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

Johnson's Russia List
#2221
14 June 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Jonas Bernstein: Re Leon Aron's "What Stalled Russian Reform" 
(Posted on JRL #2218).
2. Alan Fahnestock: Re Timothy Thompson, 11 June. (Americans
in Russia).
3. Washington Post: Jim Hoagland, An Offer We Can't Refuse.
4. Boston Globe: David Filipov, Thousands flee Russia's brutal
military. Fugitives fear hazing, death in armed forces.
5. New York Post: John Dizard, FOREIGN MARKETS ARE SCARIER THAN 
DISASTER FLICKS.
6. Chicago Tribune: Ronald Kotulak and Colin McMahon, PIE IN THE 
SKY OR NOT, NEW SPACE OUTPOST IS SHAPING UP.
7. Reuters: U.S. offers Russia help with millennium bug.
8. The Economist: Hidden history. (Re economic statistics).
9. RFE/RL: Robert Lyle, Russia: Bank Official Not Surprised At 
Market Turmoil.]

*******

#1
From: "jonas bernstein" <bernsteinj@hotmail.com>
Date: Sat, 13 Jun 1998 21:43:42 PDT
Subject: Re: Leon Aron's op-ed piece in The Washington Post, 
"What Stalled Russian Reform" (Posted on JRL #2218, June 12)

Leon Aron's piece is interesting as much for what it is attempting to do 
as for what it says. It shows, I believe, that supporters of the Yeltsin 
administration in the West want to launch a preemptive strike aimed at 
absolving the Kremlin for the coming ruble crash. Thus Mr. Aron rounds 
up the usual suspects - the "Communist led" Duma - to blame for all that 
has gone wrong.

Mr. Aron argues, for example, that the roots of the current crisis and 
of the failure of reform lie, among other things, in the fact that the 
Duma has pushed legislation that effectively prohibits the sale of land, 
contravening several Yeltsin decrees allowing farmers to dispose of land 
as they wish. 

One does not have to support the Duma's position on the land question to 
know that this argument is specious. When Yeltsin really wanted to do 
something, he simply issued a decree and made sure that it was 
implemented. A case in point: On September 1, 1995, Yeltsin signed a 
decree approving the proposal by a consortium of banks, headed by 
Uneximbank's Vladimir Potanin, allowing those banks to gain "temporary 
control" of the state's stakes in privatized companies in return for 
"loans" to the state. Within months, the now-notorious loans-for-shares 
auctions were held, and Unexim and Co. took over the Sibneft, Sidanko 
and Yukos oil companies, as well as Norilsk Nickel, among other natural 
resource giants.

Thus when Yeltsin was asked, in effect, to put the finishing touches on 
Russia's new oligarchy, he acted expeditiously, without feeling the need 
to consult parliament. And while Yeltsin did sign several decrees on the 
free sale of land, he also, in January 1994, appointed as first deputy 
prime minister in charge of agriculture Alexander Zaveryukha, a member 
of the Communist-allied Agrarian party and a man who was sure to forward 
the interests of the collective farm lobby. Zaveryukha held his post for 
more than three years (until March 1997). How strong, then, has 
Yeltsin's support for free agriculture actually been?

Mr. Aron also takes potshots at Yabloko, something he has done in the 
past. This time, he accuses Yavlinsky's party of helping create the 
current crisis by opposing the Kremlin-sponsored new tax code. First of 
all, if Yeltsin had really wanted to reform Russia's Byzantine and 
confiscatory tax "system," he - again - could have rammed it through by 
presidential decree. While the Kremlin is now hinting that it may do 
just that, it's a bit late in the day: I was hearing factory directors 
in Primorsky krai screaming about the crushing burden of taxes back in 
1993. Secondly, Yabloko, along with representatives of small business 
associations, argued that the Kremlin's original draft of the new tax 
code (reportedly authored by Yegor Gaidar under Anatoly Chubais's 
supervision) gave relief to big business while further smothering the 
life out of small and medium businesses. (Yavlinsky, by the way, noted 
last year that while he was for the free sale of land, he did not trust 
the people who brought us loans-for-shares to carry out genuine land 
reform.) 

Mr. Aron, as he has done in the past, attempts to tar Yabloko by 
associating it with the Communists. "In virtually every vote on economic 
matters, the Communists were joined by Grigory Yavlinsky's Yabloko 
faction." What Mr. Aron does not mention is that in virtually every vote 
on ALL matters, the Kremlin has been supported by Vladimir Zhirinovsky's 
LDPR.

It is an open secret that key votes in the Duma are determined less by 
considerations of principle or ideology than by those of a more wordly 
kind, to put it diplomatically. Indeed, prior to one of the votes to 
confirm Kiriyenko as prime minister earlier this year, Yeltsin openly 
advised wavering deputies to go talk to Pavel Borodin, the man in the 
Kremlin who hands out flats, dachas, cars, etc. So while in last year's 
vote on the budget most of the Communists "opposed" the Kremlin's draft, 
thirty members of the KPRF faction conveniently "defected" and voted for 
the budget, thereby passing it. Kabuki theater at its finest.

Thus to portray relations between the Duma and the Kremlin as a battle 
of ideologies, as "reform" vs. "reaction," etc., is an 
oversimplification, at best.

The other apparent goal of Mr. Aron’s op-ed is to push for an 
"emergency standby loan" to Russia on top of what it is now receiving 
from the IMF and other international lending institutions. Here I would 
simply quote what recently-appointed tax services chief Boris Fyodorov 
once said, at a time when he was a vocal critic of some of the 
government's less-than-responsible behavior: "I do not believe in 
compensation from abroad for local incompetence and corruption. There 
are too many people in senior positions in the Russian
government who think it patriotic to take as many loans as possible, and 
then quietly obtain debt forgiveness and reduction." -------

PS. For an answer to the question "Kto vinovat?" that is quite different 
than Leon Aron's, check out Anatol Lieven's piece in the latest issue of 
The New Republic (June 29, 1998).

*******

#2
From: Fahnest542@aol.com (Alan Fahnestock)
Date: Sun, 14 Jun 1998 
Subject: Timothy Thompson, 11 June

Mr. Thompson raises an interesting question, although I think that some of his
perceptions are perhaps a little off. I know of a number of American firms
that are making rather good money in Russia and the CIS, and in America on the
strength of their performance in these places (I recommend checking out Global
TeleSystems Group, a recent IPO on the NASDAQ that has doubled in about four
months --- started with Sovam Teleport and Sovintel and currently has 15 or so
cellular systems here and there as well; I can take only a small bow, as
they've managed quite well without me for the past couple of years). By the
same token, I've seen not a few Western European firms pack up and go home.
All the same, I suspect he is right in suggesting that the Europeans are, as a
rule, more successful in dealing with their Russian partners.

In my several years in Russia, I, too, was a bit annoyed by the inability of
common or garden variety American expats to cope better with the place.
There's no particular mystery about it, however. We Americans, as a rule, are
not terribly well equipped to deal with foreigners of any persuasion: we
don't speak other languages, we don't understand other cultures. I've always
figured it is because these things are rather comfortably far away for most of
us, or historically have been. The only foreigner that many of us have met
speaks Spanish and does something for a living that we would rather not do for
ourselves. Contrast this with the German who has been vacationing on
theYugoslavian Adriatic (cheaper than Italy) since he was a sprat, and who
finds himself in a nest of one kind of foreigners or another after a couple
hour's drive in any direction.

In addition, we tend to labor under the misapprehension that we have the world
by the short ones and the answer to everything, simply because we've been so
successful in so many ways; to borrow a phrase, we were born on third base and
think we hit a home run. Add to this a conviction that viable plumbing is
dealt with somewhere in the catalogue of Universal Human Rights, and that
roaches are for other people, and you come up with a preponderance of folks
who probably shouldn't be allowed very far from home.

Bizarre reactions among those Americans who venture abroad, at least those who
go beyond the more or less sanitized confines of Western Europe, are therefore
not altogether surprising (twenty years ago, before the advent of Mickey and
the MiniMart, not to mention the proliferation of sit-down toilets, such
reactions were pretty common there as well). Many hide, as Mr. Thompson
notes, among their compatriots. The ones I enjoy, no less strange, are those
who go native, and begin to blather about the pure Russian soul with the best
of their adopted playmates and make loud noises about how we ought not be
beastly to the Slav. The latter has become infatuated with the elephant's (or
the bear's?) appealingly strange physiognomy, while the former finds himself
at quite the other end, and dealing, in his own mind at least, with the
concomitant fallout.

Neither of these types is particularly effective when it comes to doing
business. The bitchers miss opportunities and are the victims of self-
fulfiling prophecies, while the others tend, ultimately, to get "took", big-
time. Again, contrast this with the German, who has centuries of experience
dealing with people across any given border who would just as soon shoot him
as do business with him: he has no choice but to see things as they are and
adapt his behavior accordingly; if he can get a little Natasha while he's at
it, so much the better. The effective American adapts similarly --- one
former boss used to say, "Hell, Moscow's no different from New York, except
they steal from me in a different language."

*******

#3
Washington Post
June 14, 1998
[for personal use only]
An Offer We Can't Refuse
By Jim Hoagland

Russia poses history with its first nuclear-armed cash flow problem,
implicitly threatening creditors not with a bankruptcy filing but with
Armageddon if Moscow's deal with the West goes south.
Rescuing the deal, which provides Russia with transitional economic help
in becoming a stable capitalist democracy, remains an offer the West cannot
afford to refuse.
But the deal has become both troubled and troubling, as corruption and
mismanagement have eaten away at the foundations of the new Russian state.
It is time for Western policymakers to reexamine the terms of the deal and
especially the role President Boris Yeltsin is carving out for himself in
Russia's rescue.
Global financial trends have moved decisively against Russia's robber
baron capitalism in recent months, creating a historic crossover in raw
power terms that the world's international financial institutions, central
banks and private investors are ill equipped to handle. Their actions on
interest rates, currency values and budgetary support suddenly become the
stuff of decisions on war and peace over the horizon.
Russia is today a local financial crisis wrapped in a national political
dilemma inside a global economic storm.
Unable and, until recently, largely unwilling to collect enough taxes to
make ends meet, the Russian government is now approaching the limits of what
it can realistically borrow from abroad and repay. It is desperate for cash
at a time when worried foreign investors are yanking money out of emerging
markets, including Russia.
The frenetic efforts of Yeltsin do not seem to be turning the tide.
Yeltsin and his new prime minister, Sergei Kiriyenko, are making a maximal
political effort but achieving an insufficient financial result.
Pressure continues to mount on the politically vital exchange rate of the
Russian ruble and on the beleaguered Russian stock markets, provoking a
debate in the West over new loans and enough help to create a stabilization
fund for Russia. The arguments for some new aid look compelling -- on
political grounds.
A ruble collapse would instantly revive inflation for Russian consumers,
already disgruntled by many features of the transition to capitalism. A
stock market collapse would give a black eye to the capitalist system as a
viable path for Russia and could bring nationalist demagogues to power.
Staving off such calamities was almost certainly the primary motivation
in this month's decision by the International Monetary Fund to release $670
million in support funding already promised to Yeltsin's government, despite
continuing shortfalls in areas the IMF had demanded be resolved.
Yeltsin's abrupt firing of Prime Minister Viktor Chernomyrdin in March
and his appointment of the much younger, more financially adept Kiriyenko
gave the IMF more room to maneuver in continuing its loans. It is even
conceivable that Yeltsin may have engineered the still largely unexplained
and humiliating timing of the dismissal of Chernomyrdin to influence
international lending and investment patterns.
If so, that would be a measure of the desperation of the country and its
ruler.
On a recent visit to Moscow, I asked the obviously chastened Chernomyrdin
if he knew why Yeltsin had been so abrupt in firing him after a five-year
partnership.
"That is a question only he can answer," the former prime minister said
of the president. "I am sure there was nothing personal in it. We had talked
about this change, and agreed it was necessary, so I could engage in other
political activities. But the big question was when," Chernomyrdin said,
indicating he had not been consulted on the timing.
Chernomyrdin dismissed rumors that Yeltsin became upset over the prime
minister's increasing visibility and apparent intention to run for president
in the year 2000. Yeltsin seems to be seriously considering such a race,
despite earlier statements that he would not run.
"I think he will do what he said, when he told the world" he would not
run, Chernomyrdin stated. "As for me, my current efforts all have to do with
preparing for the parliamentary elections of 1999, which will determine the
politics of the year 2000 election. I am not thinking of 2000."
I received a similar answer from Yuri Luzhkov, the powerful and popular
mayor of Moscow who has widely been assumed to be preparing to run for
president. Friends say he probably would not challenge Yeltsin, however.
"I am not thinking of the presidency and won't talk about it," Luzhkov
said good naturedly. "I'm too busy with the job I have."
Most signs point to Yeltsin's seeking a third term, despite
constitutional questions about his eligibility and his high negatives in
polls. The shadow of his candidacy is rapidly becoming a divisive and
destabilizing factor in the intertwined world of Russian politics and
finance. His age, health and inflexibility are deeply polarizing issues.
Yeltsin instead should be working toward a well-planned, transparent
succession in 2000 that would help entrench market reform, stamp out
corruption and establish political predictability as an important norm in
Russia. That kind of political transition should be part of the new deal
that is needed to clear the way for Western economic support for this
century's most important economic transition. 

*******

#4
Boston Globe
14 June 1998
[for personal use only]
Thousands flee Russia's brutal military 
Fugitives fear hazing, death in armed forces
By By David Filipov 

MOSCOW - Every few days, the powerfully built men in Russian military
uniforms pound on the door to the central Moscow apartment, frightening the
neighbors and threatening the occupants with fines, imprisonment, and worse
if they do not give up their son, 23-year-old Alex. 
The men always go away angry, empty-handed, and vowing to return. For
Alex is on the run from the law. His crime is that he does not want to do
his compulsory service in Russia's armed forces, where brutality and
maltreatment of draftees is the only reality. 
For the five years since he turned 18 and his number came up, Alex's life
has been driven, as he puts it, by ''pure, animal fear.'' He frequently
changes jobs and apartments, avoids encounters with authorities and trips to
the doctor. Most of all, he stays away from his parents' home and those
soldiers who keep trying to break down the steel door. 
Vitaly, 19, has not been so lucky. He was walking to the street market
where he makes his living as a vendor when two military men accosted him and
dragged him to his local draft board. The law says soldiers have no right to
arrest people in Russia, but during draft season, no one cares much about
the law. 
Neither man would provide his last name. 
June is the month when the thoughts of tens of thousands of Russian young
men like Alex and Vitaly turn to life on the lam in a desperate attempt to
avoid service in the country's harsh, hungry, and underfunded military. They
are pursued by modern-day press gangs of burly soldiers and military
recruitment officers, no less desperate to meet enlistment quotas and fill
the ranks of the world's second-largest armed forces, after China, by the
spring draft deadline at the end of the month. These people have been known
to beat, imprison, even plant drugs on their quarry - anything to get their
man. 
Russia's Defense Ministry estimates that 30,000 men skipped the draft
last year, and the number is expected to be higher in 1998. They do not run
from fear of another Chechnya, the ugly 20-month civil war that claimed the
lives of 80,000, according to unofficial estimates, many of them Russian
servicemen. 
What turns so many men into fugitives is a different statistic, this one
official: On only three days last year, when the country was not at war, a
Russian soldier did not die. Of more than 1,700 victims, 500 are believed to
have been suicides. Non-military observers say they believe the real figures
are much higher. 
''Young people are not afraid that they will have to shoot another
person, but that they will kill you in training or in the barracks,'' said
Alex. ''I personally wouldn't serve in any army, but for most others, the
main thing is fear.''
The specter of the war with Chechnya is seared into the life of the
ordinary Russian grunt, even now, nearly two years after the fighting
stopped. The humiliating Russian defeat, which many Russian and Western
analysts attributed in part to the low morale and poor training of the
Russian forces, has spawned a name for the hazing and harassment of new
recruits. 
''If they hit you in the face, they tell you `Chechnya.' If some idiot
shoots at you with a machine gun, it's `Chechnya,''' said Muscovite
Alexander Gorokhov, who recently finished a two-year hitch serving near
Vladivostok. 
Hazing exists in any army. But in Russia, hazing is particularly brutal. 
How bad is it? When the military opened a hazing hot line this year to
allow soldiers the chance to drop the dime on their tormentors, they
received 2,000 calls in the first month. Shootings among soldiers, like an
incident in May in which four servicemen killed their commanding officer,
have become so commonplace that they are no longer front page news. 
Yury Dyomin, Russia's top military prosecutor, has vowed to crack down on
hazing. But his efforts have had little visible effect so far. The Defense
Ministry says that 20,000 Russian soldiers have deserted their posts in the
past four years. Despite an amnesty program set up by Dyomin that allows
deserters to explain why they bolted, few want to risk the mandatory
five-year prison sentence if the army does not accept their explanations. 
Valentina Melnikova, of the Committee of Soliders' Mothers, a
non-government watchdog on military affairs, puts the number of deserters at
at least twice the official total. In most cases, she says, deserters cite
beatings, hunger, forced imprisonment, and other mistreatment as the reason
for leaving their units. 
Some military analysts say they believe a smaller, well-paid professional
army would have higher morale and better leadership, and therefore less
hazing, than Russia's huge, chronically underfunded conscript army of 1.5
million servicemen. 
In 1996, during an election campaign and at the height of the Chechen
war, President Boris N. Yeltsin promised to cancel the draft and move to a
professional armed forces of 500,000 men by 2000. 
This promise may have helped Yeltsin win reelection. But this year, his
defense minister, Igor Sergeyev, has said a transition to a professional
army would take as much as five years longer. If Yeltsin honors his word and
does not run for a third term in 2000, some of the favorites to replace him
do not support his plans for military reform. One potential front-runner,
Moscow Mayor Yuri Luzhkov, has denounced the idea. 
Meanwhile, the army, which in Soviet days was seen as a ''school of
life,'' and an integral part of becoming a man, is now loathed as a hellish
prison to avoid at all costs. One recent opinion poll showed that 82 percent
of young people do not want to serve in Russia's armed forces. 
As in most countries, the rich and resourceful in Russia have ways to
avoid military service. They can pay bribes of up to $5,000 to recruitment
officers, or pay slightly less for doctors to ''find'' an illness that
disqualifies them from service. Some men enter into fictitious marriages
with women who have infants to exploit a two-year delay for new fathers. 
Alex chose to run because he could not pay the bribes. The irony of his
situation is that he has declared himself a conscientious objector to
military service, which, under Russia's 1993 constitution, should grant him
the right to alternative civilian service. 
But the law detailing how such alternative service should work has been
bogged down in Parliament for four years, and the powerful military lobby of
the lower house of Parliament, the State Duma, is dead set against passing
it any time soon. As a result, recruitment officers ignore the
constitutional right. 
So have the courts. In one highly publicized case here this spring, a
Moscow judge ruled that Alexander Borodin, a 23-year-old conscientious
objector, was guilty of dodging the draft. Borodin was ordered to pay a fine
of $2,840 by the judge, who also ordered him to report and serve. The case
was a warning to young men like Alex, who believe that their best bet is to
remain in hiding. Thousands of others not do not even know they have a right
not to serve. 
''The draft board doesn't tell them and the papers don't write about it,
and the people don't know the Constitution,'' said Nikolai Khramov of
Russia's Antimilitaristic Radical Association, which opposes the draft and
advises young men to declare themselves conscientious objectors. 
Khramov tells draft-age, able-bodied men to obey the law by appearing at
their draft boards, but then to demand alternative civilian service. A
complicated appeal process ensues, and the army usually threatens criminal
proceedings. But in most cases when the would-be draftee follows the letter
of the law, and exposes the contradictions in it, he wins, Khramov says. 
Khramov's efforts have come under attack from the military lobby, which
says he is teaching people to break the law. Melnikova of Soldiers' Mothers,
which also advises young men how to legally avoid the draft, disagrees. 
''The fact that you don't support that kind of military service is also a
kind of social action,'' Melnikova said. ''If the state doesn't want to
change the way its military is run, maybe if we get enough people involved,
we can make them do it.''

*******

#5
New York Post
14 June 1998
[for personal use only]
FOREIGN MARKETS ARE SCARIER THAN DISASTER FLICKS
By JOHN DIZARD (dizard@nypost.com) 

I haven't been to any of this year's summer disaster movies, possibly
because my friends and I seem to be living in one. 
You notice how hot-dog vendors and bus drivers know the negative cost of
every asteroid epic out there? It's usually around $200 million. Well, you
can add another two or three zeros for the disaster movies the trading
community is in. 
The Russian foreign debt is about $140 billion. Japan is several hundred
billion. Potential losses in Asia are even greater than in Russia. 
The problem for investors, or, let's be honest, speculators, on the long
side of these places is that the movie doesn't let out in two hours. You
close your eyes at the scary part, and when you open them again, it's still
the scary part. 
There are a lot of financial people on the other end of my phone line who
sound like they're auditioning for the role of Karen Black trying to land
that jumbo jet. 
There are two kinds of problems my people are facing. One is the crisis
you see coming a long way off, like a comet headed for earth that's detected
out by the orbit of Jupiter. That would be like the decline and fall of the
yen. 
Then there are the unexpected plot twists, like when the psycho escapes
from the bin and is holding your child captive. The most recent of those
problems has been tipped by the rise in the dollar/mark rate. 
Selling the dollar and buying the mark was one of the year's great
no-brainer, gimme trades. 
You were betting that the Euro was going to be introduced at the
beginning of 1999, and that everything was on track for at least an initial
success. 
After all, the dollar was going to be pushed aside as a reserve currency,
and the long-suffering Europeans would finally enjoy some prosperity. Any
number of well-tailored twits on CNBC were arguing that one. 
But the psycho - played here by the Russian oligarchy - wasn't safely
under lock and key after all. 
And the German banking system, cast as the child, is being menaced. It
seems that the second-tier German banks have rather foolishly guaranteed a
lot of Russian paper, all with the good intention of supporting German
exports and German jobs. 
If the voters get the bill for this before the German election in
September, there are going to be lots of newly unemployed politicians. 
The recent rise of the dollar against the mark is telling us that that
may well happen. So much for no-brainer ideas. 
There are still a number of interesting questions about Russia. For
example, when (not if) will the total meltdown happen? The autumn seems most
likely. 
Interestingly, the Russian banks have apparently been running down their
"dollar calls," or exposure to a crash of the ruble, at about a $1 billion a
month rate. They have $5 or $6 billion left to go. So by October, the
Russian ruble could crash, taking the Yeltsin government with it, and yet
institutions such as Oneximbank could survive the hit. 
Fortunately for the speculators, the IMF and the Europeans are coming up
with a huge aid package for Russia, including compensation for commodity
price declines. That should give the hedge-fund community an exit. 
If you want to pick Yeltsin's successor, look to who the opportunists are
betting on. 
Let's say you were Henry Kissinger. 
Would you arrange a campaign contribution of $90,000 to Aleksander Lebed,
the diesel-voiced ex general? Not to buy influence in a future government,
of course, but just because you were genuinely interested in the welfare of
his Siberian constituency. 
As for that comet heading for Wall Street, a number of readers have asked
me about what they should do about the Japanese equity market and the yen.
The answer is that both are oversold, as they say, but the currency is going
to get more oversold. 
Treasury Secretary Rubin has now effectively told Chinese and Hong Kong
leaders that the U.S. will not retaliate if they devalue the renmenbi and
the HK dollar. He's blaming the mess on Japanese inaction. 
So what's the basic strategy here? Buy the bond. We are probably going
into a powerful U.S. fixed income rally. Initially it may be at the expense
of stocks, but after a Fed rate cut, equities will come back. 

*******

#6
Chicago Tribune
14 June 1998
[for personal use only]
PIE IN THE SKY OR NOT, NEW SPACE OUTPOST IS SHAPING UP
By Ronald Kotulak and Colin McMahon
Tribune Staff Writers

Controversial since it was first proposed as a Cold War outpost nearly 15
years ago, the international space station set to start assembly in November
after long delays and mammoth cost overruns will either be a monumental
waste or will prove that humans are meant to live in space.
To some critics, the space station is a boondoggle, a make-work project
for the space industry and the National Aeronautics and Space
Administration. Proponents say it will begin to fulfill the dream of
exploring other worlds.
People have tried to justify the space station on its potential payoffs
in science, technology, commerce and education; many skeptics remain
unconvinced.
"The comment here in Washington is that Rep. Tim Roemer (an Indiana
Democrat long opposed to the station) may have been right. We shouldn't be
building the space station, but we're going to do it anyhow," said John
Logsdon, director of George Washington University's Center for Space Policy.
The U.S. and Russia are full partners, each providing about 40 percent of
the station's hardware. Fourteen other nations--Canada, Japan, Brazil and
the members of the European Space Agency--are picking up the rest of the tab
so they can participate.
The most basic rationale espoused for the station comes from those in the
U.S. and Russia who want to find out what humans can do in space. It is a
goal not necessarily shared by the other countries, which are interested in
having their astronauts visit space for the prestige factor.
"The reality is that the space station is a very expensive, high-risk
gamble on future payoffs, and the results of that gamble probably will not
be known for more than a decade," Logsdon said.
"Failure of the station to show that people in Earth orbit can produce
valuable results certainly would have a chilling effect on all future human
space activity," he added.
Many scientific groups have voiced doubts about the use of manned space
programs to conduct research, especially because those programs drain money
from unmanned space exploration. "The space station is about the worst
return on your research dollar that you can find," said Robert Park, a
University of Maryland physicist and director of the American Physical
Society. "There is nothing that can be done on the station in terms of
scientific research that can't be done much cheaper and much better
robotically."
Ultimately politics, not science, drives support for the space station,
which means that a shift in political conditions could mean its collapse. If
Russia's growing economic woes, which already have caused long delays in the
space station, force that nation to drastically reduce its commitment or to
cancel it, U.S. political support for the program likely will evaporate.
Originally scheduled for completion in 2002 at a cost of $17.4 billion,
NASA now estimates the station will be finished in 2003 and will cost $21.3
billion.
A consultant hired by Congress to review space station projections said
NASA's estimate was too low on the cost and too optimistic on the
completion. Jay W. Chabrow, a former space executive, said the station will
cost $24.7 billion, with completion in 2005 or 2006.
The General Accounting Office, the investigative arm of Congress,
estimated the cost of building, operating and resupplying the space station
over its anticipated 10-year life will be close to $100 billion. "Partnering
with Russia is about the only way to keep the American piloted space flight
program going," said John Pike, director of space policy for the Federation
of American Scientists.
"Without the Russians, you don't have a space station, and without the
space station, the next time a shuttle blows up, the whole house of cards
blows over."
Russia is racing the clock to finish building a NASA-financed key early
element of the space station. It is a 20-ton, 43-foot-long module that
contains propulsion and command and control systems.
The module is set to be launched aboard a Proton rocket from the Baikonur
Cosmodrome in Kazakstan on Nov. 20, a year overdue. A Russian-built service
module, which eventually will house up to seven crew members, is set for
launch in April 1999.
The core of the station will be an interconnected network of six modules,
each the size of a city bus. Of the 43 launches needed to bring materials
and workers to space for construction of the station, NASA's shuttles will
account for 34.
Russian officials believe that the lessons learned aboard Mir, the aging
space station plagued by fires, a collision, decompression, power outages
and other serious problems, will prove valuable in making the international
space station work.
"What is being done under the joint Mir-shuttle program has provided the
groundwork, beginning with medical and biological support and ending with
language and technical compatibility and the possibility of interaction of
mission-control centers," said Yury Koptev, director general of the Russian
Space Agency.
Shuttles made nine flights to Mir, the last a week ago to retrieve
American astronaut Andrew Thomas, who had been on the cramped space station
for four months. Mir will be abandoned in the next year, burning up in the
atmosphere at the end of 1999.
The U.S. paid Russia more than $400 million for the opportunity of
putting its people aboard Mir, and its shuttles delivered food, water and
supplies. American cash and supplies helped keep Mir aloft when Russia's
space budget plunged with its economy. NASA also brought to Moscow computers
and other equipment that, though old by up-to-the-minute U.S. standards,
instantly became the best that Russia had going.
Russian scientists, respected worldwide for their ingenuity and ability
to do a lot with a little, marveled at the technology and also learned about
the benefits of tight organization, a NASA trademark. The Americans,
meanwhile, saw the need for flexibility in a long-term space mission.
Along the way, friendships were formed and barriers broken. The Americans
and Russians still explore space in different ways, but each side now has a
better understanding of the other's culture. Those kinds of intangible
benefits are expected on the space station as well.
Russia has much at stake. First there is the question of national
prestige, something Russia is struggling with these days with its economy on
the brink, its military in tatters and its neighbors flaunting their
independence after so many years under Moscow's thumb.
The Russians consider themselves unsurpassed as space pioneers, and as
the international station goes forward, they deem it only right that Russia
plays a primary role.
At the same time, Russia's involvement in the station will keep its space
industry in the know and in the mix, helping Russian companies land
contracts for such things as launching satellites. Aerospace and rocket
science promise profits in a nation struggling to rebuild its manufacturing
industry.
The idea of an international space station has had a controversial
history, starting as a Cold War bastion of American technology and evolving
to a symbol of world peace. It was almost killed by Congress at one point,
saved by a single vote.
President Ronald Reagan called for the development of a space station in
1984 to challenge Russia's Mir space outpost. It was to be a zero-gravity
research and development facility, but industry showed almost no interest in
using it to develop new materials.
During the Bush administration, the station was nearly canceled.
"It has everything to do with politics," Pike said. "The space race was
about showing that the American system was better than the Soviet system.
Now the space station is a highly visible demonstration of the fact that
we're partners, not adversaries."

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#7
U.S. offers Russia help with millennium bug
June 12, 1998

BRUSSELS, Belgium (Reuters) - The scenario is out of a Cold War novel, but
American officials fear it could really happen: Russian military early
warning computers go blank, panicked officers suspect Western sabotage and
spring into action. 
The millennium bug, or the Y2K problem, as U.S. officials call the
universal crisis of computers failing because they have not been programmed
to function properly through the year 2000, intruded into top-level
U.S.-Russia talks here on Friday. 
U.S. officials said Defense Secretary William Cohen offered Russian
Defense Minister Igor Sergeyev American expertise and ideas to help them
handle the problem. 
The danger, they said, is an erosion of confidence in early warning
systems for all militaries, with systems displaying false or confusing
messages or just failing completely if not reprogrammed. 
But it is of special concern for Russia and the United States, which
remain the world's most heavily-armed powers with nuclear missiles ready to
fire. 
The U.S. government itself has been criticized in Congress for falling
behind with its own schedule in some departments in preparing for the crunch
year -- which could have immense impact in a country increasingly dominated
by the microchip. 
U.S. officials fear that in Russia, in dire economic straits and
political tumult as it transforms from communism to capitalism, there may
not be sufficient time or attention being devoted to the issue. 
The risk is that "screens may go blank or the information that is
normally very accurate may be jumbled or be inaccurate or convey information
that is not appropriate and that all of this could be misunderstood,
misinterpreted and cause anxiety on one side or another," one U.S. official
explained. 
"Secretary Cohen wants to make sure that the Russians have an
appreciation for the complexity of solving the problem...it requires time
and it requires (a lot of) people to solve it," he said. 
The official, who asked not to be identified, said U.S. specialists have
been told by the Russians that their computers do not face quite the same
problems as U.S. systems, though it was not clear how they differed. 
The United States is already stretched to find enough computer experts to
solve the problem in its private and government sectors, and would not be
able to spare them to help the Russians if they run into trouble, one
official said. 
But Washington could offer expertise and share its own experiences. 

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#8
The Economist
June 13, 1998
[for personal use only]
FINANCE AND ECONOMICS 
Hidden history 
M O S C O W     

SOVIET statistics always were a highly political business. Measured in 
the appropriate way (by weight, for example), the output of the Soviet 
economy could be made to look much more impressive than it really was. 
Under capitalism, or what passes for it in Russia, the country’s 
statistics tend to work the other way round, understating rather than 
exaggerating the country’s performance. These days, you see, the aim is 
to fool the tax man, not the central planner. 
That may soon change. On June 10th Russia’s president, Boris Yeltsin, 
sacked the head of the government statistics service, Yuri Yurkov. The 
day before, he and a bunch of senior colleagues had been arrested for 
helping big companies evade tax. Massaging state statistics about 
output, the government says, helped make the companies’ own 
under-reporting of sales and profits more credible. Allegedly, it was 
also lucrative for Mr Yurkov. Police say they found $1m in cash in his 
apartment. Mr Yurkov, who is in detention, has made no public statement. 
The case could cast some interesting light on the performance of the 
Russian economy. Official statistics show that Russia is barely growing 
after years of decline. But market-research data, anecdote and simple 
observation all suggest that the economy has recovered from the 
post-communist crunch a bit more smartly. If Mr Yurkov comes clean about 
his office’s statistical methodology, Russia just might look a bit less 
gloomy. 

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#9
Russia: Bank Official Not Surprised At Market Turmoil
By Robert Lyle

Washington, 12 June 1998 (RFE/RL) -- A senior World Bank official says 
the continuing decline in the Russian stock market should come as no 
surprise to anyone.
Ira Lieberman, Senior Manager in the Bank's Private Sector Development 
Department, says the Russian market became "very speculative" and 
overheated two years ago because people saw the country long-range as an 
inevitable market to be in and the shares -- especially of oil and gas 
enterprises -- were so cheap.
Now, however, he said in an interview with RFE/RL, "given the problems 
in Asia and Russia's intrinsic economic problems, we shouldn't be 
surprised that the bubble has burst because the market was far too 
heated to begin with."
Lieberman is the co-author of a study on privatization and emerging 
equity markets that ironically was released this week by the bank and 
the British international investment banking group, Flemings. 
It notes that the Czech Republic and Russia both started off emphasizing 
the rapid implementation of mass privatization, but that Russia, lacking 
the needed financial infrastructure and regulatory framework, lagged in 
securities market development.
It says Moscow was unable to implement basic rules on trading, so ad hoc 
securities markets emerged in response to the need for share trading 
venues in an inefficient market environment.
The result is that markets are underdeveloped and weakly regulated with 
little or no protection for shareholder rights. 
The study notes that of 400 tradable stocks, Russian securities markets 
are dominated by the trading of only about 30 large, relatively liquid 
issues. With little or no activity in most of the other issues, stock 
quotations and prices "often do not reflect the prices at which 
transactions would take place."
Lieberman says the answer for Russia is clear -- it must return to the 
fundamentals. The tax system must be reformed to be more fair and 
universal, basic structural reforms across the economy must be 
implemented and the privatization process, which he says "went astray," 
must be fixed.
Russia is now dominated by very large financial-industrial groups that 
Lieberman says resemble the chaebels of Korea -- closed, conglomerations 
with hidden ties to each other and government officials. These 
chaebel-like groups in Russia, he says, have put the country in "deep 
trouble."
Lieberman says the frustrating thing is that if Russia would knuckle 
down to the reforms it has long known it must implement, it is a country 
with enormous potential. Given its oil, gas, mineral, forest and human 
capital resources, he says, it only awaits a generation of leaders who 
understand how markets work.
The study says privatization worldwide has grown dramatically over the 
past ten years. Revenues in 1988 which were just over $2 billion, 
exploded to over $25 billion in 1996. And that huge jump, it says, 
vastly understates the picture because the privatization of billions of 
dollars in assets in Central and Eastern Europe and Central Asia in 1997 
are not yet included in the data.
For the former communist region, the report says that privatization 
revenues from 1990 to 1996 totaled around $30.5 billion, about 20 
percent of the global total.
The study says that equity market development and privatization are 
inextricably linked and mutually reinforcing, and that both require 
transparency, political support, a clear legal framework, integration 
with overall macroeconomic and structural reforms, and a level playing 
field to attract foreign investment. 
Lieberman says one notable success in the countries of the former Soviet 
Union is Kyrgyzstan, which he says has "fundamentally reformed" itself 
as deeply as any other country in the entire region. 
"Unfortunately, it's sort of tucked away far from foreign investors and 
it doesn't have any natural resource base," says Lieberman. In the long 
run, however, he says that may be to Kyrgyzstan's advantage because 
Biskek will have to use its human capital to best advantage. 

*******