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Johnson's Russia List
9 April 1998
[Note from David Johnson:
1. Reuters: Kremlin resigned to PM setback, wins union backing.
2. Reuters: OECD - Russian GDP growing, but debt problems loom.
3. Obshchaya Gazeta: Academics Weigh Chernomyrdin's Presidency Bid.
4. Moscow Times: Louise Grogan, Arrears Enslave Labor.
5. VOA: Barry Wood, THE WORLD BANK'S TOP OFFICIAL IN RUSSIA, MICHAEL
CARTER, ON RUSSIA.
6. VOA editorial: RUSSIA SHOULD AVOID ASIAN MODEL.
7. AP: Poll Gives Lebed Poor Election Chance.
8. AFP: Defense Chief Says Army Was Unable to Fight.
9. USIA: TALBOTT ON 'THE NEW UKRAINE IN THE NEW EUROPE.'
10. Moscow Times: Dmitry Zaks, Reformed Rutskoi Courts U.S. Investors.
11. Itar-Tass: Russians Polled on Attitudes to Co-Nationals in CIS.
12. Interfax: Majority See Russia, Belarus 'Parts of One State.'
13. Reuters: Latvia government in crisis amid Russia row.
14. Interfax: NATO Envoy Reviews First Year of Alliance With Russia.]
Kremlin resigned to PM setback, wins union backing
By Alastair Macdonald
MOSCOW, April 8 (Reuters) - President Boris Yeltsin seemed resigned on
Wednesday to failing in his first attempt to secure parliamentary approval for
inexperienced Sergei Kiriyenko as Russia's prime minister.
But the odds in favour of an eventual compromise shortened when labour
leaders, who have called millions of workers out to demonstrate across Russia
on Thursday, threw their support behind the 35-year-old technocrat after he
promised an end to mounting wage arrears.
``Getting him approved at the first attempt is most unlikely,'' Alexander
Kotenkov, Yeltsin's personal representative in the State Duma (lower house of
parliament), said of Kiriyenko's chances of being confirmed as premier in a
vote on Friday in the Communist-led chamber.
Kotenkov, speaking to reporters, declined to be drawn on what Yeltsin would do
if the Duma rejected Kiriyenko, whom he has nominated to replace the veteran
Viktor Chernomyrdin and revitalise market and social reforms.
But Yeltsin has warned parliament he would re-nominate Kiriyenko until he gets
his way and would go as far as to dissolve parliament if necessary.
Communist leaders kept up their hostile rhetoric. They say Kiriyenko is too
liberal and they expect their supporters to press demands for a broad
coalition government in the workers' protests set for Thursday.
Communist Party leader Gennady Zyuganov said he would seek a change in Duma
rules to deny deputies a secret vote on Friday.
That would bolster party discipline and reduce Kiriyenko's chances of being
endorsed on the strength of discreet defectors.
If the Duma rejects three presidential nominations for premier, the
constitution demands a new parliamentary election.
Union leaders welcomed Kiriyenko's efforts to woo the disaffected by promising
to pay off public sector wage debts and beef up welfare protection.
``A positive dynamic can already be seen,'' said Mikhail Shmakov, chairman of
the Federation of Independent Trade Unions.
``Our latest meeting with acting prime minister Sergei Kiriyenko showed that
he is personally concerned and has given instructions to those who are working
out the government's programme to listen carefully to the trade unions'
suggestions and reflect them in that programme,'' he told Ekho Moskvy radio.
Despite the political uncertainty, the International Monetary Fund (IMF) said
Russia remained on a reform course, adding that Kiriyenko could sign an
economic plan agreed with the fund as early as Thursday. The agreement will be
the basis for further IMF lending.
The Organisation for Economic Cooperation and Development forecast Russia's
economy would grow by two percent this year, and double that in 1998, while
inflation would be around 10 percent this year and next.
But it also warned in its twice-yearly world economic review that Russia
remained vulnerable to aftershocks from Asia's financial crisis.
And, in a sign that Russia is suffering from low world crude prices, the
government and oil companies on Wednesday agreed to cut oil exports by about
Thursday's day of action will provide a platform for critics of Yeltsin's
economic policies, especially the Communists who said they expected 15 million
Russians -- one in 10 of the population -- to take part in the protests.
Despite Chernomyrdin's previous promises, the state owed doctors, teachers and
other public sector workers 7.6 billion roubles ($1.2 billion) as of March 1.
That failure precipitated Chernomyrdin's sacking, Yeltsin said at the time.
Thousands of doctors and other medical staff got demands for back wages and
higher pay in a day early on Wednesday.
``We just want to live normal lives and get our pay on time,'' said a woman
protesting at the White House government building.
The toughest language out of the Kremlin on Wednesday was reserved for the
government of Latvia, however.
Yeltsin's spokesman was quoted saying the president wanted Russian oil firms
to boycott Latvia's port of Ventspils in a bid to press Riga into ending what
Moscow says is discrimination against Russian-speakers in the former Soviet
OECD - Russian GDP growing, but debt problems loom
By Peter Henderson
MOSCOW, April 8 (Reuters) - Despite its growing economy,
Russia could lose control of its mounting debt if interest rates
are not held in check in the wake of the Asian financial crisis,
the OECD said in a report released on Wednesday.
The Organisation for Economic Co-operation and Development
forecast Russia's economy would grow by two percent this year,
and double that in 1998, while inflation would be around 10
percent this year and next.
It said Russia had managed to get output growing again but,
like neighbouring Ukraine and the Baltic states, remained
vulnerable to aftershocks from market turbulence in Asia.
"At higher interest rates, government debt could potentially
spiral out of control, particularly if growth in the economy
does not pick up and fiscal imbalances are not corrected in the
near future," the OECD said in its twice-yearly world economic
Russian domestic interest rates are now over 30 percent and
edged up this week on uncertainty surrounding the formation of a
new government. They peaked around 45 percent early this year
after falling below 20 percent last autumn.
The OECD said depressed world oil prices could also hurt
Russian tax receipts, which had risen in the first quarter.
But it said Russian industry had so far barely been affected
by market turmoil in Asia, since cash-poor companies had little
exposure to the already expensive debt market and essentially
had nothing to lose.
Future prospects, however, depended on development of a
credit market, but this was threatened by high interest rates
and the slow pace of reform, the OECD said.
"Very high interest rates on state securities, which
increase the attractiveness of government paper relative to
corporate debt or equity, may have the effect of delaying the
development of institutions for effective financial
intermediation in the future," it said.
The OECD also noted that fixed capital investment in the
Russian economy was falling.
It said it expected Russia's current account surplus to
shrink to $1.0 billion this year from $4.0 billion last year,
and saw a zero balance for 1999.
The OECD said the key to improving Russia's economic
performance lay in structural changes.
Improved tax collection, budget cuts, continued
privatisations and the passage of a tax code seen by the OECD as
vital to improving revenues and the business environment topped
its list of priorities.
"The future health of the Russian economy, and a revival of
fixed capital investment, will depend greatly on these
measures," it said.
The OECD gave largely the same prescription to Ukraine,
Russia's southern neighbour, where the pace of reforms has been
It said Ukraine could be close to reversing an economic
slowdown thanks to a revival in a few sectors and a vibrant
But delays in restructuring could impair recovery and,
combined with poorly developed financial markets, made Ukraine
potentially vulnerable to financial volatility.
Ukraine's central bank has raised rates and drawn down
reserves to defend its currency in recent months, when investors
have largely shied away.
The OECD said Estonia, Latvia and Lithuania had weathered
the storm on financial markets relatively well, but that their
current account deficits were high at eight to 10 percent of
gross domestic product.
"Even though these deficits were partly compensated by a
pickup in foreign direct investment, the economies of the
Baltics remain potentially vulnerable to short-term capital
flows," it said.
The OECD gave the following projections for the Russian
1999 1998 1997
Output (GDP growth, pct) 4.0 2.0 0.4
Inflation (pct) 10.0 10.0 11.0
Unemployment (pct) 10.0 9.5 9.0
Fiscal balance (pct of GDP) -5.0 -5.0 -6.9
Current acct balance ($ bln) 0.0 1.0 4.0
Academics Weigh Chernomyrdin's Presidency Bid
Obshchaya Gazeta, No. 13
2-8 April 1998
[translation for personal use only]
Feature comprising articles by Dr. of Political Sciences Igor
Bunin and Dr. Of Historical Sciences Viktor Kuvaldin: "Chernomyrdin
Has Begun His Siege of the Kremlin. Will He Have Enough 'Breath' To
Make It to the Year 2000? Will His Russia Is Our Home [NDR] Party
Live To See the Election?"
Igor Bunin: When the Party of Power Is Unified, It Is Unbeatable
The main question for both Chernomyrdin and the future of Russia is
whether all of the groups that make up the elite nucleus of the current
system will be able to reach agreement about a successor to the head of
state? Today there are five such groups: the "czar's party" (Yeltsin
himself, his family, the staff, and, in many ways, Berezovskiy)
"Chernomyrdin's party" (NDR, Gazprom, Lukoil, and most of the major
bankers), "Chubays's party," the "Nemtsov-Potanin party" and "Luzhkov's
For the time being, it is not known for sure if Yeltsin will decide to
oppose Chernomyrdin in his desire to occupy the highest post. Nor is it
known if the Kremlin will cultivate a party of power that is an alternative
to the NDR. If Nemtsov's "antioligarchic" coalition continues to exists,
if resources and cadres begin to flow into it, Russia Is Our Home will,
naturally, begin gradually to wither away.
If NDR remains the only party of power, it is guaranteed, I presume,
13-14 percent of the votes at the State Duma elections. This would give
Chernomyrdin's presidential campaign a pretty good start. If two columns
are formed, then one will apparently pick up about 7 percent, and the other
Accordingly, at the presidential election too, the one who will
represent the entire party of power in the broad sense of the word is the
electable one. If there are, say, two candidates from two
financial-political groups, then they will probably cancel one another out,
and the winner will probably be Lebed or someone like him.
The figure of Chernomyrdin, in my opinion, is most suitable for the
role of the single protege of the ruling elite. Of course, Viktor
Stepanovich has one clear disadvantage: Psychologically, he is still an
official, for five years he did not contradict the president on any point
(at least not in public) -- after that, it is not easy to adjust to the
role of independent politician right away. Back when Yeltsin rebelled
against Gorbachev, it was a "rebellion against the father." Chernomyrdin
does not have this kind of Freudian complex, he, on the contrary, is used
to respecting his "father."
But, at the same time, he is a Urals Cossack by descent, and he has
Cossack boldness in him. Even before, the ex-premier had his hierarchical
sights set on the presidency. He thought that, enjoying the status of the
country's number two, he was supposed to become number one. Now Viktor
Stepanovich also wants to prove to himself that he is a man and that it is
too early to write him off.
The NDR leader has already found his main idea. It has to do with the
fact that, if the incumbent president breaks everything every year, then
the ex-premier, having become the master of the Kremlin, is obliged to
create a stable state. Most of Russian society would like a consolidation
of the new system, not constant explosions; this society can accept the
idea of stability, order, gradualness, caution, and soundness.
We have studied in focus groups the electorate's ideas about Russia's
main politicians. The image of Chernomyrdin is very complex and
multifaceted. He also has regal qualities. Of course, they are much fewer
than in Yeltsin's image, but the respondents call Yeltsin a "lion in
decline"; Chernomyrdin is compared to a bear, a horse, a mole, and a snake
-- quite some menagerie. The qualities of soundness, wealth, and wisdom
are associated with him. In a word, if they give the NDR leader the
resources there will not be any problems with the electorate. [Bunin ends]
Viktor Kuvaldin: There Is Nothing Deader Than a Dead King [subhead]
In order to stand a decent chance as a presidential candidate
Chernomyrdin must first receive, I think, no less than 10-12 percent
support at the State Duma elections. Then he will prove that he is worth
something, regardless of the post he occupies. But I will not promise that
the NDR will now make it past even the 5-percent hurdle.
The main NDR resource is that the electorate has considered it to be
the party of power. All over the world there are so-called "deferential
voters"; in Russia there are plenty of them too. They are the ones who
make up Our Home's electoral niche. Right now, though, everyone
understands perfectly well that Yeltsin is divided on the issue of
Chernomyrdin and his movement. Consequently, the Chernomyrdinites can no
longer be regarded as the party of power, having lost direct involvement in
it. And statements like "Yeltsin does not object to the former premier's
participation in the battle for the presidency" will not save them -- you
cannot fool our electorate.
The status of the party of power is a transient phenomenon. After all,
at one time this definition was used to denote Russia's Democratic Choice
and the PRES [Party of Russian Unity and Accord], and who can now recall
that there was such thing as "Shakhray's party"? I do not think that
Chernomyrdin is still guaranteed unconditional support from Gazprom or
Lukoil. For corporations like these, good relations with the authorities
are a matter of life and death. They will hardly risk arousing the
discontent of the president or the new head of the cabinet out of feelings
of appreciation toward Viktor Stepanovich.
NDR will have a hard time turning into a conventional party and
competing with the others on an equal footing. For example, it still has
to go through the stage of real party development, which both the CPRF
[Communist Party of the Russian Federation], the LDPR [Liberal Democratic
Party of Russia], and Yabloko have already undergone. True, luckily for
Our Home, Yeltsin is not likely to institutionalize some sort of new party
of power -- he is heavily allergic to any party.
While Chernomyrdin was premier, he had the ideal opportunity to become
heir. If he had left the government slamming the door behind him, this
would have also given him some electoral clout. But the current status of
the ex-premier, who is neither in power nor in opposition, does not give
him any advantages. There is nothing more dead than a dead king.
For more articles from The Moscow Times, check out their website at
April 9, 1998
Arrears Enslave Labor
By Louise Grogan
Louise Grogan is a labor economist at the Tinbergen Institute in
Amsterdam and visiting researcher at the Institute of Socio-Economic and
Population Issues in Moscow. She contributed this comment to The Moscow
As workers march today in the Federation of Independent Trade Unions
demonstration demanding payment of back wages, the world will have a
glance at the magnitude of Russia's labor market problems. Hearing about
the demonstration from abroad, many will assume that wages have not been
paid because the employers involved are on the verge of bankruptcy. This
is a convenient fallacy that allows the Russian government and
international community to accept wage arrears as a tradeoff against
unemployment. In fact, these wages are owed by profitable and
Contrary to popular belief, the workers in the public sector are not the
hardest hit by wage arrears. A 1996 Russian labor force survey showed
that nonpayments occur more frequently in private enterprises. Wage
arrears are often unrelated to a company's financial state, and are used
by management, particularly in large mining, agricultural and
manufacturing enterprises, to obtain tax breaks from the federal
Going for months without wages sounds like slavery. Actually it is
worse, because slave owners care for their slaves as commodities, and so
invest in their food and shelter. Slaves can also escape to a better
life, whereas for many Russians there is nowhere else to go.
Furthermore, an unpaid Russian worker who quits is almost certain never
to obtain the money that he is owed.
Even with the best data available, the Russian labor market largely
defies the explanations of Western-trained economists. They thought that
price liberalization would lead to a large shedding of excess labor, and
that the wages of those who remained would rise according to their
skills, experience and on-the-job productivity. The economists also
assumed that deregulation would lead to efficiency in the labor market.
They expected that high unemployment would be a short-term transitional
phenomenon, but that this would soon be overcome by the birth of new,
According to statistics from Goskomstat, or the State Statistics
Committee, the average wage in 1995 was 34 percent of what it was before
Russia's transition from the Soviet economy.
Part of the reason for the decrease in wages can be attributed to the
way the excess profit tax operated until last year. Enterprises could
minimize taxes by keeping on as many workers as possible. Another part
is attributable to the three months of severance pay employers are
required to pay laid-off workers. It is more cost-effective to reduce
real wages until a worker quits than lay him off.
Even in profitable firms workers and unions have little bargaining power
owing to slack labor demand. In a well functioning economy, wages come
from the profits from goods and services. The more productive or skilled
workers can command higher wages because their relative contribution to
profits is high. Companies that pay good money can select from the best
workers and in turn get employees who have respect for their jobs and
employer. Companies that pay poorly, or treat their workers badly, get
high turnover and workers who shirk responsibility. Thus, low labor
demand can produce low productivity and prolong stagnation.
Unemployment is a terrible thing. It saps a person's financial reserves,
causes great stress and uncertainty and erodes self-esteem. Yet
unemployment can also be seen as a time investment in finding a more
secure, better-paid job or more suitable occupation. It is arguably less
terrible than enslavement.
The Russian government must improve the system of unemployment benefits
so that people can at least survive while they look for new work.
Workers should not be penalized in entitlements if they resign from jobs
at which they go unpaid. The severance pay requirements that are put on
employers should be revised so as not to deter firms from shedding
Enterprises should be compelled to post vacancies at employment
agencies. Investment incentives should be given for the construction of
enterprises in areas where there is only one industry. Voluntary
training schemes should be set up in cooperation with enterprises
requiring specific skills.
To make profitable enterprises pay workers on time will require a duel
with the big industrial groups that the government cannot afford to
alienate. To make unprofitable enterprises pay wages will force closures
and mass layoffs, jeopardizing social stability and putting a strain on
the chronically underfunded Federal Employment Service. Even with
millions marching, the government does not feel pressure to take such
When the Group of Seven industrialized nations and Russia met this
February, Russia agreed to an international plan to tackle unemployment
and social problems in each of the countries. The Western nations
tacitly accepted Russia's commitment to be only symbolic. Yet there are
both moral and economic reasons why the international community is
justified in pushing the Russian government to take action on wage
The situation clearly violates International Labor Organization
conventions to which Russia is a signatory, not to mention anti-slavery
and human rights declarations.
International lenders should be concerned by the severe distortion in
economic indicators that results from prolonged nonpayments. Long-term
economic growth will be compromised or delayed if bad investments are
made and if insolvent factories are not closed down. The ultimate threat
to reform, however, is that alienated workers will vote for retrograde
ideologues who make doubtful promises to redress the crisis.
Voice of America
TITLE=RUSSIA WORLD BANK (L-ONLY)
INTRO: THE WORLD BANK'S TOP OFFICIAL IN RUSSIA, MICHAEL CARTER,
HAS WARNED (WEDNESDAY) THAT THE HARD WON SUCCESSES IN STABILIZING
RUSSIA'S ECONOMY APPEAR INCREASINGLY FRAGILE. V-O-A'S BARRY WOOD
REPORTS, MR. CARTER SPOKE AT WASHINGTON'S CENTER FOR STRATEGIC
AND INTERNATIONAL STUDIES.
TEXT: MR. CARTER BELIEVES THE MOST TANGIBLE ECONOMIC SUCCESS IN
RUSSIA IS BRINGING INFLATION DOWN TO 11 PERCENT. THAT IS A HUGE
IMPROVEMENT FROM 131 PERCENT INFLATION TWO YEARS AGO. AFTER EIGHT
CONSECUTIVE YEARS OF DECLINE, THE RUSSIAN ECONOMY IN 1997
REGISTERED VERY SLIGHT GROWTH (.4%). ONE PERCENT GROWTH IS
EXPECTED THIS YEAR.
BUT MR. CARTER WORRIES THAT PROGRESS COULD BE UNDONE. INTEREST
RATES, HE SAYS, ARE TOO HIGH AND THEY CAN'T COME DOWN UNTIL THE
GOVERNMENT REDUCES ITS BUDGET DEFICIT. MR. CARTER SAYS THE
ECONOMY CAN'T GROW VIGOROUSLY UNLESS INTEREST RATES ARE LOWER.
// CARTER ACT //
OUR ASSUMPTION IS THAT IF INTEREST RATES ARE BROUGHT
DOWN THAT OUGHT TO HAVE A POSITIVE IMPACT ON THE WAY THE
BANKING SECTOR BEHAVES. BECAUSE THERE SHOULD BE SOME
MOVE AWAY FROM FOCUSING ON MAKING MONEY BY LENDING TO
THE GOVERNMENT TO BEING FORCED TO THINK ABOUT MAKING
MONEY BY LENDING RATHER LONGER-TERM FOR PRODUCTIVE
PURPOSES IN THE PRIVATE SECTOR. AND CLEARLY THIS HAS
BEEN A BIG CONSTRAINT ON INVESTMENT AND GROWTH.
// END ACT //
MR. CARTER ALSO WORRIES THAT RUSSIA IS NOW MORE VULNERABLE TO
EXTERNAL ECONOMIC SHOCKS. HE MENTIONS THE WITHDRAWAL OF SOME
INVESTMENT CAPITAL IN THE WAKE OF THE ASIAN FINANCIAL CRISIS AND
THE ADVERSE IMPACT OF LOWER OIL PRICES. RUSSIA'S BIGGEST EXPORTS
ARE OIL AND GAS.
THE WORLD BANK SAYS RUSSIA NEEDS TO ATTRACT MORE FOREIGN DIRECT
INVESTMENT. BUT, SAYS MR. CARTER, THE PARLIAMENT HAS NOT BEEN
ABLE TO REACH CONSENSUS ON WHETHER FOREIGN INVESTMENT IS GOOD OR
BAD FOR RUSSIA. THE WORLD BANK IS RUSSIA'S LARGEST SOURCE OF
Voice of America
DATE= APRIL 9, 1998
TITLE= EDITORIAL: RUSSIA SHOULD AVOID ASIAN MODEL
THE VOICE OF AMERICA PRESENTS DIFFERING POINTS OF VIEW ON A WIDE
VARIETY OF ISSUES. NEXT, AN EDITORIAL EXPRESSING THE POLICIES OF
THE UNITED STATES GOVERNMENT.
SINCE THE BREAK-UP OF THE FORMER SOVIET UNION, RUSSIA HAS
MADE CONSIDERABLE PROGRESS IN STABILIZING ITS ECONOMY. THE RATE
OF INFLATION HAS DROPPED TO ITS LOWEST POINT IN YEARS. THE
COUNTRY EXPERIENCED A SMALL INCREASE IN GROSS DOMESTIC PRODUCT IN
1997. THE UNITED STATES HAS PRAISED THE RUSSIAN GOVERNMENT FOR
TAKING DIFFICULT STEPS. BUT IF RUSSIA IS TO ACHIEVE MORE RAPID
ECONOMIC GROWTH, IT NEEDS TO MAKE FURTHER PROGRESS IN
ESTABLISHING MARKET INSTITUTIONS.
U.S. DEPUTY SECRETARY OF THE TREASURY LAWRENCE SUMMERS
RECENTLY CAUTIONED RUSSIA AGAINST THE MODEL SOME ASIAN STATES
HAVE FOLLOWED. THAT MODEL FAVORS THE CENTRALIZED COORDINATION OF
ECONOMIC ACTIVITY OVER DECENTRALIZED MARKET INCENTIVES. IT ALSO
INVOLVES GOVERNMENT TARGETING OF PARTICULAR INDUSTRIES. THE
RESULT HAS BEEN WHAT SOME CALL "CRONY CAPITALISM."
RUSSIA'S NASCENT CAPITALISM HAS EXHIBITED SOME OF THESE
TENDENCIES. AS RUSSIA'S FIRST DEPUTY PRIME MINISTER, BORIS
NEMTSOV, WROTE IN A NEWSPAPER ARTICLE LAST MONTH, "THE STATE HAS
ALLOWED AND EVEN ENCOURAGED THE CONCENTRATION OF PROPERTY AND
POWER IN THE HANDS OF A NARROW GROUP OF ENTREPRENEURS, CONNECTED
WITH BUREAUCRACY." DESCRIBING THIS PROCESS AS THE "PRIVATIZATION
OF AUTHORITY," NEMTSOV CALLED IT "DISGUSTING."
THE FACT THAT SUCH SELF-CRITICISM IS VOICED AT THE HIGHEST
LEVELS OF THE GOVERNMENT GIVES HOPE THAT RUSSIA WILL AVOID THE
MISTAKES OF SOME ASIAN STATES. THEY HAVE EXPERIENCED DEEP
FINANCIAL CRISES CAUSED IN NO SMALL PART BY THE LACK OF
TRANSPARENCY IN THEIR GOVERNMENTAL AND FINANCIAL INSTITUTIONS.
AMONG THE KEY ELEMENTS IN THE RECIPE FOR LONG-TERM SUCCESS, AS
DEPUTY TREASURY SECRETARY SUMMERS SAID, ARE TRANSPARENCY AND A
CLEAR SEPARATION BETWEEN THE STATE AND PRIVATE ENTERPRISE.
THAT WAS AN EDITORIAL EXPRESSING THE POLICIES OF THE U.S.
GOVERNMENT. IF YOU HAVE A COMMENT, PLEASE WRITE TO EDITORIALS,
V-O-A, WASHINGTON, D-C, 20547, U-S-A. YOU MAY ALSO COMMENT AT
WWW-DOT-VOA-DOT-GOV-SLASH-EDITORIALS, OR FAX US AT (202)
April 8, 1998
Poll Gives Lebed Poor Election Chance
THE ASSOCIATED PRESS
Russia's former national security chief Alexander Lebed, who is running
for governor of the key Siberian region of Krasnoyarsk, has little
chance of beating the incumbent, a poll released Wednesday indicated.
Nearly 38 percent of those questioned by the Krasnoyarsk branch of the
International Academy of Entrepreneurs backed Governor Valery Zubov, who
was followed by Lebed with about 20 percent and Communist Party
candidate Pyotr Romanov with 7 percent.
Results of the poll were cited by Interfax. Its margin of error was not
Lebed, credited with ending the war in Chechnya, finished a strong third
in the first round of Russia's 1996 presidential election.
The former general was once considered a leading potential contender in
Russia's next presidential election, scheduled for 2000, but his
popularity ratings have fallen in the past year.
Many see his attempt to become governor of Krasnoyarsk -- a large region
that is an economic powerhouse -- as a bid to regain a place in public
April 8, 1998
Defense Chief Says Army Was Unable to Fight
AGENCE FRANCE PRESSE
Acting Russian defense minister Igor Sergeyev stressed the urgent need
for military reform Wednesday, saying most units were incapable of
fighting last year, Russian news agencies reported.
Addressing retired senior officers in Moscow, Sergeyev said that if
military reform was not carried out immediately, "it will be virtually
impossible to do it ever," Itar-Tass reported.
When military reforms were launched in 1997, "no units were
combat-capable" apart from the strategic rocket forces and some units of
paratroopers, he said.
Fifty-three percent of the armed forces aircraft and 40 percent of air
defense systems and ground forces equipment needed repairs, Sergeyev
Last year, the Defense Ministry spent 90 percent of its budget
allocations just on maintaining military personnel, and the armed forces
are still in financial straits this year, Sergeyev said.
Military reforms cannot be successful with "the existing debt burden,"
Sergeyev said, adding that the Defense Ministry's utility bills had
risen to 13 billion rubles ($2.2 billion).
He also said the lessons of the conflicts in Afghanistan and Chechnya
had not been incorporated into Russian military training.
Last month, Sergeyev said the Defense Ministry could not afford to buy
any new warplanes until 2000 and would upgrade existing aircraft until
In its reform program, the Russian government plans to slash troop
strength by 500,000 to 1.2 million by the end of 1998, abolish
conscription and create an efficient, mobile, professional army.
Military experts say the targets set by the government are too
ambitious, and the army will be struggling to finance such a major
Desertions, murder, and suicides are now common in the crisis-ridden
Russian army, where young conscripts are frequently ill-treated by
08 April 1998
TEXT: TALBOTT ON 'THE NEW UKRAINE IN THE NEW EUROPE'
(Speech April 8 at Harvard workshop on Ukrainian Security) (4530)
Washington -- An independent, secure, democratic and prosperous
Ukraine is a keystone in the architecture of the new Europe, and the
United States will continue to support genuine movement towards
political and economic reform, said Deputy Secretary of State Strobe
Talbott delivered opening remarks April 8 at the Workshop on
Ukraine-NATO Relations sponsored by the Harvard University Project on
Ukrainian Security and the Stanford-Harvard Preventive Defense
Project. The workship was held at the Brookings Institution in
"As long as Ukraine moves forward with economic and political reform,
we will maintain the wide array of programs and initiatives that have
made Ukraine the forth largest recipient of American assistance in the
world -- and the number one recipient in the former Soviet Union,"
Talbott said. The United States will also continue with the
U.S.-Ukraine Binational Commission, he added, and "we will sustain our
effort to help integrate Ukraine more fully into international
institutions and structures."
Talbott cited many of Ukraine's accomplishments, such as its peaceful
transition to independence, its decision to join the Non-Proliferation
Treaty as a non-nuclear-weapons state, its efforts to resolve ethnic
differences, and its efforts to reach out "across divides of history
and geography to its neighbors, particularly Russia."
However, he stressed the need for additional political and,
particularly, economic reform, saying Ukraine "has inhibited its
ability to do two things which are, quite simply, vital for its own
long-term viability: provide a prospect of prosperity for its own
now-enfranchised citizens and integrate with the outside world. These
twin disabilities put Ukrainian security itself in jeopardy."
Talbott discussed a wide range of other issues, including Ukraine's
"Distinctive Partnership" with NATO; the March 29 parliamentary,
municipal and local elections; the future of the Ukrainian Communist
Party; and the limits on U.S. aid to Ukraine mandated by Congress
unless there has been "significant progress" on a number of specific
disputes involving the entry of U.S. firms into the Ukrainian market
by the end of this month.
April 9, 1998
Reformed Rutskoi Courts U.S. Investors
By Dmitry Zaks
It was an unlikely reversal of roles. Alexander Rutskoi, the fiery
former vice president who led a bloody 1993 uprising to turn back the
clock on Russia's economic reforms, was trying Wednesday to persuade a
group of Western executives to give him their money.
"I am a soldier. I don't beg. But I need investors who can be my fair
partners," said Rutskoi, who since his surprise election in November
1996 has been governor of the economically struggling Kursk region in
"And if you grow, or if your business will need to expand, I'll set you
up myself. I'll make sure you get some more land," Rutskoi went on.
Wednesday's event was organized by the American Chamber of Commerce in
Russia, which gave Kursk its "region of the month" award for April.
But while the Afghan war veteran was in the unfamiliar position of
asking foreign capitalists for help, he did it with his familiar
On entering the auditorium in Moscow's plush Radisson-Slavjanskaya
hotel, he immediately took charge.
"I don't know who organized this thing," he told the 50 or so executives
waiting leisurely in their seats, "but I want everyone in that corner,
And heeding orders, business-suited CEOs and Russian representatives of
Price Waterhouse, Quaker Oats, Heineken and others obediently scuttled
into the front corner of the hotel's cinema hall and pricked their ears
This is the Rutskoi sell, military style.
Colorful and forceful, Rutskoi has come a long way since September 1993,
when he and some communist allies barricaded themselves inside the White
House, which then served as the parliament building.
It was Rutskoi who called on his supporters to take up arms and seize
the bastions of Yeltsin's regime. "Young people, combat-ready men,
everybody should be forming detachments and we should now attack the
Mayor's Office and the Ostankino Television Center. We should assault
those two buildings and win," he said at the time.
Yeltsin eventually stormed the White House with tanks, forcing the
capitulation of those holed up inside. At least 170 Muscovites died in
the battle. Rutskoi and other coup leaders ended up in Moscow's
Lefortovo prison before the State Duma, parliament's lower house, gave
them an amnesty.
Rutskoi burst back into politics on the coattails of another general,
Alexander Lebed, who had just been dumped from the Kremlin. Barred from
taking part in the Kursk gubernatorial election until 36 hours before
polling stations opened, Rutskoi and Lebed arrived in town. Lebed, then
enormously popular, publicly endorsed Rutskoi's campaign. After spending
about $700 on the election, Rutskoi won 79 percent of the vote.
The Kremlin was temporarily stunned.
Today, Rutskoi sports a cellular phone and a British legal adviser who
preaches tax incentives and labor laws.
He is still rumored to run his small provincial region about 500
kilometers south of Moscow with an iron fist. One Moscow magazine
recently wrote that locals fear to complain about Rutskoi in public
because they think they might get arrested.
It also said the governor forces farm bosses to lie about their
production figures just so that the region will look good.
But while Rutskoi denies these stories, calling them a Kremlin-led
campaign to discredit him, he makes no secret of the fact that local
business and bureaucrats are completely under his thumb.
"In other regions it can take two months to agree on anything. I call
people to my office, and get their signature on the right papers in 15
minutes," he said.
Without a flicker of self-consciousness, Rutskoi told his audience
Wednesday he had several regional business whose owners have been
"cleared out" -- he did not elaborate -- and whose holdings are now
available to purchase by foreigners.
He added: "You won't be bothered by racket, I assure you. All the
mobsters fled to neighboring regions the day I arrived."
And ironic though it may be, Rutskoi's autocratic style of government is
proving attractive to some western investors.
"Out of about 20 regions that I have dealt with in Russia there is not a
single one that was more friendly to a foreign investor than governor
Rutskoi's," said Max Asgari, chief executive of the
Luxembourg-registered Sun Brewing and Partners, which is working in
partnership with a Kursk brewery.
Rutskoi said he regularly meets with Asgari to make sure the investor is
not running into problems. Asgari is actually branching out in Kursk.
Among other things, he is Rutskoi's new partner in an upscale hotel that
is just being built.
"I am a happy investor," Asgari said.
Others attending the chamber meeting were more skeptical, wondering
aloud what would happen to their businesses should Rutskoi no longer be
around to protect them.
"I won't go anywhere," Rutskoi assured them. "I plan to stay around."
Russians Polled on Attitudes to Co-Nationals in CIS
MOSCOW, April 3 (Itar-Tass) - The majority of respondents in a public
opinion poll of March 21 want Russia to take care of its people living in
the former Soviet republics.
A total of 44 percent of the respondents want the country to help
Russian-speaking persons in their settlement in Russia with money, housing
and employment, and 43 percent of the polled stand for political and
economic measures to make the former Soviet republics observe the rights of
their Russian-speaking residents.
Some 17 percent of the respondents suggested a direct humanitarian aid
to disabled Russians, and 12 percent favor the transfer of money to funds,
societies and organizations that help Russian-speaking persons. Every
tenth participant in the poll would like to expand cultural relations with
the Russians living abroad.
Only 7 percent of the respondents think that Russia should not render
any assistance to its people living in the former Soviet republics.
In the opinion of sociologists, government measures to help the
Russian-speaking persons abroad would gain support of the majority of the
The poll was held by the Public Opinion fund for 1,500 residents of
towns and villages in various regions of Russia.
Majority See Russia, Belarus 'Parts of One State'
2 April 1998
Two thirds of the Russian citizens (64%) consider Russia and Belarus
to be parts of one state. In Belarus this belief is shared by only 50% of
the population, according to an opinion poll held by the All-Russia Center
for Studying Public Opinion (VTsIOM) at the end of March, on the eve of the
first anniversary of the Russian-Belarussian Union agreement. The poll
involved 1,600 Russian and 1,000 Belarussian citizens.
Twenty-three percent of the Russian and 32% of the Belarussian
citizens said that Russia and Belarus are two different states; 13% and
18%, respectively, were undecided. Asked which other CIS countries they
would like to see in the Russian-Belarusian Union, 62% of the Russian and
62% of the Belarusian respondents named Ukraine. Forty-three percent of
the respondents in Russia and 38% in Belarus said they would like
Kazakhstan to join the Union. Next come Moldova (34% and 29%,
respectively), Uzbekistan (26% and 20%), Georgia (25% and 18%), Armenia
(25% and 15%), Kyrgyzstan (22% and 13%), Azerbaijan (21% and 11%),
Turkmenistan (20% and 11%) and Tajikistan (18% and 10%). Eleven percent of
the Russian and 10% of the Belarussian respondents oppose the admission of
other countries to the Union; 23% and 24% were undecided.
Assessing the political situation in Belarus, 19% of the respondents
in Russia and 21% in Belarus said that a dictatorship is being established
in that country. Twenty-three percent and 21% of the respondents,
respectively in Russia and Belarus, said that the political regime in
Belarus has not changed. And 10% of the Russians and 17% of the
Belarussians think that democratic processes continue in Belarus. Twelve
percent and 11% of the respondents, respectively, said that anarchy is
setting in Belarus. Thirty-six percent of the respondents in Russia and
30% in Belarus found it difficult to describe the situation in Belarus.
FOCUS-Latvia government in crisis amid Russia row
By Patrick Lannin
RIGA, April 8 (Reuters) - Latvia was rocked by political crisis on Wednesday
as the largest party in the government coalition stormed out, accusing the
nationalist prime minister of souring relations with Russia.
The walkout occurred as Russia threatened to divert its oil business from the
Baltic state, raising the pressure in a long-running row over Latvia's
treatment of ethnic Russians.
Latvia's port of Ventspils handled about 11 percent of Russia's crude exports
last year, a volume second only to the Russian port of Novorossiisk.
Prime Minister Guntar Krasts said he would soldier on with a minority
government while President Guntis Ulmanis threatened early elections if
parties could not solve their problems.
The leftist Democratic Party Saimnieks, the biggest member of a six-party
coalition, said it could no longer work with Krasts of the nationalist
Fatherland and Freedom party.
"(Fatherland and Freedom's) selfish interests hinder efforts for a compromise
with other political forces in the country, do not allow it to listen to
practical and pragmatic recommendations by European states and provoke
worsening ties with Russia," the Democratic Party said in a statement.
Its departure leaves Krasts' coalition with 45 seats in the 100-seat
parliament but he said he would continue as premier.
"I will consult with the remaining coalition partners, continue the work of
this government and replace the Saimnieks' ministers who have quit," Krasts
told Latvian radio.
President Ulmanis said early elections were possible if parliament could not
solve the government row and the crisis in ties with Russia. The next election
is due in October.
"The president stated that he does not carry political responsibility but if
parliament is not able to demonstrate it, Ulmanis will ask the nation to
express its opinion about the continued work of this parliament," Ulmanis'
Russian President Boris Yeltsin earlier told ministers to find ways to bypass
Latvia to ship oil to the west although industry experts said this would be
difficult because of the sheer volume of crude which Ventspils handles.
Interfax news agency quoted Yeltsin's press secretary as saying he also backed
initiatives by some politicians who advocated boycotting Latvian goods.
Since the break-up of the Soviet Union in 1991, Russia has consistently
accused Latvia of discriminating against its 700,000-strong Russian-speaking
Latvia denies the charge, but sets conditions, including knowledge of the
Latvian language, for those wishing to obtain citizenship as part of a
Around 550,000 people rely on old Soviet passports and will be left stateless
when they expire in October.
Tensions between the two countries rose sharply last month when Russia accused
Latvia of using brutal police tactics to break up a protest by Russian-
The dispute turned nastier as Russia's then-prime minister, Viktor
Chernomyrdin, personally insulted Krasts, and the Kremlin's main spokesman
threatened sanctions against Latvia.
Moscow was further angered by a reunion of Latvian veterans of the Nazi SS in
Riga last month and by two recent bomb blasts, including one near the Russian
embassy on Monday which caused damage but no casualties.
The Latvian SS veterans are not seen by international institutions as war
criminals but critics say they still fought on the side of the Third Reich,
which killed six million Jews.
Government parties have been searching for a compromise to soften rules on
naturalisation and encourage the integration of Russian-speakers, but Krasts'
party is against any change.
Faster naturalisation is also a key goal the European Union (EU) set Latvia to
join the 15-nation bloc.
Krasts raised tension in his coalition last week by sacking his economy
minister, who was from the Democratic Party.
The coalition has been in power since early 1996 but Krasts has been premier
only since last August.
The government includes a wide spectrum of parties, from former communists to
nationalists. Despite several crises, it has kept Latvia broadly on the path
of economic reforms which it launched after quitting the former Soviet Union
NATO Envoy Reviews First Year of Alliance With Russia
St Petersburg, Apr 3 (Interfax) -- The possibility for dialogue and
cooperation was revealed over the year following the signing of the
Russia-NATO Founding Act in Paris, Donald McConnell, the assistant to the
alliance's general secretary and the director of its political department
said Friday in St Petersburg.
These ties are extremely important since security in Europe is
impossible without Russia's participation, McConnell said in his report
entitled "Russia and NATO: A Year After Paris." All sixteen members of
the alliance have admitted this fact, he said.
NATO and Russia aim to create a new European security structure so
that all the countries of the continent can develop and feel protected, he
The act signifies a beginning of the process since it has not done
away with the disagreements between the alliance and Russia. It paves the
way for discussions, consultations and joint actions, he said.
Spheres for cooperation were singled out in the past year, he said.
NATO and Russia found common interests in undertaking joint peacekeeping
operations in Bosnia, he said. Russia assumed the obligation of
participating in similar actions in the future, he said.
The alliance and Russia should maintain dialogue on the prevention of
the use of weapons of mass destruction, on the problems of terrorism,
ecological safety and on dealing with emergency situations, he said.
A pilot project in this sphere involves the use of satellite
technologies, he said.
Among the possible and desirable levels of cooperation, McConnell
singled out military ties in carrying out strategic tasks for ensuring
The opening of the NATO mission in Moscow later this year is an event
of crucial importance, he said.