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Johnson's Russia List
 

 

December 15, 1997 
This Date's Issues:    1433 1434 

Johnson's Russia List
#1433
15 December 1997
davidjohnson@erols.com

[Note from David Johnson:
There was no #1431.
1. Reuters: Yeltsin says in command as PM heads for Turkey.
2. Reuters: Muscovites cold-shoulder city poll.
3. Dmitry Mikeyev: Criticism of Yeltsin/JRL.
4. Anne Williamson: Jerry Hough & Stocks.
5. The Hindu: Vladimir Radyuhin, RAIN DRAIN BLEEDS RUSSIAN 
SCIENCE.

6. Interfax: Yeltsin Admits Feeling "Unwell."
7. St. Petersburg Times: Nick Allen, Minkin: Chubais Gagging 
Press.

8. Chicago Tribune: Colin McMahon, FEARS OF A CRISIS WANE IN 
RUSSIA.

9. Alan Fahnestock: Hough#1430-costs of revolution.
10. St. Petersburg Times: Post-Soviet Statistics as Murky and 
Unreliable as Ever.

11. Reuters: Humbled Russia seeks new Caspian oil role.]

*******

#1
Yeltsin says in command as PM heads for Turkey
By Alastair Macdonald 

MOSCOW, Dec 15 (Reuters) - A hoarse President Boris Yeltsin said he was in
full command of Russia despite a respiratory virus that is keeping him
confined to a sanatorium. 
Underlining that it is business as usual, Prime Minister Viktor Chernomyrdin
was due in Ankara on Monday for the highest-level Russian visit to Turkey
since the collapse of communism six years ago. 
Liberal reformers First Deputy Prime Minister Anatoly Chubais and Finance
Minister Mikhail Zadornov called a news conference for Monday at which they
were likely to detail government successes in coping with an economic crisis. 
``Things are all right in Russia. I am following things all the time,'' a
somewhat croaky Yeltsin said on Sunday in his first public remarks since
entering the Barvikha sanatorium outside Moscow last Wednesday. 
``In a word there is control,'' the 66-year-old president reassured
television
viewers after voting at the sanatorium in a Moscow city election. 
``I caught a sore throat somewhere. I'm a bit weak. On the whole I don't feel
too good,'' he said. ``The doctors say it is a normal virus...It's nothing
special.'' 
Yeltsin said the virus would take about 10 days to clear, while Kremlin
doctors have insisted the illness is not serious and is not linked to the
heart bypass operation that he underwent in November 1996. 
The Kremlin had said that Yeltsin might take a stroll in the sanatorium's
grounds over the weekend but a plunge in temperatures to 20 degrees Celsius
below freezing (minus four Fahrenheit) seemed to have thwarted that. 
The cold weather also took its toll on the elections for the Moscow City Duma
or parliament. Less than one in three of seven million eligible voters turned
out. 
The results, due on Monday, could show some losses in the 35-seat Duma for
liberals who have dominated the chamber since it was set up in 1993. 
But few deputies will challenge Moscow mayor Yuri Luzhkov, who won his
own re-
election last year with some 90 percent support and is seen as a potential
successor to Yeltsin in the year 2000. 
Another possible contender, Chernomyrdin, 59, quietly marked five years in
office on Sunday. ``I look to the future with optimism and I'm convinced we're
on the right track,'' he said in televised remarks. 
In Ankara, Chernomyrdin was due to sign a deal to supply Russian gas that
would involve building a pipeline under the Black Sea. 
He told Interfax news agency that Russia, while keen to develop economic ties
with its historic southern rival, would resist Turkish ``unilateral'' changes
to a treaty governing shipping in the Bosphorus, Russia's route to the
Mediterranean. 
Chubais and Zadornov were likely to brief the media on an International
Monetary Fund decision on Friday that effectively gave the green light for new
lending to Russia. 
The IMF suspended credits in October because of its concerns about the
government's failure to collect taxes but it now says it is satisfied that
things will be better next year. 
Chubais said on Friday the government would fulfil Yeltsin's pledge to
pay off
wage arrears to public sector workers by the turn of the year and stressed a
financial crisis linked to problems in world markets was now under control. 
Russia jacked up interest rates to defend the rouble after many foreign
investors pulled out of the Moscow market and the 1998 budget will be amended
to take account of the new rates. 

*******

#2
Muscovites cold-shoulder city poll

MOSCOW, Dec 14 (Reuters) - Less than one in three of Moscow's seven million
voters braved deep sub-zero temperatures on Sunday to cast their ballots in a
city election, giving the cold shoulder to attempts to convince them of its
importance. 
Mayor Yuri Luzhkov, widely seen as a contender for the Russian presidency in
the year 2000, urged the capital's residents to take part in elections for the
35-seat City Duma, or parliament, saying it was an important body. 
But an electoral official said preliminary figures showed the final turnout
was only 29.36 percent, just over the 25 percent minimum level needed for the
poll to be valid. 
Just a month ago, a majority of residents questioned in a poll said they had
not even heard of the parliament. The mayor's job was not up for election. 
Officials blamed the weather for the lack of interest. Temperatures hit 20
Celsius below freezing (minus four Fahrenheit). 
The election is important for mayor Luzhkov because, despite his repeated
denials, he is widely assumed to be aiming to run for president when Boris
Yeltsin steps down. An opposition-dominated chamber might try to undermine
him. 
Luzhkov, who wields huge personal influence in the city and secured his own
re-election last year with some 90 percent of the vote, said he hoped the Duma
would work for the good of Moscow and not get involved in political
infighting. 
``I am sure that we will get a Moscow City Duma which will not be caught
up in
politicking but in doing something concrete for the capital,'' he told
reporters after casting his vote. 
He said the number of candidates demonstrated the significance of the
legislature. 
More than 350 candidates are contesting the 35 seats which carry influence in
a city where most of Russia's top leaders, wealth and foreign investment are
concentrated. 
Up to now liberals have dominated the parliament, a tsarist creation
reinstated in 1993 after decades of communist rule. 
The main liberal groups have since fallen out, but are trying to mend fences
in an electoral alliance to oppose communist and other leftist candidates. 
Elderly people, used to compulsory voting under communism, tend to be the
most
active voters. Opinion polls show they support mainly leftist candidates. 
Vote-counting machines were installed in the Mitino district in northeast
Moscow as an experiment, although there as elsewhere votes continued to be
counted by hand, with computers used only to tally the results, which are
expected on Monday.

*******

#3
Date: Sun, 14 Dec 1997
From: "Dmitry Mikeyev" <dfm@nicom.com>
Subject: Criticism of Yeltsin/JRL

Dear David,
It is very amusing and also instructive to sift through the piles of
criticism Yeltsin was subjected to since 1987. Yeltsin was portrayed as
"a president who is isolated in the Kremlin, who is becoming ever more
despotic, suspicious, and irrational," who had lost his social base and
become "a hindrance to the democratic process." Yeltsin has been accused
of being a ruthless neo-Bolshevik, a fanatic who can act with total
disregard toward public opinion in the name of an idea or ideal. He has
been called a demagogue and a populist who tries "to please everyone,"
who "lies and promises impossible things to the people." He has been
labeled a reckless adventurer, a gambler who thrives on confrontation.
On the other hand, he has been described as a weak leader who is
manipulated by an "eminence grise," by a "collective Rasputin," or by
Washington; who "has become a merely decorative figure" and a captive of
the "party of war." He is an autocrat clinging to his personal power by
all means, who is capable of starting a war to distract public attention
from his failures. He can be so petty and vengeful as to send his
bodyguards to intimidate a banker who supports his potential rival. He
is wobbly, his policy is highly inconsistent, and lacks a coherent
strategy. He is "old, in pain, desperately tired, and increasingly given
to drink," "the Mobutu of Russian history." These are all actual
quotations, I can give the names. 
Hardly any contemporary world leader has elicited such strong and
diametrically opposed sentiments. (Ronald Reagan did not get even half
of it). This in itself would be sufficient to canonize Yeltsin as a
great phenomenon of the century. But look at his personal achievements.
He was a top-notch athlete, a brilliant engineer, an extremely efficient
manager, and an unorthodox Party apparatchik. He then became a dissenter
and popular hero, a leader of an opposition movement and a skillful
political infighter. He dismantled the totalitarian system and empire
and then returned to his original profession of a builder, this time of
the new Russia. We can and should argue about the merits of the Russia
he created, but, let be honest, how many of us mortals can boast even
one tens of such achievements?
Hegel wrote that mortals should not be allowed to judge the great man
because they do not possess the appropriate gauges and scales. But we
live in democracy where any fool is free to make an even bigger fool of
himself, particularly when it became so easy. I have noticed lately that
many of our former active participants Celeste Wallander, Martin
Feldstein, Fred Starr, Ira Straus, Gordon Hahn, Alex Shtromas, Nicolai
Petro, Val Samonis, Patrick Armstrong, Harley Balzer, Mikhail
Alexandrov, Stephen Shenfield, Peter Rutland, Peter Mahoney, George
Breslauer (thanks), Mark Tauger, Oleg Petrov have abstained from the JRL
discussions.(If I forgot somebody, sorry, this only proves my point). I
urge them: don't give up, yet. Don't yield the platform to nite-time
comedians and clowns who wallow in the "delicious whiff of scandal."
Together with those serious colleagues who all this time have read these
pages but chosen to "stay above the frenzy" we still have a chance to
turn JRL into a very needed and useful forum.
Dmitry Mikeyev
8206 Cedar Street, Silver Spring, MD 2091
Ph, F: 301 587-8894; Ph 301 587-3049 
http://www.nicom.com/~dfm/index.htm

*******

#4
Date: Sun, 14 Dec 1997 
From: Anne Williamson <awilliamson@MCIONE.com>
Subject: Jerry Hough & Stocks

Yes Russian banks own stocks! They are the only Russian entities that do
since the Russian equities market is perhaps one of the greatest confidence
games ever successfully put over on innocent peoples, i.e. the American
people whose money was confiscated to build it and to maintain the regime
willing to go along with the scam, and the Russian people whose national
legacy was essentially confiscated for the fuel to stoke the fire. The
entire thing is held together with bailing wire and blarney; since it has no
roots in Russian culture and but a handful of favored participants from
those Russians currently living, it can be said to be entirely artificial; a
mostly uninhabited suburb under development to the NYSE. Many of this
markets' problems are the result of that artificiality and lack of a
cultural basis; they are not all the result of economics. [The tragic irony
of USAID's and HIID's approach was that Russian culture - despite the
historic lack of property rights - has an excellent basis for developing a
shareholding culture, but I don't have the time to lay it out now in an
abbreviated form.]
Essentially the West made the same mistake as Lenin did - skipping stages
of development in order to reach an ideological (Lenin) or self-serving,
pragmatic (US) end. The violence done to Russia by Harvard academics on the
glory trail in Moscow and within the US Treasury may prove to be just as
deadly as Lenin's efforts were.
Russian equities such as they are have suffered terribly from competition
with the high yielding domestic debt market - GKOs. Naturally investors put
their money where it will receive the highest return after having factored
in the risk they are willing to assume. Bonds have been low risk, to date,
because the yields have been paid through IMF lending. Big players know
that. So here's how the fabulous, government- built gravy train is
assembled: US Tax Dollars & other G7 taxpayers ---- IMF ----- Loans to
Corrupt Foreign Governments Under the US Thumb ------ Rich Families, Hedge
Funds, Portfolio Investors all jump in to the domestic debt market foreign
aid built through central bank finetuning and equities market development to
enjoy the big returns Uncle Sam [the lender of last resort to the IMF] has
so graciously assured them with other peoples' money ---- Lots of Rock
and Roll ------ US Mutual Funds [average taxpayers], Pension Funds -------
Whoops! -------- Lousy, illegitimate Govt can't collect taxes, ability to
pay yields questioned, yields rise yet further -------- Who wants this lousy
colored paper anyway? -------- Bailout! Go back to square one, taxpayers
receive bonus game. There are other aspects, but these are the basic dance
steps.
Mutual Fund and Pension Fund investment is important because that's how
Uncle Sam's minions sell the bailout to taxpayers who are understandably
concerned about their retirement funds and their savings. BUT, to date in
Russia investment by such entities should not exceed 2 to 3% of their total
investment. Those are losses the funds can absorb. Any such fund holding
more in Russian equities should be prosecuted for failing in their fudiciary
duties. Voters shouldn't be tempted to buy this argument to justify any
bailouts in emerging markets.
The big achievement of 1997 was lower GKO yields and some Russian money
moving into the equities market - banks mostly attempting to diversify and
hunting for the "greater fool" amongst Western speculators for when the gig
goes belly up. But the most money remains in bonds and that's a pathetic
comment on our AID program. Russia is a country that desperately needs
direct investment into its industrial base - not a bunch of suits buying and
selling shares. So just like Tsardom and Communism - all the resources the
country is capable of attracting are being devoted overwhelmingly to the
government's support via bond sales.
So, yes, all this finance stuff is serious. Quite serious. A week ago
Friday the Russian Central Bank said it would support the ruble but not the
commercial banks. Unfortunately, that's when the IMF and the WB stepped in
to say they'd pony up a little dough to keep the game rolling. What a pity
- in one fell swoop the market would have consumed Russia's banking
parasites, leaving the world a better place, but NO! Here comes the public
officials terrified of a Russian government appearing they might not control
and of having their failed policies exposed to their own voting publics.
Yeltsin's government in its present form will struggle on a bit longer, but
this unchanging beast is - in fact - barely alive roadkill.
I wrote earlier in a "Financial Fog" response about the situation with
the IMF and the Asian contagion and how that situation affects Russia.
Well, I was wrong about one thing - South Korea's
short term debt due before the New Year is not $60 billion, but a $100
billion. Otherwise, I was dead-on. I'm not bringing this up to flatter
myself - I've been watching the public lenders in Russia for six years - but
to remind readers so that you will take seriously this next bit.
The IMF does not have the money to bail everybody out. Neither does the
US Treasury's Dollar Stabilization Fund - Robert "Peso Bob" Rubin's big grab
is exhausted a mere 3 years after he opened the lid on the dollar fund for
US investment banks gone overboard on Mexican tesobonos (dollar-denominated
Mexican debt). There is not only the possibility that Russia experiences a
meltdown, but Ukraine and certain Eastern European countries may experience
similar problems - adding further stress to Latin America and so on and so
forth around the globe. Now pay attention.
The IMF has dreamed of this situation for DECADES. Citizens and
taxpayers couldn't be in a worse situation since the man at the head of the
IMF is one cunning, dirigiste Frenchman - Michel Camdessus and our own top
dog is a guy who basically never earned a dime in his life except through
influence peddling and is therefore very susceptible to Camdessus's upcoming
Siren song. Camdessus will try to get "the Board" to give him permission to
print SDRs to cover the bailouts' costs. That's the only way Clinton and
the IMF can get funding without Congress.
I don't have time to explain the SDR in full - but it's an IMF-issued
chit, a quasi-currency, that allows a country to swap for a convertible
currency. They're a bureaucratic gimmick in other words. And if all
members of the IMF agree, then the IMF can print them up. Camdessus and all
his predecessors have dreamed of SDRs becoming a fullblown currency - Keynes
wanted to call it a "bancor" and wasn't shy at all to say his idea was for a
single, global currency issued by the IMF acting as a global central bank.
Why do they want that? Because then the global financial and political
elite could inflate in unison assured of bailouts forever without penalty.
It would be the internationalization of the Federal Reserve System and the
so-called "business cycle", which allows funding for ambitious banks and
politicians through currency debasement or what I call the "backdoor thief".
While citizens are on the front porch beating off the taxman, the Fed's cat
burglar slips in without so much as the screen door slamming and robs the
family silently day in and day out from birth until well after death. This
is why you sometimes read statistics measured in "constant dollars". The US
dollar has lost 99% of its value since the founding of the Fed and 75% of
that loss has occured since Nixon broke the link between the dollar and gold
in 1971. That's why today millionaires are middle class - and only
billionaires are signficant.
This dangerous idea of SDR emissions is a fit with Clinton's foreign
policy Keystone cops as led by the talking picture hat and his general
expediency-over-principle approach to all things. Maybe it's not bad enough
just yet ---- but this is where we're headed with IMF bailouts either quite
soon or in the near future. They will have to do something, because US
taxpayers will balk at taking on the world - and we will be taking on the
world, because the Federal Reserve is the implicit guarantor of the IMF. We
must step aside for our own sake and for the sake of foreign populations and
let those failed governments fail. Propping them up only helps the corrupt
and the global at our expense. And it will be a slow, poisonous drain on
citizens - instead of the big flash that brings down the incompetent and the
subsidized.
Keep a close eye on your Congressmen and Senators - and if you hear talk
about "SDRs", I really recommend you speak up pronto - especially if you
have any regard for your personal liberties and the fruits of your labors.
Merry Christmas everybody.
P.S. It would be most professional if those journalists covering Russia
would clean up their copy. The ONLY foreign investor to whom Chubais is
important is George Soros who has been making any number of no doubt
fascinating, behind-the-scenes deals with the Russians when he makes
discreet "loans" to tide the kiddies over, as Potanin recently admitted.
Soros's philanthropy through his foundations is chump change. The existence
of any other foreign investor relying on Chubais is merely a theoretical
proposition and if one does exist, he deserves to lose every dime he's got.
Potanin and Chubais are trying to form a political/economic block - merging
their interests so to speak - and that ties into Boris Jordon who is
functioning as the buffer between Soros and the Russians. These are the
private sector people who have the most at stake in IMF lending. Are you
willing for your taxes to increase so their game can continue?

********

#5
Date: Sun, 14 Dec 1997 
From: VLADIMIR RADYUHIN <hindu@com2com.ru>
Subject: brain drain

For The Hindu
RAIN DRAIN BLEEDS RUSSIAN SCIENCE
>From Vladimir Radyuhin
Moscow, December 14.

Russia has lost 40 per cent of its best scientists in the 1990s due to
emigration, according to a new government report. 
Such a massive outflow of scientific talent is undermining Russia's
capacity to achieve technological breakthroughs, said Kommersant Daily
quoting a report prepared by the Russian State Committee for Science and
Technology jointly with the Foreign Ministry and intelligence services. 
At present over 4,000 top-notch Russian researchers are working abroad, a
fourth of whom have long-term contracts and are unlikely to ever return to
Russia, the study said. Overall, Russia has lost about 40 per cent of its
world-class scientists, whose departure has created gaping holes in many
areas of scientific research. About 2,000 researchers and professors have
been leaving Russia annually in the 1990s.
This estimate is challenged by other Russian sources. The former head of
the KGB, Mr. Vladimir Kryuchkov, told the NTV commercial television that,
according to his information, some 200,000 Russian researchers in nuclear
physics, biology, chemistry and other sciences have emigrated in recent years. 
Similar figures are cited by the Institute of Economic Problems of
Population. It has found that about 250,000 Russian research personnel have
left the country over the past 10 years. Many of them have come back, but
some of the most talented stayed abroad. It is them who made the Russian
science tick. 
"It is enough for 10,000 to 15,000 leading researchers to leave and
thrust areas of the country's scientific-technical progress will be
destroyed," says Dr. Felix Bromberg of the Institute of World Economics and
International Relations. 
Brain drain has reached such alarming proportions that the President, Mr.
Boris Yeltsin, called a special meeting of the Security Council last month
to discuss the problem. He admitted that the massive exodus of scientists
was "fraught with dire economic and political consequences for the nation"
and demanded that the government clear all budgetary debts to the science
sector.
But even if the government complies with the demand (which is not at all
certain, given its current cash crunch), this will hardly halt emigration or
alleviate the plight of Russian science.
Budgetary allocations for science have shrunk twelvefold over the past 10
years, according to the Institute of Economic Problems of Population.
Cash-strapped industry has practically stopped commissioning application
research.
The government has also virtually stopped financing research programmes,
because funds earmarked from the budget are barely enough to pay meagre
salaries to scientists, says Mr. Vladimir Babkin, an expert with the State
Duma committee for education and science. Even those are being delayed for
months. A year ago the government's failure to pay salaries to 15,000 staff
of the federal nuclear research institute in Snezhink, Siberia, for many
months drove its director, Academician Vladimir Nechai, to commit suicide in
despair.
Others just emigrate. In the West even junior Russian researchers get six
to seven times higher salaries than they do at home.
"In many American universities I've visited, I met groups of 30 to 40
Russian researchers, who work very hard, but Russia does not share in the
fruit of their work," says Prof. Yuri Afanasiev, rector of the Moscow
Humanities University.
The Institute of Economic Problems of Population has estimated that
aggregate losses to Russia from brain drain run at $50 to $60 billion a year.
The main winner is the United States.
"For many Russian scientists there is just no other place except the
United States where they can continue their studies, because for decades
many branches of science were developed only in the Soviet Union and the
United States," said Mr. Dmitry Trenin of the Moscow Heritage Foundation.
The United States readily flung the doors open to Russian scientists,
more than doubling the immigration quota for highly qualified personnel from
56,000 to 130,000 a year in 1990.
Israel is another big winner, with immigrants from Russia accounting for
40 per cent of its scientific potential.
Experts agree however that the biggest damage to Russian science comes
from the so-called "internal brain drain," when researchers give up their
scientific careers in favour of better-paid jobs in industry and commerce.
The number of scientific personnel in Russia in the past ten years has
shrunk from 3.4 million to 1.3 million, according to the Institute of
Economic Problems of Population. 
Prof. Konstantin Zuyev of the Russian institute of Philosophy describes
the situation as "an irreversible degradation and perhaps the collapse of
the scientific community."

*******

#6
Yeltsin Admits Feeling "Unwell"

MOSCOW, Dec 14 (Interfax) - Russian President *Boris Yeltsin* has 
admitted that he feels "unwell" so far. 
He told an Interfax correspondent after casting his ballot for a 
candidate to the Moscow City Duma at the Barvikha sanatorium, that he 
still has a sore throat. 
"Doctors say," he said, "that it is a viral infection and that medical 
treatment will last for about ten days, as usual." 
"I must have caught the virus in Moscow which means that I meet with 
Muscovites," he said. 
He announced that he works at least four hours a day and that his aids 
bring him a large pile of documents every day. 
"There is no need to worry for Russia. The situation is under control 
and information is in ample supply," Yeltsin said. 
He said he is particularly concerned about the recent tragedies [a mine 
explosion in Kuzbass and the crash of an An-124 Ruslan cargo plane in 
Irkutsk.] "We haven't experienced anything of this kind for a long time. 
We've done everything in our power to give financial aid people and 
support them at this tragic moment, and to help the victims' families 
and those who have lost their homes," he said. 
He said that Prime Minister Viktor Chernomyrdin regularly informs him of 
what is being done to deal with the consequences of the tragedies. 
He pointed out that Chernomyrdin had been appointed chairman of the 
commission for dealing with the consequences of the accidents on his 
initiative. 
He said he admired those who had gone through these tragedies for their 
staying power. 

*******

#7
St. Petersburg Times
DECEMBER 15-21, 1997
Minkin: Chubais Gagging Press 
By Nick Allen
STAFF WRITER

MOSCOW - Alexander Minkin, the investigative journalist who broke the 
Kremlin "book" scandal, launched a new attack on First Deputy Prime 
Minister Anatoly Chubais on Tuesday, alleging that he is trying to 
influence improperly the outcome of a libel case.
Minkin, a reporter for the newspaper Novaya Gazeta, said on Russian 
radio last month Chubais and four Kremlin associates had received an 
advance of $450,000 from a publisher affiliated with Uneximbank, which 
has benefited from several major privatization deals. 
Chubais and Maxim Boiko, co-author and former privatization minister, 
responded by filing a 250 million rubles ($4,100) libel suit against 
him.
Minkin said that Chubais had referred the substance of the libel case to 
the Presidential Chamber of Justice for Media Disputes, a nonjudicial 
arbitration body created by President Boris Yeltsin. 
Minkin said that Chubais had asked the chamber to rule that his 
reporting on the book scandal was biased and unsubstantiated. The 
chamber's ruling would have no legal effect but would embarrass Minkin.
"This is about the government now trying very actively - and not for the 
first time - to crush the free press," said Minkin at a news conference 
Tuesday. "Specifically, the First Deputy Prime Minister of Russia, 
Anatoly Chubais, is employing any means whatsoever to silence or 
discredit anyone who speaks against him." 
Minkin declined an invitation to attend a meeting Thursday with the 
chamber, saying that he would meet with its representatives only after 
the case was heard in a court, where, he warned, Chubais would face 
"colossal, insoluble" problems.
After Minkin's interview on Ekho Moskvy radio last month, Chubais lost 
his position as finance minister, though he kept his job as first deputy 
prime minister; his co-authors - privatization chief Boiko, Kremlin 
deputy chief of staff Alexander Kazakov and bankruptcy agency chief 
Pyotr Mostovoi - were all forced to resign. 
Minkin said Tuesday that the chamber's proximity to senior government 
means it is in no position make any judgments but said Chubais could use 
its reputation to his own ends. 
"With the help of this unconstitutional organ created personally by the 
president for unspecified investigations, he intends to exert pressure 
on the court," he said.
Andrei Piontkovsky, director of the Center for Strategic Studies, said 
Minkin had little to fear from Chubais' appeal to the chamber because it 
was not a court. But he said it might have an indirect effect. "So 
essentially Minkin is right in refusing to meet with it until after the 
court hearing. In any civilized state any pressure on a court is 
completely inadmissible." 

*******

#8
Chicago Tribune
December 14, 1997 
[for personal use only]
FEARS OF A CRISIS WANE IN RUSSIA
ECONOMY STEADIES AFTER ASIA SCARE, BUT CAUTION STILL REIGNS 
By Colin McMahon

Having watched their nation's economy slip toward an abyss over the last
several weeks, Russian officials are being careful to avoid any show of
bravado. Yet there are hopeful signs that the crisis that devastated emerging
markets in Asia and elsewhere may wind up dealing Russia only a glancing blow.
Interest rates and the currency have settled down; the equity and bond
markets have rebounded.
The International Monetary Fund said on Friday its latest mission to Russia
would recommend the completion of its review to the IMF board, a move that
paves the way for the resumption of funding suspended in October.
"The mission reached understandings with the authorities in a number of
areas, notably the framework for budgetary policies in 1998, which would allow
it to recommend the completion of the review to the IMF management and
Executive Board at this time," the fund's Moscow office said in a statement.
The optimism, though, remains guarded. Russian officials acknowledge that
the situation can, and quite often does, change daily.
Wednesday, for example, the markets fell on news that President Boris
Yeltsin was hospitalized after a bad cold turned into an acute viral
infection. If the markets sneeze when Yeltsin catches cold, a worsening of the
president's health could cause some nasty financial side effects. That's just
one bad-case scenario.
Beyond that, the crisis put a spotlight on some troubling flaws in Russia's
economy. The heavy reliance on borrowing to keep the government running is
proving difficult to sustain. Tax collection is way too low, as are rates for
domestic savings and investment.
Though more shops and restaurants open every day in the Russian capital,
the average worker has yet to see the benefits of Yeltsin's austerity program.
Average incomes dropped slightly in the first 10 months of 1997, according to
economist Mikhail Delyagin, and remain below 1994 levels. Most Russians say
they were better off before Yeltsin's reforms.
Still, that Russian officials are expressing even guarded optimism in the
wake of the international crisis is considered a surprising turnaround.
Just a few days ago, the ruble was under siege as foreign investors cashed
out of government bonds. Stocks, or at least those for whom buyers could be
found, were tumbling. Interest rates were on the way up and the currency
reserves on the way down.
After the central bank spent an estimated $4 billion in a month, some
analysts warned of a run to the dollar and swift devaluation. Already the
dollar was selling at a higher price on the street than at official currency
exchanges. The Kremlin feared a wipeout of the fruits of its reforms: a mostly
stable currency, an inflation rate of about 11 percent this year, a small but
nonetheless positive economic growth projection for next year.
Instead, Russia found some steady ground. Now officials believe the
recovery has been pushed back a mere six months. Growth is unlikely to hit 2
percent in 1998, the figure the Kremlin was hoping for a few months ago. But
next year could yet bring the first rise in gross domestic product that Russia
has seen this decade.
"Most likely we will stay at this year's level," Delyagin said. "But this
is still a serious victory. The fact that there will be no changes for the
worse is already a good sign."
Just as bad policy decisions helped Russia land in its mess, good ones
helped it gain its footing.
The central bank's decision to raise its main refinancing rate to 28
percent from 21 percent helped sway some investors who might otherwise have
bolted. The government's debt burden will rise and growth will take a hit, but
the alternative of a potential devaluation would have been far costlier.
By scrambling to find backup funding, in the form of a possible $2 billion
loan from a group of Western banks--a loan it now says it no longer
needs--Russia sent a message to investors that it could handle the assault on
its currency.
Finally, Russia's lower house of parliament moved strongly and surprisingly
toward adopting a relatively austere budget for 1998. That move last week
encouraged investors who want to see Russia bring spending in line with
revenues. The budget, which was written before the October crisis in Asia
spread to other emerging markets, forecasts a deficit of 4.7 percent of GDP.
Minister Yevgeny Yasin, a top economic official at the Kremlin, predicted
Tuesday that it could run as high as 6.7 percent, given the lower growth and
higher borrowing costs the government now expects for 1988.
The deficit could go much higher if Russia fails to do something about tax
collection. Less than 60 percent of taxes owed ever make it to the Treasury, a
shortfall so severe that the IMF is withholding a $700 million loan payment
until the situation improves.
This week the government decided to shut down two delinquent oil companies
and sell their property for back taxes. The move against the firms, which are
controlled by powerful tycoons with strong political connections, is the kind
of action critics have been demanding. Whether it will stick, however, and how
much money it will generate remain open questions. The companies vow to fight.
Another key issue is the estimated $1.6 billion that Russia owes its
teachers, doctors, scientists and other public servants.
Against the advice of his leading economic adviser, Yeltsin promised months
ago that the wages would be paid by year's end. Government officials said they
will make it happen, but it may take help from the World Bank.

******

#9
From: Alan Fahnestock <Fahnest542@aol.com>
Date: Sun, 14 Dec 1997 
Subject: Hough 1430 --- costs of revolution

I know I'm getting old and not paying attention, but I could use a little
clarification on one of Mr. Hough's assertions, to wit:
"Whatever the intention, however, it is clear that the revolution of 1991 has
cost more people in the former Soviet Union their lives than the Civil War
after the 1917 revolution."
It would be useful to know how the premises for such a conclusion are
defined,
how Jerry would limn the sequence of causality. Seems to me that perhaps he is
confusing the two. Undoubtedly, a lot of people have died since 1991, but
direct linkage of all of them to the 1991 Revolution seems excessively
redolent of Terry Pratchett's Quantum Butterfly Effect. 
Tadjikistan and Chechnya come to mind as a couple of possible contributors to
such a conclusion, but categorically denying that any such conflicts would
have occurred in the absence of 1991, per se, seems a bit of a stretch: viz
Karabakh, the Meshketian Turks, Tblisi, Abkhazia, et al. The body politic
under late Soviet power was covered with such abcesses, waiting to burst, and
Moscow wasn't showing any particular brilliance in its ameliorative efforts.
Or perhaps we are speaking of the the much-lamented decrease in life-
expectancy. Sad, indeed, but unless I am losing all my marbles, this tendency
was well underway and rather well-documented by Murray Feshbach and Nick
Eberstadt way back in the mid-80s. If it has discernibly accelerated, I will
concede a certain proportion of the incremental damages; however, even here
the strict causality isn't clear.
Probably I'm missing something --- this isn't my field anymore. I could use
some help, and having someone of Jerry's eminence in the field fall back on
the "izvestno chto" school of history isn't overwhelmingly helpful.

********

#10
St. Petersburg Times
DECEMBER 15-21, 1997 
Post-Soviet Statistics as Murky and Unreliable as Ever 

IT IS WIDELY assumed that, with the collapse of central planning, the 
padding and manipulation of economic statistics is a thing of the past. 
Alas, that is far from the case, according to World Bank economists 
Misha Belkindas and Olga Ivanova, who spoke at the annual conference of 
the American Association for the Advancement of Slavic Studies in 
Seattle on Nov. 22.
In some respects, the statistics available today from the State 
Statistics Committee, or Goskomstat, are less reliable than in the 
Soviet era. 
Dr. Ivanova noted that statistical agencies in Russia have not adapted 
their categories to reflect the standard practices of Western market 
economies. Industrial producers supply gross output data, measured in 
physical terms, with no effort to calculate value added (that is, 
allowing for changes in inputs). These gross output figures from 
different sectors are then aggregated using highly dubious relative 
prices, to come up with composite figures for national production. For 
example, different types of farm crops are counted up in tons and then 
added together using relative price indices that were fixed for the 
entire USSR as of 1983! 
About one-third to one-half of economic activity is hidden from 
statisticians; even some major plants appear to have simply disappeared 
from the data reporting exercise.
In the past, there were incentives for managers to over-report output 
(to win plan bonuses). Now, the main incentive is for firms to 
under-report output (to evade taxes). However, it still pays for some 
managers to over-report output - to help get bank loans, for example. 
Similarly, loss-making firms that are not paying taxes will tend to 
over-report in order to show how important their factory is, in an 
effort to win more subsidies from the center. No one can be sure in 
which direction the cheating is taking place. Still, Ivanova concluded 
that "cheating is peanuts compared with the gross mistakes done in 
collecting the data."
It took two or three years for Goskomstat to come up with reasonable 
deflators to allow for price inflation, which meant that the huge drop 
of GDP reported in 1991-93 was exaggerated. But nobody can say by how 
much. Dr. Ivanova was skeptical about analysts who try to use raw 
electricity output to "correct" the GDP data. Despite the comforting 
image of men in white coats watching dials, electricity output data is 
in reality hardly more accurate than any other data being reported. The 
household surveys that Goskomstat conducts are equally unreliable: data 
on investment, government spending, and foreign trade are even less 
trustworthy. According to Dr. Belkindas, it is not really in the 
interests of any government in the region to spend money on collecting 
accurate economic statistics: they prefer to pretend not to know what is 
happening.
Macroeconomic data are compiled by Goskomstat only for the purposes of 
reporting to international financial agencies, and are not based on 
systematic collection of economic data. Dr. Ivanova suggested that, 
while the IMF is fond of publishing "official statistics," it is often 
not able to produce detailed breakdowns to show where its numbers came 
from. All of this makes the hoopla generated by a reported 0.2 percent 
rise in Russian GDP in the first nine months of this year a little 
dubious.
The bottom line? After six years of market transition, the former Soviet 
economies still do not have a bottom line. Anybody who makes confident 
assertions about whether the Russian economy is rising or falling is 
indulging in a leap of faith.

This comment was submitted to The St. Petersburg Times by the Jamestown 
Foundation, a Washinton D.C.-based think-tank devoted to studying 
economic issues in the former Soviet Union. 

********

#11
Humbled Russia seeks new Caspian oil role
By Mike Collett-White 

BAKU, Dec 15 (Reuters) - Russia, casting a rueful gaze over a lost oil
empire in the Caspian, will find it tough going to regain even a vestige of
the power it once wielded over what has been hailed the world's great new
energy frontier. 
Billions of dollars of oil and gas investments have poured into
developing hydrocarbon lakes lying under its waters, and many tens of
billions are still to come. 
Seven years ago, all of this would have been Moscow's. But since the
Soviet Union collapsed in 1991 it is newly independent states bordering the
resource-rich water body which are reaping the benefits of the Caspian oil
boom. 
Nowhere is this more obvious than in the bustling Azeri capital of Baku,
where the black gold rush has quickly returned the city to its former
splendour. 
No former Russian colony is ready to bow to Kremlin pressure as in the
old days. Oil, they argue, is a powerful enough tool to secure independence
and create unimaginable wealth. 
Moscow is aware of oil's strategic and economic importance -- not only to
the region, but to Western governments who want to secure a diverse energy
base for the future. Most prominent among them is the United States. 
``We must in no way allow our influence in the Caspian region to
weaken,'' declared Russia's dynamic First Deputy Prime Minister Boris
Nemtsov recently. 
RUSSIA'S LOSS IN TERMS OF RESOURCES IS HUGE 
A breakdown of former Soviet littoral states' estimated Caspian
hydrocarbon reserves shows just how much Russia has lost and how much
Azerbaijan and Kazakhstan have gained. 
Semi-official Russian geological estimates show that if the Caspian is
divided into sectors, initial potential recoverable resources in the Kazakh
area total 4.5 billion tonnes of oil equivalent, or 32 billion barrels. 
The Azeri sector is not far behind with 4.0 billion tonnes (or around 28
billion barrels). 
Russia comes third with 2.0 billion tonnes (14 billion barrels), just
ahead of Turkmenistan with 1.5 billion tonnes (11 billion barrels) of oil
equivalent. 
The Azerbaijan International Operating Company (AIOC), an 11-member
international consortium led by a British Petroleum -Statoil alliance, will
pay $8 billion to tap less than one sixth of the estimated Azeri reserves
alone. 
The Kremlin has attacked the problem of its waning influence in the
Caspian in three ways. 
The first, and least convincing, is to continue to claim partial
ownership of oil and gas lying under water. 
Russia and Iran officially treat the Caspian as a giant lake, the spoils
of which should be divided evenly between the five littoral countries. 
Azerbaijan, Kazakhstan and Turkmenistan counter that the Caspian is a
sea, and should be divided into sectors which would then be developed by
each country separately. 
But they cannot agree on where the dividing lines fall, and are still
squabbling over some of the biggest reserves, including those already under
AIOC contract. 
As oil exploration and development continues apace despite rumblings of a
row over status, Russia's aim to work jointly is likely to be given short
shrift. 
``This policy is driven by the Ministry of Foreign Affairs, which is
still pushing for a condominium development of the Caspian,'' said Julian
Lee, oil analyst at the Centre for Global Energy Studies, who specialises in
the former Soviet Union. 
``But they seem to be losing ground in this area.'' 
UNOFFICIALLY, MOSCOW HAS PROMOTED RUSSIAN COMPANIES 
A more practical solution to redefining Moscow's role in the Caspian
basin has been to push for the interests of Russian oil companies,
particularly its biggest group, LUKoil. 
``Another way for Russia to maintain some influence has been for Russian
companies to penetrate into the region,'' explained Professor Yevgeny
Khartukov, general director of the International Centre for Petroleum
Business Studies in Moscow. 
``LUKoil was really a diplomatic flagship for the rest of the Russian oil
industry,'' he added. 
LUKoil has a stake in the two biggest international Caspian consortia so
far -- the AIOC and the $20-billion Tengizchevroil onshore development in
Kazakhstan. Both groups are due to hit peak output of about 800,000 barrels
a day early next century. 
It was also declared winner of a tender to develop major resources off
the Russian Caspian coast with up to 600 million tonnes, although some
estimates are as low as 150 million. 
Consortia are happy to have Russian representation on board, since a
superpower's presence in the region cannot be ignored. The wider the spread
of participants the better, industry executives argue. 
``From the eleven companies in the (AIOC) consortium, (Azeri President)
Haydar Aliyev has a geo-political spread that is important to his country,''
said AIOC President Terry Adams in an interview. 
MOSCOW'S BEST HOPE IS SECURING PIPELINE ROUTES 
But the Kremlin is clearly pinning most hope on a third Caspian policy
option -- pipelines. Caspian oil is worth nothing until it is sold to world
markets, meaning that the exporter of the crude has as much influence as the
producer. 
Moscow has already scored two notable victories in the battle to
transport Caspian oil west to the Black Sea. 
The biggest was the $2-billion Caspian Pipeline Consortium, which will
carry up to 1.34 million bpd by 2014, leaving plenty of room for other oil
after Tengiz crude is included. The CPC crosses Russia ending up in the
Black Sea port of Novorossiisk. 
The second feather in the Kremlin's cap was to win a contract to carry
small-volume, ``early'' AIOC oil from the Azeri-Russian border to Novorossiisk. 
This was only after intense negotiations with Russia's rebellious region
of Chechnya, across whose territory the pipeline runs. Moscow plans to build
a new pipeline section around Chechen territory to secure supplies in future. 
What Russia wants now is to win the ``main'' AIOC oil route, giving it a
dominant position over western oil exports from the Caspian for several
decades. 
``We need to win the right to transport main Caspian oil against
international competition,'' Nemtsov said. ``We have won the first round
with early Azeri oil passing through Russia, but that is only the beginning.'' 
Against him is the formidable triad of Azerbaijan, Turkey and the United
States, who want the oil to pass instead from Baku to Turkey's Mediterranean
port of Ceyhan, thereby by-passing the already crowded Bosporus. 
``We believe that the Baku-Ceyhan route will be one of the main routes
for Azeri exports,'' Aliyev said in Baku last month at the AIOC first-oil
ceremony. 
While the official reason for supporting the Baku-Ceyhan line is
environmental, no former Soviet republic will choose to rely on Moscow for
its livelihood if it can possibly help it. 

********

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