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Johnson's Russia List
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5 March 1998
[Note from David Johnson:
1. Interfax: Chernomyrdin: Russia Loved And Will Love
2. RIA Novosti: RELATIONSHIPS BETWEEN THE LEFT-WING OPPOSITION AND
POWER ENTER NEW STAGE, SAYS COMMUNIST LEADER GENNADY ZYUGANOV.
3. RIA Novosti: DEVELOPMENT OF FEDERALISM AND PRESERVATION OF CIVIL PEACEARE RUSSIA'S MAIN OBJECTIVES.
4. New York Times editorial: NATO Myopia.
5. Moscow Times editorial: New Budget Won't Avert Cuts, Arrears.
6. The Electronic Telegraph (UK): Alan Philps, West cheers end of Russian
who helped Iran turn nuclear.
7. Vladimir Popov: Devaluation of Russian Rouble.
8. Trud: NATO: POSITIONS AND AMBITIONS.(Interviews witn
Deputy Foreign Minister Nikolai AFANASYEVSKY).
9. New York Times letter: Sarah Mendelson, Soviet Reformers Won.
10. New York Times letter: Danuta Hiz, How to Engage Russia.
11. Moscow Times: Pavel Felgenhauer, DEFENSE DOSSIER:
Phoney Security Promotion.
12. AP: Moscow not supplying weapons to Iran, Israeli
13. PRNewswire: New Magazine Featuring Russian Financial Markets to
14. Stephanie Baker (RFE/RL): Russia: Entrepreneur Taps Into 'Buy
15. RIA Novosti: YABLOKO YOUTH BRANCH ESTABLISHES ANTIHERO PRIZE.
RED CHIEF LAUREATE No. 1.
16. VOA: Lisa Schlein, Ethnic discrimination in Russia.]
Chernomyrdin: Russia Loved And Will Love Privatizers
MOSCOW, March 5 (Interfax) - "Privatizers have been and will be loved in
Russia," Prime Minister *Viktor Chernomyrdin* declared at a Thursday
Cabinet session following a review of the implementation of the 1997
privatization program and tasks for this year.
Cabinet members praised the efforts of the State Property Ministry in
1997, when it collected 180% more from privatization than had been planned.
The ministry brought the budget 18.653 billion new rubles instead of the
planned 6.5 billion. Of that, some 18.077 billion were privatization
receipts and 575.7 million - income from federal property.
Chernomyrdin said that the 1998 budget approved by the Duma Wednesday
sets privatization receipts at 9.4 billion rubles. "That figure can be
multiplied," he said, "and we will multiply it." He said sticking to the
minimum revenue target would be "humiliating for the State Property
"We need more," Chernomyrdin said.
He said this year the ministry should concentrate on improving the
mechanism of managing government property. In 1997 only 25% of the planned
returns from this management were collected.
Chernomyrdin attached equal significance to the training of personnel
working in privatization. "The attitude to personnel should be caring -
this is the most important thing," he said.
He admitted that privatization in Russia "has not been ideal" but said
that "all of us had to learn, nobody was born a privatizer." In the future,
he predicted, "we will be putting up monuments to some of them."
RELATIONSHIPS BETWEEN THE LEFT-WING OPPOSITION AND EXECUTIVE
POWER ENTER NEW STAGE, SAYS COMMUNIST LEADER GENNADY ZYUGANOV
MOSCOW, March 5. /RIA Novosti correspondent Alexandra
Utkina/. Communist party leader Gennady Zyuganov announced today
that the relations between the left-wing opposition and the
executive power have entered a new stage. Speaking to
journalists on the eve of the International Women's Day holiday,
Zyuganov stressed the need "to unite on a wider basis all those
who are aware of the growth in social protest in the country."
On April 9, he went on to say, the opposition "will stage a
wider mass protest on the streets with tougher demands."
He also said that the communists will finalize the
composition of the "shadow cabinet" in spring. Zyuganov, who
proposed the shadow cabinet yesterday, said there were over 30
candidates for government posts.
He also commented on the results of yesterday's meeting
with Oleg Shenin, leader of the Union of Communist Parties -
CPSU, and Viktor Tyulkin, chairman of the Central Committee of
the Russian Communist Workers' Party. Participants in the
meeting, he remarked, confirmed the need for unity in the
communist movement of Russia. They also expressed readiness to
ensure the interaction of the Communist Party of the Russian
Federation and the Russian Communist Workers' Party "in regard
to priority steps towards restoring the power of workers in
Russia." The parties also decided to stage joint protests on
April 9, May 1 and 9.
DEVELOPMENT OF FEDERALISM AND PRESERVATION OF CIVIL PEACE
ARE RUSSIA'S MAIN OBJECTIVES
BONN, MARCH 5 /FROM RIA NOVOSTI CORRESPONDENT ALEXANDER
GULYAKOVSKY/ -- The future not only of Russia but of Europe as a
whole depends on the way which Russia will take in the 21st
century. First Vice-Premier of the Government of Russia Boris
Nemtsov stressed this in the speech which he made before the
members of the Eastern Committee of the German Economy, the
German Foreign-Policy Society and the German-Russian Forum in
the evening on Wednesday. Nemtsov noted that economic
cooperation with Germany is the top priority for Russia. The
trade turnover between the two countries increased by 20 per
cent in 1997 to reach nearly 33 billion DM. This has made
Germany Russia's trading partner Number One ahead of Ukraine.
"Establishment of a stable, social-oriented market is
remaining the absolute priority for the government of Russia,
and the example of Germany is certainly instructive for us,"
Boris Nemtsov stated. "Germany is a country of real federalism.
The federal Lands have immense powers here. The Lands compete
among themselves, evolving different social and economic
concepts of their development. This is what Russia needs", Boris
Furthermore, in Germany, as distinct from Russia, 80 per
cent of the able-bodied population works at the enterprises of
small and medium-size business. This is the foundation of
Germany's stability because small and medium-size business
generates the middle class. In this connection the First
Vice-Premier voiced the view that it is necessary to work for
this in Russia, too.
Boris Nemtsov also emphasized that development of
federalism and preservation of civil peace are Russia's main
objectives. "Each of us wants tranquillity and stable life, and
wants to be proud of his country. It is my absolute conviction
that this will occur in Russia in the 21st century", the First
Vice-Premier pointed out.
New York Times
March 5, 1998
NATO expansion received a strong endorsement this week from the Senate
Foreign Relations Committee, but the most interesting thing about the
Senate's handling of this issue is the ambivalence so many members express.
Rarely has such an important matter seemed headed for approval with so
little enthusiasm or attention. That should indicate that something is
amiss. The United States ought not to take such a fateful step without a
compelling justification and fervent conviction.
Serious doubts about the financial cost of enlargement remain, even
among supporters of expansion. There is considerable concern about the
long-term effect on Russia of advancing NATO eastward. Some senators
understandably resent White House pressure to approve the admission of
Poland, Hungary and the Czech Republic because President Clinton has
committed Washington to the plan and rejection by the Senate now would
undermine America's international leadership.
The clearest sign of ambivalence is a proposal by a Republican, John
Warner of Virginia, and the Democrat Daniel Patrick Moynihan of New York to
freeze expansion for three years after the first round of growth. The
amendment is a well-intentioned but inadequate way of dealing with the fear
that once begun, eastward expansion will be difficult to stop until it
reaches the Russian border, a prospect that worries many senators almost as
much as it does the Russians.
A freeze offers the illusion that NATO expansion can be stopped after
the admission of Poland, Hungary and the Czech Republic, and that their
membership alone will not produce a divisive new line across Europe.
Neither assumption is true. Expansion will create a new East-West divide,
and that in turn will produce great pressure for further expansion as
excluded countries press to join the elite NATO club. Romania and Slovenia
have all but been promised admission already.
To bring the NATO military alliance to Russia's doorstep is clearly to
invite a resumption of chilled relations with Moscow and even a turn away
from democracy in Russia. To stop short of the Russian border somewhere in
central Europe is to create two Europes, one democratic, prosperous and
defended by American might, the other politically adrift, economically
disadvantaged and militarily insecure. It would be far better, as Mr.
Moynihan proposes, to put off NATO expansion altogether and let the
European Union take the lead in unifying Europe through economic
cooperation. Those senators ready to support NATO expansion should
understand the political and financial price. Those who are uncertain
should not vote for expansion in the expectation that it can be contained.
For more articles from The Moscow Times, check out their website at
March 5, 1998
EDITORIAL: New Budget Won't Avert Cuts, Arrears
In theory, it should be great news that after five months of wrangling
the State Duma has finally passed a budget for 1998. The only trouble is
that it isn't really a budget.
A budget should take a realistic view of revenues and then plan spending
accordingly. But the budget the deputies have just passed takes an
unrealistic view of revenues and then authorizes the government to make
cuts if necessary.
This may suit the government fine since it will have carte blanche to
spend as much as it thinks it can afford and it will probably suit the
deputies who have effectively washed their hands of responsibility for the
economic situation. The markets will probably like the budget's low
deficit. But the document will only aggravate the chronic non-payments
crisis in the country.
The likelihood is that spending will have to be cut by about 10 percent
from budget predictions. Although the Duma has obligated the government to
announce cuts as soon as they become necessary, that uncertainty will make
rational planning impossible.
Scores of social programs and government departments that have been
promised funding will suddenly find their budgets have been slashed and
that they lack the money to pay their energy bills, their workers and their
This problem will only be compounded by the amendment adopted Wednesday
requiring the government to make proportional cuts across the board on all
budget items. Rather than deciding which programs should go ahead and which
should be scrapped, the government will have to cut back a little in all
sectors. This may make sense in some areas, but what does the government do
if it only has the funds to build half a bridge?
It is true that Russia faced an especially difficult task framing the
budget this year because of the uncertainty caused by the crisis in Asian
markets. But it would be a great pity if, after months of promising that it
will only accept a realistic budget, it now accepts this half-baked
Some may argue that it is better to have some budget than none at all.
Perhaps. But the government could just continue doing what it has already
do ne in the first two months of this year. With no budget in force, the
government is allowed to go on spending at a monthly rate equal to
one-twelfth of last year's level.
Such a policy would not lead to any more financial uncertainty and it
would allow the government to avoid the accusations of broken promises and
payment arrears to which the current rubbery document will expose it.
The Electronic Telegraph (UK)
5 March 1998
[for personal use only]
West cheers end of Russian who helped Iran turn nuclear
By Alan Philps in Moscow
A QUIET cheer has been raised in western capitals over the departure of
Russia's atomic energy minister, Viktor Mikhailov, a hated figure in
Washington because he engineered the Kremlin's nuclear ties with Iran.
Mr Mikhailov, 63, was the last member of the Russian government who
openly called for nuclear competition with America. A nuclear weapons
expert with a confrontational style, he was proud to call himself a Cold
The Kremlin said that he had resigned his ministerial position after
five years to pursue scientific interests. His spokesman said that he was
tired of trying to keep the vast, cash-starved Russian nuclear industry
But he had long been known as a loose cannon, and his independence may
have grated on the prime minister, Viktor Chernomyrdin. At the time of his
departure he was fighting moves to close one of Russia's two main nuclear
weapons centres. He may also have been the victim of a row over who would
get the proceeds of the sale of Russian weapons-grade uranium to America,
part of a US project to remove bomb-making material from circulation.
Mr Mikhailov is a passionate believer in nuclear power, and he
negotiated contracts to sell atomic plants to Iran, China and India, while
talks were also opened with Syria. He is said to have signed the contract
with Iran without even informing President Yeltsin. Washington bitterly
protested at the £500 million Iran contract, on the grounds that it could
help Teheran become a nuclear weapon state, but the Russians have refused
to give in.
While Mr Mikhailov was in charge of the nuclear industry there were
strong suspicions that Russian scientists and defence plants were secretly
selling technology to countries on Washington's blacklist.
While there is no suggestion that foreign pressure was the main reason
for Mr Mikhailov's departure, it coincides with a Kremlin campaign to
counter western claims that Iran is acquiring Russian nuclear weapons and
rocket secrets. The Federal Security Service said yesterday that it had
thwarted three attempts by Iran to acquire rocket and aviation technology.
The new atomic energy minister was named yesterday as Yevgeny Adamov, a
58-year-old scientist best known for his role in cleaning up the
consequences of the 1986 explosion at the Chernobyl power station.
From: "Vladimir Popov" <popov@WIDER.UNU.EDU>
Date: Thu, 5 Mar 1998
Subject: Devaluation of Russian Rouble
Thank you so much for issuing the "Johnson list", and
please, find enclosed, the comment on Hanke's article (+
comments by Val Samonis and Jonathan Mueller).
My comment on Hanke's article is in fact the
shortened version of my article in in Finansoviye Izvestiya
(30. 1O. 1997) and Voprosy Ekonomyky ( 1997, No. 12) and a
bit modified piece from Financial Times (Dec. 11, 1997).
I am not enthusiastic about the currency board for Russia,
but I think Prof. Hanke has the point in drawing attention
to the weakness of the Russian rouble, which is obviously
overvalued. Since 1995 among economies in transition
Russia has the highest ratio of domestic to international
prices - 70% as compared to 50% on average. Only Slovenian
prices are as high as Russian, but Slovenia is the richest
economy in transition with GDP per capita 3 times higher
than in Russia.
The rouble's overvaluation is an unaffordable luxury for
Russia. It undermines exports and the emerging economic
recovery. Russian prices converted into dollars at the
official exchange rate used to be at a level of 10% in
1992, right after the deregulation of prices, they
increased to 30-40% in 1993-94 and to 70% in 1995-97. This
is clearly an unsustainable position.
Undervaluation of the domestic currency is quite common for
developing countries since they usually need to earn a
trade surplus to finance repayment of external debt and
capital flight. Unlike mature market economies, most
developing countries have to keep the exchange rates of
their currencies low as compared to purchasing power parity
rate (actual rate corrected for the differences between
domestic and international prices) which allows them to
limit imports and consumption and to stimulate exports and
savings needed to keep the balance of payments in
Besides, some developing countries consciously pursue the
policy of low exchange rate through aggressive accumulation
of foreign exchange reserves, which helps them to stimulate
export-led growth. This used to be the strategy of Japan,
Korea, Taiwan and Singapore, when they were still catching
up with developed countries. This is currently the strategy
of many emerging market economies, especially in East Asia.
China continues to keep its exchange rate at an extremely
low level (5 times lower than the PPP rate) by accumulating
foreign exchange reserves (now at record levels). It is not
a coincidence that all fast growing economies also have
high and rapidly growing international reserves. East Asia,
including Japan and China, now accounts for a good third of
total world foreign exchange reserves. The reserves to GDP
ratio for these countries is normally above 20% as compared
to only 8% for the world as a whole.
For countries rich in natural resources (such as Russia),
however, there is a danger of "Dutch disease". This arises
because resource exports are so profitable that they earn a
trade surplus even with an overvalued exchange rate. Thus,
Middle East countries (mostly oil exporters) are the only
major group of states in the developing world with the
exchange rate close to PPP, whereas for developing
countries as a group the exchange rate is only about half
of the PPP.
The threat of a "Dutch disease" is real for Russia after
the exchange rate of the rouble approached some 70% of the
PPP in late 1995 and remains at this unreasonably high
level since then. The previously high export growth rates
slowed down substantially (from 20% in 1995 to 8% in 1996
and 0% in 1997). Needless to say, it was Russia's already
weak export of manufactured goods that was most affected by
the appreciation of the real exchange rate.
The conventional shock-therapy approach to macroeconomic
stabilisation recommends to use the pegged exchange rate as
a nominal anchor while pursuing an anti- inflationary
policy. This is the most common objection to low exchange
rate policy in transition economies, like Russia, that
survived through periods of high inflation. There is
certainly a reason in such an argument: strong rouble by
increasing import competition helps to hold down inflation
- in fact this was the case in Russia in the second half of
1995. However, the desirability of the continuation of the
strong rouble policy is highly questionable because it puts
pressure on the export sector, which so far has been the
main locomotive of economic recovery in all transition
With an appropriate monetary policy (at least partial
sterilisation of increases in the money supply caused by
foreign exchange reserves build up) the inflationary
pressure may be dealt with, as proven by the example of
many emerging market economies. Money-based stabilisation
was successful in quite a number of countries (Albania,
Slovenia, Croatia, FYR Macedonia) and there is no evidence
that it is an inferior strategy to pegging the exchange
rate for fighting inflation. Exchange rate is far too
important to use it only for fighting inflation. Even more
so, that Russia has already achieved macroeconomic
stability and looks forward to economic growth.
In fact, under the circumstances the current exchange rate
corridor (-15% - +15% from 6.2 roubles per $1 in 1998-2000)
may become unsustainable and there is a real danger of
Asian type currency crisis. True, Russia's current account
surplus is still large (2% of GDP in 1996), though
shrinking; external indebtedness is below levels considered
to be critical -200% of export earnings and 40% of GDP; and
debt service ratio (as a % of exports of goods and
services) was less than 10% in 1996.
However, there is a new vulnerability of the rouble with
respect to short term capital flows and a clear potential
for the Asian-type currency crisis. Foreign investment into
rouble denominated government treasury bills and into
Russian stocks definitely exceed modest foreign reserves of
the central bank (less than $20 billion). If many billions
of dollars are to leave the country in a matter of days
(for instance, as a result of the "forth wave" of the Asian
crisis), reserves would be hardly sufficient to withstand
the attack on the rouble. After all, Indonesia, Korea,
Malaysia, Philippines, Thailand had to devalue their
currencies recently despite quite sound macroeconomic
fundamentals and foreign exchange reserves of the magnitude
of $10-30 billion.
To be more precise, the Russian currency crisis may
resemble more the one in Mexico in 1994-95, which in a
sense was even more primitive than the recent Asian crisis.
While in Asia the crisis was caused by the overextension of
domestic credit, in Mexico since mid 1994 the value of
dollar denominated Tesobonos exceeded the amount of
reserves, which finally undermined the peso.
Senior Research Fellow
Fax: 358-9-615 99 333
Tel.: 358-9-615 99 11
358-9-615 99 213 (direct)
>From RIA Novosti
March 4, 1998
NATO: POSITIONS AND AMBITIONS
Nikita SHEVTSOV interviews Deputy Foreign Minister Nikolai AFANASYEVSKY
Question: Will you describe Russia-NATO relations today?
Answer: Their importance is evident. NATO is a major
structure on the European military-political scene and exerts
tangible influence on the situation in Europe. The development
of the situation in Europe largely depends, and will continue
to depend on Russia-NATO relations.
Our relations with the bloc are developing consistently,
largely thanks to the Russia-NATO Founding Act. If not for that
document, these relations would have developed in an atmosphere
of nervous tensions, which would have negatively affected the
situation in Europe. We should use possibilities sealed in the
Founding Act to make our relations with NATO stable and
However, there is a number of difficulties which hinder
progress in our relations. I mean the NATO ambition to be not
just a major, but the main and only factor of European
security. This is the claim to domination and to enforcing NATO
interests on Europe. This can be seen in the NATO plans for
eastward enlargement and its desire to be the focal point of
the entire structure of European security.
This attitude is not acceptable to Russia and many other
European states, which proceed from the belief that NATO is
still above all a military-political structure, a defensive
alliance of a group of states which protects the interests of
above all its members.
It will be another matter if NATO is transformed, as is
provided for in the Founding Act and follows from the
statements of NATO leaders, into an instrument of strengthening
stability throughout Europe, if it takes into account equally
the interests of all European states. But this process is
proceeding very slowly, and with great difficulties. The NATO
leadership is not ready yet to change the functions of this
organisation as a military and defensive alliance. So, time
will show how NATO will change and how our relations with it
Question: What about Russia's cooperation with the
Answer: The European Union is changing from an
economically powerful association into an independent political
pole. Unlike NATO, with its claims to monopoly and domination
in European political affairs, the EU appears to be more
realistic and constructive in political matters. This is
creating the foundation for our political cooperation with it.
A new stage in our relations began after the Agreement on
Partnership and Cooperation of Russia and the EU had come into
We have determined the common goal, which is
Economic cooperation with the EU, which is our largest
trade partner (accounting for over 40% of Russia's foreign
trade) is vital for us. The EU uses the legislation, the rules
and norms of trade and production which all European states
look up to. It is a powerful integration magnet which attracts
all European countries. We know that a number of countries
filed official requests for joining the EU, and Russia should
take this into consideration. We cannot neglect EU enlargement.
Unlike NATO enlargement, it is a process which proceeds in
accordance with the European economic realities. We have no
questions in this sphere.
At the same time, the EU is an energetic and strong
partner, who behaves in export dealings rather actively,
sometimes even aggressively, to defend the economic interests
of its members. In some spheres it behaves very harshly,
applying protectionist measures to defend its market from
rivals. And Russia feels this when exporting some of its
sensitive commodities, such as textiles, chemicals,
metallurgical items, nuclear fuel, and the like.
It should be stressed that the essence of the Agreement on
Partnership and Cooperation, which has come into effect, is to
create agencies and mechanisms for a prompt discussion and
solution of outstanding problems. The main thing is the mutual
pledge to find mutually acceptable solutions. Much in this
respect will depend on the activity and coordinated actions of
our government departments and associations of businessmen and
exporters involved in relations with the EU.
We will have to work very hard to neutralise all negative
economic consequences of the admission of East and Central
European countries - our traditional major trade partners - to
the EU. We have launched the discussion of these problems with
many of them. They understand the need to carefully analyse the
advantages and drawbacks which will be created for us and for
candidates by EU enlargement. We will have to establish a
careful balance and coordinate the actions of many of our
departments, something which the Russian government is working
Question: How should European security be built?
Answer: Our press carried several articles which say that
Russia's rapprochement with NATO and the EU is quite enough for
the creation of a new zone of security and stability in Europe,
and that the ideas of a system of all-European security should
be abandoned because this will not give Russia anything. But no
matter how important our relations with the EU and NATO may be,
one cannot say that this is the complete model of security for
the Russian state.
While maintaining very close relations of partnership and
cooperation with NATO and the EU, we will still be outside
these organisations in the foreseeable future. With these
contacts alone, Russia will not acquire the right of final say
in the processes which bear on the security of the continent. I
am convinced that the best way of preventing conflicts and
ensuring stability in Europe is to create a comprehensive
regional organisation based on a Treaty of European Security.
And Europe will eventually come to accept this truth.
Otherwise there will still be the danger of a split,
coalitions, and division lines, and hence the possibility of
conflicts. Regrettably, the bulk of our partners in Europe do
not share this opinion so far. Such ideas, in different forms,
are discussed within the framework of the OSCE, and there has
been certain progress, although not as great as we would like
it to be. Consequently, discussion is proceeding in stages,
with due consideration for dominant moods.
A few years ago our idea of creating a new model of 21st-
century European security caused much scepticism. But the 1996
Lisbon summit sealed the nascent understanding of this idea. It
was decided to discuss the political contents of the suggested
model. Two months ago, the conference of European foreign
ministers in Copenhagen approved a document on the parameters
of the Charter of European Security. This is not a treaty yet,
but it sealed the fact that it will be a politically binding
A new stage of struggle is developing around the draft
charter. Several countries are hindering the work on this
document, and there are major differences on issues of
fundamental importance. We believe that the main task is to
create an architecture of security in Europe without division
lines and zones with different levels of security.
Some countries are advocating pro-NATO views, believing
that the territories of the NATO members constitute a zone of
special security, while the rest of Europe can have weaker
security. Attempts are also made to seal in this document the
possibility of interference in the affairs of sovereign states.
In a word, we will have to work very hard in order to fill the
draft charter with practical content meeting the interests of
all European states.
New York Times
5 March 1998
Soviet Reformers Won
To the Editor:
Milt Bearden (Op-Ed, March 2) argues that United States covert action in
Afghanistan "forced the withdrawal of the Soviet army." Yet there is little
evidence to support this claim as the primary explanation.
The Soviets withdrew from Afghanistan primarily for reasons of internal
domestic reform. United States covert action made it more difficult, not
easier, for Mikhail S. Gorbachev and other reformers to get support for
withdrawal. It is not surprising that Mr. Bearden would inflate the role of
the C.I.A., with which he was long associated, but the withdrawal had more
to do with Mr. Gorbachev's and other reformers' victories inside the
Politburo than with United States poli-cy.
SARAH E. MENDELSON
Washington, March 3, 1998
The writer is resident associate at the Carnegie Endowment for
New York Times
March 5, 1998
How to Engage Russia
To the Editor:
The same arguments you use in your March 1 editorial against enlarging
the North Atlantic Treaty Organization could equally serve to advocate its
To insure that Russia "completes its transition to democracy and a
market economy" and to push forward the "vital treaty to reduce nuclear
arms . . . stalled in parliament," you wish NATO to abstain from irritating
Russian "nationalistic forces intent on diminishing democracy and chilling
relations with the West."
So you acknowledge the existence of such forces, which brought cruel
sufferings on Eastern Europeans, yet you are willing to bargain away the
security of these countries. They belong to Western culture and have proved
their adherence to Western values.
Rather than putting them at risk, we should engage more of our resources
to help Russia lift its own economy, build its managing apparatus and
dismantle its nuclear arsenal.
Tucson, Ariz., March 2, 1998
March 5, 1998
DEFENSE DOSSIER: Phoney Security Promotion
By Pavel Felgenhauer
Pavel Felgenhauer is defense and national security affairs editor for
President Boris Yeltsin has again reshuffled Russia's security
establishment by abolishing the Defense Council and the State Military
Inspectorate. Former First Deputy Defense Minister Andrei Kokoshin, who
became Defense Council secretary and chief military inspector last August,
is now the new Security Council secretary. Kokoshin has become head of the
seemingly all-powerful security body that made retired general Alexander
Lebed a security tsar for several months in 1996.
Yury Skokov, the first Security Council secretary, tried in 1992 to turn
the council into a new Politburo-type organization after the Soviet Union
and its ruling Communist Party Politburo collapsed. The Security Council
should ave become a council of elders, where the most powerful men in the
land could formulate important decisions that would determine the future of
the country. Skokov even turned down an offer by Yeltsin in 1991 to become
prime minister and opted to become Security Council secretary.
The scheme did not work. Yeltsin did not want any Politburo overseeing
his imperial-style presidency. Skokov was fired, but the Security Council
remained and even became embedded in the Russian Constitution. Thus,
Yeltsin can no longer abolish it.
But constitutional status still did not define the actual power the
Security Council and its secretaries can wield. Unlike the Defense Ministry
or Foreign Ministry, the Security Council can become anything its secretary
wishes, if Russia's omnipotent president allows.
Under Skokov it was a surrogate Politburo. Under Oleg Lobov, it was an
ill-defined bureaucratic entity that attempted to coordinate everything --
from foreign policy to ecology and medicine. Lobov and his deputy Vladimir
Rubanov believed that because anything could conceivably pose a security
risk, the Security Council should oversee everything.
Lebed succeeded Lobov, fired Rubanov and tried to turn the Security
Council into a power base that would help him take over Russia after
Yeltsin became too ill to govern. Ivan Rybkin came in after Lebed, and
under orders from Yeltsin the Security Council became a department in
charge of relations with the rebellious Chechen republic.
Under Kokoshin, the Security Council will now drastically change its
image once again. It will coordinate military reform, define defense and
security policies and so on.
But this is exactly the same task Kokoshin was given as chief state
military inspector and secretary of the now disbanded Defense Council. Last
fall Kokoshin took part in Kremlin defense policy intrigues, helped other
power ministries resist attempts by the Defense Ministry to dictate
military reform. The result was an organizational stalemate, and today
Russia's defense policies are as badly coordinated as they ever were.
Of course, Russian governmental policies are badly coordinated in many
fields. To resolve these problems, Yeltsin has created over the years many
presidential coordinating councils (more than 40), but virtually all of
them have proved to be totally ineffective.
To effectively coordinate governmental policy, especially in the field
of defense and security, any high-ranking coordinating body should have
real power and authority to make ministries and departments obey its rulings.
But Yeltsin never delegates any of his presidential powers to anyone.
Yeltsin does not need any security tsars in Russia. He is the only tsar in
town. Even after his heart operation in 1996, Yeltsin immediately grasped
the nuclear "briefcase" that he took away from former Soviet President
It is not that Yeltsin feared a U.S. nuclear attack. As in ancient Rome,
in contemporary Russia, a tsar is a tsar only while he fully controls the
armed and security forces.
Physically and intellectually, Yeltsin cannot fully control Russia's
sprawling defense and security agencies or coordinate military reform. But
he will never allow anyone else to do the job.
So Kokoshin's new, seemingly omnipotent position is a joke, not a real
promotion. Kokoshin will have a personal plane, bodyguards and other
paraphernalia, but he will have even less real power than his predecessors,
who were all political figures. Kokoshin, on the contrary, is an academic
turned high-ranking civil servant. Yeltsin used Skokov, used Lobov, used
Lebed, used Ribkin and then sent them packing. He will have no problems
Moscow not supplying weapons to Iran, Israeli minister says
MOSCOW - An Israeli government minister said yesterday that he had no
reason to believe Moscow was supplying Iran with missile technology, but
that Israel remained concerned that military know-how could still be
seeping out of Russia.
Natan Sharansky, a former Soviet dissident who is now Israel's trade and
industry minister, traveled to Russia this week to seek firm guarantees
that Russia's dual-purpose technology - that which has both commercial and
defense uses - does not find its way to Iran.
''There is absolutely no evidence and I have no basis to believe that
the Russian government consciously favors helping Iran to acquire weapons,
rockets,'' Sharansky said at the end of his two-day consultations with
Russian government officials, including Prime Minister Viktor Chernomyrdin
and Foreign Minister Yevgeny Primakov.
Sharansky said he was pleased that Russia had taken legislative steps to
end leaks of dangerous military know-how.
''But clearly decrees are very important only if they quickly begin to
have an impact in practice,'' he said, noting that Russian technologies and
Russian scientists' knowledge had been used in Iran.
Russia maintains close contacts with Iran, while the United States and
Israel regard it as a rogue state that supports terrorism.
New Magazine Featuring Russian Financial Markets to be Introduced
NEW YORK, March 4 /PRNewswire/ -- Investing in Russia, a new financial
publication focusing on investment in Russia, NIS Republics and Russian
financial markets, is proud to announce its upcoming inaugural issue. The
magazine will be published in English and distributed in the United States,
Canada and Western Europe six times per year beginning in April 1998. The
magazine will target portfolio managers, analysts, investment bankers,
corporate personnel, academics and the general investment community.
The Journal will discuss investment opportunities in Russia and other
republics of the NIS, as those economies expand and their financial markets
become increasingly liquid. Sample topics include:
-- Market analysis and forecasts by leading investment specialists
-- Macroeconomic issues in Russia
-- Russian political and legal environment as it relates to Russian
-- Rotating coverage of investment opportunities in various Russian
A team of professionals that has broad experience in analyzing Russian
financial markets will publish the journal. For the past five years, this
team has been involved in publishing Securities Market Journal (Rynok Tzennykh
Boomag), a well-known Russian financial publication. Investing in Russia will
launch its subscriptions on Wednesday, March 4th at the "Investing in Russia
and the CIS" conference in New York City. Subscriptions will be available on
a half-year, year and two-year basis.
SOURCE Investing in Russia
CONTACT: Izabella Apatova for Investing in Russia, 212-701-8564
Russia: Entrepreneur Taps Into 'Buy Russian' Mood
By Stephanie Baker
Moscow, 2 March 1998 (RFE/RL) -- Over the past two years, Russian
supermarkets have undergone a subtle transformation. Foreign consumer
goods, that flooded into the country after the collapse of Communism, are
still available, but Russian products bearing the smiling face of
entrepreneur Vladimir Dovgan have slowly elbowed their way onto the shelves
of shops and kiosks. Vodka, ketchup, tea, chocolate, toothpaste - you name
it, Dovgan has it.
Dovgan, a 33-year-old businessman from the city of Togliatti, started
his company a little over two years ago with a simple idea that tapped into
Russians preference to "buy Russian." Dovgan saw how Russians were eager to
buy the new and colorful Western consumer goods that suddenly appeared on
the market, but they were frustrated that the packaging was all in a
foreign language. At the same time, he realized that there were many
Russian companies producing quality goods, but that they lacked the
marketing expertise and distribution contacts to compete with foreign
Dovgan saw a niche to start his own distinctly "Russian" brand name to
market a variety of products, along the lines of the British drugstore
Boots, or, the multi-national powerhouse Nestle. He began targeting Russian
enterprises that produced high-quality goods, like vodka and champagne, and
offered to market and distribute their products for a two percent fee.
The key was the packaging - Dovgan attached his face to every product.
Dressed in a tuxedo, Dovgan beams out from jars of mayonnaise and bottles
of cooking oil, looking like a 19th century Russian entrepreneur who has
been selling his products for more than 100 years. The message: I've been
around, trust me.
The strategy was an instant success. In two years, he has built up a
company with more than 400 million in revenue annually, selling about 250
different products. The goal this year is to expand the selection of
products on offer fourfold and launch a distinctly non-Russian item - wine.
Many of the major multi-national companies operating in Russia have
dismissed Dovgan as a fad soon to die out, but some are realizing that the
"buy Russian" trend is here to stay, with the help of some high-level
backing. President Boris Yeltsin in a radio address last April called on
Russians to buy domestic products to help spark an economic recovery. "Do
you want fewer unemployed?" he asked. "Do you want to help Russian
enterprises? Do you want us to stand on our own feet and work at full
strength? Then I say to you, buy our goods, our Russian goods and you won't
Many Russians have linked the country's economic troubles to the flood
of foreign imports, which has added fuel to the "buy Russian" campaign.
First Deputy Prime Minister Boris Nemtsov last month inaugurated the "Buy
Russia" association, which is designed to support domestic producers and
fund a multi-million dollar advertising program.
Some of the more successful Russian food and beverage companies have
backed the project, including the popular St Petersburg brewery Baltika and
the Red October Chocolate Factory. It has even enlisted the support of the
controversial producer of Smirnov vodka, the Russian company that has
battled with the U.S.-based company Smirnoff for the right to the famous
name in Russia. Smirnov has made remarkable inroads into the Russian vodka
market by emphasizing its Russian roots, and trying to portray Smirnoff as
a foreign imitator.
In a bid to tap the nationalistic feelings of Russians, foreign
producers are trying increasingly to disguise their products as "Russian,"
developing special packaging and even product lines.
The U.S. consumer goods giant Proctor & Gamble, for example, has revived
a Soviet-era detergent called Mif, hoping that a little nostalgia and smart
advertising will prompt Russians to buy.
Major international tobacco firms have used this strategy most
successfully. British-American Tobacco has taken over the old Russian
cigarette, Yava, and created an up-market brand called Golden Yava.
Billboards around Moscow show a package of Golden Yava cigarettes flying
over New York City accompanied by the slogan "counter strike." RJ Reynolds
has created a special cigarette brand, Peter I, designed to appeal to the
patriotic sentiments of Russians. It appears to be working - Peter I is the
company's most successful brand launch since Camel.
It is not just major multi-national companies that are trying to tap
into consumers' desire to "buy Russian." The New Zealand butter industry
has heeded the 'buy Russian' call, packaging and marketing its butter to
make it appear Russian and to remove any trace of its foreign roots.
Even some of Dovgan's goods are imported from abroad, but presented like
domestic products. As more foreign companies set up production facilities
in Russia and tailor marketing to local tastes, the line between what is
Russian and what is not will blur. But for now, Dovgan is likely to
continue to prosper.
YABLOKO YOUTH BRANCH ESTABLISHES ANTIHERO PRIZE. RED CHIEF LAUREATE No. 1
MOSCOW, MARCH 4 (from RIA Novosti's Alexandra Utkina) - The
youth branch of the YABLOKO reform movement establishes a prize,
Antihero of Our Time, to be awarded to the most notorious
Russian politicians and community activists. Communist leader
Gennadi Zyuganov will receive it the first, branch president
Andrei Sharomov said to Novosti.
Young YABLOKO activists picket the State Duma tomorrow noon
to demonstrate a poster, "Chernomyrdin Thanks Zyuganov and
Zhirinovsky for Passing the Federal Budget". The pickets will be
holding balloons inscribed "Research", "Health Care", "Defence",
"Culture" and "Pensions" to let them loose at the end of their
protest action, which will mean that they expect these federal
allocations never to be paid.
Voice of America
TITLE=RUSSIA DISCRIMINATION (L-ONLY)
INTRO: UNITED NATIONS HUMAN RIGHTS EXPERTS SAY RUSSIA HAS TAKEN
SOME POSITIVE STEPS IN PREVENTING DISCRIMINATION AGAINST ITS
ETHNIC MINORITIES. LISA SCHLEIN REPORTS FROM GENEVA THE "U-N
COMMITTEE ON THE ELIMINATION OF RACIAL DISCRIMINATION" HAS JUST
REVIEWED A A REPORT SUBMITTED BY THE RUSSIAN GOVERNMENT ON
MEASURES IT'S TAKING TO PROTECT THE HUMAN RIGHTS OF MINORITIES.
TEXT: RUSSIA SENT A HIGH-LEVEL DELEGATION TO GENEVA TO PRESENT
ITS CASE AND APPARENTLY CONVINCED SOME OF THE INDEPENDENT EXPERTS
THAT IT WAS SERIOUS ABOUT ELIMINATING RACIAL DISCRIMINATION.
ONE INDEPENDENT EXPERT FROM BULGARIA, IVAN GARVALOV, SAYS THE
QUALITY OF THE LATEST RUSSIAN REPORT WAS MARKEDLY DIFFERENT FROM
ONE PRESENTED TWO YEARS AGO. HE SAYS THEN, THE COMMITTEE
CRITICIZED RUSSIA FOR FAILING TO EVEN MENTION THAT PROBLEMS
EXISTED IN THE BREAKAWAY REPUBLIC OF CHECHNYA. THIS TIME HOWEVER,
MR. GARVALOV SAYS, RUSSIA FACED THIS PROBLEM SQUARELY. BUT HE
ADDS THE COMMITTEE DISAGREED WITH RUSSIA ON PLACING BLAME FOR THE
ONGOING VIOLATIONS OF BASIC RIGHTS IN CHECHNYA.
SOME OF MY COLLEAGUES AND I ... DID MENTION THAT THE
REPORT OF THE RUSSIAN FEDERATION CREATES THE WRONG
IMPRESSION THAT THERE ARE ONLY GOOD GUYS AND THERE ARE
ONLY BAD GUYS. AND APPARENTLY THE BAD GUYS ARE ONLY THE
BUT RUSSIAN DEPUTY PRIME MINISTER, RAMAZAN ABDULATIPOV,
CATEGORICALLY REJECTS THIS CHARACTERIZATION OF RUSSIA'S POLICY.
SPEAKING THROUGH AN INTERPRETER, HE SAYS THE GOVERNMENT DOES NOT
DISCRIMINATE AGAINST ANY SPECIFIC NATIONALITY.
///ABDULATIPOV ACT -- INTERPRETER///
WE DID INHERIT A SITUATION WHERE TODAY THE
REPRESENTATIVES OF ALL NATIONALITIES HAVE SUFFERED,
INCLUDING RUSSIANS. AND MAYBE EVEN FIRST AND FOREMOST,
IT'S THE RUSSIANS WHO HAVE SUFFERED AS A RESULT OF THE
COLLAPSE OF THE SOVIET UNION AND THEIR FORCED
RESETTLEMENT OUT OF THE TERRITORIES OF THE FORMER
REPUBLICS OF THE SOVIET UNION.
THE RUSSIAN FEDERATION IS COMPRISED OF 176 NATIONALITIES AND
ETHNIC GROUPS. MR. ABDULATIPOV SAYS IT'S NECESSARY TO ELIMINATE
RACIAL DISCRIMINATION TO ENSURE THE SURVIVAL OF THESE MANY
DIFFERENT TRADITIONS AND CULTURES. HE SAYS RUSSIA IS IN THE
PROCESS OF ENACTING LAWS TO PROTECT MINORITY RIGHTS.
THE U-N COMMITTEE RECOMMENDS THAT STEPS BE TAKEN TO BAR ANY
OFFICIALLY CONDONED -- AS WELL AS PRIVATELY COMMITTED -- ACTS OF
DISCRIMINATION IN RUSSIA.