March 2, 1998  
This Date's Issues:    2087  • 2088

Johnson's Russia List
#2087
2 March 1998
davidjohnson@erols.com

[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
expansion.
4. Reuters: Russia Communist boss raps Yeltsin on govt changes.
5. Los Angeles Times: Vanora Bennett, Russian Advertising: Old 
and Improved.
6. Irish Times: Seamus Martin, Reticence reflects doubts on 
plans to bury bones.
7. New York Times editorial: Tinkering Perilously With Europe.]

*******

#1
From: "Mark Ames" <exile.editor@matrix.ru>
Subject: forbes article
Date: Sun, 1 Mar 1998 

Dear David,
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
through. 
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.
Sincerely Yours,
Mark Ames
the eXile
Don't forget to check out our website, named "Site of the Week" by Yahoo!,
at www.exile.ru

Forbes
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 
rate. 
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 
interest rate. 
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 
exchange rate. 
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 
losses. 
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. 

*******

#2
For more articles from The Moscow Times, check out their website at
www.moscowtimes.ru
Moscow Times
February 28, 1998 
WHAT THE PAPERS SAY: Yeltsin Frustrated Expectations of a 'Bloodletting' 

Otto Latsis 
Noviye Izvestia: 
[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 
some basis." 
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?" 

*******

#3
>From Slate
http://www.slate.com

NATO Expansion
Strobe Talbott and Jack Matlock 
Introduction
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 
Union.

Message #1: 
Feb. 18, 1998
From: Strobe Talbott
To: Jack Matlock

Dear Jack, 
       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 
alliance. 
       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 
enlargement. 
       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. 

Best regards, 
Strobe 

NATO Expansion
Message #2: 
Feb. 25, 1998

From: Jack Matlock
To: Strobe Talbott

Dear Strobe, 
       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 
country. 
       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 
economic instability. 
       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 
wished. 
       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 
interest. 
       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 
undergirding peace! 
       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 
east. 
       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,
Jack 

*******

#4
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
cabinet reshuffle. 
``The president and prime minister have forgotten how to listen to the
country
and have taken a course of neglecting public opinion,'' Zyuganov told Interfax
news agency. 
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.

*******

#5
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 
its flight. 
     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 
Back." 
     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 
Tom Klaim. 
     But now, as the domestic economy revives somewhat, the pendulum has 
swung back. 
     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 
succeeding here. 
     "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 
DMB&B. 
     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 
laws. 
     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 
tiaras. 
     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 
Westerners. 
     "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," 
Kilibayev added. 
     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." 
     Fast-Paced Change 
     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 
they're selling. 
     "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." 

******

#6
Irish Times
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 
Sokolov.
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 
authenticity.
The Synod, composed of Patriarch Alexiy and 12 bishops, recommended 
burial of the bones in an anonymous grave as "unknown victims of 
militant atheism."
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.

*******

#7
New York Times
1 March 1998
Editorial
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
so slight. 
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
again. 
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. 

*******