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Johnson's Russia List


July 15, 1998  
This Date's Issues: 2266  2267  

 Johnson's Russia List
15 July 1998

[Note from David Johnson:
1. Reuters: Press Hails IMF Loan, Warns of Future Debt.
2. Oleg Kalugin: Anatol Lieven.
3. Egor Engelhardt: Arbatov on START-II.
4. AP: Little Enthusiasm for Czar Burial.
5. Reuters: Yeltsin hopes for new Russian president in 2000.
6. Moscow Times: Tatyana Matsuk, ESSAY: In Russia, Women Should 
Not Be Weak or Ill.

7. Financial Times (UK): IMF: Russia's New Deal. John Thornhill asks
whether the IMF's rescue package will save Boris Yeltsin and the rouble.

8. Itar-Tass: Russian Economist Comments on 'Offhand Handling' of
Gazprom. (Dmitriy Lvov).

9. Nezavisimaya Gazeta: Tatiana Koshkareva and Rustam Narzikulov,

10. Journal of Commerce editorial: Once more, with feeling.
("Is Russia worth it?...)

11. Moscow Times: Ivan Watson, Searching in Vain for Jogger's Paradise
in Moscow. (DJ: And now for something completely different. As a sometime
runner in Moscow I can relate to this piece. Any other Moscow runners,
beside Pete Heinlein? Washington runners?)

12. Reuters: Yeltsin rules out early poll, dissolution of parliament.


Press Hails IMF Loan, Warns of Future Debt 
July 14, 1998

MOSCOW -- (Reuters) Many Russian newspapers on Tuesday hailed the 
international financial community's agreement to lend Russia billions of 
dollars in new aid but some warned of the heavy debt leaders were 
passing on to future generations. 

"Delay of the death penalty," read the headline in Nezavisimaya Gazeta. 

"The large credit from the IMF freezes questions about devaluation, 
greatly increases the country's debt and will lead to the dollarization 
of the economy," the daily said. 

International lenders on Monday threw Russia's economy a $22.6 billion 
lifeline in new credits spread over 1998 and 1999 in an effort to help 
the government deal with an acute financial crisis. 

"This is the greatest success of the Russian government," wrote Novye 
Izvestiya. "No one has ever presented our country with such an amount in 
a single decision." 

Segodnya said the International Monetary Fund support was all the more 
significant because of the IMF's own financial limitations. 

"Taking into account the current creditworthiness of the IMF, it (the 
loan) can be considered a good achievement," it wrote. 

But Segodnya -- and many other newspapers -- expressed concern about the 
future burden. 

"Russia will have a lot of money, and many debts," read Segodnya's 
front-page headline. 

Novye Izvestiya wrote that the country's current debts would last for 

"The new billions come on top of the government's $200 billion internal 
and external debt which even our children won't be able to pay off. It 
will be left to our grandchildren," the paper said. 

Deputy Prime Minister Boris Nemtsov last week estimated the country's 
overall debt at $200 billion. 

Some newspapers highlighted the personal achievement for Anatoly 
Chubais, Russia's top debt negotiator, who as the father of the 
country's privatization program has been at the center of controversy 
for years. 

Nezavisimaya, which is close to businessman Boris Berezovsky, an 
outspoken Chubais rival, said the negotiator's success in winning the 
loan would have only a small impact in boosting the economy. 

"The victory for Chubais is not a victory for Russia in the struggle 
with economic crisis," it said. "Even after these billions arrive in the 
country it seems like efforts to end economic depression in our country 
will not end." 

"The IMF aid is just an aspirin tablet which will lower the temperature 
of the sick Russian economy from 40 to 38 degrees (Celsius), but is 
unable to cure it." 

The opposition Sovietskaya Rossiya newspaper raised the hope for the 
resignation of President Boris Yeltsin on its front page and expressed 
little faith in the impact of the new loans. 

"Experts say that even if Russia succeeds in getting the IMF 
stabilization credits worth $15 billion, it will not save the ruble and 
it will have to be devalued, leading to an immediate rise in prices 
inside the country," it said. 

In some newspapers, the credits did not receive top billing. 

Financial newspaper Kommersant Daily devoted its largest headline to 
France's joy over winning the World Cup. 

Novye Izvestiya ran a large color photo above the fold on the front page 
showing hundreds of youths kissing in a park -- a celebration unrelated 
to the financial world's helping hand. 


Date: Tue, 14 Jul 
From: Oleg Kalugin <>
Subject: Anatol Lieven

As a Russian national and citizen presently residing in the USA 

I salute Anatol Lieven's lucid and persuasive argumentation on the 
Chechen War and and Russia's current problems in Mon. July 13 JRL.

Excellent piece!

Oleg D. Kalugin


From: "Egor Engelhardt" <>
Subject: Arbatov on START-II
Date: Wed, 15 Jul 1998

Dear David,
Please add to your list:

Alexei G.Arbatov's Duma's Defense Committee Deputy Head answers on START-II
ratification are just posted on "Rossija i Zagranica" forum
Thank you in advance
Egor Engelhardt
The moderator


Little Enthusiasm for Czar Burial
July 14, 1998

YEKATERINBURG, Russia (AP) - After seven years of confusion and debate, the
bones of Russia's last czar and his family are about to leave this Ural
Mountains city for burial in St. Petersburg.

Not everyone is going to miss them.

``What funeral?'' asked Sergei Koptelov, a taxi driver in his 20s, raising his
eyebrows in surprise Tuesday. ``Didn't they bury them the other day?''

Koptelov isn't alone in his lack of enthusiasm about the elaborate plans for
ushering away the bones of Czar Nicholas II and his family, who met their end
here at the hands of Bolshevik executioners.

Throughout Yekaterinburg, many people cannot quite figure out - or care about
- what is going on.

Despite comprehensive genetic tests carried out in Russia, Britain and the
United States, the Russian Orthodox Church has refused to recognize the bones
- found in a pit outside town, and dug up seven years ago - as those of the
royal family, and has tried to minimize its role in the funeral.

President Boris Yeltsin decided to snub the burial after the patriarch of the
Russian Orthodox Church, Alexy II, refused to take part.

``Local authorities lost all their interest in the funeral after Yeltsin
decided not to attend,'' said Mikhail Sinitzin, 35, a soft-spoken physician,
standing in the middle of a dusty plot of land.

Here, a small wooden chapel marks the site of a house where Nicholas, his
wife, Alexandra, and their family spent their last weeks in captivity before
being executed in a basement on July 17, 1918.

``Look at this desolation,'' Sinitzin said angrily, pointing at a deep dirt
track left by a truck that circled the chapel. ``They did not even care to
spruce it up.''

Yekaterinburg governor Eduard Rossel fought hard for the royal remains to be
buried in his city. He lost, and on Wednesday, the royal skeletons will be
taken from the Yekaterinburg city morgue and placed into small wooden coffins.
Hearses will drive them to the Church of the Ascension of the Lord.

After lying in state overnight, they will be loaded into hearses for the drive
to the airport Thursday. They will be flown to St. Petersburg and taken in a
cortege to the Peter and Paul Cathedral, the traditional resting place of
Russia's czars.

The funeral will be held Friday, exactly 80 years after the family's deaths.

In St. Petersburg, preparations neared completion Tuesday as members of the
Romanov clan, which ruled Russia for three centuries, arrived from their homes
in exile all over the world.

``We want to make sure that we are not only burying the last emperor of
Russia, but that we also begin burying the horrid part of our country's
history: the misery, the sacrifice, the losses of life suffered by Russians of
all social classes, not just the czar,'' said Nicholas Romanov, the 75-year-
old head of the Romanov Family Association.


Yeltsin hopes for new Russian president in 2000

MOSCOW, July 14 (Reuters) - Russian President Boris Yeltsin on Tuesday again
implied he would not be a candidate for re-election in the year 2000, saying
he hoped another person would take over the reins of power. 

``I would like Russia in the year 2000 to begin work peacefully with a new
president,'' the Kremlin quoted him as telling parliamentary leaders. 

Yeltsin, now serving his second term as Russian president, was first elected
in 1991. 

The constitution bars a third term, but some Yeltsin supporters say he could
still run again because he was first elected under the old Soviet

Others say such suggestions are aired to keep Yeltsin from being perceived as
a lame-duck president. 

Yeltsin was speaking on Tuesday during a session at which he was trying to
convince parliamentarians to support a package of economic austerity measures
to be debated later this week. 

For months, Yeltsin has been sending conflicting signals over his plans for
2000. Russia's Constitutional Court is due to rule later this year if he is
eligible to run again. 


For more articles from The Moscow Times, check out their website at

Moscow Times
July 15, 1998 
ESSAY: In Russia, Women Should Not Be Weak or Ill 
By Tatyana Matsuk
Tatyana Matsuk is a scholar at the Academy of Sciences Institute for 
Employment Studies. She contributed this essay to The Moscow Times. 

In Russia, you should not be weak -- especially if you are a woman. When 
I hear the saying, "A sister should be rich, and a wife strong," I am 
ashamed that I am Russian. 

But it is precisely women who among themselves repeat this byword again 
and again, when they speak about men, scornfully calling them all 
"muzhiki," a term variously translated as louts, clods or bumpkins. 

"That's the way muzhiki were created. They don't like it when women get 
sick. This must be hidden. As for purely women's illnesses, it is better 
never to speak about them at all." This is the way the majority of 
middle-age and elderly woman think. And they vigorously thrust their 
advice and experiences on the young. This is in a country where wars, 
all kinds of deprivation, drunkenness and a horribly polluted 
environment have led to a situation in which an absolutely healthy 
person is as scarce as hen's teeth. 

When I lay in the hospital as a young woman, my neighbor in the ward 
happened to be a typical Russian beauty of about 40 years old. She 
looked like the very picture of health. But she had rheumatic heart 
disease and serious complications after multiple abortions. On various 
days she was visited by her husband and a young lover. She made a show 
of being cheerful, and neither of the men "in love" with her seemed 
particularly interested in knowing why she was in the hospital. They 
only asked her when she would get out. She considered that this is how 
it should be. 

I myself almost ended up being forced to believe that this is the order 
of things. For a year, I had been seeing a young man who, in the words 
of his close family and friends, cherished the thought of marrying me. 
But when I ended up in the hospital for a month, he did not once come to 
visit. He later told me that there was no longer any reason to meet. A 
common acquaintance told me later that the wife of his friend had been 
quite ill, and that he didnot want to put up with a similar 

As a result, this champion of health married only 10 years later, trying 
to throw his mother and sister out of the apartment that they lived in 
together. His sister probably turned out to be insufficiently wealthy. 

Should he be blamed, however, for everything that happened? In acting in 
this way, he was only meeting the expectations of the majority of the 
female population of his country. Here, women even go so far as not to 
tell their husbands when they have had an abortion. It is as if their 
husbands have no relation to the pregnancy or that the adult woman is 
simply eliminating the consequences of his childish pranks. 

Public opinion is such that when a woman raises children on her own or 
takes care of a sick husband, this is her duty. But when a man does the 
same, then he is a hero. 

One of my acquaintances is now 90 years old. After the war, her husband 
left her with two small children to care for without a job. He worked as 
an agent of the NKVD, a predecessor to the KGB, and earned a decent 
living. In the words of the old woman, they were happy up until the war. 
Only her husband did not like it when she became sick. "He would come 
with his comrades and tell me to get up, lay the table and then play the 
guitar and sing for them. Of course I did so," she told me. In my 
opinion, this is simply monstrous happiness. 

Yet another very strong and younger beautiful woman was married to a 
minister of one of the former European Soviet republics. When she was 
diagnosed with cancer and had to spend a long time in the hospital, her 
husband lost his head. He was not used to taking care of himself on his 
own and found another woman. When she returned from the hospital she did 
not blame her husband. Rather, she blamed herself for not having enough 

But I was most astonished by a story I was told recently by a certain 
Natasha. She was formerly a fashion model, and her husband a successful 
photographer. They lived mostly in Paris. Then they were struck by 
misfortune. Their child died in an automobile accident, and Natasha 
ended up in the hospital with multiple fractures. Her husband almost did 
not suffer from the accident. He brought her a document to sign to file 
for divorce while she was still lying in a cast. 

Later she had a high-level official for a friend -- a Duma deputy. He 
told Natasha that she was a "breath of fresh air from dirty and 
difficult work." And he came to see her only when he needed this "fresh 
air." But after so many traumas, it was difficult for Natasha even to 
take care of herself. It is for this reason that, even though she loved 
this friend, she went to work for a marriage agency in order to marry a 
Frenchman. She was simply tired of her life and wanted at least some 
kind of humane relationship. 

I recently happened to see a piece of reporting on television that 
showed a pretty young American woman who considered it prestigious to 
serve as a Marine. It can be inferred from her words that this was 
basically because lying with your nose in the mud is very exotic. But 
for a Russian woman, mud is never exotic, nor is hard physical work. 
Life conditions all too often force men and women to look upon one 
another not as ends in themselves, but as a means and even as an unpaid 
labor force. Can there be any humanity in such a relationship? 

When a foreigner puts a marriage announcement in the newspaper, he lists 
all of his many qualities in order to attract women. If you look at the 
advertisements of Russian men, it is usually the other way around. The 
candidate for a woman's love concentrates his attention on what he 
expects from the chosen one. She should be young, beautiful, smart, 
kind, good at housekeeping and prepared to share with him all the 
burdens of life. And she must be healthy. 

When marriage advertisements first appeared in Russian newspapers, men 
wrote directly in this way. Some, it is true, were less strict in their 
selection and indicated that "you can wear glasses." Or even: "you can 
have minor physical defects." Fortunately, it would not enter the head 
of anyone in my circle of acquaintances to respond to such an 
announcement. And I hope that there will be more and more women like 
this with every year. 

The psychology of men is also beginning to change. This is in no small 
part owing to the developing boom in Russian brides in the West. But men 
are not the only ones whose attitudes need changing. The more Russian 
women consider it normal to view men not as muzhiki, but as gentlemen, 
the better it will be for us all. 


Financial Times (UK)
July 15, 1998
[for personal use only]
IMF: Russia's New Deal
John Thornhill asks whether the IMF's rescue package will save Boris 
Yeltsin and the rouble

It started as a fine idea. The creation of a market in Russian treasury 
bills (called GKOs) seemed a sensible way to bring Russia's financial 
system into the modern world. Before 1993, the government had financed 
its budget deficit by printing money, which constantly threatened to 
stoke up inflation or even hyper-inflation. The sale of debt gave the 
government an instrument to slay that particular dragon.

But it all proved characteristically Russian: good intentions were taken 
to extremes and went disastrously wrong. The government's reckless 
issuance of short-term domestic debt produced a crisis of investor 
confidence when Russia was struck by yet another round in Asia's 
financial turmoil.

The ensuing turbulence threatened to undermine the country's entire 
public finances, devour the central bank's hard currency reserves, and 
force a catastrophic devaluation of the rouble. Fears spread that a 
collapsing currency would devastate the banking system, spark renewed 
inflation, and destroy what little faith the Russian people retained in 
the competence of their government.

That is bad, of course, but similar problems have struck other Asian 
countries and in Russia itself governments come and go. What makes the 
difference in Russia is its strategic significance. Speculation has 
grown that President Boris Yeltsin himself could be forced out of 

Politicians have even drawn parallels with the events of August 1991 
when President Mikhail Gorbachev was deposed by Communist hardliners, 
hastening the disintegration of the Soviet Union.

Could Russia, still riven by regional divisions, follow that course? 
Might the deadly mixture of economic chaos, public anger and sense of 
national humiliation that fuelled fascism in Weimar Germany flare up in 
Russia now?

Such fears appear to have been taken seriously enough in Washington last 
week for the US administration to deem the situation in Russia to be a 
global strategic threat - and a potential political embarrassment to 
President Bill Clinton who had agreed to visit Moscow in September.

Last Wednesday, Russia's GKO market melted down. To sell its treasury 
bills, the government was forced to increase interest rates to over 100 
per cent. That was clearly unsustainable and the US Treasury pushed the 
International Monetary Fund into rapidly concluding a massive package of 
financial support.

On Monday, the IMF announced that it was to lend an additional $11.2bn 
to Russia this year, plus $2.6bn in 1999. When existing loan agreements 
are included, the IMF, World Bank and the Japanese government will make 
$22.6bn of finance available to Russia by the end of next year. That is 
the equivalent to some 5 per cent of the country's annual gross domestic 

Yegor Gaidar, the former prime minister who remains influential behind 
the scenes, says the US Treasury played a "constructive" role in 
speeding the negotiations. "It was always evident that the support would 
be there. But we were afraid that if all the bureaucratic procedures 
were followed then we would only get the money one minute too late."

For Russia, the critical question now is whether the rescue package, 
which was so strongly driven by international political imperatives, is 
economically workable. In the words of one adviser, the Russian 
government has now to prove that this financial support is not just 
another shot of vodka for an alcoholic but is an anaesthetic before 

Russia's government, headed by the youthful Sergei Kiriyenko, has been 
brushing up on its surgical techniques. It has drawn up a tough 
"anti-crisis" programme. If implemented successfully, the programme 
would go a long way to restoring the health of Russia's public finances.

The most pressing issue is to restructure the $70bn GKO market to enable 
the government to lower stratospheric interest rates. The government 
yesterday is announced a scheme to do this by enabling investors to 
exchange their rouble debt for a hard currency instrument. That should 
help foreign investors, who hold some $20bn of GKOs, feel more 
comfortable about Russian assets.

At the moment, the government is running a primary budget surplus 
(excluding interest payments). If it can continue to do that, it will 
soon be able to start shrinking the overall GKO market. Once the IMF 
package is approved, the price of GKOs should rise because much of the 
currency risk now pushing the price down will disappear as concerns 
about devaluation recede. That in turn will lower the yields and 
interest rates. Yields fell yesterday from over 130 per cent to 50-60 
per cent; Mr Gaidar believes they could fall as far as 15-25 per cent by 
the end of the year. That would boost liquidity in the banking sector 
encouraging Russia's banks to increase lending to productive companies.

It is a virtuous circle. But the problems in the GKO market are not just 
financial peculiarities: they are manifestations of structural faults in 
the real economy. These must now be addressed.

There is a national consensus that the federal government's budget is a 
mess. On the revenue side, Russia is dogged by an inefficient and 
narrowly-based tax regime, which places a heavy burden on the top 100 
corporate taxpayers while leaving many individuals untouched.

Even before the latest IMF agreement, the government was committed to 
pushing a new tax code through parliament that would lower tax rates and 
broaden the base. This week, parliament seems likely to adopt the new 
tax code and a host of other revenue-raising measures.

No less of a revolution is needed on the spending side. While Victor 
Chernomyrdin was prime minister (1992-98), the Russian bureaucracy 
exploded in size. It is a bizarre fact that Russia, which is half as 
populous as the former Soviet Union, employs more bureaucrats.

The government intends to cut Rbs75bn of budgeted spending in 1998 and 
slash the government payroll by 200,000. Ministers argue it is better to 
finance a small state properly than a big one poorly. Besides, they 
believe, many government employees are "phantom" workers who have more 
lucrative employment in the private sector so will not miss their civil 
service jobs.

If implemented as planned, the government's drastic fiscal tightening 
should mean Russia runs a primary surplus of 3 per cent of GDP next 
year. A host of structural reforms championed by the World Bank, such as 
regulating the utilities and oil and transport industries more 
effectively, should stimulate greater competition. The government also 
promises to conduct more fair and open privatisations.

This week, parliament will vote on the government's anti-crisis 
programme, which has been strongly criticised by the Communist party, 
the biggest faction in the Duma. The lower house of parliament has 
already diluted important measures. Mr Yeltsin has said he is prepared 
to implement the programme by presidential decree if necessary. But 
yesterday he wooed senior parliamentary leaders, seeking to mollify the 
Communists by saying he did not intend to seek another presidential 

Even assuming the programme is passed into law somehow, there remains 
the question of what effect it will have on Russia's long-suffering 
population. Already this year, the scourge of wage arrears has spread in 
both the public and private sectors. In the past, the Russian government 
has cut spending by the simple and brutal expedient of refusing to pay 
wages. The trade unions fear the government's austerity programme will 
fall heavily on ordinary workers.

Most wage arrears are the fault of private companies, not the 
government, but even these could be exacerbated by the tax squeeze. 
Vadim Borisov, Russian co-ordinator of the International Confederation 
of Free Trade Unions, says many cash-starved companies will in practice 
have choose between paying their taxes or their wages. "The government 
is trying to get more wool from the sheep but they forget the sheep is 
nearly dead," he says.

The political tensions in Russia are likely to become more extreme as 
parliamentary elections roll around next year and presidential ones in 
2000. Mr Yeltsin is standing behind his government at present but has 
changed his mind in the past when the political pressures have grown too 
intense. His prime minister has no independent political authority and 
relies entirely on the president.

Even some of Mr Yeltsin's steadfast allies have begun deserting him. On 
Monday, Dmitri Ayatskov, the influential governor of the Saratov region, 
forecast the wave of social discontent across the country would 
"overwhelm the government" and could even sweep away the president. 
Already, the jockeying for advantage inevitable before a presidential 
election is increasing the importance of likely presidential candidates 
such as Yuri Luzhkov, Moscow's populist mayor, and Alexander Lebed, the 
former general who was recently elected governor of the Siberian region 
of Krasnoyarsk.

In such a feverish climate, it might seem unlikely that a government 
headed by a powerless young prime minister and backed by a fickle 
president can successfully conduct an economic revolution in a country 
that has suffered years of slump.

But that was more or less the position of Mr Gaidar in 1992, and he rose 
to meet the seemingly impossible historical challenge. The international 
financial institutions have concluded that Mr Kiriyenko is worth a $22bn 
bet and provided him with a defence of the rouble that looks as robust 
as it can be. He may yet fashion a Slavic New Deal.


Russian Economist Comments on 'Offhand Handling' of Gazprom 

Moscow, July 11 (Itar-Tass) -- The offhand handling of the gas
monopoly Gazprom, even if indebted to the federal budget in taxes, can be
bad for the Russian economy, said Dmitriy Lvov, a an Academician secretary
of the economics department of the Russian Academy of Sciences.
"A book-keeper debt-credit approach to Gazprom can lead to serious
consequences for the Russian economy," he said in an interview with
"Gazprom is now a determinant sector in the domestic economy,
providing the bulk of Russia's revenues. The government should understand
that one must not kill the hen laying golden eggs. This is crucially
important," Lvov said.
He said a way of settling the Gazprom-government dispute over the
company's debt backlog is offset payments, given that Gazprom's debt to the
federal budget is much less than customers, including budget sector
organisations, owe to Gazprom.
Lvov said the development spending and investment in the gas industry
should be deleted from Gazprom's taxes.
"If this is not done, reduction in gas deliveries to internal and
external markets is expectable in the short term," he said.


>From RIA Novosti
Nezavisimaya Gazeta
July 14, 1998
By Tatiana Koshkareva and Rustam Narzikulov

A major IMF loan makes it possible to postpone the
rouble's devaluation, swells the Russian debt and increases
the Russian economy's dependence on the US dollar.

Anatoli Chubais has scored his latest and perhaps most
vivid political victory. His extremely difficult two-week
negotiations with an IMF mission have succeeded. The IMF has
virtually agreed to furnish Russia with a $12.5-billion loan.
Chubais' victory doesn't herald Russia's victory in its
struggle against the economic crisis. One has every reason to
believe that the current economic depression won't be
overcome, even after this country receives billions of
dollars. The IMF aid package resembles an aspirin pill, which
will bring down the temperature of the sick Russian economy
from 40 degrees to 38 degrees, ultimately failing to cure it.
The IMF loan would stabilize the Russian financial system
in a rather natural manner and for a short while. This can be
explained by the fact that national markets have been
expecting the rouble's imminent devaluation over the last two
months, with capitals fleeing West en masse. And now the IMF
has signalled market players that they don't have to fear the
rouble's devaluation for at least the next two-three months.
The concerned investors, reassured by yet another dollar
injection from Washington, would once again channel their
money into Russian securities. The governments of
industrialized countries have also got the message. It's
therefore no coincidence that the Japanese Government's aid
package has become the second step during the stabilization of
the Russian financial system.
One should also expect that private Western commercial
banks will loan money to Russia in the foreseeable future.
Summing up, the entire loan for 1998 now totals nearly $15
billion, eventually reaching $23 billion (throughout 1999).
Consequently, the Russian external debt will soar by this
amount pretty soon.
Paradoxically enough, but in the long-term perspective
Western aid spells just about the same negative consequences
as devaluation does. The allocation of credits depends on
specific pre-conditions, which pursue the same goal as
devaluation does. The federal treasury should be filled at the
expense of tax-payers, the nation's population, first and
foremost. Devaluation aims to confiscate the population's
rouble savings virtually overnight, i.e. 100 roubles would be
worth just 50 roubles after devaluation. The Government would
be expected to introduce a sales tax, raise VAT (Value-Added
Tax) levels and increase income-tax rates, thereby conducting
the same confiscation-style policy because otherwise it can't
hope to obtain all those multi-billion-dollar Western loans.
But in case of devaluation the Cabinet won't have to repay its
debts (plus interest) after 18 months.
Moreover, all-out Western aid is worse than the rouble's
devaluation. A sharply depreciated rouble would enable some
industries to improve their sectoral performance by cutting
back on specific production outlays (say, cheaper labor and
raw materials). Western credits have nothing to do with the
real sector of the economy. Theoretically speaking, the
disbursement of such loans doesn't differ much from other
borrowing mechanisms which existed a year ago, two years ago
and six years ago. Money was allocated not to facilitate a
Russian industrial recovery, but rather to buy Western-made
goods. Those were the so-called tied credits. For its own
part, the IMF doesn't care a bit about the Russian industry.
The IMF aims to get its money (plus interest) back, imposing
its own financial-stabilization concepts upon any particular
"recipient" nation.
It's pretty hard to refute such arguments. The thing is
that the bulk of the forthcoming $12.5-billion loan will be
transferred to the Russian Central Bank's accounts (so as to
exert psychological pressure on the market and to convince
market players that the Central Bank boasts immense reserves).
And the rest of the loan will be used to repay previous
domestic and foreign loans. Therefore all the money will be
spent on maintaining the so-called financial stabilization.
However, our six-year experience shows that such
"stabilization" has nothing in common with the state of
Russia's economy as a whole. An absurd situation would emerge
once again, with a strong rouble towering proudly over the
ruins of the real sector of the economy.
However, the rouble won't necessarily prosper. The
Russian Ministry of Finance has come up with an option for
replacing present-day rouble short-term government securities
with their dollar equivalents. This measure is expected to
preclude Western traders from shying away from rouble-backed
securities, fearing the rouble's possible devaluation. Should
this plan be implemented, the state will "dollarize" its
entire public debt. In other words, the rouble's reputation is
so bad that the Russian Government and the Central Bank, which
had talked about a fully convertible rouble only two years
ago, continue to oust it from circulation with the dollar's
help. From the political point of view, the Russian economy's
dollarization would be tantamount to this country's becoming a
53-rd state of the USA.
And now a few words about politics. Nezavisimaya Gazeta
has learned that the IMF has made its $12.5-billion loan
dependent on specific economic and military-political
pre-conditions. Apart from that, the IMF money is not intended
to pay wage arrears to budget-dependent organizations.
Therefore the projected loan won't defuse current rising
social tensions, failing to stabilize the increasingly shaky
Russian political system.
And that's not all. True, the Russian Government and the
IMF have reached agreement on all main issues. However, the
IMF board of directors alone will finally decide on the loan's
disbursement. According to Chubais, the IMF board will
apparently meet July 20. Consequently, at best, the IMF money
will be transferred to Russian accounts in mid-August (despite
the Cabinet's assurances to the effect that the loan will be
obtained late this July). The Russian Government will get 50
percent of the entire loan, or $6.5 billion. The remaining $6
billion will, as usual, be disbursed in the form of tranches
until the end of the first quarter of 1999. 
The problem is whether the Central Bank of Russia and the
Finance Ministry will manage to retain their domestic
resources until mid-August? The Ministry of Finance keeps
spending every Wednesday approximately $1 billion on the
repayment of GKO debts. The Ministry of Finance even had to
take money from the federal budget during the last few
auctions (in a bid to repay the afore-said GKO debts). As far
as the Central Bank of Russia is concerned, its gold and
hard-currency reserves continue to shrink by an impressive
$800-900 million each week ever since late June. Such
extravagance can deplete Central-Bank's reserves by
mid-August; in fact, such reserves may simply vanish into thin
air by that time.


Journal of Commerce
July 15, 1998
[for personal use only]
Once more, with feeling

Is Russia worth it? No country on the road to economic reform has been 
more disappointing -- or more infuriating -- than erratic, unreliable 
Russia. Now Boris Yeltsin and company have requested -- and received -- 
another multibillion bailout package.

Does Russia deserve it? The answer is no, but the debate is more 
complicated than that. Without help, Russia faced near-certain economic 
collapse, which would have set back its economy -- and perhaps its 
democracy -- for years. With help, Russia has a chance, a window of 
opportunity in which to revive its economy. That window may yet slam 
shut, but standing idly on the sidelines was not a good option for the 
world's rich countries. The task now for the West, as it doles out the 
new loans, is to push Russia hard to carry out the promised reforms, and 
hope its leaders have the courage to follow through.

No one, not even Russia's strongest supporters, can be very confident 
this will happen. The $17.1 billion in new loans pledged to Russia this 
week by the International Monetary Fund and the World Bank come with 
several conditions, including lowering the crippling budget deficit, 
overhauling the tax system and improving conditions for investors. But a 
quick look over the past few years shows Russia has never fully complied 
with all of the conditions of past IMF loans.

The environment is no more certain this time. The Russian Parliament is 
still controlled by stiff-necked nationalists and communists who have 
stalled major reforms. And with living standards stagnant or falling 
throughout Russia, unemployment rising and many workers going unpaid, 
the prospect of tough government cutbacks is not appealing.

So why loan Russia more money if the outlook is so dim? Because the 
alternative is even worse. Russia faces the prospect of a complete 
collapse of its currency if foreign investors, who hold about $20 
billion of Russian debt, begin selling rubles. Indeed, markets were 
already worried because Russia had less than $15 billion in central bank 

If Russia's currency dissolved, the economy would be reduced to a 
shambles. Many of Russia's banks would be instantly insolvent. Inflation 
would rise, perhaps dramatically. Any hope of economic growth would be 
put off far into the future.

The damage would not be confined to Russia. Other former Soviet states 
with close links to Russia, like Ukraine, would come under presure to 
devalue. Eastern Europe also would be affected, as would powerful 
Germany, which has about $50 billion invested in Russia.

Most disturbing would be the political consequences. It's doubtful 
Russia's reform-minded government could survive a currency collapse. The 
new leaders certainly would not be economic reformers. Indeed, 
dissolving the economy might give one of Russia's preening populists or 
former generals a chance to take over.

The new cash from the IMF just might prevent all this from happening. 
Russia, remember, had been making some economic gains in recent years. 
The economy grew for the first time in 1997 -- though just barely -- 
inflation had come down, and the stock market was booming. More 
important, foreign direct investment in Russia in 1997 was at least 
twice the level of prior years. Russia, under Prime Minister Sergei 
Kiriyenko, also has its most reform-oriented government in years.

So what happened? In part, a series of external shocks that can't 
totally be blamed on Russia. The Asian economic crisis made investors 
everywhere leery of emerging markets. The decline in world oil prices 
also hurt Russia badly.

An optimist would say the IMF's loans will fill in the gaps created by 
these unexpected shocks, stabilize Russia's currency, allow the 
Parliament to pass tax and budget reforms, and give investors the 
confidence to return to Russia. Perhaps. Certainly, the IMF should not 
release any of the money unless Russia honors its pledges. But it's just 
as likely that reforms will languish, Mr. Yeltsin will fire and hire a 
new government and nervous investors will steer clear of Russia.

It comes down to this: Russia simply may be too big to fail. That's a 
dismal way to make economic decisions, but there may not be much choice. 


Moscow Times
July 15, 1998 
Searching in Vain for Jogger's Paradise in Moscow 
By Ivan Watson
Special to The Moscow Times

Russian women have a reputation for mothering. To young Americans who 
move here, this is a double-edged sword. With every helping of fried 
meat and cucumbers swamped with heavy cream, we are fed gruesome details 
of shocking crimes in the suffering cities of New Russia. 

Fortunately, a stint on a high-school cross-country team taught me how 
best to cope with "light" breakfasts of smoked fish rolled in fried 
bliny and garnished with egg-ham-cucumber-mayonnaise salads: running. 

In addition to keeping the foreign food off my love handles, I long ago 
learned that running -- along with apartment-hunting -- is also a 
fantastic way to learn about a foreign city. Herein lies the problem. 

When I first stepped out onto the streets of Moscow in Asics running 
shoes, green soccer shorts, and a T-shirt, I immediately saw myself as 
the obvious prey of every gangster, desperate drunk and bored, 
delinquent teenager in the Russian Federation. 

Suffice to say, during my first several athletic outings, I felt the 
need to adopt an intense don't-mess-with-me glare while grunting and 
sweating past children and old ladies relaxing on sunny park benches. 
But so far, only dogs -- whether they be the enormous rottweilers 
walking unleashed beside their masters or the packs ofstarving strays 
limping around the city -- have merited this intimidating posture. 

Once I conquered my fear of everything that moved, however, I began 
discovering Moscow's life and culture through the sweaty eyes of a 
gasping runner. 

Since the former Soviet Union's vaunted culture of athleticism provided 
a perennial rival to the Americans in the Olympic Games, and since 
athletic complexes and stadiums dominate portions of every Russian city, 
one would think runners might be common on city streets.Only once did I 
pass a another runner, a Scandinavian-looking woman who looked 
positively spooked at my sudden appearance. The rest of the time, my 
exertions consistently turn surprised and curious heads and occasionally 
inspire the comment "sportsman." Sometimes, when not pointing at me, 
children playing in parks venture to "race" me for a few meters. 

In spring and summer, the abundant, often-untended greenery in this 
Russian capital rivals cities such as New York, Boston and Paris. Behind 
banks of aging, concrete apartment buildings lie countless pockets of 
lush parks and trees. A pedestrian, tree-lined boulevard also makes up 
one of the three concentric rings that divide the city, and runs 
conveniently close to Orthodox onion-domed churches and the cream of 
Moscow's architecture. 

Perfect for walking dogs, pushing the kids in a stroller, or sipping a 
Baltika beer in the early evening, the Boulevard Ring is unfortunately 
not made for runners: Busy traffic intersections interrupt the leafy 
parks every 400 yards. 

Intersections: I was initially impressed at how respectful Russian 
pedestrians were of traffic signals. The reason? Russian drivers have no 
respect for anything at all. Drivers accelerate when a pedestrian dares 
to cross the street. This is true no matter how quiet or traffic-free 
the street may be. My impatient decision to jaywalk and run across busy 
intersections thus becomes an adrenaline-rushed turkey shoot with me as 
the target. 

Anyone who chooses to do more than run around the same half-acre park 
for 45 minutes will inevitably have to cross a street. The distance 
across many of Moscow's streets, however, is easily the length of a 
Manhattan block. To preserve the lives of their pedestrian citizenry 
from vehicles and the rigors of winter, Moscow's 20th-century rulers 
built long underpasses. Today, many of these caverns are lined with 
shops. If runners are an unexpected sight above ground, they less 
welcome sprinting through these dark tunnels, past shoppers browsing in 
front of compact disk and flower stands. 

There is so much to be said about contemporary Moscow, a city that has 
completely transformed at least twice in the past decade. My first and 
most selfish priority, though, is to find that hidden Shangri-La where 
runners are welcomed, where they can stretch, run their timed miles, and 
maintain a maximum heart rate without risk. Until the day I find that 
jogging ghetto (or until I find that pretty Scandinavian jogger) I will 
continue exploring Moscow and Russia the best way I know how -- on 
sneakered foot. 


Yeltsin rules out early poll, dissolution of parliament

MOSCOW, July 14 (Reuters) - Russian President Boris Yeltsin, trying to win
support from the opposition-led parliament for a package of laws sought by his
government, on Tuesday ruled out dissolution of the chamber and early

``We are all one team,'' Yeltsin's press secretary Sergei Yastrzhembsky quoted
him as telling leaders of the State Duma or lower chamber of parliament.
``There will be no coups, changes in the constitution, no dissolution of the
State Duma, no early elections.'' Yastrzhembsky's remarks were published by
Interfax news agency. 


MOSCOW, JULY 14 (from RIA Novosti's Alexei Meshkov) - Any
steps toward Latvian, Lithuanian and Estonian NATO membership
will make Russia thoroughly reconsider its relations with the
Organisation despite all pains it took to get these contacts
going, Vladimir Rakhmanin, Russia's Foreign Ministry press
spokesman, said to a briefing to comment statements made by
Strobe Talbott, US Undersecretary of State, as he visited the
post-Soviet Baltic countries.
"Nothing can be farther from the truth," he described Mr.
Talbott's assumption made in Lithuania that Russia was gradually
putting up with Baltic prospects of joining NATO. Even more
far-fetched was the Undersecretary's remark that it was wrong to
demand of any country moves clashing with its own ideas of
citizenship and contemporary democratic society. This statement
clashes with the policies the USA itself is perpetrating and
advertising, said Mr. Rakhmanin.
Russia expects the United States to avoid double standards
on the issue and eventually prefer principled stances clear to
the entire world. The implementation of the US-Baltic charter is
not to be an exception, stressed the diplomat. 


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