May 20, 1998  
This Date's Issues: 2185 •2186• 

Johnson's Russia List
#2186
20 May 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: World Bank Calls Russian Situation "Crisis."
2. Interfax: Russian Foreign, Defense Ministers To Discuss Start II In Duma.
3. Gunnar Hólmsteinn Ársælsson: LEBED: WILL HE SUCCEED? 
4. Robert McIntyre: Economic data fraud.
5. Reuters: Communists Claim Enough Votes to Start Impeachment.
6. RFE/RL: Jan de Weydenthal, Russia: Rapprochement With NATO Remains 
Politically Fragile.
7. Moskovsky Komsomolets: ALexander Budberg, GET READY FOR A STORM.
8. Moscow Times editorial: Miners Need More Than Just Back Pay.
9. RFE/RL: John Helmer, Russia: Former Kremlin Security Chief Makes More 
Disclosures.
10. Commersant Daily: LEBED'S INTERVIEW.]

********

#1
World Bank Calls Russian Situation "Crisis" 

MOSCOW -- (Reuters) World Bank President James Wolfensohn said on Wednesday
that Russia's stock market was in crisis but he hoped government measures
would soon help the financial markets to recover. 
"It appears to be in crisis," he told reporters when asked about the
Russian stock market during a visit to Moscow. 
He said he had the impression from initial meetings with Russian
officials the government had matters under control. 
"In relation to the stock market crisis here, I hope that the steps that
the government are taking will address that issue and that we will pretty
soon a recovery both of the stock market and (a reduction) of interest
rates," he said. 
"Certainly that's the impression that I've been given this morning," he
said as he arrived to deliver a lecture to Moscow students. "But I'm just
at the beginning of the visit and I'll be able to give you a much better
answer at the press conference tomorrow." 
The Russian central bank raised interest rates to an 18-month high of 50
percent on Tuesday to protect the ruble. 
The benchmark RTS share index had fallen 4.16 percent by its first
calculation at 0800 GMT on Wednesday to 226.74, wiping out the gains it
made in a brief correction on Tuesday. Dealers said the mood remained
nervous ahead of treasury bill auctions later in the day. 

*******

#2
Russian Foreign, Defense Ministers To Discuss Start II In Duma 

MOSCOW, May 20 (Interfax) - Russian Foreign Minister *Yevgeny Primakov* and
Defense Minister Igor Sergeyev will meet with the State Duma leaders on
June 4 in light of the preparation for ratification of the START II Treaty,
Duma Chairman Gennady Seleznyov told Interfax Wednesday. 

Seleznyov said "nothing to be afraid of happened" in his absence when
the Duma Council approved a proposal of the Duma Geopolitics Committee
Alexei Mitrofanov on postponing the closed parliamentary hearings on the
issue from June 9 to September. 
These hearings will take place in June, and the Duma is to finalize the
decision, he said. However, they will take place after June 9 since the
Defense Ministry will hold a scientific conference on the treaty with
attendance of members of parliament on this day, he said. The Duma will
probably debate the ratification in the fall, he said. 

*******

#3
Date: Wed, 20 May 1998 
From: " Gunnar Hólmsteinn Ársælsson <maria.gunnbjornsdottir@lungmed.uu.se>
Subject: LEBED: WILL HE SUCCEED?

LEBED: WILL HE SUCCEED?
As the readers of JRL know Mr. Alexander Lebed won the gubernatorial
elections in Krasnoyarsk last weekend. He said that he was the last hope for
the people in the region and after the victory he admitted that a tough job
was waiting for him. Probably, everybody can agree to that.
However, is he likely to make miracles in the coming months and if
he fails, is he out of the political game in Russia? Will he be focusing
more on the year 2000 presidential race, than important, local matters. Is
he able to do both?
His reputation comes from an outstanding military career and
peacemaking (Moldavia and Chechnya). I must say, that the ceasefire
negaotiations in Chechnya gave him my respect, Russia was in a terrible
quicksand in Chechnya and was unable to defeat the Chechens.He stopped the
humiliation of Russia.
In Chechnya the situation was simple, it was Russia against the
Chechens, player X against player Y. In Krasnoyarsk things will be much more
complex for Alexander Lebed, running a region is not like telling two sides
to stop killing each other, especially if the other side(Russia)is almost
out of breath, militarily speaking.
No, it is now that the real and civil Lebed will be visible. For
example, what kind of economic wisdom has he to give the resource rich
region, which is plagued with the many "diseases" of Russian economic life?
Will he be a tolerant and open minded or impatient and narrow minded,
authoritarian leader? One thing is certain, he will not be able to behave as
a "jaw-breaker" in Krasnoyarsk(he smashed the jaws of 10 inobedient soldiers
in Afghanistan). Rather, he will need to work as a law-maker, i.e. to take
the initiative to keep on building a civil society in the region, marked by
the rule of law.
His opponents will do everything to make his work difficult and the
Moscow-lobby will probably work hard to keep him from fulfilling his
promises, like stopping the flow of money from the region to Moscow.
The race for the presidency in the year 2000 seems to be gaining
momentum. Lebed's victory is like pouring fuel on that fire. It will be very
interesting indeed to see what Yeltsin does. In my scenario he will run for
the presidency. I think it's very unlikely that he will give Lebed the
chance to take over the presidency, the man the president himself kicked out
of the Security Council. It would be rather embarrasing for Yeltsin to see
Lebed taking the charge of Russia. No, if his health allowes, Yeltsin will
run in year 2000 and use every means available to secure the presidency for
himself. Yeltsin is a man of power and he'll do anything to keep power
(remember the events in the autumn of 1993 - the shelling of the
parliament).Most probably, he will seek support from the same kind of
(financial)forces that supported him in the 1996 elections and at least
partly brought him victory.
One thing about Lebed and the "2000-presdency" bothers me. If he
decides to run, is'nt that quite unfair to those who voted for him as

governor? Is he just using the Krasnoyarsk elections as a springboard for
the presidency? If so, then I consider this strategy as a "cheap" trick from
Lebed and rather insulting to his constituents. Additionally, everybody
knows that Lebed does not manage to solve all problems in the region in two
years. Economics take longer time than that, and if Lebed really wants to
change things, he must recognise this fact. Also, Russia is young, speaking
in terms of democracy and market economy.
So, as things have been for the recent years in Russia and the
former USSR, exiting times in politics await us, and I am looking forward to
the next two political years of Russia.

Með kveðju/M.v.h./Yours

Gunnar Hólmsteinn Ársælsson 
Stenhagsvägen 154 
752-60 Uppsala 
SVíÞJÓÐ/SVERIGE/SWEDEN 
tel.0046-18-468268 

*******

#4
From: "Robert McIntyre" <mcintyre@wider.unu.edu>
Date: Wed, 20 May 1998 
Subject: Data fraud

A summary of the argument offered here is that since the "growth" of
the Russian economy in the past year is faked the "stagnation" now is in
fact further decline.
This note responds to many recent press references to the "growth
of the Russian economy", most recently JRL 2178 (item 8, Finansovye
Izvestia: "The Economic Slump Is Over, But Growth Has Yet To Begin) and JRL
2174 (item 1, Interfax: Shadow Economy Accounts For Half of Russia's GDP").
I have provided a simple numerical example to illustrate the point.
The discussion of this issue is not over the head of anyone who reads this
list.

SOVIET AND POST-SOVIET STATISTICS
First, a simple historical point that many readers will find hard
to believe: expert opinion was virtually unanimous that the USSR did not
fake its economic statistics about physical production. It did not keep a
"second set of books" (which was proved conclusively when the German army
captured a secret copy of the 1939 plan that turned out to exactly match
public pronouncements on those parts actually mentioned in public). 
It was thought that some lower level fraud was built into the figures as
seen from the top, and surely this was to some degree true. But this was
harder to do than you will assume unless you understand how physical
planning and "material balancing" actually work (past tense in the USSR,
present tense in Toyota, GM and every other large multi-plant,
multi-product corporation).
Disagreements about the historical growth record of the Soviet Union (or
about the size of the economy or its military at a moment in time -- the
many opinion articles written by economist Franklyn Holzman of Tufts about
inflation of the Soviet military threat were all making exactly this point)
were based on disagreements about which value-weights to use in assembling
the list of physical products (e.g., cast metal statues of Lenin, cotton
shirts, linen sheets, and sour cream) into a single measure of aggregate
economic activity (such as Gross Domestic Product -- GDP). 
There were also some famous changes in definition, like the Khruschev
period switch from reporting grain output in terms of the "barn yield"
(what actually makes it to storage) to the "biological yield" (how much
there was out in the field, in effect assuming 100% would be successfully
harvested). This definition was mentioned in the footnotes, but it was
still clearly intentional deception. Also, if something was not going well
(like mortality figures, even before the Yeltsin period catastrophe), it
would not be reported at all, or would be reported as a
difficult-to-interpret index of an earlier year. But when actual figures
were published they were, to the best of the knowledge of their authors,
correct.
WHAT IS GDP?


Total GDP is made up of dollars (or rubles, or..) worth of Lenin
statues, plus dollars worth of shirts, plus dollars worth of sheets, plus
the same for all other products produced. For each product the calculation
is a multiplication of a physical number of goods produced times an average
price in some money unit. So, the number of shirts multiplied times an
average money price for shirts equals "shirt GDP", and so on for every
product.
It does not matter if the reader likes this idea or not. No usage
they have ever heard of GDP or any other summary measure refers to anything
other than calculation on the basis just described. It is the same for
every country.

FRAUDULENT RUSSIAN GROWTH IN 1997 
The historical record suggests that Goskomstat should in general be
trusted to make honest estimates (US figures are never anything other than
"estimates", by the way) in light of what information they have available
and then report them. So, the outright fraud with overall growth figures
beginning in the Spring of 1997 is surprising. They represent a
fabrication for the following three reasons:
(1) Goskomstat abruptly raised the percentage estimate of
"uncounted" activity which the included in reported GDP;
(2) Goskomstat did not adjust past figures in light of this new
definition; and
(3) Goskomstat concealed the changed definition.

Conclusions: GDP did not rise in the last half of 1997; reported stagnation
in Spring 1998 is, by the same reasoning, evidence of a further decline in
the actual level of economic activity. The first change in definition is,
by itself, enough to explain the trajectory of reported GDP over the last
18 months.

A SIMPLE ILLUSTRATIVE EXAMPLE, IN TWO PARTS

FIRST CASE: assume that in reality there is economic stagnation all through
1996, 1997 and 1998. Each year is broken up into four 3-month quarters. 

1996 1997 1998 
100 100 100 100 100 100 100 100 100 100 100 100
1996 GDP = 1997 GDP = 1998 GDP =
400/4 = 100 400/4 = 100 400/4 = 100

Note: how can output be reported as 100 for each quarter of the year, but
then have only 100 as the total output for the entire year? Because the
figures for each quarter of the year are normally reported "at an annual
rate" (= what would happen in a full year, if the activity level of this
quarter continued steadily all through the year). Hence the actual output
for the year is the four quarterly figures added together and then divided
by four.


SECOND CASE: also in reality there is economic stagnation all through 1996,
1997 and 1998, but there is a change in definition that raises the reported
figure by 10 percent in the second quarter of 1997 and after. The 10
percent figure was selected for simplicity of calculation -- it is not an
estimate. 

1996 1997 1998 
100 100 100 100 100 110 110 110 110 110 110 110
1996 GDP = 1997 GDP = 1998 GDP =
400/4 = 100 430/4 = 107.5 440/4 = 110
Since the change in definition, by itself, produces a rise in both
the 1997 and 1998 GDP figures, recent reports of zero growth in 1998
suggests that in reality economic activity is 
continuing to decline.
This example assumes that Goskomstat has changed the definition
only one time. Frequent references since then (beginning with Kulikov and
including JRL 2178 #8) to much higher figures, raise the possibility that
there have been or will be further definitional changes. No such
statistics can responsibly be reported by Russian or other press/analysts
without having an up-to-date answer to the question "how much was added for
"uncounted activity"? Another question: are there separate "uncounted"
rates for each industrial sector?
I am not implying that "uncounted activity" is an easy to deal
with. How to define and delimit the informal and/or illegal sector
activity is a very complex question. The point here is that the national
economic statistics appear to be faked and they are being taken seriously
and used as the basis for serious conclusions about reality in Russia.
Doesn't this issue call for careful conduct by journalist and others who
are discussing current Russian economics, political and social conditions?

I cannot guess what the reaction to this kind of note will be?
Would readers find a similar discussion of "real GDP" vs "current dollar
GDP" useful (why falling prices do not necessarily cut real GDP?)?
A last note: the date of the first altered statistics may be
January 1997. At the moment I have the text of an undated article by F.
Weir (which I believe appeared on JRL) which quotes the Russian-European
Centre for Economic Policy in Moscow as first catching the inconsistency
when it analyzed the "first ray of hope" statistics for January and
February 1997. I do not have a date for this article, but it is probably
April or May 1997. Anyone know precisely or have an alternative set of
figures based on a gradual change in the uncounted share? 
If the second case is changed so that the jump occurs in the first quarter
of 1997, the yearly totals are 100, 110, 110.
Robert McIntyre
UNU/WIDER

*********

#5
Communists Claim Enough Votes to Start Impeachment 
20 May 1998

MOSCOW -- (Reuters) Russian Communist leader Gennady Zyuganov said on
Wednesday his party had collected enough signatures from deputies in the
State Duma, the lower house of parliament, to push ahead with impeachment
proceedings against President Boris Yeltsin. 
"As of now, 177 deputies have signed this document," Zyuganov told a
news conference, referring to a 12-page list of charges. Under the
constitution, the lengthy multi-stage process of impeachment may be started
if 150 Duma deputies demand it. 
The Communists, who together with two allies control 211 seats in the
450-strong Duma, demanded Yeltsin's impeachment amid a string of nationwide
protests by unpaid coal miners who are blocking railways in different parts
of Russia. 
Senior Communist deputies said the demand to launch impeachment will
face a Duma debate on Thursday. They say they hope to see the Duma stage of
the proceedings completed by Friday. 
"We call on all parties to support the miners, teachers and doctors who
believe the chief culprit is the president of Russia and are demanding his
removal from power," party leader Gennady Zyuganov urged the State Duma
(lower house) as thousands of angry workers severed rail links across the
country. 
His party colleague and Duma speaker, Gennady Seleznyov, conceded,
however, that impeachment under a constitution drawn up by Yeltsin was "a
very lengthy process and very difficult". 

In fact, it is all but impossible and previous attempts to impeach
Yeltsin have made little progress although a rebellious mood on Wednesday
in the upper house, which has generally backed Yeltsin, could change some
of the arithmetic this time. 
The regional leaders who make up the Federation Council (upper house)
passed a Communist-backed Land Code on Wednesday in defiance of the
Kremlin's wishes and also voted overwhelmingly to overturn Yeltsin's veto
on four other bills. 
Communist deputies, the biggest group in the Duma but lacking an absolute
majority, said they had collected over 100 of the 150 signatures needed for
formal impeachment proceedings. 
They distributed a 12-page indictment of the president on charges
ranging from high treason in overthrowing the Soviet state in 1991 to
policies leading to a collapse of the economy and epidemics of AIDS and
sexually transmitted diseases. 
"Committing these criminal acts under the very eyes of the whole country
gives ample ground for impeachment," it concluded. 
The problems in the coal industry were not spelled out but the charges
were on a grand scale, including a theoretical drop in the population --
due to early deaths and fewer births -- of eight million since 1991,
putting the 67-year-old leader in the same league as his genocidal Kremlin
predecessor Josef Stalin. 
The Duma also voted to invite Yeltsin to the chamber on Wednesday over
the miners' protests. He was unlikely to appear. 
The Russian constitution, approved by referendum shortly after Yeltsin
crushed an armed uprising by the Duma's Soviet-era predecessor in 1993,
sets out a complex impeachment procedure. 
Seleznyov said, however, that the deputies were in resolute mood after
Yeltsin used his legal muscle to force them to endorse his new prime
minister, Sergei Kiriyenko, last month. Only a threat of dissolution
convinced deputies to approve him. 
"Yeltsin used his constitutional powers in full to impose his prime
minister. Now the deputies have a chance to use their constitutional power
to begin impeachment," the speaker said. 
To impeach the president, one-third of the Duma's 450 members must sign
an indictment accusing the president of treason or other serious crime. A
simple majority of the Duma must then vote to set up a committee to
investigate. 
If the committee recommends impeachment, two-thirds of the Duma must
vote in secret for the motion for it to progress to the Supreme Court,
whose judges have mostly been nominated under Yeltsin, and, to check
procedures, to the Constitutional Court. 
Once the Duma has backed impeachment, the president loses his right to
dissolve the chamber. 
If the judges approve the charges, the matter then has three months to
be addressed by the 189-seat Federation Council, where the impeachment is
final if 126 members must vote for it. If the senators fail to address the
issue in three months, it lapses. 
The Council has generally been less hostile but that pattern has changed
somewhat following elections over the past year. 
For example, reserve general Alexander Lebed, a harsh critic of and
would-be successor to Yeltsin, was elected governor of Krasnoyarsk region
in Siberia at the weekend. 

On Wednesday, the senators voted for a Duma-devised Land Code placing
severe limits on trading agricultural land. Yeltsin's representative said
he was likely to veto the bill.
********

#6
Russia: Rapprochement With NATO Remains Politically Fragile
By Jan de Weydenthal

Prague, 20 May 1998 (RFE/RL) -- The NATO-Russia Council is meeting today in
Brussels to discuss changes in spending on military infrastructure during
the years since the dissolution of the Soviet Union.
Two days ago (May 18) a group of Russian soldiers joined a two-week,
multi-national NATO military exercise in Denmark. This marked the first
time that Russian troops take part in a multi-lateral exercise organized
under the NATO 'Partnership for Peace' program.
There is also a strong possibility that NATO's long-standing efforts to
open a mission in Moscow will finally succeed. Russian military officers
are currently stationed at NATO headquarters, and the Alliance wants the
same access in Moscow. Two week ago General Anatoly Kvashnin, Russia's
permanent representative to NATO, said that the arrangements for the Moscow
mission could be completed this year.
And so it seems that a rapprochement between the most important Western
Alliance and Russia is taking tangible roots, putting an end to decades of
hostility and distrust. This impression could be further reinforced by
Russia's relatively benign reaction to NATO's decision to expand eastward
by accepting the Czech Republic, Hungary and Poland as full members.
But then, this may only be a rapprochement of sorts. Although there is
no doubt that Moscow is both willing and ready to become involved in some
aspects of NATO operations, with the NATO-Russia Council providing the most
obvious example, there is no indication that Russia has either permanently
altered its policy toward the Alliance or accepted its eastward enlargement.
Indeed, it appears that Moscow intends to use the organizational
rapprochement as a means to affect changes, within, and of the Alliance
itself. 
Speaking last week (May 12) to a gathering of Russian diplomats,
President Boris Yeltsin said that Moscow hoped to "encourage radical
changes" in NATO. The goal, Yeltsin said, is to use "constructive
cooperation" with the Alliance "radically to change its essence so it
becomes an alliance which strengthens security in Europe, rather than
threatening it."
Russia has long argued that NATO should become an essentially political,
rather than military organization, to be institutionally and operationally
incorporated into a pan-European security system based on the existing
Organization for Security and Cooperation in Europe (OSCE). This
organization, Yeltsin said, "is preparing, on Russia's initiative, a
charter of European security."
Yeltsin's pronouncements strongly suggest that this long-standing
strategic concept has not be affected by recent gestures of rapprochement
with NATO, and that they may merely serve as tactics to accomplish the main
goal.
As for NATO's eastward expansion, Russia remains opposed. "We are
strongly opposed to NATO's enlargement," Yeltsin told the diplomats.
Indeed, Moscow has never "accepted" the expansion; it merely took note of
it, perhaps because it could do nothing to prevent it. But now, Russia is
determined to bloc any further enlargements, particularly into the Baltic
countries.
"In NATO expansion, there is a red line for Russia which should not be
crossed," Yeltsin recently told the Guardian newspaper (May 15), warning
that "otherwise, European stability might not withstand the new tension."

If nothing else, this confirms Moscow's apparent position that it has a
"legitimate defensive right" to preserve its influence over neighboring
states to protect Russia's national security.
Here, the concept of national security appears to acquire a dimension
exceeding concerns over immediate dangers of hypothetical invasions.
Rather, it focuses on the ultimate goal of regaining the internationally
recognized status of a global superpower.
There is little doubt that there are many people in Russia still
thinking in global rather than regional terms, considering the neighboring
post-Soviet states as "a sphere of influence," and regarding anything that
affects or weakens that influence as endangering national security.
Those people tend to look at rapprochement with NATO in purely
instrumental terms, which could only help to further their global
ambitions. And it may take some time to change those feelings and adjust
strategic policies. 

*******

#7
>From RIA Novosti
Moskovsky Komsomolets
May 19, 1998
GET READY FOR A STORM
By Alexander BUDBERG

After the bed-ridden Boris Yeltsin had fired Security
Council secretary Alexander Lebed and then got well, much to
Lebed's surprise, the retired general's life in politics seemed
to be at an end. 
Those who had worked with Lebed even for a short time,
agreed that he was incapable of building workable structures or
doing routine work. 
A series of scandals raging around Lebed the 14th Army's
commander prompted the conclusion that Lebed the politician had
died earlier than Yeltsin the politician, whom the former
aspired to replace. 
That would have been the case if it were not for Boris
Berezovsky. The No. 1 conjurer and kamikaze of today's Russia
embraced Lebed, warmed him up and showed the way to victory.
Berezovsky's reasoning is simple: he has no need for
either Lebed or Yuri Luzhkov as the next president. But they
are both the darlings of the same electorate. Which means that
if Luzhkov a presidential hopeful is to be weakened, Lebed's
hand has to be strengthened. And while Luzhkov and Lebed are
busy fighting each other, a third aspirant can well wriggle his
way to the second round of the voting to defeat Uncle Zyu (the
Communist Party's Gennady Zyuganov - Ed.), the long-appointed
whipping boy, there. 
Whatever else, Lebed's victory in Krasnoyarsk has helped
clarify some features of the future presidential election
campaign. 
Most importantly, Yeltsin will not run for reelection. Not
that Lebed cannot be rivalled. If Valery Zubov, an admittedly
weak contender, was going nose to nose with Lebed for a while,
Yeltsin can certainly beat him. Or rather could, ten years ago.
Yeltsin can still beat any other candidate from Zyuganov
to Luzhkov and Chernomyrdin simply by pulling the right
bureaucratic ropes. But to run against Lebed, Yeltsin would
have to exert himself physically, something he is no longer
capable of doing. 
Another conclusion is that Yuri Luzhkov will have to
change the strategy and tactics of his election campaign if he
wants to be a realistic aspirant to the presidency. 

His trips to the provinces usually produce a very good
impression on the local elites. But it is the people who cast
their votes for or against a candidate. Luzhkov's visit to
Krasnoyarsk did no good to Zubov.
It looks as if Luzhkov is seen as a plenipotentiary
representative of the federal centre, a man fully integrated
into the current authorities, rather than rich Moscow's Mayor.
This image is hardly any help in the provinces where people
unjustly or justly, believe that they are being robbed by
Moscow. 
It also seems that Luzhkov will have to devise novel
campaigning technologies. So far, the efforts of TV-Centre and
other media contacts of the Mayor's Office have been of little
use. And time is short.
A third, and most unexpected, conclusion is that Lebed's
victory has opened new vistas for the good old ex-premier
Viktor Chernomyrdin. Everybody - Zyuganov, Zhirinovsky,
Luzhkov, Chubais, you name it - is opposed to Lebed. To
guarantee their political survival, they will have to agree on
a single leader, an admittedly hard job to do. For as long as
they disagree on the point, Moscow is as defenseless as it had
been in 1941 before Georgy Zhukov came to defend it. 
In this light, the figure of the equidistant Chernomyrdin
can unexpectedly become the universal unifying factor.
Nor can one exclude the use of premier Sergei Kiriyenko as
a means of fighting Lebed. For this end, his image has to be
promoted. One way to do it is to attain some tangible economic
improvements. The next two years are bound to be very difficult
for Kiriyenko. Also, Kiriyenko is a much more controversial
figure than ex-premier Chernomyrdin has been. 
One can also surmise that Lebed's election campaign will
closely resemble Yeltsin's fight for the seat in the Kremlin in
1989-1991. The then chairman of the RSFSR Supreme Soviet,
Yeltsin was campaigning for Russia's independence of the Soviet
Union. Lebed's is likely to be a campaign of the provinces who
have a grudge against Moscow. The potential damage will
certainly be smaller than that in the year 1991. But the matter
of Russia's division is bound to be eventually placed on the
agenda. 
But then, Lebed's victory may bring about no catastrophe
at all. As writer Fazil Iskander said once: "Our fear is their
hypnosis." And this is not the first time that Lebed is 
feared. 
Kremlin veterans reminiscence that ranking officials
flocked to the newly appointed Security Council secretary's
office in 1996 to congratulate Lebed. Chubais was probably the
only one who did not bat an eye. 
Importantly, the current authorities - the president,
mayors, Duma members, etc. - should overcome their panic. The
expectation of Lebed the Terrible's campaign against Moscow
should not expedite the beginning of that campaign. 
It is not unlike the stock exchange: the rouble seems to
be steady enough, but everyone fears it might plummet, starts
selling and the ruble plunges. 
Lebed per se is not that strong, as the Krasnoyarsk
gubernatorial election campaign has proven beyond doubt. Yes,
he is now likely to attract all politicians who think they have

been humiliated by the powers that be. Yes, funds will flow
into his hands.
But that does not change the overall balance of forces. If
the current political elite manages to preserve law and order,
many bad consequences can be avoided.

********

#8
Moscow Times
May 20, 1998 
EDITORIAL: Miners Need More Than Just Back Pay 

There is something new about the protests by coal miners across Russia
this week. 
In the past, miners struck to force the government to pay back wages
owed to them by the state-owned coal companies. Back wages are still an
issue, but the strikers' demands are increasingly dominated by the threat
posed to the miners by mine closures. 
The government, under advice from the World Bank, has fundamentally
changed its policy toward the coal industry, pledging to stop all subsidies
by the year 2000 and close almost half of the country's mines. 
In itself, closing the mines is good policy. They are inefficient, lose
money and, even with massive government subsidies, they cannot manage to
pay workers on time. The closures must go ahead. 
But the World Bank and the government have given insufficient thought to
the question of what happens to miners left unemployed by the closures.
This year alone about 50,000 of the country's 500,000 miners will be laid
off. 
As Moscow Times reporter Stephanie Baker-Said described in an article
titled "Paid Off Then Laid Off" on April 21, most of the World Bank money
is being used to pay off wage arrears owed to workers at mines that are
being closed down. 
This gives workers a modest severance payment, but it is usually far too
little to allow them to start a new life. Most of Russia's coal mines are
located in remote regions like the Kuzbass and Vorkuta where no alternative
work is available. Unemployment benefits are meager and the impoverished
local administrations usually pay them late. 
If the miners are not simply to be left to die in the snows of Siberia,
help is needed. The World Bank and the government should realize that a
little money spent now on these programs would go at least some way to
promote acceptance of mine closures. Many miners realize that the writing
is on the wall for their pits. They would jump at the chance to start a new
life if they received a modicum of support. 
Money must be spent on retraining, job creation, moving the miners to
regions where jobs are available. Designing such programs will necessarily
be complex. For example, sacked miners face an almost unsurmountable task
finding accommodations in the big cities where jobs are available. 
But restructuring Russia's inefficient coal industry is a historically
crucial task that will pay big dividends in years to come. Cutting corners
on social spending to cushion the miners who are affected could provoke a
political backlash that undermines the whole process. 

********

#9
Russia: Former Kremlin Security Chief Makes More Disclosures
By John Helmer

Moscow, 20 May 1998 (RFE/RL) -- Alexander Korzhakov, the former Kremlin
security chief and confidante of President Boris Yeltsin, has revealed
personal knowledge that may have a bearing on the fate of Andrei Kozlenok,
a Russian diamond trader in jail in Athens awaiting extradition to Moscow. 
Kozlenok was arrested by Greek police as he arrived at Athens airport in
January. In a warrant issued by the Russian state prosecutor, he is accused
of embezzling about 180-million dollars in diamonds and precious metals
from Russian state stocks in 1993 and 1994. The Russians have applied for
his extradition, and a Greek court has ruled that Kozlenok should be handed
over. 

RFE/RL's 'Newsline' reported May 19 that Greece's Supreme Court last
week (May 15) decided Kozlenok should be extradited, and Greece's Justice
Ministry, which has final authority on extraditions, is expected to approve
the ruling. 
Kozlenok argued that the case against him is politically motivated, and
Russian authorities will intimidate or silence witnesses who could
vindicate him. He also claimed that, if he returns to Russia, he might
suffer the same fate as a former associate, who was found hanged in his
jail cell. Russian authorities say the death was suicide. 
Several former high-ranking officials in the government and the State
Committee on Precious Metals might be implicated in the case. 
Kozlenok has also claimed his diamond operations were authorized by the
Kremlin for political purposes. One of these, Kozlenok told a Russian
newspaper in April, paid for the publication of a book of memoirs by
President Yeltsin. According to Kozlenok, money from his diamond operations
went "into the fund of presidential programs of Russia. Probably, the money
was used for publication of the book." 
Russia has been applying intense diplomatic pressure on the Greek
government to return Kozlenok. The Russian press has been filled with
unsubstantiated speculation about Kozlenok's spending sprees, and the
involvement of high-ranking officials in the alleged embezzlement. 
During the period of Kozlenok's activities, Korzhakov was the head of
Yeltsin's personal security. He was also one of Yeltsin's constant
companions. In time, Korzhakov became a powerful and influential
decision-maker in his own right, keeping watch over all of the president's
subordinates and ministers. 
Then, June 20, 1996, Korzhakov was abruptly sacked, after disputes with
former first deputy prime minister Anatoly Chubais became embarrassingly
public, amid evidence of high-level corruption. 
Korzhakov then campaigned for a seat in the State Duma, where he remains
today. He has also published a memoir of his time with Yeltsin, and went on
the open attack against the president, his family, and those who currently
run the Kremlin. "The president is an empty bottle, filled by others around
him," Korzhakov told RFE/RL in an interview. 
He publicly warns that he has amassed details of corruption among
Yeltsin's advisors and high government officials from investigations he and
his subordinates gathered, when they were in the Kremlin. A new book of
these details is to be released very soon, Korzhakov said. 
Asked what he knows about Kozlenok, Korzhakov told RFE/RL he had
investigated the diamond transactions by Kozlenok's San Francisco-based
company, Golden ADA, and passed them on with his recommendations to
President Yeltsin. "I received the materials about Golden ADA, and sent
them to the President. They were met with total indifference. There were
major violations and shady deals, but nothing was done." 
Korzhakov suggests the Kremlin investigation he ordered could
substantiate the claim that some of the money generated by the scheme was
diverted to Yeltsin's book. "I don't exclude this," Korzhakov said, adding
he thought this likely because Boris Berezovsky, the Yeltsin family's
advisor and a wealthy financier, "was in charge of this book." Korzhakov
expresses deep hostility towards Berezovsky. 
Korzhakov returned several times in his interview with RFE/RL to the
theme of Yeltsin's betrayal of those closest to him. According to
Korzhakov, he had predicted Chernomyrdin's dismissal well before it
happened, in an interview with Argumenty i Fakty, that was never published.
Korzhakov is now predicting the sacking of Pavel Borodin, who heads the
Presidential Business Administration. "Of all the people Yeltsin once
trusted, only Borodin is left. There is now an unprecedented campaign
against Borodin to get him out. The next dismissal will be Borodin." 

According to Korzhakov, the President "now lives in a virtual world. He
is not in control of himself." And, Korzhakov claims the dominant influence
is exercised by Yeltsin's daughter, Tatiana Dyachenko. The appointment of
Prime Minister Sergei Kiriyenko was arranged by her, Korzhakov claims,
after a family business associate brought Kiriyenko to Dyachenko's attention. 
Kiriyenko is "the president's barbie doll", Korzhakov said. 
Korzhakov adds that he is convinced Yeltsin intends to run for a third
term. 

*********

#10
>From RIA Novosti
Commersant Daily
May 19, 1998
LEBED'S INTERVIEW
Krasnoyarsk territory Governor-elect Alexander Lebed is
interviewed by Commersant Daily's Dmitry Solopov.

Question: What will Governor Lebed begin his tenure with?
Answer: The paper Krasnoyarsky Krai has already published
the draft of a law on the procedure for recalling the governor.
I think that I should become with myself. I suppose that the
Krasnoyarsk legislature will adopt this law. So, I am burning
all the bridges. If people suddenly realise that I have come
here as part of my preparations for the [presidential]
elections or that I am plundering the region, the mechanism of
handling such a situation will be available: the governor who
would have lost all sense of moderation will be recalled.

Question: Do you want to say that Krasnoyarsk will not be
your springboard to the Kremlin?
Answer: It depends on what you mean by a springboard. In
principle, this may be a springboard, if the situation will be
flowering and all will have a normal life and see that formerly
dissociated components have formed a system, that a period of
recovery, even if not a very swift one, has started and if all
the doubting Thomases and the like become convinced that they
are on a correct course. Only in that case it can be a
springboard.
I do not know yet how much time all this will require. For
me it is important to assert myself today. I used to be a very
good army commander and wore epaulettes. Now, I have to assert
myself as a man capable of organising life in a different,
civilian, sphere. This is why I have come here.
That is why all talk that, while things are going from bad
to worse, I will be such a fool as to drop everything and run
for the presidency accompanied by hooting is simply ridiculous.

Question: With the law on recalling the governor adopted,
will relations with the centre be the issue?
Answer: I do not know any member of Sergei Kiriyenko's
government and hope to become acquainted with each. I do not
think that it might be any special problem. I do not see any
ground for confrontation. If I offer normal patterns of
interaction, the Prime Minister and his ministers will accept
them. I do not have much of a choice. I for my part simply
guarantee the existence of such scientifically elaborated
patterns.

Question: And still, many politicians in Moscow spoke out
against your candidacy up to the second round of the election
race. Aren't you afraid to find yourself in isolation?
Answer: Not at all. The plan of work with the regions

which was and remains in effect is absolutely unsuitable. It
can be changed in an evolutional way, if corresponding
conclusions are drawn just in time and the regional policy is
readjusted. It would be a tranquil and secure transition.
Otherwise, something explosion-prone, spontaneous and socially
dangerous may break out. There is no choice here.
I have been to Norilsk, which is a brilliant example to
see what's what. First of all, the road has been built there by
convicts, and there is huge wealth there. This remarkable
industrial region comprising several towns has almost 40,000
pensioners who have nowhere to go and no money to go anywhere.
They receive pensions in the amount of 500 rubles, whereas the
living wage is at the level of 1,470 rubles. It is clear that
it is impossible to compensate for the shortage of money with
potatoes. There are also 25,000 people out of work there.
Where does this city head for objectively? Either a system
which will help local people regain hope is organised this
summer and then people will patiently wait, or this megalopolis
will become a criminal city. If there is nothing to eat and
nowhere to go, while you are strong (weak people would not
survive there), you go to sell bricks in your neighbour's
doorway and he does the same in yours. It is an absolutely
hopeless situation. A prudent leader would never allow the
boiling cauldron to reach the point of an explosion. There must
be vents for steam.

Question: Which vents have you prepared?
Answer: The most prudent solution which would not require
additional budgetary allocations is to free the joint-stock
company Norilsky Kombinat from paying federal taxes for a
couple of years and use this money to help people move to other
places, thereby easing social tensions and reducing
expenditures for the upkeep of the decaying infrastructure. I
think that the plant will compensate for this money if it eases
the burden for 60,000-plus people.

Question: Do you imagine the resistance your initiative
will meet?
Answer: It will be even more difficult to keep social
explosions under control if they can be under control in
general. What has happened to the Soviet Union in fact
threatens to happen to Russia today. People are desperate. I
just state this sad fact. Social explosion are not regulated in
principle. That is why, we should, despite certain losses,
adopt a solution to ease tensions or, willing to have a new
situation, we will get nothing.
I want you to understand me correctly: I am not going to
argue with anyone. I am amazed that no one has been taking any
measures. Bosses have always been scolded for not taking the
necessary measures. This is what the bosses are for. When
something happens a bad boss begins to look for the scapegoats.
A smart boss takes measures in advance, doesn't he? He
forecasts, examines and weighs the situation, decides what is
to be done, pays and takes measures so that to keep the
enterprise working, give some hope to those of its employees
who have become redundant for understandable reasons, and pave
the way for them.


Question: They say that the interests of different
financial groups are concentrated in the Krasnoyarsk territory.
How do you envisage the line-up of forces and how are you going
to regulate the interests of financial structures?
Answer: There is no large Russian bank or significant
financial-industrial group which would not have a stake in this
territory. The previous system of economic development of this
extremely rich territory has turned it into a storage facility
at which everyone could do as he wished. I am for the
development of market relations in our country. I want our
people to work and make money; I am prepared to welcome the
interests of all the banks and financial-industrial groups. It
is the task of the territorial government to regulate their
interests. Having scrutinised the situation, I have drawn what
I think is the only correct conclusion: power should be in the
centre, and all the rest should be at an equal distance from
it. Power is the arbiter, a stern but fair arbiter. Power
should coordinate the interests, separate the fighting ones and
not allow anyone to pull the blanket to his side.
Yes, all these groups and banks have come to the territory
before me. And for that reason all of them will be paid due
attention, whether I like it or not. Some of them, like
UNEXIMBANK, Rossiiskiy Kredit or the Alfa-Group, have already
struck deep roots in our soil, while the presence of others,
the smaller ones, is less significant. But they all are present
here one way or another. And in many instances it is a case of
behind-board financial war, which is more often than not a
meaningless war, if you look at it from the side. For instance,
I do not like someone called Ivanov and I am fighting with him
just because I am a fighter, as Alexander Dumas' Portos used to
say. As a result, things are bad for me, for Ivanov, for the
economy and for all, but we, nonetheless, continue to fight.
Someone ought to handle such a situation.
I am laying the foundation of a policy as a result of
which the territory should not at least lose anything and
should acquire something, at best. The territory must not lose
anything. The people living on this very rich soil are above
everything else. It is a shame that they have to eat fodder and
dogs, while the incalculable riches of their land are being
plundered.

Question: Are you more Robin Hood or Danko?
Answer: I am not going to become involved in high spheres.
I am sick and tired of the bedlam in which I have been living.
There is a chance to start living differently. Why isn't it
used? I do not claim to the role of either Danko or Robin Hood.
I am not going to confiscate anything from anyone. I am by
nature against political extremism. Absolutely against it. I
strongly reject it. The way I have been educated, I cannot be a
separatist. It made me laugh hearing at the time when I was
still in Moscow that I am an imperial general or a nationalist.
As soon as I got four thousand kilometres away from Moscow, I
began to be called a separatist.
I do not imagine myself being either the initiator or a

participant of separatism. I have taken steps to ensure that
our country should remain integral and indivisible. I did not
start wars; I ended them.

*******