretary's assistant for international security.
The conferees discussed a wide range of global and European
security problems. Russian-US security cooperation remains
crucial not only for the two countries but the entire world,
stressed Mr. Perry.
He described President Boris Yeltsin's recent Stockholm
initiatives for international security as positive and extremely
important. The United States and other countries are to be
guided by goals and ideas put forward by the Russian president,
he deemed. Mr. Perry sees the Russian pledge to cut nuclear
arsenals as a constructive challenge to the USA demanding an
adequate answer.
Ivan Rybkin pointed out that the Russian parliament had not
yet ratified START II but, he said, whatever problems there are
cannot stop progress on nuclear arsenal cuts. This is the point
from which the Russian president's initiatives ought to be seen.
Mr. Rybkin once again put forward Russian leaders' stance on
NATO expansion prospects, stressing that the present OSCE-NATO
activity balance ought to persist.
The agenda included many issues of bilateral cooperation.

******

#10
RUSSIAN DIPLOMAT COMPLACENT ON IRAQI ARMS THREAT

MOSCOW, DECEMBER 5 (from RIA Novosti's Sergei Ryabikin) -
Iraq is hardly now presenting serious danger as far as its mass
destruction weapons go, Gennadi Tarasov, Foreign Ministry press
spokesman, said in an exclusive RIA Novosti interview.
Efforts are to focus on getting the utmost clarity on the
destruction of such arsenals in Iraq. As the matter gets
clearer, the Iraq disarmament file is gradually to close in
conformity with the UN Security Council resolution on this
issue.
Russian analyses of today's situation round Iraqi military
programmes proceed from conclusions of the UN ad hoc commission
for Iraqi disarmament and IAEA, as put forward in their official
documents. These bodies' latest reports, as circulated in the
United Nations last October, comprised information about the
basic parts of the Iraqi military programme--missiles and
nuclear, chemical and biological arsenals.
According to the IAEA report, Iraq has no potential as yet
for nuclear arms research and manufacturing. No evidence has
been found that Iraq possesses prohibited materials and
equipment or engages in banned activities. This situation makes
possible a shift from inspections to permanent monitoring and
control, deems the diplomat.
An Iraqi report on 817 out of its 819 imported missiles
satisfied the ad hoc commission. The sooner supplementary
explanations come from Baghdad on particular aspects of the
Iraqi missile programme the quicker will be a similar transition
to permanent monitoring and control.
The commission pointed out many vague problems concerning
chemical and biological weapons. Here, Iraq is to provide
exhaustive information, for which Russia is insistently
appealing.
The UN commission and IAEA have done a tremendous job
toward Iraqi disarmament over the last six years, though many
problems persist to this day. The eventual termination of
commission work depends on the scope of the Iraqi top's
cooperation with it and on commission efficiency. Russia thinks
that ample grounds are now available for the commission to
finish its work within reasonable time, said Mr. Tarasov. 

******

#11
Zyuganov--Russian Left 'Does Not Fear' Duma Dissolution 

Moscow, 4 Dec (ITAR-TASS) -- The Communist Party of the Russian
Federation [CPRF] will vote collectively against the adoption of the 1998
draft budget in its first reading. The only deputies to whom this decision
does not apply are those working on the tripartite conciliation commission.
The Communist faction leader Gennadiy Zyuganov told correspondents
after today's faction meeting that this decision was taken "virtually
unanimously." Explaining the reasons, Zyuganov said that the draft budget
"does not in any practical way change the socioeconomic policy" of the
government.
Answering a question about how the Communists will respond if the
question of lack of confidence in the government is raised, Zyuganov
confined himself to one sentence: "We discussed all the situations which
might arise."
The CPRF leader added that the leftwing opposition "does not fear the
dissolution of the Duma."

*******

#12
No unilateral nuclear arms cuts--Russia defense minister

MOSCOW, Dec 5 (Reuters) - Russia's defence minister, clarifying comments by
President Boris Yeltsin, said on Friday Moscow would not make any unilateral
reductions in its nuclear arsenal. 
Yeltsin said in Stockholm on Tuesday that Russia would unilaterally cut its
nuclear arsenal by one third. 
Yeltsin's spokesman later said he had simply shed some light on arms
reduction
talks already under way with the United States. Foreign Minister Yevgeny
Primakov also said Yeltsin had referred to limits being discussed with
Washington. 
Worried deputies in the State Duma, the lower house of parliament, invited
Defence Minister Marshal Igor Sergeyev to the chamber to explain what Yeltsin
meant. 
``Neither the president, nor, for that matter, we, have proposed any
unilateral reductions,'' Sergeyev told reporters after addressing deputies at
a closed session. ``Everything will be done on the basis of parity.'' 
Russia and the United States are working towards a START-3 treaty to
follow up
the START-2 strategic arms accord signed in 1993. 
START-2 outlined cuts in the number of Russian and U.S. nuclear warheads from
about 6,000 to no more than 3,500 each by the year 2007. The Duma has not yet
ratified it because of fears over costs and that Russia would be weakened. 
Yeltsin and U.S. President Bill Clinton agreed last March in Helsinki that
efforts should be made to draft a START-3 treaty setting limits of about 2,000
to 2,500 warheads for each side. 

******

#13
Czar's Bones Resting Place in Doubt
5 December 1997

MOSCOW (AP) - No doubt remains that a cache of bones recovered in 1991 belong
to Russia's last czar,
a top Russian investigator said Friday, but there will be no rapid resolution
of the national debate over how and where to bury them. 
``Today we can say with 100 percent certainty that the remains of Nicholas II
were buried outside of Yekaterinburg,'' Vladimir Solovyov, the senior
investigator for the Russian Prosecutor General, told a news conference. 
However, scientists will need at least two more months to sort and identify
all the parts of the acid-scarred skeletons so they can be buried with full
confidence, he said. 
``We are striving to make sure that there are no remaining questions,'' he
said. Only after the analysis is complete will a government commission begin
discussions of where to bury the remains of the czar, his wife, and three of
their daughters - Olga, Tatyana and Anastasia, Solovyov said. 
Last month, President Boris Yeltsin ordered the commission to make its
recommendations in January. 
Czar Nicholas II, his wife Alexandra and their five children were killed by a
Bolshevik firing squad on July 17, 1918, in Yekaterinburg, 900 miles east of
Moscow. Most of the bodies were burned, doused with acid, and thrown into a
pit outside the city. 
Ever since the collapse of the Soviet Union, Russians have been divided over
what to do with the bones, which have been subjected to repeated tests,
including DNA analysis in American and British labs. 
The controversy flared in recent weeks as the governor of the Yekaterinburg
region blocked their transport to Moscow for more testing. Governor Eduard
Rossel said the bones were too fragile to move and should be buried in the
city where the family was shot and killed. 
A number of factors complicate the situation, including that the bodies
of two
children - Alexei and his sister Maria - have not been found. 
Several people who took part in the executions and disposal of the bodies
have
said that two bodies were separated from the others, burned, and the fragments
scattered over a wide area to avoid detection. 
Solovyov said hundreds of bone fragments were collected from the burial site,
and they will be tested to see whether they match the existing skeletons. It
is too early to tell whether some of the bone fragments are even human, much
less those of Alexei and his missing sister. 
He insisted that there are no grounds for believing that any of the Romanovs,
including Anastasia, escaped death, despite a newly released Hollywood
animated movie based on the premise. 
``A work of art is a work of art,'' he said. ``The director can fantasize all
he likes.'' 
He also scoffed at other rumors about the fate of the royal family, including
that their remains were spirited abroad and are kept in a Russian Orthodox
Church elsewhere in Europe. Solovyov said he has investigated all these claims
and found them groundless. 
Romanov descendants have said they accept that the Yekaterinburg remains are
those of the imperial family and have urged that they be buried in a royal
vault in St. Petersburg. 
The Russian Orthodox Church, considering a petition to canonize the czar, has
insisted there be no doubt about the remains before it decides on burial and
sainthood. 

*******

#14
Russian economy returns to growth, but massive problems remain: OECD
December 5, 1997 

PARIS, Dec 5 (AFP) - The Russian economy will grow this year for 
the first time in seven years and growth should accelerate in 1998, 
but serious structural problems remain, notably in the tax, 
financial and banking systems, the OECD said Friday. 
"Growth may now have resumed and output is even booming in a 
number of enterprises and localities," the Organisation of Economic 
Cooperation and Development said in a report on Russia. 
It forecast gross domestic product growth this year of 0.5 
percent, rising to 3.0 percent in 1998, after the economy contracted 
five percent in 1996, four percent in 1995 and 13 percent in 1994, 
although it noted that forecasting is difficult because of the 
unreliability of official data. 
Inflation will also fall sharply, to 12 percent in 1997 and 10 
percent in 1998, compared with 22 percent in 1996. 
Unemployment is forecast to remain high, however, rising to 9.5 
percent in 1997 and 10.0 percent in 1998 from 9.3 percent in 1996. 
But, it warned, "macroeconomic prospects largely hinge on how 
decisively structural reforms are pushed through." 
This is a tall order, but "in the absence of such bold and 
comprehensive moves, output and living standards would continue to 
stagnate at today's low levels." 
The major problem is that because of political wrangling, 
"important reform legislation to address many of these problems" 
such as tax evasion and investment protection "has yet to 
materialise," and "considerable adjustment efforts still lie ahead," 
the report said. 
"The development of rule of law in the economic sphere has been 
very slow" and key tax reform legislation is currently held up in 
the Russian parliament. 
"A crucial menace looms on the fiscal side, revenues have 
shrunk more than the transition to a leaner and more efficient state 
would warrant," leading to a build-up of public debt and "the 
commercial banking sector remains quite poblematic as a whole, 
foreshadowing difficult policy choices." 
The fiscal situation is still "highly problematic," particularly 
as "tax evasion is still widely condoned by the population as a 
necessity for survival." 
In addition, the tax system is over-complicated, with confusion 
between federal and regional taxes and such a huge network of 
exemptions that tax collection is extremely difficult, the OECD 
said. 
Debt is also a problem, although the exact extent of company, 
bank and local authority debt is difficult to guage because of the 
market in bills of exchange, barter and other non-monetary 
instruments. 
"It appears that the total public debt could exceed 50 percent 
of annual GDP by the end of this year," the OECD said. 
Investment is continuing to decline, and will not increase 
without a new tax code, clear rules for capital markets and a code 
to protect land property rights, the OECD said. 
The regulation of financial markets and commercial banks has 
improved, but "the banking setor still remains problematic as a 
whole" and there will be an "unavoidably large number of additional 
bank failures and mergers in the near future." 
While the central banks has tightened control, measures need to 
be taken to remove special state privileges enjoyed by a number of 
banks and banks' rights as creditors need to be strengthened. 
The report also noted major problems of corruption and 
controversy surrounding recent privatisations, with corruption and 
expropriation by officials a serious problem for small businesses. 
It also said that growth is at best patchy, with Moscow doing 
far better than most other parts of the country. 
There is also a problem for medium-term development because of a 
lack of investment to replace ageing infrastructure. 
"In the oil sector for example half of the pipelines are over 20 
years old, and about 2 percent of the output leaks away due to 
corrosion or accidents." The problem is all the more worrying 
because "large parts of even the relatively recent productive assets 
are technologicaly obsolete." 

*******

#15
MSNBC
Russia's young drug addicts
With little funding for treatment, education, an epidemic spreads
By Rob Reynolds
Rob Reynolds is an NBC Moscow correspondent.

A tidal wave of drug abuse has engulfed Russia, creating a new generation
of drug addicts and stretching law-enforcement capabilities to their limits.
Official figures show there are 2 million regular users of illegal drugs.
That represents more than 1 percent of the country's population, and
unofficial studies indicate the true figure may be much higher.
THE LARGEST RATE of increase is among young people. The number of
teen-agers hooked on hard drugs has jumped fivefold in the past three years.
Sergei, 19, said he began smoking marijuana about four years ago. "First
we tried pot. Then we heard that other stuff was being sold at the
(International People's Friendship University) Patrice Lumumba University.
So we bought some heroin, because people told us it was good. So we smoked
it. We smoked and smoked."
His friend Oleg, also 19, interrupted: "We were really curious. But when
you smoke heroin, the effect is not as good as shooting it. So we started
shooting up. I don't think we were addicted right away. We tried it off and
on for a few months. The first five or six times were all right. Then we
started feeling really sick after. The only way we felt better was to do more."
A young man pulls up his sleeve to reveal where he shoots drugs into his arm.
The teen-agers obligingly rolled up their sleeves to show arms scarred by
needle marks. Another friend, Zhenya, admits he injected heroin a few hours
earlier. "Yes, I did some this morning, he said, laughing. "Just to feel
better."
The youths live in the Yasenovo neighborhood, a Moscow suburb studded
with long rows of bleak high-rise apartment buildings constructed in the
1970s and 80s. There are few jobs, and all three are unemployed. They say
life is boring, but that heroin makes it more interesting.
"When you do heroin, you don't need anything else," Sergei said. "You
feel good, you don"t need anything. You don't need to go out anywhere. You
just sit and get high."
The youths estimate that 70 percent to 80 percent of their peers in the
neighborhood take heroin, which is made readily available by a network of
dealers linked to their customers with electronic pagers and mobile phones.
While Russia has long been considered a gateway to the West for drugs
produced in Afghanistan, Iran and the Golden Triangle of Southeast Asia,
domestic drug use has only recently begun to take off. 
"Russia has not only become a transit point for drug traffickers, but in
a big way Russia is becoming a consumer of these drugs," Interior Minister
Anatoly Kulikov said. 
At Moscow's Sheremetyevo Airport, overworked customs police try to stem
the flow with the help of drug-sniffing dogs trained in Germany. Customs
officer Andrei Malinovsky says narcotics come in from all over the world. 
"We have smugglers from Latin America, Africa and Asian countries. But it
doesn't matter where the drugs are from, the dogs will sniff them out
anyway," he said.
Still, he admits his unit has only made three busts so far this year,
recovering a total of 140 kilos of drugs, a small fraction of Russia's total
drug use.
Malinovsky complains that his unit is underfinanced and understaffed, and
that the drug smugglers have become more clever in finding ways to outwit
the dogs. "They try to stir up their drugs in different kinds of liquids,
stuff the dogs don't like to smell, like lighter fluid, alcohol or perfume.
That makes it tougher," he said.
Russian police have asked their U.S. counterparts to share their
drug-fighting expertise. The U.S. Drug Enforcement Agency has set up an
office in Moscow, and joint drug-interdiction efforts were on the agenda
last month when FBI Director Louis Freeh visited Moscow.
But Russia has few drug-treatment centers and virtually no drug-education
programs for school-age children. "They didn't teach us about this in
school," Oleg said. "I never heard of any of these drugs until three years
ago. Even if we had had some kind of drug education, I don't think that
people would take it seriously."
Oleg, Sergei and Zhenya have begun meeting with counselors at their local
hospital in an effort to break their addiction. But unless Russia as a whole
comes to grips with the poverty, unemployment and social dislocation that
foster drug abuse, it's likely Russia's drug epidemic will continue to grow.

*******

#16
Government Handling of Money Market Crisis Draws Criticism 

Moskovskiy Komsomolets
3 December 1997
Report by Yana Yurova, Natalya Shipitsyna: "A Specter Is Abroad
in Russia. It Is Called the Collapse of the Whole Financial
System"

Rumors about the imminent collapse of the Russian banking system are
agitating people's minds. The country is frozen in expectation of 5
December, the day for which the bankruptcy of the largest domestic banks
has been "scheduled." Yesterday one newspaper carried a chilling editorial:
"The Ruble Has Fallen." Scared people are running to withdraw their money
from their accounts, hurrying to convert it into hard currency. Nothing
short of an Apocalypse....
In fact, however, nothing fatal is happening. What we are possibly
seeing is a routine speculative game aimed at heating up the financial
market and making money from the fall in the value of the ruble.
The very first day of December sent chills down the spines of the
entire Russian population -- when suddenly the Central Bank in fact
admitted that it was no longer in a position to hold down the rapid rise in
the rate of the dollar. And announced the broadening of the hard currency
corridor: from 5,912-5,926 rubles to the dollar to 5,879-5,963. 
Predictably, the price of the dollar immediately jumped to the (new) upper
limit.
Whence this wind that has thrown the country into yet another
financial fever? From Southeast Asia. Everything takes so long to reach
us that it's like we were living in the back of beyond: When the whole
world had recovered from the events on the Hong Kong Stock Exchange of a
month ago, Russia just started thinking that it should do something about
it. At the same time foreigners holding our securities exerted pressure on
the Russian hard currency market. With the New Year approaching they -- as
is traditional -- began to sell them, using the receipts to buy hard
currency and transfer it abroad. At any other time these actions might not
have particularly shaken our market, but now they only rubbed salt into the
Russian economic wound.
Everything is now far more serious than during [1995] "Black Tuesday":
In addition to the stock market, Russia's entire banking system has been
in jeopardy.
At first our government tried to kill two birds with one stone: to
save both the stock-market and the banking sector from collapse. All last
week support for the GKO [short-term state bonds] market alone cost the
state 1 trillion rubles every day. Nonetheless, either the Central Bank
proved to be not strong enough or it was overpowered by some new concept,
but Monday [1 December] the country's leadership made its choice. And
sacrificed the stock market for the sake of saving the ruble.
Alas, it will not at all be easy to cope with this task. After all,
ahead of redenomination the slightest rumor is enough to trigger a real
storm, sending the whole country into panic.
According to [Duma] deputy Boris Fedorov [former finance minister],
the state did not react to the situation as it should have. First,
interest rates were raised too high. Virtually all the largest banks which
had been investing in state securities have now lost trillions on the
GKO's, ending up on the verge of bankruptcy. Second, the government chose
to revise its hard currency policy at a very bad moment: This should not
have been done at the time when the country was in a political turmoil. On
the whole, the situation has been brought to the point of absurdity --
artificially, because, generally speaking, nothing serious was happening in
our economy over the past month. Now, however, Boris Fedorov does not rule
out that the Central Bank will seek IMF assistance and will ask it to give
Russia a stabilization loan: at least $5 billion....

******

#17
Business Week
15 December 1997
[for personal use only]
ASIAN BACKWASH HITS RUSSIA
By Patricia Kranz in Moscow

Russian Treasury-bill rates soared to 45% on Dec. 3, compared with their
17% low for the year, as a bout of Asian financial flu hit the country full
blast. Foreign investors, after waiting the mandatory one month to
repatriate cash, are hot-footing it from Russia. Central Bank reserves
plummeted $3 billion, to $18 billion, in little more than a week. The stock
market is off 40% since its fall peak.
The delayed reaction to the late-October Asian meltdown couldn't be worse
timed. The Russian economy was showing the first signs of recovery after six
years of decline. Higher interest rates could snuff out the upturn and
plunge Russia's budget deeper into deficit. Because of weak share prices,
the government postponed the privatizations it had planned for December to
raise billions of dollars.
The Russian government, in the meantime, is trying to persuade the
International Monetary Fund and the World Bank to release as much as $1.2
billion in loans, delayed because Russia has not met tax-collection targets.
It also is trying to arrange a 2 billion loan from Western banks.
Political problems are exacerbating the financial crisis. The State Duma, or
parliament, has blocked passage of crucial tax legislation and the 1998
budget. The Duma also has been pressuring President Boris N. Yeltsin to fire
Anatoly B. Chubais, Russia's economic czar. Just when Russia needs Chubais
the most, he is distracted and weakened.

*******