Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


June 14, 1998   
This Date's Issues: 2220  2221

Johnson's Russia List
14 June 1998

[Note from David Johnson:
1. Sunday Times (UK): Mark Franchetti, Panic grips Kremlin in 
$180m diamond scandal.

2. Paul Christensen: Manuscript by Victor Reuther on experiences of 
foreign workers, including himself, under Stalin.

3. Edward Lozansky: Statement of Participants of the Third International 
Conference "Past, Present and Future of Russia." 

4. U.S. News and World Report: Christian Caryl, Pasta king explains how 
Russia's economy really works; and Russia Media. Crisis? What crisis?

5. RIA Novosti: Democratic Choice of Russia Congress.
6. The Economist: Resurrecting Russia’s arts. 
7. Baltimore Sun: World nervously observing Russian economic crisis.
8. Komsomolskaya Pravda: Interview with musician Mstislav Rostropovich by 
Aleksandr Gamov, "Mstislav Rostropovich: Yeltsin Can Put Anyone in Their 
Place. But Not His Place."]


Sunday Times (UK)
14 June 1998
{for personal use only]
Panic grips Kremlin in $180m diamond scandal 
by Mark Franchetti, Moscow 

HE seemed to have all the attributes needed for success in the new 
Russia. Brash, smart and rich, Andrei Kozlenok was proud of his 
influential contacts within the Kremlin and the former KGB. 
However, after two years on the run in America and Belgium, Kozlenok is 
facing extradition to Russia for trial over a diamond scandal that could 
implicate some of the country's leading politicians. 

Kozlenok, 38, held in a prison cell in Greece, is accused of swindling 
more than $180m in diamonds, gems and gold from the Russian government 
with the help of corrupt officials in the chaos after the collapse of 
communism in 1991. News of his imminent return to Moscow has panicked 
former friends in high places who fear he will name them. 

Viktor Chernomyrdin, the former Russian prime minister - who denies any 
links to the scandal - is expected to be questioned by prosecutors. 
Ruslan Tumayev, a senior investigator in the prosecutor's office who has 
been pursuing the case, said he had interviewed other top officials, 
including Boris Fyodorov, recently appointed as President Boris 
Yeltsin's tax minister. Fyodorov has also denied all wrong-doing. 

The ambitious Kozlenok allegedly used his high-level connections to win 
an introduction to Yevgeny Bychkov who, as head of the now defunct state 
committee for precious metals and stones, organised huge sales of 
diamonds from Russia's mines. Bychov has since been sacked and charged 
with abusing his position, but then exonerated under a broader amnesty. 
Kozlenok then went to America where, with two Armenians, he founded 
Golden ADA, a California-based company that signed an agreement with 
Bychkov in early 1993 to polish and sell precious stones abroad on 
behalf of the Russian government. 

Two consignments of gold, diamonds and Russian pre-revolutionary coins 
followed, one valued at $95m, another at $88m. On one occasion five tons 
of gold coins were delivered. 

Instead of handing the proceeds to the Russian government, Kozlenok 
allegedly went on a shopping spree, acquiring a Gulfstream jet for $20m, 
three yachts for $1.2m, nine villas, a helicopter, two Aston Martins, a 
£337,000 Rolls-Royce, speedboats and several flats. 

Kozlenok's lawyers claim his contract with the Russian government gives 
him until 1999 to settle his debts. Prosecutors say most of the money 
was squandered and want to know the role, if any, of Chernomyrdin, 
Fyodorov and other officials. 

The Americans are also keen to talk to Kozlenok; the Internal Revenue 
Service claims Golden ADA owes it $63m in taxes. 

"Kozlenok thought he was suddenly the richest man in the world," said 
Tumayev. "He was flashy. He would get $200 haircuts and overspend 
massively. He would offer a $5,000 salary to someone used to earning 
$1,000. I believe Kozlenok is the main man, but what needs to be 
clarified is who else profited. He knows a lot. He could bring down many 
high-ranking officials with him." 

Kozlenok, who was arrested at Athens airport in January, has fought hard 
to avoid extradition and to be granted political asylum on the grounds 
that his life is in danger. Sergei Dovbish, one of his business 
partners, was found hanged on a radiator by the neck of his sweater 
while in police custody. 

"There is a strong effort to silence all innocent individuals who, not 
having other ways to protect themselves, are forced to make public all 
the information they possess," Kozlenok wrote from his cell. "Given this 
last incident, I shall not have more than two or three days to live if I 
am extradited to Russia." 


From: (Paul Christensen)
Date: Sat, 13 Jun 1998 13:26:32 EDT
Subject: Query/request

Dear David:

Greetings. I'm Paul Christensen, a Prof. of PolySc at Syracuse. I don't know
whether you put things like this out on the list, but I have to ask. About a
year and a half ago, I was given a manuscript by Victor Reuther, co-founder
and former head of the UAW. He and his brother spent time in the SU in the
1930s, and he has written a memoir of the experiences of foreign workers,
including himself, under Stalin. He is in poor health, and besides does not
know the field, so he asked me to help him get it published. I've tried a
couple of presses, with no luck. I am not doing this for my own benefit in
any way, although I think it is a good and important story. I was wondering
if you could forward this message to the list: if anyone has any suggestions
about a press that might be interested in putting out a book describing in
very personal terms the experiences of Soviet workers under Stalin, could you
contact me? My email is:


From: (Edward Lozansky)
Date: Sat, 13 Jun 1998 
Subject: conference statement

To: United States Congress
From: Participants of the Third International Conference "Past, Present and
Future of Russia," June 7 - 9, Washington, D.C. Conference was organized by
the American University in Moscow, Russian Academy of Social Sciences, and
Kontinent Magazine

Dear Members of Congress,

Once again, Russia teeters on the edge of history, pulled in opposite
directions by conflicting traditions, interests and demands. The importance of
Russia's choice of future direction between Western values of democracy, the
rule of law, economic opportunity, and international collaboration, or the
dark attractions of the past, cannot be overstated.

Russian dismay and confusion following the collapse of tyranny, combined with
mixed messages and tepid, uneven support from the West, hamper critical
efforts to build the civic and economic infrastructure necessary for Russia to
enjoy the benefits of linkage with the West. 

Everyone remembers the invaluable moral support that American and
international community and political leaders gave to the democratic forces in
the USSR during their struggle with communism. Due to their enormous effort
and sacrifice, democracy achieved an unprecedented victory over
totalitarianism, but the West has done little since then to support Russia in
her most difficult transition to freedom and democracy. Devastating economic
crisis, widespread crime and corruption creates a fertile soil for the
communist, fascist, and nationalist ideas, which may lead to Russia's
backsliding to its communist past, a cold war, and a constant threat of global
military confrontation.

Russia desperately needs economic, moral and spiritual support from the United
States and the world community, directed toward establishing true partnerships
in the areas of business, trade, culture, science, and education. Russia needs
a real integration with thw West. This integration will be beneficial not only
for the Russian people but for their neighbors and the whole world. Free,
prosperous and democratic Russia will provide a much more reliable security
for the countries of Eastern Europe than their membership in expanded NATO. 

To achieve this integration we need free exchange of information, rapid
implementation of current research and application-oriented projects, as well
as programs in economics, technology, and humanities. We need reconciliation
of ideological priorities and political doctrines; cooperation in military
peace keeping missions and the fight against international terrorism and
crime; joint study programs for universities and schools; expansion of
publications and various other needs in the areas of common human interest.

Such a multifaceted array of tasks can be accomplished only through the joint
efforts of government and public interest organizations in both countries,
joint centers of coordination and management, professional expert councils and
other effective infrastructure built on the ideas of a long-term partnership.

The United States led the West in its successful fight against communist
expansion and ideology and, as it did for Germany and Japan after World War
II, America now has the historical mission to integrate Russia, Ukraine and
other countries of the former USSR into the Western world. 

A strategic partnership of the US and Russia has global significance. Thus, it
should not depend on political and situational clashes and priorities. We hope
that our concern will be understood and that our initiatives will receive due
attention from the United States Congress, Government, and American people.

For additional information and conference materials please contact:

Dr. Edward Lozansky
President, American University in Moscow
1800 Connecticut Avenue, NW
Washington, D.C. 20009
Tel. 202-986-6010, Fax 202-667-4255, e-mail:


U.S. News and World Report
June 22, 1998
[for personal use only]
World Report 
Siberian macaroni
Pasta king explains how Russia's economy really works

BARNAUL, RUSSIA--Four time zones and 2,800 miles east of Moscow, Valery 
Pokornyak is mulling over his business plan. A self-made millionaire who 
has earned his money by making a real product that people need, 
Pokornyak is a remarkable exception to the usual pattern in today's 
Russia, where most post-Soviet tycoons have gotten rich by gaining 
control over the country's natural resources and selling them off. This 
wiry, 35-year-old engineer with a gaunt face and close-cropped hair does 
not possess either of the two main status symbols of the new rich, a 
cellular phone or a sport utility vehicle. He has built his fortune in 
the unglamorous business of producing macaroni, where margins are tight 
and satisfying consumers is everything.

Today a visitor is telling him the latest bad news from the Russian 
capital. The stock market has fallen 40 percent in the past month, 70 
percent since last August. Caught between dwindling tax revenues and 
soaring interest rates, the government is spending about a third of its 
budget just to service its debts. Foreign exchange reserves are down to 
dangerous levels, and jittery foreign investors are pulling out.

Moscow is far away. Pokornyak, seated in his office in a beautifully 
restored 19th-century villa, simply shrugs. "Whatever one might think of 
the crisis," he says, "it just doesn't interest me."

And thereby hangs a tale. For Pokornyak and millions of other 
hard-working Russians in the provinces are almost completely indifferent 
to the financial turmoil in faraway Moscow. Here in Barnaul--capital of 
the Altai Territory, a region of 3 million people in Siberia--both the 
rich and the poor operate within the constraints of what locals call 
"the economy without money," an economic reality that twists most of the 
normal laws of business behavior like a funhouse mirror. To understand 
the Altai's problems is to understand how, 10 years after the first 
fitful attempts at reform, most of the Russian economy actually 
functions. It is also to understand the roots of the crisis in Moscow's 
financial markets.

"Ninety percent of our companies can't work under market conditions," 
says Aleksei Prokoshin, head of the Federal Bankruptcy Agency in 
Barnaul. "To them it doesn't matter whether there's a financial crisis 
or not. These companies live in their own world, without money, without 
management. Most of them don't depend on investments; they don't work 
with bonds; they don't pay taxes. So it hasn't touched them. We don't 
have a financial crisis because we don't have any finances here as it 

Same managers. The Altai's problems began in the Soviet period, when 
central planners molded the local economy into a nonsensical combination 
of inefficient agriculture, heavy industry, and defense plants. When 
privatization came in the early 1990s, workers were given vouchers that 
they could use to buy shares in the companies where they worked. Afraid 
of losing their jobs if their firms were taken over by new management, 
most workers voted at shareholder meetings for the directors who had run 
things in Soviet days. So ownership of the companies changed, but 
management did not. And most managers continued producing the same goods 
they had produced earlier--whether there was a market for them or not.

"It's this artificial tightening of the monetary supply that has led to 
the drastic fall in production and sales," argues Vladimir Borodin, 
director of the Union of Industrialists. His organization unites some of 
the Altai's biggest smokestack companies, and not surprisingly it would 
like to see credit loosened and more money printed. "Only by stimulating 
production will it be possible to achieve economic growth and make the 
financial system stable," Borodin claims.

That's easy for the industrialists to say, because up to now they have 
never had to worry about constraints on their behavior. Bankruptcy has 
been virtually unheard of. Most company stocks are owned by the 
directors and are not traded openly, so even the worst managers cannot 
easily be dislodged. To keep production lines going, they happily order 
raw materials and equipment they have no money to pay for. That has 
translated into mountains of so-called interenterprise debt. Companies 
trade promissory notes, known as vekseli, or do business by barter. 
According to Vladimir Ryzhkov, an influential member of the Russian 
parliament who hails from the Altai, barter's share in the economy of 
his home district has grown steadily since "shock therapy" reforms began 
at the end of 1991. Now it constitutes well over half of the total. Some 
of the territory's big companies do up to 90 percent of their business 
in barter, and only 10 percent in cash.

Eager to avoid layoffs, local governments across Russia allow and even 
encourage cash-free business. Vladimir Raifikesht, President Boris 
Yeltsin's representative in the Altai, shows a four-page list of 
"offsets" from a Barnaul beverages factory that habitually pays its 
taxes to the local government with the products it produces--in this 
case, vodka. Periodically, the factory hands over a few hundred cases to 
a middleman hired by the government, who then tries to sell them. In 
return, part of the factory's tax bill is written off immediately, and 
the funds are credited to the local budget--to a hospital, say--even 
though it may be months before all the vodka is finally sold and the 
money actually finds its way into the hospital's coffers. Until it does, 
the hospital employees must wait for their salaries.

It is precisely this sort of practice, at every level of government, 
that has contributed to the dire state of finances in Moscow. Moribund 
firms that cannot pay their taxes in cash survive no matter what, 
burdening the budgets with "offsets," while healthy companies that pay 
their taxes in cash are crushed under the load of a tax service eager to 
squeeze out the last drop of revenue from those who still have something 
to pay. Lev Korshunov, head of the Federal Tax Inspectorate for the 
Altai, calls the system of offsets a "narcotic" the central government 
keeps trying to prohibit, so far without success. He is happy if half of 
the revenues he collects come in the form of "live money" (a favorite 
phrase in the Altai) rather than payment in kind.

Under conditions like these, the success of macaroni magnate Pokornyak 
is all the more extraordinary. To him, the rigors of the "economy 
without money" are an incentive for lean management. "We're in a very 
extreme situation, and that's good," he says. "It inoculates us against 
many things. We've learned how to manage without money. We've learned 
how to get by under the most dangerous conditions. We're like Green 

Secrets to success. Since he began with a single flour mill a few years 
ago, Pokornyak has built a vertically integrated company that extends 
from grain farming at one end to a chain of macaroni retail outlets at 
the other. The first lesson he learned, back in the raging inflation 
that plagued Russia in the early 1990s, was "don't use money." He vowed 
to avoid borrowing at Moscow rates, and at every step he has worked to 
reduce his exposure to the volatile swings of Russian monetary and 
credit policy. When he needed a new production line, he found an 
investor in Italy who was willing to give him a loan in the form of 
equipment, which he repaid from his profits at rates far lower than a 
Russian bank would have offered; two more lines are on the way today. 
When his grain growers became insolvent and stopped planting the special 
wheat he needed for his macaroni, he advanced them the seed, fuel, and 
fertilizer they needed to start planting--a "product loan" that they 
repaid in grain at harvest time, with any surplus to be sold as they saw 

By keeping his management structure lean and his margins firm, he has 
managed to manufacture a high-quality product that even local people can 
afford. A 1-pound bag of his macaroni sells for about 35 cents; in 1997 
he sold $11 million worth. "Every few weeks I get behind the counter 
myself and sell the product in order to get feedback from our 
customers," says Pokornyak. His office staff of 25 is minimal by Russian 
standards. Another 300 employees work at the flour mill and macaroni 

What's even more unusual, in this land of almost universal tax evasion, 
is that Pokornyak makes a point of paying all his taxes, and with "live 
money" at that. The tax inspectorate honored his honesty with five 
audits in 1997 alone--that very habit of penalizing the productive and 
rewarding the shirkers that has helped to bring Russia to the mess it is 
in today. But Pokornyak says that he never expected anything else from 
the government in Moscow. There's only one thing he wants in return: "If 
the ruble is devalued, I'd have to raise prices, and I'd be crushed. For 
me the stability of the ruble is very important." In that one minimal 
sense at least, Pokornyak concedes, the crisis in Moscow matters after 
all--even to people in Barnaul.


Crisis? What crisis?

On June 1, Russia's stock market plunged 10 percent, and one of the 
country's main futures exchanges collapsed altogether. Yet viewers of 
the state-owned TV channel RTR would barely have known. That night the 
broadcast led with new troubles at the Mir space station. Nineteen 
minutes into the half-hour show, the anchor finally intoned: "Meanwhile, 
today, there was another fall on the stock market. The majority of 
commentators ascribed the cause to the situation on the world markets." 
And that was it.

Such omissions are part of a larger pattern of selective--even 
bizarre--coverage of the financial tumult that peaked May 27, when 
Russia's Central Bank tripled interest rates to 150 percent in a 
last-ditch effort to keep Russian and foreign investors from rushing to 
dump rubles and buy other currencies. Coverage has varied sharply at the 
major newspapers and TV stations, depending on the financial interests 
of the tycoons who own them.

Echoes. Newspapers and TV stations controlled by automobile mogul Boris 
Berezovsky, for example, have continually speculated about a devaluation 
of the ruble--which Berezovsky is known to consider overvalued. "If the 
ruble falls in value, he will be hoping to snap up assets at rock-bottom 
prices," says one Moscow financial analyst. Berezovsky's public attacks 
on the cabinet of Prime Minister Sergei Kiriyenko have also been echoed 
in media under his control.

Media allied with banker Vladimir Potanin's empire, including RTR, have 
soft-pedaled the crisis--perhaps reflecting Potanin's closeness to the 
new prime minister. Meanwhile, rival banker Vladimir Gusinsky's NTV 
network has singled out American-born investment banker Boris Jordan, a 
Potanin ally, as one of the "foreign speculators" responsible for the 
financial meltdown. "In television reports on the crisis, you could 
clearly follow which channel belonged to whom," says Leonid Bershidsky, 
media analyst for the English-language Moscow Times.

There is another, more benign factor in the odd coverage: Few Russians 
understand how financial markets work, and even fewer have a stake in 
them. Says Masha Lipman, editor of the Gusinsky-owned newsmagazine 
Itogi: "We set up much of our coverage as a kind of literacy campaign," 
including explanations of key concepts such as treasury bills.

Last week, Russian TV was back in its role as an official reassurer. 
"The crisis has been overcome," an announcer declared. Over the 
following two days, Russia's stock market dropped another 11 percent.


Democratic Choice of Russia Congress

MOSCOW, June 13. /RIA Novosti correspondent/. The
Democratic Choice of Russia party is holding an extraordinary
congress in Moscow, which will review the party's goals in
current circumstances and make changes in the party charter to
bring it in line with the new election legislation. 
Addressing delegates, party leader Yegor Gaidar wished
success to the Sergei Kiriyenko government, stressing that the
government has a lot to do in order to prove its ability to
implement the program and stop the negative trends in the
Russian economy. According to Gaidar, the "strategic" problem is
the lack of serous legislative support for reforms. He pointed
to the weakness of reform-minded forces at the State Duma.
Hence, Gaidar said, the task of preparing for elections to
parliament's lower house in order to set up a liberal-democratic
faction in it. This task is very complicated, because the
Democratic Choice of Russia has a small electorate and limited
financial possibilities, Gaidar admitted. However, he believes,
the problems may be solved by creating a right-of-the-center
coalition. This is the only strategy that can bring success at
the elections, he said. 
According to Anatoly Chubais, chairman of the EES Rossii
board, the Democratic Choice of Russia lacks confidence,
persistence and discipline. Chubais said the party faced two
goals: State Duma and presidential elections, at which the party
must support the candidate of a broad-based right-of-the-center
coalition, who wins the election. 


The Economist
June 13, 1998
[for personal use only]    
Resurrecting Russia’s arts 
M O S C O W     
This week Moreover is devoted to Russia 

IN THE month of May, Russians could hear Shakespeare performed in any of 
five languages—among them “Hamlet” in Georgian, “A Midsummer Night’s 
Dream” in Hungarian, and “Much Ado About Nothing” in English. As part of 
the 12-week Chekhov Theatre Festival, Muscovites could also see 
Aeschylus played in Japanese, Tom Stoppard in Russian, and all of it 
from first-class visiting companies. 
In the unlikely event that the Chekhov festival failed to allure, at 
least half a dozen other plays or concerts were worth catching in the 
Russian capital on any given night. Alternatively, music fans could take 
the train to St Petersburg and hope to find Valery Gergiev, arguably the 
most exciting conductor in the world today, at work in his home theatre, 
the Mariinsky. 
So put aside the sad and much-told tales about Russian culture having 
collapsed along with the Russian economy. The capacity of the state to 
finance the arts certainly did collapse, producing a generalised despair 
in the art world. But that reached its nadir three or four years ago, 
since when things have been looking up, most markedly in the cultural 
centres of Moscow and St Petersburg. 
The state has not recovered; but the artists have. There is a new energy 
and a new sense of purpose in the performing arts, in cinema and in 
literature. Some 1,000 professional theatre companies are said to be 
active in Russia, twice the number of state theatres that were open in 
1991. The number of films being made has tripled over the past two 
years. And the organisers of Russia’s big prize for fiction in 1997 
reported that “the full-scale novel is reviving as a Russian art form.” 
The willingness of the Moscow city government to promote the arts has 
been a big factor in the cultural revival of the capital. The city 
authorities have staged festivals, lured celebrities and found theatre 
space for fledgling companies which have gone on to upstage their 
seniors. The best opera in Moscow is no longer heard at the Bolshoi, but 
at the young Helikon and Novaya opera companies, to each of which the 
city has given a home. 
Both companies offered versions of “Eugene Onegin” last year to dwarf 
the one in the Bolshoi’s repertoire. This year Helikon has hit a new 
peak of originality with its re-reading of Tschaikovsky’s “Iolanta”—a 
problematic opera about a king’s daughter who is cured of blindness. By 
presenting the blindness as a psychological rather than a physical 
condition, and by presenting the story as a family drama rather than as 
a “court” one, the theatre has found a depth and a coherence not even 
hinted at in the stodgy version of “Iolanta” in the Bolshoi’s 
The Bolshoi is still capable of offering the occasional good night of 
ballet, especially when its stunning Georgian prima ballerina, Nina 
Ananiashvili, takes the stage. But most of its productions are 
threadbare and dull, especially in opera. It claims it needs more money 
to update its repertoire, and doubtless it could make good use of some. 
But its poverty is in part of its own making. 
It prices its tickets far too cheaply, creating an industry of touts and 
agencies which buy large quantities and then sell them on for up to ten 
times their face value. Why the Bolshoi should not sell its tickets at a 
market price through its own box office (and keep all the proceeds for 
itself) is anybody’s guess. But for as long as it fails to do so it 
deserves no sympathy. 
There is still less reason to sympathise with the Bolshoi when its 
decline is compared with the ascent of the Mariinsky Theatre in Saint 
Petersburg. Mr Gergiev has forced a prodigious work-rate on the company 
there, and a still more prodigious one on himself. This past year he has 
run the Mariinsky while working also as principal conductor of the 
Rotterdam Philharmonic Orchestra and guest conductor at the New York 
Met. Companies from the Mariinsky have toured Europe, America and the 
Mediterranean (usually under their Soviet-era name, the Kirov). 
Now and again Mr Gergiev’s fatigue shows through and draws a sharp 
notice. But his relentless touring has been a business strategy, not an 
artistic one. It has yielded the money needed to keep the theatre’s 
stars happy and its repertoire alive. Commercial and critical success 
has protected the company from the internal squabbles that have 
undermined morale at the Bolshoi. The Mariinsky knows it can hold its 
head high among international companies in a way that the Bolshoi no 
longer can. Arguably, it houses not merely the finest opera and ballet 
company in Russia, but also the finest orchestra. The main worry is 
whether it will find another Gergiev, should it ever lose the one it 

Popular taste 

Russian popular culture has matched the vigour of its highbrow 
counterparts. The publishers’ bestseller lists are topped by Russian 
crime fiction: the king of the genre, Viktor Dotsenko, sells about 
750,000 books a year. Russian popular songs are chasing American and 
British ones off the airwaves. Sentimental black-and-white melodramas 
from Soviet times invariably top the annual television ratings. A 
possible privatisation of Mosfilm, the main state-owned film studio, has 
produced a furious battle for possession of the 2,000 films in the 
studio’s archive. 
A new and forward-looking Russian film industry has also been crackling 
into life. As recently as 1996 the industry seemed on the verge of 
extinction. The average Russian went to the cinema 14 times in 1990 and 
0.4 times in 1996, which means that most Russians never went at all. But 
1996 was the breakthrough year for a new generation of film makers who 
began offering films that revelled in the themes of post-Soviet life. 
Theirs were cheap, gritty dramas full of bandits, bankers and Chechen 
war veterans. Audiences lapped them up. 
In 1997, the most popular Russian film was “Brat” (“Brother”). Made by 
Alexei Balabanov on a budget of $500,000, it tells the story of a 
village boy who goes to live with his brother, a hit-man, in St 
Petersburg and who gets drawn into his brother’s milieu. Perhaps the 
most talked-about film of the past winter has been “Schizophrenia” by 
Viktor Sergeev, a political thriller about a Kremlin-backed plot to 
murder a troublesome banker—a fanciful premise with just enough 
real-life echoes to perturb. 
Some older artists may still wax regretful for the days of Soviet state 
culture, when great things could be achieved even within the confines of 
officially sanctioned taste, and greater things still could be achieved 
by those who dissented. But much of what was best from those times has 
been preserved in the extraordinary pell-mell that has followed, and 
much more has been added. From a consumer’s point of view, probably 
never before in history has an evening of leisure in Moscow been such a 
pleasure to contemplate. 


Baltimore Sun
June 14, 1998
[for personal use only]
World nervously observing Russian economic crisis

MEMBERS OF THE seven richest industrialized nations met in Paris last 
week in an emergency session on Russia's economic crisis. As the 
government of President Boris N. Yeltsin struggles to keep its reforms 
intact, Russia's stock market has plunged amid worries that the nation's 
mounting debt -- more than $33 billion in debt payments are due this 
year -- could lead to a devaluation of the ruble. What is behind the 
instability in Russia? How can its emerging market economy stabilize? 
What are the consequences for the United States and the world economy if 
those efforts fail?
Lacy H. Hunt

Executive vice president, Hoisington Investment Management, Austin, 

There were a whole set of structural problems in the Russian economy 
that were apparent before the latest crisis. My feeling is that the 
immediate cause of the current problem is not wholly due to internal 
structure but to the continuing problems in Asian markets. The problem 
is that the Asian economic crisis is spreading to Russia.

Russia mainly produces commodities and other labor-intensive products. 
The demand for these commodities is falling. For example, the price of 
oil recently fell from $23 to $15 per barrel, and this, I think, is a 
direct result of problems in Asia. You have one widely used index that 
is at an 11-year-low. This has hurt Russian trade and budget positions.

Primarily, Russia is held hostage by the international economy. So, 
whatever direction the global economy goes, so goes Russia. If the 
country were stronger internally, maybe it could diverge from that 
dependence, but that won't happen anytime soon.

Mark Blyth

Assistant professor of political science, specializing in political 
economies of industrial democracies, Johns Hopkins University.

Three basic things. First of all, there is no real cash worth anything. 
You have 80 percent of assets still controlled by the government; thus 
Russia's actual economy is not totally free for all like it is here. One 
of the other obvious problems is simple liquidity, and to function as a 
good economy, tax revenue is needed desperately.

Russia's industries aren't privatized enough to provide a solid tax 
base. When you have paramilitary units knocking down doors to collect 
liquid assets, obviously taxation efforts aren't going well.

If current trends continue, the populace may look to a more 
authoritarian government for a solution. This is why you can't really 
have instability in Russia, because this area, which makes up roughly 
one-seventh of the world's land mass, is strategically important to 
Europe and the United States.

For the foreseeable future, you might have an anti-democratic sentiment 
in Russia. This undermines the confidence in the integration of 
financial markets. If Russia drops out of the globalization loop, there 
could be some serious economic, and definitely political, results down 
the road.

Alex Beuzelin

Market analyst, Ruesch International, Washington

A couple of weeks ago, Russia was looking to sell one of its last 
state-owned oil companies. The problem was, no bids for the company 
emerged. You had a crisis erupt because it then appeared that Russia 
wasn't going to be able to meet its short-term obligations, and this 
comes at a time when things are continuing to go sour in Southeast Asia.

Russian stocks took a hit, and to stem the outflow of capital, Russia 
raised its interest rate to 150 percent.

Basically, where we're at now is, in the last week or so, we've seen a 
calm. The country has since cut the rate back down to 60 percent, but 
problems remain.

Russia has a short-term obligation to fulfill, and they've lowered their 
asking price for this oil company to $1.6 billion, down from the initial 
asking price of $2.1 billion. The country has been asking the 
International Monetary Fund to issue funds, but the IMF withheld payment 
because of Russia's inability to collect taxes efficiently. Russia has 
taken steps to collect those funds and show that they can meet 

A lot of these problems stem from corruption. Russia is rooting out what 
it feels are corrupt liabilities in order to demonstrate its commitment 
to reform. If IMF funds are restored, you could see improvements in 
confidence. Russia and the IMF have an accord worth $670 million.

Certainly, any time you see an economic crisis, it causes political 
crises as well as the decline of individual faith in a particular 
system. In Russia, this can feed to more nationalist parties striving 
for stability. Hans Belcsak

President, S.J. Rundt & Associates Inc., New York

The biggest problem is that the government is running a system with a 
large deficit and has to borrow heavily because of inability to collect 
taxes. Altogether, Russia has $60 million outstanding. Every week, it 
seems that Russia tends to pay back and then borrow more money. It's a 
vicious circle really. Roughly one-third of all government expenditures 
go to making interest payments.

It can sell Rosneft Oil -- its last state-owned company -- and some of 
its telecommunications interests, but eventually tax collection has to 
be dealt with. This downturn could adversely affect the economies in 
Germany, Hungary, Poland, Ukraine and some of the other Baltics.

Compiled by J. Leffall


Rostropovich: Yeltsin Will Not Run Again 

Komsomolskaya Pravda
11-19 June 1998
[translation for personal use only]
Interview with musician Mstislav Rostropovich by Aleksandr Gamov
in Orenburg; date not stated: Mstislav Rostropovich: Yeltsin Can
Put Anyone in Their Place. But Not His Place" -- first two
paragraphs are introduction

The famous musician, who is no stranger to politics, says that his
close friends Boris Nikolayevich and Viktor Stepanovich will never be
rivals at the elections.
Mstislav Rostropovich is evidently also called a citizen of the World
because you could bump into him in the most unexpected parts of the planet.
I did not have to go far: Our paths crossed in his native Orenburg, on
the eve of Free Russia Day. The red-letter day determined the topic of our
[Rostropovich] So you come from Orenburg too? Then be so kind as not
to call me Mstislav Leopoldovich anymore. Whenever I hear myself being
called that by my fellow-countrymen I always think: What have I done to
offend them?
[Gamov] Very well, maestro. But to be frank I did not believe that
Rostropovich had his roots in Orenburg.
[Rostropovich] My mother was born in Orenburg. And I lived here
during the war, from 1941 through 1943. My father died here. And I
learned what hunger and poverty are. Ordinary people helped me to survive.
I love this city and regard it as my cradle.
[Gamov] Now it is clear what links you to the Yeltsin family.
[Rostropovich] Yes, a sense of community as well. Naina Iosifovna
was born in Orenburg and spent her youth here.
[Gamov] When you meet do you remember your home town?
[Rostropovich] Of course. Naina Iosifovna, like myself, is terribly
homesick for Orenburg. You know, of all the presidents' wives -- and I
know them all -- she is an outstanding example as the wife of a head of
state. And how modestly she behaves! You can see immediately that Yeltsin
is the president but she is not a presidentess. Many high-ranking wives
harm their husbands. It is different with the Yeltsins.
[Gamov] And what impression does the family as a whole make?
[Rostropovich] I know the children and grandchildren. They are all
very kind, decent people.
[Gamov] And Tatyana Dyachenko?
[Rostropovich] I know her very well too. She is remarkable, a simply
beautiful woman.
[Gamov] Some people in our country believe that she often interferes
in politics.
[Rostropovich] I do not think so, because I know the president well. 
It is impossible to interfere in his affairs, he will put anyone in their
place. What appeals to me about Yeltsin is his clear thinking. In general
the president is the figure who embodies the nation. Boris Nikolayevich
fits that role completely.
[Gamov] Far from everyone in Russia thinks so. There are quite a few
people who have become disillusioned with Yeltsin.
[Rostropovich] They are wrong. You cannot blame one man, even if he
is president, for all Russia's misfortunes. In the end there is the
government which implements the president's ideas and thoughts.
[Gamov] Incidentally, what do you think of the new premier,
[Rostropovich] I like the way he speaks very frankly and very
cleverly. If only he succeeds in fulfilling all his ideas. But I have no
reservations about how he has started out.
[Gamov] You know, our Duma is collecting signatures for Yeltsin's
[Rostropovich] But that will not make things any better. I
understand that people who are suffering today see in Yeltsin a symbol of
their troubles. But they should not exaggerate!
I agree with Yeltsin that we should be more cautious with our people.
You cannot irritate them the way the Communists are doing. You cannot
say: Lie down on the rails, the worse things are, the better. Or: Take
up arms and change everything! But change in what direction? Backward? 
Are the 50 million people they killed not enough for them? No, it is not
Yeltsin who needs to be changed in Russia. Russia should have more
patience. And that patience will be rewarded.
[Gamov] People will read this and say: You are a personal friend of
the president's and that is why you are defending him. The newspapers
sometimes let slip the idea that Yeltsin's family is using Rostropovich
almost as their mouthpiece....
[Rostropovich] I know. And it is unpleasant for me to read that. 
The last time Boris Nikolayevich was ill Galya and I visited him and saw
nothing terrible -- just an ordinary cold. But people always speculate on
it: Either he is unfit or he is feeble-minded, as the Communists like to
present him. We convened a press conference to reassure people. And that
was presented as though I had been bought and our press conference was some
kind of propaganda ploy. What are they, idiots? Don't they know I need
I often meet with the leaders of foreign states, presidents and kings,
and I talk frankly with them and I know their attitude toward Russia's
head. They respect and trust Boris Yeltsin.
[Gamov] Why then are they expanding NATO to the East?
[Rostropovich] I do not believe this bloc is militaristically
directed against Russia. If in the Soviet Union the Communist Party had
decreed: We are going to a holy war, then we would have gone. But if some
fool there says: Let's have a war against the Russians, he will be put in
a mental hospital immediately.
[Gamov] Maestro, you are a personal friend of both Yeltsin and
Chernomyrdin. Viktor Stepanovich has already announced he wants to become
president of Russia. It could be that Boris Nikolayevich will want to run
again. And your two friends will start fighting each other.
[Rostropovich] No, Yeltsin will not run.
[Gamov] Why do you think that?
[Rostropovich] Because I know. I have spoken with his family.
[Gamov] A long time ago?
[Rostropovich] No, not long ago. His family in no circumstances
wants him to run at the elections.
[Gamov] But he has an influential entourage, there is new Russian
capital which is also considering who to put its money on. Suddenly they
will decide they should only put their money on Yeltsin and Boris
Nikolayevich will have a long hard think and agree to run again....
[Rostropovich] That is a personal matter for Boris Nikolayevich. But
I like Yeltsin very much and it seems to me that he should think and take
care of himself after his hard work. After all, the presidency is a hard
job.... And he has a family and grandchildren. I would like him to be
healthy for as long as possible and to feel well.
[Gamov] And if not Yeltsin, then who?
[Rostropovich] I like Chernomyrdin very much and not only because he
is also a fellow countryman. I trust him and believe him to be a decent
man with a knowledge of life. So I would be happy if he were elected.
[Gamov] Your performances in Orenburg coincided with the arrival
there of the ex-premier who, as is customary, began his election campaign
in his home town. Did you meet by accident or had you arranged it
[Rostropovich] It was my initiative. When I was planning to visit
Orenburg I sent the city mayor, my great friend Gennadiy Donkovtsev, a
telegram saying I would be happy if my arrival coincided with the arrival
of Viktor Stepanovich.
[Gamov] And what is he like?
[Rostropovich] How to explain to you? When the presidential race
began in 1996 Chernomyrdin had a bigger chance of being elected than
Yeltsin. Viktor Stepanovich refused to run and supported the president. 
That is a hard decision which only a man with a conscience can make.
And the second thing that struck me was that when Iosif Brodskiy died
Chernomyrdin was in America. He dropped everything and came to pay
Russia's last respects to the great poet. I must tell you that is worth a
[Gamov] Maestro, tell us a secret: Why, although you are
tremendously busy, are you always in Russia when things are going badly for
it? That was what happened in August 1991 and in fall 1993. And now
[Rostropovich] Don't try to frighten me, nothing terrible is
happening now. But to be frank, I sometimes hear a kind of call: You must
go home to Russia! I drop everything and go. I feel just the same on
stage when I get an instruction from somewhere on high: Play more slowly or
faster.... I have a strongly developed intuition -- in music and in life
in general.
[Gamov] And what does it tell you: Where does Russia's salvation lie
[Rostropovich] I am not a politician but a musician. I simply cannot
be indifferent toward my country. And I try to help it, either in words or
in deeds. Perhaps it is immodest to say this, but although I am not a
Russian citizen and do not have a Russian passport I punctiliously pay my
taxes to Russia.
[Gamov] That is interesting! And how much?
[Rostropovich] I get quite a lot and over the past year Galina
Vishnevskaya and I paid taxes of $100,000. And in all through my fund I
have transferred $8 million to Russia. I am surprised that wealthy
Russians are avoiding taxes. How can they fail to understand they could
lose everything in an instant! Neither God nor Rostropovich will save
Russia. The Russians themselves must save it.
[Gamov] Saving drowning people is something for the drowning people
[Rostropovich] No, Russia is not drowning. It is being
resurrected.... And we must give thanks to god that there has been a real
bloodless revolution in our country. Given such a gigantic change we
cannot expect all strata of the population to feel progress immediately. 
If we had paradise and the Lord were in charge of that paradise then of
course he would give the poor every benefit. But that is not happening. 
Nonetheless, that is how it will be.
[Gamov] Maestro, forgive me, I am listening to you and I cannot
understand why some people in Russia dislike Rostropovich.
[Rostropovich] There is nothing terrible about that. In St.
Petersburg once I was approached by two women, who said to me: "We hate
you!" Just like that. I replied: "What can I do, you can hate me if you
want." But why they hated me I did not ask. Perhaps because I always
speak the truth?
Even if they intend to hang me I shall believe deeply and sincerely in
Russia's progress.


Return to CDI's Home Page  I  Return to CDI's Library