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Johnson's Russia List


May 9, 1998   
This Date's Issues: 2170    


Johnson's Russia List
9 May 1998

[Note from David Johnson:
1. Toronto Sun: Natthew Fisher, Girls just wanna have fun.
2. AP: Yeltsin Fills Cabinet Posts.
3. AP: Russia Assails US on NATO Expansion.
4. Journal of Commerce: Padma Desai, Russia's mess masks progress.
5. Reuters: Russian govt faces tough tasks.
6. Moscow Times: Charlotta Gall, THE GREAT GAME: Washington Now
Notices Bold Caucasus.

7. John Varoli (RFE/RL): Russia: Soros Boosts Libraries And 

8. Chicago Tribune: Colin McMahon, RUSSIA IS ALWAYS ON GEORGIANS' 

9. The Economist: Russia’s world. More a plaything for today than
a place to be shaped for tomorrow.

10. Reuters: Investors stay cautious on Russia.
11. AP: Russia Troops Joining NATO Exercise.
12. Reuters: Ukraine's Chernobyl to restart May 18.]


Toronto Sun
May 8, 1998
[for very personal use only]
Girls just wanna have fun 
Sun's Columnist at Large

 MOSCOW -- As about 700 young Russian women squealed their delight, 
three male strippers dragged several women out of the crowd and onto a 
narrow platform where they ripped off the women's clothes. 
 It was Ladies' Night at the Canadian-owned Hungry Duck, which, as 
regular Sun readers may remember, is the seediest night spot in a city 
full of them. 
 Ladies' Night at the Duck is like nowhere else. For two hours only 
women are allowed in the door. The women, who are mostly between the 
ages of 15 and 20, are supplied with as much free booze as they want - 
and they want a lot. 
 Once in a suitably delirious frame of mind the women are invited to 
participate in a Bacchanalian orgy which features two brooding Russian 
bodybuilders of uncertain sexual orientation and Dillon, a lithe 
Nigerian with a winning smile. 
 After the place is hopping, a swarm of mostly Russian guys waiting 
outside is allowed in to join the revelry. But they, of course, have to 
pay for their pleasure. 
 "This is an idea I can actually take credit for," said owner Doug 
Steele to great guffaws in his cluttered office at the back of the bar, 
which is only 10 minutes' walk from the old KGB headquarters and Red 
Square. "I was thinking, 'What can I do that is totally debauched?'" 
 The economics are simple. The genial, silver-haired Nova Scotian, who 
has long been unique among expatriate Canadian businessmen in Moscow for 
admitting he pays mega-bribes to the police and to gangsters to stay in 
business, spends about $800 on free drinks for the women and $750 for 
the strippers. But the men who follow shell out about $6,500. 
 "Give these people a little freedom and they take more than people in 
other countries have ever had," was the explanation offered for the 
success of Ladies' Night by an Englishman who runs another, much more 
sedate bar in Moscow that is also owned by Steele. 
 Russians may think their country has become part of western 
civilization. But even the most gentle forms of feminism remain an 
obscure concept here. 
 Spousal assault is seldom viewed as a crime. Men routinely leave their 
wives and children, never to be heard from again. Few errant husbands 
provide child support and almost none pay alimony. 
 Women in Russia are still expected to dress up like dolls and to do all 
the housework and child-rearing. Yet, for all that, Russia is a 
matriarchal society, with venerable babushkas often running the show at 
 Until the Ladies' Night brainwave came to Steele in January, the 
Canadian's greatest "triumph," may have been when he got three Russian 
players from the Detroit Red Wings to bring the Stanley Cup into the 
Hungry Duck last June. 
 In a relatively quiet corner of the raucous bar by the men's washroom, 
which had been overrun by women trying to use the urinals, 18-year-old 
Mascha Bolodyan tried to explain what had lured her to a place where 
couples fornicating under the tables at 4 a.m is not uncommon. 
 "I came to here to study the psychological changes on the girls," 
Bolodyan, who is a journalism student, shouted in good English. "And 
then I got drunk ... 
 "A lot of us are drunk. You know, anything for free. What you see here 
is really just an experiment. Girls are having fun, that's all." 
 That's undoubtedly true for the great majority of the young women 
packed 10-deep around the horseshoe-shaped bar. Transfixed by the 
spectacle, many begged to be chosen to be stripped and molested by the 
male dancers. Most cheered whenever a young woman was hauled up on the 
stage to be revealed to the world. 
 "Just look at their eyes," Steele advised. "You can always tell who 
wants to be part of it." 
 But the experience of ending up naked at centre stage was not for 
everyone. One teenager seemed so shattered by her minute of infamy that 
she could be heard shrieking above the din long afterwards. 
 Such is Doug Steele's notoriety in Moscow that if the ubiquitous 
Russian Mafia ever makes good on its occasional promises to eliminate 
the Canadian, NASA astronauts, who are regular visitors to the Hungry 
Duck while training for flights on the Mir space station, have promised 
to launch his ashes into space. 

Yeltsin Fills Cabinet Posts
May 8, 1998

MOSCOW (AP) - President Boris Yeltsin filled the remaining posts in his
Cabinet on Friday, but investors appeared worried about the new government's
course in solving economic woes.
Russia has suffered chronic problems with collecting taxes, and as a
result is
months behind in paying millions of state workers and pensioners. Breaking
this cycle is regarded as the biggest challenge facing Prime Minister Sergei
Kiriyenko and his new government.
Yeltsin appointed Kiriyenko in March after sacking the previous Cabinet and
accusing it of not doing enough to overcome the country's economic troubles.
But foreign investors appeared unsure Friday whether the new Cabinet would do
any better. Government bonds dropped substantially and the ruble dipped
briefly in the morning.
``The market is uncertain about the new government's economic course,'' said
Sergei Babayan, a trader at the Moscow brokerage Troika-Dialog.
Kiriyenko himself fueled the worries, saying government revenues would be
about 26 percent below projections this year. In an interview published
Friday, he suggested the government may have to make even larger spending cuts
than previously announced.
``We must live according to our means,'' Kiriyenko told the business daily
Kommersant. ``We must realize that we're not wealthy enough. Moreover, we must
honestly say that we're quite poor now.''
That position has drawn criticism from the Communist Party, parliament's main
opposition group, which wants to increase government spending to help hard-
pressed citizens and struggling state companies.
Communists also complained Friday about Yeltsin's decision to fill the
with a younger generation of politicians. Yeltsin praised their youthful
energy, while the opposition criticized their lack of experience and bemoaned
their reformist ideas.
Yeltsin ``has once again surprised and dismayed us by appointing people
unknown to society to key posts in the government,'' the Communist Party's No.
2 man, Valentin Kuptsov, was quoted as saying by the Interfax news agency.
Yeltsin on Friday reappointed Yevgeny Adamov as atomic energy minister and
replaced the ministers of nationalities and health. The president also
replaced heads of several government agencies and the chief of the Russian
customs service.


Russia Assails US on NATO Expansion
May 8, 1998

MOSCOW (AP) - Russia accused the United States of making ``a fatal mistake''
Thursday by ratifying NATO's expansion to Eastern Europe, saying the decision
could threaten the START II treaty, a news agency reported.
The unusually blunt statement followed a week of virtual silence from Russia
regarding the U.S. Senate's NATO vote last week. On Monday, Poland's foreign
minister said the lack of official reaction from Moscow was a sign of ``silent
approval and understanding.''
But while Russia had acquiesced in NATO's expansion to Poland, Hungary
and the
Czech Republic, it did so begrudgingly.
After a meeting among top Russian officials Thursday to discuss the vote, the
Defense Ministry issued a statement saying the United States ``had made a
fatal mistake, which might lead to extremely negative processes fraught with
historical consequences,'' the Interfax news agency reported.
The outburst came while President Clinton's national security adviser, Sandy
Berger, was in Moscow to meet with Russian officials about the START II
treaty, which would cut the U.S. and Russian nuclear arsenals by more than
``In effect, the decision means an obstacle to the ratification of the START
II treaty by the Russian Federation,'' the statement said. ``From now on, the
question of why Russia is not ratifying the START II treaty should be
discussed not in Moscow but in Washington.''
The United States ratified the treaty last year, but the Russian parliament
has so far been unwilling to approve it.
After modifications agreed to last year by both countries, Russian
parliamentary leaders have said they believe the treaty stands a good chance
of being ratified this summer.


Journal of Commerce
11 May 1998
[for personal use only]
Guest Opinion
Russia's mess masks progress

In its third ballot, Russia's lower house of Parliament, the Duma, late 
last month confirmed Boris Yeltsin's nominee, Sergei Kiriyenko, as prime 
minister by a margin of 24 votes. Communist lawmakers in large numbers 
defied the ruling of the party's Central Committee and the repeated 
appeals of their leader, Gennadi Zyuganov, to turn down the president's 
The long battle of nerves with the Communist-dominated Duma began March 
23 when President Yeltsin suddenly dismissed then-Prime Minister Victor 
Chernomyrdin on March 23. Mr. Yeltsin's nomination of Mr. Kiriyenko, a 
36-year-old political neophyte, was seen by some as the desperate act of 
an unstable leader proposing a youngster with little prospect of 
challenging his boss.
At the heart of Mr. Yeltsin's brinkmanship, however, was his fierce 
determination to save the reform strategy of the past four years that 
has privatized Russian industry and reined in inflation.
Mr. Yeltsin's reform agenda requires a regime of budgetary restraint, 
with sizable revenue from the sale of government stock in privatized 
companies supplementing lagging tax collection. It was threatened from 
two directions: from the Communists and their left-wing supporters who 
control almost half the 450 Duma seats; and from the unruly band of 
Russia's financiers desiring control of the privatization process.
Sergei Kiriyenko's unwavering reformist credentials posed a threat to 
the former group. Too young to have any but slim presidential prospects 
in the year 2000, he could be expected to thumb his nose at the latter 
group as well.
The escalating events of the past month left little doubt of the Russian 
president's determination to use his bespectacled, balding, Bambilike 
protege for the two-pronged offensive of vanquishing the Duma's 
left-wing parliamentary opposition led by Mr. Zyuganov, and of holding 
at bay Moscow's muscle-flexing financiers. 
The prime minister-designate firmly rejected Mr. Zyuganov's alternative 
program of reviving production and financing social safety nets through 
inflationary means, and of overturning the sale of government stake in 
privatized companies.
Instead, he proposed negotiations with trade union leaders and regional 
politicians for paying wages in Russian factories while maintaining 
financial discipline. He turned down the Communist leader's suggestions 
to form a coalition government, vowing to announce his cabinet only 
after he was confirmed. 
Mr. Zyuganov was reviving the reform battles of 1992 and 1993 that led 
to the bombing of the old Parliament in October 1993. This time, the 
actors confined their high-stakes game to risking the dissolution of the 
Duma if it rejected Mr. Kiriyenko's nomination in the third ballot. 
The presidential warnings to these old opponents in the Duma was matched 
by tough signals from the government to the new troublemakers in the 
world of finance.
The latest scuffle was over the pricing of government stock valued at 
$2.1 billion in the oil company, Rosneft. In response to their 
collective complaint that the stock was overvalued, they were told the 
valuation would stay, thereby denying them handouts.
At the same time, Dmitry Vasiliev, the young chairman of the Russian 
Securities and Exchange Commission, issued rulings against two oil 
companies challenging their insider deals in favor of controlling 
These were small beginnings aimed at preventing potential collusion 
between government and business, and insider control of big business by 
a select few. Mr. Yeltsin's insistence on bringing in young technocrats 
in policy-making was evidently aimed at hastening the process.
Mr. Kiriyenko's threatened defeat in the Duma would have held back the 
fragile recovery of the Russian economy by damaging investor confidence, 
halting the ongoing privatization of Russian companies and threatening 
reform momentum if the Communists were to be returned to the Duma in 
even larger numbers.
His confirmation, by contrast, opens several encouraging possibilities 
in the near future:
The revised tax code, which the Duma has approved in a first reading, 
could finally clear by late fall providing the necessary cleaning up of 
the maze of current taxes which inhibit tax collection.
Russia's fledgling stock market has weathered the traumatic events of 
the past few weeks remarkably well. With the uncertainties out of the 
way, it will pick up with fresh infusion of funds from abroad.
The sale of government stake in privatized companies, led by Rosneft, 
can proceed on terms dictated by the "new boy on the block" and his team 
weakening the role of Moscow's overbearing financiers. The struggles 
ahead will be demanding but Mr. Kiriyenko, who had a hand in formulating 
details of the Rosneft deal, has come out ahead.
The defections by Communist legislators during the final secret ballot, 
which confirmed Mr. Kiriyenko, damage Communist conformity in Duma 
affairs, weaken Mr. Zyuganov's leadership of the party, and hold out 
prospects for its split.
From that perspective, the successful outcome of the dramatic events of 
the past month marks a resounding hurrah in Boris Yeltsin's turbulent 
political career. 


TALKING POINT-Russian govt faces tough tasks
By Timothy Heritage 

MOSCOW, May 8 (Reuters) - Russian President Boris Yeltsin's new government
looks set to follow similar policies to its predecessor but will have more
independence from outside political and financial groups, analysts said on
The handful of ministers named on Friday by Yeltsin and Prime Minister Sergei
Kiriyenko left some questions unanswered, including who will be the permanent
trade and industry minister and whether the cabinet list is otherwise complete
But Friday's appointments continued a trend in which Yeltsin has plumped for
specialists with little political experience and no strong alliances with the
powerful financial groups seeking to influence the government. 
"There are no new sensations. It's a team of technocrats without any
ambitions -- just what Yeltsin needed," Andrei Piontkovsky, director of the
Centre for Strategic Studies think-tank, told Reuters. 
Georgy Gabunia, 46, moves from his behind-the-scenes job as deputy foreign
trade minister to become acting trade and industry minister. Nikolai Khvatkov,
50, a little-known aide trusted by Kiriyenko, will head the government
Moscow physician Oleg Rutkovsky becomes health minister and Yevgeny Adamov
stays on as atomic energy minister. Vitaly Budko, the former head of the
coalminers' union, becomes chief of the federal service overseeing natural
monopolies in transport. 
"On the whole, the new government should not be expected to change policy,"
said Alexander Bekker, a commentator for the Moscow News weekly newspaper.
"The new premier has put together what is in its own way an adequate
government -- precise specialists who are experts in specific spheres." 
"There is yet another distinguishing feature in Kiriyenko's choices. His
personnel choices have brought about a government that is impervious to the
oligarchs," he added. 
The so-called oligarchs are powerful industrial, business and financial
which have long had political sway. Yeltsin has made clear he wants their
political influence ended. 
Kiriyenko, 35, has had a troubled start to his new career. The lower house of
parliament rejected his candidacy twice before confirming him as prime
minister on April 24. 
But that was the easy part. Kiriyenko said in an interview published on
that Russians must accept they live in a relatively poor country and that
tough times may lie ahead. 
"We must live within our means and understand that we are not rich enough. We
must honestly say we are quite poor today," Kiriyenko told the Kommersant
Daily newspaper. 
The message is that Russia needs a dose of strong medicine and that Kiriyenko
is prepared to be tougher than his predecessor, Viktor Chernomyrdin, in
applying it. 
"Kiriyenko is promising only blood, sweat and tears. This is a new
message for
Russians after years of promises by the Communists, then the free market
reformers who followed them," Piontkovsky said. "The new government faces a
terrible task" 
Russia's economy has shown signs of coming out of the doldrums, and the
government on Thursday forecast rising growth and falling inflation in the
next three years. 
But many problems remain. 
The foreign debt is $120 billion, and the outstanding domestic debt is about
370 billion roubles ($60 billion). The economic crisis in Asia has also
increased borrowing costs for indebted developing countries such as Russia. 
Kiriyenko says Gross Domestic Product (GDP) rose 0.4 percent in 1997, the
first year of officially recorded growth since 1989, but it stopped growing in
the first quarter of this year. 
Tax collection and revenues are low, the fall in world oil prices has hit
Russia, a major producer, hard and inflation, although on the way down, was
still about 12 percent in 1997. 
Some analysts say the independence of the new cabinet from outside groups,
regarded by Yeltsin as a bonus now, may prove a problem if economic
difficulties grow. There may be few people, other than Yeltsin, ready to come
to Kiriyenko's rescue. 
The opposition-dominated State Duma has made clear it will give Kiriyenko a
rough ride and Yeltsin's decision to snub the ministerial candidates supported
by major business and media tycoons may make them work against the new prime
Kiriyenko has made clear he will not alter policy to satisfy his critics but
acknowledges it is a risk for his government. 
"Whatever we do, I think we will busy ourselves with laying the groundwork
(for a better economic future), even though we realise it could cost us our
heads," he told Kommersant Daily. 


Moscow Times
May 8, 1998
THE GREAT GAME: Washington Now Notices Bold Caucasus
By Carlotta Gall
Special to The Moscow Times

Brzezinski just walked in," whispered my former boss who was chairing our 
talk. We were in the bowels of the Center for Strategic and International 
Studies in Washington, telling a very high-powered audience what we could 
about Chechnya. 
Zbigniew Brzezinski was silent in the back row near the door but he bought 
our book afterward and gave us a 10-minute chat. His office, decorated with 
dark, gleaming leather furniture and framed photos of him making history 
with various world leaders, made it feel a bit like an official audience. 
He, and others in Washington, among them State Department officials, 
military specialists and even the odd CIA man, are still interested in 
Chechnya, especially because of its place in the larger picture of the 
turbulent Caucasus and resource-rich Caspian. 
Their questions ranged from what happened to the U.S. aid worker Fred 
Cuny, to whether Chechen or Wahabbi militants spread unrest further across 
the region. For their part they dropped a few interesting tidbits during 
conversations although my general impression was that the region is not 
significant enough in the grand scheme of things for their leaders to care 
too much. 
But Washington has noticed the growing assertiveness of the Caucasus 
states of Azerbaijan and Georgia in their relations with Russia since its 
defeat at the hands of the Chechens. 
Washington is responding accordingly and is determined for the main 
pipeline route for Caspian oil to go through Azerbaijan, Georgia and 
ultimately Turkey, bypassing the two big powers in the region, Russia and 
Brzezinski told a good story highlighting how Russia's grip on the region 
is sliding. The bulk of the weapons the Chechens obtained from abroad 
during the war came from Russian troops based in Georgia and Armenia, he 
said. The men based in the so-called TransCaucasus loathe their army 
comrades in southern Russia, who were doing the fighting against the 
Chechens, and so had no compunction about selling weapons to be used 
against them. 
It makes me think Moscow could count little on its soldiers in the 
Caucasus if it ever wanted to. 
Brzezinski describes the final battle of Grozny in August 1996 as Russia's 
version of the Tet offensive, the battle that dealt Russian morale a fatal 
blow. Maybe Chechnya will color Russia's foreign policy for decades just as 
Vietnam did the United States'. 
So as Russian hegemony in the region wanes, is U.S. or Western influence 
gaining? It still seems relatively unimportant in Washington. 
The Caspian is attracting a lot of interest among students, academics and 
oil consultants. Applications to study Russian at U.S. universities has 
been dropping for about five years now, but interest in Caspian and 
Caucasus related studies is growing. 
That may be because of the money and grants sponsored by the oil 
companies. It must be also because the region is one of the least 
well-known places in the world, and so all the more intriguing. 
But one friend in Washington, whose son must be the only six-year-old 
American who can say "Chechnya," predicts the place will remain on the back 
burner. The countries are far away, and the oil and gas, however plentiful, 
is difficult to get out and so expensive. 
Yet he, and not a few of his Washington colleagues, cannot wait to get 
back there. 


Russia: Soros Boosts Libraries And Publishing
By John Varoli

St Petersburg, 8 May 1998 (RFE/RL) -- The Russian branch of the Soros' Open
Society foundation recently announced a $100 million program to lift
Russia's libraries and book publishing industry out of their doldrums. The
ambitious, three-year project will, first and foremost, disperse this money
among 3,500 Russian libraries.
Any Russian library - from a major regional one to a prison library - can
apply to participate in the program, said Yekaterina Geniyeva, the president
of Open Society-Russia.
The lucky 3,500 libraries - there are a total of 150,000 libraries in
Russia, according to Geniyeva - will be given a list of 2,000 books from
which to choose. Central regional libraries will be given $10,000 to spend
on the acquisition of new Russian books, as well as Russian translations of
foreign-language books. All other libraries will be given $3,500 to spend.
Daniil Granin, a leading Russian author, told RFE/RL, as the latest Soros
initiative was announced, that "libraries have been abandoned by our
government," adding that many have not purchased books for the past seven
years, and that many libraries are located in dilapidated structures.
As far as which books will be made available, Frances Pinter, head of
Open Society's international publishing program, said, they are careful to
take Russian national sensitivities into consideration.
The list of books from which to choose will be put together by the Open
Society, with the help of input by a broad spectrum of leading figures from
among the Russian intelligentsia and library sector.
As with most other Soros projects, Open Society plans to share the costs
50-50 with the government. And though many regional governments claim to be
strapped for cash, the Open Society said that 81 of Russia's 89 political
subdivisions ('subject' of the Federation) have already expressed
willingness to participate in the project.
By increasing Russian library book purchases, the Open Society also hopes
to give a boost to Russia's struggling publishing industry and book
"We're trying to kill many birds with one stone," said Open
Society-Russia president Geniyeva. "We're trying to improve education and
enlightenment in the country by helping the libraries, which in turn will
help the publishing industry."
The project also plans to connect the chosen libraries to the Internet,
and fully computerizing up to 100 regional and city libraries. "Another
aspect of the program is to revitalize the role of libraries as community
centers," said Open Society international publishing program head, Pinter.
On the overall influence of the Soros organization in Russia, Granin
says, "judging its results, Soros' Open Society has probably done more than
some government ministries, and it spends its money more effectively and wiser."
George Soros, a Hungarian-born, American billionaire has donated millions
of dollars to programs to promote democracy, a free-and-open media and
market reforms in Eastern Europe and the former USSR. He is also reported to
have made a great deal more money in currency-speculation trading, And, last
Summer, Soros extended a short-term, emergency loan - at what he says was a
very profitable interest rate - to Russia to help Moscow through a recurring
wage-payment crisis.


Chicago Tribune
8 May 1998
[for personal use only]
By Colin McMahon, Tribune Foreign Correspondent. 

TBILISI, Georgia 
The lights still go out in the former Soviet republic of Georgia, but now
there's more or less a schedule and people know that, eventually, the power
will return.
Refugees from the breakaway region of Abkhazia still live in Foreign
Ministry office space, but they've made their places quite homey and have
built what might even be called normal lives.
Then there's the consoling fact that President Eduard Shevardnadze is still
alive and in power, while those trying to kill him are losing strength.
Nearly seven years after winning its independence amid the rubble of the
Soviet Union's collapse, Georgia is making strides, enjoying democratic reform
and economic growth unrivaled in the region. The Caucasus nation has revived
its centuries-old role as a conduit of trade and counts on being a major
player in the transshipment of oil from the Caspian Sea.
Georgia also is an important strategic partner of the United States in an
oil-rich but historically volatile region.
Shevardnadze was in Moscow recently conferring with Russian President Boris
Yeltsin, but there is little question where Georgia's heart lies.
"It is only due to the help of the U.S. people and government that Georgia
exists today," said Peter Mamradze, Shevardnadze's chief of staff. "Without
that money, we could not have survived the years of chaos and hunger."
Things could still go wrong. Corruption plagues the nation, discouraging
merchants and traders from moving their goods across Georgian roads.
The 70-year-old Shevardnadze, as evidenced by a professional attack on his
life in February, remains a target.
Relations with Russia, meanwhile, are uneasy even on good days. Although
Georgia is the birthplace of Josef Stalin and remains home to a museum
glorifying the Soviet leader who sent millions to their deaths, most Georgians
hold little nostalgia for the old USSR and little esteem for their giant
neighbor to the north.
The collective memory is too strong of more than a century under the
czarist heel, of nearly seven decades under Soviet domination, of lifetimes of
being treated as second-class citizens.
Last month, Georgians solemnly marked the anniversary of the April 1989 day
when Soviet troops attacked nationalist demonstrators in Tbilisi, killing at
least 20 people.
Even today, Shevardnadze and other leaders are convinced that some members
of the Russian power structure want to see Georgia fall into chaos and have
lent money and expertise to those groups intent on killing the president.
"There is a certain threat to the stability and economic prosperity in
Georgia," said Zurab Zhvania, the 34-year-old speaker of Georgia's parliament.
"Unfortunately, this threat comes not from the fundamentals in our country but
from abroad . . . from individuals and organized forces in Russia who are
still occupied by the illusion that the empire is not lost and that there can
be a chance for revenge.
"They cannot accept the idea that Georgia is an independent, sovereign
state ready for partnership with Russia--an equal, not a smaller brother in
this big family of Soviet nations."
The recent summit of the Commonwealth of Independent States in Moscow was
designed to bring closer together the dozen member nations that grew out of
the Soviet Union's collapse. (The Baltic states rejected the CIS from the
start). Some Russian officials and nations such as Belarus see the CIS as a
potential vehicle to restore the military and economic ties, as well as the
faded glory, of the USSR.
The CIS summit made no notable progress, partly because Georgia and most
other members are interested in the possibility of economic benefits but
nothing more.
Moscow and Tbilisi have warred over issues for most of the decade.
Georgia attributes its failure to put down a separatist rebellion in
Abkhazia to the military supplies and advice that the Russian army allegedly
gave the Abkhazians. That Georgian troops bungled missions throughout the
1992-93 civil war and committed gross human-rights violations is rarely
Four years after signing an uneasy truce monitored by Russian peacekeeping
troops, the Abkhazia stalemate festers. The Abkhazians reject all offers of
autonomy within the Georgian nation, demanding nothing short of complete
independence. Hundreds of thousands of ethnic Georgians chased from their
homes by fighting that left more than 10,000 dead remain too afraid to return.
Talks barely limp along.
Beyond their differences in Abkhazia, the Georgians and Russians have
clashed over vodka shipments and other customs issues. Most damaging is the
belief in Tbilisi that some Russian officials are at least protecting and at
worst directing Georgian terrorists intent on bringing down the Shevardnadze
The Feb. 9 attack on Shevardnadze, the second since 1995, was well-funded
and well-armed. About a dozen would-be assassins attacked the president's
convoy with guns and grenade launchers. Tbilisi, while being careful not
directly to accuse the Yeltsin administration, immediately pointed the finger
at "certain other circles" in Moscow.
"To the Russians, we are all barbarians in the Caucasus," said Alexander
Rondeli, a Georgian Foreign Ministry analyst.
"The Russians want instability. They tell Westerners: `It's our cage, our
zoo. Why do you come here? Stay where you are. We'll take care of them.' "
American officials don't necessarily disagree with this analysis. They note
that the Yeltsin government does not always speak with one voice and that the
Georgians, especially former Soviet Foreign Minister Shevardnadze, know how
Moscow works.
While Georgia sees the U.S. as its protector, Washington sees Georgia as a
potential anchor for democracy and free markets in a region ripe for conflict
and authoritarianism. The U.S. will pour $120 million in aid this year into
Georgia, making the nation one of the world's highest per capita recipients of
American help.
Georgia's parliament has overhauled its justice and electoral systems with
promising results. Investment is growing, entrepreneurs are sprouting, and
growth soared past 11 percent and inflation fell to less than 14 percent last
The hope is that when oil starts flowing in force from the Caspian, a
pipeline through Georgia will not only help the nation's people but also
lessen the chance of one country--whether it be Russia, Iran or somebody
else--controlling the spigot.
"The pipeline is not the gold that people think," Rondeli said, meaning
that pipeline royalties will not make Georgia rich the way oil revenues are
expected to descend on neighboring Azerbaijan. "The pipeline means stability.
It triggers investment.
"Those in Russia who want Georgia back under its boot, they don't care
about the oil," he said, returning to a favorite theme in Georgia's halls of
power. "But they understand that a pipeline means a new era in this region. A
pipeline means Georgia is lost."


The Economist
May 9, 1998
[for personal use only]
Russia’s world 
More a plaything for today than a place to be shaped for tomorrow 
Russia and the West

HOW many spanners in the West’s works does it take to make a foreign 
policy for Russia? If the measure of Russia’s influence abroad were the 
number of ways it could foul up the West’s policies in general, and 
America’s in particular, then it could fairly claim to be what it says 
it wants to be: a great power once more. Yet, for all its recent 
spanner-tossing—offering diplomatic succour to Iraq in the row over UN
inspections, helping an India or an Iran build bigger missiles, 
refusing to press Serbia to end repression in Kosovo, selling missiles 
to the Greek part of divided Cyprus—playing spoiler is not as satisfying 
as being a shaper of world events. Russia is miffed at what it sees as 
its second-class role in an America-dominated world. It wants to be a 
first-class power in a more equal, multipolar one. So who is stopping 
Russia is still a mighty power in Europe. Despite its recent economic 
woes, later this month the leaders of the G7 rich nations will sit down 
with Russia’s president, Boris Yeltsin, for a by now annual G8 summit. 
Although Russia was unable to block NATO’s forthcoming 
enlargement—endorsed last week by the United States Senate—what it has 
won in return could be worth much more: a NATO-Russia Council that could 
help forge a new security framework for all of Europe. Add Russia’s 
permanent seat at the UN Security Council and its membership in other 
clubs, from the Organisation for Security and Co-operation in Europe to 
the sniffier Council of Europe, from the informal Contact Group on 
former Yugoslavia to Russia’s very own Commonwealth of Independent 
States, and the complaint that Russia is not being accorded its 
big-power due is patently absurd. 
Yet, troublingly, as the opportunities to co-operate grow, so does the 
tetchiness between Russia and the West (see article) . Some friction is 
inevitable. Russia is a vast country, with its own interests in both 
Europe and Asia. For that reason it was never going to be happy to see 
NATO grow bigger, even though its own officials admit that today’s 
expanding NATO is reassuringly different from the cold-war version. 
Similarly, whether relations with the West are up or down, it makes 
sense for Russia to be on good terms with China and to try to get on 
better with Japan. And Russia is bound to take a keen interest in the 
doings of its neighbours—especially those that are home to millions of 

Unhappy in its own way 
All big powers have their squabbles. Think of America’s disagreement 
with France over Iraq, India’s border quarrels with China, or America’s 
differences with its European allies over Bosnia. Yet Russia’s 
resentment of America seems more deep-seated. Partly that is a 
reflection of Russia’s own weakness. Shorn of empire and in straitened 
circumstances, Russia still tends to view the world through 
balance-of-power lenses: another country’s gain is Russia’s loss, and 
vice versa, especially when that other country is America. Hence the 
popularity of Russia’s wily foreign minister, Yevgeny Primakov, who 
takes the credit at home for playing a weak hand well, undercutting 
American policy from Iraq to Kosovo. 
Yet Mr Primakov does Russia fewer favours than many Russians imagine. 
The real problem is that the currency of world power has changed. It is 
no longer missile throw-weight but economic weight that guarantees a 
hearing. And it will be decades, if ever, before Russia can rival 
America on that score. Still, if Russia really wanted to increase 
influence, not just sulk about it, the means are already at its 
In the recent crisis over Iraq, Russia could not have prevented America 
from striking Iraq, if America had so decided. Yet by teaming up with 
China and France in the Security Council, Russia could take a turn on 
the world stage and some of the credit for finding a diplomatic 
solution. Yet Russia came close to over-reaching itself. In its 
determination to annoy America by ruling out force in all circumstances, 
despite Iraq’s flagrant violations of UN resolutions, Russia also put at 
risk the credibility of the Security Council itself, its chief means for 
being treated as an equal with America in future. 
Similarly, Russia undermines its claim to an equal voice through its 
sales of missile and other technologies to countries, such as Iran, that 
are suspected of wanting to build nuclear weapons. Russia has signed all 
the accords that aim to prevent such proliferation, yet greed for cash 
and an itch to stick it to America make it repeatedly turn a blind eye 
to its own arms exporters. In fact Russia has more interest than most in 
keeping such weapons out of troubled regions, since many are close to 
its own borders. Only a failure to look beyond the short term prevents 
it from seeing the merits of upholding the rules. 
Yet Russia’s recent behaviour suggests it is more interested in 
point-scoring than in helping shape the world. One casualty of that may 
be the new NATO-Russia Council. If Russia were genuinely interested in 
building a new security space in Europe, this would be the place to 
start. The chances are, however, that the West will find more spanners 
chucked in the works—and Russia’s influence will be all the smaller for 


EMERGING MARKETS-Investors stay cautious on Russia
By Valerie Darroch 

LONDON, May 8 (Reuters) - Foreign investors are optimistic that Russia's newly
appointed government will deliver on promises of economic reform but unwilling
to increase exposure until they see action, London analysts said on Friday. 
``Russia is a 'show me' story for most investors. We've got a very sound
reformist government. Now it's a question of whether they can deliver,'' said
Geoffrey Dennis, global emerging market strategist at Deutsche Morgan
The final line-up of ministers in Prime Minister Sergei Kiriyenko's new
cabinet was expected to be unveiled later on Friday in Moscow and the roll
call so far has impressed western investors. 
``They are all relatively young technocrats...There will be less
resistance to
change within the government so reform might happen more quickly,'' said Mark
Cooke, chief investment officer at Brunswick Capital Management. 
But he voiced the concerns of several analysts that it would take real
progress on the key issues of tax reforms and budgetary arrears to dispel
investor scepticism. 
Confirmation that the International Monetary Fund will disburse a $700
loan tranche would boost sentiment, but this is contingent on Russia making
progress on its external reserves and on tax collection. 
The disbursement is widely expected to take place but a decision was delayed
by the government changes. 
``The IMF loan disbursement has not been fully priced into markets. A nod
the IMF would be helpful to equity and fixed income would reduce
Treasury yields,'' said Kaspar Bartholdy, fixed income strategist at CSFB. 
A refusal by the IMF to disburse the loan would hit markets hard, he said. 
``There is some degree of uncertainty and the market may remain a little bit
nervous but there is no reason to suspect we are going to get any negative
news on Russia from the IMF,'' said Chris Portman at ANZ Investment Bank in
Currently, Russian PRINs (RUSPRIN) are 1/4 firmer at 62-1/8 bid and the IANs
(RUSIAN-RR) are 1/4 stronger at 71 bid. 
The new Russian government gave an upbeat economic outlook this week,
forecasting GDP growth of 2.5 to 3.0 percent in 1999 from 0.4 percent in 1997
and a drop in inflation to between 3.7 and 4.5 percent from 12 percent in
Analysts view the forecasts as achievable if the government can get to grips
with the budget deficit. But they cite high yields on bonds as evidence that
the market remains nervous. 
``Real bond yields (minus inflation) are very attractive but they will
continue to fall. In the long run bonds will be outperformed by equities,''
Brunswick's Cooke said. 
``The GKO one-year yield is supposed to average around 25 percent but it's
been above that for some time,'' said DMG's Dennis. The yield is now over 30
Kingsmill Bond, head of Russian equity research at DMG, particularly favours
the telecoms sector and retailer GUM. 
``Investors are much more cautious than before. They were very much bitten by
the 50 percent collapse in the (equity) market last year,'' Bond said. 
The Russian market climbed by some 200 percent in the first eight months last
year but turned sharply lower in the wake of the Asian financial crisis and
tumbling oil prices. 
Oil stocks account for around one-third of the total market
capitalisation and
are likely to remain under pressure despite some help from excise tax cuts.
However, Merrill Lynch Russia analyst Dan Lubash said this could be a good
chance to buy oil stocks at a good price and tipped LUKoil and Surgut. 
Merrill's top sector is telecoms, which it expects to lead the way on
growth. ``Our top telecom picks are Rostelcom and Svyazinform Samara Region,''
Merrill said in a research note.'' 
Overall, most funds are sticking with a neutral weighting on Russia, said
DMG's Dennis. ``You should have some weighting in Russia and we're cautiously
optimistic,'' he said. 
But he said that in view of the encouraging signs in recent days, ``...there's
a small bit of me that says Russia will absolutely fly.'' 


Russia Troops Joining NATO Exercise
May 8, 1998

BRUSSELS, Belgium (AP) - Russia has agreed to send ground troops to a NATO
exercise for the first time, a significant step toward closer ties with the
Atlantic alliance, a NATO official said Friday.
A platoon of about 30 to 35 Russian infantry will join Operation Cooperative
Jaguar, a weeklong peacekeeping exercise in Denmark that begins May 18, the
official said on customary anonymity.
The training is part of NATO's Partnership for Peace program, a 4-year-old
collaboration with former East bloc nations including Russia. Some 3,000
troops from 17 countries, with more than 30 aircraft and 30-plus ships, will
take part in Jaguar.
The Russian participation marks the first time Moscow has sent ground troops
dedicated for combat, NATO officials said. Russia has joined previous
exercises on a more limited basis, for example with medical teams.


Ukraine's Chernobyl to restart May 18

KIEV, May 8 (Reuters) - The third reactor at Ukraine's stricken Chernobyl
nuclear power plant will be restarted on May 18, the plant's new director said
on Friday. 
``We plan to start up on May 18,'' Vitaly Tovstonohov, appointed director of
the plant earlier this week, told Reuters by telephone from Chernobyl, located
about 150 km (100 miles) north of the capital Kiev. 
The third reactor, the only one still operating at the plant, was shut down
last year after cracks were found in the cooling system's pipes. 
Ukraine had planned to re-activate the reactor on May 5. But the government
delayed the start saying it had been asked to do so by the European Bank for
Reconstruction and Development (EBRD) to avoid panic at the bank's annual
general meeting in the Ukrainian capital this weekend. 
``We could start it earlier, we are ready to do so but we have to delay it
(until end of EBRD meeting),'' Tovstonohov said. 
Chernobyl's fourth reactor exploded in 1986, throwing up a radioactive cloud
which contaminated large parts of Ukraine, Belarus, Russia and other parts of
Ukraine has promised Western donors, including the Group of Seven (G7) rich
industrial nations, that it will close down Chernobyl by 2000. 
But Ukraine and donor countries have been haggling over hundreds of millions
of dollars the former Soviet republic says it needs to close down the plant
and repair a leaking steel and concrete structure covering the highly
radioactive fourth reactor. 
Ukraine is also demanding $1.2 billion to complete two new nuclear
reactors in
the west of the country. 



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