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Johnson's Russia List
23 May 1998
[Note from David Johnson:
1. Reuters: Surgeons say Yeltsin health fine, can run again.
2. Reuters: Russia's ex-PM gently chides successor over crisis.
3. Journal of Commerce: Michael Lelyveld, Sanctions on Russia face
veto.Senate passes Iran penalties after president delays action.
4. Moscow Times: Nick Allen, Duma Debates Return To Name of
5. RIA Novosti: SOCIAL DEMOCRATS DECLARED FORMATION OF A PATRIOTIC
6. RIA Novosti: SDA LEADER NAMED BABURIN, GLAZIYEV AND ROGOZIN AMONG
HIS POTENTIAL ALLIES.
7. The Independent (UK): Phil Reeves, Idealism expires as a Communist
becomes Russia's rights monitor.
8. Edmonton Sun (Canada): Dan Healing, FINANCIER PLANS FOR INCREDIBLE
SPAN. EDMONTON EASTERN END FOR $250B ALASKA/RUSSIA TRADE CORRIDOR AND
9. Los Angeles Times: Selina Williams, Self-Ruling Georgia Is Painting
10. VOA: Michele Kelemen, OVERDUE WAGES.
11. Business Week: Patricia Kranz, ROUGH DAYS FOR THE RUBLE.
12. Reuters: Unpaid miners ease grip on Russia's railways.
13. Financial Times (UK) editorial: Yeltsin's dilemma.
14. Reuters: Ex-communist states' plight like Great Depression.]
Surgeons say Yeltsin health fine, can run again
By Gareth Jones
MOSCOW, May 22 (Reuters) - Pioneering U.S. surgeon Michael DeBakey said on
Friday Boris Yeltsin was in excellent health nearly 20 months after his life-
saving heart bypass and could run again for the Russian presidency in 2000 if
DeBakey and Renat Akchurin, the Russian surgeon who performed Yeltsin's
November 1996 bypass, also dismissed speculation in parts of the mass media
that the president might be suffering from an illness affecting his mental
``As far as I am concerned, there is no basis on health grounds why he should
not run again (for a fresh presidential term),'' DeBakey told a news
conference after he and Akchurin had met Yeltsin for lunch.
``That is a decision he can make without considerations of health. His health
is excellent...(Running again for the presidency) is a political, not a
medical decision,'' he added.
Yeltsin, 67, has said he will not seek another term but some commentators say
the impulsive Kremlin chief might change his mind.
Poor health linked to his heart problems marred the first six months of
Yeltsin's second term and led to his quintuple bypass, but he has generally
been in good physical health since then -- apart from several bad colds and a
Making his debut on the Internet last week, Yeltsin replied to an American
query about his health by challenging the questioner to a sporting encounter
to see who was fitter.
He also boasted about his long working day and heavy schedule.
But Yeltsin's recent behaviour has sometimes been erratic and he occasionally
appears distant and unfocused, giving rise to rumours of some new illness that
DeBakey was keen to quash.
``I find him not only in physically excellent condition but also mentally
quite vigorous,'' said DeBakey.
The Texan surgeon, now 89, was a consultant during Yeltsin's bypass operation
but did not take a direct part. He did not examine Yeltsin during Friday's
meeting, but said he had seen the results of recent routine examinations.
Akchurin, who sees Yeltsin fairly regularly, was equally forthright.
``I regard these attempts to find some new illness as unhealthy
curiosity...and an unworthy attitude,'' he said.
DeBakey was in Moscow to promote his new book, ``The New Living Heart,'' which
has been published in Russian.
The book, co-written with Antonio Gotto, is on prevention and cure of heart
ailments, a subject of considerable interest in Russia, where heavy smoking,
drinking and a fatty diet contribute to an average male life expectancy of
DeBakey noted that heart disease was the biggest killer in most industrialised
countries, including Russia and the United States where he said it posed a big
drain on the economy to the tune of some $250 billion a year.
Yeltsin, who wrote a forward to the Russian edition, received a copy of the
book from DeBakey on Friday.
Russia's ex-PM gently chides successor over crisis
MOSCOW, May 22 (Reuters) - Sacked Russian prime minister Viktor Chernomyrdin,
his eyes clearly focused on presidential elections in 2000, distanced himself
on Friday from the new government and the economic turmoil engulfing it.
Chernomyrdin, who announced his intention to run for the presidency shortly
after President Boris Yeltsin ditched him two months ago, gently chided his
inexperienced young successor Sergei Kiriyenko, saying he had acted too
Russia is reeling from a wave of strikes by miners and other workers that have
paralysed much of the national rail network. Their protests have coincided
with turmoil on the country's financial markets that have forced the
authorities to jack up interest rates to 18-month highs to shield the rouble.
"The government should immediately have taken major, all-embracing measures
with the president's involvement," Interfax news agency quoted Chernomyrdin as
Chernomyrdin, 60, did not spell out what measures he had in mind, although he
hinted he had persuaded Kiriyenko to send two ministers this week to regions
where miners are striking over wage arrears.
"Straight after our chat (with Kiriyenko) deputy prime ministers (Boris)
Nemtsov and (Oleg) Sysuyev flew to the striking regions instead of to Italy
and South Korea," he said.
Yeltsin sacked Chernomyrdin and his entire government on March 23 mainly for
their failure to tackle the wage arrears afflicting millions of Russian
On Friday Interfax quoted Chernomyrdin as saying he did not feel responsible
for the problems shaking Russia.
Commenting on his five years at the helm of government, he said: "We passed
through the most difficult times. The situation was even more complex then."
He said Kiriyenko should focus more on boosting tax revenues than on cutting
spending to put the economy back on track, and should also try to explain his
policies better to the country.
Chernomyrdin, a former gas industry boss, believes he has the solid experience
required to become Russia's next president. But Yeltsin has given his bid only
By contrast, the 35-year-old Kiriyenko has been a member of the government for
only about a year but has impressed commentators with his grasp of economics
and his calm under fire.
On Thursday Chernomyrdin's centrist Our Home is Russia party said the former
premier would soon contest a by-election for a vacant seat in parliament in
Yamalo-Nenetsky, a region of northern Siberia with rich natural gas reserves.
The seat is expected to be a safe one for Chernomyrdin, who needs to stay in
the political limelight to keep alive his hopes of one day replacing Yeltsin.
Journal of Commerce
26 May 1998
[for personal use only]
Sanctions on Russia face veto
Senate passes Iran penalties after president delays action
BY MICHAEL S. LELYVELD
JOURNAL OF COMMERCE STAFF
The Clinton administration delayed imposing sanctions on Russian
companies that sold missile technology to Iran in hopes of winning a
veto fight against additional proliferation curbs.
The administration had planned to punish several Russian entities under
existing laws in a bid to head off a Senate vote on the Iran Missile
Proliferation Sanctions Act. The measure requires more sweeping trade
and aid penalties against all companies involved in transfers to Tehran.
But a State Department official indicated the pre-emptive move had been
postponed because the missile legislation looked set to pass by an
overwhelming margin, whether the administration acted against the
Russian companies or not.
That prediction proved true Friday as the Senate voted for the Iran
missile sanctions by a wide margin.
The administration has said repeatedly President Clinton will veto the
bill because it infringes on his foreign policy powers. It also
threatens billions of dollars in U.S.-Russian space cooperation and
satellite launch business. The measure, authored by Rep. Benjamin
Gilman, R- N.Y., passed the House in November on a voice vote.
The move also threatens billions of dollars of chemical exports, which
are tied to the legislation.
Waiting for the big fight
Officials are now saving the administration's more limited sanctions
against Russia for the veto override fight that is likely to follow. The
reasoning is that the effort would have been wasted on the initial vote,
but it may have more success in convincing a minority to sustain the
veto by arguing that new penalties are unnecessary.
The strategy has been met with skepticism, even among some Clinton
supporters on Capitol Hill.
The president's decision to delay punishing the Russian proliferators
seems to have less to do with congressional strategy than with softening
the blow in Moscow, said one Democratic staff member. By waiting until
after the vote, Mr. Clinton can tell President Boris Yeltsin that
Congress forced him to take some action against Russian companies.
But the administration has let down at least two U.S. constituencies
with its tactics on the Iran missile bill. Chemical exporters have been
worried about the outcome since last year. At that time Mr. Gilman tied
the missile curbs to implementing legislation for the Chemical Weapons
Convention in order to make the veto a tougher choice.
Still can't comply
Without the implementation legislation, the United States cannot comply
with the CWC treaty, even though it was ratified over a year ago. As a
result, nearly $70 billion a year in U.S. chemical exports are subject
to sanctions by the 110 nations which have already implemented the CWC.
A total of 167 countries have signed the treaty. Despite the stakes,
chemical makers are understandably reluctant to be drawn into the battle
between Congress and the White House because opposing the veto could be
seen as going soft on missile proliferation to Iran.
"I can't comment on whether the president should veto the legislation,"
said Michael Walls, senior counsel for the Chemical Manufacturers
Association. "We're not going to take up that Iran missile issue."
But the chemical makers are miffed that their export concern has been
tied up in knots, particularly since both chambers of Congress have
already approved the CWC implementing measure.
The Senate passed it as stand-alone legislation last May, but had to
pass it again Friday because it came back from the House with the
missile curbs attached.
"CMA and the chemical industry are committed to timely implementation of
the convention and we need the legislation to do that," Mr. Walls said.
Arms control experts are angered because they see the White House as
neglecting the chemical weapons problem while also dragging its feet on
"This is consistent with the lack of priority given to the CWC, rhetoric
notwithstanding," said Michael Moodie, president of the Chemical and
Biological Arms Control Institute. The administration had months to
avert the tangle of the two issues that was engineered in the House, but
it largely ignored the problem, Mr. Moodie said.
Will it make a difference?
Now, there are doubts whether delaying penalties against a limited
number of Russian arms dealers will have any effect in the Senate during
an override fight, given the mood in Congress on proliferation issues.
"The way this is going, the administration is going to lose on both
sides," Mr. Moodie said.
The administration may ultimately back down from its veto threat, said
Mr. Moodie. If it does, it could use waivers in the missile sanctions to
exempt Russia, while benefiting from CWC implementation. But the
credibility of future veto warnings would suffer serious damage. If the
veto does take place and is sustained, Mr. Walls hopes that Congress and
the administration will work together to pass the CWC legislation again
May 23, 1998
Duma Debates Return To Name of Stalingrad
By Nick Allen
Josef Stalin's name has been purged from Russia's maps for decades, but
a controversial comeback is in the cards as State Duma deputies discuss
restoring it to the country's most celebrated military landmark.
The lower house of parliament is set to vote soon on a draft request to
President Boris Yeltsin to once again rename the southern city of
Volgograd as Stalingrad, honoring the generalissimo's part in the
crucial victory of Soviet forces over Germany and its allies in the
1942-1943 battle for the city.
Despite the connotations Stalin's name still carries, Duma Deputy
Alexander Vengerovsky, formerly a member of Vladimir Zhirinovsky's
Liberal Democratic Party, is hoping that regardless of party
affiliation, deputies will remember the dictator's achievements.
"This is nothing terrible for the Russian people," Vengerovsky said
Friday. "I divide Stalin into two parts: the dictator and violator of
human rights, and Stalin the supreme commander of the Soviet forces in
World War II."
"Everyone knows that the battle was one of the deciding moments of the
war, and the whole world knows it as the battle of Stalingrad, not
Volgograd," Vengerovsky said.
Like many Russian towns, Volgograd is no stranger to chameleonlike name
changes, having been known as Tsaritsyn until 1925, when it took the
Soviet leader's name. In 1961, eight years after Stalin's death, the
city became Volgograd.
It was the site of one of the most significant and bloody battles of
World War II, marking the turning point in the fortunes of the invading
More than 1 million Soviet soldiers and an estimated 40,000 civilians
died during the six-month battle that raged in the ruins of Stalingrad,
as well as an estimated 800,000 Germans, Romanians, Hungarians and
But because millions of Soviet citizens perished in Stalin's labor
camps, Vengerovsky's proposal is a prickly one.
"This would of course be difficult for victims of the repressions and
their families," said Arseny Roginsky of Memorial, a human rights
organization that works with victims of Soviet repression.
"Stalin was a criminal and to name a town after a criminal is just
stupid," he said.
If the Duma approves the proposal, the final word will go to the
president and the Volgograd region authorities. Regional Governor
Nikolai Maksyuta is reported to be in favor of the move, but the
Volgograd city authorities remain opposed.
"People are trying to make political capital out of this," Stanislav
Klinzhev, deputy head of the Volgograd city administration, said Friday,
adding that although locals are proud of their city's place in history,
they are more preoccupied with economic troubles than renaming their
home. "But I think the presidential team has enough sense [not to
approve the change]."
The move may nevertheless find resonance among a "considerable number"
of Communist deputies, who form the largest bloc in the Duma, said
Andrei Andreyev, spokesman for Communist Party leader Gennady Zyuganov.
"[Stalin's] personality cannot be cast entirely in one light, or made
out to be as black a tyrant as Hitler."
SOCIAL DEMOCRATS DECLARED FORMATION OF A PATRIOTIC 'THIRD FORCE'
MOSCOW, MAY 23. /FROM RIA NOVOSTI CORRESPONDENT MARIA
BALYNINA/-- Political and public movement 'Social Democratic
Association' /SDA/ declares the formation of 'the third force'
based on the alliance of 'social-democrats and progressive
patriots.' This was stated today by chairman of the SDA
organisational committee Oleg Rumyantsev at the movement's
inaugural congress opened in Moscow. The congress is attended by
54 delegates from 54 regional branches of the SDA.
Rumyantsev stressed the necessity of formation of an
electoral bloc at the 1999 parliamentary election which could
unite the movements' possible supporters who were 'dispersed
through various political parties at the previous election.'
"This autumn will face the bloc's active construction on the
threshold of forthcoming election, and we intend to seriously
participate in it.'
SDA LEADER NAMED BABURIN, GLAZIYEV AND ROGOZIN AMONG HIS
MOSCOW, MAY 23. /FROM RIA NOVOSTI CORRESPONDENT MARIA
BALYNINA/-- This summer, the public and political movement
'Social-Democratic Association' /SDA/ is planning to form a
coalition with some marginal political movements and parties.
This was stated by the movement leader Oleg Rumyantsev at a
press-conference today. His Social-Democratic Association is
holding an inaugural congress in Moscow. Among his potential
allies Rumyantsev called a political bloc of Moscow mayor Yuri
Luzhkov, Sergei Baburin's Russian Public Union, Dmitry Rogozin's
Congress of Russian Communities, Sergei Glazyev's Democratic
According to Rumyantsev, it is too early today to speak
about members of the future coalition. "But this autumn, the
frames of the formed 'Third Force' will be well seen," said the
From his words, sooner or later he expects to see former
co-founder of Yabloko, incumbent deputy chairman of the Auditing
Chamber of the Russian Federation Yuri Boldyrev, Sergei Glaziev
and other well-known politicians among his movement's members.
Rumyantsev said he is sure that the SDA will not only
overcome the 5-% barrier at the next parliamentary election but
also form the second largest faction in the Lower House.
The Independent (UK)
23 May 1998
[for personal use only]
Idealism expires as a Communist becomes Russia's rights monitor
By Phil Reeves in Moscow
IN A MOVE which symbolises the loss of the idealism that held sway in
the immediate aftermath of the Soviet Union's collapse, Russia's
parliament yesterday elected a senior member of the Communist Party to
be the nation's human-rights commissioner.
The decision, part of a trade-off over jobs between parties, infuriated
Sergei Kovalyov, the previous incumbent, a former dissident considered
Russia's successor to Andrei Sakharov.
Mr Kovalyov, the country's best-known rights activist, who spent years
in a Soviet prison camp for his activities, called the appointment of
Oleg Mironov a "foregone conclusion". He told the State Duma, or lower
house, before being shouted down: "The shameless deal leading a
Communist to this position is monstrous."
Rights groups, which blame the Communist Party for trampling individual
rights during decades of repression, are certain to argue that the job
of commissioner, though vague (and lamentably under-funded) is needed,
and should not be a mere chip in a political bartering process. The
concept of human rights is still in its infancy in Russia. The 1993
constitution, which affords citizens considerable protection, is ignored
at grassroots level and by the government. Abuses of individuals by the
legal system and the authorities - notably the police, who beat up
prisoners and target ethnic minorities - are still widespread.
Such is the relative novelty of a rights commissioner that the role has
yet to be fully defined, though he has the power to launch legal appeals
for those who believe their rights have been violated. He can also issue
annual reports. The appointment of Mr Mironov, 59, a former law
professor who is a member of the Communist Party Central Committee,
ended two years of tawdry bargaining between parties over who should
have the job.
In the end, the Communists appear to have been given it in return for
giving the pro-government party "Our Home is Russia" chairmanship of the
parliamentary defence committee. Mr Mironov is now expected to quit the
party. Among the 11 candidates were Mr Kovalyov, fired from the
commissioner's post in 1995 after mounting a campaign excoriating
President Boris Yeltsin for the Chechen war but not before confirming
his reputation as a courageous, fiery defender of rights. Another
contender was the former justice minister Valentin Kovalyov, who was
fired after publication of photographs which appeared to show him
frolicking in a steam bath with two naked women, neither of whom was his
Edmonton Sun (Canada)
May 22, 1998
FINANCIER PLANS FOR INCREDIBLE SPAN
EDMONTON EASTERN END FOR $250B ALASKA/RUSSIA TRADE CORRIDOR AND LAND LINK
By DAN HEALING -- Business Editor
A California "financier" is heading a venture he claims will result in a
$250-billion bridge project across the Bering Strait between Alaska and
Russia within "five to 10 years."
But Ted Pollard admitted yesterday he doesn't have the financing or the
permission of the American and Russian governments to attempt such an
Nor, he said, has he ever built a bridge or any other major construction
In a story in the Nome, Alaska-based Bering Strait Record recently,
Pollard, described as a "California tycoon," is quoted as saying his plan
includes an 8,000-km economic zone linking Canada and Russia, with the
eastern part ending in Edmonton.
The plans are included in an Internet page.
Reached in Palo Alto, California, yesterday, Pollard said he created the
Web page because, "I've been working on this 10 years ... and now it's time
to publicize it.
"The first part is to get the money and then everything else steps in
place after that."
He said he hasn't talked to the governments involved because "no one would
believe you could do it until you get the funding together. It's not going
to be funded by any government or any Wall Street kind of deal."
Most bridge builders hope to make money but Pollard said the dream is more
important than personal wealth.
"It's a project that needs to be done.
"It's not meant to be a money-making venture. If you can cause it to be
financed in a certain fashion it will sustain itself. This is not meant to
be a corporation that you sell stock in and have to give stockholders a
return on investment."
The strait - only 120 km at its narrowest point - would be crossed via
rail and road bridges linking Big Diomede Island, owned by Russia, and
Little Diomede, which belongs to Alaska.
In Pollard's plan, there would be no bridge toll, he said, instead
suggesting the U.S., Canadian and Russian governments would raise money
through taxes on gasoline.
Pollard envisions a road from Fairbanks, Alaska, west along the Yukon
River and then north through Unalakleet, Golovin, White Mountain, Nome and
The road would leave mainland Alaska at Wales and span Diomede with a
Los Angeles Times
May 23, 1998
Self-Ruling Georgia Is Painting the Town
By SELINA WILLIAMS, Special to The Times
TBILISI, Georgia--City workers are out en masse to repaint the grand old
buildings lining Tbilisi's main street in bright hues of yellow, pink
and blue as this capital gears up to celebrate 80 years since Georgia's
first declaration of independence.
Tuesday's big party, which will include a parade of the former
Soviet republic's military hardware, will also celebrate Georgia's
second attempt at independence this century. That one got off to a shaky
start in 1991 but now looks more promising, as Georgians get ready to
cash in on the Caspian Sea region's oil bonanza.
Under the steady hand of President Eduard A. Shevardnadze, a former
Soviet foreign minister, this mountainous country in the crisis-prone
Caucasus region finally appears to be finding its niche. After the early
post-Soviet years of hyper-inflation, war and anarchy, Georgia has
managed to stabilize its currency, disarm the gunmen who once roamed the
streets at will and hold together cease-fires in two separatist regions.
Georgia's first stab at self-rule, in 1918, was not so long-lived.
The state was quickly conquered by the Red Army in 1921 and swallowed up
by the Soviet Union along with oil-rich Azerbaijan to the east and
Armenia to the south.
By contrast, the new Georgia posted 10% growth last year, winning
praise from international lending institutions.
"We started from absolute zero, and now we've got to the stage
where we can talk not about whether we're independent, but how to
strengthen and reinforce our independence," said First Deputy Foreign
Minister Mikhail Ukleba.
Ukleba is typical of the new generation of energetic,
Western-oriented Georgians who have been working to build and fortify
parliament and other democratic institutions. He has also been one of
the key negotiators pushing for Georgia's entry into the Council of
Europe and the World Trade Organization--each likely to happen next
But high ideals of independence and integration into the
international community mean little to the many impoverished refugees
who lost everything when fighting broke out in the separatist republic
of Abkhazia a year after Georgia declared independence in 1991.
About 250,000 people in this country of 5.5 million remain
homeless--temporarily housed in cramped hotels and begging on the
But the fiercely patriotic Georgians, many of whom still refuse to
speak Russian, do not want to turn the clock back, no matter their
"Independence was a good idea, and I wouldn't want Georgia to lose
that," said Tamila Tsagareishvili, 58, a lecturer in ethnography at
Tbilisi State University. "But we just had such high expectations of
independence, that things would improve.
"Instead, they got worse," she said, laughing about her paltry
salary of 35 lari ($25) a month.
The government hopes that solutions to many of the problems can be
found in a pipeline that will start pumping oil from Azerbaijan through
Georgia and on to international markets early next year. Georgia hopes
to win an even bigger pipeline to carry about 800,000 barrels a day, but
it is competing with Russia.
"The big pipeline and Caspian oil can be a tremendous support for
our nation to remain independent," said Alexander Rondeli, a foreign
policy expert here.
"But at the same time, it can also bring disaster," Rondeli said,
referring to a recent attempt on Shevardnadze's life widely believed to
have been organized by reactionary forces in Russia hoping to
destabilize the region and thus win the pipeline contract. There are
still fears in Tbilisi that another assassination attempt could be in
Voice of America
INTRO: LABOR UNREST HAS BEEN BUILDING IN RUSSIA AS STRIKING COAL
MINERS DEMAND MONTHS OF BACK PAY. MINERS IN UKRAINE HAVE BEEN
TAKING SIMILAR ACTION. BUT AS V-O-A'S MICHELE KELEMEN REPORTS
FROM MOSCOW, THE REPEATED STRIKES HAVE DONE LITTLE TO RESOLVE THE
CRISIS OVER UNPAID WAGES IN SEVERAL FORMER SOVIET REPUBLICS.
TEXT: UNPAID OR UNEMPLOYED WORKERS SELL ANYTHING THEY CAN THESE
DAYS AT THE "HAYMARKET" IN THE UKRAINIAN CAPITAL, KIEV. THERE
ARE OLD SHOES, USED KITCHEN UTENSILS -- HARDLY ANYTHING ONE WOULD
WANT TO BUY. BUT TATYANA TIRENTYEVA SAYS THE TWO-DOLLARS-50
CENTS (EDS: LOCALLY, FIVE HRYVNA) SHE CAN MAKE ON A GOOD DAY
SELLING NAILS AND BOLTS FROM HER FACTORY IS BETTER THAN THE
SALARY SHE NEVER RECEIVES.
/// TIRENTYEVA ACT IN UKRAINIAN -- ESTABLISH AND FADE ///
"I WORK, BUT HAVE NOT BEEN PAID IN A YEAR," SHE SAYS AS SHE PULLS
OUT A WHITE PIECE OF PAPER CALLED A SPRAVKA -- A KIND OF
CERTIFICATE. SHE SAYS "I SHOW IT ON PUBLIC TRANSPORTATION TO GET
AROUND, BUT SOME PEOPLE GET ANGRY WITH ME FOR USING IT BECAUSE I
LOOK LIKE SOMEONE WHO CAN EARN A LIVING."
IT IS A HUMILIATING WAY OF LIFE FOR THE WOMAN ONLY IN HER 40S.
SHE CAN NOT PAY HER RENT OR UTILITIES. HER HUSBAND IS ILL AT
HOME. HER SON -- WHO FINALLY GOT A JOB AFTER A YEAR-AND-A-HALF
-- IS ALSO SUFFERING WAGE DELAYS.
//OPT// /// SECOND TIRENTYEVA ACT IN UKRAINIAN -- ESTABLISH AND
"I BOUGHT SOME ONIONS TODAY," MRS. TIRENTYEVA SAYS, "AND I HOPE I
CAN MAKE THEM LAST. WE ARE NOT DYING OF HUNGER, BUT WE ARE NOT
LIVING IN A CIVILIZED MANNER." //END OPT//
HER STORY IS NOT UNUSUAL. WORKERS IN UKRAINE, RUSSIA AND
OTHER FORMER SOVIET REPUBLICS ARE OWED THE EQUIVALENT OF BILLIONS
OF DOLLARS IN BACK WAGES. WITHOUT SALARIES, WORKERS CAN NOT
PAY THEIR BILLS, SO COMPANIES CAN NOT PAY WAGES. IT IS A
VICIOUS CIRCLE OF NON-PAYMENTS.
ECONOMISTS POINT TO A NUMBER OF UNDERLYING CAUSES TO THE WAGE
CRISIS. AS THE SOVIET SYSTEM COLLAPSED, SO DID DEMAND FOR MANY
OF ITS PRODUCTS. COMPANIES TRYING TO REVIVE TRADE LINKS FOUND
THEMSELVES ACCUMULATING DEBTS AND DOING TRADE, NOT WITH CASH, BUT
BY BARTER. THEY STARTED PAYING WORKERS IN PRODUCTS RATHER THAN
CASH. TAX EVASION SKYROCKETED. THEN, GOVERNMENTS BEGAN HAVING
TROUBLE PAYING STATE EMPLOYEES.
EXPERTS IN RUSSIA SAY BAD GOVERNANCE HAS ALSO PLAYED A ROLE. LAWS
ARE WEAK AND THERE ARE FEW PENALTIES FOR NON-PAYMENT. THE U-N'S
INTERNATIONAL LABOR ORGANIZATION IS WORKING TO CHANGE THAT AND
IMPROVE RUSSIA'S LABOR LAW. PIERRE DE LAME IS A PROGRAM OFFICER
AT THE I-L-O'S MOSCOW OFFICE.
/// DE LAME ACT ///
IN ANY KIND OF MARKET ECONOMY, THE GOVERNMENT IS NOT
ONLY RESPONSIBLE FOR PAYING ITS CIVIL SERVANTS, BUT ALSO
FOR MAKING SURE THE LAWS ARE CORRECTLY IMPLEMENTED FOR
PRIVATE WORKERS. THAT IS THE WAY THE SYSTEM WORKS.
/// END ACT ///
BUT IT HAS NOT WORKED THAT WAY, UP TO NOW. BANKS PROVIDE FEW
FINANCIAL SERVICES AND A SHORTAGE OF CASH HAS PREVENTED EVEN
PROFITABLE COMPANIES FROM PAYING WAGES. //OPT// SOME OF THE
FUNDS SENT TO UNPAID WORKERS HAVE BEEN DIVERTED. MONEY-LOSING
FACTORIES REMAIN IN OPERATION BECAUSE THERE IS NO SOLID
BANKRUPTCY SYSTEM IN PLACE. //END OPT//
MR. DE LAME SAYS THIS DOES NOT BODE WELL FOR RUSSIA'S FUTURE.
/// SECOND DE LAME ACT ///
IT IS NOT VERY GOOD FOR LABOR ETHICS. HOW COULD YOU
HAVE A CORRECT ATTITUDE TOWARD WORK IF YOU ARE CORRECTED
NORMALLY ON A REGULAR BASIS? AND IT CERTAINLY HAS AN
IMPACT ON PRODUCTIVITY. //OPT// SO, IT IS NOT VERY GOOD
FOR THE ECONOMY ON THE WHOLE. THAT IS VERY CLEAR. //END
/// END ACT ///
BUT THERE IS NO QUICK FIX. MOST ECONOMISTS AGREE FORMER SOVIET
REPUBLICS MUST IMPROVE BANKRUPTCY AND BANKING SYSTEMS, END BARTER
TRADE AND FOLLOW THROUGH WITH TAX REFORM. BUT ALL OF THIS TAKES
TIME -- AND STRONG GOVERNMENT COMMITMENT. THE UNANSWERED
QUESTION IS, HOW LONG DO THESE COUNTRIES HAVE?
//REST OPT// SO FAR, MOST LABOR PROTESTS HAVE FIZZLED OUT AS
FORMER SOVIET REPUBLIC GOVERNMENTS PLEDGED TO PAY BACK WAGES,
BUT PEOPLE MAY NOT REMAIN PATIENT MUCH LONGER. COAL MINERS ARE
LEADING THE WAY IN RUSSIA AND UKRAINE -- AND GOVERNMENTS, FOR THE
MOMENT, ARE PAYING ATTENTION.
Business Week: June 1, 1998
International -- European Business: RUSSIA
[for personal use only]
ROUGH DAYS FOR THE RUBLE (int'l edition)
Russia's markets are reeling as fears of a meltdown rise
On the evening of May 19, a convoy of luxury cars pulled up to a glass
building on Leninsky Prospekt in central Moscow. Executives from Russia's top
10 investment banks hopped out of their Volvos and Mercedes and headed to the
office of Dmitri Vasilyev, chairman of Russia's Federal Securities Commission.
The Russian stock market had plunged 12% that day and was down more than 40%
for the year so far. Vasilyev had summoned the bankers to his office to learn
``We told him the major problem is lack of trust,'' says Marlen Manassov,
general director of Brunswick Warburg investment bank in Moscow.
That's only one of many monumental challenges now testing the Russian
government. Hit by declining oil prices and fallout from turbulence in
Indonesia and Japan, Russia's financial markets are reeling. The ruble is
under pressure, and Russian officials are scrambling to ward off an Asian-
DEVALUATION DREAD. Russia faces a severe crisis. ``Debt is ballooning rapidly,
and the revenue side of the budget is weak,'' warns Robert Devane, head of
fixed-income trading at Troika Dialog investment bank. ``That has led to fears
of devaluation.'' Reserves have dropped to $15.5 billion from a high of $24
billion in mid-1997. The Central Bank spent $520 million in the second week of
May alone to defend the ruble. Even so, for a short time on May 19, the ruble
traded at above 6.2 to the dollar, the limit of the corridor in which the
Central Bank has pledged to support the currency in 1998.
The latest turmoil in Russian financial markets was triggered by renewed
instability in Asia. As one of the world's largest and newest emerging
markets, Russia is vulnerable to aftereffects of shocks in other economies.
This year, it is the second-worst performing stock market in the world, after
Indonesia, according to International Finance Corp. statistics. That's in
sharp contrast to 1997, when Russia's market gained 111%. That attracted
speculative investors--the first to leave in times of trouble.
Russia's bond markets are also sensitive to the whims of foreign investors.
They hold 25% to 30% of the $60 billion market in Russian government
securities. When foreigners stop buying--as they did when riots erupted in
Indonesia--there aren't enough Russian investors to pick up the slack. To pay
its bills, Moscow must dip into reserves or raise rates high enough to lure
foreigners back. When Central Bank Chairman Sergei K. Dubinin hiked key rates
from 30% to 50% on May 19, he said it was prompted by an attack on debt
markets by Western financial institutions.
Of course, many of Russia's problems are homegrown. The ruble is fragile
because the government increasingly is financing its deficit with high-cost,
short-term borrowing. More than 80% of government bonds mature in a year or
less, and rates are now double government projections in its 1998 budget.
Meanwhile, a new law that restricts foreign ownership in one of Russia's
biggest blue chips, Unified Energy System, to 25% has exacerbated market
jitters. Investors took the law as a negative sign for all foreign
shareholders. The government is challenging the law in Russian courts.
Dubinin's rate hike helped calm the stock market, which rebounded by close
to 3%. But even with the rate increase, the government was able to sell just
half of a $2.1 billion debt offer on May 20. That shortfall ups the pressure
on Moscow to get its fiscal house in order. Prime Minister Sergei Kiriyenko
vows to boost tax collection and cut spending. But low oil prices and an
opposition-dominated parliament will make it difficult. Still, since the new
Prime Minister's confirmation in April, Kiriyenko has shown his mettle. When
the parliament criticized the government's failure to pay overdue wages to
striking coalminers, Kiriyenko refused to allocate new money. Instead, he
persuaded deputies to cut their own perks by $83 million.
If Kiriyenko can shore up Russia's finances, it will go a long way toward
shielding the market from further Asian shocks. A new $700 million tranche of
a $10 billion loan from the International Monetary Fund--now under
discussion--could ease the government's immediate financial crunch. But to
reassure investors, Russian companies must also show they intend to treat
shareholders fairly. Until then, Russia runs the risk of lurching from crisis
By Patricia Kranz in Moscow
FOCUS-Unpaid miners ease grip on Russia's railways
By Martin Nesirky
MOSCOW, May 23 (Reuters) - Unpaid miners eased their economy-sapping grip
firmly on the main Trans-Siberian route.
Opposition Communists convened an extraordinary closed-door meeting in Moscow
to discuss the crisis and a special monitoring team from the International
Monetary Fund left for Washington after having scrutinised the country's
``The mission, working closely with the Russian authorities, collected further
information needed to complete its analysis,'' an IMF statement said.
It was not immediately clear whether the IMF team would recommend its managers
disburse the next $670 million slice of a $9.2 billion loan but Russian
ministers said they were confident the Fund would give the green light.
On large chunks of Russia's vital rail network, the signal was still firmly on
red, although miners did lift their 10-day blockade on some lines in Siberia
and southern Russia.
A spokeswoman for the Kemerovo administration in southern Siberia, focal point
of the protests, said by telephone that two lines had been reopened after
talks between unions and Deputy Prime Minister Oleg Sysuyev.
``The commission has finished work at Mezhdurechensk and Prokopyevsk and the
blockade there has now been lifted,'' she said. A third bypass route around
the main line could be opened later on Saturday.
The spokeswoman said Sysuyev and regional governor Aman Tuleyev had flown by
helicopter to another barricade to talk to miners, who have been holding up
hundreds of trains to demand wage arrears be shelled out.
In southern Russia, a goods train was allowed through on the north Caucasus
line, Itar-Tass news agency reported.
Mining union officials could not be reached for comment.
President Boris Yeltsin said on Friday the miners' action had gone too far and
was seriously damaging Russia's already delicate economy to the tune of
millions of dollars.
Much of Russia's freight, particularly across Siberia's inhospitable
territory, moves by rail.
Miners responded to Yeltsin's remarks by saying they would take an even more
The Communists, Yeltsin's main foes and the predominant force in the State
Duma lower house of parliament, looked set to come out with a similarly tough
line from their Moscow congress.
The meeting was initially called to discuss unspecified changes in the party's
charter but Duma speaker Gennady Seleznyov, a Communist, said the agenda was
``The main issues at today's forum are the party's charter and our attitude
toward the socio-economic crisis in Russia,'' Interfax news agency quoted him
There is little doubt Russia is in economic crisis.
Market turmoil, sparked by Asian and domestic factors, has pushed Russian
shares to 16-month lows. Interest rates have been jacked up by two-thirds to
50 percent to protect the rouble.
Small wonder the new government of Prime Minister Sergei Kiriyenko is
signalling it now expects no economic growth this year. Forecasts had
previously pointed to one or two percent growth in gross domestic product, the
best test of a country's economic wellbeing, after 0.4 percent last year.
The IMF said the mission had reviewed an ``urgent action programme which
entails significant new measures that the government has prepared to address
the difficult financial and social conditions.''
The statement gave no details of the new measures, but Finance Minister
Mikhail Zadornov told the State Duma lower house of parliament on Friday
Russia had agreed a tax and fiscal programme with the IMF.
Zadornov also said the cabinet was close to completing a plan that would shave
nearly $7 billion off the budget.
Financial Times (UK)
20 May 1998
RUSSIA: Yeltsin's dilemma
Last weekend, Boris Yeltsin participated as a full member at the summit
of the new group of eight leading industrial countries. But the country
he then returned to is still a shaky emerging economy. Russia's
vulnerability to the turmoil elsewhere reflects continued failure to
make its monetary and fiscal policies credible.
Since Russia is a large country, heavily dependent on oil and strongly
influenced by a corrupt business elite, Indonesia's crisis was bound to
bring it to the markets' attention. The pressure has come via the
foreign exchange market. To meet it, the central bank has raised
interest rates sharply: lombard rates are 50 per cent, from 30 per cent
only last week, and real interest rates are around 40 per cent. Not
surprisingly, the stock market has plunged - by 22 per cent since the
beginning of last week and almost 60 per cent from last October's peak.
Fortunately, the impact of high interest rates on Russia's undeveloped
market economy is not that large. It is the effect on the fiscal
position that is more immediate and powerful. This is part of a vicious
circle. One explanation for the loss of market confidence is worry about
Russia's fiscal position. But that is, in turn, worsened by the high
interest rates needed to defend the exchange rate.
What are the authorities to do? The response must come on two principal
First, the lack of any convincing alternative to the exchange rate as
the anchor for monetary policy, combined with the frightening east Asian
evidence on what happens when pegs collapse, makes a credible commitment
to the exchange rate imperative. The central bank must make it clear it
will raise rates to whatever level may be needed to hold an exchange
rate that is not fundamentally overvalued.
Second, the government must build on its recent success in cutting the
fiscal deficit. In the first two months of this year the federal budget
deficit was down to only 2.3 per cent of gross domestic product, as a
result of higher revenue and lower spending than last year. In the
longer run, fiscal credibility must be achieved by curbing spending,
since the share of consolidated revenue in GDP, at 30 per cent, is
already high by the standards of countries at similar income levels.
Russia has had much bad luck. Every time it may be on the eve of a
convincing economic recovery, something moves that prospect over the
horizon. It has been unlucky once more. Its best response, however, must
be to strengthen the fundamentals still further. It has come a long way
already. If its government continues on its present path, it deserves
continued outside support.
Ex-communist states' plight like Great Depression
By Wojciech Moskwa
WARSAW, May 22 (Reuters) - Formerly communist Eastern European states have had
a drop in output during this decade's drive toward capitalism comparable to
that of the United States and Germany in the Great Depression of the 1930s,
according to a World Bank study.
World Bank economist Branko Milanovic said post-communist states opening up
their economies in the early 1990s had matched the roughly 20 percent decline
in gross domestic product earlier suffered by the U.S. and Germany.
"The post-communist depression in Russia is deeper than the Great Depression
was in the United States and Germany while the depression in Poland, although
deeper during the first two years (1990-1991) was not as severe," Milanovic
told a seminar in Warsaw late on Thursday.
Milanovic's new book, "Income, Inequality and Poverty During the Transition
from Planned to Market Economy," argues that while unemployment soared during
the Great Depression, post-communist economies adjusted to the drop in demand
through a severe cut in real wages.
"Labour costs were adjusted in Eastern Europe, while in the 1930s we witnessed
an adjustment in employment levels," said Milanovic, whose book was published
In Poland, where economic reforms were the most sweeping and quickest, real
wages fell by about 15 percent in the 1990 to 1996 period.
The drop was even more drastic in Russia, where real wages fell by 50 percent
between 1992 and 1995, before picking up slightly.
"Not many people realise that during the Great Depression wages held
relatively flat in real terms in the United States, Germany or Britain...of
course at the cost of unemployment," Milanovic said.
Unemployment rates topped 40 percent in Germany and 25 percent in the United
States during the 1930s, while jobless rates peaked around 18 percent in post-
Milanovic's book says the wage decline and increasing inequality in incomes
created a large growth in poverty in East European and formerly-Soviet states
during the 1990s. Households with less than four dollars per head per day to
live on were defined as being beneath the poverty line.
"The total estimated number of the poor in the 18 countries has risen
twelvefold from nearly 14 million, or about four percent of the population, to
168 million in 1993-1995, or approximately 45 percent," Milanovic wrote.
He said that although poverty increased in all countries, the richer economies
of Eastern Europe, such as the Czech Republic, Hungary, Slovakia and Slovenia,
suffered only modest one or two percent rises in the number of the poor.
Milanovic said that, unlike in developed economies, in post-communist
countries it was wage earners who bore the brunt of the new poverty, partially
because of badly-allocated social assistance programmes.
"It is more difficult to ascertain who is the poorest in post-communist states
and it often turns out that the poor are really the wage earners, not the
unemployed," he said, adding that social transfer systems were much less
efficient in Eastern Europe than in developed market economies.
The poorest 20 percent of the population in transition economies received only
28 percent of social assistance funds, while the bottom quintile of those
living in developed market economies gain 42 percent of social transfers.
The situation is most striking in Russia and the Ukraine, where the poorest
quintile get only six percent of social aid.
Milanovic argues against introducing minimum income requirements in post-
communist countries because the difference between such levels and actual
working wages would be small, thus undermining the incentive to work and
"A guaranteed minimum income, even if feasible economically, would have a
detrimental impact on the work ethic at this stage of income and development,"