June 10, 1998   
This Date's Issues: 2213  •2214

Johnson's Russia List
#2214
10 June 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Rolling Stones to Play Moscow for First Time.
2. Vek: Irina Demina, ONE SALARY FOR THREE. One Bread-Winner Should 
be Able to Keep Up a Small Family.
3. John Tedstrom: Re: 2213-Tax Purge.
4. Jonas Bernstein; Re "List of Russian Oligarchs Published on Internet." 
5. Jewish Telegraphic Agency: Lev Krichevsky, In quest for financial
bailout, Russia addresses extremism.
6. AP: Dealers Helped by Soviet Collapse. (Drugs).
7. Reuters: Duma Drops START 2 Hearing from Agenda.
8. Interfax: Duma Deputy Warns Against Hasty START II Ratification.
9. Zavtra: Nikolay Anisin: "After Lebed--The Deluge, If You Will."
10. RIA Novosti: LIVSHITS AND URINSON CLAIM ROUBLE WILL NOT BE 
DEVALUED UNDER ANY CIRCUMSTANCES.
11. Rossiiskaya Gazeta: STATE DEBT SERVICING EXPENDITURES BECOME 
EVER MORE BURDENSOME.
12. Dmitri Glinski Vassiliev: Opposition to Yeltsinism.
13. RFE/RL: Robert Lyle, Russia: Income Inequality Growing In Transition
Nations.
14. Boston Globe: David Filipov, Russia's blunt new tax man backs law with 
commandos.
15. Russia Today: Rod Pounsett, It's the Economy, Stupid.
16. Jamestown Foundation Monitor: DUMA PRESSES AHEAD WITH PLAN TO 
IMPEACH THE PRESIDENT and LEADERS AND LAGGARDS IN THE CIS 
ECONOMIES.]

*********

#1
Rolling Stones to Play Moscow for First Time 
9 June 1998

LONDON -- (Reuters) The Rolling Stones, slammed in Britain for canceling
their home tour because of a new tax law, on Tuesday announced they are to
play in Moscow for the first time in their 30-year career. 
Keith Richards, who broke two ribs last month when falling off the steps
in his library looking for an anatomy book, has been given a clean bill of
health and is ready to perform again. 
"We have always attempted to pioneer massive tours into new
territories," singer Mick Jagger said in a statement announcing details of
the Moscow gig on Aug. 11. 

"On the last tour we played Prague for the first time to 120,000 people
and although it poured with rain, the crowd were uplifting in their
response and we consider it one of the best shows we ever participated in,"
he added. 
The veteran band, pledging they were "keen, lean and fit," gave details
of the revised itinerary for the European leg of their world tour. 
It starts in Nuremberg, Germany on Saturday and wraps up in September in
the Netherlands. 
The veteran rockers are keen football fans who have ensured that their
shows do not clash with the main matches of the World Cup soccer tournament. 
Technicians have been sent ahead to install satellite television dishes
so they can watch the games in their hotel suites around Europe. 

*********

#2
>From RIA Novosti
Vek, No. 22
June 1998
ONE SALARY FOR THREE
One Bread-Winner Should be Able to Keep Up a Small Family
By Irina DEMINA

Only 10 percent of the Russians are satisfied with their
lives today, and only 20 percent expect good prospects - these
are the figures revealed by surveys conducted by Natalia
Rimashevskaya, director of the Russian Academy of Sciences
Institute of socio-economic problems of the population. As many
as 33 percent do not accept the present-day reality and are
ready to protest.
Our country has split in two, and two different "Russias"
have emerged; they are far from understanding each other.
According to Natalia Rimashevskaya, the highest and lowest
incomes now differ by a factor of 13-25, with the world's
highest factor being 10. Every fourth Russian is living beyond
the poverty line. At least three million people have found
themselves in the social-risk group, making desperate attempts
not to fall lower, to the lowest layers of society. Half of the
poorest group are teenagers, who, as research suggests, suffer
from the lack of proteins, carbohydrates, let alone vitamins.
Poverty is the hardest on children and large families.
People's physical and mental health is being undermined.
The number of people suffering from chronic diseases has grown,
as two-thirds of the Russian population constantly live under
stress. The prevailing emotions today are fear of the future,
uncertainty and apprehension. These might be the reasons for
the upsurge of alcoholism and drug-addiction. Forty-one
suicides are committed per 100 people, which is too much.
It is evident that every next generation's health is
poorer than that of the previous one. In 1995, more than

one-third of the pregnant women suffered from anemia, which is
the result of bad nutrition. Sociologists call it a "social
funnel," meaning that the sick reproduce the sick and the poor
reproduce the poor. Forecasts have it that the Russian
population will fall from 130 million to 115 million people in
the near future.
All the above requires prompt and systematic efforts of
the government. According to Rimashevskaya, the first priority
is to make the minimal pay equal to the subsistence level.
Several financial measures of the kind should be taken before
we embark on the housing, utilities and other social reforms.
Representatives of the legislative branch agree with the
conclusions of the social scientists. Sergei Kalashnikov who
chairs the State Duma committee for labor and social issues
also considers the labor remuneration problem as one of the
most burning today. His conviction is that one salary should be
enough to keep up a family of three. What is happening in
reality though, is a massive exploitation of human resources
which are drastically underpaid, given the prices 20 percent
higher than elsewhere in the world. Salaries make up only 40
percent of people's incomes. Having extra jobs is regarded as a
virtue, although in most cases working for several companies
tells on the quality of the work.
Kalashnikov thinks it is high time the Duma adopted a law
on minimal social standards, which would define the desired
living standards. People should not only know about minimal
living standards, but also about the prospects of improvement
of their families' lives within one, three or more years.

*********

#3
Date: Wed, 10 Jun 1998 09:42:25 -0400
From: John Tedstrom <tedstrom@rand.org>
Subject: Re: 2213-Tax Purge

The recent report of the arrest of Yurii Yurkov, Chairman of Goskomstat,
points to the breadth and depth of the problem of corruption in the Russian
government. It also points to yet another way in which this corruption can
have an impact on Russia's economic image and policy by distorting economic
statistics.
I have just completed research on Russia's informal economy. In contrast
to the report in today's NYT which quotes the IMF as saying Goskomstat
undercounts economic activity by 20 percent, my figures are much more
disturbing. Based in large part on household surveys conducted by the
Russian Longitudinal Monitoring Survey group, in 1996 Russia's real GDP for
the month of December 1996 was 386 trillion rubles, compared to
Goskomstat's official figure of 240.2 trillion rubles--a 61 percent
increase. This puts the informal economy at 49.8 percent of GDP.
We do these estimates for December of 1994 and 1995 as well, with similar
results. In my study, I compare these results to other estimates of
Russia's informal economy. Ours come in higher than others, including the
"macro-electric" estimates which put the informal economy at 41.6 percent
of GDP in 1995. In the next day or two, our paper will be on our web site.
Best,
John Tedstrom,
Sr. Economist,
RAND

tedstrom@rand.org
202-296-5000, ext. 5215

********

#4
From: "jonas bernstein" <bernsteinj@hotmail.com>
Subject: Re: Interfax report: "List of Russian Oligarchs Published on
Internet." 
(Item 15 from JRL #2213, June 10)

According to Interfax, the folks at Panorama say on their web-page that 
the term "oligarchy" in the modern Russian political context was first 
used by Aleksandr Privalov of Izvestiya and the late Andrey Fadin of 
Obschaya Gazeta a year and a half ago. Panorama adds that the term 
"achieved widespread popularity after December 1, 1997, when then-First 
Deputy Prime Minister Boris Nemtsov used it in a press interview to 
contrast Russia's current 'oligarchical capitalism' with his own vision 
of 'popular capitalism.'"
In fact, the first person to refer to Russia's post-Soviet system as an 
"oligarchy" was Aleksandr Solzhenitsyn, in a speech he made in June 
1994, shortly after his return to Russia.The Nobel laureate said that 
what Russia had was oligarchy, not democracy.
Seeing that it has become a journalistic cliche to go on about 
Solzhenitsyn's "irrelevance," I thought it was worth pointing this out.

*********

#5
Jewish Telegraphic Agency
In quest for financial bailout, Russia addresses extremism
By Lev Krichevsky 
MOSCOW, June 3 (JTA) -- The Kremlin is apparently discussing ways to 
attack neo-Nazism and ultranationalism as part of its efforts to tackle 
the nation's financial crisis. 
The issue was raised at a meeting this week between President Boris 
Yeltsin and 10 of Russia's most powerful industrialists and bankers. 
Little is known about the specifics of the 100-minute conversation, but 
it is clear that at least one of the participants in the meeting -- 
Vitaly Malkin of the Russian Credit Bank -- raised the issue of Russia's 
negative image abroad, saying that solving this problem alone would 
attract more foreign investment and could contribute to economic 
improvement. 
Russia, with a sinking currency and a rising debt, is seeking 
international aid to help buttress the economy. 
The problem of Russia's rising extremism apparently was addressed in 
this context. 
Speaking to reporters after the meeting, Yeltsin's spokesman Sergei 
Yastrzhembsky said, ``The struggle against nationalism, Nazism and 
xenophobia is an absolutely timely theme." 
He said the Yeltsin administration will ``treat the issue seriously 
because the actions of the new breed of brown shirts cause growing 
concern" and ways should be found to ``nip such actions in the bud.'' 
Russian Jewish groups as well as police believe that neo-Nazis may have 
been behind last month's bombing of a Lubavitch synagogue in Moscow. The 
blast ripped through the synagogue in Moscow's Marina Roscha 
neighborhood, injuring two and causing a partial collapse of the 
building's wall. 
Skinheads have also been involved in a series of recent attacks on 
foreigners of African and Asian origin in Moscow, and a young Russian 
rabbi was beaten by skinheads in a subway station in the Russian capital 
last month. 
Three participants in the Kremlin meeting with Yeltsin -- Malkin, 


Vladimir Goussinsky, a media mogul, and Mikhail Fridman, who heads the 
financial industrial consortium Alfa Group -- are major underwriters of 
Jewish communal life in Russia.

**********

#6
Dealers Helped by Soviet Collapse 
By Robert H. Reid
June 10, 1998

UNITED NATIONS (AP) -- Drug traffickers have established links across
Central Asia to smuggle narcotics from Afghanistan to lucrative markets in
Western Europe, taking advantage of the collapse of the Soviet Union. 
And leaders of the newly independent states, including Tajikistan,
Uzbekistan and Kyrgyzstan, complain they lack the resources to combat
criminal syndicates based in Russia and Western Europe. 
``Two or three years ago, people in Kyrgyzstan had only a theoretical
idea what heroin is. Nowadays, it has become one of the main drugs on the
illegal market,'' Kyrgyz Prime Minister Kubanychbek Jumaliev, told the U.N.
special session on drugs Tuesday. The three-day conference ends today. 
The end of the Soviet Union's police-state internal controls gave
traffickers a freer hand to move opium and other drugs across Central Asia
to the streets of Berlin, Paris, London and other Western European cities. 
U.N. officials say the problem is made worse because of the decades-long
instability in Afghanistan, which along with Myanmar produces most of the
world's illicit supply of opium. 
The newly independent states of Central Asia, some with their own
instability problems, lack the means to control their borders and maintain
surveillance on drug traffickers moving in and out of Afghanistan. 
``Today, it is possible to say with confidence that the main source of
growing, producing and delivering drugs to the European countries is
Afghanistan,'' said Foreign Minister Abdulaziz Kamilov of Uzbekistan. 
Afghan factions use drug money to buy more weapons, which in turn
produces more fighting and instability, he said. 
The president of Tajikistan, Emomali Rakhmonov, complained that the
international community has devoted considerable resources to fighting
drugs in Latin America and Southeast Asia but has left poor Central Asian
states on their own. 
Rakhmonov said that in 1991, the year the Soviet Union collapsed, police
in Tajikistan seized only 22 pounds of narcotics. In 1997, Tajik police
seized more than 4.5 tons. That, he estimated, was no more than 15 percent
of the total amount of drugs that passed through Tajik territory. 
``The Republic of Tajikistan is not yet in a condition to finance
independently the programs and measures to combat this evil,'' Rakhmonov
said. 
Kamilov, the Uzbek foreign minister, suggested that the European Union
help Central Asian states establish a coordination center to monitor the
flow of drugs and develop plans for curbing it. 
********

#7
Duma Drops START 2 Hearing from Agenda 
10 June 1998

MOSCOW -- (Reuters) Russia's lower house of parliament on Wednesday
scrapped plans to hold a hearing on the START 2 arms reduction treaty next
week, dealing a new blow to U.S. and Kremlin hopes that it will soon be
ratified. 
A proposal by ultra-nationalist Vladimir Zhirinovsky to put off the June
16 hearing won the approval of 235 deputies in the opposition-dominated
Duma and was opposed by only 39. There were no abstentions. 

The Duma did not immediately set a new date for the hearing, reducing
the chances of the treaty being ratified before the Duma's autumn session
which starts in September. 
Zhirinovsky has made clear he wants no hearing before the autumn session. 
"By taking this decision, you have struck a serious blow to the
prospects of developing Russia's nuclear forces," Roman Popkovich, head of
the Duma's defense committee, told deputies. 
START 2, signed in 1993, would reduce U.S. and Russian deployed nuclear
warheads from about 6,000 each to no more than 3,500 each by the year 2007. 
The U.S. Senate has ratified the treaty, but the Duma has held back
because of the high cost of carrying out the terms of the treaty, as well
as fears that Washington is developing defense systems that may violate the
1972 Anti-Ballistic Missile treaty. 
Washington denies doing so. 
The issue is a pressing one for the Kremlin because Washington has made
clear it wants the treaty ratified by the Duma before U.S. President Bill
Clinton agrees to another summit with Russian President Boris Yeltsin. 
Yeltsin has vowed to get the treaty ratified and the Kremlin has been
waging a campaign to win the Duma's approval. 
Foreign Minister Yevgeny Primakov, Defense Minister Igor Sergeyev and
security chiefs met leaders of the parliamentary factions last Friday to
explain why the Kremlin believes the treaty is in Russia's interests. 
But the Duma is in no mood for compromise after a bruising battle with
Yeltsin over his nomination of former regional banker Sergei Kiriyenko as
prime minister. 
The Duma rejected Kiriyenko's candidacy twice before grudgingly
approving him in a third vote to prevent Yeltsin dissolving the chamber and
calling a new election. Yeltsin's insistence on Kiriyenko offended many
opposition deputies.

********

#8
Duma Deputy Warns Against Hasty START II Ratification 

Moscow, June 8 (Interfax)--The Russian State Duma can ratify the START
II Treaty "only if it receives government guarantees on sufficient
financing for programs to enhance defense capabilities," Chairman of the
lower house's Foreign Intelligence Subcommittee Aleksandr Vengerovskiy told
Interfax on Monday.
This year, the United States has "sharply increased" allocations for
creating nonlethal and nontraditional weapons in the Livermore and Los
Alamos laboratories and in the Prospective Research Department of the
Defense Ministry," Vengerovskiy said.
Ratification of this treaty would mean that "while cutting its
nuclear-missiles potential, Russia would fail to attain U.S. level in
developing other weapons due to financial difficulties in the first place,"
he said.
Numerous factors show the scale of these difficulties, he said. For
instance, over 50 tonnes of the weapons grade plutonium are stored in
unsuitable conditions and cannot be recycled, he said. The Kurchatov
Nuclear Physics Institute created a technology for turning the weapons
grade plutonium into fuel for nuclear power plants, but no funds to do so
are available, he said.
The growing number of states possessing nuclear arms or standing on
the threshold of doing so is yet another factor requiring "an extremely

weighted" approach to the ratification, he said.
Following India and Pakistan, Israel, possessing "roughly 120 nuclear
warheads" can declare its nuclear potential, he said. North Korea, South
Africa, Brazil and Iran are close to building nuclear weapons, he said.
Under these conditions, the problem of Russia's defense should be
considered "particularly carefully" and consideration of "the ratification
of the START II Treaty should not be hurried," he said.

*********

#9
CPRF's Grassroots Influence Seen Declining

Zavtra
19 May 1998
[translation for personal use only]
Article by Nikolay Anisin: "After Lebed--The Deluge, If You Will"

The main outcome of the gubernatorial elections in Krasnoyarsk
Kray is that the people's patriotic opposition is losing influence
among its electorate.
Prior to the first round of these elections, the opposition
leader flew into Krasnoyarsk, and on behalf of the CPRF [Russian
Federation Communist Party] and its allies, campaigned for the
candidacy of Communist Petr Romanov. Last year, the bloc of
Communists and Agrarians obtained 40 percent of the votes in the
elections to the kray Legislative Assembly. But this time, only 13
percent voted for Romanov.
Prior to the second round, the second-ranking opposition
figure--State Duma Speaker Seleznev--visited Krasnoyarsk and tried
passionately to convince local citizens to choose Zubov over Lebed.
The entire Central Committee of the CPRF then appealed to the people
to support Zubov. After this, Zubov increased his level of support
by three percentage points, while Lebed's support rose 12 percent.
In other words, of the 13 percent of Krasnoyarsk citizens who wanted
to see opposition candidate Romanov elected governor, only 1 percent
responded to the appeals of the Communists.
I f we take into account the fact that Lebed trailed Zubov only
in relatively comfortable Krasnoyarsk and that he was victorious in
the impoverished cities and villages of the kray, we must then
acknowledge that all the destitute people and people discontented
with the present authority have stopped believing in the opposition
leaders and no longer wish to follow them. The flesh and bones of
the Yeltsin regime--Governor Zubov--does not suit the majority of
voters in this extremely large region of Russia, but neither do the
Communists.
In essence, the elections in Krasnoyarsk Kray did not involve
a struggle between the authority and the opposition, but rather a
confrontation between two representatives of different groups of
capital possessing real power. One of these--Lebed--permitted
himself to vilify the regime created by this power.
In the gubernatorial elections of 1998, Lebed played the same
role Yeltsin played in the RSFSR presidential elections of 1991. At
that time, Gorbachev and the Union center did not suit a segment of
the power elite, so this segment financed the Yeltsin "opposition."
Taking advantage of the popular discontent with Gorbachev's
policies, Yeltsin was able to create a parallel center of authority.
In the present case, the capital interests involved in efforts to
disintegrate Russia and redistribute ownership allocated tremendous

assets in support of "opposition figure" Lebed in Krasnoyarsk Kray,
with the purpose of instituting a new center of power, this time in
confrontation to Yeltsin.
Lebed must work off the funds spent to secure his victory. We
therefore have to believe that he is hardly likely to behave like
another "opposition" general--Rutskoy, hardly likely to drag all his
relative into the kray and begin solving purely personal problems.
From his governor's office and platform in the Federation Council,
Lebed will most likely bring down a barrage of criticism upon the
policies of the regime. He will rally a significant segment of the
power elite around his persona and consolidate all the protest
energy of the people. As a result, there will be no room for the
current opposition in the next presidential elections, just as there
was no room for it in the gubernatorial elections that took place in
Krasnoyarsk Kray. Thus, in the year 2000, Russia will have to
choose between two proteges of comprador capital eating up the
country. In such event, the opposition will have to lean against
Yeltsin or his protege, or against Lebed.
In the gubernatorial elections in Krasnoyarsk Kray, opposition
leaders got on Zubov's bandwagon. And were embarrassed. But what
else but embarrassment can we expect from an opposition whose
leaders are not seen at the people's revolts in Anzhero-Sudzhensk,
or Inta, or Vorkuta, or anywhere else. All that can save the
opposition will be new, nonstandard tactical and strategic
measures.

********

#10
LIVSHITS AND URINSON CLAIM ROUBLE WILL NOT BE 
DEVALUED UNDER ANY CIRCUMSTANCES
//JUNE 9, 1998 /RIA NOVOSTI/--
##The Russian rouble will not be devalued under any
circumstance, neither at present nor in the future, Alexander
Livshits, deputy head of the Russian president's administration,
announced on Monday.
Yakov Urinson, Russia's economics minister, fully share's
Livshits's standpoint. Urinson said he is 100-percent sure that
the Russian currency will not be devalued in the near future.
"This issue will simply not be discussed. Russia does not want
to wage on with a 'wooden' rouble,"Urinson explained.
The Russian authorities have only two or two-and-a-half
months' time leeway to implement the government's decisions on
the stabilisation of the economic and financial situation in
Russia, Alexander Livshits, deputy head of the Russian
president's administration, said on Monday. According to
Livshits, a fundamental change for the better in Russia's
finance must be obtained by this coming September. The
authorities are prepared to take this effort and there are
enough resources to cope with this task, Livshits emphasized.

*********

#11
>From RIA Novosti
Rossiiskaya Gazeta
June 10, 1998
STATE DEBT SERVICING EXPENDITURES BECOME EVER MORE BURDENSOME

According to estimates of the Finance Ministry, the
expenses for the servicing of Russia's foreign debts will grow
from 8.4 per cent of budget expenditures in 1998 to 12.3 per
cent in 2001. Their absolute figure will reach 58.5 billion
roubles. In this connection, the Government intends to sharply

reduce borrowings on the external markets. Their share in the
total volume of state debts is expected to be cut to 12.7 per
cent in 1999 and to less than 5 per cent in 2001. Internal
debts will account for the bulk of state debts. Meanwhile, the
market of Russia's state debt securities is extremely tense. In
the second half of May, the yields on GKOs and OFZs jumped to
50-80 per cent of annual interest (150-300 per cent higher than
in October 1997). This means that the expenses for the
servicing of internal debts grow quickly. Borrowings on the
internal market become no less burdensome for the state than
borrowings on the external market. That is why the Finance
Ministry intends to limit the rate of state securities issuance
by the pace of DP growth. 

********

#12
From: DGlinskiva@aol.com Dmitri Glinski (Vassiliev)
Date: Wed, 10 Jun 1998 10:52:28 EDT 
Subject: Opposition to Yeltsinism

To the Readers of the Johnson's Russia List
As a recent subscriber to JRL, I am greatly impressed by the quality of
material and discussion, and I would like to express my admiration for the
editor of this virtual newspaper. It is now clear that a large, if not the
overwhelming number of Russia-watchers in the United States are
increasingly aware of the scope of the Russian national tragedy that has
been unfolding behind the smokescreen of the liberal-capitalist rhetoric. I
see this as a belated vindication of Boris Yeltsin's democratic opponents
who had demonstrated the fraudulence of this rhetoric as early as in
1991-92 and whose subsequent attempts at establishing a civic alternative
to the regime were promptly silenced or destroyed. While lucky few among
the democratic oppositioners, like Grigori Yavlinski, later managed to
achieve some degree of international recognition (thanks, in part, to their
association with Gorbachev), the leaders of the first wave of the
democratic opposition have been skillfully isolated from their
international audience. 

I believe it may be useful for some of you to know that recently a
group of four founding figures of the Russian democratic opposition to
Yeltsinism have been for a second time denied a chance to present their
views to the American audience. One of them is none other but Academician
Yuri Afanasiev, a leading social democrat, rector of the Russian State
University for the Humanities and a founder of the Democratic Russia
Movement. The group also includes Leonid Batkin, an outstanding scholar and
a close associate of Andrei Sakharov; Dmitri Furman, the widely-read
Russian columnist who published an article in the wake of the 1991 coup
identifying the new Russian government as free market Bolsheviks; and poet
Yunna Morits, a prominent member of the board of the Russian PEN Center,
involved in the human rights issues. A year ago, a project of a joint
conference bringing together leading Russian and American intellectuals
critical of the shock therapy was initiated in Washington but collapsed
because the American sponsor withdrew its financial promise. More recently,
the four people that I have mentioned were scheduled for the end of
September to appear at a round table of the AAASS in Florida. A few days
ago, it has become clear that, again, the funding for their trip is not
forthcoming. Given that this latter project required some $8,000 to $10,000
to materialize, it is plain to see even from Russia that obstacles were
more political than financial.
This is largely an exercise in self-denunciation, since I have been
among those involved in the preparation of both events. However, it also
exemplifies the formidable extent of mutual isolation between the original
opponents of the Russian kleptocracy and their counterparts in the United
States. As someone who had worked on the project of the democratic
opposition in Russia back in the early '90s, I can only welcome the fact
that its erstwhile insights have now become a widely accepted currency
among mainstream Western observers. Yet it is disturbing to see that the
decadent mood prevailing in the field and the resulting decrease in funding
have erected a new iron curtain between intellectuals, and that the leading
dissidents of the '90s are now mired in isolation from the American public
opinion, much more solidly than their predecessors were in the Soviet
Union. It would be helpful if some of the JRL readers find spare time to
share their thoughts about this state of affairs.

Dmitri Glinski (Vassiliev), George Washington University/SAIS
(DGlinskiva@aol.com)

*********

#13
Russia: Income Inequality Growing In Transition Nations
By Robert Lyle

Washington, 10 June 1998 (RFE/RL) -- Two-thirds of Russia's population is
receiving some sort of welfare, or social transfer payment, according to a
senior government official, and 90 percent of many of those payments are
going to the well-to-do, not the poor.
First Deputy Prime Minister and Minister of Labor and Social Development
Mikhail Dmitriev says the Russian system is actually causing a growing
income inequality because welfare and pensions are still largely based on
the old communist system -- where benefits went to everyone regardless of
income.
It was an advanced, comprehensive, and mature system in communist days
because the general level of poverty was relatively small and incomes were
generally equal, Dmitriev told an IMF conference on economic policies and
equity in Washington this week.
However, he says in the transition to a market-based system, these huge
social transfers, designed to assist the poor, are actually making the rich
richer and the poor poorer.
The upper 30 percent of the Russian population collects more allowance
for children than does the bottom 40 percent, says Dmitriev, and that
happens in almost every category of social payment. 
This brings "enormous" political resistance to any reform designed to
better target benefits to the most needy. Making the problem worse, says
Dmitriev, is that only 20 percent of this huge 350 billion ruble government
outlay for social payments is actually financed. The remaining 80 percent
is an unfunded liability of the government, showing up usually as arrears,
and contributing to general fiscal imbalances.
In some Central European countries, says Dmitriev, the problem was dealt
with by increasing taxes. But in Russia that is not a solution because the
tax system itself is regressive.
He says 40 percent of the general government revenues come from
individual income and payroll taxes, which are assess on wages that are
already below average. This means that mostly the very poor and the middle
class are paying these taxes, the revenues from which are than unevenly
redistributed in favor of the richer families.
Former Polish Deputy Prime Minister and Finance Minister Grzegorz
Kolodko told the conference that designing policies to tackle many of the
issues of growing inequality is not so easy. Often, he said, officials fail
to consider the feelings and beliefs of the people.
Part of the problem, he said in a paper for the conference, is that
there were naive, unrealistic expectations that the transition would be
swift, quickly bringing both higher income and more fair distribution of
the fruits of a better-performing economy.
The reality was far different, he said, with income inequality growing
rapidly, often enriching the wealthy at the expense of the poor. This
accounts for a 1997 public opinion poll in Russia in which 82 percent of
those questioned said poverty was due to the transition economy while 88
percent believed that wealth came from connections. Only 39 percent through
wealth came from hard work.
But this doesn't mean that the people don't accept growing inequality,
said Kolodko. They accept and even expect it "so long as they see that it
serves the public service that everybody is going to be better off," he said. 

Kolodko, now a professor at the Warsaw School of Economics, said this
is the biggest challenge for policy makers -- to understand that while
inequality must necessarily rise in the transition, changes in equity
should be controlled and managed by sound policies. These changes cannot be
left "entirely to the just-released market forces, he said. The challenge
is to assure that in the longer run, "everyone's standard of living may
improve." 
*********

#14
Boston Globe
10 June 1998
[for personal use only]
Russia's blunt new tax man backs law with commandos 
By David Filipov

MOSCOW - A tough new gang has hit the streets of Moscow and other Russian
cities in search of anyone foolish enough to keep loose cash or goods where
the gang can find them. 
Commandos wearing black ski masks and full combat gear raid street
vendors and small businesses. They confiscate property first and ask
questions later. 
Their leader, a man so blunt that his friends once dubbed him the
Bulldozer, has vowed to take on Russia's richest companies and has
reportedly drawn up a hit list of the nation's 1,000 wealthiest citizens. 
This is no crime syndicate on the rampage. This is Russia's tax
collection agency and its tough new chief, Boris Fyodorov, who has vowed to
end Russia's chronic, crippling tax shortfall by forcing the rich to pay
their share and making Russians law-abiding taxpayers. 
It is a monumental task in a land where most people view tax evasion as
their birthright. Only 3.2 million tax declarations were submitted last
year from a population of 150 million, Fyodorov said yesterday. 
''For years, the government has been pretending to collect taxes, and
people have been pretending to pay them,'' he quipped. ''We have to change
this strange habit.''
The stakes are high. Russia annually fails to collect billions of
dollars in taxes, forcing the Kremlin to borrow heavily. More than a third
of Russia's budget is spent servicing this debt. This in turn puts added
pressure on a state already unable to pay teachers, doctors, miners, and
soldiers. 
President Boris N. Yeltsin partially blamed the tax shortfall for a
recent crisis of confidence among investors that threatened the ruble and
forced the government to briefly triple key interest rates to 150 percent
last week. While markets here have stabilized, allowing the government to
bring rates down to 60 percent this week, improving tax collection is often
mentioned by international lenders, including the International Monetary
Fund, which has held up payments to Russia over the issue. 
Enter Fyodorov, 40, whose iron-fisted monetary policies were credited
with halting inflation and stabilizing the ruble while he was finance
minister in 1993. However, his critics charge that Fyodorov failed to pay
the government's bills, triggering a debt crisis that cripples Russia to
this day. 
A commentator from NTV television called him ''the mad dog of Russian
finance.'' Itogi magazine quoted a Russian government official as calling
him ''rude, impudent, and ill-willed'' - and perfect for the job. 
ince Yeltsin appointed him last week, Fyodorov has threatened the 51,000
Russian companies that are estimated to owe a combined $150 billion in back
taxes with confiscation of assets if they do not pay up. He has promised to
create a database of the 10,000 richest politicians, bankers, entertainers,
and other prominent citizens and track down and imprison tax evaders. 

But first, Fyodorov said yesterday, he has to purge the tax
inspectorate of corrupt officials. 
''Some of my deputies are leaving today; some will leave tomorrow,''
Fyodorov said. ''There is corruption. I have to deal with it, although I
would prefer not to.''
His announcement followed the detention of Yuri Yurkov, the head of
Russia's State Statistics Committee, and several other senior officals on
suspicion of distorting information about major companies to help them
avoid paying taxes. Investigators seized more than $1.5 million in cash -
$1 million of it during a search at Yurkov's apartment that was shown on
Russian television. 
The arrests could have far-reaching implications if it turns out that
there has been manipulation of the data that government officials rely on
to make policy and collect taxes. 
Fyodorov has talked so tough that he has been forced to back off a
statement he made to a Russian newspaper last week that he was drawing up a
hit list of celebrities who would be squeezed for tax payments. 
''If a person says he is a multimillionaire on television but does not
pay taxes, we have to make him pay,'' Fyodorov said in a television
interview Sunday. 
The question remains whether Russians will be coerced into paying more
taxes by the tough new approach. Most people here still view the state as
they did in the Soviet era - as an intrusive, thieving entity that is best
outwitted or ignored. Anyone who openly declares his income to tax
authorities is considered a fool. 
It's not uncommon at cocktail parties to overhear Russian businessmen
chatting about new ways to avoid taxes. Russia's huge and rarely audited
collection of fly-by-night commercial banks, off-shore corporations, and
false-front companies makes it easy for citizens and businesses to hide
what they own. 
People who avoid taxes are seen as folk heroes. After Russian
cross-country skier Larisa Lazutina won three gold medals at the Nagano
Winter Olympics, the government announced that she would have to pay 35
percent income taxes on her nearly $1 million prize from the Russian
Olympic Committee. The announcement so outraged the public that the
government backed down. 
And how are the tax police going to find Slava, whose construction
business only pays and accepts cash, who keeps his money in offshore
accounts and under several names, who spends next to nothing, so as not to
attract attention? 
''It is almost as if the authorities, never tiring of new ways to make
people's lives difficult, have wished to visit a new plague upon them,''
said Slava, who asked that his full name and company name not be used, to
avoid giving the tax authorities a way to find him. ''First we lost all our
savings to inflation, then our jobs, and now they want us to pay tax. It's
a crime.''
Some analysts believe the problem is not how much Russia collects, but
what it does with the money. 
''Russia already collects plenty of taxes,'' said Rory McFarquhar, an
economist and tax specialist with the Russian-European Center for Economic
Policy. The problem, he says, is that much of the money goes to regional
governments that squander it. 
But changing the way tax money is spent is a problem that Yeltsin, who
depends on the political support of regional governors, would rather not
face. 

Economists here say that what is needed is a reform of Russia's
outdated corporate tax laws that impose a dizzying number of levies on
businesses and make it impossible for honest companies to make a profit.
Fyodorov agrees and adds that he would like to lower personal income tax
rates. Currently, anyone who earns more than $8,000 annually faces a 35
percent tax rate without any deductions. 
Yeltsin has promised to submit a new tax code to parliament this year.
But Yeltsin made that promise last year, too. 

********

#15
Russia Today

http://www.russiatoday.com
June 9, 1998 
It's the Economy, Stupid.
By Rod Pounsett

The campaign for the 2000 presidential election shows all the signs of
already being up and running. 
All the presidential hopefuls, including newly elected Krasnoyarsk
Governor Aleksander Lebed, Moscow Mayor Yury Luzhkov, Communist leader
Gennady Zyuganov, Yabloko party leader Grigory Yavlinsky and other fringe
contenders like Saratov Governor Dmitry Ayatsov, seem to have recognized
that it is going to be a long, hard fight to win over the hearts and minds
of the people. They are scrambling for the electioneering high ground at
every opportunity. 
Even President Boris Yeltsin's new hands-on daily involvement in affairs
of state looks very much like a man seeking another term. To be sure,
Yeltsin's introduction of Ayatsov to U.S. President Bill Clinton as "the
next president of Russia" was a joke. But if he and the others are
seriously on the campaign trail, they had better get out of Moscow and
listen to the people, because the news is not good. 
Yeltsin and his new government may be marginally happy about the way
they are riding out the economic crisis, but for ordinary Russians,
battered by the effects of one crisis after another, it may have been one
too many. 
Unimpressed by international praise and support for Yeltsin's fight to
save the ruble and fearing the warnings of increased austerity, many seem
totally disillusioned with the politicians at the helm. Or, more precisely,
they would welcome a clean sweep at the top. 
The subtle Russian variation on our phrase "a new broom sweeps clean" is
"a new broom sweeps in a new way." Recent opinion polls suggest the
majority of people are against any major ideological upheaval or a return
to Soviet-style communism, but may be looking for new faces. 
"Things are not too good even here in Moscow for people without
connections, but compared with other parts of the country we're relatively
well-off thanks to people like Mayor Luzhkov,"
housewife Larrisa told me. 
She, like many of her friends, earns extra money interpreting for
foreign business representatives and tourists. "There's quite a lot of cash
circulating in big cities like Moscow and St. Petersburg, so even without a
regular job most of us, especially with language skills, can scrape a
living together. But from what I read in the newspapers and hear from
people I know in other parts of the country, there's a great deal of
suffering because of the central government's bad management," said Larrisa. 
"Anyone who wants to be president of this country in the future had
better start thinking about ordinary people and not just making the rich
richer." 

It is not just miners, teachers and the military, for whom pay days are
few and far between, who are disgruntled, nor those used to suffering in
more deprived areas in the harsh northern territories. The discontent I
have encountered is widespread across all sectors and all parts of the
country. 
Take, for instance, a fairly typical family in Kazan, capital of the
Tatarstan region. In previous times, they would have felt secure about
their family's future. Ravil is a senior manager in a local military plant
and his wife Svetlana was a teacher before budget cuts two years ago left
her without work. They both obtained good university degrees and entered
jobs they believed would be for life. Their two children, 20-year-old Yury
and 17-year-old Anna, both students, will be eligible to vote for the first
time in the next presidential election 
Ravil is not optimistic about his children's future, saying they had
little chance of getting a job, even a low paid one. "The manufacturing
industry has been completely destroyed in our country. We don't make things
anymore, we just import them. Thousands of people have lost their jobs in
my industry and they're blaming the present government in Moscow." 
Svetlana has been trying to earn money any way she can since losing her
job at a formerly prestigious local institute. "I had been helping someone
with a stall at the local food market but they cannot afford to pay me any
more. Now I go out alone and trade what I can at street markets." 
She said many highly educated friends are in the same position. "One man
I know who used to be a senior lecturer is now a street cleaner. But the
people I feel sorriest for are the pensioners. They have even less to live
on and sometimes they don't even receive their pension entitlement and have
to beg in the streets." 
She also worries about her children's prospects. "It doesn't matter how
well they do in their examinations, they're going to have to take any job
they can find. No one can chose a career any more." 
Yuri, in his final undergraduate year, said he knows it will be tough
once he graduates. But he added: "None of us want to go back to the way
we're told it was in the old days, but I'll be voting for change at the
next presidential election." 
Anna agreed: "It's time someone else was given a chance to be
president." She said her friends' parents are also facing a hard time. "We
understand they have no spare money to give us for clothes or enjoying
ourselves." 
In Voronezh, some 400 miles southeast of Moscow, recently married
assistant museum curator and part-time customs worker Sergei and his
teacher wife Tatiana offered another view. 
Formerly one of Russia's main military industrial production centers,
residents of Voronezh have always enjoyed a somewhat protected lifestyle.
Even now the job situation is relatively good, thanks to successful
"conversion" projects at local factories and because of big orders at the
main Ilyushin aircraft plant. Despite this, Sergei and Tatiana, both in
their early 30s, have had a major change of heart concerning reforms, and
many of their friends are having similar doubts. 
At the beginning of perestroika and glasnost, Sergei was among the
vanguard of those involved in reform. His perspective differs now: "Russia
needed to change, but the change should have come about by evolution not
revolution. Yeltsin and (Mikhail) Gorbachev before him have driven Russia
into a revolution and the resulting changes reflect that process. We seem
to be going nowhere." 

The change of heart for Sergei and his wife had already begun by the
last presidential election in 1996 -- they voted for Communist leader
Zyuganov. Sergei added that now they have no idea who they are going to
vote for in the year 2000. 
A few weeks ago in my column I said the job of Russian president seems
to be up for grabs. What the contenders need to understand is that most
ordinary Russians, even the better educated, are still finding the whole
reform process difficult to understand. Macro-economics and international
relations are the last thing on their minds while they struggle to put food
on the table or consider their children's job prospects. 
For anyone to stand a chance of winning the hearts and minds of the
politically disillusioned Russian electorate, they must first change the
direction and language of their rhetoric. 
Sophisticated words about budget cuts, market forces and living within
their means is all very well for international lending agencies and big
business. But both the present electorate and young future voters need more
relevant messages about how it will affect their lives. 
Rod Pounsett writes a weekly column for Russia Today.

*********

#16
Jamestown Foundation Monitor
10 June 1998

DUMA PRESSES AHEAD WITH PLAN TO IMPEACH THE PRESIDENT. Communist deputies in
Russia's State Duma moved a step closer to their goal of impeaching
President Boris Yeltsin yesterday when they mustered enough votes to get the
issue put on the parliament's agenda. The next stage is the creation of a
parliamentary commission. It will consider the charges brought by the 215
disgruntled parliamentarians who signed the appeal for impeachment.
Originally scheduled for June 2, then set for June 11, this stage of the

process now seems likely to be further put off until June 19. Communist
faction leader Gennady Zyuganov is away on a foreign trip. Until he returns,
Communist deputies are unwilling to nominate their representatives to the
commission. (Russian agencies, June 9)

The next stage of the process--electing the members of the commission--will
require the participation of 226 deputies. If and when it finally takes
shape, the commission will have fifteen members, nominated by the various
parliamentary factions in proportion to their share of parliamentary seats.
The chairman will be elected by the Duma by secret ballot. The Communist
faction is expected to claim three seats on the commission plus the
chairmanship. The pro-government Russia is Our Home faction will be eligible
for three seats; Vladimir Zhirinovsky's Liberal Democrats and Grigory
Yavlinsky's Yabloko will get two seats each; while the People's Power,
Agrarian and Russian Regions factions will each get one. 

Russia's constitution makes it very hard for parliament to impeach the
president, and the vague list of charges being brought against Yeltsin is
very unlikely to bring about his ouster. However, the president is forbidden
to dissolve parliament once impeachment proceedings have begun, and it may
well be this aspect that most appealed to the deputies who signed the appeal.

LEADERS AND LAGGARDS IN THE CIS ECONOMIES. Official CIS Goskomstat data for
the eleven CIS economies in the first quarter of the year show some
successes, but most of the economies have still not shaken off their
economic depressions. (CIS Goskomstat bulletin, Finansovye izvestia, 21 May). 

Kyrgyzstan and Georgia led the pack with reported GDP growth of 11 percent,
followed by Azerbaijan with 8 percent. Armenia reported 6 percent growth,
Uzbekistan 3 percent and Tajikistan 1 percent. Belarus' reported growth rate
of 13 percent cannot be taken seriously. Such a figure is inconsistent with
the fact that Belarus owed Russia US$470 million for unpaid energy
deliveries as of 1 April, and reports that an increasing variety of food
items are disappearing from store shelves in that country. (Minsk Economic
News, 26 May) In the first quarter Moldova and Russia registered zero GDP
growth, while Ukraine and Turkmenistan experienced a drop. Even though
industrial output has stabilized in countries such as Kazakhstan and
Moldova, agricultural output continues to fall there: Meat output was 40-50
percent down on the 1997 level in those countries, also in Ukraine and
Russia. 

Inflation appeared to be under control in all the countries of the region,
running at an annual rate of 26 percent in Turkmenistan, 11 percent in
Armenia and 10 percent or less in the remaining countries.

*********