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Johnson's Russia List


March 1, 1998  
This Date's Issues:    2086  • 

Johnson's Russia List
1 March 1998

[Note from David Johnson:
1. Boston Globe: David Filipov, Yeltsin shakes up Cabinet,
but not in way he promised.

2. Fred Weir on military conscripts.
3. Journal of Commerce: BOB PACKWOOD & JAMES CARTER, Time is 
ripe for US-Russia free trade.

4. AP: Anna Dolgov, Russia's Friendly to Tobacco Cos..
5. Nezavisimaya Gazeta: Vitaly TRETYAKOV, NEMTSOV: "OUR PRESIDENT 

6. US News and World Report: Mortimer Zuckerman, The new Russian 
menace. Its intrigues in Iraq and now Iran suggest ominous intentions.

7. US News and World Report: Looking for proof. (Russia and Iran).


Boston Globe
1 March 1998
[for personal use only]
Yeltsin shakes up Cabinet, but not in way he promised 
His modest shuffle fails to punish top officials
By David Filipov

MOSCOW - It has been the most anticipated event in Moscow political 
circles for months now: the big Cabinet shakeup that President Boris N. 
Yeltsin has been promising to punish the ''culprits'' responsible for 
the country's economic failings. 
Yeltsin yesterday fired three ministers, in charge of transportation, 
education, and relations with other former Soviet republics. None of the 
three were major figures in Yeltsin's Cabinet. 
But while the moves lacked impact for Russians' everyday lives, they 
provided insight into the latter-day ruling style of Yeltsin, whom 
commentators increasingly describe as a president more concerned with 
maintaining his grip on power than tackling the day-to-day problems of 
governing Russia. 
''People say he used to know much more about the everyday lives of 
people, and spoke with voters in a language they understood,'' Georgy 
Bovt, political analyst for the newspaper Kommersant Daily, commented 
recently, comparing Yeltsin to the doddering former Soviet ruler Leonid 
Brezhnev in his last years. ''Today, the ex-populist appears to head a 
Brezhnev-like regime.''
Yesterday's shakeup was an odd finale to Yeltsin's longstanding promise 
to Russians that he would clean house of those responsible for late 
paychecks, insufficient tax collection, budget shortfalls and other 
familiar Russian economic woes. 
Yeltsin made the promise last fall, when the Kremlin was embroiled in 
scandals and Russian financial markets were reeling from the effects of 
the Asian financial crisis. Yeltsin set a date for a public Cabinet 
session that would brief him on how the economy is going. He promised 
heads would roll. 
At the time, speculation swirled around the most powerful and 
controversial members of Yeltsin's economic team, Deputy Prime Ministers 
Anatoly B. Chubais and Boris Y. Nemtsov and Prime Minister Viktor S. 
But later, Yeltsin vowed to keep his three top lieutenants. At 
Thursday's nationally televised meeting, he repeated his vow to sack 
unnamed ''culprits,'' then abruptly left halfway through without firing 
Chernomyrdin took over, mixing in time-tested Soviet rhetorical 
flourishes with the high-technology terminology of capitalist Russia, 
but providing few clues about what the government was up to. 
''We will carry out our just monetary cause to the end,'' said the 
premier. ''State finances remind me of virtual reality.''
After an opposition lawmaker gave a long, critical speech, Chernomyrdin 
''Yes, things are difficult, but when have they ever been easy?''
The liberal Russian press saw in the meeting echoes of the past. ''The 
event proceeded like a good old party meeting where there is something 
to argue over, but everyone knows their part ahead of time, and there is 
nothing to fear,'' commented the newspaper Segodnya. 
As for the ministers who lost their jobs, it is doubtful that most 
Russians have ever heard of them. 
Valery Serov, who was deputy prime minister in charge of relations with 
Russia's former Soviet neighbors, has taken much criticism of late. 
Nikolai Tsakh headed Russia's railroad monopoly. Education Minister 
Vladimir Kinelyov's most distinguished moment was a largely unsuccessful 
campaign to protect the Russian language from foreign words. 


Date: Sun, 01 Mar 1998 
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT) -- Anton Korshunov is preparing to go
underground and says he'd rather live his life on the lam than
spend a day in the brutal, chaotic nightmare that is Russia's
collapsing army.
``I'm terrified,'' says the slightly built, dark-haired
18-year old. ``I've talked to many people who've been in, and I
know that I couldn't survive that ordeal.''
His immediate goal is to escape the annual call to the
colours, beginning this month, in which military chiefs plan to
scoop 200,000 young men into a vast conscript army the Russian
government cannot afford, no longer needs and has pledged to
Mr. Korshunov is not alone. The defence ministry admits
that 70,000 youths evaded the country's mandatory 2 year military
service last year. An estimated 40,000 army deserters are also on
the run.
Russian law is tough on draft evasion, and police have
the power to stop any young man on the street to demand proof of
military service.
``I don't live with my parents, because that's the first
place they'll look for me,'' says Mr. Korshunov. ``And I never go
out, not even to buy bread.''
Most draft dodgers try to obtain forged student
deferments, or convince a sympathetic doctor to certify them
unfit for service. Some, like Mr. Korshunov, just plan to stay
hidden and hope the laws will change.
``I know lots of guys who live like that,'' he says.
``There are whole networks of people who help each other, provide
jobs, supply false papers and safe living places.''
There is some hope that change will eventually come.
Russia's constitution, authored by President Boris
Yeltsin in 1993, grants draft-age conscientious objectors the
right to perform unspecified alternative civil service instead of
a stint in the military. 
But parliament has yet to pass an enabling law, and the
handful of young men who have tried to realize their
constitutional rights through the courts have all been sent on to
prison or the army.
``This is the only country in the world where
constitutional rights are purely theoretical,'' says Sergei
Sorokin, a lawyer who counsels draft evaders. ``The courts are
subservient to political power, and they are no help at all.'' 
When he was running for re-election in 1996 Mr. Yeltsin
promised to phase out conscription by the year 2000 and replace
the Cold War-era military with a modern all-volunteer force.
But Defence Minister Igor Sergeyev recently said the
cash-strapped army cannot afford such a rapid makeover and
conscription will have to stay until 2005 or beyond.
``The big conscript army is the legacy of Russia's
imperial era and superpower status, and as such has many
political supporters,'' says Mr. Sorokin.
``The fact that we have no law on alternative community
service for young men after almost 10 years of democratic reform
testifies to the continuing strength of the militarist-patriotic
forces in Russian politics.''
Mr. Sorokin says the paralytic, disintegrating armed
forces could just break down one day soon, thus forcing the pace
of change.
Even top generals admit the army is barely able to house,
feed and pay its 1.5-million personnel on threadbare post-Soviet
military budgets.
Army service was considered a man's ``honourary duty'' in
Soviet times. But it has since degenerated into a living hell
where young recruits are subjected to brutal hazing, used as
forced labour to enrich corrupt senior officers, and are
routinely deprived of adequate nutrition, clothing, shelter and
health care.
The Committee of Soldier's Mothers, Russia's leading
anti-military organization, estimates at least 5,000 conscripts
died last year through accidents, disease, suicide and neglect.
``Russia doesn't have an army anymore, it's just a huge
monster that swallows young men and chews them up,'' says
Valentina Melnikova, the group's spokesperson.
``The only sane response is to run away.''


Journal of Commerce
March 2, 1998
[for personal use only]
Guest Opinion 
Time is ripe for US-Russia free trade  
Bob Packwood is a former Republican senator from Oregon and James Carter 
is former chief economist of the Republican National Committee. 

 With an approval rating of 3% in one recent poll, Russian President 
Boris Yeltsin's domestic popularity has fared about as well as the 
Russian economy. Since 1990, the former superpower's economic output has 
shrunk by 43%, compared with a "mere" 25% in the United States during 
the Great Depression. 
 After nearly a decade of continuous economic decline, the Russian 
economy managed to grow 0.4% in 1997. Before Asia's financial meltdown, 
most economists mistakenly saw Russia on the verge of an economic 
The Asian crisis unnerved international investors, particularly those in 
emerging markets. In the last two months of 1997 alone, foreign 
investors withdrew $4 billion from Russia. To defend the ruble and stem 
the foreign capital outflow, Russia's central bank raised the country's 
key lending rate to 42% from 28% and then back down to 39%. But now high 
interest rates threaten to forestall Russia's economic recovery. 
 Meanwhile, the government's continued reliance on high-yield, 
short-term debt could eventually lead Russia into a financial crisis of 
its own, prompting many economists to predict continued stagnation. 
 Russia's fiscal, economic and political problems are intimately 
connected. With Communists in control of Russia's lower house of 
Parliament, Mr. Yeltsin's tax, budget and free-market reform efforts 
have stalled. 
Still, there are reasons for optimism. The economy is no longer in 
free-fall, and inflation has declined from a peak of 2,324% in 1992 to 
below 10% today. Mr. Yeltsin has had great success in privatizing the 
economy, eliminating price controls, slashing production subsidies and 
curtailing defense spending, which the CIA estimates fell 80% in real 
terms since the late 1980s. 
 Granted, if xenophobic, reactionary Russia's nationalists and 
Communists return to prominence, progress could be reversed. 
 How should the Clinton administration address Russia's tenuous 
situation? Thus far, the United States has granted Russia more than $4.7 
billion in assistance while last month President Clinton proposed a 73% 
boost in U.S. financial assistance. Rather than increase financial aid, 
the administration should broaden trade with Russia by proposing a 
U.S.-Russian Free Trade Agreement. 
 U.S.-Russian trade has already grown considerably in the 1990s. In 
1993, the United States granted Russia Generalized System of Preferences 
status, exempting more than 4,000 semifinished and agricultural goods 
from U.S. import tariffs and customs duties. And in late 1994, 
Presidents Clinton and Yeltsin pledged to expand bilateral trade and 
investment ties resulting in a 47% jump in bilateral trade between 1993 
and 1996. While the United States is one of Russia's largest trading 
partners, however, Russia is only the 30th-largest U.S. trading partner 
behind Ireland. 
 Russia, meanwhile, is aggressively seeking to diversify its trade 
beyond the other former Soviet republics. "Russia sees its future in 
free trade and deeper integration in a global economy," noted then-U.S. 
Ambassador to Russia Thomas Pickering in 1996. 
Nevertheless, some were surprised late last year when President Yeltsin 
proposed establishing free-trade zones with China and India toward a 
tripling of bilateral trade with each by the year 2000. Why should the 
United States strive for less with Russia? Although Moscow abolished all 
import tariffs after 1990, the average import tariff today is 13%, the 
value-added tax on most imports is 20% and the excise tax on most 
imported luxury goods ranges from 20% to 570%. On top of that, Russia 
compounds various taxes when it assesses import levies. Combined with 
non-tariff barriers such as import licensing and customs processing 
fees, these taxes make the Russian market relatively difficult to 
 This explains why our trade with Russia is stuck in first gear. Our 
primary exports to Russia include meat, tobacco and machinery; our major 
imports include aluminum, steel, seafood, crude oil and inorganic 
chemicals. But a free-trade agreement that dismantles existing trade 
barriers would promote economic ties between our two countries as never 
 Consider the North American Free Trade Agreement. In the three years 
after Nafta became law, America's trade with Mexico and Canada surged 
44%. In fact, the $128 billion boost in trade with those countries was 
nearly seven times as great as America's total trade with Russia over 
the same three years. A Russian free-trade agreement would likely exceed 
the impact Nafta and the U.S.-Canadian Free Trade Agreement have had on 
America's trade with Mexico and Canada, given the far more daunting 
barriers inhibiting U.S.-Russian trade that would be removed. As Ronald 
Reagan said: "Free trade serves the cause of economic progress, and it 
serves the cause of world peace." 
 Before the White House tries to convince Congress that Russia deserves 
a 73% hike in financial aid, Mr. Clinton should consider how a 
free-trade agreement could revitalize Russia's economy and reinforce its 
fledgling democracy. 
 Consider all that can be gained by a U.S.-Russian Free Trade Agreement. 
Then consider what could be lost without one. 


Russia's Friendly to Tobacco Cos.
28 February 1998

MOSCOW (AP) - At a disco party in a covered stadium, thousands of young people
sway to booming music. Once in a while, somebody breaks from the neon-lit
crowd to take free cigarettes from the smiling women who stroll the corridor
Sponsored by Camel cigarettes, the party is one of the many promotions by
Western tobacco companies that are aggressively marketing their products in
one of the world's most smoker-friendly nations.
With fewer people lighting up in the United States and tobacco companies on
the defensive, cigarette manufacturers are expanding in Russia to compensate
for lost sales at home.
They have received a warm welcome in Russia, where at least 50 percent of the
people smoke, consumers are hungry for most things Western and tobacco taxes
are low.
And unlike the United States and other countries that limit or ban cigarette
advertising, there are few effective controls on marketing tobacco products in
Almost anything goes. In the hinterlands, where entertainment is scarce,
Western tobacco companies offer young Russians free admission to parties if
they buy a pack of cigarettes.
Billboards all over Russia feature pictures of skyscrapers and white sandy
beaches and slogans like ``Total Freedom'' or ``Rendezvous with America.''
They aren't advertising foreign travel - but American cigarette brands like
Camel, Winston and Marlboro.
At shows and presentations, young women with trays of cigarettes walk around
the audience offering free smokes.
``It's a very important market for us ... because smoking has a long-standing
tradition in Russia,'' said Axel Gietz, spokesman for the main European office
of R.J. Reynolds, the maker of Camel cigarettes.
No one under age 18 is admitted to Camel-sponsored discos, he said.
``Every time an underage person is caught smoking, we are blamed, and it is
used as an (excuse) for even stricter laws on marketing,'' Gietz said in a
telephone interview from Geneva, Switzerland. ``So it certainly does not help
our business to encourage minors to smoke.''
Western-made cigarettes are far milder than Russian ones, which use harsh
tobacco. As a result, foreign firms have done well in Russia, with the
Americans leading the pack.
R.J. Reynolds, one of the biggest foreign players in the Russian market, has
seen its sales double each year for the past three years, reaching $351
million in 1997, Gietz said.
Russia has relatively strict laws on the books to limit tobacco advertising -
but no functioning legal or monitoring system to enforce them. Television
tobacco ads were banned in 1995. But direct marketing and billboard
advertising have increased to make up for the loss.
``In all civilized countries, they passed this stage a long time ago and have
long since established'' limits on tobacco advertising, said Tatyana
Kamardina, senior researcher at the government's Institute for Preventive
Medicine in Moscow.
``Tobacco companies have huge funds, and they spend them on converting
people,'' Kamardina said.
Doctors and health-minded people may warn against smoking, but they are
in the
minority in Russia. Most Russians consider smoking a relatively innocent
indulgence, especially compared to the binge drinking, poor diet and frequent
accidents that give Russian men the lowest life expectancy in the
industrialized world.
Although the harmful effects of smoking are well known in Russia, they
really struck a chord in a country where most people are just looking for some
comfort in their lives.
``Smoking in Russia is more than smoking,'' comedian Igor Ugolnikov said on
his late-night TV show. ``It's not about the ruinous craving for tobacco, but
about the constant stress and upheavals.
``You open a fresh newspaper, and immediately you open a new pack. And like
that, on the nerves, day after day, pack after pack. Here, just recently,
during the stock market crisis, one banker got so nervous he smoked a whole
stack of dollars by mistake.''
Russians buy more than 11 billion packs of cigarettes a year, of which 4
billion are imports, said Vladimir Aksyonov, spokesman for British American
Tobacco in Moscow.
``In Russia, the tendency is clearly in favor of American blends,'' Aksyonov
Russian companies aren't happy about that and are stepping up their own
Russia's leading tobacco company recently put up billboards adorned with the
slogan ``Strike Back'' and a picture of its Yava cigarettes hovering like a
spaceship over New York.
Russian brands also have a price advantage. At the equivalent of about 50
cents a pack, Russian cigarettes are much cheaper than Western brands, which
run up to $2. In a country where the average monthly salary is about $200,
Russian brands still sell well.
Not all Russians embrace smoking, and some don't appreciate the advertisers'
``The foreign companies have not been producing fewer cigarettes, yet smoking
in the West has fallen,'' said Vladimir Dmitriyev, a Muscovite. ``So where are
they selling all their cigarettes? Right here.''


>From RIA Novosti
Nezavisimaya Gazeta
February 25, 1998
On the Eve of the Government's Report to the President
First Vice-Premier Is Full of Strength and Optimism. 
He Firmly Believes That Yeltsin Wants "to Cure the
Monster into a Normal Creature"

I have not had such a long conversation with Boris Nemtsov
since the end of autumn. At that time the second First
Vice-Premier and the President's favourite whom the public
believed to be his undeclared heir apparent, was in low spirits
and tortured by doubts concerning his possibly voluntary
resignation from the government, among other things. When I
interviewed him on February 21, he was radiating optimism and
energy again. 
The following is an abridged version of that interview.

Question: I seems to me that you have been giving too many
interviews lately. Am I mistaken?

Answer: There is one thing which the government either
does not handle at all or handles very poorly. It is explaining
to the public what it wants to do, what it has done and what it
is going to do next. In my opinion it is, in fact, our
Achilles' heel. I have concrete duties as a government member
and their fulfilment directly depends on whether people
understand or not why something is necessary and how it is
being done. I will cite a couple of examples.
The provision of servicemen with housing is a very
important program. What is more, we have for the first time
ever elaborated this program quite uniquely, bypassing all
kinds of bureaucratic and intermediary organisations. MinFin
(Finance Ministry) transfers money directly to the accounts of
those servicemen who need housing, not the accounts of generals
who then use it to build their own "dachas". No more such
practice. For example, MinFin directly sends money to Chita, to
the servicemen who are on the waiting list for flats.
This concerns 210,000 former officers. Because there are
no intermediaries such as ministries and departments, the
success or failure of this program completely depends on the
ability of the government to explain the mechanism and how it
will work and where one can complain if something goes wrong.
The second example is personnel training. Every year five
thousand managers from all over the country who are under 35
years old are to undergo training in Russia and abroad.
Seventy-nine Russian regions have already set up personnel
training commissions and published advertisements on an open
competition for all those willing. It has been explained which
expenses will be covered out of the federal and local budgets,
which out of the budgets of enterprises and which will have to
be sustained by trainees; which countries may be chosen and in
which areas training will be available. It is huge advertising
work. It is even more important that the provision of 84
million new rubles for these purposes. The state plan for
personnel training is another important program. The next
program is competitions and tenders. In his Message the
President has mentioned twice only one issue--competitions.
Competition commissions have been created in each region, each
place and each army unit. The general attitude to the idea was
rather sceptical. And I will now tell you the result. Since
April 8, when the corresponding presidential decree was
published, there have been 9,500 different tenders on the
purchase of all sorts of things, from uniforms for the military
to the construction of federal roads. As much as 32,000 billion
rubles have been spent, and more than 3,000 billion have been
saved, according to very modest estimates. It is a huge sum of
money. And we are subjected to a lot of humiliation for each
trillion rubles, either borrowing the money in foreign markets
or becoming engaged in arm-twisting. The program of
competitions and tenders for which I am responsible can only be
fulfilled through a lot of explanatory work.
Now about the declaration of incomes by public servants.
All of them would not have filled in such declarations without
huge propaganda work. Or, take the decision on the growth of
investments in the automobile sector. It has been the first
decision in many years aimed at ensuring the implementation of
a coherent industrial policy. By the way, it has met with a
stormy reaction from the International Monetary Fund mission.
This decision requires a lot of explaining among the leaders of
automobile plants and those who work in the automobile
industry. Why so? It stipulates a unique procedure for
increasing investments in the sector which did not even exist
in the past. There has been no analogue to it in Russia. This
procedure is as follows: If you invest $250 million or more and
manufacture more than half of the required parts and components
for an automobile in Russia within the next five years, the
plant's territory is turned into a free storage facility. It
means that equipment and other parts may be brought duty free
to its territory. In exchange you have to create jobs in
Russia. There are also other programs, including the program
for reduction of tariffs on the services of monopolies and the
housing reform. All these programs should be understood by the
It is clear that without a counterbalance to monopolies,
which happen to be the only suppliers of corresponding
services, we are unable to get the public understand how
important this problem is. So, what have we done? We are
creating societies of the consumers of monopoly services around
practically all the regulating bodies. In a word, I am in
charge of the programs the fulfilment of which completely
depends on the support of the public or its absence. That is
why public relations should occupy a considerable part of my

Question: I have difficulty formulating the goal set by
our government. Maybe I just don't know it and the government
has made this goal public. True, I head Mr. Chernomyrdin's
report at Davos and I have read the President's
state-of-the-nation address--there are many right words there,
including those concerning the 21st century, but both are too
vague about 1998. Both only speak about transition to an
economic recovery and qualitative economic growth.
Nevertheless, I presume that the Government, or at least
Nemtsov, has some other objective unconnected with economic
recovery, which is not made public however. Why? Because all
realise that the year 1998 is the key one preceding the years
1999 and 2000. It is politically the most important year. All
the trench warfare should end in 1998 and the line-up of
political forces will become clear. It is impossible to achieve
absolute unity of the financial-industrial groups in a big
country such as Russia. Consequently, political objectives in
1998 will inevitably affect economic objectives. Could you
briefly formulate for the public the objective of the
Government, which includes Nemtsov, for 1998? 

Answer: We realise that the outcome of the 1999 and 2000
elections depends on our performance in 1998. So, our objective
is not to achieve a statistical economic growth of 1.5-2.5 per
cent or even 5 per cent, but to bring about changes, especially
in the social sphere--real income, unemployment, etc.--which
people will feel. This is the key objective that will determine
the outcome of the elections. When public opinion polls show
that more than half of Russians consider the results of 1998
better than the results of 1997, I shall consider my own task
and that of the government accomplished by and large. 
If the State Statistical Board reports growth in industry,
while public opinion surveys give a somewhat different picture,
I shall admit our failure to meet the target. This is important
from the viewpoint of the situation in 1999-2000.
However, this is a tactical objective. The strategic goal
for us is to acknowledge the fact, and this is absolute truth,
that the market economy in this country has too many 
birthmarks, that it is so far a hybrid, a monster, and that to
perpetuate this situation means to condemn Russia to miserable
existence in the 21st century. 
Therefore, the strategic objective for 1998 is to
establish comprehensible and clear rules of economic, social
and other conduct that would gradually transform this monster
into a normal creature. Incidentally, I consider this my duty
to address this problem personally. 
True, these rules are not designed for effect. When I
signed the documents on tenders, everyone thought it was
nonsense. But I can say now that it's hard to evaluate how many
bribes were prevented by these tenders. No one can say. There
were 27,000 or 28,000 participants in these tenders.
Fortunately, many of these companies even did not try to bribe
anyone. How long did that practice continue? There is no answer
to this question.
Then we abolished the so-called special oil exporters. How
many contract murders did we manage to avert when we pumped
several million tons of oil and entered the revenues directly
into the budget accounts rather than let them settle in
someone's pockets? The effect of this measure is also hard to
It is quite clear that the establishment of such rules by
therapeutical methods--I emphasise the word "therapeutical"
because this is very important--helps to convert this country
from an economic monster into a normal country. 
In addition, there are things that make us different from
Eastern Europe, from all countries with transitional economies,
such as Poland, Hungary and the Czech Republic. We have
specifics not only arising from our Eurasian location, but also
structural specifics connected with the economy. We had
centralised planning for a longer period and the monopoly
economic system has become implanted in our consciousness far
more deeply and naturally. 
That is why the main objective for the authorities is to
establish the rules of the games that would create equal
competitive conditions and put pressure on the monopolies which
have no rivals and won't have any for some time to come. It is
a key issue, because monopolism is like a cancer tumour which
can metastasise. On the one hand, it affects all citizens,
sucking money out of them; on the other hand, it creates
metastases of corruption, which are impossible to remove.
This is the most critical economic subject which we should
deal with, also if we want to build a civil society and if we
want the 2000 elections to pass without any turmoil in this

Question: Grigory Yavlinsky, an economist and political
leader you respect, criticises the government. He formulated
his main grievance against the government in Davos where he
said that the entire line of political and economic conduct of
the government cannot change this monster and only serves to
preserve the oligarchic system which has survived until the
beginning of the 21st century thanks to your government. Since
this system it allowed to survive, it will grow stronger and
carry on to the next century. Mr. Yavlinsky claims that the
government is doing nothing to change this trend.

Answer: He fails to see the emergence of a wholesale
electricity market and the crackdown on the energy oligarchy.
He fails to see access to the gas pipeline. He fails to see the
audits of big monopolies. He fails to see the repeals of the
absurd decisions by some governors who were trying to close
their markets to their own producers. He fails to see all these
things, but they do exist.
Access to the oil pipeline is a matter of great importance
for Russia. Can't he see this? Access along with transparent
rules for oil exports. As I have already said, we have
introduced declarations of income and tender sales and
abandoned the practice of appointing authorised banks and
keeping customs accounts with such banks. Although he fails to
see all this, these things do exist. And there is no
True, I also would like to see this oligarchic monster to
transform into a democratic and socially-oriented market
economy overnight. I would like that very much. I assure you
that no one, even Yavlinsky, cannot do so overnight, even if he
comes to the White House. This can't be done. This is first.
Second, I know only too well that every step we take, including
those I have described above, meets with extremely strong
resistance. I can feel it. I can feel it every day whenever I
want to make a decision. Although Yavlinsky is my friend and I
think well of him, I don't think he will be able to overcome
this pressure in a matter of days. 
The disease has been diagnosed. Oligarchic capitalism is
dangerous for society and for every individual and it is
disgusting in general, and it's loathsome to me. It must be
redeemed, step by step, moving slowly but persistently in this
direction without making any abrupt twists and turns. 
There is, for example, a plan to restructure the Ministry
of Railways by breaking it up into five or six cargo
transportation companies, selling them to private owners and
letting them compete with one another. Theoretically, this plan
is correct. At first it will create a competitive environment,
then private capital will appear and those who work better will
win. However, this cannot be done. This plan will never be
allowed to be carried out by those who work on railways and
their defenders in the State Duma and elsewhere. There is no
way. However, it is possible to move ahead by stages. We may,
for example, organise five or six state-owned companies and see
how they will work. Then we shall see, in the 21st century. I
don't think Yavlinsky has anything better to suggest. Or
rather, one may suggest anything, but you can't do that. That's
where the difference between us lies: he can suggest, but I
must do. 
Every day I see the difference between theory and
practice. I have to tackle problems by therapeutical means,
because whenever I try to make things better I see how people
react, how interests clash, how people become polarised and
what hatred this may arouse. I know it from my own experience.
He doesn't. So I know better.

Question: There is another serious hypothesis. There is no
denying the fact that the government has good intentions and
its performance is getting better, although the extent of these
improvements is debatable, but all its efforts automatically
aim to undermine the power of oligarchic capitalism. They
automatically undermine the social and financial basis of the
established regime and the positions of those who hold key
posts in the system created by this regime. So, people who
represent this regime will do everything to prevent its
collapse, at least before the year 2000, for if this regime
collapses, they will lose their grip on power. What do you

Answer: I have absolutely nothing to do with this. There
are no oligarchic structures on which I could rely financially.
That is why I have nothing to lose. I have my views and I try
to do what I think is right, using, among other things, my team
in the government. This is important. 

Question: Then conflict is inevitable, at least from the
viewpoint of passive onlookers, between Nemtsov and Yeltsin,
Chernomyrdin, Chubais, because all analysts more or less agree
that Yeltsin and Chernomyrdin and Chubais represent this
oligarchic capitalism one way or another through various

Answer: I would not include our head of state in any such
list. He is an honest and impeccable man. All the mess around
him is another story. I am upset to hear you trying to put the
President in the same camp with any people, however respected.
Secondly, I am convinced that the President does not want this
country to be like that. He has repeatedly told me so. Even if
you read his message attentively, you will find there--maybe
expressed too timidly, though--all the elements of a civil
society to dream about: competition, small and medium-sized
businesses, openness and so on. If this had run against the
President's grain, he would have crossed that out. 
The President has the desire to cure the monster and he
does not feel dependent on any group. He does not have such
feeling of dependence.
He is a political patriarch. He cannot ever do anything
for opportunistic reasons, including his non-existent relations
with these groups. I do not count his inner circle. It is a
different story. 
True, there are influence groups, but I am speaking about
the President. This is what you asked. As for the rest, I don't
think Chubais is afraid of losing the support of financial
groups after all these scandals. There is nothing to lose. You
may ask: what about Potanin? That's what you are thinking,
aren't you? Nonsense. Their relations are normal, spontaneous.
So what? I also have normal relations with many people. As for
the prime minister, it's a different matter. He had worked in
the fuel and energy sector for many years and he certainly
realises its significance, including its significance from the
political point of view. 

Question: Suppose the legal problem of Yeltsin's running
for the presidency for a third term has been resolved one way
or another. Does he have a chance of winning?

Answer: You know, I have been greatly surprised by the
results of a public opinion poll about how seriously people
take the problem of the successor, whom the President should
name. When I didn't know the answer, I thought that about five
per cent or maybe 10 per cent of people took this problem
seriously. Now I know that people attach great importance to
this matter. Why? The thing that people want the least is
upheavals. It is the instinct of survival. I think that this
instinct of survival, the wish to live in a predictable country
give Yeltsin a big chance from the voter's point of view. This
is first.
Second, from the viewpoint of the different conflicting
groups, I don't think that any of them, however big, would dare
oppose if the question is decided like this. I don't think so. 
Last but not least, I don't think anyone in power, not
from the party of power, but anyone in power will dare run
against the President if the latter agrees to re-run. All these
factors allow me to conclude that the President has a big


US News and World Report
9 March 1998
[for personal use only]
The new Russian menace
Its intrigues in Iraq and now Iran suggest ominous intentions

What is Russia up to these days? Why has it emerged as the champion of 
those two pariah states, Iran and Iraq?
In the past few months, Russia has emerged as the principal obstacle 
within the United Nations to enforcing the resolutions seeking control 
of Saddam Hussein's development of weapons of mass destruction (WMD). 
Last year, Russia got the pressure taken off Iraq by brokering a bogus 
deal. Since then, Russia has worked to increase the amount of oil that 
Iraq can sell and has campaigned to end sanctions against it. Is Russia 
moved by its financial interest in the billions of dollars Iraq owes 
Russia and the prospect of huge oil contracts? Or is there something 
more sinister? 
While we have all focused on Iraq, a potentially more disturbing 
relationship has developed between Russia and Iran, a country 
relentlessly hostile to U.S. interests, and the fomenter and financier 
of terror in the Middle East. Iran is close to being able to build a 
missile with a 1,300-kilometer range, which could radically transform 
the military balance in the region. It is also developing chemical, 
biological, and even nuclear capabilities without the international 
scrutiny that inhibits Iraq. 
Moscow's role. Russia's fingerprints are all over Iran's missile 
development through the involvement of various Russian entities, 
including the Russian Space Agency, NPT Trud (a rocket-motor 
manufacturer), Polyus (a laser manufacturer), and the Russian Central 
Aerohydrodynamic Institute. These groups have provided materials and 
assistance in the design of nose cones, guidance and propulsion systems, 
gyroscopes, and a wind tunnel for missile testing and assessment--while 
also training thousands of Iranian scientists and engineers. With 
Israeli assistance, the CIA has figured out which Russian companies are 
involved in Iran's weapons trade and notified Russian authorities. But 
instead of seeking to shut them down, Russia has sought to shut down the 
intelligence leaks--an ominous sign. Under U.S. pressure, Russia has 
recently set out a pro forma legal basis to prevent the flow to Iran of 
missile technologies and the knowledge required to manufacture chemical 
and biological agents. But Russian security agencies have shown no 
commitment to enforce these limitations. Indeed, the transfers are 
taking place on such a large scale and at such a level that the only 
reasonable inference is that they must have political support at the 
highest levels within Russia.
One culprit is easy to identify: Foreign Minister Yevgeni Primakov. He 
is an Arabist and a virulent anti-American. He is also a former head of 
a KGB division and politically a free agent. Since President Yeltsin is 
remote from much of government policy, Primakov's Iraq-Iran lovefest is 
Act I of his undisguised ambition to expand Russia's world role. The 
domestic political benefit is to appease Russian nationalism by 
demonstrating a willingness to stand up to, and even foil, U.S. efforts.
To date, the Clinton administration has preferred to respond 
diplomatically. For almost a year, a special envoy, Frank Wisner, has 
been working on this issue with Yuri Koptev, the head of the Russian 
Space Agency, reporting respectively to Vice President Al Gore and 
Russian Prime Minister Victor Chernomyrdin. Meanwhile, Iranian-Russian 
missile cooperation has, if anything, accelerated, to the point where 
the CIA believes Iran will be able to extend the range of its missiles 
with no outside help within a year or so. A missile was tested as 
recently as last December 15, provoking President Clinton to call 
President Yeltsin in protest.
We have substantial political leverage over Russia. We have the legal 
right to invoke sanctions against any country or company trading 
critical technology with Iran. More important, we could cancel the joint 
space effort that is worth hundreds of millions of dollars to Russia. 
Gore and Chernomyrdin will be meeting in March. If we do not get 
satisfaction, the soft touch must be considered a dead end. Then the 
administration, or, in its failure, Congress, must act with appropriate 
measures. Communism may be dead, but Russia's role is as destabilizing 
and dangerous as was any Stalinist intrigue.


US News and World Report
9 March 1998
[for personal use only]
Washington Whispers
Looking for proof

The Clinton administration is putting pressure on Moscow to demonstrate 
that it is indeed clamping down hard on the transfer of missile 
technology to Iran. At issue is an executive order, signed in January by 
Prime Minister Victor Chernomyrdin, that tightened control on the export 
of "dual use" technology, which can be used in missile production. Now 
Washington wants proof that the order is being enforced. According to 
U.S. sources, Leon Fuerth, the national security adviser to Vice 
President Gore, was in Moscow recently to urge the Russians not to come 
to Washington empty-handed in March when Chernomyrdin holds a regular 
bilateral meeting with Gore. The Americans hope the Russians will be 
able to report the arrest of illegal Russian exporters or show evidence 
that suspect technology has been intercepted en route to Tehran.



MOSCOW, MARCH 1, RIA NOVOSTI - As usual, Monday is going to
be a busy day for President Yeltsin. In the morning, he is
scheduled to have three working meetings: with prime minister
Chernomyrdin, prosecutor general Skuratov and Supreme Court
chairman Vyacheslav Levedev. At 1 pm, the president will receive
members of the Russian Olympic team who just came back from the
Winter Olympics in Nagano.
The agenda of a regular meeting between the president and
the premier which will begin at 11 am in the Kremlin is likely
to be topped by discussion of the results of the government
report made on Thursday, and personnel reshuffling in the
cabinet of ministers. Other issues which may be reviewed by
Yeltsin and Chernomyrdin may include Rosneft privatization.
According to sources in the Kremlin, the same issue will be
discussed during the meeting between the president and Yuri
Skuratov. On the eve of the meeting, the procurator general told
RiA Novosti that he viewed the initial steps taken in the
process of Rosneft privatization as a mistake. Thus, he
described the decision to hold a tender for the right to name
the reserve price of the stake in Rosneft as "poor" for it
involves large expenditures.
The sources do not rule out that Yuri Skuratov may fill in
the head of state on the progress of the investigation into the
facts about telephone conversations between Alfred Kokh,
ex-chief of the State Property Management Committee, and a
number of officials, published in the Moskovsky Komsomolets
newspaper. The procurator general told RIA Novosti that the
investigation effort was in full swing and it was too early to
speak about its completion.
According to the sources, Boris Yeltsin also expects
Skuratov to provide an update on the investigation of the
Kholodov and Listyev cases.
RIA Novosti was told at the presidential administration,
that a draft agreement between the Russian Federation and the
Republic of Ingushetia on delineation of powers in the judicial
and legal sphere is to be submitted to the president on March 2.
The commission which is drafting the document includes Yuri
Skuratov and Vyacheslav Lebedev, chairman of the Supreme Court.
In this connection, the sources in the entourage of the
president believe that the agreement will be discussed during
Yeltsin's meetings with both the prosecutor general and the
chairman of the Supreme Court.
In addition, it is believed in the presidential
administration that the first meeting the president has with
Lebedev this year will focus on the progress of judicial reform
in Russia.
After the intense working meetings the president will 
deliver on his earlier promises and meet with the Russian
Olympic team. At his meeting with the Japanese minister for
foreign affairs Keidzo Obuti last Monday, Yeltsin emphasised
that the Russian athletes had spared no efforts in the sports
competition. The president recalled at the time, that the
Russian select raked in nine gold medals at the Olympics.


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