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Johnson's Russia List


June 4, 1998   
This Date's Issues: 2206 2207

Johnson's Russia List
4 June 1998

[Note from David Johnson:
1. Laura Belin: Yeltsin and the bankers.
2. Reuters: Russia wants fair trade not aid -Kiriyenko.
3. Rossiyskaya Gazeta: Estimates of Russian Property Abroad 'Wildly 

4. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Past Venal
Sins Taint Kremlin's Crisis Program.

5. Sovetskaya Rossiya: Vasiliy Safronchuk, "Financial Mudslide."
(Crisis in 'Pseudomarket Economy' Analyzed). 

6. Renfrey Clarke in Berkeley June 7.
7. Los Angeles Times: Carol Williams, Tycoons in Russia Buy Themselves 
a Voice. Media: Moguls purchase news outlets to shape opinion about 
candidates most likely to benefit their bottom lines.

8. Itar-Tass: Gaydar--Russia 'Passed the Peak' of 'Financial Crisis.'
9. Jamestown Foundation Monitor: RUSSIAN HEARINGS ON START II TREATY. 
10. Moscow Times: Nick Allen, Russia's Scientists Plead for Funds.
11. Washington Post: From Bruce Blair's review essay "Loose Cannon."
(Russian nuclear weapons).

12. Itar-Tass: Kiriyenko: Russia's Problems 'Psychological' Not Economic.
13. Radiostantsiya Ekho Moskvy: Poll Shows Yeltsin Still Most Influential 


Date: Wed, 03 Jun 1998 
From: "BelinL" <> 
Subject: Yeltsin and the bankers

A few thoughts on Yeltsin's latest meeting with the bankers: 

In his opening remarks, Yeltsin said, "We don't meet often -- when it becomes
unavoidable, when the state is in difficulties, the economy starts creaking,
when foreign investors start fleeing." This strikes me as either forgetful or
misleading, since Yeltsin's last meeting with the bankers (held in
1997) had little, if anything, to do with foreign investors fleeing, etc. The
major downturn in the Russian markets and the pressure on the ruble occurred
later in the autumn.

The president summoned the bankers to the Kremlin last September because it
had become clear that the "bank war" over the privatization auctions for
and Norilsk Nickel was not dying down on its own. If anything, it was
escalating: two days before Yeltsin met with the bankers, "Nezavisimaya
(financed by Boris Berezovskii) accused Anatolii Chubais of "striving for
complete control over Russia" and strengthening "oligarchic, not democratic"
trends in Russian society.

Yeltsin's main goal last September was to persuade the bankers to stop
"quarreling with the government." At the time, he said he wanted to defuse
tension between businessmen and cabinet members "whom I could not give up
any circumstances." He even boasted after the meeting that the bankers had
agreed "to end their battle" against Chubais and Boris Nemtsov. Probably every
JRL reader remembers that the alleged truce, if it ever existed, did not last

One wonders how long the spirit of cooperation Yeltsin and the businessmen are
reported to have forged yesterday will last.

Radio Free Europe/Radio Liberty, Prague


Russia wants fair trade not aid -Kiriyenko
By Alastair Macdonald 

PARIS, June 3 (Reuters) - Russia needs fair trade not aid from the world's
wealthy nations if it is pull its economy out of crisis, Prime Minister Sergei
Kiriyenko said on Wednesday. 

Skirting round the issue of whether Moscow was negotiating emergency loans to
see it through a budget crisis, Kiriyenko, on a long-scheduled first foreign
trip to France, said the real help it needed was access for its goods to
Western markets. 

After meeting French President Jacques Chirac he said there had been and would
be no talks on foreign loans during his trip, although he did not explicitly
deny that Russia was interested in borrowing to tide it over its financial

"The sole support that Russia needs is the creation of equal conditions and
equal opportunities," he told reporters. 

"In the first instance this concerns equal rights of access to markets,
including and above all to the markets of European Union countries and the
absence of any open or hidden discriminatory limitations on Russian goods," he

This would be a main theme of talks with Prime Minister Lionel Jospin later on
Wednesday and on Thursday, which would also review the state of the Russian
economy and measures planned by its government to stem chronic budget

Russia, struggling to re-establish its industrial base after a 50 percent
slump in output in the past decade, has regularly railed against EU import
tariffs and is negotiating to join the World Trade Organisation. President
Boris Yeltsin has even said he would like to join the European Union one day. 

Kiriyenko, 35, stressed that his 24-hour visit to Paris for a regular Franco-
Russian economic forum had been planned long ago, during the tenure of his
predecessor, Viktor Chernomyrdin, who was sacked by Yeltsin on March 23. 

Praising the strides Russia had made with France and other Western partners on
political and security issues, he said the main outstanding issue was in
improving economic ties. 

"It's not a question of concrete aid to Russia, it's a question of normal,
mutually profitable development for both countries," the former banker said on
his arrival in Paris. 

In Moscow earlier, Russian Finance Minister Mikhail Zadornov denied a report
Russia would ask the Group of Seven rich nations, including France, for $10
billion in emergency finance. 

Asked if he had discussed any G7 loan to Russia with Chirac, Kiriyenko said,
"No we did not discuss this issue." Asked if there would be discussions on a
loan during his talks in Paris, he said, "No, this is not in the programme of
the visit and there will not be any outside the programme either." 

There was nonetheless widespread talk among international bankers that Russia
was in line for billions of dollars in loans as the government put measures in
place to try to end chronic underfunding of the budget due to poor tax

As Kiriyenko was speaking, Western banks were signing up for a new $1.25
billion five-year Eurobond for Russia. 

Kiriyenko, a previously obscure official who has gone through a baptism of
fire as Russia's financial markets were hammered last month by investor
jitters over the budget, said on departing Moscow that he had no worries about
leaving the helm. 

"I am not afraid of leaving, I am absolutely certain that the situation is
under control," he told Interfax news agency. 

Repaying his confidence, the Russian stock market index rose 8.47 percent
after a 12 percent rise on Tuesday. 

Putting his preaching into practice, Kiriyenko trimmed the size of the Russian
delegation to the Paris talks in line with an austerity programme announced
two weeks ago. 

"Those who could settle matters by exchanging faxes or by telephone, and not
spending state money on visits to Paris, have stayed at home to work," he

G7 officials from the United States, Japan, Germany, Britain, France, Italy
and Canada are to meet in Paris next week to discuss ways of helping Russia
weather the financial storm. 


Estimates of Russian Property Abroad 'Wildly Different' 

Rossiyskaya Gazeta
28 May 1998
[translation for personal use only]
ITAR-TASS report: "Whether Big Or Small, It Is Still Ours"

Yesterday Rossiyskaya Gazeta advocated the adoption of a law on
Russian property abroad.
Addressing the "Valuing the Country's National Wealth" conference
yesterday, Mark Masarskiy, chairman of the Federal Valuation Fund,
announced that the value of Russian property abroad is variously estimated
at between $2 billion and $600 billion.
He noted that it is mainly land and property complexes in the Near
East: in Israel, Lebanon, Egypt, Syria, and also in Italy. Moreover,
Russian property abroad also includes some gold and foreign currency
Such wildly different valuations of Russian property abroad make a
very bad impression on foreign partners and "makes them doubt whether
Russia actually has anything abroad."
But after seven years of work by the International Experts' Council
for the Valuation of Russian Property Abroad there has still been no
official decision on the proportion of property abroad in Russia's national
wealth, Masarskiy noted.


For more articles from The Moscow Times, check out their website at

Moscow Times
June 4, 1998 
SEASON OF DISCONTENT: Past Venal Sins Taint Kremlin's Crisis Program 
By Andrei Piontkovsky 

With the adoption of the "anti-crisis program of the government" made up 
of 60 items, which replaces the "17 tasks of the government," the word 
"crisis" became official. But the authorities are moving very slowly 
toward an understanding of the fundamental reasons for this crisis. 

For months people spoke of the "consequences of the crisis in Southeast 
Asia." Lately they have been talking about a "plot of stock-market 
speculators who are trying to empty our pockets." Strangely enough, 
Central Bank chairman Sergei Dubinin, in particular, has taken great 
pains to develop this theme. But if he complains about a plot of some 
successful speculators, then he is complaining about his own 

Finally the prime minister made a significant step toward grasping the 
essence of the crisis. Once again citing a familiar list of external and 
superficial circumstances, he admitted all the same that the crisis 
could have arisen only against the backdrop of more basic causes -- a 
chronically growing budget deficit and as a result the growing cost of 
servicing state debt. From this all 60 points of the crisis program 
follow -- a sharp reduction in government expenditures and more severe 
tax collection. 

Despite the seemingly indisputable need for this program, it has a 
substantial flaw. The budget and the fiscal relations take in less than 
half the Russian economy. The remaining part operates through money 
surrogates, barter and double books. Here is a typical example. Miners 
do not receive their wages, because consumers do not pay for the coal 
they receive. But the director of the mine continues to send the coal 
because the director of the power station pays 5 percent of its costs, 
but to the mine director personally and in cash. The system of 
nonpayments has been eating away at the Russian economy for so long 
because influential clans and groups have an economic interest in it. 

The government now speaks for the first time of bankruptcies and the 
sale of debt. In practice this would mean a new redistribution of 
property on a large scale throughout the country. There would be a need 
to remove all the thieving directors who were appointed by the 
authorities themselves and give the companies over to effective 
managers. But, first of all, where are you going to get these effective 
managers? Second, the current masters of the Russian economy -- from the 
oligarchs to the so-called red directors -- would not await their lot 

A year ago then First Deputy Prime Minister Anatoly Chubais was 
convinced of this. After creating a system of corporate capitalism and 
personally appointing superwealthy people who got rich at the expense of 
the state budget, he naively proposed that starting from any moment he 
could introduce a new system of honest and transparent rules of the 
game. The oligarchs who, like drug addicts, could no longer kick the 
state budget habit, started a war of moral destruction against Chubais. 
Among other things, they informed us about the interest-free credit he 
received in 1996 and about his stormy writing activities in 1997 and 

The current young and not-very-young reformers will undergo a 
no-less-concentrated attack if they try to establish order in the 
economy. And they will turn out to be no less vulnerable than Chubais. 

Russia's Power and Business have long befouled themselves together in 
the carnal sin of corruption and theft. Where can a righteous man be 
found who can save the foresaken city of our Economy? 


Crisis in 'Pseudomarket Economy' Analyzed 

Sovetskaya Rossiya
2 June 1998
[translation for personal use only]
Article by Vasiliy Safronchuk: "Financial Mudslide"

The past week has been the latest stage in Russia's slide into the
profound financial crisis that is a reflection of the acute socioeconomic
crisis. The financial crisis became most acute Wednesday 27 May, when it
turned into a real panic. The price of shares on the Moscow stock exchange
fell 12 percent in a single day and over May it has dropped a total of 50
percent, reaching 137 points -- the lowest level since December 1996. The
prices of so-called blue-chip shares, that is the most reliable and liquid
shares, dropped even further. For instance, Savings Bank shares fell 25
percent in a single day and shares in the YeES [Unified Energy System]
Russian joint-stock company fell 14 percent. At the same time the yield on
state bonds (short-term state bonds and federal loan bonds) surged on the
market to 90 percent, the highest level in the past 22 months. Let us
recall that the yield on short-term state bonds is the interest which the
government has to pay when it attracts money from the money market to cover
the budget deficit. The higher that interest rate, the more the government
has to pay for the funds it has attracted. The interest rate on government
bonds is the most reliable indicator of the degree of business circles'
trust in the government -- the higher that rate the lower investors' trust
in the government's policy and vice versa. On 27 May trust in the
government fell so low that investors totally ignored the latest short-term
state bonds auction and the government was obliged to pay 2.4 billion
rubles [R] out of the treasury to buy the bonds which have matured and to
pay the interest on them. At the same time, the higher the interest rate
on government securities, the more the government has to pay to the holders
of bonds to redeem them and pay the interest on them. Nechayev, a former
minister in Gaydar's government, recently cited the following figures. 
Over the past five years through the sale of bonds to nonresidents, that is
to foreign investors, $18 billion has been attracted yet we have had to pay
$72 billion for them! In other words for every dollar borrowed we have had
to pay $4. If the interest rate on short-term state bonds remains at 90
percent then the entire revenue section of the budget will not be enough to
service the state debt.
Together with the collapse of the price of bonds and shares on the
stock market, on 27 May there was a drastic decline in the ruble exchange
rate -- to R6.19 to the dollar -- and it went beyond the framework of the
established currency band. Russian and foreign holders of Russian
securities sold them in a panic and used the money they obtained to buy
dollars and hastily took them abroad. That panic was fueled by rumors about
the inevitable devaluation of the ruble. To halt the panic on the
financial market the government and the Central Bank resorted to
extraordinary financial and administrative measures. The Central Bank's
refinancing rate was trebled -- from 50 to 150 percent. Central Bank
Chairman S. Dubinin called this measure a "cold shower" for speculators who
"want to earn money from us." According to him the pressure on the ruble
was the result of a plot by speculators against the Russian national
currency in order to generate its devaluation and profit from it. In
exchange jargon this is called bear speculation. The calculation was that
such a high bank rate would demonstrate the Central Bank's readiness to
protect the ruble exchange rate by all means at its disposal. It was also
expected that such a high bank rate would make the Russian securities
market more attractive to foreigners and Russian bankers. But that did not
happen and the ruble exchange rate continued to fall. In just one day the
Central Bank, according to some estimates, had to spend up to $1.5 billion
from its own currency reserves to keep the ruble exchange rate within the
established band limits.
The crisis reached such dimensions that early on the morning of 28 May
B. Yeltsin summoned Kiriyenko, Finance Minister Zadornov, and Central Bank
Chairman Dubinin and demanded that they take steps to save the ruble and
the stock market. After conferring with them the president stated,
contrary to the facts, that the Central Bank and the Finance Ministry had
sufficient funds to hold up the ruble exchange rate. But that was not
true. The level of the country's gold and currency reserves had declined
to a dangerously low level -- $14 billion. The point is that according to
universally accepted rules the level of a country's gold and currency
reserves should cover the cost of one quarter of its imports. In our
country there are barely enough for a month. But that is not the only
thing. Foreign investors are holding Russian bonds to a sum of about $20
billion, which is over one third of the government securities market. If
they decided instantly to sell all government bonds the Central Bank would
not have the reserves to maintain the ruble's present course. On the night
of 27-28 May S. Kiriyenko met with the country's biggest bankers -- Potanin
(Uneximbank), Gusinskiy (MOSTbank), Khodorkovskiy (Menatep bank), and
Smolenskiy (SBS-Agro) -- and asked them to support the national currency. 
In turn they cited the fact that they were merely fulfilling their foreign
clients' instructions. There were reports that one foreign bank which
displayed the greatest activity in the bear speculation on the ruble was
the Morgan Grenfell bank -- the London branch of the German Deutsche Bank. 
Incidentally, this branch is headed by the brother of Boris Jordan --
Potanin's partner and president of the MFK-Renaissance bank. Before the 27
May auctions Morgan Grenfell had dumped a large package of short-term state
bonds and thus provoked a collapse on the government securities market. It
has long been known that for bankers patriotism is a secondary concern when
there is a whiff of a profit!
After the conference with Yeltsin a program of measures was announced
for emerging from the financial crisis. These measures are not of
sparkling originality and we have heard them mentioned several times in the
past six months. There was also a statement of the government's
determination to reduce expenditure and raise the tax collection level. 
The list of the biggest tax defaulters was published and the Temporary
Extraordinary Commission for Strengthening Tax and Budget Discipline was
urgently convened to exact their arrears. The defaulters were threatened
with bankruptcy and the destraint of their property. A law is being rushed
through the Duma on toughening criminal liability for tax law violations.
The president threatened that "heads will roll" but so far the only head to
roll has been that of A. Pochinok, chairman of the State Tax Service, who
has been replaced by B. Fedorov, former member of Gaydar's cabinet and one
of the co-authors of shock therapy. Additional fiscal measures have been
announced: Taxes on land have been raised, the so-called imputed tax on
market traders has been introduced, as has the tax on casinos, while yet
again the toughening of the vodka monopoly and so on have been announced.
Terrifying scenes of tax police raids on wholesale markets are shown on
The diversity in officials' statements about the reasons for and ways
out of the financial crisis draws the attention. Central Bank Chairman S.
Dubinin speaks of a "plot" among bankers while Deputy Premier V. Khristenko
believes that it is simply that some 'selfish people" have taken advantage
of the situation. Premier S. Kiriyenko assures us that the government does
not intend to resort to foreign loans to overcome the crisis while Finance
Minister M. Zadornov, on the contrary, believes that we cannot manage
without IMF and World Bank loans. He also speaks of the need to place
loans on the international financial markets to the sum of $2-6 billion. 
In general, everyone is at cross purposes. The players on the exchanges
are now waiting to see how the market reacts to the auctions for the
placement of the next tranche of short-term state bonds and federal loan
bonds to the sum of R9 billion, which should take place 3 June.
It is fictitious, that is to say paper, capital, not real capital,
that is circulating on the stock markets. Irrespective of whether the cost
of shares and bonds rises or falls as a result of exchange speculations,
real capital, that is the fixed production capital and natural resources,
remains. It will remain even if the stock and currency markets disappear
completely and with them those who are profiting on the stock market and
currency speculations and siphoning money abroad through the exchanges. F.
Engels wrote in his supplements to the third volume of Marx' Das Kapital
that the exchange is the place where capitalists take from each other the
capital they have accumulated. The exchange, he said, is proof of the
demoralizing influence of the capitalist economy. Under the conditions of
Russia's pseudomarket economy the exchange is in addition an instrument for
robbing the whole people!


Date: Wed, 3 Jun 1998 14:33:52 -0800
From: (Alex Chis & Claudette Begin)
Subject: Russia: Renfrey Clarke in Berkeley June 7

Hi All,

I just wanted to alert people to this rare opportunity to learn more about
what's happening in Russia today. Renfrey, as well as being the
correspondent in Moscow of Green Left Weekly, was also instrumental in the
magazine Russian Labor Review.

Having lived in Moscow through the period of the greatest changes in Russia
in decades, his insights into events there and knowledge of Russian history
go far beyond his articles.

Take advantage of this opportunity to talk with Renfrey himself.

I reproduce the meeting announcement below.

alex chis


You Are Invited

To A Discussion With Renfrey Clarke, at the home of Estar and Erwin Baur,
2026 Los Angeles Ave, Berkeley.

Renfrey has been the Moscow correspondent for Green Left Weekly, published in
Australia, for over a decade. His insightful reporting throughout this
turbulent period in Russian history has been picked up and published by others
on the left who follow developments in that country.

Sunday, June 7 7:00 p.m.

Directions: Take Martin Luther King north, which changes into Alemeda, until
you come to Marin Circle (with a fountain). Turn right and go up Los Angeles
four houses on the right.


Los Angeles Times
June 3, 1998 
[for personal use only]
Tycoons in Russia Buy Themselves a Voice 
Media: Moguls purchase news outlets to shape opinion about candidates 
most likely to benefit their bottom lines. 
By CAROL J. WILLIAMS, Times Staff Writer
MOSCOW--When banking mogul Vladimir Gusinsky bought 25% of the Israeli 
newspaper Maariv last week, he was tipping off the cognoscenti about his 
druthers in Russia's next presidential election. 
     Gusinsky and the rest of Russia's small clique of oligarchs have 
been buying up major newspapers, magazines and broadcast networks to 
shape public opinion about the political candidates they consider most 
likely to benefit their bottom lines. 
     In the case of Gusinsky's recent purchase, the tycoon--variously 
associated with three rival contenders to succeed President Boris N. 
Yeltsin--appeared to be settling on support for Moscow Mayor Yuri M. 
     Luzhkov has invested heavily in ventures aimed at luring back the 
brains and money that have migrated to Israel over the past two decades, 
and Gusinsky's purchase secures a platform for Luzhkov to campaign among 
Israel's 800,000 emigre Russians. 
     Such obscure, behind-the-scenes manipulations of the media are the 
hallmark of Russia's post-Communist press--an institution that has been 
liberated from Soviet-era censorship but is still far from what Western 
journalists would consider free. 
     Journalists and others supportive of a more independent press 
complain that democracy's development here is stunted when the media are 
the tools of a tycoon's trade rather than venues for debate and 
examination of public interests. 
   "The authorities and many other people have come to view the media as 
weapons with which to resolve political questions. And it is partly our 
own fault, as we created this role in 1996 when all the mass media took 
the side of the president" in the last election, said Oleg Dobrodeyev, 
head of the NTV network. NTV, by the way, is owned by Gusinsky in 
alliance with Rem Vyakhirev of Russia's natural gas monopoly, Gazprom. 
     Dobrodeyev and other media managers lament the editorial intrusions 
of their politically motivated owners, but Western champions of free 
speech note that the Russian press has made great strides toward 
independence and objectivity in the decade since Soviet leader Mikhail 
S. Gorbachev introduced glasnost. 
     Gone are the days when Communist Party ideologues dictated, line by 
line, the "news" to be printed or broadcast. But Russian journalists 
note that only two years ago criminal charges were brought against the 
producers of NTV's satirical puppet show, "Kukli," for lampooning 
Yeltsin and his Kremlin cronies. And this week, the president called 
broadcasters on the carpet for "excesses" in covering the recent 10-day 
blockade of Russian railroads by coal miners who hadn't been paid. 
     "The media owners are sometimes the worst censors," Yeltsin 
complained, blaming privately owned television for encouraging the 
striking miners by publicizing their "illegal actions." 
     Big Change Since Soviet Era 
     Nonetheless, journalists are aware of the contrasts with the Soviet 
era, when any coverage of social unrest was unthinkable because 
Communists controlled every step of the corrupted information business. 
   When publisher Sergei Fedorov and a few friends started a business 
newspaper in the Volga River city of Samara in the early days of 
glasnost, they were arrested for running a photo that made fun of the 
Communist leadership's approach to dealing with ubiquitous shortages. 
The photo showed a sign at a pharmacy explaining that because of 
insufficient stocks, condoms were for sale only to elderly World War II 
     "I can't imagine such an incident being repeated in today's 
conditions," Fedorov, now head of his own regional publishing company, 
recalled of his short-lived shutdown with nostalgic good humor. 
     But the leadership's ability to obstruct press freedom is still in 
place, even if strong-arm tactics like arrest and suppression are 
resorted to less often. 
     "Almost all newspapers now are owned by private investors, but they 
are all printed on presses that remain local government monopolies," 
noted Pavel Gusev, the editor of the lively Moskovsky Komsomolets daily. 
Like all Moscow-based media, Gusev's newspaper never dares extend its 
exposes and muckraking to Luzhkov's city government, which has at times 
shown it is willing and capable of sabotaging publication by every trick 
from cutting off electricity to a newsroom to revoking an office lease. 
     Businessmen Can Control Content 
     The powerful businessmen who own controlling interests in Russian 
media are also able to rein in reports that are unflattering to any of 
their empires' diverse figures by direct or implied threats to fire 
writers or editors who are indiscreet. 
   The daily Izvestia, for example, ran a story more than a year ago 
quoting a report that then-Prime Minister Viktor S. Chernomyrdin had 
amassed an estimated $5 billion in personal wealth during his government 
service as head of Gazprom. Editor Igor Golembievsky was forced to 
resign--outraged oligarch Vagit Alekperov, who owns much of Izvestia, is 
allied with Gazprom. 
     Two years ago, the influential magnates who united behind Yeltsin 
to ensure the defeat of Communist Party leader Gennady A. Zyuganov in 
the presidential race were of one mind because their vast capitalist 
networks were uniformly at risk in the event of a Communist comeback. 
     But as the country gears up for the contest that will decide who 
succeeds Yeltsin, the tycoons have splintered in their support for the 
non-Communist contenders. 
     Gusinsky, whose Most Group banking interests have long been 
entwined with Luzhkov's quasi-private municipal financing and 
construction ventures, had been flirting with Chernomyrdin and liberal 
economist Grigory A. Yavlinsky before his recent moves signaling a 
preference for Luzhkov. 
     Vladimir O. Potanin, the politically engaged chairman of the 
powerful Uneximbank empire, has steadfastly aligned himself with the 
party in power--the Yeltsin entourage that has yet to put forward an 
heir apparent for the presidency in 2000 but seems to be grooming young 
reformer Boris Y. Nemtsov. 
     Perhaps Russia's most powerful oligarch, Boris A. Berezovsky, has 
been using his media holdings--ORT television, the daily Nezavisimaya 
Gazeta and the weekly magazine Ogonek--to push the agenda of the ousted 
Chernomyrdin while keeping his options open with the current reform team 
as well as nationalist-patriot Alexander I. Lebed. 
    Berezovsky takes exception to the term "oligarch" as well as to 
suggestions that the independence of his media outlets is subordinated 
to his political aims. 
     "Private capital has no claims to power in Russia," the 
mogul-cum-public-servant said. He has already served as deputy head of 
the national Security Council and is currently head of the government 
agency in charge of relations with former Soviet republics, and he has 
used those positions to wage open warfare with prominent reform 
strategist Anatoly B. Chubais as well as the man to beat in the next 
election, Luzhkov. 
     Despite his assurances, Berezovsky makes it clear that he is 
engaged in the media business to influence the development of a market 
economy. His influence with Nezavisimaya Gazeta, for example, was 
apparent during a savage battle with Chubais late last year, when the 
newspaper cast the Kremlin's chief economic architect as a bribe-taker. 
     Freedom of Press Depends on Economy 
     But those with longer memories of the rough road to freedom that 
the Russian media have traveled concede that the emergence of a fully 
independent press is contingent on widespread economic revival. Until 
considerably more advertising revenue and disposable income are in play, 
they say, the media will remain the moguls' playthings. 
     "What choice did we have but to be bought so we could work another 
day?" asked Vitaly Tretyakov, the editor of Nezavisimaya Gazeta, which 
Berezovsky bailed out of impending failure three years ago. 
     Nezavisimaya Gazeta, which means "Independent Newspaper," will 
apparently have to wait for broader economic revival in Russia to live 
up to its name. 
* * *
 The Moguls and the Media 
     * Boris A. Berezovsky: head of Logovaz financial-industrial group 
that encompasses car imports and sales, aviation, oil and media--ORT 
television, Nezavisimaya Gazeta and Ogonek. Supports former Prime 
Minister Viktor S. Chernomyrdin, one of the few declared candidates for 
the next presidential election. Also bankrolled the regional 
gubernatorial campaign recently won by retired Gen. Alexander I. Lebed, 
apparently trying to keep his options open. Generally supportive of 
President Boris N. Yeltsin, but less keen on the "young reformers" 
believed to be running the Kremlin. 
     * Vladimir Gusinsky: head of Most Group banking empire and major 
shareholder in daily newspaper Sevodnya, news weekly Itogi and NTV. 
Strong links to Moscow Mayor Yuri M. Luzhkov. Also supportive in the 
past of liberal economist Grigory A. Yavlinsky and Chernomyrdin. 
     * Rem Vyakhirev: head of state natural gas monopoly, Gazprom, which 
holds major interests in dailies Trud and Rabochaya Tribuna, as well as 
NTV. Strongly supportive of former boss Chernomyrdin. 
     * Vladimir O. Potanin: head of the Uneximbank holdings that include 
oil, metals and telecommunications as well as media interests in dailies 
Komsomolskaya Pravda, Russky Telegraf and Izvestia. Closely allied with 
Yeltsin team but has also shown support for Luzhkov. 
     * Mikhail Khodorkovsky: head of the Menatep banking and industrial 
group with oil interests and influential share of Independent Media, 
which produces Moscow's main English-language daily, Moscow News, and 
Russian-language editions of magazines Cosmopolitan, Playboy, Good 
Housekeeping and Men's Health. 
     * Vagit Alekperov: head of Lukoil vertical monopoly with major 
holdings in daily Izvestia. Supportive of Chernomyrdin. 


Gaydar--Russia 'Passed the Peak' of 'Financial Crisis' 

MOSCOW, May 31 (Itar-Tass) -- Russia passed the peak of a financial
crisis on Wednesday [27 May]. The situation started to stabilize on
Thursday and Friday following the correct moves of the Central Bank and the
Russian government, Russian ex-premier, economist Yegor Gaydar said in an
interview with the RTR Zerkalo television program on Sunday.
If the tendency remains, risky people can start buying the Russian
stock next week, he noted.
The government and the Central Bank have reaffirmed their
understanding of the importance of the ruble stability for the Russian
economy and grave consequences of the possible currency instability, Gaydar
said. They proved the ability to prevent the threat.
"The crisis lesson was very useful and the government program aims to
solve the serious structural problem with a better quality of the budget
policy," he noted.
In the words of Gaydar, the role of speculators in any financial
crisis is serious but he would warn against such estimations. The
financial speculator is a predator that attacks a financial system weakened
by the monetary and fiscal policy of an insufficient quality, he said. 
Gaydar called for holding a high-quality policy so that playing against the
ruble occurs to none.


Jamestown Foundation Monitor
3 June 1998

RUSSIAN HEARINGS ON START II TREATY. The Russian Duma confirmed yesterday
that it plans to hold closed parliamentary hearings on the START II treaty
on June 9. According to Duma deputy speaker Vladimir Ryzhkov, the hearings
are to take place at the Russian General Staff and will cover the full gamut
of questions related to START II and a possible follow-up START III treaty.
Participants will include Defense Minister Igor Sergeev and Foreign Minister
Yevgeny Primakov. On June 5, Ryzhkov said, the two ministers are to hold
working meetings with representatives from several Duma factions. (Russian
agencies, June 2) Russia's military leadership backs ratification of the
START II treaty and Sergeev and Primakov have become the pointmen in the
Kremlin's efforts to get the treaty ratified.

The June 9 hearings should probably not be interpreted, however, as a signal
that the Duma is at last ready to move forward on START II. According to
Duma Defense Committee member Aleksei Arbatov, hearings on the issue are
likely to last a "long time." Arbatov said that lawmakers would be seeking
information on, among other things, the Kremlin's long-term plans for
development of the country's strategic forces and their financing. (Russian
agencies, June 2)

Russian lawmakers have raised a number of objections to quick ratification
of START II. One of them has been what they say is the government's failure
to provide a blueprint of Russia's military development in the years to
come. Without that knowledge, lawmakers say, they are unable to judge the
consequences of the treaty for Russia. For some Russian Duma members, this
particular objection is related to their criticism of the Kremlin's military
reform program. They charge that military spending cuts and defense
restructuring are destroying the country's conventional forces and thus
enhancing the importance of Russia's strategic forces. That, they say, makes
consideration of the START II treaty especially important for Russia's

Duma speaker Gennady Seleznev, meanwhile, warned U.S. President Bill Clinton
yesterday against trying to browbeat Russian lawmakers into ratifying START
II. (Russian agencies, June 2) Seleznev was referring to indications from
Washington that Clinton will not travel to Moscow for a long-awaited summit
with President Boris Yeltsin until START II is ratified. The Kremlin
appeared earlier to acquiesce to this logic, but Russian Foreign Minister
Yevgeny Primakov recently suggested that it might be wise for the Clinton
administration to decouple the scheduling of the summit from ratification of
the treaty.


Moscow Times
June 4, 1998 
Russia's Scientists Plead for Funds 
By Nick Allen
Staff Writer

Picketers warned that if the Kremlin fails to pay, 130,000 researchers 
will hold nationwide protests. 

Banners of protest were unfurled on Moscow's streets yet again 
Wednesday, this time as scientists picketed the Finance Ministry to 
demand that the government pay the money promised to their impoverished 

Small in numbers, great in learning, about 60 scientists came from all 
over the country to plead for the 255 million rubles ($41.3 million) 
they say is owed the Russian Academy of Sciences. 

Organizers warned that if the government, which is in the midst of a 
financial crisis, fails to come up with the money, the academy's 130,000 
researchers will hold protests nationwide on June 18. 

Vladimir Khlebodarov, the president of the academy's union, said a 
meeting Monday with Deputy Finance Minister Izosim Molchanov left the 
union unsatisfied. 

"We left with only verbal assurances, no documents," Khlebodarov said. 
He said of the 320 million rubles allocated to the academy for April, 
May and June, it had received only 65 million rubles. This did not cover 
even half a month's wages, which average the equivalent of $150, much 
less provide funding for equipment, chemicals and other materials 
necessary for research, the union leader said. 

Unaware of the protest taking place outside his offices at the time, 
Molchanov said in a telephone interview Wednesday that only a small part 
of funding was still unpaid and that the academy should not rely solely 
on government funding. 

"They have to understand that we have limited resources," Molchanov 
said, adding that the academy's income from other areas was twice the 
amount provided by the government. 

Some institutes have lucrative research contracts with commercial 
companies, or make money by leasing space in their extensive facilities. 
But those without outside sources of income are really struggling. 

"They don't know how to distribute their money properly," Molchanov 
said, referring to the academy's leadership. "I told them yesterday to 
take the other income of their institutes under control and keep track 
of it." 

Molchanov said the academy's researchers are faring better than many 
workers in education or health, who earn only half as much. 

Since 1991, the academy has seen more than 70,000 scientists move to the 
lucrative private sector, Khlebodarov said. 

Representatives of scientific centers from as far away as the Caucasus 
Mountains and Vladivostok in the Far East came to Moscow for the 
protest. They said researchers were unwilling to leave their jobs, but 
were fed up with living on precarious subsistence wages and getting no 
funding to support their research. 

"You can't do scientific work on wages alone," said protester Omar 
Mamayev, chairman of the scientists' union in the republic of Dagestan. 

Some demonstrators blamed the government for the dire state of Russian 

"Our government has inflicted more damage on science than even invaders 
like Hitler or Napoleon did," said Professor Igor Podgorny, 73, from the 
Moscow Institute of Astrology. 

During a meeting in May with the head of the Russian Academy of 
Sciences, President Boris Yeltsin summoned Prime Minister Sergei 
Kiriyenko and urged him "to pay special attention to the financing of 
the Russian Academy of Sciences in 1998 and 1999." 


Washington Post
For the Record
June 3, 1998 
>From Bruce Blair's review essay "Loose Cannon" in the summer issue of 
the National Interest:

Whereas the principal aim of American nuclear policy during the Cold War 
was to deter a strong and aggressive Soviet Union, the nuclear risks we 
face today stem from Russian weakness. Russia's conventional forces have 
declined to the point that they can no longer protect Russian territory, 
and into this vacuum has rushed a growing reliance on nuclear weapons -- 
including the prospect of their first use early in any serious 
conventional conflict.

To make matters worse, the nuclear forces themselves have become 
vulnerable. Budget sources prevent Russia from dispersing its weapons 
into the sanctuaries of the oceans and forests to the point that, in 
their present configuration, its strategic forces could not ride out a 
U.S. attack. Consequently, Russia today faces far stronger pressures to 
"use or lose" its nuclear arsenal than at any time since the early 

While Russia relies more on nuclear weapons and on launching them on 
warning, its nuclear control regime is steadily deteriorating in 
physical, organizational and human terms. Soviet designers built an 
impressive command system to ensure strict central controls over nuclear 
weapons -- a core value of Soviet political and military culture -- but 
they understandably overlooked a host of dangers that developed after 
the Soviet empire dissolved. 


Kiriyenko: Russia's Problems 'Psychological' Not Economic 

Paris, June 2 (Itar-Tass) -- In an interview to Le Figaro newspaper in
the runup to his first official visit to Paris, Russian Prime Minister
Sergey Kiriyenko said the biggest problems against which Russia comes up
are psychological rather than economic. He believes the current financial
crisis is just a symptom of Russia's ailment.
"It is necessary to attack the root-cause of the ailment, not just its
symptoms to bring about the recovery," Kiriyenko said. "For a long time the
state has been spending more than it was earning and this brought about the
crisis of confidence which is the chief cause of the financial crisis,"
Kiriyenko said.
"People grew tired of reforms as they do not witness their specific
results. Still the changes are vast. It would take several decades in
other conditions for what has been achieved in Russia in just a few years,"
the premier said. "But the main problem is that people still cannot feel
the specific results of these changes."
Kiriyenko said it is now justifiable to speak of the upsurge of
Russia's economy which grew at the rate of 1.5 per cent in 1997. The
indexes for 1998 are also positive, he said. As to the closure of
enterprises, closures affected above all those enterprises whose products
are uncompetitive or else production costs are too high. "If we continue
backing and financing these enterprises, population will above all suffer,"
he said.
"The new Russian government does not depend on any party in its
activity," Kiriyenko stressed. "Our main task is to achieve specific
economic results, to resolve the problem posed by mining strikes, to
stabilise the situation in the financial market and, in perspective, to
ensure the growth of the entire economy."
Asked about role of Russian president Boris Yeltsin the premier said
that the president is "the key figure in the state, the guarantor of its
stability and the main support for the activity of the new cabinet. "I can
say that Boris Yeltsin's historic mission has not yet been completed, and
it will be of future importance," Kiriyenko said.
Noting that the Russian government keeps the situation in the
financial market under control, the premier promised that the rouble will
not be devalued. Having reserves of 14 billion dollars, Russia has no need
to ask the International Monetary Fund (IMF) for extra financial aid which
would "complicate the situation regarding debts still more." Still the
situation is not simple, there may be relapses to the crisis, and time is
needed to overcome its consequences. "We have won so far. It is now
necessary to eliminate the root-causes of the crisis," the prime minister
During his official visit to France, Kiriyenko is going to discuss
matters of cooperation in various areas -- automobile building and the
aerospace industry, nuclear power. Whereas in the past Russia was of
interest as a supplier of raw materials and energy carriers, it now has
broad prospects for cooperation, also with France, in high-tech area. 
"There is no need to be afraid of cooperation with Russia. It is enough to
act in accordance with existing traditions. Whoever realises this earlier,
will have bigger advantages," the Russian premier said.


Poll Shows Yeltsin Still Most Influential Politician 

Radiostantsiya Ekho Moskvy
30 May 1998

Boris Yeltsin is the most respected and influential figure among
Russian political leaders. This is the opinion of Nizhniyy Novgorod
experts, including well-known public figures and journalists. In ratings,
Boris Yeltsin is followed by Moscow Mayor Yuriy Luzhkov; State Duma Speaker
Gennadiy Seleznev; Federation Council Chairman Yegor Stroyev; Russian
Communist Party Leader Gennadiy Zyuganov; and Viktor Chernomyrdin, leader
of the Russia is Our Home movement. Prime Minister Sergey Kiriyenko is
only eighth on the list. Aleksandr Rutskoy, Kirsan Ilyumzhinov, and Sergey
Shakhray bring up the rear.


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