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Johnson's Russia List


March 5, 1998  
This Date's Issues:    2093   2094

Johnson's Russia List
5 March 1998

[Note from David Johnson:
1. Boris Lvin: Re Hanke, Samonis, Mueller.
2. Nikst: Official Web site of the Duma Geopolitics Committee. 
3. Reuters: Russians divided over Stalin's legacy, 45 years on.
4. Reuters: Russia oligarchy risks peril in asset fight, Soros.
5. Reuters: Yeltsin wins budget fight at little political cost.
6. the eXile: "Hardware Score: Why Our Military Shopping Spree Has Russia 
Pissed Off."

7. AP: Russians' Chess Passion Endures.
8. Gerald Schendel: JRL#2079 Chess City in Elista.
9. Jamestown Foundation Monitor: RUSSIAN OPPOSITION TO FORM SHADOW 



Date: Wed, 04 Mar
From: Boris Lvin <>
Subject: Re: Hanke, Samonis, Mueller

Dear David:

I believe this discussion on the monetary arrangements in Russia and
elsewhere is long overdue. There are still too many opinions about, for
example, currency boards. I am not a devoted follower of Prof. Hanke but I
believe that adoption of the currency board option is best compared to
something like a decision to quit smoking ? it may turn out to be
unsustainable but cannot do any harm anyway.
As Milton Friedman once said, ?it is very important to keep the sharp
distinction between unifying two currencies (currency board option ? BL)
and pegging one currency to another (traditional fixed exchange rate ? BL).
They are as different as they can be?. And it is often overlooked that the
only difference between those East Asians who are in crisis and those who
are not (Hong Kong, Taiwan, Singapore) is their monetary constitution (the
latter effectively have more or less currency board system). Thus, Hong
Kong survived not because its reserves were that large as GDP ratio but
because they exceed the currency in circulation. Similarly, if one were to
consider the currency board option in Russia he must compare reserves to
the base money which is rather small. Moreover, widespread dollarization
makes such a decision even more easier.
There can be no speculative attack against real currency board; or at least
this attack is doomed beforehand. Indeed, attack means that speculators
test your commitment to keep preannounced exchange rate. But in the
currency board the exchange rate is fully supported by actual reserves and
not by your commitment and reputation.
Another common mistake is to compare the Asian crisis to the Russian
situation. The only common denominator is the word ?crisis?; Russian
problems are 99 percent of fiscal nature while the Asian ones are almost
entirely related to the monetary arrangements. If Russia adopts currency
board it would mean that the Central Bank no longer stands ready to support
the ruble-denominated public debt which is of quite short maturity. This
is the real issue. Ideally, currency board precludes sovereign debt at
all; or it tolerates it within narrow limits (assuming that servicing it is
not a hottest problem of the Treasury).
On the other hand, external accounts matter rather little here. The Asian
crisis was caused nit by current account deficits but the mismatch the
financial institutions created between their short-term external borrowing
and longer-term domestic lending under the (more or less implicit) exchange
rate guarantees extended by their Central banks. Moreover, all external
accounts figures which observers are bound to operate with are notoriously
imprecise. In the case of Asians, they tend to disregard actual outflows
initiated by residents; in the case of Russia, I believe, they mean next to
nothing ? due to , among other factors, very poor coverage of various trade


Date: Wed, 4 Mar 1998 
From: "nikst" <> 
Subject: Official Web site of the Duma Geopolitics Committee

Dear David,

I think that for the recipients of the JRL it will be of great interest
to visit the Official Web site of the Duma Geopolitics Committee:

[BTW: The head: Alexey Mitrofanov - young "Foreign
Minister" in the LDPR (= Zhirinovsky party) ]

In Russian & In English

As an specimen of the texts see below beginning of the
Mr. Alexey MITROFANOV's report (very long):




Russian idea and solution to 'the Russian question' has two inseparable
components complementing one another - internal and external. Russia for
the outside world and Russia for its own people that is our today's topic.
In the course of the present parliamentary hearings 
I appeal to the respected deputies and guests to pay equal attention to
both aspects of the problem. Since The Committee on Geopolitics is the
organizer of the hearings, allow me as the Chairman of the Committee to
concentrate on the foreign-policy aspect of the question. 

2. "The Near Abroad"
4. UN, OSCE etc..



It is generally accepted that global political changes going on all over
the planet are conditioned by the collapse of the world socialist system
and the USSR. Actually the collapse of the global forces balance existing
for more than fifty years has become a natural consequence of the
deliberate destruction of the post-war international relations system,
formulated and stated in Teheran, Yalta, Potsdam, Dumbarton Oaks, San
Francisco and at last in Helsinki. 


Russians divided over Stalin's legacy, 45 years on

MOSCOW, March 4 (Reuters) - Nearly a third of Russians believe Soviet dictator
Josef Stalin should be remembered mainly for leading the country to victory in
World War Two and not for the injustices of his rule, an opinion poll showed
on Wednesday. 
But in the survey, conducted by the All-Russian Centre for the Study of
Opinion, an almost equal number of Russians canvassed agreed Stalin was a
``cruel, inhuman tyrant guilty of the extermination of millions of innocent
The same percentage of people said not enough was known to pass
judgement on
Stalin and his rule. The survey coincided with the 45th anniversary of
Stalin's death on March 5, 1953. 
The survey, in which respondents were allowed to choose several statements
about Stalin, said 16 percent regarded the dictator as a wise leader who
turned the Soviet Union into a superpower. 
Expressing a view often heard in Russia, thirteen percent of respondents
they believed only a harsh leader like Stalin could keep order in such a large
and potentially anarchic land. 
Asked whom they considered Russia's most outstanding social or political
leader since the 1917 Bolshevik revolution, more than a fifth named Soviet
state founder Vladimir Lenin. 
Stalin, who was born in Georgia and gradually amassed absolute power after
Lenin's death, was the second most popular leader with 15 percent of votes.
Ironically, the late human rights campaigner Andrei Sakharov came third with
11 percent. 
Sakharov was widely revered in the 1980s for his uncompromising
opposition to
the Communist system. 
Russia's present head of state President Boris Yeltsin, who also won
popularity by opposing the Soviet authorities, came 10th in the poll with just
two percent of votes, far behind Soviet-era leaders like Yuri Andropov and
Leonid Brezhnev.


Russia oligarchy risks peril in asset fight, Soros
By Peter Henderson 

MOSCOW, March 4 (Reuters) - Russia's financial oligarchy is flirting with
disaster in a fight over government assets, international financier George
Soros said on Wednesday. 
The state is now taking control of unruly markets but reformers are in a
position now than early last year because President Boris Yeltsin appears to
be playing political games with government factions rather than standing
solidly behind reformers, Soros told businessmen. 
He likened top bankers scrambling to divide state assets to seven men in a
boat approaching a waterfall. ``They were so busy fighting among themselves,
they didn't hear the waterfall.'' 
Political analysts believe some leading bankers co-ordinated support to re-
elect Yeltsin in 1996, prompting speculation that the government repaid them
during auctions of state property. 
Top reformers have pledged to make new sales fair. 
Soros said he had made a mistake as an investor by participating in an
for 25 percent of state telecoms holding company Svyazinvest, which he won as
part of a consortium offering $1.8 billion for the stake last July. 
``My mistake was that I didn't realise the redistribution hadn't been
completed,'' he said. ``The fight was still going on.'' 
Investors in Russia have been increasingly concerned about shareholder
and believe that Russia must act to make state auctions fair and defend
property owners. 
The Asian crisis shook world markets and forced investors to take a harder
look at where they had put their money in Russia, but up to last year the
oligarchy persisted in its bad habits, Soros said. ``They just got carried
Soros said he arrived in Moscow this week prepared to lob a volley of
accusations against authorities for failing to stop corporations from robbing
foreign shareholders of their rights. 
But he said he found the government's securities watchdog had already taken
measures, especially in high profile cases involving oil companies SIDANKO
``I came too late because the federal securities commission has taken
action,'' he said. 
The commission has halted a convertible bond issue which would have diluted
minority investors' holdings in SIDANKO. Commission head Dmitry Vasilyev also
said subsidiaries of YUKOS have promised to respect shareholders' rights and
corporate law. 
Soros said the latter move annulled disputed decisions of shareholders'
meetings last year, when YUKOS subsidiaries voted to give their boards power
to transfer assets. Minority shareholders saw that move as asset stripping. 
Soros also supported moves by a shareholders' rights commission chaired by
Prime Minister Viktor Chernomyrdin. 
Soros said Russia would be better off changing the behaviour of the
rather than the oligarchy itself and that a successful transition from bandit
to legitimate capitalism would require government-business cooperation. 
But business interests were already positioning for the 2000 presidential
election and top reformers such as First Deputy Prime Ministers Anatoly
Chubais and Boris Nemtsov were not fully supported. Soros met both men during
his visit. 
``Things looked a lot better in the spring of 1997 when Yeltsin gave
individual support to reformers,'' Soros said. 
``The idea of communism, central planning, is totally out of the
question, but
new forms of dictatorship, new forms of nationalism, nationalistic
dictatorships, are not to be excluded.'' 


Yeltsin wins budget fight at little political cost
By Timothy Heritage 

MOSCOW, March 4 (Reuters) - President Boris Yeltsin emerged largely victorious
on Wednesday from a nearly six-month budget battle with the Russian parliament
which threatened at one stage to bring down his government. 
Yeltsin made several concessions to win the backing of communist-led
opposition in the State Duma, the lower house, and even made a dramatic
appearance in the chamber last December to appeal for the budget's approval. 
But he resisted pressure to sack his young economic reform chiefs or change
his reform policies to win the Duma's backing -- and he achieved it without
making major political sacrifices. 
``Yeltsin has shown again that he knows how to deal with the Duma,'' said
Andrei Piontkovsky, head of the independent Centre for Strategic Studies
``The communists got absolutely nothing of importance in this battle.
They are
just losing their credibility as an opposition party.'' 
The long battle over the government's 1998 spending plan eventually
ended in
anti-climax. Deputies finally passed it after such a short debate on Wednesday
that Prime Minister Viktor Chernomyrdin did not arrive in time for the vote. 
That was a sea change from the tension of October when the Duma put on its
agenda a vote of no-confidence in the government over its budget policies and
economic record. 
The communists eventually backed down after last-minute bargaining with the
Kremlin. Their readiness to accept they would not achieve their main demands
was evident by December, when they allowed the budget to go through on its
first reading. 
The long battle did bring them some results. The government was forced to
revise its budget targets and a new tax code was put off in a big setback to
the government. 
The government says the compromises, along with a worsening in the global
economic climate, have made spending and revenue figures unrealistic, although
it has pledged to stick to the key deficit target of 4.7 percent of gross
domestic product. 
Yeltsin also bowed to demands to hold broad talks with opposition
leaders on
Russia's most pressing problems and abandoned his tough anti-communist
rhetoric for paternal talk of compromise and reconciliation with his old foes.
But he ignored the communists' key demands for the removal from the
of their old enemy Anatoly Chubais, one of the masterminds of reforms, and for
the creation of a broad coalition government. 
Their criticism of a ``ruinous'' government economic programme failed to
any radical changes of policy. 
By dropping their resistance to the budget, the communists have now
given up
their main bargaining chip with Yeltsin, although they can always put pressure
on the government by censuring its handling of the budget once it formally
passes into law. 
``The battle is over and the communists achieved nothing of substance.
Now the
State Duma has nothing to bargain with,'' said political analyst Lilia
Shevtsov of the Carnegie Endowment for International Peace think-tank. 
What has emerged in the last six months is a new inclination for compromise
and a shift away from confrontation by both Yeltsin and the opposition. 
Little more than a year ago deputies were seeking to impeach Yeltsin,
who was
then sick. Now the speakers of the two parliamentary chambers hold regular
consultations with him and ``round table'' talks have started. 
Yeltsin realised that reforms could be upset by major political
confrontations. The communists appeared to decide they had little to gain from
a major showdown with Yeltsin now, two years before the next parliamentary
Regional officials also put pressure on the communists to pass the
budget to
ensure much-needed government cash handouts set out in the spending plans
reached the regions. 
The time for confrontation may come later, perhaps when the annual
battle over
the budget begins next autumn or in the autumn of 1999, just before the next
election is due. 
``Yeltsin does not need to worry about the communists now, at least
until next
autumn. The battle then could be much harder,'' Shevtsova said. 


From: "Matt Taibbi" <>
Subject: exile
Date: Thu, 5 Mar 1998 

Enclosed is this week's lead, entitled "Hardware Score: Why Our Military
Shopping Spree Has Russia Pissed Off."
Thanks as always. Please write if you have questions--
Matt Taibbi


"Hardware Score: Why Our Military Shopping Spree Has Russia Pissed Off."

Maria Krivikh, the public relations officer for the Moscow office of the
Siemens corporation, had a quick answer when asked to respond to reports
that the German firm had gained a controlling share in a Russian factory
which produced sensitive atomic submarine technology.
"If they're selling it," she said, "why shouldn't we buy it?"
The Siemens story, which appeared two weeks ago in Profil magazine, is
just the latest in a string of dozens, if not hundreds of instances in
which foreigners have obtained large stakes in strategic Russian factories.
Siemens bought into a Kaluga plant which owns a state monopoly on welding
technology needed for the construction of nuclear subs; over the course of
the last five years, other foreign investors have bought stakes in plants
that produce everything from attack helicopters to optical equipment for
spy sattellites and even to stealth technology.
Although the Defense Ministry, FSB officials, and the State Accounting
Chamber disagree, Siemens claims its purchases were legal, and in fact it
probably will get to keep its stake in the Kaluga Turbine Factory (KTZ).
That's because complaints by all of these bodies over the last two years
have been ignored by the Prime Minister's office and by the Presidential
No matter how the Siemens story ends, it's already proved one thing
conclusively, which is that the system of bureaucratic checks and balances
which exists in normal countries to prevent the outflow of state secrets is
hopelessly fractured here in Russia. Ten years ago, Kaluga residents
hesitated even to say the name of the KTZ aloud. Now a German company can
buy KTZ's controlling share and a seat on its board of directors above the
objections of the Defense Ministry, simply by trading on the secondary market.
Whether their motives are strictly financial, or whether, as Russian
conspiracy theorists are quick to claim, their motives are more sinister,
foreigners who buy into military enterprises automatically exit the realm
of pure economics. The question of who has access to state secrets or
control over military production is at the heart of the entire concept of
statehood. In this country, the myriad ways in which westerners have fallen
on the carcass of the military-industrial complex can't help but be seen by
some Russians as an attack on their sovereignty. And as time goes on,
they'll have more and more trouble distinguishing transnational investors
from hired spooks out to get them-especially since they have good reason to
think both have been operating with near-total impunity here in the last
five years.
There is a very recent historical precedent for Western powers
disregarding their own ethical guidelines in order to seize the military
secrets of a defeated adversary. In 1946, the CIA, in conjunction with NASA
and the War Department, instituted Operation Paperclip, which was designed
to bring the German scientists and engineers who had built the Nazi war
machine to America for debriefing. 
The trouble was, American law at the time prohibited the immigration of
anyone with a Nazi past. Which was a problem for the abovementioned
agencies, since more than three-fourths of the scientists the War
Department was interested in were former Nazis. There was no getting around
the law, though; when Harry Truman authorized Paperclip, he insisted that
Nazis still be excluded from the program.
Soon afterward, however, CIA director Allen Dulles began a campaign of
manipulating the background checks of targeted Nazis to cleanse their
political pasts and make them clear for immigration. As a result, ex-Nazis
like Arthur Rudolph and Wehrner Von Braun, designer of the V-2 rocket,
eventually became U.S. citizens. Rudolph even went on to design the Saturn
5 rocket for the Apollo moon landings. 
Russian intelligence officers must certainly be aware of the thorough
job the U.S. did in cannibalizing the remains of defeated West Germany,
particularly since they themselves were just as thorough in making use of
the military resources of the East. And for obvious reasons, they and many
other Russians view the collapse of the Soviet Union as being very
analagous to the defeat of Germany. Both were huge militarized powers with
advanced military research programs, and both, in defeat, turned over the
task of rebuilding their societies to Western advisors. The only difference
was, the Allies in 1945 openly admitted to a policy of dismantlement and
disarmament of the enemy, while in 1991, the West only talked about Russian
disarmament as a means of better using factory space. Many Russians believe
that latter difference is purely cosmetic.
It makes sense that government officials like the ones who protested the
Siemens sale are likely to assume the worst intentions of Westerners in any
vaguely suspicious situation, even when a case can be made that no real
wrongdoing has been committed. In this atmosphere, overt attempts to gain
improper access to sensitive military secrets can only vastly increase the
paranoia level on the Russian side. 
Unfortunately for Western businessmen, and for West-Russian relations in
general, you don't have to look far to find examples of these incidents.
On November 18, 1994, a Komsomolskaya Pravda article entitled "Did the
CIA Privatize Our Secret Factory?" hit the newsstands all over the country.
The article reported that shareholders of a Moscow factory called NII
Grafit had sent a letter to both the Duma and the Federation Council,
complaining that a foreigner had improperly invested $700,000 in the
venture through a dummy Russian company called "Graniks." NII Grafit
produced Russian stealth technology. The foreigner's name? Jonathan Hay.
When the eXile first heard about that story last year, we couldn't do
much but sit on it. Although the piece had already been published in a
major newspaper, and had been written by two well-known and reputable
investigative journalists (Leonid Krutakov and Sergei Sokolov), it was just
too wild a story to run without stronger evidence. That a tweedy Harvard
grad like Hay, a man too dumb to keep from being caught investing spare
change in his girlfriend's mutual fund, could take time off from his heavy
day job designing the disastrous American aid effort to act as bagman for
daring cloak-and-dagger deals in obscure factories...well, that was frankly
too goofy a story for even us to believe. Even after we interviewed NII
shareholders who confirmed the story off the record, we still couldn't
publish it with any confidence.
Then last week, while researching this story, we learned from the State
Accounting Chamber that the Hay-NII Grafit deal was on public record and
had been circulating in the Russian government for years. In early 1995,
some six months after the Krutakov piece first appeared, the Accounting
Chamber-which incidentally did not exist in 1994 and could not have been a
source in the Krutakov story-- did an audit of the State Property Committee
(where Hay sat on an expert commission) and passed the results on to the
Duma and to the Prime Minister's office. Included in that report is the
following passage:
"...about 40% of the joint-stock venture Moscow Electrode Factory, which
includes the research laboratory NII Grafit, which produces
uranium-graphite compounds for nuclear submarines, nuclear power plants and
nuclear warheads, as well as cloaking surfaces for "invisible" airplanes
similar to the American B-2 "Stealth" bomber, as well as other compunds
used for space exploration, was purchased for $1.5 million dollars by a
Russian company called "Graniks." Funds for the purchase had been paid to
"Graniks" by U.S. citizen Jonathan Hay, an employee of Harvard University..."
Hay long ago made it clear that he would not speak to the eXile under
any circumstances. But if you're thinking that you know what exactly it is
he would have denied, if he had he made a comment in this case, you're not
the only one. When asked for his opinion as to what Hay might have been
doing with NII Grafit, Edward Luttwak, senior fellow and intelligence
analyst at the Center for Defense and Strategic Studies, had a ready answer:
"He might have been a CIA agent working on an assignment," he said. "Or
he might have been someone simply making a bad investment. Those academic
types have a tendency to make stupid investments."
If even a conservative Western analyst like Luttwak can publicly
entertain the notion that Hay is a CIA agent, then you can imagine what the
Russians think. Valery Meshalkin, the Accounting Chamber inspector who
authored the State Property Committee audit, says he's even personally
insulted by what he calls the low-tech nature of Hay's approach.
"That he's CIA, I have no doubt," he said. "But the point is that he
doesn't even bother to cover it up. He's a public figure, out here openly
directing the aid movement, and then he's doing these things so brazenly. A
secret agent should be more careful. This is the level of contempt they
have for us."
Meshalkin is one of what probably are many Russians who see little
difference between Hay-style half-bright cash investments through shady
middlemen and open purchases of shares in factories by large Western
corporations like Siemens. 
"It's all one kasha," he said, implying that both former and latter are
planned actions by intelligence agencies.
Meshalkin sounds hysterical, but the irony is that in the age of global
capitalism, you don't even need a conspiracy against you to lose your
sovereignty almost overnight. Russia's experience has demonstrated that.
Part of the difficulty these days in keeping military secrets safe, for
instance, is the general weakening of nations in general in the face of
increasingly confident and aggressive corporations. Luttwak, for example,
believes that Siemens was only playing by the rules of the current game
when it made its purchase in Kaluga.
"The standard is that if Russia is selling it, then there's no reason
not to buy it," he said. "The only ethical consideration is whether or not
the purchasing company is itself publicly held. If any Russian can buy
shares in Siemens, then there's no reason for Siemens to feel badly about
buying Russian property. 
"Private corporations do not view the protection of secrets as their own
problem. Ethical and political considerations do not compute in commercial
transactions. As it stands, governments are expected to protect their
secrets through classification systems. If something is deemed secret and
not fit for sale to foreigners, then it is the government's responsibility
to prevent the sale."
All of which makes sense-except that in Russia's case, the bureaucracy
has proven itself incapable of defending its secrets. In the Siemens-KTZ
case, for instance, the KTZ factory chiefs never received permission for
their share issue from the State Anti-Monopoly Committee. The factory,
which is the only one in Russia that possesses the special welding
technology necessary for the construction of large submarines, was
registered back in the Soviet days on the list of state monopolies. But its
share sale was conducted in violation of a July 3, 1991 law governing the
privatization of such monopolies. 
As a result, the Siemens stake, at 20.31%, now exceeds the Russian
government's 20% stake. And since it is still a monopoly, the state's
failure to enforce its own rules now means that a German company might not
only have access to the factory's secrets, but virtual control over
Russia's atomic submarine manufacturing capacity.
"They have a representative on the board of directors, and their stake
is larger than the state's," said Meshalkin. "Even if they aren't truly
interested in our technology, their contolling position is a disaster for
Russia. One could imagine, if there were ever a war, how absurd we'd look,
having let foreigners control the development of a critical property like
This is the reason that Meshalkin, who concedes that not all Russian
military factories have secrets the West might be interested in, is so
upset about the way the privatization of these factories has been
conducted. He believes that incidents like the Siemens purchase have left
Russia incapable of maintaing and coordinating its own sovereign military.
As evidence to support his claim, he produced a list two pages long of
factories designated as strategically sensitive which now are at least
partially-owned by powerful Western companies-companies like Boeing (part
owner of the Moscow Helicopter Factory), Phillips (part owner of the
electronics joint-stock company VELT), Sikorsky, First Boston and others. 
"These are only the companies we came across accidentally, as part of
other audits," he said. "We haven't even gone looking specifically for this
kind of thing yet. But you can see from the list that foreigners are in
prime position to squelch the development of our arms industry."
Luttwak disagrees with Meshalkin, believing that the vast majority of
those companies are in as money investors only. "No publicly-held
corporation would ever be enlisted to slow down the production of a company
it part owns. That would be a violation of fiduciary responsibility to its
own shareholders. And then, anyone who can prove that the directors of a
company acted with any motive other than a profit one would be able to sue
the directors for everything they had."
The problem with that reasonging, of course, is that Russians don't care
too much about fiduciary responsibility, as long as these sales keep
happening. In fact, it would almost be worse, from the Russian point of
view, if Western companies really were independent of their national secret
services, and sought constantly to fulfill their fiduciary
repsonsibilities. Because in that case, these companies would have to
actually use the technology they paid money for.
Siemens can claim all it wants that it's only interested in the civilian
uses of the Kaluga plant-spokeswoman Krivikh even told the eXile on the
phone that Siemens does not have a military technology program-but thanks
to the miracle of the information superhighway, any Russian these days get
get on the web, spot the Siemens Defence Electronics page, and call their
bluff. Even Burt the syphilitic monkey is smart enough to know that not
using technology as rare as the type developed at KTZ would be asinine. 
So there are really only three possible reasons Siemens bought into that
plant. One is that they intend not to use the technology on purpose,
presumably for some sinister reason. The other is that they intend to use
it. And the third is that they paid their hard-earned money for it for the
sheer, wacky fun of owning their own Russian submarine plant. 
Any way you look at it, Russia in the age of weak bureaucracy and mass
privatization loses out to the West. It doesn't matter if there was no
conspiracy and only the realities of global economics were at fault:
Russians are still going to be pissed off for ages hereafter that companies
like Siemens took advantage of their inability to protect their state
secrets. The excuse "If they're selling it, why shouldn't we buy it?" is
only going to temper Russia's future antipathy toward the West by the
smallest conceivable fraction. And that's only if the excuse holds up-which
it likely won't.
Why not? Because the appearance of conspiracy is simply too conspicuous
for any patriot to ignore. Just imagine if a Russian version of Jonathan
Hay, an Ivan Khayev, say, came to America following a political upheaval
and went to work auctioning off American industry. This Khayev earned a
seat on expert commission and also secured, through his Russian-speaking
American ally in government (Jack Chubaiston, say), a Presidential decree
saying that no privatization project can be approved without this Russian's
say so. Then this same Khayev, in conjunction with an army of other
highly-paid Russians, writes a whole new set of legislation for American
business practice. Then the auctions commence and Russian investors walk
away with big pieces of everything from the Stealth bomber to the Space
Shuttle to Electric Boat. The auctions may violate laws, but the average
American can't keep the directors of places like Electric Boat from selling
out any more than they can keep them from laying off workers. And even when
the local FBI office protests the sales, the cases die when Louis Freeh
mysteriously refuses to prosecute.
Meanwhile, the American General Accounting Office catches Khayev buying
sensitive information through middlemen, but Khayev gets away with it-and
not only gets away with it, but goes on to set up a ridiculous scheme to
make his middle-aged Russian girlfriend rich off the American Social
Security Fund.
Then let's say all this happened, and then Khayev and the Russian
government stood back and claimed it had all been just good business and
friendly diplomacy. If that wouldn't make sense, well, that's because it
wouldn't make sense, just as it doesn't in today's Russia. What does make
sense is just the opposite-that the American military, the CIA, and
American corporations found common interests in seizing and dismantling
Russia's military, and helped each other make their ambitions reality,
becoming at least emporarily richer and more powerful in the process.
"It makes perfect sense that if there were something the CIA considered
favorable to the American interest, then they would give a body like USAID
a pretty direct shove in a place like Russia," said Christopher Smith, an
intelligence analyst at the Center for Defense Studies at King's College in
London. "It doesn't take a real leap of imagination to see that."
About the Siemens case, Smith said it was perfectly natural that
Russians spun conspiracy theories around the incident. "If laws were broken
and whole ministries were ignored, then either somebody screwed up very
badly, or somebody let it go deliberately, which for a Russian is a pretty
disturbing possibility."
Although Luttwak says fiduciary responsibility and other factors prevent
publicly-held corporations from working in concert with security services,
common sense would here as well tend to argue the opposite. If the
President of the United States can travel abroad to lobby for Boeing
contracts or commit his whole armed forces to war to protect the domestic
oil industry, then it stands to reason that American intelligence services
could be used on behalf of American industry to secure advantageous
positions in auctions of foreign properties. 
"It is obviously in the interests of all NATO governments to enlarge
their own military and economic capacities at the expense of potential
enemies," said Smith. "From their point of view, buying controlling stakes
in key Russian companies doesn't seem farfetched at all. It seems like
quite a smart move."
Smart in the short-term, anyway. In the long run, Hay and all the rest
of the people who cooked up the privatization miracle here in Russia have
almost certainly doomed us to another long and costly cold war through
their frat-boy attitude toward foreign policy. The fact is that Russia was
not prepared, either financially or bureaucratically, to compete with the
West on even terms in the privatization process. The country was splintered
and cash-poor, and by setting the rules as they did, Hay & co. guaranteed a
lopsided victory for our side. And they padded the score even more by
pulling off cheap stunts like sneaking into stealth technology factories
through middlemen after work and ignoring anti-monopoly rules. All of which
is not much better than stealing the away team's equipment bag or leaving
their locker room unheated, as frat boys tend to do as a means of winning
games and making longtime enemies.
Worse than anything, the behavior of Westerners in the privatization
process, particularly in the military sector, ruined whatever credibility
the West ever had among ordinary Russians not only as honest businessmen,
but as smooth operators. If we came in in 1991 as champions of fair play,
by 1998 we've demonstrated that the only ethical standard we really worried
about was not getting caught. But even there, in the case of Hay, the man
America sent here to teach Russians the principles of law-based economics,
we got caught a lot.
"If there's anything that all of this proves," said Meshalkin, "it's
that all those years when we were fighting the cold war against the
imperialists, we were right. Most of us had pretty strong doubts until now.
"As for Hay, what amazes me is how naive these college boys are. They
have no idea what they're getting into. The secrets they know today to get
rich on might make them walking targets tomorrow. The stakes are so high
that no matter where they went to hide, somebody would find them. Russians
have a lot of experience at that."


Russians' Chess Passion Endures
4 March 1998
By DAVE CARPENTER Associated Press Writer

MOSCOW (AP) -- It's a classic winter scene, the kind landscape painters
might capture in Bavaria or Boston, but with a distinctly Russian twist.
Deep in the woods, children are sliding down icy knolls, cross-country
skiers are gliding between white birches, mothers are pushing strollers, and
men in fur hats are ... playing chess.
Ch-ch-chess anyone?
In a country where people seem to ward off hypothermia by lining up
outdoors to buy ice cream, perhaps it's not surprising to come across a
bunch of guys in parkas pushing pawns in a snowy forest.
The regular games in Moscow's Timiryazevsky Park underscore a passion
for chess in Russia like nowhere else on earth -- one that appears only to
be growing in the era of computer chess and the Internet.
From schoolchildren to granddads, ditch-diggers to presidents,
practically everyone seems to know how to play ``shakhmaty,'' and well.
``In Soviet times, the government supported chess because we wanted to
show the world we were the strongest and cleverest,'' said Ruslan Urtayev, a
construction worker who brought his preschool son along to watch him play in
the park.
``Now we just play because we love it. It's all about the beauty of
ideas, the beauty of give-and-take,'' he said.
For Russians still pained by the loss of the motherland's status as a
world superpower and sports titan, there is beauty, too, in the continuation
of a proud tradition.
The game is believed to have originated in India, but there's no doubt
that the center of chess has been in Russia for some time.
When chess moved to the salons and coffeehouses of Europe, writers
Alexander Pushkin, Leo Tolstoy and Ivan Turgenev became aficionados and
helped popularize it.
By the start of this century, Russians at the highest level were nuts
about chess -- a rare sentiment shared by both nobles and revolutionaries.
Russia's last czar, Nicholas II, coined the term ``grandmaster.'' Not to be
outdone, Lenin called chess ``gymnastics of the mind.''
The mass development of chess came only after the Bolshevik Revolution,
however. With the Communist Party's sanction, a remarkable reign of Russian
dominance began that looks set to continue well into the 21st century.
All but two of the 13 world champions of the past 70 years -- and only
American Bobby Fischer in the past half-century -- have been natives of
Russia or the former Soviet Union.
Many of the best grandmasters live here, chess is a staple of many
school curriculums, and TV sports reports routinely give chess results.
While the Timiryazevsky chessmen were hunched over ice-covered picnic
tables one recent Sunday, there also was evidence of Russian chess mania in
a more conventional setting.
Just a half-mile from the Kremlin, dozens of tournament games were under
way in the hushed silence of the Central Chess Club, Russia's biggest.
Men in stiff blazers, gangly boys in heavy metal T-shirts and a few
young women bent over their boards under chandeliers and black-and-white
photographs of this century's world champions.
The path for many of those greats led through this club, including
reigning world champion Garry Kasparov, the highest-ranked player ever.
Boris Postovsky, coach of Russia's national team, expects one of his
players, No. 2-ranked Vladimir Kramnik, to succeed Kasparov on the chess
``Just as you could say that the Brazilian character and weather combine
to produce soccer players there, you could say the same about the Russian
temperament and climate being well-suited to chess,'' Postovsky said.
The key ingredient to the country's success may be simply that so many
Russians play it now, even from the first grade, he said. The reason is not
to breed champions, but rather a strongly held belief that chess is good for
``Chess used to be prestigious,'' said Valery Chekhov, a junior world
champion in the 1970s. ``Now not as much. But children are starting to love
it for different reasons.'' The main reason is the use of computers in
today's chess world, which has sparked a resurgence of interest among kids,
Chekhov said.
While Kasparov and his predecessors became champions through endless
reading and playing, chess experts agree computers have pushed the game to a
higher level -- making chess research and previous outcomes much more widely
Russia's bright chess future is visible at a children's center where
Chekhov and his wife, Tatyana, provide free after-school lessons.
Tatyana lectures to an attentive class full of young chess-lovers,
gesturing with a pointer to a chess diagram taped to the blackboard.
In an adjacent room, kids are immersed in brightly colored computer
chess programs. Clicking on the correct answer to a problem prompts a cheery
Ilya Savidov, a gum-chomping 10-year-old, pumps his fist and exclaims
``Yes!'' as he racks up more points. He may be a classic example of the next
chess generation -- kids who like to sit and push buttons at the keyboard
and wind up being good players.
Ilya, who's been playing chess for three years, insists he likes soccer
better. But there's no hiding his zest for the national game.
``There are some nice combinations,'' he observes. ``You really have to


Date: Wed, 4 Mar 1998 
Subject: JRL#2079 Chess City in Elista
From: (Gerald Schendel)

Dear David,

reading a report on the recent presidential board meeting of the World Chess 
Federation FIDE (by Willy Iclicki/Belgium - a FIDE official) I would like
to add 
some remarks to the report of Phil Reeves on Chess City in Elista/Kalmykia 

FIDE Deputy President Makropoulos (Greece) confirmed during that meeting
that the 
Kalmykia Republic is preparing very seriously the next chess olympiad (25 
September - 10 October 1998) in Elista. He went recently there to check the 
preparations. The President of the Russian Chess Federation Selivanov (a
of the Russian Duma) "confirmed that the Russian government is supporting the 


Mr Iclicki wrote: "Makropoulos will tell us more in a special interview
that I 
will publish later this week" (


Jamestown Foundation Monitor
5 March 1998

Gennady Zyuganov said yesterday that his party is negotiating with its
nationalist and agrarian allies to form a shadow government. He predicted
that the team would include regional governors Nikolai Kondratenko of
Krasnodar Krai, Vasily Starodubtsev of Tula Oblast and Aman Tuleev of
Kemerovo Oblast. Zyuganov's statement represents tacit recognition that
President Yeltsin is not going to invite Communist ministers into a
coalition government. In an effort to get the federal budget through
parliament last fall, Yeltsin hinted that he would consider such a
possibility. He even got the Communists to commit their ideas to paper, only
to dash their hopes by publicly commenting that he had "no time" to read
their proposals. Zyuganov complained bitterly yesterday that the president
has not followed through on his promises to schedule more of the weekly "Big
Four" and monthly "roundtable" discussions in which the communists invested
so much hope over the winter months. (Russian agencies, March 4)

Zyuganov said yesterday that the opposition is pressing ahead with plans for
a nationwide day of protest against Russia's "anti-people" government on
April 9. The Communists had originally planned to organize a protest on
March 27, but switched the date when Russia's trade unions announced plans
for a one-day general strike to protest wage arrears on April 9. Union
leaders reacted with anger, saying the Communists were muscling in the
unions' event because they were incapable of organizing a protest on their
own. The secretary of the Federation of Independent Trade Unions of Russia,
Andrey Isaev, said the unions were ready to cooperate with the Communists
but resented being "dragged into politics." (Russian agencies, February 23) 

domestic counter-intelligence service--and the main successor to the Soviet
era KGB--claimed yesterday that his agency had caught twenty-nine foreign
agents last year while exposing some 400 foreign intelligence officers.
Nikolai Kovalev, director of the Federal Security Service (FSB), attributed
the success at least in part to a special hotline that the FSB created in
June of 1997. The hotline was part of an unusual program under which the FSB
offered amnesty to Russian citizens spying for foreign powers. They had only
to dial the special number and turn themselves in. (See Monitor, June 5, 1997)

Kovalev also said yesterday that his agency had prevented 130 terrorist
attacks last year and arrested thirty-two drug dealers, including thirteen
from abroad. His remarks followed a closed-door meeting of the FSB
leadership attended by Prime Minister Viktor Chernomyrdin and recently named
Security Council Secretary Andrei Kokoshin, among others. The session was
devoted to an examination of the agency's performance in 1997 and to setting
its goals for the coming year. (AP, Russian agencies, March 4)

Like others in the Russian intelligence community, Kovalev has argued that
the post-Cold War years have brought not the expected decline in foreign
espionage conducted on Russian territory, but a significant increase.
Kovalev has typically pointed to the United States and various other Western
countries, along with the Baltic states, as the primary culprits. Such views
dovetail with Russia's turn to what its practitioners would call a more
hard-headed and pragmatic approach to broader foreign policy issues, and to
Moscow's now long-established determination to defy Washington and seek its
own allies around the world. It was therefore something of a surprise when
one of Kovalev's deputies on February 3 accused two of those new-found
allies--Iran and China--of having stepped up their intelligence activities
in Russia. (AP, March 4) 

Yesterday's FSB meeting comes amid a shakeup of Russia's defense, security
and intelligence establishments. To date, the FSB appears to have benefited
from that shakeup. Reports have indicated recently that the country's border
forces will be subordinated to the FSB, a change seemingly borne out by the
presence at yesterday's meeting of recently named border forces commander
Colonel General Nikolai Bordyuzha. (Russian agencies, March 4)


RFE/RL NEWSLINE Vol 2, No. 44, Part I, 5 March 1998

Russian First Deputy Prime Minister Nemtsov said a further eastward
expansion of NATO to incorporate unspecified former Soviet republics would
be "madness," ITAR-TASS reported. Nemtsov said that such a move would
destabilize the situation in Russia and thus be "bad for the U.S. and
Europe." Also on 4 March, newly appointed Russian Security Council
secretary Andrei Kokoshin told Ekho Moskvy that Russia will have "an
adequate response" if NATO deploys nuclear weapons in East-Central Europe.
Addressing his new responsibilities, Kokoshin said that Russian national
security requires amending existing laws to provide for a "smoother
interaction" of the country's power structures. He also said the choice of
countries to which Russia exports arms should be dictated not by commercial
interests but by national security. LF


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