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Johnson's Russia List


February 19, 1998   
This Date's Issues: 2069  2070

Johnson's Russia List
19 February 1998

[Note from David Johnson:
1. Renfrey Clarke in Moscow: RUSSIA: OPPOSITION TO DEFENCE CUTS 

2. The San Francisco Flier: Russia: What's Up, What's Down, What's 

3. Paul Goble (RFE/RL): Regionalization Now Could Prove Ephemeral.
4. Reuters: Yeltsin sees off challenge on Russia land reform.
5. Reuters: IMF, Russia talks face ``mass of problems.''
6. The Guardian (UK): Tom Whitehouse, Vodka king satisfies Russian 

7. Rossiyskaya Gazeta: Aleksandr Sabov, "The Whale and the Bear. 
America and Russia in a Changing World."

8. AP: Russia To Cut Nuclear Program.]


Date: Wed, 18 Feb 1998
From: (Renfrey Clarke) 
Subject: Russia's military opposition

#By Renfrey Clarke
#MOSCOW - How much should Russians be made to pay for the armed
defence of their country's new capitalism? Among millions of
half-fed, seldom-paid workers, the figure of zero rubles would no
doubt spring to mind.
#Cutting all funding for the Russian armed forces, however, would
not solve the really painful question: how would you cope with
the vast apparatus you had declared redundant? What would you do
for the military officers whose careers were cut short, not to
speak of huge numbers of workers in defence-related enterprises?
#Posed originally in the era of Soviet perestroika, the challenge
of military ``downsizing'' is now bedevilling Russia's
capitalists. Mindful of their need for military defence - above
all against an embittered Russian population - the country's new
rulers nevertheless look toward the armed forces as an area where
economies can be made and solutions found to at least some of the
state's financial problems.
#Needless to say, these plans are not to the liking of military
officers, defence plant directors, or the several million workers
employed in Russia's ``military-industrial complex''. The last
year or so has seen the rise of an increasingly organised and
angry ``military opposition''. Arguably, this now poses a much
more real threat to the government than the tame, compromising
#Until the late 1980s the Soviet armed forces swallowed a ruinous
portion, at least 20 per cent, of the USSR's gross domestic
product. The demands for a less expensive military - the current
medium-term target is to spend 3.5 per cent of GDP on defence -
have been accompanied by a drastic reformulation of the tasks
assigned to the military by government strategists.
#The Soviet-era goal of being able to use conventional forces to
mount overwhelming counter-blows against attack has been
abandoned. Deterrence is now to be provided by Russia's nuclear
arsenal; the ground forces are to have the capacity to fight only
limited wars directly on the country's borders.
#The initial response of the General Staff chiefs to this new
thinking was disbelief, together with manoeuvres aimed at
protecting their fiefdoms until ``normal'' funding resumed.
Partly to convince the generals and admirals that the old days
were gone for good, the Russian government funded the armed
forces at levels well below those promised in state budgets.
#The result is that naval vessels now rarely put to sea; air
force pilots are in the air for only a fraction of the time
needed to maintain their combat skills; and the army, as shown by
its humiliation in Chechnya, lacks the ability to fight even the
limited border wars foreseen in the new strategies.
#Rearguard actions by military chiefs have continued. According
to Moscow journalist and military analyst Pavel Felgenhauer,
defence officials deliberately divert funds meant for officers'
salaries in order to pay for weapons procurement, research and
development, and military construction. Defence Minister Igor
Sergeev, Felgenhauer states, has pooled all the money he has been
able to find in the defence budget in order to begin production
and deployment of a new nuclear missile, the Topol-M. The salary
backlogs - officers are now owed an average of a month's pay -
have been put to political use, giving the defence chiefs a
weapon in their campaign for funding increases.
#Particularly in the ground forces, the combination of government
cuts, misdirection of funds by top officials, and large-scale
theft has brought chaos and disintegration. According to retired
general Lev Rokhlin, the chairperson of the Russian parliament's
defence committee, the army in 1997 received only 64 per cent of
its food and 23 per cent of its clothing budget.
#Morale in the ranks has fallen catastrophically. Soldiers are
often hungry and cold, and the brutalisation of draftees is a
continuing scandal. Suicides are frequent, and in a spate of
recent incidents, soldiers have run amok and turned their weapons
on comrades.
#Understandably, young men in Russia will do almost anything to
avoid being called up. Through legal exemptions, by bribing
medical examiners, or simply by going missing, around 80 per cent
of potential conscripts dodge the draft. Those who serve are
mostly the poorest and least educated.
#The situation of junior officers is little better than that of
rank and file soldiers. For lieutenants and captains, even those
with families, home is often an overcrowded barracks. Career
prospects are dim, since the government's cost-cutting plans
include a drastic culling of the senior ranks.
#Many officers have reacted by becoming sharply politicised. The
trend of military opinion has held little comfort for President
Boris Yeltsin. The view is now commonplace that the army chiefs
would no longer side with Yeltsin in a crisis as they did in
October 1993, when they agreed to the president's demand that
they shell the parliament.
#Serving officers in Russia are barred from political activity,
but are quite capable of organising themselves behind the scenes.
Meanwhile, there are no checks on activity by retired officers.
Last year saw the formation by Lev Rokhlin of the Union for the
Defence of the Army and Military Industry. Raising the call for
Yeltsin's dismissal, this movement has spread rapidly. It now
claims to have 73 regional organisations across Russia.
#As the officer corps has become politicised, the government has
moved toward a showdown with the whole complex of Russian
military and military-industrial interests. At the end of
November, a core plan was adopted for a profound restructuring of
the armed forces by the year 2005. According to the English-
language <I>Moscow Tribune,<D> this plan would involve cutting
total military personnel by 500,000, to a figure of 1,200,000, by
the end of 1998.
#Accompanying this is a scheme, unveiled by Vice-Premier Yakov
Urinson in the last days of 1997, to cut the total number of
defence sector enterprises by more than 60 per cent. Out of 1760
such enterprises, the new defence production complex will consist
of 670 plants.
#Many of the defence plants are out in the cold already, since
the Defence Ministry is failing to pay them for goods and
services delivered. At the end of 1997, the federal debt to
defence enterprises stood at the equivalent of more than US$3
#In all, output by Russia's defence industries has reportedly
fallen by a factor of 11 in the past six years, and arms exports
by a factor of four. Logically, the redundant plants would have
been converted to producing goods for the civilian market. But in
1995 the Federal Defence Industry Conversion Program received
only 25 per cent of its anticipated funding, and in 1996 only 11
per cent. No funds at all were assigned in 1997.
#By effectively writing off more than a thousand defence industry
enterprises, the Russian government has launched an attack of
staggering scope on the country's working people. In some cases
it is not just industrial plants that have been sentenced to
economic death, but whole cities. Russia has numerous ``company
towns'' where a defence plant is the only major employer.
#The rapid growth of the military opposition has not been matched
by a corresponding rise in its political impact. This is partly
because of divisions within the officers' own ranks, and also
because effective collaboration with civilian oppositionists has
not emerged. People such as Rokhlin and retired general Aleksandr
Lebed, for example, are reluctant to have dealings with Russia's
largest opposition force, the Communist Party of the Russian
Federation (KPRF).
#There has also been standoffishness on the part of the
civilians. The KPRF leadership, which has recently shifted its
tactics toward a compromise with the government on key economic
issues, is said by parliamentary sources to regard Rokhlin as too
radical. Commentators have recently predicted that the KPRF will
join with pro-government forces in the parliament to try to oust
Rokhlin from his position at the head of the defence committee.
#The communists' opportunism does not, however, mean that the
government can breathe easily. Even without help from the KPRF, a
political bloc consisting of prominent ex-generals plus the
directors of a thousand-odd defence enterprises could prove
highly virulent as an opposition force. Such a bloc would attract
wide popular backing, as is shown by the fact that trade union
bodies in many defence plants have declared their support for
Rokhlin's movement.
#The moves by Russia's rulers to sack large parts of the officer
corps and gut the defence complex thus represent an immense
gamble, and show how desperate the government perceives its
financial position as being. If the army chiefs were to take up
the military opposition's demand that Yeltsin quit, there is
little sign that the president could muster the forces needed to
resist them.
#According to opinion polls, the army is far more popular than
Yeltsin with the Russian population. Nor would the Interior
Ministry's paramilitary police units be likely to side with the
president, since the Interior Ministry troop commanders are for
the most part former army officers.
#For worker oppositionists, the tensions between the Russian
government and its armed forces are obviously good news. But
while alliance with the military opposition may be a necessity
for the Russian labour movement at particular points and around
certain issues, it holds great perils if pursued as a general
strategic approach.
#Russia's military chiefs are not a pro-worker force; their
political allegiance is to capitalism, in its subsidised, state-
supported, military-industrial variant. Nor, in any sense, are
the military leaders democrats. If an armed forces takeover saved
the jobs of defence industry workers, it would almost certainly
mean the loss of the only real gain most Russian workers have
made in the past decade - the right to organise themselves and to
engage in political and industrial struggle.
#The only circumstances in which Russia's military opposition
could play a progressive social role would be as part of a much
broader movement in which mobilised workers exercised decisive
leadership. Any attempt by the officers to take power outside the
framework of such a movement must be fought against.


The San Francisco Flier
February 12, 1998
Russia: What's Up, What's Down, What's Left

At the height of Cold War xenophobia in America there came the occasional
heretical suggestion that were we really interested in knowing what the
Russian people were like, we should simply make an excursion to our own
Midwest. If anything, the comparison understated the abidingly conservative
values of family, custom and sodality cherished by the Russian populace.
Historically their strain of forbearance has been singularly resolute,
as we should at least have been reminded by the example of their experience
in WWII.
Such heroic patience is the only way to explain the fact that Russian
wage workers have not as yet attempted to seize the country. More than
20 million people, one Russian worker in four, are not paid regularly.
Another five percent, approaching four million people, are owed between
six and twelve months' pay. Only one-quarter of Russian workers are paid
in full and on time. Forty percent of workers in a survey last year (and
54 percent of unskilled workers) said they had not received salaries for
the previous month. As of October 1 nearly 55.3 trillion rubles ($9.4 billion)
in unpaid wages were owed by the state and private enterprises. Almost
half of the country's 22,000 companies are in violation of Russian Federation
legislation on wage payment.
This compilation of State Statistics Committee figures and independent
research data are furnished by the International Federation of Chemical,
Energy, Mine and General Workers' Unions (ICEM), which is leading the campaign
against non-payment of wages in conjunction with the FNPR, the Russian
Independent Federation of Trade Unions, and the International Confederation
of Free Trade Unions (ICFTU). The 20-million member ICEM, which successfully
pioneered the use of the Internet against Bridgestone/Firestone in organized
labor's first cyber-campaign in 1996 (Flier, 7/25/96), launched
an electronic campaign against wage arrears in Russia in November. As with
the Bridgestone strike, the ICEM web site ( provides
links for sending protests to the World Bank and other international
the Russian government, regional administrations and employers, and
banks and corporations.
During the first six months of 1997 the number of strikes in Russia
increased five-fold from the previous year, averaging 5,000 stoppages per
month from January to March. It will probably surprise no one that the our "paper of record" --
reported almost nothing of this, with the exception of the massive general
strikes in the fall of 1996 and in March of 1997. In the energy sector,
where the thrust of worker anger will likely force a showdown, a pair of
mine explosions in December and January which claimed 94 lives received
scant coverage (500 Russian miners have died on the job in the past two
years), as did two serious protests in late January by workers enraged
by the failure of the government to keep the promise it made in July to
pay off all wage arrears by the end of 1997. In the Far Eastern Maritime
District 2,500 miners and defense industry workers blocked the Trans-Siberian
railway in two places for two hours, the largest to date in a continuing
series of demonstrations against the railway. The miners had not been paid
for 7 months, the defense workers for 19 months. In Siberia, more than
50 miners in Polusayevo who had not been paid for two years stormed management
offices and took the mine's director and 20 executives hostage. Detailed
English-language accounts of these incidents could be found only through
the BBC and Reuters.
Production has fallen off 50 percent since 1991. As the Russian oligarchy
squirrels capital abroad to the tune of some $2 billion each month, direct
foreign investment in tandem with IMF/World Bank lending have stepped forward
to exacerbate the misery. The comparatively meager level of foreign investment
--$2 billion in the first half of 1997--
has largely been in natural resources--oil, coal,
gas and timber. Removing the systemic inter-enterprise debt and wage obligations
of these essential state industries by allowing them to collapse has been
the IMF's ongoing demand, and an $800 million loan to the Russian coal
industry from the World Bank in December was made conditional on the
carrying out a coal privatization program. It is expected that the proportion
of coal produced by privately-owned mines will rise to 50 percent by year's
end, from a current level of 8.5 percent.
Concurrent with the approval of the loan was an announcement by the
government of its "restructuring" of the industry and its plans this year
to shut down at least 87 of the 200 mines presently in operation. Coal
sector employment has fallen 18 percent in the past two years to 359,000,
and the new closures will shrink it by another 100,000 workers.
For the motley synod of free-market converts now administrating Russia
into chaos, this inevitable squaring-off with the best organized and most
assertive of Russia's workers appears to be the litmus test of its "reform"
policies. It coupled the mining decree with the revelation that by the
year 2000 it will have reduced the number of defense sector enterprises
by two-thirds--from 1,700 to 670. Then, on January
6, it capped off its vision of the future with an all-encompassing diktat,
outlining the drafting of a new labor code which will curtail the influence
of trade unions in worker-management relations.
The response of the miners was their January direct actions
and, in effect, the addition of a political component to their economic
resistance. One needn't have looked too far to see prior glimmerings. On
December 17 Segodnya reported that the Maritime District miners
"consider that the coal sector in Russia should be state-owned." On January
15 an estimated 200,000 miners in the Kuzbass, Siberia's leading coal region,
demanded a halt to mine closures and called on the government to fund a
plan for the revival of production in the region. Last summer, as destitution
and despair grew, the Kuzbass workers set up soviet-style "committees of
salvation," elected at shop floor level, coordinated with town councils
and integrated with the unions. These committees have spread to other regions
as well.
The Kremlin's fear of the miners' clout with other workers and unionists
has also spread fear among the leadership of the Communist Party as it
acquiesces in the chilling march of Yeltsin's market restorationism. In
deciding to jettison those former-apparatchik led
institutions the miners are now left and not happily
with the trade unions as the sole leadership vehicle
for themselves and an increasingly militant and growing cross-section of
workers. Recent statements from the hierarchy of the FNPR-- 
heir to the old state unions--reveals it to be
as alarmed as the government at the rising vehemence of worker activism.
Its refusal to initiate a comprehensive strategy to combat the crisis has
further alienated workers.
The legendary self-restraint typical of the toilers of the Russian heartland
is fading, as indicated by the Kuzbass miners' threat of a regional general
strike if their demands are not met. In the absence of a viable organ of
national leadership, such isolated actions remain a far cry from the working
class moving as a single entity, though as symbolic displays they&nbsp;
are crucial to what will surely develop eventually. A small upturn in the
economy, and corresponding rising expectations among workers
or, obversely, another plunge in globalism's fortunes, and an accompanying
Hobbesian nightmare might well be the fuel which
ignites an all-out Russian class struggle.
For the international labor bureaucracy, the Western unions like ICEM
which are properly battling with their Russian affiliates in the good fight
for back wages, the crux of the notion of internationalism is yet at issue.
Should Russian workers determine that neoliberal corruption and avarice
are intent upon obliterating all traces of Russian sovereignty, they will
award international labor's social democratic concept of "social partnership"
with capital a class-collaborationist tag. Will Western unionists somehow
attempt to hold the workers in check? Re-direct what will essentially be
a syndicalist revolt for social ownership of industry toward
some kind of reconstituted but still complaisant FNPR? And what of the CP
and its careful
maneuvering with the military (long overdue for a coup attempt) 
is there in the Western labor secretariat's prospectus a selling point
for worker allegiance to a Zyuganov-Lebed Bonapartist nationalism?
Objective conditions (as they say) being what they are, the deepest
wellsprings of denial aren't much of a barrier against this powder keg's
detonation, and it's a given that Michael Specter of The New York Times,
should he finally bother to try, would be hard-pressed to explain it for
you. This newest extension of the dialectic will again be, as Rosa Luxemburg
understood it, a matter of spontaneous self-education.
Copyright John Hutchison 1998


Russia: Analysis from Washington -- Regionalization Now Could Prove Ephemeral
By Paul Goble

Washington, 18 February 1998 (RFE/RL) -- The current period of relative
stabilization in Russian politics reflects the increasing power of that
country's farflung regions rather than the emergence of a new consensus in
But because this devolution of power from the center to the periphery was
a result of the unplanned decay of a hypercentralized state rather than the
product of constitutional agreement and because such regional power is
unprecedented in Russian history, the set of arrangements producing
stability now may generate something else in the future.
Both possibilities flowing from the new regionalization of Russian
politics -- toward greater stability and toward new clashes between the
Moscow and the regions -- have been very much on public view this week.
On the one hand, Sunday marked the fourth anniversary of the
power-sharing treaty between the Russian Federation and the Republic of
Tatarstan. That document, the first of more than 40 that have been signed
since, simultaneously codified a new situation in which the regions had
gained power as Moscow lost it. They have thus helped to redefine precisely
what the Russian Federation in fact is.
Tatarstan President Mintimir Shaimiyev suggested that Moscow-Kazan treaty
laid the foundations for a set of "absolutely new relations" between the
Russian capital and Russian regions. And he argued that these agreements
represented "an attempt to work out the mechanics of representing local
interests rather than being a manifestation of separatism."
Consequently, Shaimiyev added, these accords do not threaten the
territorial integrity of Russia. Instead, they have brought stability to
that country. And as a mark of the new calm they have produced, Shaimiyev
noted that his government was not planning any special celebration of this
anniversary. For him and his people, it has become an accustomed part of life.
But on the other hand, three developments this week highlight the ways in
which the new power of the regions may provoke some serious political
controversies in the future.
First, Aleksandr Lebed, a former Russian presidential candidate and more
recently secretary of the Russian Security Council, said that he was
focusing all his efforts on winning the governorship of Krasnoyarsk. 
Brushing aside questions about his possible presidential ambitions in the
future, Lebed nonetheless indicated that the region he hopes to head could
become a powerful base for challenging the central Russian government both
on its own and in alliance with other regions.
In a formulation that may become his campaign slogan in the future, Lebed
argued that "Russia can be a strong and respectable country on only one
basis: that it has independent regions, linked by common interests." 
Such a slogan may win the retired general friends in many regions, but it
certainly looks like a threat to any pretensions Moscow may have to recover
overall leadership of the country. 
Second, the current governor of Krasnoyarsk, Valeriy Zubov, told a
Japanese audience that his region wants to reach out to foreign countries
for ties and investments and that he hopes Tokyo and other world capitals
will respond. 
Zubov's visit follows the Russian-Japanese summit held in his region in
November 1997 and thus may be seen as logical progression of regional trade
ties. But his appeal for international cooperation calls attention to
something many have overlooked: ethnically Russian regions have been even
more active and more successful than non-Russian ones in promoting ties with
foreign countries.
Neither of these developments necessarily threatens the integrity of the
country either. Indeed, like the Moscow-Kazan accord, they may actually
place limits on such possibilities.
But at the same time, both suggest that the central government must now
operate under a set of constraints imposed by the region not only far
greater than any it has accepted in the past but which threaten its ability
to function. And as the third development of the week shows, many in Moscow
may not be willing or able to accept such limitations.
On Tuesday, the Russian Supreme Court ruled that Ingushetia could not
conduct a referendum that would have made the judicial system in that north
Caucasian republic directly subordinate to its president, Ruslan Aushev. The
court held that the plan violates the country's legal norms and interferes
with the power of the federal authorities. 
If Ingushetia accepts that ruling, it will be a victory for a more
orderly federalism. But if it does not -- and its acceptance of such
dictates is far from certain -- Moscow's demands could spark a more serious
problem, not so much another Chechnya but rather a new series of regional
challenges to the center.
And that is why the new regionalization of politics is so problematic.
Moscow must reestablish its control over certain functions if the Russian
Federation is to become an effective state. But the regions are likely to be
reluctant to give up anything they have won lest they again face an
all-powerful Moscow.
Shaimiyev, Lebed, and many others are prepared to play out this game
within the Russian political system. But as Chechnya shows, some other
regional leaders may not be. And if that proves to be the case, then the
stability wrought by regionalization now could prove ephemeral. 


Yeltsin sees off challenge on Russia land reform

MOSCOW, Feb 18 (Reuters) - President Boris Yeltsin scored a victory on
Wednesday in his battle to liberalise Russia's farm sector when the upper
chamber of parliament failed to overturn his veto of a conservative draft land
Many Russian lawmakers still oppose the free sale of agricultural land,
fearing that it will lure speculators into an industry still struggling to
improve its productivity. 
After two hours of heated debate the Federation Council, composed of 189
influential regional leaders, rallied only 67 votes in support of the draft
code. A total of 120 votes were needed to overcome the president's veto. 
This means the draft land code, which had practically ruled out the free sale
of land, must be ditched and a new one drawn up. 
Last summer Yeltsin vetoed the draft, which was devised by the pro-communist
majority in the State Duma lower house and approved by both chambers. Yeltsin
said the code would be fatal for plans to reform the stagnating agricultural
Most agricultural land, which formerly belonged to Soviet collective farms,
has been shared out among Russian farmers but they are not allowed to sell or
buy it. 
Yeltsin says the lack of clarity about land ownership discourages farmers
investing money and labour in their land and hampers the government's efforts
to revitalise the sector and make it more efficient. 
His opponents say that unlimited land ownership would prompt impoverished
farmers to sell their plots to speculators and finally ruin the sector. 
The Duma overturned the presidential veto last September. In December
keen to find a compromise, convened a round table of parliamentary leaders,
influential politicians and government officials to discuss the land code. 
``The round table showed that there are no major disagreements on the
issue of
private land ownership,'' Yeltsin told parliament in his state of the nation
address on Tuesday. 
``There is a problem with state control of transfer and use of land. This is
what we must focus on,'' he added, indicating room for a possible compromise. 
Yeltsin said the government would present to parliament a set of draft laws
next year that would block the use of farm land for non-agricultural purposes.
The draft laws will limit the right of non-residents to buy land and will
the process of land purchase ``transparent'' to reduce the risk of speculative
``If we allow delay we will leave the agricultural sector without investment,
on the fringes of economic development,'' Yeltsin told deputies in Tuesday's


FOCUS-IMF, Russia talks face ``mass of problems''
By Brian Killen 

MOSCOW, Feb 18 (Reuters) - The International Monetary Fund's talks with Russia
ran into a wall of problems on Wednesday, Russia's Itar-Tass news agency said.
The report threw into doubt the release of funds that might bolster Russia's
tentative recovery from Asian-related economic problems. But it held out some
hope that an eleventh hour deal could be struck before IMF Managing Director
Michel Camdessus meets President Boris Yeltsin on Thursday. 
``The talks are proving difficult, there is a mass of problems,'' Tass quoted
one of the Russian participants at the talks as saying. ``The working group is
striving to find a compromise during the night.'' 
The main stumbling blocks included IMF demands for a cut in oil import
to 20 from 30 percent and the introduction of duties on oil transport, he
The Fund was also said to be seeking the abolition of customs benefits for
foreign car manufacturers deemed harmful to investment in the domestic
Camdessus gave no clues about the release of the latest $670-million tranche
of a $9.2-billion credit, but it had looked to be in the bag until the Tass
report dampened hopes. 
The IMF chief had earlier praised Russia's handling of the fallout from the
Asian crisis and said lessons should be learned from Asia's problems. 
``Russia must protect itself against the dangers of this turbulent universal
market place,'' he told reporters after talks with Prime Minister Viktor
The stress placed by Camdessus on the word ``itself'' -- echoing
Yeltsin's own
recent emphasis on self-sufficiency -- suggested the IMF might not be
considering any extra funds to supplement those already earmarked for this
Camdessus' three-day visit coincides with a fresh battle over the 1998 draft
budget after Yeltsin called for amendments to produce a more realistic
document -- one that the IMF might view as a signal of Russia's commitment to
financial discipline. 
The opposition-led State Duma lower chamber of parliament dropped a
fourth and
final reading of the bill from Wednesday's agenda to allow time to review
several government amendments. 
Chernomyrdin, who was warned by Yeltsin in Tuesday's state of the nation
address that his government's future was on the line if it failed to revive
the economy, told reporters the budget debate was provisionally rescheduled
for Friday. 
But the Duma's budget committee rejected the finance ministry's main
amendment, raising the prospect of a presidential veto unless a compromise can
be thrashed out. 
The budget is vital to satisfy the IMF and put Russia firmly back on the
tracks of economic growth after the Asian crisis reversed a rampant bull
market in Russian shares and triggered an outflow of capital from the treasury
bill market. 
The Russian central bank was forced to raise interest rates sharply on
February 2 to defend the rouble amid rumours of an imminent devaluation. The
bank lowered the rates slightly last week as confidence picked up and treasury
bill yields dropped. 
A senior Western banking source said the IMF's disbursal of the next tranche
of its extended fund facility for Russia had not yet been taken. 
``I think it's pretty likely there will be a positive outcome...The major
issues are the budget,'' he said. ``The real question is the credibility of
the budget numbers...There are no vibes of doom and gloom.'' 
A senior Yeltsin aide told a news conference that Camdessus was satisfied
the Russian government's work and its plans. 
``On the whole we have won approval of the actions we undertook and those we
are planning to undertake,'' deputy administration head Alexander Livshits
told a news conference. 
Chernomyrdin struck a similarly optimistic note. ``I think Russia and the
IMF's 1998 cooperation programme will be adopted,'' Tass news agency quoted
Chernomyrdin as saying. 
Foreign investors, whose confidence might be jolted if the IMF were to
withhold support, were given some cause for cheer by a decision by Russia's
federal securities commission to annul a convertible bond issue by oil company
The issue, seen as a test of Russia's corporate governance, was deemed to
breached minority shareholders' rights. 


The Guardian (UK)
19 February 1998
[for personal use only]
Vodka king satisfies Russian shoppers 
By Tom Whitehouse 

Vladimir Dovgan's business strategy is an extension of his black belt 
karate prowess. "I don't want to be killed," says the 33-year-old 
multi-millionaire food magnate and the bearer of Russia's first 
post-Soviet brand name. 'That's why I'm not interested in oil or 
banking. Food is far less dangerous." 
But thanks to new duties imposed on food imports this week Mr Dovgan is 
set to make a killing himself. 
In the immediate wake of the Soviet collapse, American frozen chicken 
and Chinese pasta held pride of place on supermarket shelves. Now, as 
Russian shoppers become more discerning about which Western flavours to 
sample, "Dovgan" vodka, oats and milk pull at the housewife's purse 
Happily for Mr Dovgan the new protectionist measures make his products 
relatively cheaper. 
"Your Sainsbury's would ruin us. Food is a product that Russia must 
produce alone," he says, playing his favourite patriotic card. "Foreign 
food companies have all the experience, all the advantages. It would be 
a battle between a professional boxer and a child if we let them in." 
His appeal for protection against foreigners is made more compelling by 
his rags-to-riches, pizzas-to-vodka tale of business triumph. A poor boy 
from the far east with no political connections, he made his first 
fortune publishing a karate manual. Then came crisps, followed by 
pizzas. Vodka provided his biggest breakthrough. 
"More Russians died through drinking bad vodka in the early 1990s than 
died in the war in Afghanistan. Selling clean drink that people could 
trust was a good business idea," he says proudly. 
After the first Yeltsin administration ended the monopoly on alcohol 
production there was an explosion in the moonshine distillery business 
that destroyed the reputation of Russia's national drink, and thousands 
of its consumers along with it. 
While the new rich turned to Swedish and Finnish brands, Dovgan sold 
middle- and lower-class drinkers proven vodka from qualified producers. 
The Dovgan brand was born when he put his beaming smile above the 
"protected quality" logo on all bottles. 
That was 18 months ago. Now the logo and a numbered bond promising 
satisfaction or your money back - which doubles as a lottery ticket - is 
stuck on more than 200 products, including lemonade, flour, lard, 
brandy, beer and kvass (a traditional weak rye-beer). 
Mr Dovgan plans to franchise his name to 1,000 more products by the end 
of the year, without owning the factories that produce them. Using a 
media profile that makes Richard Branson seem shy and retiring, he 
reinforces public trust by selling himself as a Russian patriot. 
"Without Dovgan I would not have had a chance for a real education," 
says Sergei Shusko, one of a hundred poor teenagers enrolled at the 
Dovgan Institute of New Business Technologies in Moscow. 
"We don't want to be dependent on foreigners any more. We must rely on 
ourselves," says another student. 
Contestants in a weekly Dovgan television game-show compete for his 
products. For the New Year edition he made a guest appearance as Uncle 
Frost (Russia's Father Christmas) distributing free sweets. 
But there is a limit to customer loyalty, and price is crucial. Mr 
Dovgan's cakes are not exceedingly good, just relatively cheap and 
"Russians do have particular tastes, but of course if foreign goods are 
cheaper they will sell more," he says. 
Asked if his charitable instincts extend to paying taxes, Mr Dovgan is 
evasive. "I do not have European accountants, I have Russian ones. 
Anyway, the government makes it impossible to do business completely 


Russia Now 'Regional Power' in US-Led World 

Rossiyskaya Gazeta
5 February 1998
[translation for personal use only]
Second and concluding part of article by observer Aleksandr
Sabov under the "Three Centuries of Chasing the Leader" rubric:
"The Whale and the Bear. America and Russia in a Changing World"

[Passage omitted on history of Russian-U.S. relations in 19th, 20th

21st Century: Quo Vadis? 

Two factors at once draw attention to themselves. First, the
unanimity with which both the ruling Democrats and the opposition
Republicans in America assess the present situation in the world as a
unique opportunity for the United States to become the sole global leader. 
Second, the unanimity with which the new "pax americana" is being founded
on recent sensational theories: "the end of history" (F. Fukuyama) and
"the clash of civilizations" (S. Huntington). The modern West is, they
maintain, the "ultimate haven" of history for which mankind has striven. 
Freedom of seafaring is abolished -- henceforth all "laggards" must only
sail in the leader's wake. The limit on ideological conflicts has
essentially been reached, and what lies ahead is no longer conflicts
between countries or coalitions so much as "clashes of civilizations." It
only remains for Western civilization to win the last form-of-civilization
victory, to use a philosophical term.
In its relations with Russia the United States has always had dealings
with alien regimes -- first an absolutist monarchy, then an ideologized
totalitarian system. And yet the two countries found a common language
more frequently than they lost it. Our interests coincided or were close
whenever we were faced with common enemies or common obstacles. We had
only to lose them or end up face to face with each other, and the
partnership would be forgotten and the ideological differences would assume
a universal scale. This is how we have gotten through the past
half-century -- in a bipolar world swept by "Cold War" drafts.
But now there are no more ideological differences. There is no more
Berlin Wall, which divided Europe and, along with it, the whole of the rest
of the world. There is no "evil empire," and even this very concept will
soon be effaced from memory. Does anyone threaten the security of Russia
today? Does it inspire a feeling of fear in anyone?
As far as can be seen from the threshold of the 21st century, which
history has now almost reached, the horizon ahead is clear. Only meticulous
analysts notice some haziness in the very distant future. If aggressive
fundamentalist forces accede to power in a number of Islamic countries.... 
If too active pan-Turkism unites with them.... If vast China, with its
bulging population, bursts its stays, and nationalist forces, which will
need to invent an external threat in order to assert themselves, gain the
upper hand there.... All this is in the subjunctive mood, only this time
with regard not to the past but to the future. It is clear that all these
"ifs" can be neutralized only with a coordinated policy of a new,
multipolar world.
But the United States is abandoning this today. In the unipolar world
which "victorious America" has enthusiastically set about building, a
coordination mechanism is just not needed. It is still permitted to some
extent by the Clinton administration, which, while regarding U.S. hegemony
as of paramount importance, nonetheless proceeds in its foreign policy from
the need to cooperate with allies and international organizations. On the
other hand, the "new isolationists" -- there are not that many of them, but
their voice is clearly audible -- demand that U.S. foreign policy activity
be reduced to the minimum, that money not be spent on peacekeeping
operations, and that financial aid to other countries be terminated on the
pretext that it is better to tackle problems at home than those of the
whole world. These are simply different types of Americanocentrism, and
the appearance of the 21st century will to a considerable degree
predetermine which of them will win the internal U.S. debate.
There is no disputing the fact that the United States really has
gotten an opportunity for the first time in history to assert itself as the
sole world superpower. The road to global peace -- on the West's terms --
is open and is now a one-way street: toward a single world market, a world
information system, and a dominant system of values and culture, that is,
in the final analysis toward the undivided hegemony of Western
civilization. Having been forced to draw in its horns because of its
internal problems, Russia has reduced its global politics to the minimum. 
China is not yet ready to contend for the leadership even in the Asia and
Pacific region, although its strategy of accumulating forces and building
up economic and military strength is aimed precisely at domination -- at
first on the scale of the Asia and Pacific region, but then on a global
Is it not in this context that it is most correct to assess the
meaning of NATO's eastward expansion? Post-Soviet Russia with its Eurasian
civilization must be drawn as quickly as possible into the West's
geopolitical habitat, in any case before a struggle for hegemony gets under
way between the Chinese Tiger and the U.S. Whale. Is this moment far off? 
Analysts believe that it is 20-30 years away, at any rate during the first
half of the 21st century.
What is left for the Bear: the role of referee in the ring or just
the role of an onlooker? In connection with the defeat in the Crimean War
Prince Gorchakov, the aforementioned Russian diplomat, once remarked:
"Russia is accused of being isolated and silent in the face of facts
which harmonize neither with law nor with justice. It is said that Russia
is angry. Russia is not angry. Russia is concentrating." At that time,
the middle of the last century, Russia really did "concentrate" and managed
before the beginning of the 20th century to make its presence felt as one
of the most dynamic countries in the world. Sadly, this process was then
interrupted by the revolution, which, in addition, awakened a new
hegemonist itch -- an ideological one -- in the former socialist
But the time to "concentrate" really has come to us now. For the
second time in two centuries. Even if imperial ambitions are still being
heard from the lips of certain Russian politicians, it is already clear to
the country what its new role is -- to be a regional power in a multipolar
world and to devote its strength finally to its own development. The fact
that the world will sooner or later become multipolar is confirmed best of
all by the experience of those who have already made such attempts --
"concentrated" on the idea that the world revolves around them and tried
alone to bear the leader's burden on their shoulders.
But, since the time of Alexander the Great, such attempts have
invariably failed.


Russia To Cut Nuclear Program
18 February 1998

MOSCOW (AP) - Russia will shut down three of eight plants involved in nuclear
weapons production amid severe fund shortages, a top government official said
Nuclear Energy Minister Viktor Mikhailov said Russia's military nuclear
program has been cut by half over the past six years and now accounts for only
10 percent of the nuclear industry output.
He did not specify the names of the plants.
The last year has been the worst year for the military nuclear program in
terms of funding. The government provided only 30 percent of budget funds
earmarked for the purpose, the ITAR-Tass news agency quoted Mikhailov as
However, Mikhailov said Russia would complete construction of the Bushehr
nuclear power plant that it is building in Iran, and strongly denied U.S.
allegations the plant could help Tehran build an atomic bomb.
``Iran's technological potential doesn't allow it to produce nuclear
weapons,'' he said.
Washington long has opposed Russia's $800 million deal to build the nuclear
reactor in Iran. Moscow has shrugged off U.S. security concerns, arguing that
it needs the money to keep its own ailing industry afloat.
Mikhailov also said he would travel to Syria soon to sign an agreement on the
``peaceful use of nuclear energy.'' He did not elaborate, and the prospect of
such cooperation has sparked serious concerns in Israel.
Also Wednesday, a nuclear official said Russia expects to build its first
floating nuclear power plant in 1999 and anchor it off the remote northern
Chukotka Peninsula.
The plant would be built at St. Petersburg's Baltic shipyard and towed to its
planned location off the Chukotka village of Pevek, said Yevgeny Ignatenko,
managing director of the state-run Rosenergoatom, which runs Russia's nuclear
power plants.
Such plants are ``indispensable in remote regions'' and do not entail new
technologies or production facilities, he said, according to ITAR-Tass.
A second floating plant is planned for the Taimyr Peninsula coast in the next
few years, he said.
Russia is also negotiating the sale of a similar reactor to Indonesia.
Ignatenko voiced concern that Indonesia's currency and financial crisis might
derail the project. He said President Boris Yeltsin would discuss the project
during his planned visit to Indonesia in the second half of this year.


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