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Johnson's Russia List


May 21, 1998  
This Date's Issues: 2187 2188 

Johnson's Russia List
21 May 1998

[Note from David Johnson:
1. Interfax: Russian Premier: Situation "Very Complex."
2. Reuters: Communists Delay Bid to Oust Yeltsin.
3. Baltimore Sun: Will Englund, Russia's last czar now an icon to some.
4. Reuters: Who's to Blame for Russia's Crisis? 
MEANS." (Interview with Finance Minister Mikhail Zadornov).


7. Reuters: Yeltsin has Kind Words for Lebed.

9. Nezavisimaya Gazeta: Ivan Otdelnov, RUSSIA REDOUBLES EFFORTS TO


11. Testimony on U.S. policy toward Russia of the State Department's "top
Russian specialist," Ambassador-at-Large Stephen Sestanovich.]


Russian Premier: Situation "Very Complex" 

MOSCOW, May 21 (Interfax) - Russian Prime Minister Sergei Kiriyenko
Thursday described as "very complex" the wave of protest actions sweeping
the country's coal mining districts. 
Opening a Cabinet meeting, Kiriyenko said the government is facing
"conditions of social and informational pressure." 
"However, we cannot succumb to allotting budget funds to the protesters.
We are responsible for the country's economy and we cannot take from
somebody to put out a temporary fire in another place," he said. 
An additional 526 million rubles was injected into the federal budget
Wednesday after cutting costs for support of the government and members of
parliament. Transfer of these funds to regions started on the same day and
will continue through the week. 
The government on Wednesday set up a crisis headquarters to deal with
the strikes, he said. Minister Yakov Urinson will depart for the Komi
autonomous republic and deputy prime ministers *Boris Nemtsov* and Oleg
Sysuyev are visiting coal mining regions, he said. 
A real budget is not a abstract objective but a condition for normal
development of the economy, he said. A tight program for attracting
additional revenues and equally tight program for cutting expenditure is
under consideration in the government, Kiriyenko said. 
Debts will continue to pile up until the federal budget becomes real, he


Communists Delay Bid to Oust Yeltsin 
May 21, 1998

MOSCOW -- (Reuters) Russia's Communists said on Thursday they had delayed
their parliamentary bid to impeach Boris Yeltsin and the president's
spokesman dismissed their plans as "games and firecrackers." 
"The documents (for impeachment) are still in the works. This means the
procedure will not go ahead before the week after next," said Communist
deputy Sergei Reshulsky. 
The Communists had originally planned to start the impeachment process
on Friday. They started gathering signatures to press their bid on
Wednesday amid growing social unrest over chronic delays in the payment of
"What can they do? Zyuganov had to strut in front of the party congress.
Now they are playing games and firecrackers," Yeltsin's chief spokesman
Sergei Yastrzhembsky told reporters. 

In fact, it is all but impossible to impeach Yeltsin and previous
attempts have made little progress. 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. 
Reshulsky made clear the Communists were not deterred by the
difficulties ahead. "The issue will not be confined to just signatures. The
procedure will go ahead according to the constitution," he said. 
Parliamentary sources said the Communists needed time to formalize their
charges against Yeltsin because most of them dated back to the president's
first term in office before 1996 and would be hard to prove. 
Most deputies will spend next week working in their constituencies. 
Zyuganov said on Wednesday that 177 deputies -- well above the 150
deputies required to start the procedure -- had signed the petition to
impeach Yeltsin. 
The charges brought by the Communists against Yeltsin include destroying
the Soviet Union in 1991 and his bloody dissolution of parliament in 1993. 
The deputies are in resolute mood after Yeltsin last month forced them
under threat of dissolution to endorse his new prime minister, Sergei
Social tensions reached fever pitch this week as thousands of angry
miners cut the country in half by blocking major railways, demanding
millions of dollars in delayed wages. 
The Communist charges make no mention of the problems in the coal
The Duma's Communist speaker, Gennady Seleznyov, conceded on Wednesday
that impeachment under a constitution drawn up by Yeltsin was "very
Seleznyov, upper house speaker Yegor Stroyev and Prime Minister
Kiriyenko had been due to meet Yeltsin later on Thursday to discuss cuts in
Russia's nuclear arms. 
But Seleznyov told reporters in the Duma that the social tensions in the
country would now dominate their agenda. 
"We will focus on the miners' problems but we will broaden the issue to
discuss the situation in the country as a whole." 
The issue of people's savings lost in the course of Yeltsin's painful
market reforms would also be discussed, he added. 
Yastrzhembsky has said that Yeltsin would use Thursday's meeting to
attack parliament for dragging its feet over ratification of the START-2
nuclear arms reduction treaty.


Baltimore Sun
20 May 1998
[for personal use only]
Russia's last czar now an icon to some
Some consider the murder of Nicholas II a symbol of all the nation's ills 
By Will Englund 
Sun Foreign Staff 

MOSCOW -- Faith brought a thousand people to an old war monument here
yesterday, faith in the redemptive power of a man who in life was loving,
mild and inadequate.
In death, the murdered Czar Nicholas II has become something else
altogether. Above the priests and uniformed Cossacks and kerchiefed old
women who came to mark his 130th birthday, the banners flapping in the warm
breeze bore his likeness as if that of an icon.
"I think the czar fulfilled his mission, which was like Christ's," said
Valentina Shatskaya. "He paid with his life for the sin of the Russian
Prayers were intoned, incense burned. A priest walked through the crowd
splashing holy water, as believers held placards and icons out to try to
catch a few drops.

Like almost no czar before him, the unassuming Nicholas haunts Russia
to this day.
Even as the service proceeded, a few blocks away, the Russian government
was confirming its decision to bury what are almost certainly the czar's
bones and those of his family in St. Petersburg on July 18, the 80th
anniversary of their execution. The government would like to see the
funeral as a symbolic laying to rest of Russia's tragic past, so that the
country can move on. The believers at the war monument would have none of it.
The government commission on the czar's bones -- now lying in a morgue
in Yekaterinburg -- is trying to portray his death as a simple, bloody
murder, she said, rather than a prophesied -- though temporary -- triumph
of evil.
In the turn-of-the-century tumult that marks Russia today, a small but
intense religious revival is one refuge for people looking for certainty,
comfort, faith. The country seems to have horribly lost its way; people
look back to the last Orthodox Christian emperor and lift him out of
history and into the realm of belief.
"He can be called a banner -- for the revival of Russia and of the
Orthodox church," said Margarita Pavlova. "He was the last Russian czar,
murdered in such a ritual manner. There has to have been some meaning to
this murder."
"It was the annihilation of traditional Russia," said her friend,
Alexander Kodakov.
The St. Petersburg funeral, she said, will be a "terrible lie." The
government is trying to trick the Russian people, she said. "I don't doubt
for a second that these are not the czar's bones."
Against DNA tests and forensic evidence that all point to the
authenticity of the remains, Pavlova puts her religious certainty. "I await
the canonization of the czar," she said, as a first step toward putting the
country back in God's grace.
The crowd pressed close to the newly restored monument, which honors
those who died in the war to free Bulgaria from the Ottoman Turks in 1877.
Vendors stood at tables toward the back, offering religious tracts,
histories of the White Guards who fought against the Bolsheviks,
anti-Semitic monographs and fascist newspapers
Shatskaya, a cleaning woman at a monastery, believes the forces of evil
are striding across Russia, and that only Nicholas can intercede to save
the country. "His canonization," she said, "will be the beginning of the
revival of the whole Russian people."


Who's to Blame for Russia's Crisis? 
20 May 1998

MOSCOW -- (Reuters) Russia's economic turmoil prompted new allegations on
Wednesday that unidentified backstage forces were orchestrating chaos, but
then no crisis would be complete in Moscow without a conspiracy theory. 
The central bank must wish it had a dollar for every version of events
bandied about by the press in the past week. 
The financial crisis has created fertile ground for finger-pointing and
speculation, not just in the financial markets and in the press, but in the
corridors of the Kremlin itself. 
President Boris Yeltsin, after meeting youthful Prime Minister Sergei
Kiriyenko and his new government on Wednesday, added his voice to the
chorus of vague allegations. 
"Someone deliberately wants to wreck (the work of the government),"
Yeltsin said, adding that the government needed strong nerves. 

As Asian-related jitters unnerved investors in Russia, and domestic
economic worries gained a momentum of their own, few would dispute that
Russia has been the victim of a cruel combination of market circumstances. 
But many Russian commentators, not to mention officials, see hidden
hands conspiring to make life difficult for Kiriyenko, 35, who was
confirmed in his post on April 24. 
Central Bank Chairman Sergei Dubinin blamed the financial turmoil on
unnamed Western speculators -- comments reminiscent of those made by
Malaysian Prime Minister Mahathir Mohamad in the wake of his country's
currency problems. 
The press has delved even deeper into the murky world of Russian
politics and business, where rival financial groups are seen orchestrating
virtually every important aspect of life. 
The pro-government newspaper Rossiiskaya Gazeta saw more than
coincidence in the financial crisis, which erupted at the same time as a
miners' protest across the country. 
"In the White House (government headquarters), they do not rule out
calculated games by speculators aimed at lowering prices of state
securities and the ruble," the paper said. 
"Very many unfavorable factors have come together at once," it said,
adding that powerful oil and metals producers were thirsting for a drop in
the ruble to boost export revenues. 
The Izvestia daily, in which oil giant LUKoil has a big stake, agreed
there was a remarkable concurrence of events. 
"All at once, on several fronts, things are happening, each of which
would be capable on its own of shaking the government of the most
prosperous country. 
"It would be naive to say that the timing of all of this is just pure
coincidence. Such a quantity of coincidences only happens in a bad
detective story," it said. 
But Izvestiya said the previous government of Victor Chernomyrdin,
dismissed by Yeltsin on March 23, had to share some blame for the shaky
state of the economy. 
It mentioned emerging market problems linked to southeast Asia and low
world oil prices, which have hit Russian exports. 
And it suggested that the problems on the markets were also partially
the responsibility of Russia's big financial groups. "Without the
participation of the leading players nothing happens there (on the
markets)," it said. 
Sevodnya, which is controlled by tycoon Vladimir Gusinsky's Most group,
said financial speculators were seeking to drive down prices of
high-yielding treasury bills. 
But it mentioned another contributing factor for the stock market crisis
-- a law adopted by parliament limiting foreign ownership in national
electricity firm EES. 
"Along with other factors, it is this particular document which is
responsible for the market fall," it said. 
EES shares, the market bellwether, have been leading the market
downwards since Yeltsin signed the controversial law before the slide
Rossiiskaya Gazeta said Western investors wanted to make Russia
dependent on foreign credits, with shares in Russian enterprises such as
EES taken as collateral. 
As the newspaper's theory had it, the stock market was being pushed down
ahead of this month's planned privatization of Rosneft, the last big oil
enterprise still in state hands. ( (c) 1998 Reuters) 


>From RIA Novosti
May 21, 1998
Finance Minister Mikhail Zadornov talks with Trud's
political commentator Vitaly Golovachev about the past crisis
and what lies ahead for Russia.

Question: How will the recent sharp fall of the prices in
the state securities market affect ordinary Russians?
Answer: The reduction of prices affects, above all, the
interests of financial, commercial stock-holding structures.
Their packages of shares have become noticeably depreciated.
Some structures have sustained considerable losses.
It goes without saying that the latest events in the stock
market have had an unfavourable influence on the country's
financial system. Nonetheless, the situation has been under
control. The Finance Ministry, the Central Bank and the
government did the utmost to immediately arrest the negative
trends. The situation started improving already on Tuesday. Our
financial system has thereby confirmed once again that it is
sufficiently stable.
Question: What has caused the stock market crisis?
Answer: Both outside and domestic factors have had a role
to play. Financial instability persists in Southeast Asia.
Grave trials have fallen on Indonesia. South Korea has serious
problems and a complicated situation exists in Japan. Certain
difficulties are observed in all the developing markets. Hence
the natural capital flight from these to more tranquil markets.
A few words about our domestic problems. The law On
Specificities of Stock Handling adopted by the State Duma has
undoubtedly a negative role to play. Right from the outset the
government was against the draft of that law. The President has
vetoed it, but parliament has overridden his veto. (That law
restricts by 25% the share of the stock of the RAO Unified
Energy Systems, UES, which foreigners may own, though they
already own more at present. - Ed.) The government intends to
contest the law in the Constitutional Court. Anyway, we
guarantee that the rights of the investors will not be
impaired. But the very fact that this law has been adopted has
unfortunately played a negative role.
What is more, the crisis was largely provoked by
speculative "attacks" of several stock market players. We know
who they are but I would not like to name them at this point.
Question: Speaking to the State Duma a month and a half
ago, Prime Minister Sergei Kiriyenko appraised our economic
situation as "critical and very grave". Didn't he deliberately
exaggerated the difficulties so that possible later changes for
the better looked more effective?
Answer: I think that Kiriyenko's appraisal was quite
Question: The Finance Ministry at a recent government
session submitted a document, according to which the country
may go bankrupt if its state debts continue to grow. Is such a
danger real?
Answer: The press has largely dramatised the contents of
our documents. The issue at hand has been, in fact, that it is
inexpedient and even dangerous to continue accumulating state
debts. We need a package of measures for improving the

financial situation. This is what we have offered. As a matter
of fact, our documents predict positive changes, not a
catastrophe. If the proposed measures had not been approved,
things would have really become very bad.
Question: Russia's state debt (domestic and foreign) has
already exceeded $200 billion dollars. This is equivalent to
half of the country's gross domestic product. Isn't it an
emergency situation?
Answer: No, it is not an emergency. It is not much, by
international standards, when the state debt is equivalent to
50% of the country's GDP. In Belgium, for one, it is equivalent
to 120% of GDP and in the US to more than 100%, too. By the
way, one of the requirements for the accession of a European
country to the agreement on the introduction of a common
currency is that its state debt should not exceed 60% of its
GDP. As you see, we are perfectly qualified under this
Question: What about other requirements?
Answer: Inflation should be less than 3% a year and budget
deficit less than 3%, too. I hope that in 2001 Russia will also
be able to reach the minimal budget deficit target.
Question: What is your forecast for this year's inflation?
Answer: Between 6% and 7% in 1998. It will be the lowest
inflation level in the past few years.
Question: Judging by all this, things are pretty good.
However, wage arrears continue to grow, including in the
budget-financed sphere in which it has added up to 9.5 billion
rubles. Why can't you cope with this problem?
Answer: I want to emphasise that the federal budget owes
nothing to the public-sector employees. It is mostly in the
regions that wages are not paid to doctors and teachers. There
are quite definite and very uneasy reasons of both an objective
and a subjective nature for this. As economic recovery
continues, this knot will be untied, above all, with regard to
public-sector employees.
Question: But according to the State Statistics Committee,
or Goskomstat, real incomes are falling and the quality of life
is deteriorating.
Answer: I cannot agree with you. Cash incomes include
profits from the sale of currencies. Today, Russians sell less
currency. That is why statistics show a certain reduction of
cash incomes. This does not mean, however, that the quality of
life is deteriorating. Quite the contrary. The growth of trade
bears to show that the quality of life is improving with regard
to many people, as their purchasing capacity is growing.
Question: And still, won't Russians have to tighten their
belts again in a short while?
Answer: I do not think so. Small business has a tendency
towards development, industry is growing, even if at a slow
pace, and inflation is stabilising at a low level. The thing is
that all the sectors of the economy should work more
efficiently. And to ensure this is the government's top
priority task.
Question: The inter-departmental commission for the
reduction of federal budgetary expenditures, which you head, 
completed its work a few days ago. It has been decided that
about 200,000 employees will be no longer paid out of the

federal budget. Part of organisations, schools and public
health institutions will now be financed out of regional
budgets and part of such organisations and institutions are
eliminated. Education minister Tikhonov told me a few days ago
that he will have to sack 12,000 people. Several thousands
public health workers are to be fired. The greatest number of
redundant workers - about 70,000 - are to be in the territorial
offices of ministries and departments. Do all these reduction
plans remain?
Answer: The numbers are being specified, but the picture
as a whole is about what you have described.
Question: Could you give a couple of examples?
Answer: The health care and pre-school children's
institutions of the Railways Ministry are transferred under the
control of the local authorities. In the sphere of higher
education, a number of schools situated in the same city will
be merged, for instance, into one university. (The lists of
projected mergers has already been made public. - Ed.) The
agricultural enterprises of the Defense Ministry are
transferred under the control of the local authorities and
forestries. The search and rescue services of the Emergency
Situations and Interior Ministries and fire-stations are also
merged. I want to stress, however, that the government has not
considered all these proposals yet and has not adopted any
concrete decisions. When the final decision is made, I promise
to give my first detailed interview to Trud.
I would like to say in conclusion that budgetary
expenditures - be it the federal or the regional budget -
should correspond to budgetary revenues. The country simply can
no longer live beyond means. Unfortunately, we have been living
so not for the first year, covering the shortage of means by
foreign and domestic borrowings. An end is to be put to this
faulty practice if we do not want to become dependent on the
West or go bankrupt. Isn't it only reasonable to spend no more
than you have in your purse? So, let us adhere to this rule.


Yeltsin intends to raise the issue of ratification by the State
Duma of the Start-2 Treaty at a meeting of the Council of Four,
Presidential Press Secretary Sergei Yastrzhembsky reported on
the eve of the president's meeting with the prime minister and
the chairmen of both Houses of Parliament.
The question of ratifying this treaty is "too serious,"
Yastrzhembsky stressed, to make it "a subject of deputies'
political ambitions." At the same time, he noted, the government
must answer all the "lawful questions" from deputies concerning
the financing of the realisation of the Start-2 Treaty, and the
consequences of the ratification of the treaty for national
security and the Russian nuclear missile forces. According to
Yastrzhembsky, the president gave all the powers to the defence
and foreign ministries to "conduct a most profound dialogue with

the State Duma."
The press secretary also noted that if the government still
has not presented an economic justification for the actions of
Russia after the ratification of the Start-2 Treaty, then the
blame lies entirely at the door of the cabinet of ministers.
A consequence of this was the unpleasant surprise which the
deputies sprang on the Kremlin on Tuesday by deciding to
postpone closed hearings on the Treaty from June to September.
Diplomatic sources do not rule out the possibility that this
demarche may hinder the plans of the Russian and US presidents
to meet in Moscow in July. And though, as Yastrzhembsky
asserted, the US does not put forward the ratification by the
Duma of the Treaty as an essential precondition for the arrival
in Russia of US President Bill Clinton, the American side "does
have corresponding wishes and expectations."
Russia has not only "expectations," but also complaints
against the US parliament. According to Yastrzhembsky, the
ratification of the Treaty may turn out to be jeopardised
because of actions of the US Senate. In the coming days it
intends to discuss the imposition of economic sanctions against
firms participating in contracts with Iran, in the category of
which Russia's Gazprom also falls. 


Yeltsin has Kind Words for Lebed 
20 May 1998

MOSCOW -- (Reuters) Russian President Boris Yeltsin on Wednesday
congratulated his former aide and now bitter critic Aleksander Lebed on
being elected governor of a Siberian region and said he was sure he would
improve its fortunes. 
"Dear Aleksander Ivanovich (Lebed), congratulations on your brilliant
success in the Krasnoyarsk governorship election," Yeltsin said in a letter
published by the Kremlin. 
Eighteen months ago, the president sacked Lebed after just a few months
as his security adviser, accusing him of harboring excessive presidential
Lebed, a former paratroop general who came third in the 1996
presidential election before being drafted to the Kremlin, has made clear
he wants to succeed Yeltsin in the year 2000. 
Preliminary results from Sunday's regional poll gave the law-and-order
campaigner 57.3 percent of votes cast, well ahead of Kremlin-backed
incumbent Valery Zubov on 38.2 percent. Final official results are due on
The vast, mineral-rich Krasnoyarsk region could become Lebed's
springboard to the Kremlin. 
But in recent days Lebed, 48, has said he will not seek the presidency
until he has brought prosperity to the region -- a task likely to take time
in view of its heavy reliance on the largely outdated, Soviet-era defense
"The region's inhabitants have placed their trust in you. I have no
doubt that you will care for people's basic needs and for the interests of
the region and will justify the hopes of the people of Krasnoyarsk for a
better life," Yeltsin said. 
Lebed has also said he wants to win for his region, which boasts
chemical plants and huge nickel and aluminum reserves, 
greater autonomy from distant Moscow, and will personally take the issue to
the president. 
Yeltsin in his letter said he expected Lebed, who automatically takes a
seat in the 189-seat Federation Council upper house of parliament, to
cooperate with the Kremlin. 

"I believe that your activities in the post will serve to keep up the
democratic and economic changes in the Krasnoyarsk region and to strengthen
Russia's federative statehood. I am counting on constructive cooperation." 
Lebed, 48, has more than once said Yeltsin, 67, was too unhealthy to run
the state. 
He played a key role in ending wars in former Soviet Moldova in 1992 and
in Russia's rebel region of Chechnya in 1996 but both the Kremlin and the
Communist opposition have questioned his ability to tackle Krasnoyarsk's
economic woes. 
Lebed says Russian politics is plagued with corruption but has so far
refused to outline his plans for Krasnoyarsk, saying only that he will
guided by law, not by autocratic whim. 
Under local regulations he must be officially inaugurated in the week
beginning on June 4. 
Lebed, quoted by Interfax news agency, said he was "sincerely grateful
for the congratulations." 


SHNITNIKOVA - Former Vice-Premier and State Property Management
Committee head Alfred Kokh assumes he might be arrested by the
Moscow Prosecutor-General's Office, but keeps claiming he is not
guilty. He said so at a press-conference in Moscow today. This
form of detention can be applied to me under our criminal
procedure norms, said Kokh. Kokh has been summoned for
interrogation to take place tomorrow.
The former vice-premier also showed newsmen a test-copy of
his book "The Sale of the Soviet Empire", issued in America,
which he has dedicated to the Russian Prosecutor-General's
Office. In the words of Kokh, the rights for its publication are
reserved by the literary agency Barror International, which
bought them from the Swiss firm Servina Trading for $130,000. 
Kokh's royalties for selling the book to the Servina publishers
is known to be $100,000. According to Kokh, he has gained no
additional money from the re-sale of his copyright to the
American agency.
It was these $100,000 which caused the institution of
criminal proceedings against Alfred Kokh on October 1, 1997.
However, the author himself does not consider this fee to be too
high. In his words, Russian government officials have never
before written such popular books on economic themes and
therefore it is just the first precedent. Kokh cites the
American agency's $30-dollar higher fee for the book as a
confirmation of the fact that the initial price was not
artificially raised. According to him, one book copy will cost
Asked by newsmen about the charge of misappropriating state
property, expressed in receiving a three-room apartment at state
expense, brought against him, Kokh noted that an apartment was
his main condition when he received an invitation to occupy the
post of State Property Management Committee chairman. The former
vice-premier states that he wrote an application for a flat,
which served as a basis for allocating him a definite sum of
money for such a purchase. In the opinion of Kokh, this can

hardly be viewed as theft. 


>From RIA Novosti
Nezavisimaya Gazeta
May 21, 1998
The FSS forwards a new report to state agencies

Yesterday the Public Relations Centre of the Federal
Security Service sent a note to the state agencies of Russia
responsible for the operation of enterprises of different forms
of ownership. The note includes an additional list of foreign
companies connected with military programmes for creating mass
destruction weapons, in particular North Korean, Pakistani, and
Iranian companies. 
This is another action taken by the Russian government to
strengthen the regime of the non-proliferation of mass
destruction weapons and missile technologies.
The G8 summit, which ended on Sunday, approved, including
at Russia's initiative, a statement which pointed to the need
to strengthen the policy of non-proliferation of mass
destruction weapons and missile technologies. Before the G8
leaders approved that joint statement, Russian President Boris
Yeltsin spotlighted the problem at the collegium of the Foreign
Ministry. Even before that, Defence Minister Igor Sergeyev made
a large statement addressing this problem as a long-term task
of ensuring national defences. 
Like the other G8 states, Russia denounced the holding of
two series of nuclear explosions in India. But, although all G8
countries have a negative attitude to that event, they differ
on what should be done with regard to India. For example, the
Russian stance is closer to that of France than of the USA. It
is interesting that Israel's stance on the matter differs
dramatically from the US attitude and virtually coincides with
the Russian attitude. 
Russia's active stance on the non-proliferation of mass
destruction weapons and missile technologies is understandable,
as many threshold countries are located closer to Russia than,
say, to Japan or Western Europe, not to mention the USA and
This problem is very important for Russia also because it
has technologies which are very attractive for those who want
to have their own nuclear weapons or missiles. Until recently,
the trouble was not so much that Russia had a great deal of
such technologies, while its defence enterprises badly needed
money. The trouble was the legal uncertainty which existed in
this sphere in Russia. 
The Russian Defence Ministry's commission on export
control, led by the current Security Council Secretary Andrei
Kokoshin raised the alarm. Andrei Kokoshin, then first deputy
defence minister, demanded that all military and dual
technologies created on budgetary allocations should be defined
as government property. But he was resisted by pro-market
radicals and the lobbies of the former "red directors," who had
grown used to thinking of these technologies as their property.
Now Kokoshin is supported by the new premier, Sergei Kiriyenko,
who proclaimed the policy of strengthening the role of the
state in the economy.
The joint actions of the government and the Security
Council produced a presidential decree "On the Legal Protection

of the Results of Military, Special and Dual Research and
Design and Technological Projects." Both Kiriyenko and Kokoshin
plan to ensure strict control over the fulfilment of this
decree, with the use of all means and possibilities available
to the state, including secret services. 


MOSCOW, May 20, 1998. /From RIA Novosti correspondent
Alexei Meshkov/ -- The quality of reforms being carried out in
the military field will ultimately depend on the care shown by
the state for the combat readiness and efficiency of the armed
forces being reformed, a RIA Novosti correspondent was told at
the Russian Defence Ministry. 
This was a comment on the results of a conference of army
and navy commanders that ended on the day before. The conference
summed up the period of winter training and specified tasks for
the summer. 
The Defence Ministry is seriously concerned about the
"fullness" of the military budget. 
Allocations for the planning and upkeep of armed forces in
1998 are a mere 2.9 per cent of the GDP, and in the first
quarter of the current year the army was disbursed only one
twelfth of the planned sum. 
The Defence Ministry is building up its debts all the time.
By the beginning of 1998 the debts totalled 35 trillion roubles
(34 per cent of the expenses planned for the year). 
This means, it was stressed in the military establishment,
that more than one-third of the army's military budget no longer
belongs to it, since it will be used to pay off last year's
In the view of Defence Minister Igor Sergeyev, "this is a
real millstone, which hampers movement" and one cannot proceed
with such a weight for a long time. 
This problem is also leaving its imprint on the combat
training of the army and the navy. In the winter period training
was done "in the dire absence of money, fuel and other materials
required for maintaining combat readiness".
The Defence Minister estimates that because of problems the
Russian army in 1997 had no units ready for immediate fulfilment
of combat missions except nuclear deterrence forces and some air
borne troops. 
Problems also dog the renewal of equipment, it is claimed
in the Ministry. So, according to the military establishment,
troops are less than 30 per cent equipped with new samples of
weapons and military equipment. 
In addition, 53 per cent of the air fleet and about 40 per
cent of air defence facilities and helicopter fleet are out of
order or need repairing. 
At the same time, 90 per cent of the sums allocated for the
Defence Ministry is spent on keeping up the armed forces, on
money allowances, and store and food supplies. 


20 May 1998 
(New team to have major impact on U.S. concerns) (4820)

Washington -- The ability of Russian President Yeltsin's new team "to
address the major challenges Russia faces will have important
implications for Russian-American relations," the State Department's

top Russian specialist, Ambassador-at-Large Stephen Sestanovich, told
the Senate Foreign Relations subcommittee on European Affairs May 20."
It will have a major impact on questions that have been, and will
remain, of particular concern both to this administration and to
members of Congress --whether it's Russia's ability to implement a
tough and effective non-proliferation policy, the economic strategies
necessary to attract foreign investment and encourage growth, the
protection of religious liberty, or Russia's relations with its
neighbors and the world," he stated.

Sestanovich then went on to outline the administration's four main
goals for Russia. They are: -- "to reduce the threat to the United
States and to international peace posed by weapons of mass
destruction"; -- "support for democracy and respect for human rights,
including religious freedom"; -- "Russia's continuing transition into
a modern, market-based economy, coupled with Russia's integration into
the world economy"; and -- "a Russia cooperatively engaged with its
neighbors and integrated into Euro-Atlantic and global communities."

Following is the text of Sestanovich's remarks, as distributed at the
Senate Foreign Relations subcommittee on European Affairs:

(Begin text)

1. Introduction

Thank you, Mr. Chairman, for the invitation to appear before you today
to discuss U.S. policy toward Russia. This is my first meeting with
your committee since I joined the State Department last fall, and it
could hardly come at a more opportune moment. In Moscow, President
Yeltsin has put together a new government -- one of youth, talent, and
reformist conviction, and he has charged it with restoring momentum to
his policies across the board. The direction that his new team takes,
and its ability to address the major challenges Russia faces, will
have important implications for Russian-American relations. It will
have a major impact on questions that have been, and will remain, of
particular concern both to this administration and to members of
Congress -- whether it's Russia's ability to implement a tough and
effective non-proliferation policy, the economic strategies necessary
to attract foreign investment and encourage growth, the protection of
religious liberty, or Russia's relations with its neighbors and the

How these questions are addressed will to a very large extent
determine what kind of country Russia will be and what kind of role it
will play in the world. On this, America's stand is clear. As
President Clinton declared in his Berlin speech last week, "the
secure, free and prosperous Atlantic community we envision must
include a democratic Russia. For most of this century, fear, tyranny
and isolation kept Russia from the European mainstream. Now Russians
are building a democratic future. We have an enormous stake in their
success.... We must support this Russian revolution."

Americans of both parties have agreed that Russia's revolution
deserves our support. They have seen that doing so serves American
interests in the most palpable way. The administration and Congress
have worked together to give concrete support to this revolution. As

Secretary Albright told the Senate Budget Committee: "Our highest
priority is to ensure that NIS [the New Independent States of the
former Soviet Union] countries build peaceful ties with the West
through free-market engagement and reliable democratic institutions."

To advance these interests in our relations with Russia, this
administration pursues a four-part agenda:

First, we seek to reduce the threat to the United States and to
international peace posed by weapons of mass destruction. Russia
itself no longer threatens America the way it did for so many decades.
Ensuring that the remnants of the Soviet military-industrial complex
do not threaten us or our allies remains a principal goal of U.S.

Second, we support democracy and respect for human rights, including
religious freedom. Just as Americans supported those who yearned to be
free of communism throughout the Cold War, so now we must stand up for
Russia's new generation of democrats as they build a civil society. A
democratic Russia at peace with itself is more likely to be at peace
with us and with the world.

Third, we strongly support Russia's continuing transition into a
modern, market-based economy, coupled with Russia's integration into
the world economy. A market economy is the essential complement to
democracy and respect for fundamental human rights. It creates
opportunities for those Russians who have put behind them the habits
and outlook of the past. It provides opportunities for U.S. business
to participate in Russia's revolution, as well.

Fourth, we seek a Russia cooperatively engaged with its neighbors and
integrated into Euro-Atlantic and global communities. This is key to
building a world based on equality among states rather than on
confrontation and domination.

Mr. Chairman, these are extremely ambitious goals. Reaching them
requires several things. One of them is bipartisan support. Since
1991, that support has by and large held firm. But I would be less
than candid if I did not acknowledge that this bipartisan consensus is
under very severe stress. In the face of these challenges there are
plenty of people, possibly some members of this committee, who have
begun to question whether these are in fact realistic aims for
American foreign policy in 1998.

This administration's answer to that question is, emphatically, yes.
The key to restoring a measure of bipartisanship to our Russia policy
is for us together to tackle the problems we face head on. The more
thoroughly we talk through the difficulties that we encounter in our
relations with the Russians, the stronger, I believe, will be the case
for the policy that we are pursuing.

Another prerequisite for achieving our goals is understanding what
Russians are thinking. Russians are themselves divided about their
policy goals.

There are, for example, those in Russia who understand that ratifying
the START II treaty will enhance Russia's security and serve the
urgent need of military reform; others prefer to block
Russian-American agreements of any kind. There are those who see
perfectly clearly that the flow of dangerous missile and nuclear

technologies to Iran directly threatens Russia; but others believe
they can make money from it and, to keep doing so, may try to subvert
any strengthening of export controls. Many are committed to protecting
the free exercise of religious faith in accordance with the Russian
constitution and Russia's international obligations; others fear
religious freedom and diversity. There are Russians who know that the
long-term revival of their energy industry cannot succeed without
foreign partnerships; others would rather let production slide than
allow outsiders in. There are Russians who accept the independence of
their neighbors and regard it as essential to Russia's security and
democratic success; others want to reconstitute the Soviet Union, no
matter the price.

Mr. Chairman, what makes these differences serious isn't that we don't
know where those who set Russian policy stand. We do. It was, after
all, President Yeltsin who on Sunday emphasized to President Clinton
his personal determination to use all the powers of his office to stop
sensitive technology transfers to the Iranian missile program. It is
the defense minister and foreign minister who are pushing START II
ratification in the Duma. And it was Sergey Kiriyenko who, as energy
minister, committed himself to resolve problems faced by
Russian-American joint ventures in the energy sector.

What makes the policy divisions I have described important, and what
we must bear in mind as we deal with a Russia in transition, is their
impact on the way policy is carried out. No matter the issue, the
Russian system produces results -- good, bad, or indifferent -- only
very slowly. The system itself is still undergoing profound change:
the jurisdiction of government agencies is often poorly defined; their
decisions are subject to constant challenge by the special interests
affected; bureaucrats who want to ignore a particular decree or law
can sometimes take cover under another one with a diametrically
opposite meaning.

I have dwelled on the difficulties that we face in pursuing our
ambitious agenda toward Russia because some people conclude from these
difficulties that we have had to give up, and that we are now pursuing
second-best results. We are not, and it would be unacceptable to do

The stakes are too high for us to accept second-best results. That was
not this administration's approach when it worked for the withdrawal
of Russian troops from the Baltic states; when it concluded a
trilateral U.S.-Russia-Ukraine agreement to remove nuclear weapons
from Ukraine; when it completed the NATO-Russia Founding Act; when it
stood behind the Russian reformers in their successful battle against
inflation or frankly when it stood with them against a communist

It was said of every single one of these efforts that it could not
succeed. And they definitely could not have succeeded without
persistence, patience and steady nerves. They could not have succeeded
without continued bipartisan support for our Russia policy and for the
resources that the Congress made available to advance our interests....

6. Conclusion

The common thread of our policy toward Russia is to address all four
parts of the agenda I described together, comprehensively, and in a
way that advances international peace and stability. We seek to
demonstrate in practical ways the benefits for Russia of being part of
the international community and to ensure against the isolation that,
for 70 years, produced such terrible consequences for Russia and the

The new government in Moscow understands the importance of
integration. The top echelon of this new team represents something we
have never seen before in any Russian government. It is comprised
exclusively of young governors and former regional administrators who
made their mark in the country's most politically progressive
provinces. They carry no Soviet-era baggage. They have, instead,
first-hand knowledge of how markets function and an awareness that the
average Russian cares more about his own government's ability to
collect taxes fairly and provide services effectively than about NATO
enlargement. They understand that in a democracy voters reward
bottom-line results, not empty promises. This modern progressive
outlook should serve Russia well, and we look forward to working
closely with this new team.

We cannot guarantee that democracy will triumph in Russia -- that is
for the Russian people to determine. But we owe it to ourselves to
take full advantage of the opportunity to advance our broad agenda
with Russia to secure a safer future for all Americans.



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