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2 March 1998
[Note from David Johnson:
1. Forbes: Steve Hanke, IS THE RUBLE NEXT?
2. Moscow Times: WHAT THE PAPERS SAY: Yeltsin Frustrated
Expectations of a 'Bloodletting.'
3. Slate: Strobe Talbott and Jack Matlock debate NATO
4. Reuters: Russia Communist boss raps Yeltsin on govt changes.
5. Los Angeles Times: Vanora Bennett, Russian Advertising: Old
6. Irish Times: Seamus Martin, Reticence reflects doubts on
plans to bury bones.
7. New York Times editorial: Tinkering Perilously With Europe.]
From: "Mark Ames" <email@example.com>
Subject: forbes article
Date: Sun, 1 Mar 1998
I came by this article in the upcoming issue of Forbes, a column by Steven
Hanke, who at present is acting as economic advisor to Indonesian president
Suharto. Hanke is a foe of the IMF and is trying to push through a currency
board to stabilize the rupiah, an idea that both the United States and the
IMF (as if there's a difference!) strongly oppose, to the point that
they're threatening to cut off IMF funding if the currency board plan goes
FYI, in Hanke's photograph, he is shown in
oak-background-and-dark-blue-suit, thin, trim, and clutching a pipe--a kind
of 90s downsized sage. Best not to look at the photo.
Here's his doomsday piece re: the ruble.
Don't forget to check out our website, named "Site of the Week" by Yahoo!,
March 9, 1998
IS THE RUBLE NEXT?
By Steve H. Hanke
Steve H. Hanke is a professor of Applied Economics at The Johns Hopkins
University in Baltimore.
WHICH WILL BE THE NEXT country whose currency blows up? Russia, with its
system of pegged exchange rates, is a prime candidate.
Russian roulette. To protect the ruble and itstreasury bonds, Russia
would have to implement dramatic fiscal and microeconomic structural
reforms. Since July 1993 the ruble has been operating within a crawling
peg system. Bear with me a moment while I explain. In a pegged system
the currency is pegged to a foreign currency like the dollar or the
deutsche mark but is permitted to fluctuate in a narrow band around the
parity. (For a definition of the different kinds of exchange rates, see
my column of Oct. 20, 1997.)
Using pegged rates, Russia's monetary authorities have allowed the
nominal value of the ruble to depreciate slowly and in an orderly manner
against the greenback (see chart, below, top). On Nov. 10, 1997 the
Russian central bank set the central parity at 6,200 rubles to the
dollar and widened the fluctuation band to plus/minus 15%. On Jan. 1,
1998 the ruble was redenominated, so that the new central parity is now
6.2 rubles to the dollar. But the basic ratio remains unchanged.
Until October of last year, the interest rate necessary to attract and
keep foreign money in ruble-denominated debt had been rather stable at
about 20%. But with the troubles in Asia, the repricing of risk in
emerging markets and capital flight from Russia, the rates have shot up
to over 30% (see chart, left, bottom). This nominal rate translates into
about a 20% real rate since Russian inflation is running about 10% a
year. That's not just high. It is punishingly high.
These high real interest rates have helped attract enough foreign money
to keep the ruble stable, but even so, the Russian central bank's
reserves declined from $23.1 billion at the beginning of the fourth
quarter of 1997 to $19.3 billion at the end of the quarter. Given that
$4.5 billion of these reserves are encumbered as collateral, the net
foreign exchange reserves declined from $18.6 billion to $14.8 billion
in the fourth quarter.
Either interest rates will have to go to the moon to keep foreign money
from quitting Russian treasury bills or Russia will have to abandon its
pegged exchange rate.
Can the ruble continue to hold? I don't see how. As the troubles in Asia
continue to wreak havoc on the international markets, the rickety ruble
will come under increasing pressure. Either its interest rates will have
to go to the moon to keep foreign money from quitting Russian treasury
bills (called GKOs) or Russia will have to abandon its pegged exchange
My conclusion: By midyear, if not before, Russia's foreign reserves will
reach alarmingly low levels. To avoid collapse of the ruble as reserves
dwindle, Russia would have to implement dramatic fiscal and
microeconomic structural reforms to restore investor confidence. Given
the political situation, the chances for this are nonexistent. Thus the
only possible defense of the ruble can be an even higher short-term
Ah, you say: Russia has no real system of private credit, so high
interest rates are not as devastating internally as they are elsewhere.
True, but understand this: Higher interest rates mean higher costs to
roll over short-term government debt. Consequently, higher interest
rates impose a heavy strain on Russia's rickety fiscal apparatus. Faced
with having usurious rates Russia will be tempted to abandon its pegged
So don't be tempted by high yields into Russian government paper: What
you gain in high interest rates you may well give back in currency
Beyond this, a ruble devaluation will send shock waves into central and
eastern Europe. It will also motivate more repricing of emerging market
risk and a further deterioration of the international financial
environment. The danger of a full-scale international financial meltdown
has by no means passed.
For more articles from The Moscow Times, check out their website at
February 28, 1998
WHAT THE PAPERS SAY: Yeltsin Frustrated Expectations of a 'Bloodletting'
[Prime Minister] Viktor Chernomyrdin's speech at the enlarged government
session Feb. 26, which lasted more than an hour, was peppered with
several vivid, stylistic witticisms, each of which had a political goal.
But perhaps his most remarkable statement was that "the government is
accused of carrying out monetarist policies. I admit we are carrying
them out. But carrying them out poorly. This means that we will carry
out our just monetary cause to the end."
Chernomyrdin belongs to a generation that remembers what caused his
distant predecessor to say, "Our cause is just. We will smash our enemy.
Victory will be ours." What a long path the former oil and gas commander
must have passed through in order to allow for such an analogy to so
unpopular a cause as monetarism.
"State finances remind me of virtual reality," the prime minister said
in another of his noteworthy remarks. He said the adoption of a real
budget is the government's main task, and spent some time trying to
convince those present that the recent amendments to the budget by the
government are in earnest. The circumstances have changed from the days
when the government agreed to raise spending by 27 billion rubles [$4.5
billion]. Now there is a hole in the budget -- 50 billion rubles -- and
nothing can be done but to cut spending.
At the end of the speech, Chernomyrdin let it be understood that he was
not indifferent to several recent political and semipolitical scandals.
"The government will not allow any one to walk over it -- no
educational, party and especially international institutions," he said
in remarks that were interpreted as a response to the reproaches of some
journalists and politicians that the International Monetary Fund is
giving orders to the Russian government. Later in the speech he raised
the theme of the relations between power and business. The prime
minister considered the accusation that even high-level officials are
sometimes the protectors of unfair competition to be "not always without
The speech was thorough and contained many interesting facts, but those
present were expecting something else. They have long awaited the
promised "bloodletting." Since December, people have been hashing and
rehashing in every way the question: Who will be fired?
Nezavisimaya Gazeta, Feb. 27
Serious Political Farce
Everything that went on at the enlarged government session left a strong
impression of theatricality and falseness.
After a half-hour recess, the president unexpectedly disappeared. It was
reminiscent of an escape from a tedious and boring ceremony. Boris
Yeltsin is not new to theatrical political performances, but yesterday's
act evidently moved into the realm of farce. The comedy intensified
after the president's press service explained his sudden disappearance
by saying its boss needed to write his traditional Friday address.
The president prepares his radio address every week, and there was no
need to leave the White House without giving an explanation. The
reaction of the stock market only goes to show what immediate serious
consequences political farce can have for the entire country.
Komsomolskaya Pravda, Feb. 27
Poor Tea Service
There was only one government service that could be singled out for
dismissal at the meeting -- the one responsible for providing the
orators and guests with glasses for the water and tea. During the prime
minister's address, at precisely the moment when he was dressing down
[Valery] Serov [deputy prime minister for relations with other members
of the Commonwealth of Independent States], something irritated Boris
Nikolayevich [Yeltsin's] throat (perhaps the deputy prime minister was
about to be fired) and the president began to cough. There was no glass
of water next to him. The head of state had to drink from [Federation
Council Chairman] Yegor Stroyev's bottle. When it was Tatarstan
President Mintimer Shaimiyev's turn to speak, they also failed to bring
him some water, and he had to make due with the tea that the prime
minister had not finished.
Could it be that in the government as a whole, it is the glass service
that is not doing its job?
Segodnya, Feb. 27:
Party Meeting Revisited
The governmental report at the enlarged Cabinet meeting turned out to be
as eventful as opening a carbonated beverage. However heated passions
had been over the dismissals of unnamed ministers, what actually
occurred was quite boring. The event proceeded like a good old
[Communist] Party meeting where there is something to argue over, but
everyone knows their part ahead of time, and there is nothing to fear.
Even the collisions predicted between the government and the Duma did
not take place. Only two deputies took the stand: Vladimir Zhirinovsky
and Nikolai Kharitonov from the Agrarian Party, who gave a long speech
about the endless troubles facing the agriculture sector. Chernomyrdin
gave a philosophically soothing response: "Yes, things are difficult,
but when have they ever been easy?"
Strobe Talbott and Jack Matlock
Strobe Talbott is U.S. deputy secretary of state. Jack Matlock is the
George F. Kennan Professor at the Institute for Advanced Study and
former ambassador to the Soviet Union. He is author of Autopsy on an
Empire: The American Ambassador's Account of the Collapse of the Soviet
Feb. 18, 1998
From: Strobe Talbott
To: Jack Matlock
NATO enlargement--an issue you and I have discussed on several
occasions--is approaching a moment of truth. Last week President Clinton
transmitted to the Senate the documents that would bring the Czech
Republic, Hungary, and Poland into the alliance. The Senate is expected
to vote in early March.
For the last four years, since the president decided that NATO
should reach out across the old divide of the Cold War to take in new
members, you have had serious questions about the wisdom of this course.
I'm glad to have the chance to continue our exchanges on this subject
here in Slate.
The case for enlarging NATO comes down to this: Opening the door
to new democracies that aspire to, and qualify for, membership will
strengthen stability, undergird peace, and enhance integration in
Europe. That goal is profoundly in the interest of the United States.
Twice in this century Europe has exploded into world wars that cost the
lives of over half a million Americans. The Cold War cost us the
equivalent of over $13 trillion.
While those conflicts are behind us, there are still threats to
the security of Europe. They include internal dangers, such as outbreaks
of ethnic conflict and violent nationalism, and external ones,
especially those posed by the spread of missile technology and weapons
of mass destruction. Enlarging NATO will increase Europe's ability to
deter and, if necessary, defeat those threats.
The leaders of NATO invited the Czech Republic, Hungary, and
Poland to join the first round of enlargement because those countries
have passed the toughest tests of political and economic reform and
because they are ready now to contribute to the strength of the
NATO is, at its core, a military organization--a collective
defense pact. But it is more than that: It is also a political
organization. In fact, it always has been. In the '50s, NATO provided
the security umbrella under which France and Germany reconciled. That
laid the ground for the European Union. In the early '80s, NATO promoted
the consolidation of civilian-led democracy in Spain. On numerous
occasions, NATO has helped keep the peace between Greece and Turkey.
Throughout its existence, NATO's unified command has removed the
incentive for military competition among Western European powers. I
stress that point because it's easy to forget in today's world, when the
unity of Western Europe seems natural and commonplace, that it was not
always thus. For centuries it was precisely the Western European
powers--anything but unified--that were almost constantly at war with
each other. NATO helped end that pattern.
A post-Cold War NATO can foster integration and cooperation
between what we used to think of as East and West. Moreover, NATO's open
door to the East can foster integration and cooperation among the
central Europeans themselves.
In fact, there's already progress in that direction. In pursuit
of their goal to join the alliance, a number of central European states
have accelerated their internal reforms, and they have resolved
virtually every old ethnic and border dispute in the region.
The United States is actively encouraging other European and
transatlantic organizations to open their doors wide--and keep them
open. We believe that a nation's eligibility for full participation in
these structures must be determined not by history or geography, not by
its affiliations and attitudes in the past, but by its values and
conduct in the present and by its orientation toward the future.
That raises what I know is a particular concern of yours: the
effect of NATO enlargement on the states of the former USSR--the empire
you so skillfully autopsied in your last book. Russia is a particular
concern because of the intensity and persistence of its opposition to
Stereotypes die hard, on both sides of what used to be the Iron
Curtain. Just as many of our own experts and commentators cling to Cold
War prejudices about Russians and what makes them tick, so many Russians
nurture a Cold War image of NATO. These include Russian hard-liners who
long for what they remember as the glory days of the Soviet Union and
who exploit what they depict as the specter of NATO to whip up
nationalistic passions. There are also plenty of Russian reformers and
democrats who worry--and warn--that NATO enlargement threatens to
strengthen those reactionary forces.
That risk is both exaggerated and manageable. Just as President
Clinton and the other leaders of NATO have recognized the emergence of a
new Russia, so many Russians are, I believe, beginning to acknowledge
that there is a new NATO. Far from being directed against Russia, it is
committed to working with Russia. Last year the alliance and Russia
signed a "founding act"--a charter setting forth principles of
cooperation. Today allied and Russian troops are serving side by side to
keep the peace in Bosnia. A new consultative body, the NATO-Russia Joint
Permanent Council, will hold its third meeting at the level of foreign
ministers in April.
Russian reform and U.S.-Russian relations face many challenges in
the years ahead, but the expansion of a defensive alliance with which
Russia itself has an increasingly close and beneficial relationship need
not be one of them.
I look forward to your response.
Feb. 25, 1998
From: Jack Matlock
To: Strobe Talbott
We have so often agreed on important foreign-policy questions
that it pains me to take issue with your views on the consequences of
enlarging NATO's membership. Nevertheless, I consider the
administration's policy seriously misguided. My principal concern is
not, as your letter implies, Russia, but the safety of America and its
allies, and the effectiveness of American foreign policy.
You have written an eloquent defense of current policy, but I
cannot agree with many of your statements. Will the policy of enlarging
NATO "strengthen stability, undergird peace, and enhance integration in
Europe"? I believe not. The countries now being considered for
membership are in fact stable, face no internal threat of ethnic
conflict, and have no serious frictions with their neighbors. Future
threats to their stability are much more likely to come from the
internal stresses related to the transition to democratic institutions
and a market economy, rather than from the aggression of another
Significant proportions of the population in two of the three
candidate countries are dubious about the benefits of NATO membership,
and not a single one has a public willing to increase defense spending
to fulfill obligations imposed by NATO membership. Polls sponsored by
the United States Information Agency in 1996 indicated that Polish
citizens were against additional defense expenditures by 74 percent to
16 percent, Czechs by 84 percent to 11 percent, and Hungarians by 87
percent to 9 percent. Nevertheless, the administration is assuring us
that the cost to the United States will be minimal and that others will
pick up the tab. Some serious contradictions lurk behind that argument.
Without modernization, unified communications, improved infrastructure,
and a lot of expensive weaponry, the armies of the new members will not
be an asset to NATO but a burden. All these things are expensive and our
Western European friends have said they won't pay a penny; the
administration tells the Senate we won't have to pay much, but if we
don't the whole burden falls on the new members; and if they cut social
spending to upgrade their military, this can lead to political and
And how about European integration? The integration the countries
of central and Eastern Europe need most is membership in the European
Union. If we really want to encourage integration, why don't we tell our
European allies that so long as there is no threat to the countries in
question, we will consider NATO membership only after admission to the
EU? Otherwise we give the Western Europeans a convenient excuse to delay
the politically painful step of opening their markets to countries that
desperately need them. NATO expansion at this time is more likely to
delay, rather than hasten, European integration.
Of course, NATO is more than a military organization, and that
fact should have figured more prominently in the administration's
thinking when it embarked on its current course. New countries could
have been brought into the political structure without raising the
concerns stimulated by military integration. Furthermore, under the
Partnership for Peace, NATO and its partners could have arranged as much
practical coordination and modernization of military forces as they
I could challenge many of the other general statements in your
message, but let us turn to the most fundamental questions: Where are
the most serious security threats to the United States and its allies
today? Where is the most serious instability in Europe? The answer to
the first, I believe, is that the potential leakage of weapons of mass
destruction to rogue regimes or terrorists is the most immediate
security threat to all of us. (Isn't this what the confrontation with
Saddam Hussein is all about?) As for instability, the Balkans obviously
take the prize in Europe. Expanding NATO to the countries now proposed
does nothing practical to meet the first threat, and it is hard to
discern any direct relevance to the second as well. You speak of the
persistence of outmoded stereotypes (and I agree that they are
dangerous), but I believe our current policy on NATO enlargement is
fueled precisely by outmoded stereotypes. Unless there is a real
military threat from Russia (a proposition practically nobody advances),
enlargement makes no sense at all, since all the other worthy objectives
the administration cites can be reached by other means. Military
alliances deal primarily with military threats; other instruments are
more useful for nation-building when external threats are absent.
I do not share your optimism that we can manage our relations
with Russia in the context of a relentlessly expanding NATO. The problem
is not that Russians think NATO is a threat. Most understand it isn't,
despite what their loudmouth chauvinists say. But they do understand
that so long as they are not part of it, they are not part of "Europe."
Symbolically, this is extremely important, since democracy in Russia
depends critically on a feeling that Russians are European and European
institutions can work in Russia. The feeling of rejection and
inferiority breeds irresponsible Slavophilism, and the suspicion that
the United States is extending its influence at Russia's expense
undermines our ability to secure cooperation even when it is in Russia's
Our current policy has already inflicted perceptible damage to
our relations--as we are seeing in the Duma's continued failure to
ratify START II and in the Russian shenanigans regarding Iraq--but the
situation will get much worse if NATO expands to the Baltic states, as
the administration reportedly has promised. By slowing the process of
weapons destruction and inhibiting continued Russian cooperation to
ensure the safety of nuclear weapons and fissile materials, enlarging
NATO's membership increases these threats to our security. Further
expansion could bring the arms-reduction process to a complete halt and
trigger a Russian decision to increase reliance on nuclear weapons. I
don't see how anybody can view this as strengthening security or
It seems obvious to me that we cannot ultimately have peace and
security in Europe without Russia. Russia will be either a security
partner or a problem. We cannot ensure that Russia is a reliable
partner, but we should do all we can to encourage democratization and
responsible behavior, and not create an enemy by treating Russia as one
until it proves that it is. I know this is not easy. I have dealt with
Russians my entire adult life and have never been an apologist for their
faults and weaknesses. During the Cold War, I had fewer reservations
about our hard-line policy than you did. But with the Cold War over (and
we should not forget that the current Russian leadership helped us end
it), our strategic objective should be to bring Russia into the world
community and a European security structure. The NATO-Russian founding
act is a diplomatic achievement, but will be of limited value if NATO
continues to expand. The idea that you can build cooperation with Russia
and encourage its democratic forces in the context of an expanding NATO
is--to put it as mildly as I can--wishful thinking.
So far as reaching "across the old divide of the Cold War" is
concerned, it takes real chutzpah for the administration to claim (as it
has in testimony to the Senate) that moving the NATO border eastward
erases the lines of the past. It re-creates them, though of course in a
different form. The political division of Europe ended with the fall of
the Iron Curtain, the reunification of Germany, and the removal of
Soviet troops from Eastern Europe. It ended bloodlessly because we
convinced the Soviet leaders it would be in their interest to go quietly
and we would not take advantage of their departure. If you have any
doubts on that point, I would suggest you ask your staff to show you the
memorandum reporting Secretary Baker's conversation with Gorbachev in
early February 1990. I am not suggesting that there was anything legally
binding in that conversation, but Gorbachev says in his memoirs that
Baker's argument, which included the statement that the jurisdiction of
NATO would not move eastward, convinced him to agree that a united
Germany could stay in NATO. Gorbachev is no longer in power and Russia
is not the Soviet Union, but since the Soviet collapse there is even
less justification than there was in 1990 and 1991 to move NATO to the
Strobe, the administration had it right in 1993, when it declared
a partnership for reform in Russia and announced the Partnership for
Peace. At that time, Secretary of State Warren Christopher warned
against moving too rapidly to bring new members into NATO. I thought I
detected your deft hand in our policy, which was right on target with
our strategic objectives. But the Partnership for Peace was not even
tested before we devalued it by making it seem second-best to full
membership. By changing our policy to favor a process of expansion, we
are repeating in a political form the strategic mistake the French made
after World War I. They assumed the next war would be like the last, and
they built a Maginot line. Feeling safe as they huddled behind it, they
failed to confront Hitler when he rearmed the Rhineland, annexed
Austria, and destroyed Czechoslovakia. But when the Germans finally
invaded France, they came from a different direction and the Maginot
line turned out to be irrelevant.
The thinking that underlies our current policy is an exact
parallel. Mesmerized by the wars and confrontations of the past, we
ignore today's real threats and, by arming against those of the past,
diminish our ability to deal with those of the future. If NATO continues
its preoccupation with the debate over which new members to accept and
with the process of absorbing them into the alliance, it will be less
and less capable of contributing to the security and well-being of the
continent. Preoccupied with its expanding waistline, it will gradually
become a mere spectator to the real game in the international arena.
I sure do hate to see this happen.
With warm personal regards,
Russia Communist boss raps Yeltsin on govt changes
MOSCOW, March 1 (Reuters) - Russian Communist Party leader Gennady Zyuganov on
Sunday accused President Boris Yeltsin and Prime Minister Viktor Chernomyrdin
of ignoring the people and said they had been too timid in their latest
``The president and prime minister have forgotten how to listen to the
and have taken a course of neglecting public opinion,'' Zyuganov told Interfax
Zyuganov, whose party holds the largest number of seats in the State Duma
(lower house of parliament), said the sacking of three ministers on Saturday
was irrelevant because key figures remained in place.
He said Yeltsin should have axed his liberal first deputy prime ministers,
Anatoly Chubais and Boris Nemtsov, and other market reformers who he said were
responsible for Russia's economic decline.
On Saturday the Kremlin announced the dismissal of Valery Serov, deputy prime
minister in charge of relations with former Soviet republics, Transport
Minister Nikolai Tsakh and Education Minister Vladimir Kinelyov.
Yeltsin had indicated a while back that he was not satisfied with the
cabinet's performance and had said some ministers were likely to lose their
jobs but the changes have, so far at least, been more modest than expected.
Zyuganov, defeated by Yeltsin in the last presidential election in July 1996,
praised Serov for forging closer ties between Russia and other former Soviet
republics such as Belarus and Ukraine.
Russia has formed a loose economic union with Belarus and has seen a big
improvement in troubled ties with Ukraine over the past year culminating in
last week's state visit to Moscow by President Leonid Kuchma.
``(Serov's sacking) means that yet again the grouping has won which does not
want closer contacts and friendship with the countries of the Commonwealth of
Independent States (CIS) and loathes everything Slavic,'' Interfax quoted
Zyuganov as saying.
Liberal members of Yeltsin's team oppose closer economic ties with Belarus,
whose authoritarian leader Alexander Lukashenko has rejected carrying out
radical market reforms.
Los Angeles Times
March 1, 1998
[for personal use only]
Russian Advertising: Old and Improved
Consumers: Czarist glamour and home-grown values are hot commodities.
By VANORA BENNETT, Times Staff Writer
MOSCOW--A giant pack of Russian cigarettes flies toward the defenseless
New York skyline. Torch raised, the Statue of Liberty helplessly watches
There's an undercurrent of vague menace in the picture that can be
instantly recognized by anyone who ever watched a Cold War-era movie.
And it's underscored by the aggressive slogan of the flashy Russian
advertisement, displayed on huge billboards all over Moscow: "Striking
The ad for a local brand of cigarettes, Yava, is just one of many
indications that Russia's newfound consumer fantasies not only are
becoming as slickly designed and sophisticated as their Western models
but are growing more nationally self-assertive.
In the post-Soviet crisis of the early 1990s, when most Russians
were self-deprecating about anything that came from their own country,
goods imported to Russia were instantly in demand. Russian producers
even marketed their goods under pseudo-foreign names. For instance, the
Moscow clothes designer Anatoly Klimin sells under the trademark name
But now, as the domestic economy revives somewhat, the pendulum has
Buyers here want to be shown that their home-grown Russian values,
as well as their goods, are at least as attractive as foreign ones. And
a big new advertising industry--made up of both the subsidiaries of
Western agencies and of Russian agencies born after the Soviet collapse
in 1991 but already surprisingly mature--is realizing that it must
satisfy the demand for Russian national flavor if it is to continue
"As we've gotten more experienced, the magic of 'imported' has
faded. We've learned to distinguish between good products and the
second-rate," commented the weekly newsmagazine Itogi. "Having been
disappointed by stinking Turkish tea, rubbery Polish sausages, Chinese
clothes that come apart and clocks from Hong Kong that fall to bits,
Russian consumers are getting nostalgic for the Russian mustard and
chocolate and sausage that they grew up with."
Western Ads Misfired
The first Western ads shown in Russia in the early 1990s often got
their market wrong, offending people because they didn't take into
account Russian sensibilities, according to Vyacheslav Chernyakhovsky,
editor of Reklamny Mir (Advertising World) magazine. Ads for tampons
embarrassed this prim society; ads featuring black people apparently
touched a chord of racial unease. Now the agencies are learning to
provide what the customer wants.
"Of course, we still adapt a lot of Western ads, but the amount of
shooting we do for separate Russian ones has gone rocketing up since
1992," said Elmira Mikhailova, the 29-year-old vice president of a
subsidiary of the Western agency D'Arcy Masius Benton & Bowles, or
Russia's advertising business--and retail sales in general--is
dominated by foreign firms. According to Vladimir Yevstafiev, the head
of leading Russian agency Maxima, more than 90% of the ads shown on
nationwide television today are for international companies' products.
The top-billing Moscow ad agencies listed by Advertising Age weekly
in April 1997 were also all branches of foreign companies, led by DMB&B.
The much smaller, leading Russian companies Video International, Premier
SV and Maxima came in way down the list. Russian agencies operate at a
disadvantage, Yevstafiev said, because they are hamstrung by Russian tax
A Boyar's Market
The stakes are high and the potential enormous in a country of 150
million people just learning capitalism. So whether ad agencies are
Russian or foreign, they are now using Russian themes to sell--even if
their products are not intrinsically Russian.
These themes are as popular with Russia's small but wealthy circle
of target buyers--known inside advertising agencies as "bandits, bankers
and bimbos"--as the snazzy, jazzy ads of the purely Western approach.
Coca-Cola, which has built several plants here in an apparent
attempt to be seen as Russian, has just put up billboards featuring a
glamorous black-and-white shot of a modern man and woman about to kiss,
above a heart reading "Coca-Cola."
But, in a nod to the fairy tales every Russian remembers from
childhood, it also names the lovers as Ivan the Czarevitch and Yelena
the Beautiful--who fall in love and live happily ever after once he has
rescued her from a wicked wizard with the help of a magic wolf.
Ads seldom feature reminders of prosaic or painful collective
memories of real 20th century Soviet life. The Russian imagery that ad
agencies prefer is a more fanciful mixture of history, literature and
legend: czars, boyars, horses on gleaming snow, legends of firebirds and
wolves, snatches of imperial balls, chandeliers, taffeta gowns and
The lost glamour of last century's aristocratic Russian
language--written with an extra letter, the silent "hard sign," which
was abolished soon after the 1917 Revolution--has become a nostalgic
advertising favorite. The "hard sign," written like a small "b" with a
tail in front, is now often inserted at the end of product names to
suggest uninterrupted high-quality production since czarist days.
Western-made Smirnoff vodka pins its image on emigre chic--spelling
the name "Smirnoff" with two Western Fs, like the aristocrats who fled
the Russian court in 1917 to make a new home in France or America. Its
current ad shows the two Fs magnified through bottle glass, and the
slogan boasts of "international quality."
Smirnoff's new Russian-made rival, Smirnov, started modern
production based on traditional family recipes only after the Soviet
collapse. It emphasizes its links with the past by spelling its name
with a quaint hard sign, festooning its ads with czarist double-headed
eagle emblems and using the punning slogan "The Hard Sign of Quality."
But there's more to the new school of Russian advertising than
vague appeals to a mythologized past.
"What's natural in our ads is storytelling and sardonic humor,"
newsmagazine Itogi commented. "One of the best ways of peddling goods in
Russia is to tell a joke. That's understandable: Jokes are the
legitimate inheritance of Russians after a long period of autocratic and
totalitarian rule. There are ironical ads in the West too, but it's here
that they correspond best to the psychological profile of society."
One of the things that Russians argue about is whether their Soviet
years of being bombarded with political slogans--along the lines of
"Communism equals Soviet power and the electrification of the whole
country!"--makes them more or less susceptible to modern ads.
Bakhyt Kilibayev, who in 1993 designed the first wildly successful
all-Russian advertising campaign, for a pyramid-scheme savings company
called MMM that later collapsed, said Russians are more gullible than
"The media has mythologized our country's catastrophe in the last
decade. They probably didn't do it on purpose. But as a result, we all
feel that we're living somewhere where there's been a catastrophe,"
Kilibayev said. "That's why no one notices the good things in life--and
there are plenty of them: the holidays in Turkey, the full fridge, the
new television--because they're convinced it's nothing compared to the
global catastrophe whose victim they've become. Perhaps by buying
consumer goods, we're stifling our inner sense of catastrophe.
"In this situation, when all real ideals and direction have been
lost, you can tell people--and sell people--whatever you like,"
But Sergei Koptev, chief executive officer of DMB&B in Moscow, said
it is only a myth that Russians are conditioned to treat ads as
obediently as if they were Soviet agitprop. The two concepts are
qualitatively different, he and other ad executives say, stressing the
new choices offered by capitalism.
"What is true is that adults notice ads more because they're still
a bit alien," he added.
"But the kids growing up now accept them as a normal part of life.
By the end of the century, kids who were born in the perestroika era and
are completely uninfected with that old Soviet way of life will start
turning 14 and 15. Those are kids who already have so many brands in
their heads, and who talk in ad-speak, and who will influence our lives
very strongly. Everything's going to change when they come to the market
in the next couple of years. That's the great dividing line coming up."
Ad executives are dismissive of popular grumbles that Russian
advertising standards are still lower than those abroad, that too many
naked women sprawl sexily on too many cars, and that shocking or teasing
consumers is as high on the agencies' agenda as explaining the products
"Our industry has grown up 20 years in just five or six. And we've
got to go on moving just as fast because the consumer is moving so
fast," Koptev said. "He's got huge choices, and he's exercising his
right to make those choices. All the fun of our life is that it's
changing so fast."
Nevertheless, there's a hint of unease among ad people at the
Russian-first message coming from consumers.
"The message on everyone's lips now is 'Buy Russian,' " said
Koptev, adding that he'd prefer a more sophisticated form of patriotism
that would accept not only the traditional staples as Russian but also
those foreign companies that have made commitments to the Russian
economy--like his own client, Coca-Cola. "What they should be saying is
'Buy Made in Russia.' "
At the Russian Maxima agency, creative director Vladimir Konstantin
agreed that Russian-pride sentiment should be treated with caution.
"I don't think it's all good to go back wholeheartedly to buying
only the brands we remember from our childhood. That kind of nostalgia
might mean we're producing and selling goods that are not of high
quality," he said.
"Russia's always been a place of extremes, and when a trend starts
it usually gets taken to the very limit," Konstantin said. "So we won't
be using Russian chauvinism as a selling tool."
February 28, 1998
[for personal use only]
Reticence reflects doubts on plans to bury bones
By Seamus Martin
Russia: The bones found in Yekaterinburg in 1991, reputed to be those of
Tsar Nicholas II as well as some of his family and servants, are to be
buried in St Petersburg in July, according to one of Russia's deputy
prime ministers, Mr Boris Nemtsov.
Mr Nemtsov was accompanied by a representative of the Russian Orthodox
Church, Metropolitan Juvenaly, when he made the announcement in Moscow
but the decision appears to be far from final. It was significant that
the proposed burial was not openly supported either by President Yeltsin
or by Patriarch Alexiy II of Moscow and all the Russias.
Although identified by DNA tests as belonging to members of Romanov
family, the "Yekaterinburg bones" have been the subject of controversy
in Russia and among Russians abroad.
Émigré Russians believe that the true remains of the Imperial family,
executed by Bolsheviks in Yekaterinburg in 1918, are cemented into the
walls in the Russian Orthodox Church of St Job in Brussels, having been
smuggled to western Europe by a pro-monarchy investigator, Mr Nikolai
Mr Peter Koltypin-Wollovskoy, president of the imigri (White) Russian
commission on the remains, told The Irish Times that he did not dispute
the DNA results which proved the Yekaterinburg bones to be those of
members of the Romanov family but argued that, since so many Romanovs
had been executed in the course of the Russian civil war, these were not
necessarily the bones of the Tsar and his immediate family.
Yesterday, the full text of the decision on the bones by the Holy Synod
of the Russian Orthodox Church expressed grave doubts on their
The Synod, composed of Patriarch Alexiy and 12 bishops, recommended
burial of the bones in an anonymous grave as "unknown victims of
Initially, it had been anticipated that Mr Yeltsin would be involved in
a major ceremony in which the Yekaterinburg bones would be interred in
St Petersburg and all victims of Soviet repression would be
commemorated. In this way the Russian President - a former Communist
Party boss of Yekaterinburg who ordered the destruction of the house in
which the Romanovs were shot - would have the opportunity to wash his
hands of one of the nastier events of his political past.
As the pro-monarchist forces began to exercise their influence, however,
this opportunity quickly faded from the scene. Mr Yeltsin left Mr
Nemtsov holding the baby.
Patriarch Alexiy, a close confidant of Mr Yeltsin, quickly put
Metropolitan Juvenaly into a similar position.
Yesterday's government decision to bury the bones as those of the
Imperial family runs contrary to the views of the Holy Synod and of the
Russian Orthodox Church in Exile.
New York Times
1 March 1998
Tinkering Perilously With Europe
With Washington preoccupied by other events, the Senate is rapidly moving
toward a momentous decision on NATO expansion. Though the issue has stirred
little passion outside the foreign policy fraternity, the eastward extension
of NATO ought to concern every American because it may damage the country's
paramount security interests for decades to come. There is still time for the
Senate to weigh these risks and to reject a plan that is likely to undermine
the very goals the White House insists it will achieve, including the
advancement of democracy and unity in Europe.
Redrawing the map of Europe does not happen every day. When it has been
tried over the centuries, by treaty or force of arms, it has often led to
devastating conflict. In promoting NATO membership now for Poland, Hungary and
the Czech Republic, and creating an expectation of future invitations for
other Eastern European nations, the Clinton Administration is betting that
several potentially harmful consequences will not result. That is a bet the
country should not make, especially when the potential gains of expansion are
The clearest danger zone is Russia's relationship with Europe. The
political, economic and military stability of the continent depends heavily on
whether Russia completes its transition to democracy and a market economy. Any
move that impedes or reverses that transformation is clearly not in European
or American interests.
Yet that is precisely what NATO expansion may do. For the moment, Boris
Yeltsin has grudgingly accepted NATO growth as the price Moscow must pay for
harmony with the West and the financial assistance that comes with it. But
Bill Clinton and his aides mistake Mr. Yeltsin's acquiescence for permanent
Russian acceptance. His successors may well prove less cooperative. In
Russia's volatile political environment, NATO expansion could easily be
exploited by nationalist forces intent on diminishing democracy and chilling
relations with the West.
Even under Mr. Yeltsin the prospect of expansion has taken a heavy toll. A
vital treaty to reduce nuclear arms is stalled in parliament. With NATO forces
likely to move hundreds of miles closer to its border, Russia has already
placed greater reliance on its nuclear weapons as a first line of defense.
Relations with Washington are deteriorating across a range of issues, from the
handling of Iraq to the management of Russia's nuclear materials.
In exchange for these serious consequences, NATO expansion would bring no
discernible gain. East-West divisions are evaporating and free markets are
spreading. An increasingly democratic Russia poses no threat to its neighbors.
This is not a picture that cries out for enlarging a military alliance whose
core purpose, defense against the Soviet bloc, is obsolete. Even a majority of
citizens in the Czech Republic see no need to join NATO.
It remains a mystery why absorption in the European Union is not the
preferred way to promote unity and prosperity in Europe. It would do so in a
way that embraces rather than excludes Russia. There will be ample time in the
future to plant the NATO flag farther east if Russia should turn threatening
Then there is the financial expense of expansion. The Pentagon recently came
up with a new estimate of the cost, $1.5 billion over 10 years. The number is
laughable, clearly cooked to reassure the Senate as it approaches a vote. Only
a few months ago the Pentagon calculated the cost could run as high as $35
billion over 13 years. Two years ago the Congressional Budget Office estimated
the price tag might be as high as $125 billion over 15 years.
In giving the Senate the power to ratify and amend treaties, the
Constitution expects more of the Senate than it is delivering on NATO. There
must be a serious, sustained debate about enlargement, not the rush to
approval that the White House would prefer. The 50th anniversary of NATO's
birth in 1999, Washington's deadline for installing new members, is hardly a
compelling reason to force a decision that the country is likely to regret
well into the next century.