Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


March 17, 1998  
This Date's Issues:    2112  •   

Johnson's Russia List
17 March 1998

[Note from David Johnson:
1. Journal of Commerce: John Helmer, Russia's new cronyism.
2. Reuters: Russian doctors set aside pride to learn in U.S.
3. Reuters: Tobacco giants announce new Russian investments.
4. Paul Goble (RFE/RL): Demography Influences Economic, Political 
Destiny In Russia.

5. AP: Suicide Becoming Disease in Russia.
6. Moscow Times: Yulia Latynina, INSIDE RUSSIA: Uranium Next Field 
of Battle For Oligarchy.

7. WP: Thomas Lippman, Gore Carves Unique Post With U.S.-Russia 

8. Reuters: Russian, foreign investors smell change in air.
9. Kathy Lally: eXile.
10. Jamestown Foundation Monitor: ANOTHER RUSSIAN GOVERNMENT 


Journal of Commerce
March 17, 1998
[for personal use only]
Guest Opinion
Russia's new cronyism

MOSCOW -- Never stand between a dog and a tree. That's a piece of advice 
Russia's First Deputy Prime Minister Anatoly Chubais must have had in 
mind the other day when he was berating his critics for something he 
called "crony capitalism." It's obvious he thinks Russia's the tree, and 
his banker enemies the dog.
When it comes to the transactions Mr. Chubais arranged with George 
Soros, the American financier, last year, it's just as obvious that 
Russia was the tree. But what exactly was Mr. Soros, who recently 
acknowledged lending "several hundred million dollars" to the government 
in June 1997, and possibly other sums of money in the months before? And 
where exactly was the International Monetary Fund standing while Mr. 
Soros was doing his bit to add to the pool of liquidity?
The possibility that Mr. Chubais and the IMF endorse one type of 
favoritism in financial policy, but not another, approving "crony 
monetarism" while disapproving "crony capitalism," is a distinction that 
is difficult to appreciate, especially if you are standing between the 
dog and the tree. Here's why.
According to Vladimir Potanin, the Uneximbank chairman whom Mr. Chubais 
appointed deputy prime minister in charge of the economy between August 
1996 and March 1997, Mr. Soros has been lending to the Russian 
government for quite a while. No details were mentioned by Mr. Potanin 
in a public statement reported by Reuters on July 31, 1997, except that 
Mr. Soros' money helped finance the Russian budget deficit when cash was 
short between issues of Eurobonds that started in November 1996.
Mr. Soros himself admitted one of these loans, according to a wire 
service report of remarks he made in Moscow a few days ago.
The former chairman of the Russian Parliament's Budget Committee, which 
drafts the legal authorizations for treasury borrowings like these, is 
now Finance Minister Mikhail Zadornov, and he is saying he doesn't know 
anything about the Soros money, and is investigating to see what was 
loaned, when, and on whose say-so.
Mr. Zadornov has already made clear, though, that he doesn't like, and 
won't authorize Mr. Chubais' unusual borrowing technique. That was 
demonstrated in December when Mr. Chubais invited several Western 
bankers to his office to ask for an emergency one- or two-month 
"bridging loan."
One of Mr. Zadornov's reasons for blocking the move then is that he 
didn't like the security Mr. Chubais tried to offer, linking the $1.5 
billion loan to the sell-off of state shares in the valuable Rosneft oil 
company. Is it possible that Mr. Soros asked for similar security for 
his earlier loans, tying them to the privatization of the state 
telephone company, Svyazinvest, and possibly other state assets as well?
The IMF's Moscow representative, Martin Gilman, ought to know what was 
happening. It's his job to monitor very carefully each week the Russian 
government's foreign obligations, before reporting to Washington a 
figure the IMF calls Russia's net international reserves. These consist 
of gold plus hard currency, minus foreign loan obligations to the IMF 
and other lenders.
According to the secret agreement Mr. Gilman worked out last year with 
the Russian government, the IMF insists that a target net reserve level 
is kept every month. If it slips -- because the government has borrowed 
more, or sold off too much gold and hard currency -- Mr. Gilman is 
supposed to press a button on the hot line to Managing Director Michel 
Last month in Moscow, Mr. Camdessus claimed he wants to introduce 
transparency in the way Russia manages its finances, and he offered his 
own version of transparency by promising to publish one of the documents 
he and the Russian government have agreed to sign.
That hasn't happened yet, and when it does, it isn't likely to reveal 
the net reserve target or other figures Mr. Camdessus and Mr. Gilman 
prefer to keep secret. Making them public would alert ordinary folk like 
you and me, not to mention the Russian Parliament, to unusual 
transactions with public money, faith and credit.
When I read out a list of questions about what Mr. Gilman knew last year 
about the Soros lending, and invited him to clarify whether he was in 
the dark, Mr. Gilman refused to say. Others who knew about the Soros 
lending say IMF officials may not have known, or if they did, they 
didn't care. When Mr. Gilman was asked to be open for once, so he 
wouldn't leave the impression he was covering up a crony transaction, he 
chose to remain silent.
It's understandable that the IMF doesn't want to get its hands dirty in 
this business. If Mr. Chubais ran to Mr.Soros for money when Mr. 
Camdessus refused to lend by freezing another loan installment, then the 
IMF is bound to know, and to be jealous, possibly even angry. And when 
dogs like that start to show their teeth, it's not safe to stand between 
them, even if you are a tree. 
John Helmer writes for The Journal of Commerce from Moscow. 


FEATURE-Russian doctors set aside pride to learn in U.S.
By Daniel Bases 

NEW YORK, March 17 (Reuters) - To Westerners who have seen Russia's medical
system first hand, it is clear it operates along third world standards. 
Admitting that the system is a shambles, one group of Russian medical
practitioners has come to New York, a medical mecca, looking for solutions.
``We have no illusions. There is room for improvement,'' Dr. Alexey Tretiakov,
chief executive officer of the Health Center of Noyabrsk, said. 
Dr. Elizabeth Pinkhasov, assistant professor of neurosciences at the
University of Medicine and Dentistry of New Jersey, organized the tour for the
13 Russian doctors and two nurses. She was stunned by the openness of the
doctors and their willingness to admit to the severe problems they have. 
``I have been helping show Russian medical professionals America for the past
10 years and this group, with such a zeal to learn, put aside their Russian
pride, which for 70 years told them they were the best. This is unusual,'' she
The visit was not intended for learning new medical procedures, Pinkhasov
said. The group came to learn about American health care administration. 
Russia's nascent insurance industry, combined with a severe shortage of
date equipment and supplies, forces most patients to buy their own needed
drugs and sterile supplies before they even walk into a hospital for care.
While some private hospitals that cater to the rich have achieved Western
standards, they are a minuscule minority. 


The visitors came from Noyabrsk in remote western Siberia, situated atop one
of the world's largest oil fields. It has a medical center that is better than
most in Russia, but because of a lack of exposure to new ideas and little or
no funding, municipalities across the country have been slow to make changes
to hospital organization and medical delivery. 
One change needed soon, the Noyabrsk doctors said, is the establishment of an
AIDS public awareness campaign. Two years ago, Noyabrsk had one case of HIV.
Now there are 22 cases, and the doctors say they expect that number to grow in
their remote and largely heterosexual population of 110,000, of which nearly
half are under the age of 25. 
Bankrolled by a progressive city government, the group realized that a
tour of
New York metropolitan area hospitals was ``very rare, perhaps five percent of
all hospitals in Russia are doing what we are doing,'' Tretiakov said. 
Over the course of five days in late February, they visited Pinkhasov's
hospital, which is a major AIDS treatment center, as well as Lenox Hill
Hospital, Western Queens Community Hospital and the Hospital for Special
Questioning their hosts on a broad range of topics, the group gathered up new
ideas as well as a dose of reality. The Siberians admitted they would not be
able to replicate an American-style medical system immediately but said there
were many changes that can be made with what is available. 
They were most concerned that, almost without fail, patients were suffering
from post-operative infection. They explained that they cleaned their hands
before surgery using only ordinary bars of soap, and supply shortages forced
them to share hand-scrubbing sponges, spreading germs. 


While the sharing of germs was unwanted, the sharing of patient data was
uppermost in one doctor's mind. ``First thing we can do when we return is
increase the efficiency of passing simple patient information from department
to department,'' said Irina Yakovleva, head of obstetrics and gynecology. 
``We still have a pregnant woman carry her own hospital chart into the
operating rooms to deliver to the doctors before delivering the child,''
Yakovleva added. 
In Noyabrsk, medical charts are still handwritten because they do not have a
central computer to file medical histories. 
``So much of what we face now is tradition, medical superstition and health
ministry rules,'' said Tretiakov, who runs an 855-bed facility on an $18
million budget. 
``Even if I wanted to start up a new medical service, there is no money to do
it,'' said a frustrated but hopeful Dr. Sergey Gutov, chief of the trauma
unit. ``For now we can begin centralized laboratory tests,'' he said. 
The Noyabrsk doctors fired off questions, both medical and administrative.
``How much does a nurse make compared to a doctor?'' asked Ludmila Rede,
Noyabrsk's head nurse. 
``About a quarter of what the doctors are paid,'' answered Jackie Kostic,
president of nursing at the Hospital for Special Surgery. 
Russian nurses on average earn between $70 and $80 a month, the group said.
Doctors in Noyabrsk get well above the national average, taking home a
potential $2,000 a month if they work double shifts and get extra pay for
working in a remote area. 
They were astonished to learn that U.S. cardiac patients are discharged five
days after surgery and that people with hip replacements are walking just
hours after surgery. In Russia, insurance policies require a 24-day stay for
cardiac patients, and joint replacement is a rarity, the doctors said. 
Rede laughed when asked what will be changed at home. ``What's not to
change?'' she asked. She said she plans to end the common practice among
Russian nurses of cleaning operating rooms and bedpans themselves,
transferring those duties to assistants and orderlies instead. 
In 1995, after helping facilitate exchanges for 7 years, Pinkhasov founded a
not-for-profit organization called the International Medical and Scientific
Exchange Inc. Exposure to America's medical system has been an evolving trend.
``They told me they spend so much time just trying to keep a patient alive
that they can't focus enough energy on trying to keep them out of trouble to
begin with,'' Pinkhasov said. 
One older Russian doctor summed up the trip in a toast: ``We came from a land
where people's minds and hearts are frozen, but after a week with you we feel
a thaw.'' 


Tobacco giants announce new Russian investments
By Adam Tanner 

MOSCOW, March 16 (Reuters) - Three leading Western tobacco companies on Monday
separately announced plans to expand their Russian operations in moves that
will add nearly half a billion dollars to the country's economy. 
In the largest deal, Philip Morris Management Services B.V., part of Philip
Morris Cos Inc of the United States,
announced it would build a $250 to $300 million cigarette factory in the
Leningrad (correct) region outside St Petersburg in northwestern Russia. 
R.J. Reynolds International, part of RJR Nabisco Holdings Corp, 
said it would invest $120 million over the
next two years on local cigarette production. B.A.T Industries Plc 
said it would invest another $60 million. 
Russia is the world's fourth largest tobacco market,and about two-thirds of
its men and a third of its women smoke, according to World Health Organisation
Foreign cigarettes account for about 40 percent of a market where 220 billion
cigarettes were smoked last year. 
"We believe in the vast economic potential of the Russian tobacco market and
are committed to long-term fruitful work in Russia," said B.A.T's managing
director Ulrich Herter. 
Philip Morris will start building a factory in late May with a planned output
of 25 billion cigarettes a year, spokesman Alec Tuigunov said. 
Philip Morris already has factories in St Petersburg and in Krasnodar in
southern Russia, and Tuigunov said Russia's demand for their cigarettes was
rising by two percent a year. 
Philip Morris's factory in St Petersburg produced 3.1 billion cigarettes in
1997 compared to 2.0 billion in 1996. Its factory in Krasnodar produced 7.8
billion cigarettes last year against 4.3 billion in 1996. 
The investment by R.J. Reynolds is intended to improve production at its
in St Petersburg, the company said in a statement. 
Reynolds has invested more than $400 million in Russia since 1992, and it
it had a 20 percent share of the market. 
The RJR-Petro plant in St Petersburg, which Reynolds bought in 1992, produced
37 billion cigarettes in 1997, up from 12 billion in 1994. 
B.A.T has already recently spent $150 million upgrading plants in Moscow and
The expansion in Russia comes as the U.S. Congress reviews the terms of a
planned settlement in which the American tobacco industry would pay $368.5
billion over 25 years and make other concessions because of the negative
health impact of smoking. 
Such concerns remain muted in Russia, where men die at an average age of 58
and nearly a third of all male deaths are tobacco-related, the WHO said in a
1997 report. 
Asked if he felt a responsibility for Russia's tobacco-related health
problems, B.A.T's Herter told Reuters: 
"Everybody know that...with cigarette smoking, there are risks attached. This
is well known, it is on each pack, it is in our advertising...Our
responsibility is to make the best brands in the world." 
In a market where some consumers are beginning to resist the widespread
saturation of foreign goods, B.A.T has had success in promoting its own local
Yava brand. 
Its Moscow factory starting producing an up-scale Yava Gold last August and
the company now says it already commands 40 percent of the mid-priced market
in the capital. 
The company has ushered in the new cigarette with one of the most
recent local advertising campaigns, appealing to Russian patriotism. 
One current billboard shows a cosmonaut tethered to the Mir space station
painting the words "Yava Gold" on the side of the American space station.
Below the image are the words "retaliatory strike" -- once the language of the
Cold War. 


Analysis from Washington: Demography Influences Economic, Political 
Destiny In Russia
By Paul Goble

Washington, 16 March 1998 (RFE/RL) -- A recommendation by the World Bank 
that the Russian government not privatize its state pension system calls 
attention to the increasing impact of demography on the policies and 
politics of the post-Soviet states.
In arguing against privatization, the bank officials noted that there 
are now fewer than three Russian workers for ever Russian retiree, a 
ratio that puts a far greater burden on the former and one that means 
the latter might be shortchanged in a privatized system. 
Many Russian reformers are unhappy with the World Bank's position, but 
for three reasons, they are likely to go along. 
First, Moscow needs the assistance of the World Bank and thus is 
generally willing to follow its dictates.
Second, the Russian authorities are likely to find it easier to continue 
doing what they have been doing, especially if it is consistent with the 
demands of the international donor community.
And third, as democratization proceeds, Russian politicians are likely 
to be ever more responsive to groups, such as the elderly, who have now 
form a far larger percentage of the population and even more of the 
electorate than ever before.
This last factor -- the direct impact of demography on politics -- is 
likely to prove increasingly important not only in Russia but across the 
post-Soviet states.
First, in many of these countries, such as Estonia, Latvia, and Ukraine, 
falling birth rates mean that the proportion of the population over 60 
is rising. And the experience of other countries suggests that the 
elderly will vote in disproportionate numbers.
As a result, they are likely to serve as an increasingly important 
counterweight to those who would push for privatization without regard 
to its impact on pensioners.
Second, in other countries, such as those in Central Asia, high albeit 
falling birthrates mean that governments must contend with the very 
different burdens that a youthful population presents: the need for more 
schools and more jobs.
And these governments know that any failure to deal with these 
demographic pressures could lead to a politically explosive situation 
that they might be unable to contain.
Third, several of the countries in this region must carry an enormous 
burden as a result of refugee flows. In Azerbaijan, for example, one 
resident in seven is a refugee, something that inevitably casts a shadow 
on government activities of all kinds.
Fourth, many of these countries must confront the problems of rural 
depopulation and the uncontrolled influx of people into major cities. 
That is particularly true in Russia, where the collapse of state 
subsidies to those living in north are now moving south and west.
But it is true elsewhere as well. In Armenia, for instance, many people 
have fled the still earthquake-ravaged western regions to Yerevan. And 
some Armenians have even left the country as a whole. 
And fifth, virtually all these countries must contend with the 
consequences of the fact that the demographic behavior of one ethnic 
group on their territory may be very different than that of another.
In Kazakhstan, for example, not only do ethnic Russians have a lower 
birth rate than ethnic Kazakhs but at least some of them are choosing to 
return to their titular ethnic homeland. 
That means that the relationship numerical and political of ethnic 
Russians and ethnic Kazakhs in Kazakhstan is changing rapidly with 
unpredictable consequences for both groups and for that country.
Ten years ago, many observers in both the USSR and the West argued that 
demography might define the destiny of the Soviet Union, that 
differences in population growth rates between Slavs and Central Asians 
could tear the Soviet Union apart. 
The impact of these differences at that time was probably less than many 
of these observers assumed not only because the differences were less 
dramatic than some of them suggested but also because the authoritarian 
Soviet system could often override them.
But now and especially in the future, demographic patterns in the 
post-Soviet states are likely to have the kind of impact that many had 
expected them to have earlier.
That conclusion reflects the declining ability of governments in this 
region to ignore demography either because of their own weakness or 
because of their commitment to democratic procedures.
And it suggests that both the peoples of this region and those outside 
who care what happens there should be paying more attention to 
demographic realities lest the impact of these realities prove not only 
unwanted but unexpected as well. 


Suicide Becoming Disease in Russia
16 March 1998

MOSCOW (AP) - First his health went, then his job, then his wife. After
watching his life dissolve, Vladimir tried to take control in the only way he
could imagine: killing himself.
It's long been a solution all too common among Russians when life becomes too
painful. And suicides, already high in Soviet times, have soared in the 1990s,
cutting across age, gender and class to claim thousands of victims each year.
Even more fail in their attempts, ending up in emergency rooms, psychiatric
wards or - like Vladimir - in suicide crisis wards of public hospitals.
``I don't even remember what it was that I swallowed,'' Vladimir said, his
fingers fiddling nervously with a neon-orange plastic watch hanging off his
bone-thin wrist. ``I just remember feeling like I'd lost everything.''
Suicides shot up 67 percent from about 39,200 in 1990 to 61,900 in 1994, the
peak year. By 1996, the number had edged back to 57,900, and preliminary
estimates for 1997 point to a further decline, to 54,900, the State Committee
on Statistics says.
The level remains extraordinarily high - weighed against population, Russia's
suicide rate is triple that of the United States and Canada.
Suicides are especially high among Russian men. Russia is the world leader in
male suicide, along with Latvia, according to the U.N. World Health
Psychologists blame the instability this decade has brought, including the
fall in standard of living, growth in unemployment and politically or
economically motivated migration to other regions.
Vadim Gilod, deputy director of the 60-bed suicide crisis ward at Moscow's
Hospital No. 20, said the ward was a reflection-in-miniature of the stresses
Russians face.
``People used to try to kill themselves to solve purely personal problems,''
Gilod said. ``Now the despair is magnified by social failure.''
Vladimir, who asked that his last name not be used, has a history of
alcoholism - an illness that predisposes its sufferers to suicide. Hunched
over in a small, sparsely furnished consultation room in the suicide watch
ward, he spoke haltingly of one setback after another.
A broken leg. A lost job. Cancer surgery.
Then came the crowning blow, one that still causes his large green eyes to
cloud over and his voice to drop to an almost inaudible whisper. His wife
announced last year that she wanted a divorce - though the couple would
continue to share the apartment. Her lover moved in, rubbing in Vladimir's
loneliness and humiliation every day.
``I'm not a monk. I need a soul mate,'' mourned Vladimir, 49. ``I couldn't
live just with `hello and good-bye' each day, seeing and hearing what's going
on but not being able to touch her.
``I couldn't stand it anymore.''
And so on New Year's Day he swallowed a bottle full of pills and landed
in the
hospital, surrounded by others who had likewise decided the only way to cope
with misery was to end it all. But they failed.
Now they are getting intensive counseling, in individual and group sessions.
Many are on medication. They live in single- or five-bed wards decorated with
the patients' posters and stocked with fruit, cookies and other food brought
by visitors.
It could be any other ward in the hospital, except the doctors don't wear
white coats, and patients eat around tables, family style, instead of off
wheeled-in trays.
Staff members encourage patients with pats and hugs. The doors are not
patients can walk out any time.
However, many don't feel ready to re-enter the world when their maximum one-
month stay in Hospital No. 20 is up. Vladimir had no idea what he would do
Most of the ward's 60 patients are trying to cope with crises in their
lives: grief, abandonment, low self-esteem. Some were brought from emergency
rooms; others were referred by Moscow's crisis hotline or by counselors at
walk-in clinics, where increasing numbers of people facing crises are seeking
A few of the patients are recovering from drug abuse and alcohol-related
psychoses. Most addicts don't seek help, however, and some experts blame the
country's widespread drug and alcohol abuse for the high suicide rate.
``There's the constant search for a high, and then the withdrawal
symptoms. If
they can't get their dose, they kill themselves,'' said Vladimir Voitsekh,
deputy director of the suicide center at Moscow's Psychiatric Institute.
``So far, we haven't found a way to reach these people.''
Counselors have also lost touch with many people suffering from chronic
illnesses since a 1993 reform freed psychiatric patients of mandatory visits
to clinics.
All of that has stretched Moscow's suicide prevention network to the limit.
There is a continual waiting list for Hospital No. 20, which despite its
mismatched furniture and peeling linoleum is regarded as the best equipped of
the 16 city hospitals that have unlocked suicide wards.
The seven lines at Telephone of Trust, the only crisis hotline for
Moscow's 10
million people, are jammed day and night. Counselors can handle only about 300
calls daily, said Sergei Trofimov, director of the city-financed hotline since
its founding in 1982.
``It's very little,'' Trofimov conceded.


Russian Suicide Rates
Number of suicides in Russia, and rate per 100,000 population:
1990 - 39,200, 26.4.
1991 - 39,400, 26.5.
1992 - 46,100, 31.0.
1993 - 56,100, 38.1.
1994 - 61,900, 42.1.
1995 - 61,000, 41.4.
1996 - 57,800, 39.4.
1997 (estimate) - 54,900, 37.5.
Source: Russian State Committee on Statistics.


For more articles from The Moscow Times, check out their website at

Moscow Times
March 17, 1998 
INSIDE RUSSIA: Uranium Next Field of Battle For Oligarchy 
By Yulia Latynina 
Yulia Latynina is a staff writer for Expert magazine.

Nuclear Power Minister Viktor Mikhailov was discussing plans for the 
future with his deputy when he was called in to see Prime Minister 
Viktor Chernomyrdin. After a short conversation, the prime minister 
rangthe president to inform him that Mikhailov wanted to step down and 
would be returning to scientific work. If that's what he wants, so be 
it, came the answer. 
On the eve of Mikhailov's resignation, the newly appointed Security 
Council secretary, Andrei Kokoshin, had been holding a long conversation 
with the president about Mikhailov. They were speaking mostly about the 
sale of uranium. 
In 1993 the United States reached a deal with Russia by which Russia 
would convert 500 tons of highly enriched uranium from nuclear warheads 
into low-enriched uranium for reactors. The U.S. Uranium Enrichment 
Corporation, or USEC, paid for the conversion as well as for the uranium 
itself. Then the state-owned U.S. uranium enrichment company was 
privatized, and Russia got the chance to sell $4 billion worth of 
uranium independently. 
The Nuclear Power Ministry chose the obscure Pleiades Group, which 
promised to pay for the uranium within 2 1/2 years after the first 
delivery. The firm was headed by a close friend of Mikhailov's, Alexei 
Shustorovich. It is Shustorovich who is considered to have organized the 
controversial deal to import U.S. supercomputers into Russia. 
Pleiades was cut out of the uranium deal last spring because of 
resistance from Uneximbank and the State Duma, or lower house of 
parliament. But by the end of the year, Pleiades once again became the 
main player in the contract. 
Part of Russia's uranium is exported to the United States through the 
Swiss-based Global Nuclear Service and Supply, or GNSS. Fifty-one 
percent of GNSS belonged to Russian company Tekhnabexport and 49 percent 
to the American millionaire Oren Benton. 
Benton declared bankruptcy Sept. 23, and his 49 percent share in GNSS 
was put up for auction. After Benton declared bankruptcy, it was 
Pleiades that should have bought his share in GNSS. But Uneximbank, 
which services part of Tekhnabexport's accounts but has difficult 
relations with it, also had a claim on a share of GNSS. 
Then the auction was put off indefinitely. But GNSS itself established a 
daughter company in Delaware, 49 percent of which was sold to Pleiades 
for $245,000. In December, Tekhnabexport received permission from the 
Central Bank for a two-year deferment in the payment for the uranium and 
announced that the uranium would be sold through GNSS, Delaware. 
The irony of the story is that Uneximbank and Alfa-bank were interested 
in having Mikhailov dismissed. But as a result of their efforts, the 
post of nuclear power minister was filled not by Valery Lebedev, 
director of Krasnoyarsk-26, who is sympathetic to both banks, but Oleg 
Adamov, who is very close to business magnate Boris Berezovsky. It is 
clear that the new minister will do everything to remove Uneximbank from 
Tekhnabexport. The uranium business itself will become, along with 
Svyazinvest and Rosneft, yet another battlefield for the oligarchs. And 
independent ministers like Mikhailov, who work only for themselves, will 
become fewer and fewer. 


Washington Post
March 14, 1998
[for personal use only]
Gore Carves Unique Post With U.S.-Russia Collaboration
By Thomas W. Lippman

When Vice President Gore took on the task of "reinventing government," 
he probably wasn't thinking of the Russian government as well as his 
But today his files include entries on labeling Russian foods, 
developing the oil fields of the Russian far east, testing Russian 
children for lead in their blood, mapping the Russian Arctic, 
privatizing Russian farmland, securing nuclear material from dismantled 
Russian weapons, cutting the cost of treating Russian tuberculosis 
patients, writing a Russian tax code and modernizing Russia's air 
traffic control system.
Those tasks and more have become the domain of the Joint Commission on 
Economic and Technological Cooperation, chaired by Gore and Russian 
Prime Minister Viktor Chernomyrdin. In five years, the Gore-Chernomyrdin 
commission has grown into a bilateral government conglomerate, with 
officials at many levels working on problems of energy, health, 
agriculture, investment, space and the environment.
It has put Gore in a unique position for a vice president, as virtual 
day-to-day manager of one of this country's most important and difficult 
international relationships.
His role in the commission could benefit Gore politically if, as 
expected, he runs for president in 2000. He drew extensive television 
coverage in California Thursday as he toured aerospace plants with 
Chernomyrdin lauding the "thousands of jobs" created by U.S.-Russia 
satellite joint ventures that the commission promoted.
Gore could potentially also share the blame if relations between the two 
countries deteriorate in important areas. So intricately has he become 
involved in the details of Russian government, administration officials 
said, that Russian cabinet ministers often ask his help in persuading 
Chernomyrdin to increase their budgets.
To hear Gore tell it, the stakes of the commission's work are enormous 
for both countries.
"Let your mind wander out 50 years," he said. "Think about a Russia 
committed to democracy and a free market, and a source of stability on 
the Eurasian land mass. That's better for the United States than a 
Russia seething in anger and despair and maybe experimenting with 
wrongheaded demagoguery."
Senior officials said the commission operates within the outlines of 
Russian policy developed by President Clinton and his senior advisers, 
in particular Deputy Secretary of State Strobe Talbott. But they also 
said that the commission, with its focus on details, has taken on a life 
of its own as an anchor of stability in a relationship troubled by 
disagreements over issues such as policies toward Iraq and Iran.
The commission "is like ballast in the hold of a ship," Talbott said. 
"It helps keep the ship from capsizing when you have a lot of heavy 
waves." According to Talbott and other officials, the value of the 
commission exceeds its specific accomplishments because it has forged 
working bilateral relationships at many levels that continue regardless 
of differences on security issues.
That assessment is shared by some critics of the administration's 
handling of relations with Russia, including Sen. Richard Lugar (R-Ind.) 
and Susan Eisenhower, chairman of the Center for Political and Strategic 
"Relations right now are more strained than they have been in some 
time," said Eisenhower, who visited Russia last month. "For just that 
reason, it would be a disaster if anybody called off Gore-Chernomyrdin. 
A dialogue wouldn't take place without that mechanism."
In addition to the commission's nuts-and-bolts work on technical matters 
such as defense conversion, senior officials said, Gore and Chernomyrdin 
-- with the approval of their bosses -- have developed a separate 
one-on-one channel in which they address some key security issues. 
"He and I have developed a vocabulary of trust," Gore said in an 
interview during the flight to California. "There is nothing we can't 
talk about."
U.S. unhappiness over a new Russian law that appears to favor the 
Orthodox Church over other religions, Washington's distress over war in 
the breakaway Chechnya region and U.S. objections to Russian exports of 
missile technology to Iran have been conveyed through Gore-Chernomyrdin 
as well as through normal diplomatic channels, senior officials said. 
Chernomyrdin is sometimes difficult to persuade, officials said, but 
when he is persuaded he can be effective in conveying a U.S. position to 
President Boris Yeltsin.
Within the Clinton administration, the role of the commission -- and of 
a similar structure Gore has developed with South Africa -- has 
propelled the vice president and his national security adviser, Leon 
Fuerth, into a position of foreign policy influence rarely achieved at 
the vice presidential level.
Fuerth, the de facto executive secretary of Gore-Chernomyrdin, is a 
member of the "principals committee" of senior foreign policy advisers 
to President Clinton. That designation means he often joins Secretary of 
State Madeleine Albright, Defense Secretary William S. Cohen and White 
House National Security Adviser Samuel "Sandy" Berger when major 
decisions are being made.
Fuerth, who has been an adviser to Gore since Gore was in the House of 
Representatives, is also a member of the administration's Policy 
Steering Group on the Former Soviet Union, which Talbott has chaired 
since 1993.
Because Talbott and other officials responsible for Russia policy are 
briefed before each Gore-Chernomyrdin meeting, administration officials 
said, Gore has avoided stepping on toes as he ventures into areas 
normally reserved for the secretaries of state, defense and energy. Gore 
and Fuerth hear from representatives of state, defense, treasury and 
other departments whose issues are on the Gore-Chernomyrdin agenda 
before making commitments to the Russians, officials said. 
Clinton and Russian President Boris Yeltsin agreed to the concept of a 
bilateral commission at a 1993 summit meeting in Vancouver.
On the U.S. side, officials said, the original idea was to seek 
cooperation in energy, space and high technology issues. Later the 
agenda expanded and the United States used the format to provide money, 
technology and expertise to help Russia overcome the legacy of communism 
and build a modern state.
The Russians welcomed the assistance, but according to Gore they also 
had a good deal to offer, especially in space technology. "We learn from 
them, too," Gore said. "There are a lot of things that they do better 
than we do."
U.S. officials would deal with their Russian counterparts on many 
bilateral issues even if the commission did not exist, several officials 
said, but the discipline of the semiannual meetings forces participants 
to seek concrete results.
Some critics, however, have questioned the importance of the results. 
Ariel Cohen, a Russia specialist at the Heritage Foundation, said, 
"These gentlemen, Gore and Chernomyrdin, need to show positive results, 
so they paper things over."
At a news conference after the commission's 10th meeting Wednesday, Gore 
expressed some frustration that most people know little about the "200 
agreements" he said the commission has reached. Senior officials 
acknowledge that many are mundane arrangements involving topics of 
little glamour: agricultural credit, public health statistics, business 
accounting standards, nuclear power plant management.
There have been larger achievements as well, Gore and other officials 
said. In one agreement reached through the commission, the United States 
will help Russia modify the fuel cycle at two nuclear plants so Russia 
can end the production of weapons-grade plutonium. Another cleared the 
way for Conoco Inc., the oil exploration and production subsidiary of 
DuPont Co., to invest millions in developing an oil field in Russia's 
far north, officials said.
Energy Secretary Federico Peña said the commission helped him reduce 
opposition in the Russian parliament to U.S. participation in Russian 
oil and gas projects. 
"When I explained to them that our market is wide open and [the Russian 
company] Lukoil is doing business in the United States, their eyes 
widened," Peña said. "That's the kind of exposure I would not have had" 
without the commission.
According to Health and Human Services Secretary Donna E. Shalala, the 
commission has helped the Russians undertake such public health tasks as 
fluoridating drinking water and iodizing their salt. In addition, she 
said, as a result of bilateral cooperation, "open and honest reporting 
of disease outbreaks has become the norm in Russia."


Russian, foreign investors smell change in air
By Peter Henderson 

MOSCOW, March 16 (Reuters) - Foreigners and Russian government officials
discussed bureaucratic logjams that have stifled investment for years, but on
Monday they said something finally was different. 
"We're on the same wavelength," Coca Cola Co's European group 
president Nevill Isdell said at a news conference
following a meeting which investors called the most constructive in years. 
"I am very happy," Prime Minister Viktor Chernomyrdin told the conference.
"There were a lot of proposals -- they were many and needed." 
Foreigners' list of proposals have not changed for years -- the Foreign
Investment Advisory Council on Monday said it wanted a tax code, international
accounting standards in Russia and a sound production sharing law for oil
industry investment. 
Russian government officials have promised all these things in the past and
made the same kinds of promises on Monday, but both sides said they had real
hope for the future. 
"I felt more encouraged today than I have felt in a long time," Asea Brown
Boveri Ltd <ABB.BO> chairman Percy Barnevik told reporters after the meeting. 
The difference was not in words so much as attitude. "You see the light
in the
tunnel now," Barnevik said. 
Practically every top Russian government economic minister attended the
conference, including Chernomyrdin, First Deputy Prime Minister Anatoly
Chubais, Economy Minister Yakov Urinson and minister without portfolio Yevgeny
Those ministers are also presenting a united front, especially on basic
economic issues such as the necessity of passing a tax code, a key reform
issue that has languished in government and parliamentary committees for
"Bringing it into force will give a green light to tax reform," Chernomyrdin
said in a written statement for presentation to investors. 
He and President Boris Yeltsin have both said recently they want the code
passed this year, and Coke's Isdell said he got the message. 
"We are not far away from having success in terms of having a code which we
feel will bring Russia the investment it deserves." 
So far foreigners have not felt Russia deserved much at all. 
Foreign investment last year was drastically low for a country of Russia's
size. Chernomyrdin said it was about $10.5 billion, including $4 billion in
direct investment. 
The government wants overall investment increased by 10-15 percent this year,
though Chernomyrdin said Russia's major economic policy was to bring down
interest rates, which it hiked over the last few months in order to defend the
Russia garnered much international praise for sticking to its monetary policy
in tough times, and Chernomyrdin said his government now faced the question
whether it could manage its economy rather than whether it would re-embrace
"Russia has a lot less -- how do you call it -- image problem," he said. 


Date: Mon, 16 Mar 1998 
From: "Baltimore Sun (Moscow Bureau)" <>
Subject: eXile

Dear David Johnson,
Let a thousand flowers bloom, let Matt Taibbi print whatever he wants. After
all, it's a free country. And we all can use some help keeping on our toes.
But why reprint it? All of us who need this message about our shortcomings
can pick up an eXile and read it. Reprinting only the press reviews deprives
the reader of necessary context. In a recent eXile, the editor wrote about
how he dealt with his pregnant girlfriend when she refused to get an
abortion. She wouldn't listen to reason, so he threatened to kill her. That
worked! Then he muses on forever about another pregnant acquaintance who
aborted and about his relief that this child - who would have been a
sloped-head idiot - was instead a dead fetus properly wallowing in the
sewers. I don't know how it all turned out, I didn't read further. But it
did help me understand the mean-spirited and mindless attack on Fred Hiatt.
So don't just reprint part of the eXile. Give us all or nothing.
Kathy Lally
The Baltimore Sun


Jamestown Foundation Monitor
March 16, 1998

President Boris Yeltsin's representative in the State Duma, says that a
major government overhaul is planned for later this year. (Obshchaya gazeta,
March 5) As Yeltsin hinted in his state-of-the-nation speech to the Russian
parliament last month, the reorganization is likely to see the abolition of
the post of deputy prime minister and a reduction in the number of federal
ministries. Since last July, a reform commission has been reviewing the
structure of the government apparatus, co-chaired by Kotenkov and Mikhail
Krasnov (who was, until he resigned last month, Yeltsin's adviser on legal

If the multiple deputy prime ministers are abolished, they would be replaced
by a single deputy premier, whose task would be to substitute for the prime
minister when he was out of the country. This in turn would necessitate the
dismissal of one of the current first deputy premiers--Boris Nemtsov or
Anatoly Chubais. At present, there are eight deputy prime ministers, who are
charged as liaisons between the president and government ministers. Unless
they simultaneously head specific ministries of their own (as some of them
do), they lack their own administrative-operational staff and have generally
proved unable to push reform proposals through the labyrinthine bureaucracy.
They are forced to rely on specially created commissions (and media
publicity) to advance their policy agenda.

Another concern of the reform commission is to reduce the plethora of
agencies with overlapping and ill-defined jurisdictions. There are currently
nearly a dozen different types of federal agency: ministries, state
committees, ordinary committees, services, supervisory agencies, ordinary
agencies and departments. The commission wants to reduce all this to a core
of about twenty ministries. The reform will also try to tackle the ongoing
problem of privileges and special services for government officials of all
ranks. At present, these range from subsidized housing to state-provided
dachas and cars, and cost more than salaries.

...DON'T HOLD YOUR BREATH. It would be unwise to expect any radical
breakthrough from this commission. Krasnov said last month that the reform
must be carried out "very carefully and slowly," and might not be fully
operational until 2005-2007. As opposition deputy Aleksei Podberezkin
observed, "The ministries have been reorganized five or six times, and each
reorganization was only a waste of time." (Argumenty i fakty, March 9) The
government's response to bureaucratic inefficiency is, typically, to create
new bureaucracies. For example, the job of supervising the spending of an
$800 million World Bank loan for pension reform has been given to a
nongovernmental agency--the Russian Foundation for Social Reforms. The
foundation was set up in parallel to the Ministry for Labor and Social
Development, with twenty-one officials and a $1.5 million budget. The
creation of a separate foundation gives the World Bank tighter control over
the program, and enables it to pay officials an average of $2,000 a
month--ten times the average for ministry civil servants. The World Bank
project budgets $28 million for technical advice, and a recent newspaper
report question the wisdom of such spending. For example, a single senior
advisor from France will be paid $220,000 a year in salary and expenses.
(Komsomolskaya pravda, March 12)

YELTSIN IMPEACHMENT THREAT. Two of Boris Yeltsin's fiercest critics are
joining forces in an effort to impeach him. Lev Rokhlin, the retired army
general who last year set up the Movement for the Defense of the Army (MDA),
and radical Communist parliamentarian Viktor Ilyukhin are accusing the
Russian president of "genocide" against the Russian people. (Russian
agencies, March 15) They plan to take their case to Russia's Supreme Court
and to the International Court of Justice in The Hague. Rokhlin chairs the
Duma's Defense Committee while Ilyukhin heads its Security Committee.
Yeltsin is probably not losing sleep over the threat. Only states can take
their complaints to the court in The Hague, while Russia's constitution is
deliberately fuzzy on impeachment procedures. Meanwhile, the strength of
popular opposition to Yeltsin's government will be put to the test on April
9, when the MDA and the Communists plan to join the national day of protest
being organized by Russia's trade unions. 


Return to CDI's Home Page  I  Return to CDI's Library