This Date's Issues: 2072
Johnson's Russia List
to CDI's Home Page I Return
to CDI's Library
20 February 1998
[Note from David Johnson:
1. Reuters: Yeltsin: Army Problems Foremost for Russia.
2. Newsday: Susan Sachs, Iraq Crisis Focuses Russia Foreign Policy /
Critical, but not hostile, to U.S. actions.
3. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Russia Denies
Labor Chance To Vent Anger.
4. Paul Goble (RFE/RL): Georgia: Analysis from Washington -- Stability
Constitutes A Means To Other Goals.
5. the eXile: Alexander Hinshtein (Moskovsky Komsomolets), "Strange
Exchange: What Was $500 Million Doing in the U.S. Embassy?"
6. RIA Novosti: THE YEAR 1998 WILL MARK A TURNING POINT IN STREAMLINING
FINANCES AND CLEARING UP THE PILES OF FINANCIAL PROBLEMS IN THIS
COUNTRY'S ECONOMY, SAID ANATOLY CHUBAIS.
7. RIA Novosti: RUSSIA'S FIRST VICE-PREMIER BORIS NEMTSOV DESCRIBED LE
FIGARO'S ALLEGATION THAT HE IS A PROPONENT OF MONARCHY AS 'SHEER
8. Reuters: Duma Ratifies Human Rights Convention.
9. Columbia Journalism Review: Neela Banerjee, BIG BUSINESS TAKES
OVER. A budding independent press returns to the old ways.]
Yeltsin: Army Problems Foremost for Russia
20 February 1998
MOSCOW -- President Boris Yeltsin said on Friday the problems facing
Russia's huge but demoralized armed forces were of frontline concern for
Russia is slashing the size of its military now the Cold War is over and
plans to switch from reluctant conscription to a willing, all-professional
force early next century.
"We are building a new army -- a professional, mobile army which meets
modern requirements," Yeltsin said in his weekly radio address.
"An army like that must be manned by people for whom suitable conditions
have been created, who do not have to wander around homeless and wait for
their pay for months on end," he said, referring to some of the military's
"Let me stress again that the problems of the army are not secondary but
of foremost significance for Russia," he said in his address, which was
devoted to marking the country's Feb. 23 "Defender of the Fatherland"
He said Russia needed servicemen who "are convinced their profession is
very much needed by the state and the people and is among the most
honorable ones, a profession which the public sincerely respects."
Yeltsin and his government view military reform as an important element
of their overall program to convert Russia into an efficient market economy.
On Tuesday, Yeltsin said in his annual state-of-the-nation address the
authorities had paid wage arrears to uniformed personnel but still owed
mountains of money to the armed forces and would have to speed up reforms
this year to clear the debt.
Defense Minister Igor Sergeyev said last month the future of military
reform depended on parliament approving the 1998 budget. The State Duma
were debating the draft in its fourth and final reading on Friday.
The armed forces are being cut to 1.2 million men this year, close to
half the strength of the Soviet Union's Cold War fighting machine.
Military officers, from Sergeyev down, favor a professional force over
conscription, not least because many young men dodge the draft anyway.
Sergeyev has said Yeltsin's deadline of 2005 to end conscription is
unlikely to be met.
An important element of this, and one given scant attention, is bullying
by older soldiers and officers, a practice unlikely to draw youngsters to
join up voluntarily. There have been several cases in recent years of young
soldiers shooting comrades after apparently snapping under the strain of
As the military slims down, various branches of the forces are being
merged, for example air and air defense and all three rocket forces --
strategic, military space and missile defense.
The commander of the now combined Strategic Rocket Forces, Col.-Gen.
Vladimir Yakovlev, told reporters on Thursday the merger had improved
efficiency even though some 60 percent of his nuclear missiles and
equipment was outdated.
20 February 1998
[for personal use only]
Iraq Crisis Focuses Russia Foreign Policy / Critical, but not
hostile, to U.S. actions
By Susan Sachs. MOSCOW CORRESPONDENT
Moscow - Despite the accompanying headaches and tensions, the
Iraq crisis is helping to lift Russia out of its long-standing
After richocheting between subservience and resentment in its
relations toward the United States, Russia is staking out an independent
foreign policy that aims to be contrariant but not hostile to
Indeed, Russia views the United States as partly responsible for
tensions in the Persian Gulf and is capitalizing on old ties to Saddam
Hussein in spearheading opposition to an American military strike.
"We don't want to be anti-American," said a senior Russian Foreign
Ministry official in Moscow, speaking on condition of anonymity. "What
we want now is to do everything on the basis of international
legitimacy. But in the case of Iraq, the obligations have all applied
only to one side."
According to this Foreign Ministry official, who was posted to
Baghdad for several years and is now deeply involved in the efforts to
avert a new gulf war, Russia attributes the current conflict partly to
Hussein's own stagecraft and partly to "real provocations" by the UN
That team, the latest group of experts assigned by the UN Special
Commission on Iraq to search for and destroy Iraqi weapons of mass
destruction, was denied access to some suspected weapons sites, sparking
the latest crisis.
Echoing the line of the Iraqi leadership, the Russian diplomat said
the present UN team is "highly politicized" that team leader Richard
Butler, an Australian, has shown considerable "bias" and that the
United States has lost credibility in the eight years since economic
sanctions were imposed on Iraq by unjustly blocking or delaying
legitimate humanitarian-aid projects.
He said Butler's teams "conducted really very strange inspections"
last year, including a hunt for eavesdropping devices in buildings near
the special commission headquarters in Baghdad and a demand for prison
records to determine whether inmates were subjected to biological
"What can you find in an Iraqi prison? Records? A document?" the
diplomat said. "It's stupid, and it was done just to provoke the
Although Russia long quietly acquiesced in American policy toward
Iraq, the diplomat added, it now wants to see "balance" restored to the
Considering its historic political, military and economic alliance
with Iraq, Russia's empathy is hardly surprising. Through war and
sanctions, first as patron and then as disciplinarian, Russian diplomats
maintained the closest and most sustained contacts with Hussein of any
foreign country. During the Persian Gulf War, when all western and
nearly all Arab diplomats left, Russia kept its embassy in Baghdad open
As a result, Moscow has access and even some influence with Iraqi
leaders that others do not. But that relationship lately has been
misunderstood, if not downright mistrusted, by both the Iraqis and the
Americans, according to the Russian official.
Hussein, for example, "exaggerates" the depth of Russian support in
his face-off with the UN. "He calculates, but he also miscalculates,"
the diplomat said. "He did that before, when there was the Soviet Union,
and he miscalculated who will be on his side."
And while Iraqi officials are "not naive," he added, they do
misjudge. For example, the Iraqi ambassador in Moscow spends much of his
time and energy cultivating members of the Duma, or lower house of
parliament. But while the Duma might make a lot of noise, it has
virtually no impact on Russian policy-making.
"We take it into consideration, of course, but we also think about
our relations with America and with Europe. We can't put all our eggs in
the Iraqi basket," the diplomat said.
At the same time, Russian officials are clearly irritated with the
U.S. government, which they complain is unduly suspicious of Moscow's
rapport and access in Baghdad. They blame Washington's "jealousy" for a
spate of American press reports in recent days, in which unnamed sources
accuse Russia of trying to sell Iraq equipment to produce biological
Russia has retaliated with its own leaks. In the past two days,
newspapers here have run front-page stories accusing American
journalists of purveying "obvious propaganda" and quoting unnamed
as saying the United States is "deliberately
discrediting Russian efforts" in order to dominate the Middle East.
In any case, the Moscow diplomat said, bombing Iraq won't further UN
aims or weaken Hussein.
"In the gulf war, he calculated and saved the Republican Guard,"
said the diplomat, recalling that most units of the elite presidential
militia were deployed outside Baghdad. "He's not so foolish as to put
these people under fire this time. He calculates all the options."
Nor is a military strike likely to trigger civil uprisings, either
in the Kurdish-dominated north or the Shiite Muslim-populated south, as
the did the gulf war seven years ago.
The Kurds already have "de facto independence," the diplomat said,
"and are more or less satisfied with what they have . . . In the south
the underground structures, if they exist, are not substantial." And
next-door neighbor Iran, also Shiite, "will be quite careful" not to be
seen as supporting a rebellion.
Finding and killing Hussein are also improbable.
"How long can the Americans strike? Two, three, five days? He'll
keep moving and no one will know where he is, just as he did in the Gulf
War," the diplomat said. "All his life has been devoted to his own
What a bombing raid will accomplish, he added, will be the
interruption of the UN weapons monitoring system.
The Iraq conflict has brought about a rare moment of political
accord in Moscow, with politicians from liberal and nationalist camps
all condemning what is seen as American bullying of the international
community over Iraq.
Still, Moscow is not unrealistic. If the Americans do bomb Iraq,
Russia will be able to do little more than complain.
"We'll denounce," the diplomat said and shrugged. "We'll send
messages saying everyone must do their utmost to stop the bloodshed."
For more articles from The Moscow Times, check out their website at
February 20, 1998
SEASON OF DISCONTENT: Russia Denies Labor Chance To Vent Anger
By Andrei Piontkovsky
I have a friend who is a diplomat from a small, beautiful European
country. He is a man of high intellect, with a deep and sincere sympathy
for Russian culture and the Russian people. The first three months of
his diplomatic service were spent exclusively in Moscow. During that
time, he was rather optimistic about the course of reform and Russia's
future political prospects. Then, as a part of his job, he left for a
short trip to the provinces.
When we met after his return he stared at me and almost shouted
indignantly, "Why are there no social outbursts in your country!?"
Well, why are there no social outbursts in my country? Life for ordinary
people in the country outside Moscow is indeed extremely hard.
Hardships that are incomparably less severe (such as price increases of
2 to 3 percent or small social benefits cuts) have been enough to bring
hundreds of thousands of angry demonstrators onto the streets of
European countries and to bring down governments. France is a recent
case in point.
There is nothing of the kind in Russia. There are only some isolated
cases of strikes off in Siberia or the Far East, which have no
repercussions for the Moscow political establishment. Why is this?
Russia's famed patience? Disillusion and resignation? Hopelessness and
One explanation is clear. What we usually refer to as an "explosion"
never simply happens out of the blue. Any social protest is articulated
through necessary channels and institutions.
Russian capitalism is justly defined as wild capitalism not only because
of the criminal behavior and bad manners of our robber barons, but also,
and perhaps mainly, because our working people (an almost forgotten
term) are denied any of the institutions that defend their rights and
interests, which are so efficiently used by their colleagues in
There have never been any labor unions in this country. Under the
Communists, they were just instruments of party control and coercion,
the "party's driving belts," to cite Lenin's famous definition of them.
Having privatized huge areas of land and real estate of the former
official Soviet labor unions, the bosses have turned into prosperous
There is no effective social legislation. There are no parties of the
left. Of course, there is the Communist Party of the Russian Federation,
headed by Gennady Zyuganov. Communist leaders still ritually use
socially minded rhetoric. But when it comes to practical policies, these
wealthy gentlemen -- some of whom are dollar millionaires and casino
owners -- are more preoccupied with integration into the corridors of
power than with articulating the social unrest of the underprivileged.
What is officially described now as national consensus and
reconciliation, is in reality a deal among different clans of the
political establishment (oligarchs, red directors, the presidential
family, opposition leaders) on the terms of making a smooth transition
toward a post-Yeltsin period and safely preserving their positions,
fortunes and privileges.
These clans will never risk their fortunes again to the unpredictability
of a popular vote. We creatures outside this golden ring of power and
money shall not ever be asked about our opinion.
"They were all alike. The creatures outside looked from pig to man, and
from man to pig, and from pig to man again, but already it was
impossible to say which was which."
Georgia: Analysis from Washington -- Stability Constitutes A Means To Other
By Paul Goble
Washington, 20 February 1998 (RFE/RL) -- Georgian President Eduard
Shevardnadze has announced that despite the assassination attempt against
him, "Georgia will become even more stable."
While Shevardnadze's words earlier this week were entirely natural under
the circumstances, his reference to stability calls attention to the
variety of ways in which that term is now being employed in the post-Soviet
After almost a decade of unrest, both the governments and peoples of
this region are naturally searching for stability, a situation in which
life is more predictable and the future less threatening. And they are
being urged to move in that direction by foreign governments and firms who
find it difficult to operate where conditions are unsettled.
Not surprisingly, governments of the region have responded to these
desires. But these governments divide according to whether they see
stability as a means to achieve other things or as an end in itself. Those
who see it as a means -- and they include Shevardnadze -- stress that at
least some stability is necessary for any progress to take place.
Without some predictability in their lives, the leaders of these
countries argue, individuals will be unwilling or even unable to make the
choices and take the risks necessary for their countries to move from the
authoritarianism of the past to democracy and free markets in the future.
And like the Georgian president, they explicitly link the search for
stability to the achievement of these larger goals. Indeed, in the same
paragraph of the speech in which he said that Georgia will become "even
more stable," Shevardnadze noted that this was a precondition for
accelerating reforms and expanding cooperation within his country and beyond.
But far more leaders across this region have taken the opposite
position. They insist that the pursuit of stability is an end in itself and
that other values, such as democracy and freedom, must be sacrificed if
they undermine the achievement of that goal. And they argue that
authoritarianism is a proper response to current difficulties.
All too often, such leaders enjoy significant support at home and even
acclaim abroad precisely because they appear to be able to solve problems
that the leaders of other governments, more interested in and committed to
democracy, appear unable to address. But for three reasons, their
"successes" are more apparent than real and are likely to evaporate over
* First of all, the elevation of stability over democracy and freedom in
such countries inevitably stifles the very initiative and interaction that
is at the heart of a modern society. As the Soviet system under Leonid
Brezhnev showed, the pursuit of stability at the expense of everything else
led to decay, stagnation, and ultimately to disintegration.
* Second, the elevation of stability above everything else contributes
to the kind of authoritarian system in which the supreme leader cannot
tolerate the emergence of the kind of political forces that would link him
to the population or allow for the emergence of a successor.
Lacking the kind of ties to the population that more open and democratic
societies inevitably require, leaders who see stability as an end in itself
over time lose the ability to mobilize the population. And as a result,
they increasingly rely on the army and the police to keep themselves in
Not only does that preclude the development of democratic institutions
and values, but it means that the current leader cannot tolerate much
opposition or the emergence of a successor. And that in turn means that
leadership change, something inevitable in all systems and especially so in
those with aging leaderships, is inevitably rocky and unpredictable both
for the populations and for outside investors.
* And third, and most seriously of all, the pursuit of stability as an
end in itself by many of the leaders in this region means that the
populations will have a far more difficult time overcoming the legacies of
the Soviet system and in acquiring the values and skills needed for both
democratic self-government and free markets.
Without such skills, these countries are likely to stagnate just as the
Soviet system did. And consequently, those enjoying authoritarian stability
today are leading candidates to be the victims of both stagnation and
instability in the future.
In short, those who put their faith in stability as an end in itself are
almost certainly doomed to discover as so many rulers have in the past that
they and those they admire will soon lose the means to achieve it. By
contrast, those who understand that it is only a means to other goals are
likely to find that they will achieve it as well.
From: "matt tabbai" <firstname.lastname@example.org>
Date: Fri, 20 Feb 1998 11:58:56 +0300
Enclosed is the lead of our new issue-- a reprint of the Alexander
Hinshtein article in MK. I don't think you've already printed it.
Incidentally, I wanted to respond to Leonid Bershidsky's latest column,
which shockingly was not entitled "A Few Thoughts on a Subject Suggested by
Our Marketing Department." Of all the sites he mentioned, he most
conspicuously neglected ours, which is also free. Unlike any of those other
sites, though, ours won three net distinctions in its first week up: Yahoo
Pick of the week, Cool site of the Minute, and the Golden Sparrow Award.
JRL readers should check it out if they have any free time left after
reading all of the Moscow Times's advertorials. [www.exile.ru]
Thanks again for keeping up your list-- I'll be in touch
The only official response to Hinshtein's piece after it was published
in Moskovsky Komsomolets last week was a quote from an unnamed U.S. embassy
official who spoke to Nezavisimaya Gazeta at the end of the week. That
official said that the $500 million in new $100 bills were stored at the
embassy because no Russian bank--not even the Central Bank--would guarantee
the security of such a large sum.
Hinshtein added this comment to that U.S. response for the reprint of
his story in the eXile:
"The reaction of the U.S embassy doesn't surprise me. In fact, it would
be strange if the embassy suddenly admitted that it had participated in the
illegal financing of Boris Yeltsin's reelection campaign. The very
abruptness of the response is suggestive. It shows that the embassy in this
matter has been left with no alternative but to simply deny the obvious."
"Strange Exchange: What Was $500 Million Doing in the U.S. Embassy?"
By Alexander Hinshtein
Under the Cover of Darkness
"A special reserve of 500 million dollars, not released with the
issuance of the new 1996 series 100-dollar notes, will be placed in the
U.S. Embassy in Moscow.
"The Federal Reserve Bank of New York will deliver the banknotes to
Sheremetyevo-2 in the form of diplomatic cargo, addressed to the U.S.
This is an excerpt from a secret memorandum of the American Embassy. Is
it just me, or does this seem a little strange, even very strange?
What reason could the yankees possibly have for using their embassy as a
cash depository? War? Revolution? A plot hatched by the forces of
Official representatives of the Embassy explain the story in the
following way: in early 1996, the American Federal Reserve System planned
to release its new $100 bills in Moscow. But...
"We didn't have any confidence that crowds of people wouldn't rush to
exchange booths and trade in all of their old $100 bills for new ones,
despite countless assurances that the old bills would be worth just as much
as the new ones."
As a result, "it was decided to prepare in advance a large enough
reserve supply of these new banknotes that Russian citizens wouldn't be
faced with any problems in the early stage of the circulation of these bills."
There is some logic in the American explanation. But only some.
Many people may remember that the issue of the new $100 bills was
accompanied by a massive campaign in the press instituted by both the U.S.
Embassy and the Russian Central Bank. Newspapers which didn't print
pictures of the bills and descriptions of their characteristic features
were few and far between. It was hammered home over and over again that the
old bills wouldn't lose their value, that they would be removed from
circulation gradually, through the years.
I don't know about you, but it never entered my head to run to a
currency exchange in a panic and exchange my old bills for new ones.
You don't need to be a great economist to understand that no great
cataclysm could possibly have occurred. People have other things to worry
about. There was no fuss at all, for instance, when the Germans issued
their new marks with the magnetic stripes.
Whatever. We could write the whole thing off to the American lack of
????. But even in that case, the whole affair doesn't seem any less strange.
Why was it necessary to hold a half million dollars on the territory of
the embassy? After all, there is a decent enough cash depository in the
form of the Central Bank. Brink's, the company which transported the money
from the Federal Bank in New Jersey to Moscow, could just as easily have
transported the money to the Central Bank vault.
No one among the embassy spokesmen could answer that question. There was
no basis for not having confidence in the Central Bank. From the point of
view of security, the embassy was no better.
Excepting one thing. The complex on Novinsky Boulevard enjoys the right of
extraterritoriality- without permission, even Boris Yeltsin can't enter.
If darkness is the friend of youth, then extraterritoriality is the
patron saint of all traders in secrets and mysteries. It isn't for nothing
that embassies way back when were home to conspiracies against another
young country, the Soviet Republic.
Money-Changers With Diplomatic Passports
It would be stupid to think that the Russian government was totally in
the dark about all of this.
Central Bank Press Secretary Irina Yasina told me that the entire operation
was completed in agreement with the Bank, the Customs Committee and the
FSB. The heads of government, including the Prime Minister and the
President, were also fully informed about the delivery.
Yasina confirmed that Russian government agencies completed controlled
the movements of the banknotes that had arrived in Moscow right up to the
time that they were delivered to their new owners.
The thing is, according to official embassy press releases, the whole
half billion dollars was sold to Russian banks within two weeks of their
The banks, of course, paid by wire transfer, paying money directly to
the accounts of American banks, who in turn purchased "baksi" from the
American Federal Reserve System.
I never managed to determine who exactly acquired the 500 million
"zelyennikh." An unofficial source within the embassy said that the buyers
were for the most part big banks, including first and foremost some of the
top 100 largest Russian banks.
It's worth noting that this is the only incident in American history in
which a strictly financial transaction was conducted as a diplomatic
operation. U.S. officials admit that they have never held a currency
reserve in an embassy in any other country in the world.
"In those countries where there is a large demand for U.S. currency,
central banks have always acted as cash depositories."
The Yankees could easily have gone along that route. But they didn't,
preferring to break the law.
A reminder: at that time, article 162 of the criminal code was still in
effect, a law which prohibited all unregulated hard currency exchange
operations. In order to buy or sell foreign currency, one had to have a
license issued by the Central Bank.
The embassy, of course, did not have and could not have had such a license.
Nonetheless, Yasina believes otherwise.
"The actions of the U.S. Embassy did not fall under the auspices of the
criminal code, as any embassy reserves the right of extraterritoriality on
There's one more mystery. Why was it necessary to undergo such a
complicated operation when it would have been much easier to transfer the
currency, as I've already noted, to the special vault of the Central Bank.
Then-Ambassador Thomas Pickering, rather than clear the matter up, only
threw grease in the fire. In discussions with Russian authorities, he
deferred to instructions from Washington in saying that the American side
attached special importance to the smooth completion of the operation.
Translating from diplomatese to common human language, "smooth
completion" generally means complete secrecy. It's not surprising that for
almost two years, practically no journalists knew about the events of March
I'll try here to lay out a chronology of events.
On March 19, 1996, the Embassy sent an official letter to the Russian
Foreign Ministry. In its communication it informs the the Ministry of the
operation and announces that it"would be grateful for any help towards the
successful realization of the operation. Specifically, the Embassy requests
the support of the Customs Committee in the acceleration of the delivery by
diplomatic channels of the Federal Reserve cargo beginning on March 21..."
Incidentally, some sources say that the sacks of the dollars already
began arriving by diplomatic channels (i.e. exempt from customs duties and
legally immune from inspection) into Sheremetyevo on March 14.
Other sources put the date of the first delivery on March 21-two days after
the letter to the Foreign Ministry. The transport ended on March 25.
The new dollars were then transferred to the U.S. embassy, where they
sat and waited for official release into circulation.
They were then sent out to Russian banks. Notably, as U.S. officials
themselves put it, "the Embassy will for all intensive purpose be used as a
point of sale."
At that point, of course, when the money is finally disbursed for use as
freely traded currency, neither the Central Bank, nor the Embassy, nor the
Customs Committee had any control over its movements.
Please indulge me one more time as I list all the unusual
characteristics of this apparently harmless financial transaction:
1) the money was kept in the embassy, even when it would have been
easier for U.S. officials to deliver it to the Central Bank;
2) Both the embassy and then-Ambassador Thomas Pickering were active
participants in the operation, even though such operations are not among
the normal duties of diplomats;
3) The whole process took place at breakneck speed. On March 19 the
embassy applied to the Foreign Ministry, and on March 21 the money was
4) Russia was the only country where the U.S. undertook such an
operation; in other countries, it used central banks.
5) The very reason for the operation-the creation of a special reserve
"in the event of an extreme set of circumstances, when it might become
necessary to satisfy an elevated demand for new banknotes" (as the U.S. put
it in its letter to the Foreign Ministry)-seems frivolous and argumentative.
Clearly there are a lot of unanswered questions here. Particularly since
Americans are almost certainly the most sober-minded people in the world.
They don't do things like this just for the hell of it.
Millions by Land-Lease
I don't claim to know the full truth here. All of the possible
explanations offered below are the exclusive result of my own ruminations
and guesses, guesses which are bolstered, true, by consultation with people
in the know. That includes members of the Russian secret services.
I'll start with the big picture...
The spring of 1996 was not a simple time for Russia. All the weight of
the state power structure was thrown behind President Yeltsin's reelection
campaign. The questions was immediate: either sick, but ours-or healthy,
And what was the most important thing in the reelection campaign? The
"Golosui Ili" concerts? The "Yeltsin-Our President" t-shirts? The payment
of salaries and pensions?
No. The most important thing was money. No money, no concerts. No
t-shirts. No salaries.
We can now safely make a sensational announcement: a part of that
reelection campaign money came from foreign countries. As a rule,
"humanitarian aid" came in the form of government credits issued at
laughably low interest rates.
There weren't one or even two major Western powers who threw money at
Yeltsin. It was many more. Top officials in Russian government travelled
abroad personally to "extract" credits. (I don't name names here only
because some of them told me about this themselves).
All of this, of course, was a flagrant violation of the law. Article 45
of the Federal Law "On the Presidential Elections of the Russian
"Contributions to campaign funds are not allowed from...foreign
governments, organizations, or citizens."
But Yeltsin and his cohorts didn't have time for laws. The stakes were too
high to worry about garbage like that. There's no place in politics for the
clean at heart.
It's also logical to assume that the Clinton administration wasn't
standing on the sidelines either. The U.S. was probably more interested
than anyone else in the victory of Yeltsin. If Zyuganov had come to power,
it would have meant a loss of control over a great power. From there, a
third world war is just over the hills again.
But at that moment even Clinton's personal position was unenviable. The
U.S. presidential elections were approaching, and U.S. voters were divided
about equally in their support for Clinton and Dole.
If Clinton had openly campaigned for Yeltsin, it would have lent
enormous support to Yeltsin's opponents. Bill had nothing to gain by
The new banknote operation was the one way to kill two birds with one
The important thing was that, formally, Washington played no role
whatsoever in the election. The half-billion was sold to Russian banks, not
to the campaign headquarters. And how those banks used those "baksi"
afterward was their own private business. The whole thing was seamlessly
done. And nobody really knew about it while it was happening anyway.
Unfortunately, I don't know the exact conditions under which the
Americans sold their dollars to the Russian banks. I wouldn't be surprised
at all if they were more than a little loose, so to speak.
But I do know one thing. As you remember, the dollars were acquired by
Russia's largest banks.
Our largest domestic banks actively participated in the reelection
campaign. A minimum of ten banks became "guarantors of democracy." Each of
these transferred tens of millions of dollars to the campaign fund. Or else
just handed the money over in cash.
On the memorable night of June 20, 1996, officers of the Presidential
Security Service arrested Lisofsky and Yefstafiyev in front of the White
House, where they were caught carrying $538,000 in exactly those brand new
It would be interesting to compare the serial numbers on those bills
with the bills which were kept in the embassy. Just imagine if they
coincided! But nobody did that. Here that old extraterritoriality came in
How the Americans sold off their half-billion, on what terms, to whom,
and in what quantities-it all remains a diplomatic secret. And we'll never
know whether Lisofsky's walk out of the White House was the end of a
journey which began in New Jersey.
THE YEAR 1998 WILL MARK A TURNING POINT IN STREAMLINING
FINANCES AND CLEARING UP THE PILES OF FINANCIAL PROBLEMS IN THIS
COUNTRY'S ECONOMY, SAID ANATOLY CHUBAIS.
MOSCOW, FEBRUARY 20. (FROM RIA NOVOSTI CORRESPONDENT
DMITRY ZNAMENSKY). 1997 will see a change in all basic
tendencies in the country's economy. It will be the first year
in the last ten when the minus will be replaced by a plus in
basic economic tendencies, said first vice-premier of Russia's
government Anatoly Chubais when opening the meeting of the
extended collegiate of Russia's Finance Ministry.
He stressed that though a 0.4 percent GDP growth does not
guarantee positive tendencies in the Russian economy this year,
it is, nonetheless, a very important indicator.
At the same time, the first vice-premier underlined, the
enterprises are riddled with problems, such as the hardest
problem of non-payments, wage payment delays, tax arrears,
barter, etc. This financial litter, financial mess do not allow
concrete enterprises to get out of the crisis in which they have
found themselves. Therefore, he said, this year the Finance
Ministry must make the main emphasis on clearing up the
Anatoly Chubais added that the President's decision to ban
the system of offsetting debts between enterprises as of January
1, 1998, is of no minor importance for resolving this task. The
offsetting of debts is the most painful phenomenon and it will
be hard to overcome it at one go, the vice-premier noted. At the
same time, he expressed hope that regional authorities will do
their best to cope with this task.
To make the economy work, a realistic budget is necessary,
he emphasised further. This is why the government expects that
today the State Duma will make a principled decision and pass
the country's main financial document in its fourth reading. In
Anatoly Chubais's words, it was the unrealistic budget that
generated non-payments in the country and one "unreal" rouble
written into it resulted in 5-7 roubles in non-payments at the
end of the year.
RUSSIA'S FIRST VICE-PREMIER BORIS NEMTSOV DESCRIBED LE
FIGARO'S ALLEGATION THAT HE IS A PROPONENT OF MONARCHY AS 'SHEER
MOSCOW, FEBRUARY 20. /Report by RIA Novosti's correspondent
Alexander Ivashchenko/ -- Boris Nemtsov, first vice-premier of
the Russian government, described the allegation by the French
newspaper Le Figaro that he is a proponent of monarchy as 'a
sheer nonsense'. "There can be no roll-back to the past, and one
can only jokingly speak about the restoration of the monarchy in
Russia," Nemtsov told the journalists.
At the same time, Nemtsov stressed that Russia needs 'a
strong state power', indicating that without 'broad authority'
the Russian president would not be able to solve the key state
issues listed in the president's recent address to the Federal
In Nemtsov's opinion, in the course of the debate on
Yeltsin's possible successor, some may entertain a certain
association with the monarchy, but 'it is not serious anyway'.
Touching upon Boris Yeltsin's nomination for the third
presidential term of office, Nemtsov said such possibility could
be 'a stabilising and consolidating' factor in the life of
Duma Ratifies Human Rights Convention
20 February 1998
MOSCOW -- Russia's communist-led lower house of parliament, the State Duma,
voted overwhelmingly on Friday to ratify the European Convention on Human
Russia signed up two years ago to the Convention, which allows citizens
the right to appeal to an international court, when it joined the 40-member
Council of Europe.
Parliament, dominated by socially conservative communists and
nationalists, had been slow to ratify the convention but supporters warned
that failure to do so would jeopardize Russia's membership of the
In the end, the Duma voted by 294 to 11 for ratification.
"Ratification of the convention is an important step on the road to
providing real protection for human rights in Russia," Vladimir Lukin, the
liberal chairman of the Duma's international affairs committee, told the
Columbia Journalism Review
[for personal use only]
BIG BUSINESS TAKES OVER
A budding independent press returns to the old ways
by Neela Banerjee
Banerjee is a free-lance writer in Moscow.
Russia's new breed of capitalists seems to have learned an important lesson
from their Communist predecessors: to run the country, it helps to run the
Independent media emerged in the old Soviet Union in the late 1980s, and
for a few years produced hard-hitting coverage of news ranging from local
police scandals to the disastrous war in Chechnya to government waste and
corruption. But lately, much of the independent media has moved back under
the control of the state and of business interests close to it. Tough
coverage of anything is a rarity, and what little there is tends to be
viewed as serving particular political or business agendas.
Over the last year, Russia's most formidable corporations have taken
control of much of the national press. In 1996, the country's largest
company, the natural-gas monopoly Gasprom, bought 30 percent of the private
nationwide TV station, NTV. The powerful private lender Uneximbank this
spring purchased 20 percent of Russia's most popular daily, Komsomolskaya
Pravda, with a circulation of 1.25 million. Most recently, Uneximbank and
LUKoil, the nation's biggest oil concern, divvied up ownership of the
respected national daily Izvestia after a public battle that led to the
ouster of most of the editorial board by the new owners.
For Russia's new media barons, the payoffs promise to be huge. In an
economy still heavily controlled by the government, those who have become
rich have been the insiders - companies and banks that were given a
headstart on reforms when they were spun off from Soviet ministries. By
acquiring the media, and with them the chance to shape public opinion,
Russia's corporate giants strengthen their position. "In such
circumstances," Sergei Agafonov, then foreign editor of Izvestia, wrote in
April, "a free independent press is doomed, but an unfree and dependent
press can flourish." By late July, Agafonov was out of a job.
The fight over Izvestia reveals how valuable the media are to big business.
It also shows how Russia's editors themselves, through arrogance and bad
business decisions, have pushed their media into the orbits of corporations.
Once the flagship of the Communist press, the eighty-year-old Izvestia
(News) fashioned itself into an independent, publicly held company after
the Soviet Union fell apart. About 51 percent of the paper was owned by
management and current and former employees, and most of the rest was in
the hands of two local banks. Marginally profitable, Izvestia, with a daily
circulation of 517,000, lacked the resources to expand.
Most of the Russian press, especially outside Moscow, operates at a loss.
Few publications have bothered to build marketing staffs to sell
advertising, and hyperinflation during the early years of reform drove many
advertisers out of business at the same time it drove distribution costs
sky-high. Most print media received state subsidies for newsprint and
distribution in the early 1990s, but as government resources dwindled,
newspapers were willing to survive at any cost, including selling out to
"At this rate," says Vladimir Samarin, deputy editor of the small
independent paper Orlovsky Vestnik in Oryol, 210 miles south of Moscow,
"most of the independent press will soon be either back on the state dole
or owned by big business." In Russia these days, "independent" means
publications that don't have local administrations or powerful businesses
as their backers. As Robert Coalson, an American who is an official of the
nongovernmental National Press Institute research group, wrote in August in
the English-language Moscow Times, "Russia's editors have continued the
Soviet tradition of seeking out sponsors and producing newspapers oriented
toward satisfying those sponsors."
Before 1996, a few corporations had quietly acquired stakes in the media.
It was the crucial role the press played in re-electing President Boris
Yeltsin last year that triggered the recent corporate buying spree. Fearful
that a Communist victory would mean the end of reforms, owners of the
national media had their reporters campaign unabashedly for Yeltsin and
give scant coverage to his Communist challenger, Gennady Zyuganov. Without
such a media tilt, many believe, the president might have lost. He won
After the election, the Yeltsin government rewarded its friends. Boris
Berezovsky, a private businessman whose Logovaz oil and auto-sales
conglomerate owns a sizable stake in Russian Public Television, was named
deputy head of Russia's security council last fall. Vladimir Gusinsky, who
owns MOST, a conglomerate of media, banking, and real-estate interests,
quickly received state approval for his television station NTV to go
nationwide and to launch a new cable TV venture.
Other big businesses caught on: owning the press and flaunting one's
control over it spelled clout. Izvestia's editors, seeking to upgrade the
paper, made a deal with LUKoil in late 1996: the oil concern bought the
stakes held by the two local banks and committed to a $40 million
investment over the next five years. But LUKoil was far from pleased last
April when Izvestia reprinted a story from the French newspaper Le Monde
alleging that Prime Minister Viktor Chernomyrdin had amassed a fortune of
$5 billion by taking a cut of Russian oil and gas exports. Even detached
observers thought it was irresponsible for Izvestia to reprint the Le Monde
story rather than do its own reporting on such an incendiary issue.
LUKoil, after threatening to sell its 41 percent stake because of the
story, chose instead to buy more equity and take control of the board, with
the aim of replacing the paper's top editors. Says Pyotr Neyev, head of
investor relations at LUKoil: "I don't know what they expected. Let's face
it: economics and politics are still too tightly joined in Russia. No
matter how big the business, it's not fully independent of the government."
Unable to match LUKoil in a bidding war for the remaining equity,
Izvestia's management recruited Russia's largest private lender,
Uneximbank, as its financial partner. With the bank's help, the management
acquired just over 50
percent of Izvestia's shares. But the relationship with Uneximbank also
proved too good to be true. Like LUKoil, Uneximbank has a long history of
close ties to the Yeltsin government. Within two months of bankrolling
Izvestia's defense against LUKoil, Uneximbank teamed up with the oil
concern to oust the editor-in-chief, Igor Golembiovsky, and most other top
editors, replacing them with lower-ranking Izvestia veterans.
The stated reason was poor management of the paper by the old editors.
Golembiovsky charges that the new shareholders are trying to remake
Izvestia into a mouthpiece for their interests. "The newspaper will now be
a loyal supporter of the government," he predicts. "They all saw what the
press could do in last year's elections. Now, everyone is getting ready for
the elections in 2000."
Since its recent media acquisitions, Uneximbank has launched an aggressive
campaign to buy more stakes in privatized Russian companies. Controversy
surrounding its latest acquisition, 25 percent of the telecommunications
company Svaziinvest, has been reported in most media - but late, and with a
spin favorable to the bank, in Izvestia.
Golembiovsky and the other former Izvestia editors, meanwhile, appear
undaunted by their defeat. With financing from "bank loans and advertising"
- Golembiovsky won't say which banks - they plan to put out a new,
five-day-a-week paper starting November 1. Its name: Noviye Izvestia - New