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

Johnson's Russia List


July 12, 1998  
This Date's Issues: 2259  2260

Johnson's Russia List
12 July 1998

[Note from David Johnson:
1. Herbert Ellison: Comment on views expressed by James Millar and
Clifford Gaddy quoted in a Reuters piece JRL#2256.

2. Carl Olson: "Shocking" Russian debt load.
3. Herbert Levine: obituary of Don Green.
4. Komsomolskaya Pravda: Goskomstat Corruption Case Detailed.
5. Komsomolskaya Pravda: Aleksandr Gamov, "Does Yeltsin Expect 
Gorbachev-Style Foros?" (Yeltsin Seen 'Weakened' by Entourage).

6. Moscow Times: David McHugh, Yeltsin Courts Generals, Hints at Plot.
7. St. Petersburg Times editorial: Government Neglects Investment in

8. Vladivostok News editorial: Tough times for Primorye.
9. Barbara Starr, Could a terrorist seize a Russian
nuclear weapon?

10. Itar-Tass: Abdulatipov Notes Danger of Nationalism, Fascism in

11. Peter Reddaway: Letter to The Financial Times re IMF.]


From: (Herbert J. Ellison}
Date: Sat, 11 Jul 1998 
Subject: Comment on article No. 1, Johnson's Russia List #2256

Dear David,

I would like to comment on the views expressed by James Millar and
Clifford Gaddy quoted in a Reuters piece titled Russia Asks West for
Cash, Advice, Moral Support, Johnsons Russia List, #2256. 

Mr. Millar's complacency about a ruble devaluation (he apparently
described it as inevitable and a way to force the government to tackle
its problems) is a surprising comment from a distinguished specialist on
the Russian economy. The Kiriyenko government has taken vigorous and
well-designed measures to deal with the financial crisis that threatens
the ruble, and to meet the IMF requirements for lending. It is, arguably,
the most competent government Russia has had since 1992, but, like its
predecessors, operates against a consistent opposition from a Duma
majority, chiefly communist, opposed to the fundamental direction of its

On the question of ruble devaluation, one wonders how Mr. Millar can
ignore the fact that the Russian private banking system, already teetering
on the brink of bankruptcy, would collapse when obliged to repay its heavy
foreign currency debts following a severe ruble devaluation. And what
about the impact of the ensuing inflation on the Russian population with
its memories of hyper-inflation still fresh? Even the severest critics of
Russian economic policy recognize the benefits of the governments success
in reducing inflation and stabilizing the ruble. Has he not noticed the
riots in Indonesia in the face of the collapse of the rupiah and runaway

Mr. Gaddy apparently rejects an IMF bailout because of a genuine concern
for the future of the country. I would suggest some reflection on what
sort of future Russia faces if the dithering of the IMF and the empty
words of reassurance from Western governments allow the financial collapse
to occur. Mr. Gaddy suggests that bailout funds would be wasted. Surely
the personnel and policies of the present government indicate the
opposite: the real danger is that delay or denial of IMF support will
virtually guarantee financial collapse and severe and protracted political
turmoil. The costs of such an outcome--for Russia and the world--should
be clear enough.

One cannot deny that the governments of the post-communist era in Russia
have made mistakes in economic policy, the most costly of which in the
current crisis is the accumulation of very heavy short-term indebtedness.
But the conversion of this problem into the present crisis (just when
Russia appeared to be making an economic recovery) was a direct outgrowth
of the extended impact of the East Asian economic crisis which cost Russia
many billions of dollars in revenue from export of raw materials (chiefly
oil), and started the panic among both Russian and foreign investors about
the security of their investments in Russian equities and government

There has been no shortage of government efforts to strengthen the
governments fiscal position since the Asian crisis reached Russia last
November, and the impact of the first phase was contained. But the
deepening of the Asian crisis in May and June, combined with persistent
Duma opposition to tax reform and other needed legislation, has greatly
complicated its task. The current government is neither responsible for
the fiscal crisis it confronts or for the East Asian crisis that
precipitated it. And surely, given the enormous importance of Russian
recovery to world politics, a request for $10-15 billion from the IMF,
which is crucial to financial recovery, can be as readily justified as
more that $40 billion each to South Korea and Indonesia. 

Herbert J. Ellison
University of Washington 


Date: Sat, 11
From: (Carl Olson)
Subject: "Shocking" Russian debt load

Some figures that Prime Minister Sergai Kiriyenko has quoted to demand 
more IMF funds can be characterized as "mock shock". He has stated that 
the Russian government debt now stands at a (shocking) 44% of Gross 
Domestic Product.
This announcement for Americans would be the same as President Bill 
Clinton announcing that the U. S. federal government debt of $5.5 trillion 
is a (shocking) 69% of the Gross Domestic Product of $8 trillion. This 
of course excludes state and local government debt.
Prime Minister Kiriyenko also fails to disclose as to how much of the 
Russian government's debts are already collateralized by the hundreds of 
billions of dollars held in official and unofficial accounts in the West.
So long as the Russian ruling class doesn't care enough to invest these 
hundreds of billions of dollars in Russia (including paying off their 
debts), then why should the public in America and elsewhere care more?

Best regards,
Carl Olson
State Department Watch


From: (Gail Buyske)
Date: Sat, 11 Jul 1998 18:15:58 EDT
Subject: obituary for Don Green

The following obituary of Don Green was written by Herb Levine. I think it
would be of (sad) interest to many of your readers.

Best regards,
Gail Buyske

JANUARY 2, 1944-MAY 9, 1998
Donald W. Green, specialist on the Soviet and Russian economies, died of
leukemia on May 9, 1998, at the age of 54. He was active in both academia
and the business world. 
Dr. Green earned degrees from the California Institute of Technology (BS
in Biology); Kings College, Cambridge (BA and MA in Economics); and the
University of California, Berkeley (PhD in Economics). At Berkeley, he
studied under Professor Gregory Grossman and wrote his dissertation on a
comparative study of American and Russian engineering elites, 1870-1920.
He joined the faculty of the University of Pennsylvania as an Assistant
Professor in 1970. There he became the co-developer, with Christopher
Higgins, of the first full-scale macroeconometric model of the Soviet Union
and co-author with Higgins of the book, SOVMOD-I, published in 1977. The
numerous papers produced by the Sovmod project, and its capstone volume
SOVMOD-I, had a significant impact on the analysis of Soviet economic plans
and performance.
In 1977, Green moved from Penn to Chase Manhattan Bank, where he became
Vice-President responsible for economic analysis of the Soviet Union,
Eastern Europe, and China. In the succeeding years, his work at Chase
expanded. He added the duties of Deputy Director of International
Forecasting, responsible for global economic analysis, and Chief Domestic
Economist. In 1988, he left Chase to become Executive Vice-President and
Chief Financial Officer at the Mercator Corporation. He played an
important role there in the development of the American Trade Consortium, a
consortium of major American companies (Chevron, Archer-Daniels-Midland,
Johnson & Johnson, RJR Nabisco, Kodak and Ford) that negotiated
joint-ventures with a Soviet consortium of several large-scale enterprises
and ministries. After the dissolution of the Soviet Union at the end of
1991, Green took on the position of Chief Financial Officer and Managing
Director at PlanEcon, Inc., a Washington-based consulting firm on the
economies of the former Soviet Union and Central and Eastern Europe.
PlanEcon had evolved out of the Sovmod project at Penn, and Green was a
founder and member of its Board of Directors. He was a key figure in the
management and substantive work of PlanEcon for the last six years of his
Green was also a contributing editor of the journal SOVIET ECONOMY from
1984-1991; and a member of the Board of Directors of the International
Research and Exchanges Board (IREX) from 1982-1993 and was responsible for
the management of the IREX endowment portfolio.
He was a member of the American Economic Association, the American
Association for the Advancement of Slavic Studies, and the Association for
Comparative Economic Studies.
Green is survived by his wife, Cynthia Bear, a daughter, son, three
grandchildren, his mother, father, and two sisters.


Goskomstat Corruption Case Detailed 

Komsomolskaya Pravda
16 June 1998
[translation for personal use only]
Article by Yelizabeta Mayetnaya and Aleksey Rakcheyev: "Family
Problems Prompted Me To Commit These Vile Acts"

Here is the confessions, astounding for its style and notable for its
content, written by arrested State Statistical Committee (Goskomstat) chief
Yuriy Yurkov to general prosecutor Skuratov.
"Dear Yuriy Ilich,
Family problems prompted me to commit these vile acts, but I want to
state right from the start: this in no way affected my job performance. I
always told myself that I would give the money back as soon as we started
living in our own apartment. As always life turned out to be a bit more
complicated. One has to pay for everything. I am prepared. Shame is the
most terrible thing there is, and it appears that I have earned it.
I pledge to make full compensation for the harm that I have done. I
have the desire to do so, and I want nothing more than to justify myself
before the state and before my children. Yu. A. Yurkov, 8.06.98"
We decided not to correct the writer"s punctuation; this way it
seems more sincere and pitiful. Poor, poor Yuriy Alekseyevich! The minister
of exact figures just had no place to live. What was the government
So we decided to look into Mr. Yurkov"s living conditions. On the
eve of his arrest the ex-head of the State Statistical Committee could have
taken his leisure in any one of three "housing spaces"! One belongs to his
parents. Another to his wife"s parents. But the third, acquired not
long before his arrest, was created by Yurkov out of two two-room
apartments located on the same stairwell. The renovations cost this member
of the government $60,000. While waiting to move into those apartments,
Yurkov and his wife were in fact living in a government-owned dacha. By
mutual agreement: his wife could not get along with her mother-in-law, nor
could the head of the State Statistical Committee stand to live with his.
As we have already reported, a search of a safe in the
ex-minister"s office turned up $3,000. According to information we
have obtained, Yurkov has already admitted that as a result of his schemes
he pocketed at least $150,000 (see diagram). $30,000 was seized during a
search of his deputy Valeriy Dalin"s safe. Investigators have accused
him of receiving an additional $12,000. But the one who earned the most
money off statistical information was Boris Saakyan, director of the State
Statistical Committee"s Main Computing Center [MCC] (GVTs —
Glavnyy vychislitelnyy tsentr]; he was the main inspiration behind the
scheme to wring big money out of little numbers. Detectives found $1.5
million in his apartment! Informed sources confirm that it was the head of
the MCC that was in charge of the whole "statisticians" affair." It
was he — Boris Saakyan — who in 1994 got the brilliant idea of
making money off of boring state statistical "number crunching." Over time
statisticians raised the business to the state level and even got the
government to go along with their "Charter," which allowed the State
Statistical Committee to sell information on a commercial basis.
However, these clever bureaucrats completely "forgot" to develop the
necessary set of documents that would clearly define the price of
information or its degree of accessibility to outsiders and to commercial
structures in particular. Most important, they "forgot" to define the
state"s profit from all these operations. The State Statistical
Committee"s hundreds of employees worked industriously making money
for their agency"s high-ranking officials.
The State Statistical Committee found its first clients in...
advertising newspapers. Pleasant female committee employees called in
response to ads and found out what kind of data businessmen were interested
in and in what amounts. If the potential customer agreed, he was put in
contact with Saakyan. The MCC director billed the businessmen based on the
value of the information provided. At the very start of this new "job"
Saakyan was not above taking $200-300 for an analytical report. But over
time his fees rose sharply, and he began taking in between $1,500 and
$10,000. Six percent of the contract amount went to department heads.
According to the most conservative estimates, some enterprising employees
of the State Statistical Committee earned more than $30,000 a year on the
sale of commercial information alone. Had it not been for Saakyan"s
greed, they might have kept on pulling plums out of the fat statistical pie
for a long time to come. But Saakyan quite simply ripped off one
businessman, failing to provide him with information for which he had
already paid. The offended businessman went to the FSB and exposed the
scheme of side earnings that committee employees had developed over a
period of years.
All that investigators have left to do is to figure out how major
firms and companies managed to evade taxes with the help of the information
sold by the State Statistical Committee. But even now they are aware of
some other means by which the managers of the MCC and the State Statistical
Committee enriched themselves.
For example, the MCC publications center regularly paid $12,000 a
month into Saakyan"s pocket (see diagram).
The kickback mechanisms by which the MCC operated will be familiar to
any budding entrepreneur: the press runs of statistical books and textbooks
were understated, while cheap newsprint was "bought" and written up at the
price of expensive glossy paper. The difference accruing from all these
manipulations was an excellent supplement to the respectable but small
salaries of State Statistical Committee employees.
Leasing space to almost 40 outside commercial firms brought the MCC
director another $15,000 in pure profit each month. A portion of the budget
funds allocated by the government to upgrade computer hardware also found
its way into the pockets of Saakyan and his colleagues. Between 30 and 50
percent of the contract amounts were brought into his office on a silver
platter. The total amount of joint commercial operations undertaken by the
MCC and outside organizations using budget funds is estimated at R2 billion
[old denomination rubles].
Strategiya Bank quite unexpectedly turned out to be involved in the
"statisticians" affair." The bank is managed by a brother of minister
of economics Yakov Urinson, A. M. Urinson. This bank had set its sights on
the MCC and once extended a loan to it, half a billion rubles, old
denomination. Saakyan also entrusted his personal savings to this bank.
Here is how the arrest went. The unsuspecting Saakyan arrived in
Yurkov"s outer office early Monday morning carrying a small leather
suitcase. It contained $120,000, his fee for the latest successful (or so
he thought) deal. Seeing a chief detective in the office, Saakyan was
scurried off and sat down in a far corner of the outer office, trying to be
as inconspicuous as possible. By that time people were looking for him all
over the State Statistical Committee. A female employee happened across the
MCC director hiding behind a newspaper (incidentally, alleged to have been
Komsomolskaya Pravda) and "accidentally" gave him away. He immediately
admitted that he was bringing the leather case full of greenbacks to
Incidentally, during a search of MCC director Boris Saakyan"s
office detectives found out that he was quite a Casanova as well. Instead
of money, which all the other suspects kept in their office safes, Saakyan
kept hidden in his office intimate photographs of his lovers, many of whom
worked for him.
We have seen the pictures. These "ladies" from Saakyan"s harem
are remarkable for their buxom figures. And they continue to work in the
same jobs...
It is said that if they refused to go along with the boss" wishes
they were threatened with a negative job review at the least, and in the
worst case with termination.
Now three indictments have been handed down in the
"statisticians" affair," against Yuriy Yurkov, Valeriy Dalin and Boris
Saakyan. All three are presently residing in separate "rooms" at Lefortovo
Prison. The investigation continues to dig intensively. Lefortovo still has
some vacancies...


Yeltsin Seen 'Weakened' by Entourage 

Komsomolskaya Pravda
8 July 1998
[translation for personal use only]
Article by Aleksandr Gamov: "Does Yeltsin Expect Gorbachev-Style Foros?" --
first three paragraphs are editorial introduction

The other day the country was stirred by another wave of horrifying
gossip. "A new SCSE [State Committee for the State of Emergency] is being
prepared in Russia," "the current crisis will end in a coup," certain
newspapers are telling the population.
Who knows, maybe it is true. At any rate, the political atmosphere in
Russia continues to thicken, as evidenced by a mass of signs -- from the
controversy over Gazprom to the economic crisis that the young reformers
and technocrats cannot surmount. And new elections are approaching
inexorably, making people's imaginations consider results that cannot be
predicted even by the biggest oligarchs headed by Berezovskiy himself....
All these things taken together are very worrying to our observer
Aleksandr Gamov. He has spent the past week in the corridors of the top
levels of Russian power -- cautiously trying to get information from his
carefully concealed informers, tirelessly sniffing out, digging up, and
putting together the story. And, as a result, he has decided to share with
you the information he has pieced together. "Gamov is a shrewd guy and he
has the right to do that," we decided, and agreed to print his views of the
current situation. And suppose there is even the slightest grain of truth
in his comments?

Two Years in the Life of the Russian President -- His Health Is
Stronger, But Is His Authority Weaker? [subhead]

The Kremlin likes to celebrate (secretly, of course) two dates marking
Boris Yeltsin's second ascension to the throne -- 3 July (his victory in
the second round of the elections) and 9 August (the date of his
inauguration as head of state). Although it would be more correct to
consider all those 38 days in July and August as "red letter days" (or
"black letter days" to some). Because it was during that period in the top
echelons of power that the "great personnel upheaval" whose fruits we are
reaping today began.
But God himself ordered that we drink to 15 July -- some with
happiness, others in sadness -- after having these fruits as an hors
d'oeuvre. That was the day that "A.B. Chubays" -- a man and a job, all
rolled into one -- arrived at the Kremlin like a whirlwind. And then it

How Chubays Privatized the Kremlin [subhead]

When Yeltsin appointed Chubays head of the Presidential Staff, the law
on privatization started being studied in full seriousness in the Kremlin's
corridors. And a frightening conclusion was reached -- if Chubays wanted
to, he could privatize all the Kremlin's real estate in two shakes. All
you would have to do would be to float Borovitskiy Hill [on which the
Kremlin is built]. The rest would be a technical matter.
But trouble came from an unexpected quarter. The crafty Chubays
realized that Kremlin veterans had uncovered his perfidious scheme, and
therefore he did not float Borovitskiy Hill but started on the other side. 
He began the "black deed of denationalization" with...those very Kremlin
veterans, arguing roughly as follows -- there was too much obsolete
"personnel capacity" at the Kremlin. They were allegedly holding up
Happily for him, Yeltsin was on vacation at Valday at the time and
therefore, clearly, did not fall on the list of those "surplus to
requirements." And then again the man had only just been elected, and by
the whole country, so let him work a bit, perhaps he will still prove
But all the others.... Sometimes slowly, sometimes rapidly, but while
Yeltsin was regaining his strength and his health for his upcoming heart
operation, the crafty Chubays was performing a speedy operation, and
without anesthetic, on the institution of his aides. The operation was a
success -- the institution's days were numbered.
Following the volunteer Viktor Ilyushin, the monsters of the aides'
art started flying out of the Kremlin -- people like Dmitriy Ryurikov,
Yuriy Baturin, Georgiy Satarov, Lev Sukhanov, Boris Kuzyk, Anatoliy
Korabelshchikov, Mikhail Krasnov.... Only Marshal-cum-aide Yevgeniy
Shaposhnikov survived. Another two former senior aides got lucky --
Vladimir Shevchenko, who turned out to be the very essence of a protocol
chief, and Valeriy Semenchenko, who was camouflaged as head of the
president's chancellery.
Some of the aforesaid retirees might get indignant -- you've gotten
the architect mixed up, we were dismissed not by Chubays but by Yumashev. 
But there is no mixup here -- yes, the expulsion from the Kremlin of the
last of the Mohicans was handled by Borisovich Mark Two [Yumashev], but he
was acting in accordance with the plan of Borisovich Mark One [Chubays],
who, departing on government service in March 1997, strictly ordered his
successor that the president needs administrators rather than aides.
Admittedly, the administrators were not administering anything. Unlike
the old comrades-in-arms who had been with Yeltsin for years, most of the
Chubays and Yumashev nominees did not particularly overburden themselves in
the state's service, and some of them even got their fingers burned soon,
in the "book affair." With the dismissal from the administration of
Aleksandr Kozakov and the departure of Maksim Boyko, there were essentially
no outstanding personalities in the Kremlin apparatus. If there were any,
Chubays took them with him into the government.
And the attempts to plug the personnel gaps with "old faithfuls" --
recall the unsuccessful appointment of Viktoriya Mitina to a hot seat --
led to a great deal of embarrassment. The Kremlin, after ignominiously
losing the gubernatorial elections in Krasnoyarsk, got as its "reward"
General Lebed, who, judging by his recent anti-Yeltsin statements, sees
himself as a stronger opposition figure than the '96-vintage Lebed.
Unfortunately, Yeltsin is completely copying Gorbachev in his
personnel policy. Having gotten rid of his old comrades-in-arms and having
failed to surround himself with equally reliable new people, the optimistic
general secretary came a cropper in Foros in August 1991, which accelerated
the collapse of the Soviet Union. What awaits Yeltsin and Russia? Perhaps
the same as we have already been through?

Valya Yumashev -- Backsliding Journalist [subhead]

When in the spring of 1997 the president suggested that his "literary
alter-ego" [reference to Yumashev's work on Yeltsin's books] head the
Kremlin staff, the staggered Valentin Yumashev honestly admitted that he
was so taken with journalism that he could live a maximum of six months
without it. And then "creative backsliding" would begin, and he would want
to pull on his old faded sweater and just write and write....
At the time Yeltsin heeded this supplication from a creative man and
agreed that Valya would spend six months as Kremlin castellan, and then
someone else would be found to fill his shoes. They looked for "someone
else" in the president's entourage, but Chief Yumashev has still not been
released. The head of the Presidential Staff has already scribbled three
tearful petitions, saying "for pity's sake, let me go, I'm into my third
term." But all to no avail.
Why has Yeltsin got a stranglehold on this "backsliding journalist"? 
Perhaps without wanting to, Yumashev has over the past year and three
months found himself in a trap, because, strange as it may seem, he is now
a factor of political stability -- both within the Kremlin and around it. 
Were Yeltsin to dismiss Yumashev today the pyramid of checks and balances
that the president has built up so carefully over the past two years would
come crashing down. After all, if we look into it, the parallel and
vertical lines of power have only just been put in place --
Yumashev-Chubays, Yumashev-Nemtsov, Yumashev-Dyachenko, and even, finally,
Yumashev-Berezovskiy. If you take away this link, the entire chain will be
broken. It would be necessary not only to seek new Chubayses and Nemtsovs,
and to bring new relatives into the Kremlin's corridors, but also to
nurture oligarchs who have been brought close to the court.
And then politics has long become a family affair for the First
Family. Yumashev can be said to have the same access to the president's
home as a relative. Were he to leave the post of chief administrator, it
would be necessary to have someone else sitting at the dinner table. And
there are plenty of mouths to feed there as it is. (more) 08 jul pp/ironton
The other day rumors once again came out of the Kremlin about upcoming
dismissals. Clearly, Yumashev had tendered another resignation to the
president. But B.N. is no fool. He has put Valya's journalism sweater in
mothballs and hidden it in the Kremlin trunk. As a destabilizing factor.

Can Governors Oust President? [Subhead]

Hardly.... Although, if you look at it from the other angle,
Yeltsin's angle, what is he thinking, after all? That the dyed-in-the-wool
opposition-minded lower house intends to impeach him -- in other words,
kick him out bag and baggage. And he is keeping his ear to the ground just
in case. He may favor Speaker Seleznev with a medal, he may send a little
letter to the Duma saying "let's implement the anticrisis program on a
constructive basis." But meanwhile on the periphery -- where B.N. no
longer shows his face (Kostroma doesn't count) -- things are going on....
It is said that the other day Yuriy Lodkin, the leader of all Bryansk,
was asked: "Is it true that your Duma has decided to oust the president?" 
He replied: "That's the first I've heard of it." But his eyes were so
If stern noises were coming out of the Bryansk forests alone, that
would be OK. But the legislative assemblies of 12 oblasts -- including
Yaroslavl, Volgograd, Vladimir, and Ryazan -- have simultaneously voiced
their unanimous support in different forms for the State Duma "impeachers."
I would note that these are by no means the "Red guberniyas." What about
the striking mining regions?
The Kremlin is currently patting itself on the back for having managed
to preserve political stability in Russia over the past two years, to
"mothball" the Zyuganov electorate, and to prevent any Caucasian or other
civil wars. Yes, that is true. But, clearly, people on Borovitskiy Hill
cannot see that Russia is no longer the same as it was two years ago. 
Russia is not stupid, and it can see that the situation is getting worse,
most of the president's promises of two years ago have been archived. And
that power vacuum that the capital's oligarchs like to gossip about is
evident everywhere while disenchantment and hopelessness flourish.
Yet further confirmation of that can be found in the inroads into
power being made by criminal elements, whose most outstanding
representatives are Mayor Konyakhin of Leninsk-Kuznetskiy and Mayor
Klimentyev of Nizhniy Novgorod, who has not yet managed to take office.
But the governors know which way the wind is blowing. Most of them,
in public, support Yeltsin. But even among them there are plenty who, when
necessary, will quietly indicate to their regions' legislative assemblies: 
"Don't look to us, do your job the way the Communist Party and Comrade
Zyuganov personally teaches you to." As a result, a rather paradoxical
situation is emerging -- if the Duma can be prevailed upon not to wash the
president's dirty linen in public, dozens of local Dumas will revolt. And
Seleznev's chamber will have no option but to follow their lead. After
all, the Duma supports the people.
Don't forget, Boris Nikolayevich, you have to keep your eyes peeled as
well as your ear to the ground!

By Way of Epilog [subhead]

If the theory about a coming coup had not appeared yesterday it would
have had to emerge today. Or, at the very least, tomorrow. Because the
authorities' impotence cannot go on indefinitely. Two years ago we elected
a sick but strong president. The reason why we are now once again hearing
hints that it is time to "clear the way" for year-2000 candidates, the
reason why coup "scenarios" are being drawn up in dachas near Moscow is
that in those two years the president has made a physical recovery but has
been weakened by his entourage.
Yet he still has another two years in office....


Moscow Times
July 11, 1998 
Yeltsin Courts Generals, Hints at Plot 
By David McHugh
Staff Writer

Facing a financial crisis and strikes over unpaid wages, President Boris 
Yeltsin met top military commanders Friday in the Kremlin and said the 
government was strong enough to resist any attempt to overthrow it. 

"We are strong enough to curb all plans for seizing power and other 
extremist plans," Yeltsin was quoted as saying by Interfax. Extremists 
"will fail, because our power and law-enforcement agencies are very well 

It wasn't made clear where the "extremist" threat might come from. But 
Yeltsin's remarks come at a time when his own officials are saying that 
the country's deteriorating economic condition threatens to bring social 

Coal miners are blocking the Trans-Siberian Railroad, and protests by 
other unpaid workers have been spreading. Many are calling for Yeltsin 
to step down. 

Pavel Felgenhauer, military analyst for the Segodnya newspaper, said 
Yeltsin was campaigning for the military's support. "His overall 
situation is becoming more and more precarious, and the loyalty of the 
armed forces is under question." 

Felgenhauer pointed to Yeltsin's promises to support the military 
financially and his promotion of three key generals. "It just shows how 
desperate his situation is," he said. 

Yeltsin gave a third star to Interior Minister Sergei Stepashin, who 
runs the police and internal troops, and to Anatoly Krapivin, commander 
of the Federal Guard Service, which protects government officials. 
Presidential Security Service commander Anatoly Kuznetsov received a 
second star. 

In a further sign of concern, Yeltsin postponed a vacation scheduled to 
start next week. Last week he skipped a summit meeting in Kazakhstan 
with Chinese and Central Asian leaders to tend to the situation at home. 

Prime Minister Sergei Kiriyenko painted a grim picture of Russia's 
financial condition as he lobbied the Federation Council, or upper house 
of parliament, in support of emergency economic legislation. 

He said that "social tension" was rising and that financial markets 
"have ceased to exist in practice" due to very low trading volumes. 
Investors are awaiting the outcome of negotiations for a bailout package 
from the International Monetary Fund. 

Kiriyenko stressed that the government would pay off its maturing bonds 
at the expense of other budget obligations. 

Pointing out that much domestic debt is owed to Russian banks, 
government default would mean "that banks would not pay out money to 
individuals and enterprises," Kiriyenko said. He was answering a 
suggestion from Primorye region Governor Yevgeny Nazdratenko to call a 
moratorium on paying debts. 

Kiriyenko stressed the burden imposed by short-term debt in urging 
support for the government's plan, which is intended to raise new tax 
revenue, stimulate growth and cut spending. 

The Federation Council, made up of regional leaders, voted 97-4 for a 
resolution expressing general support of the emergency package. The 
bills in the package are still making their way through the State Duma, 
or lower house, and must be acted on separately by the upper house. 

Three Duma bills raising taxes on gambling establishments were defeated 
by the Council, with members saying the Duma had gone too far by 
tripling the tax rate per gambling table. Federation Council chairman 
Yegor Stroyev said a compromise was likely to be reached. 


St. Petersburg Times
July 10, 1998
Government Neglects Investment in Populace 

RUSSIA is on the edge. The crushing burden of the government's reforms 
has led to a wave of protests, and Gazprom's decision to cut off 
indebted power generators like Lenenergo is likely to stoke the flames 
of public resentment higher.

But the government of President Boris Yeltsin cares little for the wants 
of the people it pretends to represent.

Nothing better demonstrates the Russian government's dangerously skewed 
priorities than its choice of representatives to negotiate with the 
International Monetary Fund on the one hand and with protesting workers 
on the other.

Russia's choice as chief negotiator with the IMF is Anatoly Chubais, a 
prominent member of the elite who has a long-standing relationship with 
Yeltsin. To emphasize the gravity of his post, Chubais was also given 
the rank of deputy prime minister. But it sends mere deputy ministers to 
meet with defense industry workers and miners owed millions of dollars 
in back wages.

This regime has done nothing to compensate the tens of millions of 
ordinary Russians who lost their savings in the hyperinflation caused by 
Yegor Gaidar's shock therapy in 1992, yet it has paid $150 million over 
the past two years to compensate French holders of tsarist bonds, which 
were issued 74 years ago. It intends to pay $250 million more.

The government has also allowed mismanagement and corruption to burn 
away money allocated to repay small investors robbed by pyramid schemes 
like MMM, but Prime Minister Sergei Kiriyenko has assured domestic and 
foreign treasury bill holders that the government would never default on 
those obligations.

This attitude permeates government in Russia. In St. Petersburg, sailors 
live on rotting hulks because they sunk their money into Nevsky Prostor, 
a real estate pyramid originally backed by the city. As City Hall shrugs 
its shoulders at those sailors and other investors in Nevsky Prostor, it 
moves to guarantee multi-million dollar loans for a new terminal for the 
high-speed rail link.

Russia's rulers are wrong to bow to the needs of international finance 
while ignoring the needs of its own people. Such a course of action is 
dangerous in the short term and foolish in the longer term. In the 
immediate future, Russia faces the alarming prospect that the people 
will rise up against Yeltsin and his underlings, men who are as isolated 
from the populace as Mikhail Gorbachev and the coup plotters were in 
1991 - as out of touch as Nicholas II in 1905 and 1917, for that matter.

Lest such warnings be thought an exaggeration, think of the fury that 
builds up inside men and women who have worked for up to two years - the 
miners doing so at daily risk to life and limb - without pay, while 
Moscow fat cats live in luxury.

But even if violent social upheavals are avoided, the Yeltsin regime is 
wooing the wrong investors when it follows the IMF's prescriptions. In 
its frantic desire to keep fickle foreigners - and their tens of 
billions of dollars - interested in Russia, the government is turning 
its backs on a population that has an estimated $50 billion hidden under 
mattresses - and which has sent an estimated $200 billion out of the 
country in the past decade. 

And while foreigners will be wary of Russia whatever the Kiriyenko 
government does over the next few months, the country can only be set on 
the path to stable prosperity if its own population is engaged in that 


Vladivostok News
July 10, 1998
Tough times for Primorye

The parade of angry voices on the Vladivostok State Radio Broadcasting 
Company was as ominous as the gray, sodden skies outside. “How can we 
stand it anymore?” asked one woman. “What are we going to do with our 
leaders? They’re useless!” 

Life in Vladivostok has taken a turn for the worse. Already suffering 
from sporadic water supply, the city is experiencing power outages as 
electricity provider Dalnergo cut power after its workers struck for 
back wages. Vladivostok residents joke about not having to travel to 
country homes: Rural conditions have come to them. 

It would be funny if it wasn’t so sad — or so true. Residents feel 
helpless to effect change. The recent postponement of City Duma 
elections is a further blow to citizens’ rights to choose a better 
future for themselves. That Vladivostok has been without a city 
government for five years indicates a lack of commitment to democracy by 
local leaders. City and regional officials have seized on City Duma 
elections as a sparring point and the courts as their battlefield, tying 
up the election process with a string of legal disputes. What a shame 
that the courts, an instrument of justice, are being used to deny 
residents the right to vote. 

“All politics are local,” a famous U.S. congressman once observed. The 
physical and psychological distance between the political scene in 
Moscow and Primorye certainly has something to do with the crisis 
situation here. But it seems that city leaders heap blame on the krai, 
and the krai heaps blame on the federal government, in order to avoid 
facing the real issues of local administration. Residents need to 
pressure local leaders up front, demand accountability, confront them 
with their complaints and criticism, and not expect salvation, or 
handouts, from Moscow.

Dark days in Vladivostok, indeed. 


Next Stop, Ground Zero
By Barbara Starr
July 10 -- Could a terrorist seize a Russian nuclear weapon?

This nightmare scenario is one of the Clinton administration's constant

Now, despite high level assurances by Moscow that all of its nuclear weapons
are secure, Russian and U.S. scientists are joining forces in an effort to
study what could happen if a terrorist set off a nuclear explosion in Moscow's
elaborate subway system.

'Catastrophic Consequences'

The low-profile U.S. Defense Special Weapons Agency is giving the equally
obscure Russian Academy of Sciences High Energy Density Center money to
forecast "catastrophic consequences of a terrorist nuclear explosion in an
underground complex." 

DSWA, which conducts highly classified research on the effects of nuclear,
chemical and biological explosions, would not reveal how much money they plan
to spend on the nine-month project.

And they wouldn't even say that the Moscow subway was the facility to be
studied. A Pentagon spokeswoman later confirmed the details.

The agency says the Russian academy has unique expertise in studying the
impact of nuclear weapons and wants them to study the effect of the weapons
throughout the subway system, including contamination and seismic shock.

How Real a Threat?

Officials have no evidence that anyone with nuclear weapons has threatened the
Moscow subways. But rumors have swirled for months that the Russian government
has misplaced more than 100 suitcase-sized nuclear bombs that could be easily

Current Russian government officials consistently deny that such weapons

U.S. congressional representatives have shown concern that such weapons -- if
they truly exist -- could fall into the hands of terrorists, with public areas
like subways being particularly attractive targets.

Loose Nukes?

Last month, a top U.S. nuclear weapons military official told a press
conference he is relatively unconcerned about Russian nuclear security.

U.S. Air Force General Eugene Habiger, commander-in-chief of the U.S.
Strategic Command, visited several Russian nuclear weapons facilities in June.

"I was told in no uncertain terms this was not an issue," Habiger said of his
discussions with the Russians. 

"When you talk about two 100-ton doors to get through to a national weapons
site, that is pretty significant." 

But some reports suggest that not all of Russia's nuclear stockpile is so well

After thieves stole weapons-grade enriched uranium from the Sevmorput shipyard
in 1993, Mikhail Kulik, a Russian Navy special investigator, derided his
country's security measures for nuclear material.

"Potatoes are guarded better," he said.

Perhaps in response to comments like that, the U.S. spends significant amount
of money each year helping Russia to maintain security over its nuclear

Furthermore, about $500 million annually is funded by the U.S. to keep
thousands of Russian scientists employed so they do not leave Russia to assist
rogue nations such as Iran in its nuclear weapons program. 


Abdulatipov Notes Danger of Nationalism, Fascism in Russia 

Moscow, July 8 (ITAR-TASS)--Former Vice- Premier of the Russian
Federation Ramazan Abdulatipov considers that there is a danger of
nationalism and fascism in Russia.
Speaking at a constituent conference of the Assembly of Peoples of
Russia here on Wednesday, he expressed a view that law enforcement bodies
had not been prepared to eradicate sprouts of this ideology.
He believes that the Assembly of Peoples of Russia will help resolve
this task. One of the aims of the Assembly will be the defence of citizens
from discrimination on the national and ethnic signs, and a support for
distinctive national cultures.
First Deputy of the Secretary of the Security Council of the Russian
Federation Vyacheslav Mikhaylov told reporters that so far Russia really
had no laws which could check fascism and extremism.
People must be punished and parties disbanded for the activities aimed
at sowing strife between nations. As long as there is no such a law, these
phenomena will prosper, Vyacheslav Mikhailov pointed out.
He believes that the Assembly of Peoples of Russia could be one of the
instruments of influence on the Russian State Duma when proposing and even
preparing these or those draft laws.


Date: Sat, 11 Jul 1998
From: "Peter Reddaway" <>
Subject: Letter to The Financial Times

Sir, Readers who compare Prof. Padma Desai's letter of July 10 with mine
of July 8 ("IMF funding for Russia would not solve the country's problems")
will note that she does not dispute my facts. Rather, she imputes to me
views that I did not express.
The key point about today's Russia is that President Yeltsin's
regime has lost its legitimacy. The main reasons are : it is corrupt, and
most of its IMF-oriented economic policies have worked very badly.
Therefore, first, it cannot implement effectively any policies that would
hurt powerful interests, nor can it appeal to the population for support.
Also, logically enough, the range of groups demanding that Yeltsin resign
is growing rapidly.
When (probably not if) Yeltsin does resign, Russians will be able
to choose a new president, who will appoint a new prime minister. Both, we
may hope, will enjoy much more authority than Yeltsin, will be able to
consider fresh approaches and ideas, including Prof. Desai's and Martin
Feldstein's, and will have enough support to actually implement reforms. To
the extent that these reforms are not (Desai's word) "sensible", they will
fail, political consequences will sooner or later ensue, and useful lessons
will be learned.
Most important today, we must let the Russians rule themselves as
freely and democratically as possible - not, as hitherto, under constant
pressure from Westerners whose prescriptions have helped bring Russia to
its present sorry state. Then, over time, real national learning about
economics and politics - impossible under seventy years of communism - can
occur. And the Russian-Western hostility which is now gathering pace can
perhaps be mitigated.
Peter Reddaway, Professor of Political Science, George Washington


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