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Johnson's Russia List


June 24, 1998   
This Date's Issues: 2236 2237  

Johnson's Russia List
24 June 1998

[Note from David Johnson:
1. The Independent (UK): Phil Reeves, Yeltsin risks turmoil with
crisis budget.

2. Reuters: Crisis Poses Growing Threat to Yeltsin.
3. Reuters: Russia's ``Kinder-surprise'' fights fall guy image.
4. Moscow Times editorial: Yeltsin Ties The Hands Of Reform.
5. Mark Scheuer: US-Russian relations and Arbatov.
6. Izvestia: Vyacheslav Nikonov, WILL YELTSIN QUIT IN 2000?
7. Robert McIntyre: Re data fraud.
8. Robert McIntyre: Helmer and American Manipulation of the Russian

9. Jacob Kipp: A Few Comments on Various Topics.
10. Interfax: Sociologist Shares Yeltsin Concern Over Rising Extremism.
11. Moscow Times: Dmitry Zaks, President's Income Jumps to $325,000.]


The Independent (UK)
24 June 1998
[for personal use only]
Yeltsin risks turmoil with crisis budget
By Phil Reeves in Moscow 

WITH the International Monetary Fund cracking the whip over his hefty 
shoulders, Boris Yeltsin declared yesterday that Russia's financial 
turmoil had reached "alarming proportions" and was causing "extreme 
social tension". 

His remarks are his bleakest assessment to date of a fiscal crisis which 
has seen investors fleeing Russia in droves, halving the value of 
stocks, and driving up the cost of government borrowing to astronomical 

Yesterday Mr Yeltsin and his Prime Minister, Sergei Kiriyenko, sought to 
convince the IMF that Russia is deserving of more help - namely, a 
$10-15bn stand-by fund to support the rouble - by unveiling a package of 
austerity measures designed to avert catastrophe. 

Mr Yeltsin also appealed to his many foes in parliament for their 
support, underlining his words with dire warnings about the consequences 
of squabbling with the Kremlin. 

He appeared to hint that if the Communist-dominated State Duma - with 
whom he regularly battles - fails to pass his fiscal proposals, then he 
would introduce his measures by presidential decree. Speaking at a rare 
joint meeting of government and parliamentarians, the president said the 
crisis is "so acute that there are social and political dangers". 

Some proof of this came yesterday with further protests in the Far East 
by miners, who have been staging protests over unpaid wages and job 
losses. While some of the causes for Russia's problems were not of its 
own making, many were, said the president. 

"A great deal of the fault lies with us. We have lost momentum in 
reforming the economy. The situation with payment of wages, pensions and 
welfare has deteriorated again." 

However, the Kremlin's crisis plan - which was spelt out by Mr Kiriyenko 
- had a familiar ring and will be greeted with cynicism by many 

It includes a simpler tax code and a crackdown on Russia's army of tax 
dodgers. There would be budget cuts, lower interest rates - now at 60 
per cent - less government borrowing, and new regional sales taxes. 

The state would raise money by taking control of alcohol production and 
running lotteries. As he outlined his strategy, the prime minister 
painted a grim picture of a government engaged in a desperate weekly 
juggling act - issuing debt to raise funds to pay debt. In the next six 
months alone, Russia must roll over a breath-taking 189bn roubles - 
$30bn - to redeem short-term high-interest treasury bills. 

Russia wants the IMF's billions as a "stand-by facility", whose mere 
presence will restore market confidence in the rouble. Above all else, 
it has been battling to defend the currency, mindful that its collapse 
would almost certainly bring a return to runaway inflation, destroying 
one of the few achievements of the transition from Soviet central 
planning to a market economy. 

Although an IMF team has been wrangling with the Russians over its 
austerity measures - it has, for instance, been demanding greater 
efforts to increase its dismal tax revenues - the fund seems set to 
agree to offer more support in the end. 

But its officials will certainly need some more convincing evidence that 
Messers Yeltsin and Kiriyenko can translate yesterday's grand words into 


Crisis Poses Growing Threat to Yeltsin
By Timothy Heritage 

MOSCOW, June 23 (Reuters) - Russia's financial crisis is posing a growing
political threat to President Boris Yeltsin and, if left unattended, could
seriously undermine him, political analysts said on Tuesday. 

Yeltsin signalled his concern at a joint meeting of the parliament and
government by sounding a warning that the crisis was alarming and carried
political and social dangers. 

Political analysts said Yeltsin's remarks were partly intended to shock the
West into offering Russia much-needed financial help and to help persuade the
opposition-dominated parliament to back a government anti-crisis plan. 

But the analysts said the crisis now posed a genuine threat of instability,
was gradually gnawing at Yeltsin's authority and threatened to ruin his main
economic achievements -- the relative stability of the rouble and reduced

``The situation really is quite unstable, primarily because social reserves
are to a large extent used up -- people are again not getting paid, pension
delays have increased and the opposition has taken the path of radical
opposition,'' said Vyacheslav Nikonov, head of the Politika Fund think-tank. 

``The opposition has for the first time announced that it will have nothing to
do with the authorities, at least with its strategic course, so I think the
situation is more tense than it was before,'' he told Reuters. 

Just how far that instability goes, or could go, is a moot point but the
pressure is telling on the 67-year-old president, who has been in office since

Yeltsin's popularity is low in opinion polls and he is facing mounting
pressure on various fronts. 

Workers, from miners to scientists, are staging scattered protests to demand
unpaid wages and Yeltsin's resignation. Opposition members of parliament have
started long and complex impeachment procedures against him. 

Boris Berezovsky, an influential tycoon-turned-politician who backed Yeltsin
in his re-election campaign in 1996, turned up the volume last week by saying
he believed Yeltsin should not stand for a third term in the next election,
due in 2000. 

Sergei Mikhailov, from Russia's Socio-Political Centre, said Yeltsin had rung
the alarm bells about social and political upheaval on Tuesday both to press
demands for Western help and to express genuine fears in the Kremlin. 

``It is question of both. Ending the crisis is getting harder and harder. It
is really quite serious,'' he said. 

The longer the financial crisis continues, the greater the risk of a
devaluation of the rouble. That would mean ordinary Russians feeling the

``A devaluation would undermine Yeltsin's main achievements -- currency
stability and a low rate of inflation. That would be the end of the Yeltsin
presidency,'' Andrei Piontkovsky, head of the Centre for Strategic Studies
think-tank, said. 

``Very definitely people are fed up with Yeltsin -- this is now a prevailing
feeling. I'd assess his political life in terms of months, certainly not
beyond the next financial crisis.'' 

Other analysts do not go so far. They say Yeltsin is a political survivor who
has proved he is at his best in a crisis and has often got up off the canvas
when he seemed down and out. 

Opposition politicians' warnings in the last few years that major social
unrest was about to erupt have all proved wrong, and protests at the moment
are isolated and not coordinated by any big opposition parties. 

Hope remains that the government's crisis plan, unveiled on Tuesday, will
solve the crisis. 

``This is crunch time and this is the government doing their bit in the battle
now in place,'' said Alasdair Breach, a Moscow-based economist. 

But discontent with Yeltsin and frustration is likely to grow if the crisis --
in which share prices have sunk, wage arrears have lingered, interest rates
have grown and the rouble has been under threat -- continues. 

That would have unpredictable consequences, even though Yeltsin has immense
powers under the constitution and ousting him would be extremely hard. His
resignation seems unlikely. 

``The number of people unhappy with Mr Yeltsin is unbelievably large,'' said
Viktor Kremenyuk, deputy director of the USA and Canada Institute think-tank.
``If the demands for his resignation became more widespread, maybe he'd have
to go.'' 

That would alarm the West, which still regards Yeltsin as the guardian of
market reforms and fears a political vacuum and instability in Russia without
him. He has no obvious successor to continue his market reform course. 

Although most analysts rule out the risk of a coordinated army uprising,
Western officials fear the return to power of communists or nationalists, or
perhaps a coalition of both ruling the vast nuclear state of 150 million

The policies of several politicians likely to seek the presidency when
Yeltsin's term ends inspire little confidence abroad or cause outright alarm. 

Possible candidates include Moscow Mayor Yuri Luzhkov, Krasnoyarsk region
governor Alexander Lebed, ex-prime minister Viktor Chernomyrdin and Communist
Party chief Gennady Zyuganov. 


Russia's ``Kinder-surprise'' fights fall guy image
By Philippa Fletcher 

MOSCOW, June 23 (Reuters) - Few people would argue that Russia's young prime
minister, Sergei Kiriyenko, has exceeded expectations since he took over the
government two months ago on the cusp of an economic crisis. 

But while he has impressed many of the sceptics who argued he was too
inexperienced for the post, he has failed to shed the image of a fall guy who
could easily be dumped by his sponsor President Boris Yeltsin if the problems
get worse. 

Kiriyenko outlined tough new measures on Tuesday to try to stop the slow-
burning crisis flaring out of control, once again revealing a strong will
behind the youthful face and sweet smile. 

The 35-year-old former banker, who works out at home with boxing gloves and a
punch bag, has pulled no punches when it comes to unpopular market reforms. 

To some he looked like a schoolboy when Yeltsin plucked him from obscurity and
led him into the vast office vacated by Viktor Chernomyrdin -- a political
heavyweight with five years in the job. In two months, however, he has grown
into the post. 

Even his opponents came up with grudging praise during consultations over his
appointment during which he said he would listen to politicians but not horse-
trade over cabinet posts. 

But Kiriyenko has discovered that while a businesslike, no-nonsense approach
can win him fair-weather friends, when the going gets tough, swords start to
be drawn. 

The opposition-dominated parliament, which gave in to Kiriyenko's candidacy
only after Yeltsin threatened to dissolve it, has got its own back by
nicknaming the former banker ``Kinder-Surprise.'' 

Calling him after a chocolate egg containing a toy is designed to suggest he
is someone not to be taken seriously -- an argument which is being
increasingly used by opponents of his tough austerity measures. 

``Kiriyenko is still a lightweight. If someone wants to persuade Yeltsin to
drop Kiriyenko they will use that argument, and they are already using it,''
Vyacheslav Nikonov, head of the Politika Fund, told Reuters. 

Nikonov cited media reports which presented last week's appointment of
seasoned reformer Anatoly Chubais as Russia's representative for negotiations
with international financial institutions, as a sign Kiriyenko was too weak to
work alone. 

The media in question, Nikonov said, were owned by those big businessmen,
known in Russia as ``oligarchs,'' who find Kiriyenko's uncompromising approach

``The new government has turned out, as was predicted by Kiriyenko's
opponents, to be weak and unpopular,'' said Yevgeny Kiselyov, whose Itogi
current affairs programme goes out on one such media outlet, the commercial
television channel NTV. 

Kiriyenko, who has less than a year's experience in broad government and spent
only four months as energy minister in the last cabinet before becoming prime
minister, has sought refuge in his close relationship with Yeltsin. 

``I have telephone discussions with the president virtually every day and we
meet several times a week,'' he told Russian Television at the weekend. 

He has also shown unexpected mettle and grace under fire and his clear, if
technical, policy speeches are a sharp contrast with the mumbling style of
Chernomyrdin -- sacked for letting reforms drift. 

A scholarly-looking man with thinning dark hair, Kiriyenko said he was as
astonished as anyone by his elevation to power from a provincial background. 

He helped found a bank in the city of Nizhny Novgorod, a laboratory for
economic reform, in 1994, and briefly headed Russia's third biggest oil
refinery, Norsi, before leading reformer Boris Nemtsov made him deputy energy
minister in 1996. 

His wife Maria has said he is determined to succeed. 

``If he thinks he is capable of something he does it. If he has his doubts,
then he just won't take it on,'' she said in an interview published in April. 

Yet analyst Andrei Piontkovsky wondered whether the economic crisis, which led
Yeltsin to warn of political instability and social unrest, might not be
making Kiriyenko think again. 

``I think Kiriyenko is having second thoughts about becoming prime minister of
this country in these conditions,'' he said. 

Another analyst, Sergei Mikhailov from the Russian Socio-Political Centre,
said Kiriyenko had found himself in the position of firefighter, and would
continue to enjoy Yeltsin's backing only if he managed to control the flames. 

Others agreed. ``Yeltsin will support him, but a lot depends what happens in
the country,'' Nikonov said. 

Kiriyenko makes no bones about Russia's parlous economic state, reeling off
statistics in the candid, matter-of-fact style that has impressed both locals
and foreign investors, whose loss of confidence in Russia fed the latest

``The government has shown itself to be clearly cognisant that there is a
crisis. They are no longer in denial,'' said Eric Kraus, chief strategist at
Regent European Securities in Moscow. 

The question is whether Kiriyenko can push through measures to overcome the
crisis before it overcomes Russia. 

As he told parliament just before his appointment,''there is no time to


Moscow Times
June 24, 1998 
EDITORIAL: Yeltsin Ties The Hands Of Reform 

The government of Sergei Kiriyenko is to be congratulated on finally 
presenting a coherent plan to head off the fiscal crisis that is now 
threate ning Russia. But the chances for its passage do not seem much 
better than they did for a similar initiative last year. 

Led by then-first deputy prime ministers Boris Nemtsov and Anatoly 
Chubais, the government presented a substantial reform package last 
summer. It included a realistic budget for 1998, tax reform and spending 

At the time, the "young reformers" pledged -- in terms no less bellicose 
than those we are now hearing from Kiriyenko -- to push the reforms past 
the inevitable opposition of the Communist-dominated State Duma, the 
bureaucracy and the financial tycoons who style themselves as Russia's 

In 1997, the young reformers lost on all counts. None of the measures 
was passed. The Duma rejected the tax code and the welfare cuts. The 
budget for 1998 was delayed until it was irrelevant and unfulfillable. 

The greatest culprit in that debacle was neither the recalcitrant Duma, 
nor the oligarchs, who did their best to destroy the reformers. 

The real villain of 1997 was President Boris Yeltsin. Having given the 
reformers a mandate to reform Russia's finances, he failed to support 
them when they encountered opposition. He encouraged the oligarchs to 
undermine the government using their media sleaze campaigns, and he 
failed to lobby consistently for the reforms in the Duma. 

So does this reform plan and this reform team stand a better chance ? 

The desperation of the current situation is one reason why Yeltsin and 
the government may try harder this time. The financial crisis in Asia 
and the fall in world oil prices mean the government is faced with the 
real threat of a debt default. The International Monetary Fund has let 
it be known that it will not release funds to stabilize the ruble or 
bail out the budget until it sees that the government is serious. 

But despite all this, Russia may just decide to muddle along, 
regardless. The government may claim to have a pact with the oligarchs, 
who even cooperated on the drafting of the current anti-crisis plan. But 
the oligarchs will observe this truce only so long as it serves their 

The Duma is just as recalcitrant as ever, perhaps more so, since it 
knows that elections are now only 17 months away. 

And worst of all, Yeltsin is still deeply ignorant of economics, 
mistrustful of his ministers and unwilling to following through on any 
unpopular policies. 


Date: Tue, 23 Jun 1998 
From: "Mark Scheuer" <>
Subject: US-Russian relations

I want to take issue with what seems to be a growing trend among 
observers of US-Russian relations-most recently exemplified by Geogi 
Arbatov's article in JRL 2233--that the apparent decline in the 
"strategic partnership" is a result of poor US policy and policy 

I am truly exhausted by, and fearful of, these conclusions. First, they 
tend to focus more on faults in US policy and less with problems created 
by Russia's process of reform implementation. Second, US policy bashing 
is catchy; I'm concerned that Russians are investing too much into it, 
and too many high-profiled American authorities and scholars continue to 
subscribe to its "trendiness". As a result, people seem to believe the 
US-Russian relationship is well on its way to a Cold War reprise. I 
sincerely hope that analysts who contend this are doing so for effect and 
not because they're convinced it is the case. I think Mr. Arbatov's 
inability to explain how US-Russian relations will move from the more 
practical level they are on now than during the "honeymoon", to the 
war-footing of the Cold War is evidence that such claims are much 

While rejecting the idea of a Western conspiracy against Russia, Mr. 
Arbatov implicates Western economic theories' guilt in the present 
Russian crisis. But it is Russian "bizzaro-world" implementation of 
reform that has failed the spirit of revival. When the IMF requires 
greater privatization, it does not include a caveat that demands Russian 
farmers not be allowed to buy or sell their lands or use them as 
collateral for loans. When the United States commits foreign aid to 
develop a freer press or political parties, it does not expect reporters 
to be assassinated nor rampant political corruption. When Western 
investors plunge millions of dollars into joint ventures, they do not 
expect to be run out of the country when the venture starts to make a 
profit or threatened by the mafia with no legal recourse. The list of 
policy implementation failures-well documented in the annals of JRL-goes 
on. But for lack of better advice, Russians need to learn a universal 
lesson: one must take responsibility for one's actions.

I recognize the luxury of beating up on the United States. It's 
tradition, comfortable and effectively relieves anxiety. But I believe 
the anxiety of the Russian people described by Arbatov about the United 
States has been overstated. Living with Russians for a year in Moscow, I 
heard many more hours of discussion about Russian political failure, 
Russian bureaucratic corruption, and the Russian mafia than I did of how 
Russians feel threatened by NATO expansion. NATO expansion is a 
non-issue for the Russian voter. It has merely become a tool for Russian 
politicians to beat up on the West or send panic through a population 
otherwise preoccupied.

Although there are aspects of US foreign policy that have failed, such as 
its insensitivity to Russian security concerns in Europe, there is much 
fairness in US foreign policy. And it is beginning to show results. For 
all the pain NATO expansion has caused, the United States and Russia are 
finding new areas of cooperation. Russian contributions to the SFOR in 
Bosnia have met with nothing but high praise from the US military. The 
recent joint NATO-Russian military exercise "Operation Jaguar" was the 
first of its kind between the former enemies. In Central Asia, American 
demands for fair competition in the development of resources has not only 
led to a softened Russian position on Western activity in the region but 
to greater Russian acknowledgement of the Caspian states' sovereignty. 
In addition, President Clinton's commitments to restructuring the time 
limits on START II reductions and a commitment to START III negotiations 
send strong signals to Russia that the United States wants to de-escalate 
tensions and bolster the strategic partnership. Again, US policy is 
taking effect. Accusations by Russian conservatives that START II is an 
effort by the West to weaken Russia have given way to level-headed 
questions like "how do we pay for START II?" The United States' CTR 
program has an answer for that.

Mr. Arbatov recalled an American saying when he said that the suddenness 
of the Soviet collapse "caught us with our pants down." I'd like to 
introduce Mr. Arbatov to another American phrase: "play ball". The 
United States is going to have great difficulty supporting financial 
rescues, encouraging American investment in Russia, supporting 
alternative Russian candidates, and not supporting a second round of NATO 
expansion unless Russia begins to act like the "great" nation it 
continually reminds the world it is. Great nations in the 21st Century 
will have their own houses in order while acting responsibly on the 
international stage. The United States needs no lectures on how long 
capitalism takes to develop. Our 222nd birthday is in less than 2 weeks 
and we still have millions of citizens unemployed, uninsured, and lacking 
education-all while our economy is booming! We are a nation driven by 
profit and are eager to develop markets that show promise. Much of our 
policy, therefore, will be based on those prospects. Russia will find 
little charity from us. But if it "plays ball"-i.e. sticks to solid, 
long-term reform plans, provides a political voice for burgeoning 
democrats and interest groups, and acts responsibly 
internationally--Russia can count on a strong, mutually-beneficial 
relationship with its former enemy.

Much like the post-Cold War theorists who believe Reagan's huge military 
build-up brought down the Soviet Union, those who blame the United States 
for the chaos in Russia place too much confidence in America's ability to 
affect events in Russia. We do not vote in Russian elections, we do not 
place Russian ministers and we do not run Russian factories. Russia must 
take responsibility for its own decision making and its own recovery.


>From RIA Novosti
June 23, 1998
By Vyacheslav NIKONOV, Politika Fund

President Boris Yeltsin said after a visit to Kostroma's
Ipatyevsky Monastery last Friday that the Constitution made it
impossible for him to run for presidency for the third term.
Though it is not the first time that Yeltsin claims he has no
plans to head the country in the next century as well (and
such declarations were usually followed by more than ambiguous
remarks on the same subject), the President's words sounded
quite plausible this time, and many experts and commentators
are inclined to believe them.
There are numerous grounds, which are more of a pragmatic
and political than of a constitutional nature, to presume that
Yeltsin's decision is final. The most important of them is
probably the President's extremely thin chance to be
re-elected in 2000.
In the beginning of 1996, Yeltsin's ratings were also
very low - 6% ( at present, they are as low as 3%). However,
substantial changes have occurred in the country's regional
and financial-industrial elites and public sentiment in
general since then.
Two years ago the President managed, albeit with great
difficulties, to personally appoint the overwhelming majority
of governors. Today, all the governors with the exception of
the Karachayevo-Cherkessia leader have their own electorates
and are not in a hurry to link their fates to the rather
unpopular federal centre. What is more, many of them are
either the stooges or the supporters of the opposition. The
unity of the federal centre elite is not guaranteed for the
President, either. When Boris Berezovsky talked last week of
Yeltsin's non-electability, he did not express only his
personal opinion. Such an opinion is widely shared in the
so-called oligarchic circles and among numerous experts.
The President has never such a low popularity among the
electorate as now. When answering in opinion polls the
question "for whom you would not vote under any
circumstances", 52% of respondents named Yeltsin. He has been
the "leader" in this respect for the second month running,
outpacing the indisputable "favourite" of the past few years,
Vladimir Zhirinovsky. The latest opinion poll has shown that
the ratio of Russians who think that he coped better with his
presidential duties during the first term than the second is
39:6; 55% see more negative things in his work, 11% - more
positive; 51% would be glad if he resigned before his term
expires and 10% would be sorry if that happened. There is
little hope that the situation in the country as a whole and
the sentiments of the electorate might change for the better
any time soon. The President and his government will not gain
more popularity by the measures which they will have to carry
through in the name of financial-economic stabilisation.
Having said that he has no desire to stand for
re-election in a form which has convinced many, Yeltsin makes
his own situation both more complicated in some aspects and
much simpler in others.
It is common knowledge that the "lame duck", as the
Americans have been calling their own President lately,
carries less weight. It will be more difficult for Yeltsin 
now to get his initiatives approved by the State Duma and the
Federation Council. The conflict of the elites, which until
now avoided to talk of the "heir" and may now feel free to do
so, can escalate. Some of Yeltsin's rather unreliable
supporters and even part of his staff may distance themselves
from him. Meanwhile, the attention of Western capitals will
increasingly begin to shift from the figure of the present
President to those who have the chance to replace him.
On the other hand, Yeltsin does not set himself the task
of re-election which to a considerable degree gives him a free
hand for the implementation of the necessary stabilisation
measures, among other things, despite the opposition of
influential political, financial-industrial and public
circles. The impeachment procedure initiated by the State Duma
last Friday and the KPRF's "resign Yeltsin" call become
suspended in the air inasmuch as the President is not going to
cling to his post to the last moment of his life.
By setting the deadline of his presence in the Kremlin,
Yeltsin can gain some more popularity. We saw the looks of
nostalgia on the faces of Kostroma students when he confided
his 2000 election plans, or, sooner, the absence of any, in
them. In the eyes of those young people and many other
Russians he is the patriarch of politics who has made a
tangible contribution to the history of Russia. If, on top of
everything else, Yeltsin will prove to be the first Russian
ruler in the past thousand years to transfer power to the
newly elected head of state on his own free will and in
accordance with the Constitution - something that has never
happened in this country - he will not only turn a new page in
history but will also make many people forget their grievances
towards him.
The elite groups will have the possibility to begin
thoughtful preparations for the 2000 elections, because
absolutely different options are possible depending whether
Yeltsin runs for re-election or not. Clarity is always better
than vagueness, especially when the issue at hand is such a
decisive variable quality in Russian politics as the
What is more, Yeltsin's role in the future elections
remains of great, if not decisive, importance. During the
election campaign he will still be in the Kremlin, keeping the
main administrative and information levers in his hands and
orienting state machinery for the support of the candidate who
will be most acceptable for him.
So, if the President has made up his mind firmly and
irrevocably, he has a chance to complete his term without any
particular losses and even with some gains.
However, one should not exclude that by saying that his
re-election for the third term was unconstitutional Yeltsin,
in fact, meant the absence of the long-awaited Constitutional
Court decision on this issue. And the Court may still decide
that his present term is the first.


Date: Tue, 23 Jun 1998 14:22:41 -0400
From: "Robert McIntyre" <> 
Subject: Re: data fraud

I have received an inquiry from a reader as to whether the arrest of 
senior GOSKOMSTAT officials (in part for helping to conceal/reducing 
some company results changed my opinion ("Data Fraud" ,JRL 2186, item 
4) that Russian growth during 1997 was fabricated. 
The short answer is that the alleged conduct refers to financial 
figures, not quantity of output. GDP totals are normally assembled 
(as briefly described in the "Data Fraud" note) by multiplying 
physical amounts of each type of output times fixed price weights 
taken from an earlier period. 
From what I know the misconduct charged is of two types: (1) false 
financial information to the government about the financial success 
(in money terms) of specific companies; and (2) providing correct but 
confidential information about one producer to another. Neither 
would have anything at all to do with the GDP calculations. 
A better answer under these conditions would perhaps be "who knows" 
what actually happens within Goskomstat. 
I admit that the first things I thought of when I heard of the 
arrest was how this would lead cheer-leading western publications to 
use this to explain the "poor" Russian statistical results. The 
Economist promptly obliged on 13 June. Komsomolskaya Pravda said the 
same thing on 10 June (JRL 2219, item 6) 
One related subversive thought: the simple-minded interpretation of 
(2) above is that one firms needs information about another 
firm because they are in hot "market competition". The darker and 
more realistic explanation is that the information is useful 
for either blackmail the producer in question, or incriminate 
it to the tax police. That could also be the way the tax police 
cracked this case (if they did).


Date: Tue, 23 Jun 1998 
From: "Robert McIntyre" <> 
Subject: Helmer and American Manipulation of the Russian Press

Regarding the Note (JRL 2232, item #7) from Laura Belin about the 
Helmer article in JRL 2231. Four points: 
(1) The study of mine referred to by Helmer is an article in the 
journal Europe-Asia Studies (formerly Soviet Studies), no 5 of this 
year. It has the undigestable title: "Regional Stabilisation Policy 
Under Transitional Period Conditions: Price Controls, Regional Trade 
Barriers and Other Local-Level Measures". The article explains the 
economic logic of the Ulyanovsk program. The integrated and mutually 
reinforcing demand-side, supply-side and expectational (both sides) 
measures employed are not irrational or ignorant. They represented 
careful and coherent market manipulation worthy of technically 
well-trained Western economists (assumed to be pursuing the same 
policy goals). No economist confronted with these facts (in the 
absence of the Red Spectre) would be surprised that the measures had 
considerable positive effects. It is surprising that the positive 
effects lasted so long in what is alleged to be an increasingly 
integrated market economy. 
(2) Regarding the question of the relative honesty and reliability 
of anonymous responses to World Bank researchers in Ulyanovsk, I 
suggest that inspection of the World Bank study will convince most 
readers that it is the carefully done work of people who are not 
naive. That truth-telling in Ulyanovsk is more risky than in the 
other cities covered is both unprovable and entirely 
(3) The fact that the governor has won several libel suits against 
his critics says nothing about either the facts of those cases or 
how commercial law, permit issuance and market regulation proceed. 
Moscow Izvestiya has been running a multi-year campaign against the 
Governor Goryachev. I fearlessly proclaim that this is a result of 
ideological hostility rather than high (or even average) levels of 
corruption in the locality. My understanding of the "misuse of 
agricultural subsidies" charge is that there was no implication of 
theft or personal enrichment, but only of another public use be made 
of subsidy funds within the agricultural sector. I am 
absolutely not certain about the facts of that case. Does anyone 
have good information on this point. (In some of the material that I 
have read there appears to be some misunderstanding of how subsidies 
work elsewhere). 
(4) The newspaper (the "Simbirski kur'er") that Belin mentions as 
the agent of press freedom in Ulyanovsk is a Yeltsin-Chubais 
propaganda organ. That does not mean it should be repressed, but 
its ownership should be known to permit informed evaluation of its 
bias. I believe that a careful inquiry would reveal that it was 
directly set up and financed by the US government through the 
"Eurasia Foundation". That helps to answer the question which must 
have occurred to many readers of how a new, presumably struggling, 
paper "could not be printed in Ulyanovsk and was brought in from 
Nizhnii Novgorod"? 
This "free press" campaign was not open and above-board aid. It was 
simply another part of the US support for Yeltsin regardless of other 
ethical considerations. Imagine the reaction to the headline "US 
Founds Pro-Government Newspapers in Russian Provinces". Or, "Soviets 
set up USA Today Hoping to Dumb-down Cold War Rival". In my 
investigations in Ulyanovsk (including a 1995 visit when I already 
knew the source of the money for the newspaper) local people that I 
talked to had no idea of a direct US government link. I am sure that 
Eurasia Foundation will claim that was a start-up aid and that they 
don't do that now. I would be surprised if they deny their role, 
which may have been both the money and the idea itself. I know 
about this from Eurasia Foundation self-promotion materials I picked 
up from a shelf in their Moscow office (also I believe in 1995).


Subject: A Few Comments on Various Topics
Date: Tue, 23 Jun 1998 

1. Have been following the Herspring-Hough exchange on Lebed between trips
to Helsinki and Moscow. Regarding Lebed, he is a national-populist who
identifies with the Russian working stiffs who carried the burden of the old
order and got shafted and have been shafted by the new order as well. He is
not a run-of-the mill-general but a charismatic figure and so military
stereotypes are about as relevant as saving Yeltsin was a obkom secretary.
He is a nationalist enough to want Russia to be a great power and to have
its interests recognized. But he is also a realist. He is democrat enough
to have taken off his uniform and used the electoral process to go for
political power. He got Russia peace in Chechnya -- if not a political
settlement. He is hated for that by those in the military and VVMVD who
want to go back. The lead song on a CD for the VVMVD chorus is "We were
betrayed." It is a "stab-in-back" theme on Chechnya and politicians. As to
the Pinochet charge, as far as I know, the General struck through bloody
coup and not the ballot. Lebed has gone to the ballot twice and supported
the process. His removal in October 1996 with its Russian legion spin and
Kulikov actions looked more like a coup against Lebed than a coup by Lebed. 
As to the military, he understands that downsizing is not reform and that
reform begins with the rebuilding of morale -- the relationship between
soldiers and officers, which is terrible. Conscript quality is at an
all-time low, conditions of service, which were always bad, are collapsing,
and officers are demoralized. There is a shortfall of young officers who
will have to do the rebuilding at the company and battalion level.
He is not the West's "new, great white hope." But he is a serious Russian
political figure with a real electoral base.

2. Ames and Limonov. I oppose censorship in general and welcome JRL's
publication of the Ames and Limonov materials. But we ought to be aware that
Mark does not always present the logic of publishing Limonov in quite the
same way as he did in the recent JRL exchange. In issue #16/41 of "the
eXile" Mark responded to a letter to the editor from Torsten Andersson . . .
"A Swedish Dick" was the caption to the letter. His defense of Limonov,
while profane, stressed Limonov's claims as a Russian and an expert on
communism and how much it sucks. He follows that with a passionate
portrait of the present crisis in Russia. Good points. Then his clincher:
"These days the Russian army couldn't beat the West Indian cricket team.
[hyperbole, but good] Can you imagine how that feels? Oh, wait-you're
Swedish. So you can imagine. Excuse me." [a dirty dig with great power
chauvinism written all over it that sound more "American juvenile" than
Russian nationalist or sophisticated "American in Moscow." Does anybody
else have the feel that Mark and the boys should be running the Kit Kat Klub
in some other capital, several decades earlier, but then maybe Moscow is in
a Weimar season.

3. Surprised that there has been no coverage so far of the Moscow storm from
Saturday night - Sunday morning. The "uragan" had high winds 60 MPH+, heavy
rain, and lightning after the collision of wamr and cold fronts [Moscow had
a high of 100'F on Saturday.] Reports on the local news on Sunday morning
and a drive from Sputnik Hotel on Leninsky Prospect through the city on the
way to Sheremetovo II, suggested pretty severe damage to trees, bill boards,
store windows, autos, and buildings. Many trees were uprooted. Kiosks
were lifted up and carried into bus stops and parking areas. I observed
roof damage on several larger buildings near the Moscow River and on
Leningrasdsky Prospect. Sheremetovo was closed from 1050 to 1530 on Sunday
because of a transformer failure which left the arport without lights or
power. I understand that this was storm-related problem. Noted that on the
way out of the city crews were out cleaning up. Luzhkov seems to deliver.


Sociologist Shares Yeltsin Concern Over Rising Extremism 

Moscow, Jun 22 (Interfax) -- The director of the Institute of the
Sociology of Parliamentarism, Nuzgar Betaneli, has said he shares Russian
President Boris Yeltsin's concern over a rise in extremist ideas and forces
in Russia.
Yeltsin commented on the subject in a radio address dedicated to the
start of World War II in 1941.
Betaneli told Interfax a nationwide poll conducted by his institute
shows that 5% of Russians regard the activity of pro- fascist organizations
in the country in a "more or less positive" way. Another 1% of those
polled said they are "very positive" about such organizations and 2%
"positive." The poll was held in early June among 6,000 respondents in 62
Russian regions (about 250 cities and villages).
About 6% of respondents said they are "indifferent" toward this
problem. Another 6% of respondents said they are "somewhat wary" of the
activities of pro-fascist groups.
Some 45% of Russians said they felt "negative" about pro-fascist
organizations and 26% were "very negative."
Another 12% of pollees were undecided.
A positive attitude toward pro-fascist organizations in Russia among a
part of the country's population "is not a disease affecting only
teenagers," Betaneli said. For instance, the number of those who
positively assessed the activity of pro-fascist organizations in Russia
among people aged 16-17 was 5% of respondents; 9% among those aged 18-19;
8% among those aged 20-24 and 6% among those aged 25-29. The figure for
those aged 30-34 was 7%; those aged 35-39 -- 4% and those aged 40-49 -- 6%.
The number is declining for older people. It was only 3% for Russians aged
40-49; 2% for those aged 60-69 and 1% for those aged 70 and older.
Moreover, 11% of respondents believe that fascists may rise to power
in Russia in the next few years, Betaneli said.
Another 52% of respondents said such a development is impossible in
Russia, 9% showed indifference, and 28% were undecided.
Furthermore, 27% of respondents said that life in their city or
village would be much better if their neighbors were only people of the
same ethnic group as theirs.
Pro-fascist ideas are especially strong among students (10%). Students
are followed on this alarming list by scientific researchers (9%),
individual entrepreneurs (7%), workers (6%) and servicemen (5%). Half of
the 6% of workers said they are active supporters of pro-fascist
About 7% of respondents said they are ready to take part in "armed
protests" to defend their rights, well above the 4% six months ago,
Betaneli said.


Moscow Times
June 24, 1998 
President's Income Jumps to $325,000 
By Dmitry Zaks
Staff Writer

President Boris Yeltsin earned the equivalent of about $325,000 in 1997 
-- seven times more than the year before, according to an official 
report. The Kremlin would not say, though, how Yeltsin earned the extra 

Yeltsin, 67, declared a 1997 income of 1,950,324,000 old rubles, 
according to a list of officials' earnings published Tuesday in 
Rossiiskaya Gazeta, the government's official paper. The sum converts to 
about $325,000 at the year-end exchange rate. 

For 1996, Yeltsin declared an income of 244,000,000 old rubles -- at the 
time, less than $45,000. 

The Kremlin confirmed the figures but could not explain where the money 
came from nor say what the president's current salary was. "This is 
normal," a spokesman in the Kremlin press office said Tuesday. "It is 
difficult to say any more now. Call back tomorrow." 

The income figure for Yeltsin was published with those for Prime 
Minister Sergei Kiriyenko and Cabinet members. 

The sources of the officials' income were not revealed, nor were their 
salaries disclosed. But officials seemed to be taking the declarations 
more serious than they did last year, when some filed declarations that 
clearly did not match their lifestyles. 

Yeltsin last May issued a decree demanding that top officials declare 
their incomes and assets. Although meant as a populist measure to root 
out corrupt officials, the decree backfired when it became clear it was 
being flouted. Business tycoon Boris Berezovsky, then deputy secretary 
of the Security Council, was rated a billionaire by Forbes magazine but 
claimed he was worth $38,500. 

The president explained at the time that his $42,000 income was modest, 
but that he did not need much since the state budget covered most of his 
expenses. He said most of the money came from royalties from his two 
books, "Against the Grain" and "Memoirs of a President." 

A scandal is not likely, however, said political analyst Yury Korgunyuk 
of the INDEM research center. 

"Perhaps he also has some unofficial source of income -- like many other 
people in Russia and other countries, too," Korgunyuk said. "A scandal 
is only possible if someone plans an organized attack, and few would 
dare lead one against Yeltsin." 

The government member reporting the highest 1997 income among those 
listed in Rossiiskaya Gazeta was not Yeltsin but Sergei Generalov, the 
fuel and energy minister. 

Generalov reported making the dollar equivalent of about $735,000 last 
year as vice president of Bank Menatep, part of the Rosprom business 
empire of financier Mikhail Khodorkovsky. 

Prime Minister Sergei Kiriyenko, who worked as a senior executive in a 
Nizhny Novgorod oil firm before he came to Moscow last spring as deputy 
fuel and energy minister, said he earned $125,000 last year. 

Declared incomes for the government's three deputy prime ministers were, 
in dollar equivalents: Boris Nemtsov $93,000; Oleg Sysuyev, $23,000; and 
Viktor Khristenko, $29,600. 

Others included Foreign Minister Yevgeny Primakov, $56,500, and Defense 
Minister Igor Sergeyev, $11,500. 

The most modest income belonged to Health Minister Oleg Rutkovsky, a 
physician who reported earning $3,150 last year before joining the 


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