April 5, 1998  
This Date's Issues: 2134•  2135• 

Johnson's Russia List
#2134
5 April 1998
davidjohnson@erols.com

[Note from David Johnson:
1. John Danzer: Why Yeltsin does what he does.
2. Reuters: Russian acting PM pledges to pay off wage arrears.
3. Reuters: Chubais, ex-CEO win UES board seats.
4. IntellectualCapital.com: Nina Khrushcheva, Deconstructing Yeltsin.
5. Rossiiskaya Gazeta: Vladimir KUZNECHEVSKY, A PLANNED POLITICAL 
IMPROMPTU. Why did the West support the resignation of the Russian 
Government?
6. Los Angeles Times: Carol Williams, Ex-Soviet States Chart Own 
Course. Election outcomes in Ukraine, Moldova and Armenia underscore 
a determination to break from Moscow's influence. 
7. New York Times book review: Firebrands and Firebirds. Exploring 
Russia's identity through 10 centuries of its artistic tradition. 
Richard Lourie reviews "BETWEEN HEAVEN AND HELL: The Story of a Thousand 
Years of Artistic Life in Russia" by W. Bruce Lincoln.
8. Business Week: Patricia Kranz, WHO NEEDS RUBLES? Russia's virtual 
economy hides a lot of business--and tax revenue.
9. Business Week editorial: HOW TAXES CRIPPLE RUSSIA.]

*******

#1
From: John Danzer <Telos4@aol.com>
Date: Sat, 4 Apr 1998 
Subject: Why Yeltsin does what he does.

WHY YELTSIN DOES WHAT HE DOES.

Yeltsin is this. Yeltsin is that. He's crafty. He's a boor. Yeltsin loves
uncertainty and change. Blah, blah,blah! Let me insert my own personal
"blah".
I have spent 25 years studying personality and have developed a coherent
typology of personalities based upon the body-typing (somatotype) scheme of
W.H. Sheldon. Please keep the groans to a minimum. Although I am not an
expert on Russia I know what I'm talking about here.
Yeltsin is a Mesomorphic Endomorph. According to my typology he is dominated
by Muscles. His secondary constitutional component is his gut. His third
component is ectomorphy or the nervous system. His fourth component is the
sensory system.
What does this mean? You can describe any person first of all by what they
want and how they get what they want. Secondly you can describe a person by
what they avoid and how they avoid it. People like Yeltsin, dominated by
muscle, WANT "control". Unfortunately his second component is what he uses to
gain control namely "gut". 
What does the gut do? Absolutely nothing. The viscera is simply a surface
for contacting nutrients to be absorbed. It is often called the vegetative
system. It vegetates which means it doesn't do much. So Yeltsin wants control
but he wants it to simply happen - without doing anything. His 4th component
is the sensory system. This means that he doesn't want change. He avoids
change. So how do you explain the pattern of frequent firings? His third
component is the nervous system. The third component is his way of avoiding
what he doesn't want. Nervous systems are the component of decisiveness.
Nervous systems are best at saying "NO" because they are the protective
boundary. So Yeltsin wants control and avoids change. He wants control
without planning for it. Sooner or later as he looses control and starts to
drift toward the unpredictable he bursts forth with a crude functioning of
his nervous system and says "Nyet". 
He fired, Gorbachev, the Soviet Union, the old parliament, the old
constitution, Chechnya, Lebed, Grachev, Rodionov, and now his whole cabinet.
He is now threatening to fire the Duma. He has been fortunate that the people
around him have been able to salvage things. The current situation is very
dangerous. Yeltsin has
exploded for perhaps his last time. The longer it takes to confirm his new
Prime Minister the greater his frustration with few useful options remaining.
To fire the Duma means the type of change Yeltsin doesn't want. His last
option is to fire himself either by resigning or retreating into his usual
depression. He could very easily die or become incapacitated without a
successor if the current situation doesn't resolve itself. 
I can't explain my whole theory in this forum. However, I am working on a
Web-Site that will be available soon. If anyone is curious about this stuff
E-Mail me at Somagraph@aol.com and I will give you the URL when it is up and
running.

********

#2
Russian acting PM pledges to pay off wage arrears

MOSCOW, April 4 (Reuters) - Russia's acting prime minister Sergei Kiriyenko
told trade union bosses on Saturday the government had found cash to pay wage
arrears to many Russians ahead of a day of national protest over delayed
salaries. 
``We will transfer the money to the regions next week. This will ease the
situation a bit,'' Kiriyenko said in televised remarks. He did not say how
much the state would pay. 
The pledge to pay delayed wages to the public sector workers may
undermine the
stance of the opposition which, along with trade unions, is preparing protests
across Russia on April 9. 
Kiriyenko, whose fate largely depends on the mood of the opposition, said he
would not rule out meeting the protesters. 
The Communist-dominated lower house of parliament, the State Duma, is due to
debate his candidature for the post of premier on April 10. 
``We are expecting all-Russian protests on April 9. The reasons why
people are
taking to the streets are clear. It is humiliating to work without getting
paid,'' Interfax news agency quoted Kiriyenko as saying. 
Kiriyenko noted that the federal government was responsible for only a small
share of the wage debt, but said this did not absolve it of responsibility. 
He also promised to work to ensure such debts did not mount up again. ``The
work will be continuous -- not just from time to time, not from one protest to
another.'' 
President Boris Yeltsin criticised his former prime minister Viktor
Chernomyrdin over the issue when he sacked him and all his ministers on March
23. Now he wants Kiriyenko to head the cabinet. 
Millions of workers in both the public and private sectors are owed billions
of roubles in unpaid salaries. 
Official statistics show total wage arrears in all sectors of the economy
totalled 57.8 billion roubles ($9.51 billion) as of March 1. Of that figure,
the federal and regional governments owe 7.6 billion roubles ($1.2 billion). 
The government declared last summer it had paid off billions of roubles to
long-suffering pensioners, and later set a schedule to pay off debts to the
military and other key groups. 
An angry Yeltsin set a deadline of January 1, 1998 for all arrears to be paid
off. The government said it had scraped together the funds, and blamed
regional authorities when some workers remained unpaid after the New Year. 
Just three months later, debts to both public and private sector
employees are
piling up again. 
Kiriyenko said responsibilities had to be clearly divided between the federal
and regional authorities in order to avoid the confusion that had reigned at
the start of the year. 

*******

#3
Chubais, ex-CEO win UES board seats

KONAKOVO, Russia, April 4 (Reuters) - Shareholders in Russia's national
electricity grid UES voted former first deputy prime minister Anatoly Chubais
and the company's former chief executive Boris Brevnov onto the UES board on
Saturday. 
At an extraordinary shareholders meeting at Konakovo, northwest of Moscow, a
company official named the two among a list of 15 directors newly elected to
the board. 
Chubais, 42, a pioneer of Russia's free market reforms, was sacked along with
the rest of the cabinet by President Boris Yeltsin on March 23. 
Brevnov, 29, was appointed chief executive of the state-controlled firm last
May but stepped down amid a boardroom row on Friday. 
The other new directors included acting deputy fuel and energy minister
Viktor
Kudryavy, who has the nomination of the government majority shareholder to
chair the board. 
Also elected were acting chief executive Oleg Britvin, who was Brevnov's
deputy until Friday, Natalya Fonareva, the head of Russia's monopolies
watchdog, Yevgeny Yasin, an acting minister without portfolio in the outgoing
government, and Pyotr Rodionov, deputy head of state gas monopoly Gazprom. 

*******

#4
>From IntellectualCapital.com
http//www.intellectualcapital.com
Deconstructing Yeltsin 
by Nina Khrushcheva 
April 2, 1998 
Nina Khrushcheva is a researcher in history at the Institute for 
Advanced Study at Princeton, and the granddaughter of Nikita Khrushchev. 

Around the world commentators fondly insist that Boris Yeltsin's 
relations with reality are episodic, unpredictable, erratic, maybe even 
insane. Sacking your entire cabinet when everyone thinks you are home 
sick in bed only adds to this impression. But those who subscribe to it 
are very wrong. 
True, Yeltsin is not the healthiest president Russia has ever had, but 
his actions in dismissing his government are neither strange nor the 
result of illness. They are very Russian. In fact, the sheer 
"Russianness" of the president should not be hard for outsiders to 
grasp. 

Typically Russian?

The problem is that, for years, the world has misinterpreted Yeltsin. By 
declaring himself anti-communist a decade ago, Yeltsin earned the nearly 
unconditional support of the United States and the West. But being a 
democrat does not make Yeltsin any less Russian. Every time he does 
something typically Russian, the world (America most of all) seems 
genuinely stunned. Rash and rushed attempts are made to explain away his 
behavior as caused by bad advisers, old age, failing health and/or a 
feeble mental capacity. 

A pattern is emerging 

It is, of course, difficult to make sense of someone who declares 
himself just like you and then acts in ways you can scarcely fathom. 
Look again at Yeltsin's actions over the past five years, however, and 
each makes perfect sense from the point-of-view of an authoritarian 
Russian leader who is a little modernized and democratized by the 
existence of open borders. 
•In 1993 Russia's president ordered his tanks to open fire at his own 
parliament, excusing this as necessitated by a threat to democracy. 
•In 1994 Yeltsin started a war in Chechnya, insisting that guns were the 
only means with which to deal with uppity nationalist rebels. 
•In 1995 at the United Nations he declared that Russia would not support 
an American presence in Bosnia; after a personal meeting with President 
Clinton, however, he suddenly agreed to back the American president, 
apparently for the sake of the presidential buddy system. 
•After being out of his office for almost a year because of illness, on 
his return in March 1997 Yeltsin sacked practically his entire cabinet, 
accusing them of not working, and claiming that a little anxiety was a 
good way to teach Russians how to do their jobs. 

A leader like the people 

This year's cabinet dismissals are deja vu all over again, at least 
through Russian eyes, and not only because these mass firings happened 
two years running. Russians remember that when Stalin felt things were 
getting too quiet, he would shake people up with a purge. Granted, 
Stalin's purges were bloody and violent, but the impulse to upset the 
apple cart remains incredibly familiar to Russians. 
Russian leaders (like ordinary Russians) like drama; they lack patience. 
This is why Russians prefer revolutions: it is easier to fix the blame 
on someone for the world's imperfections than bring about change in a 
steady, persistent way. To achieve most things you need a clear 
strategy. 
Russians are not good at strategizing. They act on impulse, wait to see 
what happens and hope that things will turn out right. Yeltsin, I 
believe, has no clear understanding of what his government should do or 
be. He felt an urge, and now the chips will fall and only he can pick up 
the pieces. 
One other thing to keep in mind about Yeltsin is this: Russian leaders 
are not prepared mentally to leave office in their lifetime. 
Chernomyrdin, an acting president whenever Yeltsin took to his sick bed, 
acquired excessive power insofar as Yeltsin was concerned. More and 
more, Chernomyrdin appeared anointed the president's successor. It 
became a question of Boris Nikolaevich's honor to show "who is a master 
in the house." So he did, and in a clever way. 

To his dying day? 

Yeltsin didn't simply fire his prime minister, allowing Chernomyrdin to 
go into opposition and become a real threat, which is the mistake 
Gorbachev made with Yeltsin in 1989. No, Yeltsin gently shifted his 
premier into managing a future presidential campaign, thus making him 
responsible for the future of Russian democracy. Despite the fact that 
Chernomyrdin announced his own candidacy, he did not stop being the 
president's man, and most likely will stay Yeltsin's gray shadow as long 
as the president desires. As for the appointment of Sergei Kirienko, the 
35-year-old acting prime minister, the message is obvious: It does not 
matter who governs, as long as I, President Yeltsin, am in charge. 
All of this tumult is mere prelude. Any number of articles in the 
Russian press suggest the possibility of Yeltsin running once more for 
president in 2000. And although a few days ago he himself officially 
stated that he won't run, we shouldn't bet on that -- remember Yeltsin 
unexpectedly and swiftly changes his mind. Russia's Constitutional Court 
will decide about the legality of the matter this coming October. True, 
the constitution limits the president to eight years in office, but just 
when the clock started on Yeltsin is in question: Did it begin when he 
was elected president of a Russia still part of the USSR, or did it only 
begin in July 1996, after he won the first presidential campaign 
conducted by the Russian Federation? 
I am no constitutional scholar, but I see all sorts of escapes for 
Yeltsin within his constitution. Imagine what kind of loopholes a real 
lawyer can discover if the president asks him nicely to find them? In a 
country where law is the man in power, this remains probable. 
Instead of seeing Yeltsin's actions as erratic, we should recognize them 
for what they are: declarations that he remains strong and powerful, and 
is planning to stay high up for years to come. Yeltsin may lack the 
stamina to complete another six years as president, but that doesn't 
matter. He will insist on serving his country until his dying breath. In 
this, Boris Yeltsin is a most typical Russian leader. 

******

#5
>From RIA Novosti
Rossiiskaya Gazeta
April 3, 1998
A PLANNED POLITICAL IMPROMPTU
Why did the West support the resignation of the Russian Government?
By Vladimir KUZNECHEVSKY

The intrigue with the resignation of the Chernomyrdin-led
government and the nomination of Sergei Kiriyenko, whom few
knew before March 23, to the post of the new premier remains
one of the main subjects of discussion in Moscow and the
Western capitals.
Meanwhile, the Russian President has explained the main
reason for the government's resignation. "Of late, the
Government has been clearly lacking dynamism, initiative, novel
outlooks and fresh attitudes and ideas," he said. "The country
needs a new team capable of ensuring real, palpable results."
These words by Yeltsin clearly mean that Russia has
finished the transition period from the administrative-economic
system to a market-economy society. The President was quick to
sense the mood in society and made a decision which could no
longer be postponed. The government of the transition period
was destined to end its existence together with the conclusion
of this period. And so it did.
The real political actions unambiguously show that the
resignation of the Government was a decision seriously, and I
would say painfully, pondered by the President. It was a
decision which the President approached several times in the
past year but did not make for several, including subjective
reasons.
However, there is one fact which we cannot overlook. 
The Russian public wonders why the heads of the leading
Western powers invariably and firmly support Yeltsin's major
political actions. The latest expression of this support was
given at the tripartite meeting in Moscow, between Boris
Yeltsin, Jacques Chirac and Helmut Kohl. Yet nobody seems to
see the obvious answer to this question: The Western
presidents, chancellors and premiers see what the numerous
critics of Yeltsin do not notice - the fact that the reform
policy has a firm backing. 
Much is being said and written about the extravagant
actions of Boris Yeltsin and his allegedly inadequate
behaviour. Every one who comments on the actions of the
President usually assess his actions separately. And nobody
wants to regard his actions as part of the system of
presidential power, with all his duties from awarding an order
to a famous couturier to signing the budgetary address. Not to
mention other, more complicated things of greater significance
for the state and the nation. And yet all this variety of
actions fits, simultaneously and at each given moment, in the
head and the heart of one man. 

Resignation from Power. For Good
The revolutionary stage of the democratic reformation of
Russian society is over. In point of fact, Chubais did not suit
the preceding stage, with his manners of a revolutionary seaman
who came to a bank as its new manager with a naked gun in
November 1917. But he was summoned to do this because the
President regarded him as a sign of continuity of the policy
pursued by Gaidar's government. And although the role of this
"young reformer" has been overrated, as it appears from the
statements made by Berezovsky, Khodorkovsky, Gusinsky, Fridman
and others, yet Yeltsin charged him with tackling the ultimate
problem: the repayment of wage and pension arrears. 
It turned out, however, that Chubais cannot settle this
problem. He can only make it less acute. How? By robbing
Gazprom and selling Svyazinvest. By getting another IMF loan.
It is strange that Michel Camdessus tolerated these methods for
such a long time. The IMF was not so tolerant of other
countries and persons. As soon as Leonid Kuchma got an IMF
credit and used it to repay pensions and wags, the credit line
was blocked and the IMF told Kiev that the credit had been
granted not for squandering it, but for leading the country out
of the economic crisis. 
And yet the IMF tolerated the "squandering" of its credits
by Chubais for a very long time indeed. Why? There can be only
one explanation: Like Yeltsin, the IMF had a distorted view of
Chubais. But now their eyes have opened. Hence the decision to
fire Chubais.
Objectively speaking, Anatoly Kulikov - like Chubais -
could not remain in the government any longer for objective
reasons. Because like Chubais, he was a sign of the
transitional quality of the government. As the Interior
Minister, he did not so much work to ensure law and order, as
to get as many powers in his sphere as possible. 
He could not understand that there cannot be a mammoth
Interior Ministry in a civilised, civil society, which will
inevitably be created after the transition period - provided
historical conditions make this possible and the head of state
has the foresight and the will - Anatoly Kulikov worked hard to
created such a monster. 
In the past few years, he created all kinds of spetsnaz
units, brigades and divisions, all subordinate to him. An
offspring of the Interior Troops himself and a graduate of two
military academies, which he finished with honours, including
the Academy of the General Staff, Kulikov did not work in the
militia for a single day and hence regarded the Interior
Ministry as a military unit. The efforts to protect public
order, the individual and property of citizens, not to mention
the specific militia work, was of secondary importance to the
minister. He tried to appoint representatives of the Interior
Troops, army men, even to the posts of heads of Interior
Ministry branches in territories and regions. His three closest
deputies were army men, and General Maslov, who is acting
Interior Minister now, is a tankman. The militia was never
commanded by a tankman in the Soviet Union and Russia before. 
The last example of Kulikov's misunderstanding of the role
of the Interior Ministry was his covert resistance to the
transfer of the penitentiary system to the Ministry of Justice,
although the transfer is a vivid proof of the movement of
society from a transition stage to the status of a civilised,
civil state.

Life After Resignation
Rumours about Chernomyrdin's resignation appeared back in
1993, and since then they resurfaced regularly until March 22,
1998. The reason for this is not the personality of Viktor
Chernomyrdin, but the period through which the country went. 
It was the time of post-Gaidar government, with Gaidar as
a government member. Later Gaidar was replaced with Chubais,
but this did not change the essence of the matter. Viktor
Chernomyrdin headed a transition government for five years,
with all the contradictions of the transition period. In 1992
society's back was broken, but not fatally. And Chernomyrdin
worked brilliantly to heal society's back. Russia did not go
beyond the point of no return under Chernomyrdin.
It is not Chernomyrdin's fault that he was the premier
during the transition period. He could easily head a post-
transition government, the more so that in this case he would
not have had to mend what Gaidar and his dare-devil lab head
buddies did to Russia. But history - and the President who
chose Chernomyrdin contrary to the resistance of his team -
wanted him to take over after Gaidar. Now we see how
far-sighted and clever this choice was.
It is clear now that the post-transition government should
be headed by someone other. It is not that Chernomyrdin has
surpassed his master in some things. The thing is that the
premier of the transition period cannot head the
post-transition government. We need a man who is not burdened
with old "achievements," better still a technocrat, which means
not a politician, with inordinate managerial and human skills.
Judging by everything, this is why Yeltsin chose Sergei
Kiriyenko. For the umpteenth time, Boris Yeltsin displayed -
hopefully - his phenomenal political intuition. 
And what will Viktor Chernomyrdin, who is nearly 60, do
now? He is not Chubais, who three times proved to the city and
the world that he has no political skills and that his
administrative talents are overrated. Chernomyrdin is a man of
a different quality and scale. Using the American term, he can
be described as the presidential material. If he shows the
strong will and personal confidence suited to the current
historical situation, his political career will have a bright
future. 

*******

#6
Los Angeles Times
April 4, 1998 
[for personal use only]
Government 
Ex-Soviet States Chart Own Course 
Election outcomes in Ukraine, Moldova and Armenia underscore a 
determination to break from Moscow's influence. 
By CAROL J. WILLIAMS, Times Staff Writer
 
MOSCOW--Fed up with unfulfilled promises of looming prosperity, 
Ukrainians have chosen a fractious kaleidoscope of politicians to fill 
their next legislature, a move that will likely deepen the political 
paralysis gripping their country. 
     In neighboring Moldova, voters this week were swayed by nostalgia 
for the stable poverty of the Soviet era and gave Communists a fresh 
chance to rule. 
     Across the Black Sea, in the roiling Caucasus region that was also 
once Soviet territory, Armenians endorsed a fiery patriotic-nationalist 
movement. 
     While all three elections occurred within a relatively compact 
corner of the Kremlin's erstwhile empire, about the only common themes 
in the balloting were cries of foul play among the losers and forecasts 
of additional stumbles in their economic transitions. 
     What the votes in Armenia, Moldova and Ukraine showed to the 
world--which often seems to regard the former Soviet Union as a 
surviving political entity--were the markedly different courses chosen 
by these sovereign states. 
     Almost seven years after a hard-line Communist coup against Soviet 
leader Mikhail S. Gorbachev shattered the image of a cohesive and 
functioning federation, even the poorer republics on the ex-Soviet 
periphery have established full independence from Moscow. 
     That the once-dominant Russia has reacted with near disinterest 
testifies to the irreversible nature of the Soviet breakup and the 
likelihood that each former Soviet republic will continue to decide its 
own fate. 
     "Russia certainly respects this choice by the Armenian people," 
Russian Foreign Ministry spokesman Gennady Tarasov said after Robert 
Kocharyan's election to the Armenian presidency was confirmed Wednesday. 
     Those sober words represented a diplomatic about-face from less 
than two months ago, when Russian officials warned that the ouster of 
Armenia's then-president, Levon A. Ter-Petrosyan, could herald a new era 
of conflict in the Caucasus region. 
     Monday's runoff between former Premier Kocharyan and Soviet-era 
Communist leader Karen S. Demirchyan was more a referendum on the 
importance of maintaining the nation's grip on the Armenian-populated 
Nagorno-Karabakh territory in neighboring Azerbaijan than on the 
economic difficulties that are a constant in the former Soviet Union. 
     In fact, the 3.6 million citizens of Armenia, many of whom depend 
on remittances from relatives in the West to make ends meet, made clear 
that they attach a higher priority to holding sway in Karabakh than to 
investing in industrial recovery. 
     The choice of Kocharyan, a former leader of Karabakh and 
standard-bearer for those who refuse to accept Azerbaijani rule of the 
territory, appeared to commit the country to expensive new arms outlays, 
criticism for refusing a foreign-mediated compromise on Karabakh and 
exclusion from the oil bonanza flowing from the Caspian Sea. 
     In Ukraine, Communist deputies won more than a quarter of the 450 
seats in parliament--a subtle realignment of political power that will 
make it even harder for President Leonid D. Kuchma to carry out 
tentative reforms. But the party that ruled in Soviet times did not 
manage to cobble a majority to effectively oppose Kuchma; the new 
lawmakers are primarily independents from across the political spectrum. 
     "This election was a victory for democracy but a defeat for 
democrats who couldn't unite," said Serhij Naboka, head of the 
independent Elections '98 Press Center in Ukraine. 
     Ukraine owes $3 billion to government workers and pensioners, and 
many of its 50 million citizens are underemployed. In light of that, a 
worsening case of political gridlock in parliament can only be expected 
to deal a further blow to the economy. 
     The Kremlin's only public reaction to the Ukrainian vote was to 
cast Russia as the more successful builder of a post-Soviet market 
economy. 
     Voters in Moldova, an impoverished country of 4.3 million people 
that is landlocked between Romania and Ukraine, appeared more determined 
to turn back the political clock, awarding 40 of 101 legislative seats 
to candidates from the Communist Party. 
     If Communist Party leader Vladimir Voronin can enlist the support 
of a centrist party, the Communists will hold the reins of power in one 
of the few countries in the region where real authority rests with the 
legislature instead of the president. 
* * *
     Special correspondent Mary Mycio in Kiev, Ukraine, and Times staff 
writer Vanora Bennett in Yerevan, Armenia, contributed to this report. 

*******

#7
New York Times
April 5, 1998
[for personal use only]
Book review section
Firebrands and Firebirds 
Exploring Russia's identity through 10 centuries of its artistic 
tradition. 
By RICHARD LOURIE

--------------------------------------------------------------
BETWEEN HEAVEN AND HELL 
The Story of a Thousand Years of Artistic Life in Russia.
By W. Bruce Lincoln.
Illustrated. 511 pp. New York:
Viking. $34.95.
---------------------------------------------------------------

Since we're coming to the end of both a century and a millennium, an 
event that we will experience but once, we're inevitably in for a long 
stretch of roundups, look-backs, top-100 thises, worst-100 thats. In the 
case of Russia, a millennial review makes more than mere numerical 
sense. As a European civilization, Russia is roughly 1,000 years old, 
having accepted Christianity in 988. And now that Soviet Russia has 
collapsed under its own weight in the first year of the last decade of 
this century, any clues to its future -- if it is to have one and not 
disappear from the face of the earth as one of its own prophets, the 
19th-century philosopher Pyotr Chaadaev, predicted -- are probably best 
sought in its garish, violent, operatic past. 
So, in principle at least, W. Bruce Lincoln's book is justified. In 
practice, however, the results are decidedly mixed. Seeking to probe 
Russia's identity through its art, this book has an identity crisis -- 
to use an archaic buzzword -- of its own. The problem lies in both 
intent and execution. A scientist recently remarked to me that good 
science depends not only on rigorous checking of data but on making sure 
you're asking the right questions. Lincoln poses the problem as follows: 
''I found myself asking how a country with such a tormented past had 
brought into being such brilliant works of art.'' Harry Lime, the 
antagonist of the film ''The Third Man,'' answered that question 
cynically and well when quipping that Switzerland's 500 years of peace 
and prosperity had produced only the cuckoo clock. Suffering forces us 
to seek meaning; art is one instrument of that search. 
Why its spirit burns brighter in certain places at certain times is 
probably unknowable. I, for one, thought that the end of the Soviet 
empire would produce an efflorescence of art in Russia and, so far at 
least, have been proved dead wrong. Lacking a sharper initial question, 
Lincoln has deprived himself of a means of filtering 10 centuries' worth 
of data. Especially in the first quarter of the book, the reader has the 
same sensation of glut -- cathedrals, dates, rulers, isms -- that comes 
from a tour guide's breathless patter. The reason is simple: the volume 
covers the first 800 years of Russia's history in little more than 100 
pages while allotting over 300 to the 19th and 20th centuries. This 
results in an unbalanced narrative, though one that may well reflect the 
realities of history. It certainly is true that with a few glorious 
exceptions Russia produced little in its first 800 years that merits the 
close scrutiny, say, of Tolstoy's novels. But, oddly, while packing too 
much in, ''Between Heaven and Hell'' shortchanges some of those glorious 
exceptions. We are told that ''The Song of Igor's Campaign,'' a compact 
12th-century military epic, was the work of an ''unknown poet equal to 
those Western masters who had composed 'Beowulf' and the 'Song of 
Roland,' '' yet not a line is quoted to support that weighty assertion, 
even though Vladimir Nabokov took the trouble to translate the poem. 
This book's shaky sense of identity is also reflected in its style and 
diction. Especially in his coverage of the first 800 years of Russian 
architecture, Lincoln resorts to a prose of vapid enthusiasms; too many 
buildings are described like this, about a country palace: ''a 
breathtaking masterpiece that fairly shimmered with Baroque splendor.'' 
And when he reaches for metaphors, he mixes them badly, as in this 
description of the last two-thirds of ''War and Peace,'' where, Lincoln 
says, ''details and portraits blossomed into a chronicle that plumbed 
the very depths of human experience.'' To further muddy those very 
depths, Lincoln has chosen to use the standard scholarly transcription 
of Russian names, a decision that a savvy editor would have vetoed from 
the get-go; it results in such eyesores as Chaikovskii. Even our old 
friend Alyosha from ''The Brothers Karamazov'' becomes Alesha, with a 
very un-English dieresis over the ''e.'' 
All this is a shame because Lincoln, the author of such valuable 
histories as ''The Romanovs,'' has clearly done epic research for this 
book, which, once it settles down, especially in its treatment of the 
19th and 20th centuries, has both good anecdotes and good insights. For 
example, he traces the roots of Russian ideological art back to Ivan the 
Terrible (also the inventor of the first secret police): ''As Russia's 
first Government-supported art schools, the Czar's newly organized 
Kremlin workshops yielded the first art and artists who served the 
ideological aims of the Russian state.'' Before Socialist Realism there 
was Czarist Realism! And he has perceptive remarks to make about 
Russia's age-old and continuing struggle between imitating the West and 
finding its own way: ''The age of realism thus brought Russian art, 
music and literature into the very center of the European experience at 
the same time as it placed Russia at the center of its artists' work.'' 
Inevitably, any book about Russia, especially one about Russian artistic 
life, is bound to be full of outsize and extravagant personalities. 
Sergei Shchukin, the art collector, supposedly ''the only man ever to 
have owned more Picassos than Picasso himself . . . once acquired 11 
Gauguins in a single afternoon.'' The great ballerina Pavlova, famous 
for her role in ''The Dying Swan,'' had apparently so identified with 
that role that when she was stricken with pleurisy, she ''whispered to 
her maid: 'Get my ''Swan'' costume ready,' and then, a few moments 
later, breathed her last.'' Scriabin apparently had an ego that would 
make Donald Trump look bashful. In his notebooks he wrote: ''I am come 
to tell you the secret of life, the secret of death, the secret of 
heaven and earth. I am the author of all experiences. I am the creator 
of the world.'' But scattered observations do not compensate for a lack 
of rigor and distillation that tinges even the book's concluding 
sentence, which is as platitudinous as a politician at a prayer 
breakfast. Speaking of the artists of Russia's turbulent present, 
Lincoln says that ''it will be their consciences combined with a sense 
of the past and a vision of the future that will shape Russia's artistic 
experience in the decades that lie ahead.'' 

Richard Lourie has just completed a novel, ''The Autobiography of Joseph 
Stalin,'' and is beginning a biography of Andrei Sakharov.

********

#8
Business Week: April 13, 1998
{for personal use only]
International -- European Business: RUSSIA
WHO NEEDS RUBLES? (int'l edition)
Russia's virtual economy hides a lot of business--and tax revenue
By Patricia Kranz in Moscow 

Russia's Yamal-Nenets Autonomous Region, north of the Arctic Circle, is rich
in natural gas, vast in size, and small in population. The local government in
the capital of Salekhard gets most of its income from energy royalties.
Airplanes are the preferred method of travel. But the tale of how Yamal-Nenets
Governor Yuri V. Neyolov acquired a Tupolev 154 airplane shows just how far
Russia still has to go before it can accurately be called a free-market
economy.
To get his plane, Neyolov had to turn to what is fast becoming known as
Russia's ``virtual economy.'' Representing as much as two-thirds of all
transactions in Russia, the virtual economy is a vast web of barter,
promissory notes, tax offsets, and other nonmonetary forms of payment. The key
players are not banks but thousands of intermediaries called barter
specialists. Their job: to put buyers and sellers of goods together, often via
complicated chains of transactions. Through such a middleman, Neyolov
``bought'' his plane by trading gas paid to his government in lieu of energy
royalties. 
The deal involved not only monopoly Gazprom, which owed the royalties, but
manufacturers of aircraft and components in three other cities. The middleman
earned a commission--in goods--equal to 10% of the $17 million plane.
Russia's economy revolves around such deals. They are, in
effect, the tape and wire that keep the $425 billion economy together despite
severe liquidity shortages and a scarcity of bank credit for companies that
can't afford to borrow at Russia's 30% interest rates. Because of barter,
scores of enterprises that would have been bankrupt long ago in the West are
still producing--and employing workers. That has provided a safety valve,
especially for one-factory towns in remote regions. And because so much
business is done with hard-to-measure substitute money rather than cash,
official statistics underestimated the plunge in the economy from 1992 to
1996--and the speed of economic growth today. Government numbers say that
Russia's gross national product rose 0.4% last year, but the economy may
actually be chugging along at 3% or 4%, says Andrei Volgin, president of
Moscow-based Adamant Financial Corp., which acquires and restructures Russian
companies.
That doesn't mean barter is a good thing for Russia. With so little
business done in cash, the government can collect hardly any taxes. Meanwhile,
barter substantially raises the cost of doing business, most economists point
out. Since most sellers prefer cash, they charge a premium to accept bartered
goods or promissory notes. Then, barter specialists take commissions.
Together, these markups can add 10% to 70% to the cost of a transaction.
Barter may also be massively distorting the value of Russia Inc. Most
companies accept more than half of their revenue in bartered goods. These
sales are recorded as inventories, works-in-progress, or accounts receivable.
Profits are almost impossible to measure, since the value of a truckload of
widgets in lieu of payment in rubles may be arbitrary. Says Volgin:
``Corporate books have almost nothing to do with reality.''
NO CHOICE. Why do companies use such a cumbersome system? For many heavy
industries, it's a matter of survival. Machine-tool builders, steel mills, and
chemical makers have a harder time selling their goods than producers of raw
materials and consumer goods, so they rely on barter. For more prosperous
companies, barter is the most common way to skirt Russia's onerous taxes.
``Companies report virtual profits and have no cash to pay wages or taxes,''
says Pyotr Karpov, deputy head of Russia's bankruptcy commission and author of
a landmark government study on barter.
Needless to say, proliferating promissory notes also wreak havoc with the
Central Bank's monetary policy. They are a form of private money not measured
in statistics. Indeed, some experts say that just as much of this substitute
money floats around in Russia as there are rubles in circulation--some $61.6
billion. So while the official inflation rate in Russia has fallen from an
annual 840% in 1992 to 11.4% in 1997, hidden inflation is probably higher.
The barter boom took Boris Yeltsin's government by surprise. His reformers
thought that freeing prices in 1992 and later tightening monetary policy would
force inefficient enterprises out of business. But companies continued to ship
to one another. Those that couldn't pay in cash simply swapped products. In
1994, after the government cut off subsidies, companies began issuing
promissory notes. These circulate through a large but unregulated market
dominated by local banks.
Most notes end up in the hands of customers, who return them to the issuing
company in exchange for goods or services. A small percentage are redeemed for
cash. Says Elizabeth Sullivan, an ex-adviser to the Central Bank: ``No one
anticipated that companies would rely so heavily on these cash substitutes for
so long. This didn't happen in Central Europe.'' Although enterprises in
postcommunist Central Europe also relied on barter in the early 1990s, they
returned to cash as their governments tightened money and stabilized their
currencies. Central European companies also do more business with European
counterparts, which pay in cash.
Ironically, the Russian government has contributed to the growth of the
virtual economy. Under pressure from the International Monetary Fund to cut
state spending, Yeltsin's policymakers sometimes substituted tax credits for
government outlays. Says Andrei Tolmachev, a barter specialist: ``The
government tried to pretend that offsets were real money.''
Once Moscow jumped into the game, it spread. By 1997, only 10% of tax
payments were made in cash, says Karpov. The rest came in the form of
electrical energy, natural gas, or rail shipments that the government accepted
from companies in lieu of cash. But with tax revenues collapsing, Moscow
simply borrowed money to pay bills that must be paid in cash, such as state-
sector wages. As state borrowings have increased and interest rates have
soared, companies have been starved for credit. So they issue more promissory
notes--spinning a vicious circle.
Now, Moscow wants to break the barter chain. After months of resisting, the
parliament recently passed a tight 1998 budget that aims for a deficit below
4.7% of gdp. And tax offsets were outlawed as of Jan. 1, 1998. That means all
taxes must be paid in cash. In a break with the past, energy giants such as
Gazprom and Unified Energy System no longer will be forced to supply
government and corporate customers who can't pay. That will minimize the
energy trades that are at the root of the barter economy. As Gazprom and ues
demand payment in cash, the government hopes, their customers will begin
demanding cash payments from their own clients.
Smart managers already are reaping benefits by cutting down on barter. For
example, Severstal, one of Russia's leading steel producers, has cut costs by
10% to 12% since late 1996 by paying cash for iron ore, gas, power, and
transportation. The company has reduced barter operations from 30% of sales in
1996 to 17% in 1997. But Severstal is one of the major issuers of promissory
notes. Some 30% of its sales are settled through these notes. Until banks
begin lending money to companies, many will need to issue promissory notes to
keep operating.
CRUNCH. Many more enterprises will have to follow Severstal's lead before the
Russian economy can begin to function like a true market. If the government
sticks with its plans to force more companies to buy, sell, and keep their
books based on cash, it may sharply accelerate the much-delayed restructuring
of Russian industry. Such steps may prove painful, but they could speed growth
and bolster government coffers as companies generate the cash they need to pay
taxes.
A big question is whether the government has the guts to push through such
a strategy just two years before key presidential elections. Moscow faces a
difficult task: convincing both voters and the Communist-dominated Duma that
keeping the virtual economy alive will, in the end, sabotage workers'
security. Barter was an innovative way for companies to survive the initial
stresses of Russia's shift to capitalism. But now, the country must trade in
its virtual economy for the real thing--one based on cold, hard cash.

*******

#9
Business Week: April 13, 1998
[for personal use only]
International -- Editorials
HOW TAXES CRIPPLE RUSSIA (int'l edition)

Russia's economy appears frozen somewhere between communism and capitalism.
Not only is it dominated by a handful of very rich bankers, but much of the
actual commerce that takes place is in the form of barter. Cash is rarely
used--and for good reason. Banks extend very little credit. Even if they did,
barter would be preferred to cash. Why? Taxes. A crazy-quilt of exorbitant
taxes is levied on corporations and individuals, driving most participants to
a ``virtual economy'' of barter. Unless Moscow simplifies and lowers taxes,
barter will continue, and government services will suffer from a lack of
revenues.
Call it a virtual, black, or gray economy, it is where two-thirds of all
Russian transactions take place. In lieu of cash, there are promissory notes,
tax offsets, and other nonmonetary forms of payment--as well as the simple
exchange of goods. Moscow promoted this system by substituting tax credits for
government outlays. With taxes so high, the credits became instantly
appealing.Then the big
energy companies got into the barter business to keep their major industrial
buyers alive.
Moscow now wants a more transparent economy. It has outlawed tax credits
and ordered that taxes must now be paid in cash. Energy companies are also
demanding cash. But more must be done. Until a reasonable tax code is passed,
companies will avoid giving up all their profits to the government by sticking
to barter. To get more, Moscow must demand less.

*******