Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


December 11, 1997  
This Date's Issues: 1424  1425  1426

Johnson's Russia List
11 December 1997

[Note from David Johnson:
The RIA Novosti news agency's web page is a major source of
Russian news and commentary. It is located at
It's content has been great reduced in the past few weeks but
today it is back up to speed. All today's items in JRL come
from the RIA Novosti web page.
2. Rossiiskaya Gazeta: Anna Kozyreva, THE GOVERNMENT MAY BE FORMED 




Sergei Ivanov of Rabochaya Tribuna Talks with Sergei Rogov, Director 
of the US and Canada Institute, about Cost of Russian-American 

8. Interfax-Argumenty i Fakty: Leonid Sedov, PREFERENCES OF RUSSIAN 

The socio-economic landscape is getting brighter.
10. Executive and Legislative Newsletter: Mikhail Delyagin, WEAK 

11. Ekonomicheskiye Novosti Rossii i Sodruzhestva: CIS ECONOMY IN 



December 11, 1997 

President Boris Yeltsin, who had a cold, has contracted an
acute viral respiratory disease. Physicians who are treating
him "do not exclude influenza." 
In this connection, Yeltsin has been transferred from his
Gorky-9 country house to the Barvikha sanitarium where he will
spend "ten to twelve days."
Yeltsin showed the very first signs of having a cold in
the course of his state visit to Sweden. 
"The President has a slight fever, over 37 degrees
Centigrade," Sergei Yastrzhembsky said.
The Kremlin spokesman said the President does not have to
stay in bed, yet has been advised against going out. Yeltsin
has "no limitations on work with written materials" or phone
Yastrzhembsky also confided that heart surgeon Renat
Akchurin, who operated on the President a year ago, has been
"working closely" with Yeltsin lately. In particular, Akchurin
accompanied the President on a number of trips.
(Interfax information)


Rossiiskaya Gazeta
December 10, 1997

The Big Four spent the bulk of their time discussing the
law "On the Government," Duma speaker Gennady Seleznev said
after the meeting. The thing is that the press carries articles
distorting the essence of the law. They claim that under this
law the President will not appoint ministers and vice-premiers.
This misunderstanding has been cleared: the President promised
to sign the law on Tuesday, and the Duma deputies will
introduce individual amendments, related to power ministers and
relations with the Foreign Ministry, after the law is signed. 
Gennady Seleznev suggested that the President should
analyse the concept of forming the government on the basis of
the Duma majority. Boris Yeltsin agreed to accept corresponding
proposals in the near future. He stressed that this principle
may be "used after the election of the new president." On the
other hand, he agreed that "this subject must be discussed by
all means."
Replying to journalists' questions, the Duma speaker
pointed out that this concept would enable the government to
rely "not on the faction which has the majority, but on the
majority of the deputies' opinion in the State Duma and the
Federation Council."
The concept will be elaborated soon, signed by the
chairmen of the two houses and forwarded to the President. No
special law is necessary to do this, since the President has
the right to appoint ministers. 


By RIA Novosti correspondent Alexandra Akayeva
MOSCOW, DECEMBER 10, RIA NOVOSTI - Half a million dollars
"in the scandalous xerox box" has long since been collected for
the benefit of the state and has been used as cash, this
correspondent was told at the information and public relations
centre of the Russian Prosecutor-General's Office.
On April 7, 1997, a criminal case involving an attempt to
take out of Government House on June 19, 1996 538,000 dollars by
Boris Yeltsin's electioneering officers Arkady Yevstafyev and
Sergei Lisovsky was closed for lack of a criminal occurrence.
At the same time, since no claims for damage to this sum
were filed with the prosecutor's office, Prosecutor-General's
Office investigator Georgy Chuglazov decided also the future of
the currency.
On April 7, 1997 the administrative department of the
Prosecutor-General's Office, in execution of the investigator's
ruling, put 538,850 dollars in the Prosecutor-General's Office
account, and on April 17 this money was remitted into the
federal budget revenye by payment order No. 04/97. 


MOSCOW, DECEMBER 11, /RIA NOVOSTI/ -- First Deputy Prime
Minister Anatoli Chubais is satisfied with today's verdict of
the presidential Judicial Chamber for Information Issues on his
calumny suit, he says in a statement.
He had never put to the slightest doubt newsmen's right to
circulate reliable information and make personal evaluations of
events. "In this context, the initial article of the verdict
cannot but win wholehearted support," stresses Mr. Chubais.
The court reprimanded journalists Alexander Minkin and
Sergei Dorenko for "violations of journalistic ethics by
undeserved derisive epithets" applied to Anatoli Chubais.
Nevertheless, the verdict describes as lawful their
dissemination of information concerning work at the book, "On
Russian Privatisation" by a team of authors, on which the
plaintiff was prominent, and specifying the amount of their
royalties and the terms on which the team had received the sums.
This information and the defendants' caustic comments on it
fully complied with journalists' right of free information
search and freedom of personal evaluations.
The defendants were also reprimanded for "biased and
ungrounded" accusations of the plaintiff concerning his Cabinet
activities and the receipt and spending of the privatisation
book royalties.
Mr. Chubais was disappointed, however, as the court had not
determined to pass the file on to the public prosecutor for a
check of alleged abuse of office by the defendants. "I have
never intended, and do not intend now to have criminal
proceedings started against these journalists," he points out.
He merely wants a public prosecutor to make a thorough check of
the facts and confirm the classification of charges against him
as calumny. At any rate, "the final say on the matter will
belong to the court of law".
On the whole, today's Judicial Chamber session completely
refuted allegations made by the defendants yesterday that its
verdict had been ready beforehand. The chamber once again proved
its independence and objectivity.
The Vice-Premier thanked the mass media for proceedings
coverage and expressed his hope that they would bring the
verdict to the public in full. 


MOSCOW, DECEMBER 11 (From RIA Novosti's Galina Filippova) -
"Amendments to the Russian Constitution must be made, but this
is a task not for today but for tomorrow," thinks Grigory
Yavlinsky, leader of the Yabloko movement and its faction in the
State Duma.
"The developments of the past four years revealed the
weakness of certain constitutional provisions," Yavlinsky told
RIA Novosti. "This cost the Russian society dearly. I mean above
all the developments related to the war in Chechnya." Besides,
"it is obvious that the balance of powers is distorted in the
Russian Constitution, as it was approved at a time of very
serious civil conflict in 1993." 
"The Russian society cannot go on living in conditions of
this balance of powers," Yavlinsky thinks. "And hence the
priority task for the future is to make a package of amendments
to the Constitution. This may be impossible to achieve now in
view of the current tensions in the country, but we should
accept this as a strategic direction."
To begin with, there must be a more clear-cut distribution
of powers between the president, the government, the
constitutional and the supreme courts, and the upper and the
lower house of the parliament. "I want to stress that the powers
of the president should be balanced in the Constitution in such
a manner as to preclude threats to civil rights and freedoms in
Russia to come from the very institute of presidency," Yavlinsky
said. "Consequently, we will work on these issues. But we think
that they may not be the priority for the parliament or the
president today," the Yabloko leader said. 


MOSCOW, December 11, (from RIA Novosti correspondent
Marina Uryvayeva) -- The aim of proposals to make changes in the
Constitution is "to weaken the President's prerogatives nad
powers and to strengthen the power of the elective legislative
body", Chairman of the Russian Constitutional Court Marat Baglai
told RIA Novosti on the eve of Constitution Day.
He noted that the "criticism of the Fundamental Law
concerns primarily the mechanism of power established by the
Constitution". "Nobody criticises the main sections of the
Constitution formulating rights and freedoms. The criticism
concerns political relations, precisely those which influence
the creation of the form of government, and it can be either
presidential or parliamentary", said the Constitutional Court
He recalled that "a presidential from of government has
been codified" in Russia now. "We hear the political opposition
say that it would be desirable to affirm a parliamentary form
under which the government is formed by the parliament and is
responsible to it," noted Marat Baglai. In this connection he
stressed that "the Constitutional Court will defend any
constitutional provisions, whatever they may be". "If the form
of government is changed, then we will defend this form, the
main thing is that it is constitutional and adopted
As the Constitutional Court chairman noted, "no country has
such a perfect document as would provide answers to all the
questions of the life of society". "Russia", he said, "is now in
a stage of transition from totalitarianism to democracy and
still does not understand what constitutionalism is, how much
their rights and freedoms have broadened and what new great
possibilities and mechanisms have been created for the
protection of their rights".
"The most important thing the Constitution provided for
democracy" , Baglai believes, "is the freedom of the press and
the freedom of opposition". Besides that, "it has expanded the
catalogue of all rights and freedoms - political, personal and
socio-economic and laid the foundation for the protection of
human rights, legality and law and order in the country", he
"The most delicate function of any Constitution is to
establish balance between freedom and power. Only given this
balance, when the state knows the limits of its powers, a normal
functioning of human society is possible", the Constitutional
Court Chairman stressed.
Touching upon existing problems, he said that there are
some contradictions between the provisions of legislative acts
of a number of constituent members of the Federation and the
federal Constitution. This phenomenon, in the opinion of Baglai,
"is inevitable during the transitional stage when far from
everybody realises in what unity lies and what is to be
considered admissible specifics of each constituent member of
the Federation". In this connection he strssed that "by
overseeing the compliance of the legislative acts of the
Federation members with the Fundamental Law, the Constitutional
Court contributes to creating a single legal environment in the


Rabochaya Tribuna,
December 9, 1997
Sergei Ivanov of Rabochaya Tribuna Talks with 
Sergei Rogov, Director of the US and Canada Institute,
about Cost of Russian-American Relations

Question: The Russian and American Presidents have been
friends for five years now. Over that time our two countries
have travelled a path from very close relations (or
"honeymoon" relations, as Mr. Kozyrev put it) to this 
statement made by President Yeltsin in Oryol recently: "It's
time to correct the tilt in our relations. The United States
is not the only country in the world". What are the actual
results of the five-year period of Russian-American political
and economic conflicts?

Answer: It would be more appropriate to put this question
not in the context of personal friendship between the
Presidents of the Russian Federation and the United States,
but in the context of the relations between Moscow and
Washington in general. These relations are now fundamentally
different from the Soviet-American relations. There was a
confrontational model at the time of the USSR. What has come
to replace it now?
There was a lot of talk at one time about
Russian-American strategic partnership. "Honeymoons" and
personal relations between presidents come and go, but the
interests of the two countries remain.

Question: Are there realistic preconditions for
Russian-American partnership today?

Answer: Let us take a look at Russian-American economic
co-operation (this is the only basis on which partnership can
be built). It is extremely underdeveloped compared with the
United States' relations with Western Europe, Japan and China,
the main partners and rivals of the United States. Russia's
trade with the United States is a mere five percent of Russian
foreign trade turnover. True, the United States is our third
largest trade and economic partner after Germany and Ukraine,
but Russia's trade with the European Union accounts for 40 per
cent and with the CIS countries 20 percent. If we compare 
these figures, we shall see that there is no reason for much
optimism about strategic partnership: there is too wide a gap
between the role of the United States in the world economy and
the pitiful part played by Russia.

Question: This is especially regrettable taking into
consideration that Russia is potentially a vast market for
American consumer goods. Do you agree?

Answer: Domestic demand is extremely unbalanced in
Russia. A fairly small population group accounts for almost
half of all consumption in this country. How many Cadillac
cars can they buy? Two or three, as they do in jokes about the
new Russians. Most Russians can't afford Chinese goods, let
alone American ones. 

Question: Nevertheless, the notorious chicken leg
quarters, which were used to be called "Bush's legs" here, are
regarded by most Russians as an example of inferior American
products, whose exports to this country is backed by the White
House. In addition, some Russian-American instruments of
co-operation are openly lobbyist. Take the Gore-Chernomyrdin
Commission, for example.

Answer: I think this commission is one of few examples of
two-way street co-operation. True, the Americans are using it
to lobby for their interests, but we are using it to advance
our interests. Specifically, the Gore-Chernomyrdin Commission
played a favourable role in some large-scale projects, such as
the Proton missile project, the sale of radioactive materials
and so on. But the very existence of this commission is a sign
of weakness of the Russian economy. The Americans do not set
up such commissions with their European, Japanese or Chinese
partners. The very fact that this intergovernmental structure
exists testifies to the current inequality between the United
States and Russia in the contemporary global economy. 
As for the "Bush's legs", if we take last year's figures
for US trade, we shall see that meat products and poultry and
tobacco and alcohol account for almost 50 percent of American
exports to Russia. This is less than $1 billion of $730
billion worth of annual US exports. What seems serious to us
may be of some interest for some of President Clinton's
friends but not for the American economy as a whole.

Question: What is then the essence of the much-vaunted
American aid programme for democratic Russia?

Answer: I would like to recall that five years ago Gaidar
and Kozyrev spoke about a new Marshall Plan. The expectations
of vast American aid have not been justified. Over these years
the United States has granted to us several billion dollars,
which is a drop in the bucket for Russia. The United States
has played a far more significant role from the viewpoint of
rendering economic assistance to Russia through the World Bank
and the International Monetary Fund where the United States
plays a leading role. This may seem to be good, but the
Russian economy increasingly begins to look like a drug
addict. The requirements the international financial
organisations make to the strategy and tactics of the Russian
reform aggravate the economic crisis in Russia. Of course, it
would be unfair to blame the Americans or the World Bank for
the gross mistakes made in the implementation of reforms in
Russia, but the medicines they offered us only aggravated the
disease. Specifically, sharp cuts in government spending have
led to a more profound decline in production.
The Americans played a key role in Russia's admission to
the London and Paris clubs and in progress in the negotiations
on Russia's admission to the World Trade Organisation. On the
one hand, this is good for us, but in the final analysis the
conditions on which Russia is joining the international trade
organisations are extremely unfavourable for us. Here I can
cite China as an example: it has conducted negotiations on
admission to the WTO for 11 years and it has wrenched
significant concessions from that organisation, because the
Chinese economy is not quite ready for complete openness. As
for us, we are becoming integrated with the world's economy on
the conditions that make us extremely vulnerable to the world
market upheavals. The latest stock market crisis bears this
out. In short, the United States plays a very important part
in setting the conditions on which Russia will be integrated
in the world economy. 

Question: At the conference "Russia in the 21st Century"
you said that "Russia needs five-percent economic growth to be
able to become one of the power centres" and that "only in
that case Russia will attain the 1990 level of the Russian
Federation, not the USSR, by the year 2015". What does this
prediction mean from the viewpoint of foreign policy?

Answer: We'll take 15 to 20 years to regain pre-reform
GDP level. Here is an example. This year we gathered in a good
grain harvest, but it is 35 percent below the Soviet record.
In addition, it created big problems for our agriculture. In
Soviet times we tried to develop livestock farming and since
we didn't have enough fodder grain, we had to buy it in the
United States. Now Russia's livestock population has shrunk by
40 percent. We don't have to buy grain to feed our cattle now,
but we eat "Bush's legs". It is a paradox. It is generally
believed that our vast natural resources automatically make us
a great power. It is a very dangerous delusion, which does not
let us think about the future and encourages us to spend up
our national wealth. As a result we may find ourselves in the
backyard of the developed world.

Question: Isn't it the reason why Russia has not been
included in the group of 10 countries known as the New
Emerging Markets, the countries with rapidly developing
economies and strategic economic partners of the United States
in the 21st century. Incidentally, Poland and China have been
included in this group... 

Answer: Just as Indonesia, Brazil and some other

Question: There must be objective reasons for this, which
you have just given. However, there are also subjective
factors, such as the Jackson-Vanik amendment of 1974, which
imposes restrictions on trade with Russia, and the recent ban
on the sale of American PP-2000 computers for the Russian
Atomic Energy Ministry. There are many similar examples
redolent of the Cold War era. Why do the Americans behave so

Answer: The United States is still trying to prevent
Russia from returning to the world arena as a potential
adversary. Hence the relapses of the Cold War, which are not
related to communism, but arise from geo-political interests.
I wonder why no similar sanctions are used against communist
As for the super-computer scandal, I should say that for
all our economic weakness, we still retain the potential of a
nuclear superpower. We should not delude ourselves: if the
Russian economy does not begin to grow at a fast pace, in 15
years we shall lose this potential--there is too wide a gap
now between our current economic state and the powerful
nuclear infrastructure created by the Soviet Union. We can see
that the United States is trying to make us reduce our nuclear
capabilities and it is doing this by using the methods that
should have no place in relations between equal partners.
These are the classical methods of economic war. 
I think that the growing alienation between Russia and
the United States is a cause for concern. It does not bode
well for international security and stability. I hope Russia
will regain strength some day and sooner or later it will play
the role of one of the world's power centres. That is why 
growing differences between us is a major precondition for
future geo-political upheavals. 


Interfax-Argumenty i Fakty, No. 48
December 1997 
By Leonid SEDOV (VTsIOM)

The last weeks of autumn were characterised, apart from
other things, by the intensification of Russia's foreign policy
in several directions at once. First of all, the success in
settling the explosive conflict between the USA and Iraq is
indisputable. Apart from this, Russia's recent foreign policy
contacts involved both East Asian powers (Japan and China),
Ukraine (a giant among the near abroad countries) and France, a
dissident member of the North Atlantic Treaty Organisation. All
Russia's official and non-official contacts revealed its desire
to search for new guidelines and possibilities in relations
with the outer world, which has long lost clearly-defined and
consistent contours for Russia. To a considerable extent, this
is also due to the split of our public thinking since it is
very difficult for Russian people to part with the illusions of
a great power and come to realise the country's real position
in the world. 
Some of the components of the complex of a great power
include the feeling of a hostile encirclement, ill intentions
on the part of aliens and expectations of possible intrigues
and plotting. 
The polls carried out by the Russian Public Opinion Poll
Centre (VTsSIOM) make it possible to determine, with a high
degree of accuracy, the quantitative and qualitative
composition of the groups of the population with the expressly
power-xenophobia complex. Thus, in August 1994 the respondents
were asked whether they agreed with the statement: "Russia has
always caused hostile feelings among other states; today, too,
no one wishes us good." 
It turned out that this view was shared by 42 per cent of
those polled and 18 per cent of the respondents absolutely
agreed with this statement. The general mistrust towards
foreigners is widely spread and is witnessed to be shared by
almost 20 per cent of the population. 
The same 18 per cent of Russians negatively assess the
rapprochement with the West, although the majority of them (47
per cent) welcome this process. 
As many as 20 per cent of Russian people believe that the
inclusion of East European countries and the Baltic states in
the NATO structure presents a threat to Russia. According to
them, an adequate response to this process would be the
build-up of Russia's military efforts (8 per cent) or the
signing of an anti-Western union with China, Iran, etc. One out
of every ten respondents does not approve of the signing of the
agreement between Russia and NATO. 
As many as 19 per cent of the respondents observe that at
the next presidential elections the promises to return to
Russia the status of a great power will be decisive in their
choice. Finally, the question: "What is more important for
Russia: to restore its military might, return the status of a
superpower or focus on raising the level of the economy to the
world level?" revealed that 20 per cent of the respondents gave
preference to the first option. Again, 19 per cent of the
polled are convinced that "Russia is the greatest country in
the world and superior to all other countries." 
All these figures were obtained during various polls
conducted in the course of the past three years. That is why
the constant figures of 18-20 per cent look very convincing.
The figures show directly: about 20 per cent of the population
display anti-Western mentality. The analysis reveals that
mostly these people can be found among pensioners or among
those who vote for the Communist Party or against all
candidates. There is nothing surprising in this. At the same
time, the increased share of "superpower isolationists" is
witnessed among managerial staff and Muscovites. 
The results of the polls concerning the attitude of
Russian people to the relations between Moscow and Kiev also
deserve serious analysis. 
According to these polls, 77 per cent of the polled
recognised as extremely important and approved of the treaty
with Ukraine signed last May. Simultaneously, 53 per cent of
the respondents insist that Sevastopol is a Russian city. As
regards the division of the Black Sea fleet, 36 per cent of the
respondents believe that this is detrimental to the interests
of Russia while another 16 per cent are sure that this is a
source of new conflicts. Only 24 per cent of the polled
observed the beneficial nature of the treaty. 
A similar picture is witnessed in relations with Japan. As
many as 66 per cent of Russia were convincingly for the
immediate signing of a peace treaty with Japan and only 13 per
cent believe that Russia's military presence on the Kuril
islands rather than a peace treaty is more consonant with its
security interests. A still greater number of people (74 per
cent) object to the transfer of the islands to Japan. This idea
is supported by only 9 per cent. The option of joint use of the
disputable territories was supported by 30 per cent of the
polled; however, 44 per cent are against this option. It seems
that in their foreign policy views Russians are guided by the
saying: "Primary considerations prevail over friendship." 


Vek, No. 45
December 1997
The socio-economic landscape is getting brighter

The socio-economic situation in Russia has been
vacillating from "very bad and hopeless" to "bad but hopeful."
In fact, macroeconomic stabilisation was regarded as the only
achievement of the past few years. Even the government was
restrained in assessing the results of its work.
However, an unbiased analysis of the development of the
socio-economic situation in the past two or three years shows a
clearly positive change in many vital spheres of our life. It
is not visible because we compare the current situation with
our life under "developed socialism." But the picture will be
completely different if we compare it with 1994-1995, when
major changes were registered in several spheres, and not only
macroeconomic ones. The number of positive changes continued to
grow this year, too. And the statistical stability of many
indices continues to grow, which means that there is a smaller
probability of backward dynamics. 
We expected a growth of the GDP back in 1996, as soon as
prices and the rouble stabilised. However, the GDP dropped by
5% in the first eight months of that year. It grew by 0.7% in
1997, for the first time since 1990. After six years of the GDP
falling by 4-15% annually, this tentative growth cannot be
described as fortuitous. It should be said that the growth of
the GDP was registered above all in the exporting industries,
since the gap between exports and imports has been increasing
especially quickly (by some 30% a year), with foreign trade as
a whole growing by some 15% (less trade with the CIS states).
The dynamics of retail trade, which reflects a vital
socio-economic sphere, looks quite differently. This index has
not changed as dramatically as the GDP. It vacillated from -7%
(1995) to +2% (1993). The fall in retail trade in 1995 was
precipitated by the "unjustified" growth in 1993, when the
people had to spend all their money on purchases owing to the
fact that annual inflation reached 840%. A stable growth has
been registered this year, for the first time since 1994. After
a fall of retail trade by 7% in 1995 and by 4% in 1996, this
index grew by 0.4% in the first eight months of this year. 
The volume of paid services grew, for the first time since
1991. After the annual fall of 6-30% in the past six years,
this index grew by 0.4% in the first eight months of this 
The growth of retail trade is directly linked with the
growth of the people's incomes, in particular wages and
salaries. Let's analyse the dynamics of take-hoe wages on one
worker. After it fell by 8% in 1994 and 28% in 1995, it grew by
6% and 2.6% in 1996 and 1997, respectively. The ratio of the
average per capita income and the subsistence wage grew in
1995-1997: 202% in 1995, 211% in 1996, and 214.6% in
January-August 1997. 
The pensioners' incomes grew, too. In 1996, real pensions
amounted to 57.5% of the 1991 figure, but were nevertheless
higher than in 1992 and 1995.
The ratio of incomes of the poor and the rich sections of
population is becoming more favourable. In 1994, 10% of the
better well-off citizens had an income that was 15.1 times
higher than that of the 10% of the poorest citizens. But this
figure dropped to 12.5 times by August 1997. This means that
income stratification is becoming less glaring, which is a
major socio- political sign.
Stabilisation and certain positive changes in macroeconomy
are influencing social indices. The average life span began
growing in 1995. After it dropped to 64 years in 1994, it grew
by four months in 1995 and by 15 months in 1996. For the first
time since 1993, the disease rate dwindled in 1996: 646.3 cases
per 1,000 of population (30 cases less than in 1995).
The number of registered crimes is falling, too. This fall
is not stable, yet in 1996 this index reached the lowest level
for the preceding three years (2,652,000). This trend continued
in 1997, with 165,000 fewer crimes registered in August-January
than in the same period last year. This fall was mostly due to
the decrease in hooliganism, thefts and robberies, which is
directly linked with the improvement of the socio-economic
climate in the country. 
The number of suicides is dwindling, too, although their
number was still 50 percent higher in 1996-1997 than in
To make the picture complete, it should be said that
stabilisation and the growth of the GDP are proceeding against
the far from ideal background. On the contrary, the number of
strikes and subsequent losses has grown (4,575,700 man/days in
the first eight months of 1997, as against 1,543,100 man/days
in the same period of 1996). 
On the other hand, the strike dynamics does not reflect
the dynamics of unemployment. The number of registered
unemployed in 1997 fell from 2,524,000 to 2,144,000 in
January-August 1997, and the load per vacancy went down
accordingly from 9.2 to 5.9. The strike dynamics most probably
reflects the growth of wage arrears (from 13,380 billion
roubles to 39,890 billion roubles in January-August 1997).
In addition to quenching inflation and stabilising the
exchange rate of the rouble in the past two years, the
government ensured a considerable reduction of the yearly
refinancing rate of the Central Bank (from 185% to 28%) and the
profitability of the short-term government securities (from
166% to 18%). This means that conditions are developing for
rerouting investments from the financial sphere into
industries. The volume of foreign investments doubled annually
in the past few years, which points to a stable trend of the
growth of trust for the stabilisation and economic growth
indices in Russia.
Specialised mathematical calculations prove that virtually
all positive changes are not unexpected. It appears that
foreign investors are guided in their operation by similar
analytical evaluations, which are not always obvious in a
simple comparison of indices. 
Drafted by experts of the Working Centre for 
Economic Reforms under the Russian Government


Executive and Legislative Newsletter, No. 50
December 1997
By Economist Mikhail DELYAGIN

To start with, what is "economic security"? Security per
se is being protected against all threats, both realistic and
potential. Economic security is thus protecting an economy
against the threats inherent in it, on the one hand, and
protecting society against threats emanating from the economy,
on the other hand. 
The basic issues in the sphere of the Russia's economic
security are identical to those of the Russian economy on the
whole. The worst threats are arrears, a crisis of investments,
and society's stratification.
Having ripped off the Gazprom mammoth corporation,
increased its foreign debt and expedited the privatisation of
the more profitable major enterprises, the state has paid its
debts to pensioners and started reducing its debts to the
public-sector workers. In the course of four months - July
through October, the state debt has gone down 15.8% from 11.4
trillion to 9.6 trillion roubles. 
But the state still owes the nation quite a lot,
especially where the payments of benefits are concerned - 2
trillion roubles.
The budgetary debt stays at but 17.4% of the total wage
indebtedness. The rest are the debts of finance-hungry
The debt to the population is but a shell of the general
crisis of payments, whose root is in the shortage of money to
settle accounts between enterprises. The share of settlements
serviced with the help of non-cash roubles was reduced from 42%
to 30% last year, by official data.
At the present time, the state is incapable of ensuring
the sensible use of allocations: these are pocketed by
financial manipulators, infused into the financial markets and
boosting inflation to eat away at the real production sector.
Therefore, we have to minimise this kind of assistance. The
only limit here is a politically stable and integral state. 
The money shortage, only partially offset as it is by
booming money surrogates, is the main barrier in the way of
capital investments to the real production sector.
The majority of Russian enterprises are "bad debtors" due
to the huge amount of arrears. Bankers say they have enough
money but nowhere to invest it. 
One method of improving the economy's health today is to
transfer budgetary accounts from the banks to the Federal
Treasury. Why?
The "price tag" as of 1 October 1997 is 9.4 trillion
roubles, or nearly 1.6 billion US dollars. Banks are keeping
7.1 trillion roubles' worth of budgetary resources that cannot
be used otherwise, while their overall technological capacity
is no more than 2.5 trillion roubles. In the case of the
regional budgets, the figures are 11.8 trillion and 7.0
trillion roubles, respectively.
The situation is not being made any easier by the fact
that the money is spread unevenly among banks. Monopolism is
thus taking on an ugly form and influencing the banking sphere,
the industry and politics alike. The transfer to a competitive
servicing of the budgetary accounts in line with the
President's decree, and of all major accounts to the Federal
Treasury would invigorate Russia's banking system. 
A permanent budgetary crisis is one of the more
fundamental signs of the systemic crisis in Russia's finances.
The task of replenishing the budget seems to be time-serving.
But this is the shortest way to the strategic aim of
strengthening the state, the formation of a rigid and
comprehensive system of fiscal control and, furthermore, the
switchover to a reasonable economic policy of stimulating and
managing the economy. 
Stronger state control would make the financial policy
inflation-free and softer, would help real money oust barter
deals and money surrogates, cushion the crisis of payments and
improve living standards. The key task for Russia today is to
minimise budgetary expenditures in real money and do away with
the 'funny money' and mutually off-setting accounts. 
Apart from the crisis of payments, Russia's economic
security is endangered by a crisis of investments and society's
stratification. The state committee for statistics indicates
that the gap between the incomes of the most affluent 10% and
the poorest 10% of the population stopped growing this past May
to stand at 12.4 times over, only to grow to 12.5 times over in
July and 12.6 times over in October. 
There are two Russias, so to speak: one Russia of the
relatively rich and the growing middle class, and another
Russia of the very poor who are spending all their efforts to
survive. The latter, who are in the absolute majority, can be
saved by lowering and radically simplifying the taxes on small
businesses which would thus be able to shed the criminal
fetters, become fully legitimate and boom to become a prop of
the economy and, hence, of the bulk of the population's
There is no doubt that the Russian state will keep the
currency market under control. Official statements indicate
that the state has all necessary resources to keep the currency
market stable and predictable and is capable of applying them
to the hilt. In other words, the world may collapse, but the
dollar's exchange rate would stay within its crawling corridor,
come hell or high water. 
The state has three instruments of saving the national
financial system from crisis phenomena. These are: the markets
of corporate stock and government securities plus the currency
market. The market of corporate stock has been hurled at least
a year back in terms of liquidity and six months back in price
terms by the latest stock exchange crisis. 
The economic policy for 1998 largely depends on the
situation in the market of government securities, in particular
the short-term government bonds, or GKOs. Reports of successful
negotiations with the IMF can cool some 'hot heads'. But the
rate of the outflow of foreign capital and, hence, the scale
and forms of the state's reaction would depend on the situation
in the global markets. 
There are two trends: the capital drain from the
developing markets and its restructuring in the developing
markets. Following the developments of the past few weeks, the
Russian market is no longer as attractive as, say, that of
Crisis phenomena are known to improve the efficiency of
the economic policy and may open the door to decisions that
used to be rejected, like the decision to effect a deeper
differentiation of the obligatory reservation norms. 


Ekonomicheskiye Novosti Rossii i Sodruzhestva, No. 21
(Data Released by CIS Interstate Committee for Statistics)

In 1992-1996 the average annual decrease in gross domestic
product of the CIS countries equaled to 10 percent (it grew by
1-2 percent a year in most countries of the European Union).
decrease rates differ across CIS countries - from annual 4
percent in Uzbekistan to 16 percent in Azerbaijan. As a result,
in Belarus, Kazakhstan, Kyrgyzstan and Russia the 1996 GDP
figures became comparable with the early 80s level; in Ukraine,
with the late 70s level; in Armenia, the mid-70s; in
the early 70s; in Moldova and Georgia, the late 60s; and in
Azerbaijan, the early 60s level. A real GDP growth was
in Armenia and Georgia starting from 1994, in Kazakhstan and
Kyrgyzstan - starting from the beginning of 1996, in Belarus
Uzbekistan - from July 1996. The total volume of the CIS
countries' GDP in 1996 constituted 60 percent of the 1991 level
and 55 percent of the maximum 1989 level, which corresponds to
the GDP in 1977.

Dynamics of the Gross Domestic Product 

of the CIS Member Countries 

in 1991-1996 as percentage against the previous year 

1991 1992 1993 1994 1995 1996 
Azerbaijan 99.3 77.4 76.9 80.3 88 101.3 
Armenia 88.3 58.2 91.2 105.4 106.9 105.8 
Belarus 98.8 90.4 92.4 87.4 89.6 102.6 
Georgia 78.9 55.1 70.7 108.7 103.3 111.2 
Kazakhstan 89 94.7 89.4 87.4 91.8 101.1 
Kyrgyzstan 92.2 86.1 84.5 79.9 94.6 105.6 
Moldova 82.5 71 98.8 69.1* 98.1* 92.0*
Russia 95 85.5 91.3 87.3 95.9 95.1 
Tajikistan - - 82.7 87.3 87.6 83.3 
Turkmenistan - - - - - - 
Uzbekistan 99.5 88.9 97.7 94.8 98.8 101.6 
Ukraine 91.3 90.1 85.8 77.1 87.8 90 
CIS as a whole 94 86.1 90.3 86 94.7 95.4 

* Not including the territory of the Dniester left bank and the
town of Bendery

CIS Economy in January-August of 1997 

Main Socio-Economic Indicators 

as percentage against January-August 1996 

GDP Gene- Price Moneta- People' Inde- Retail 
(fixed ral index ry in- s spen- xes goods 
pri- volume of comes dings of con turn- 
ces) of indust of the on -sumer over2 
indust rial popula- consu- prices (fixed 
rial produ- tion1 mer prices)
output cers goods 
(fixed and ser 
prices vices 

Azerbaijan 105.5 100.6 113 137.7 123.4 104.7 119 
Armenia 102.3 98.8 117 112.13 120.03 109.9 105 
Belarus 111 115.0 187 1728 1793 160.4 117 
Georgia 114.74 112.1 - - - - 1276 
Kazakhstan 101.64 103.3 117 - - 120.5 128 
Kyrgyzstan 118.1 141.2 136 139.5 138.2 128.4 107 
Moldova 94.55 90.9 120 115.53 114.63 112.3* 936 
Russia 100.0 101.4 1137 119.2 115.1 114.77 100.4 
Tajikistan 102.8 91.1 155 by 2.4 by 2.6 138.7 156 
times3 times3 
Turkmeni- - - - - - - - 
Uzbekistan 103.94 - - - - - 110 
Ukraine 94.3 96.6 109 130.76 121.93 119.2* 104 
*Estimate, calculation.

1. Preliminary data.
2. Including sales at foodstuffs, consumer goods and mixed
markets; according to the estimate of national statistics
3. January-July.
4. January-June.
5. January-March.
6. Registered companies.
7. August against August. 


MOSCOW, DECEMBER 10, RIA NOVOSTI - The Russian brain drain
is subsiding, Deputy Prime Minister Vladimir Bulgak said to
Radio Russia in a live cast this afternoon.
An average two thousand researchers were leaving Russia
every year from 1992 into 96--a year when 4,084 were employed
abroad, 2.6% of the total number of Russian research experts. A
majority were leaving on temporary contract arrangements.
Reciprocally, close on three thousand came to Russia from the
West over the same period, most of them top-notch scientists.
Research has every chance to regain its former social
prestige in Russia--suffice it to mention several hundred
contracted experts who have recently come home ahead of
schedule. Ample hopes are pinned on a fundamental research
reform at which the federal Cabinet is working. Its concept will
come under debates at a Cabinet session this month.
The reform is expected to bring its first practical fruit
in 2000 or a year later. 


December 10, 1997

The total issue of Russian newspapers dropped by 7.5
times, and of magazines, by 5 times this year as compared to
1991. As a result, there are some 200 copies of periodicals per
1,000 of population, says the report of the Union of
Journalists of Russia, "On the Critical Situation of the
Russian Mass Media." 
The least "reading" member of the federation is Chechnya,
where no newspapers and magazines are published at all, say the
authors of the report. Next comes Ingushetia, where there are
17 copies of newspapers and magazines per 1,000 of the
There are 161 copies of newspapers and magazines per 1,000
Muscovites daily, and 168 copies in Chukotka. The unmatched
leader is Bashkortostan, with 513 copies of newspapers and
magazines per 1,000 of the population. 
The average monthly salary of journalists in the regional
mass media varies between 50 and 120 dollars, while the
conditions of their work are becoming ever more dangerous. Last
year alone, 19 journalists were killed and none of these
murders has been solved.


Return to CDI's Home Page  I  Return to CDI's Library