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Johnson's Russia List
 

 

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

 Johnson's Russia List
#2267
15 July 1998
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Greg Myre, Russia Economic Bailout Debated.
2. Washington Post letter from Paul Saunders: Boris Yeltsin's Milch Cow.
3. Ray Smith: Liewen and Matsuk.
4. Cali Ruchala: Alexander Bovin's Isvestia Piece (JRL#2265).
5. Lance Crist: Running in Moscow.
6. Moscow News: Sujata Rao, NEWS ANALYSIS: Russia's Debt Seen Under
Control.

7. Journal of Commerce: Michael Lelyveld, As Gazprom goes, so goes Russian
bailout. IMF says energy firm must pay taxes in cash.

8. RIA Novosti: RUSSIA'S PRE-1997 IMPERFECT LEGISLATION ENABLED SOME
WINNERS OF INVESTMENT TENDERS FOR THE SALE OF STATE PROPERTY TO 
EVADE MEETING THEIR OBLIGATIONS.

9. Christian Science Monitor: Judith Matloff, Risky Game in a Russian
Republic.Millionaire president of Kalmykia caught in swirl over death of biggest
critic.

10. Washington Post editorial: Another Russian Bailout.
11. Los Angeles Times editorial: Lifeline for Russia.
12. RIA Novosti: VALENTIN KUPTSOV SLAMS RUSSIAN MASS MEDIA.
13. Reuters: Lawyer Targets New Religion Law.] 

*********

#1
Russia Economic Bailout Debated 
By Greg Myre
July 15, 1998

MOSCOW (AP) -- The hard-line parliament debated President Boris Yeltsin's
economic austerity plan today, and its verdict could determine whether
international lenders proceed promptly with a huge bailout package for
Russia. 
Russia is in urgent need of cash, and it reached tentative agreement
Monday for $17 billion in new loans to help stabilize financial markets
that have been in a tailspin for months. 
But the International Monetary Fund and other lenders will be reluctant
to hand over the money if Russia does not deal with chronic financial
problems, such as a bloated state budget and a porous tax collection system. 
Parliament's lower house, the State Duma, held a special session today
to consider more than 20 proposals from Yeltsin's administration. Communist
lawmakers and other opponents have been resisting spending cuts and tax
increases. They say the government should be spending more money, not less,
to help struggling Russian citizens and industries. 
Parliament rejected several of the proposals earlier this month, and
Communist leaders have not given any sign that their position has changed. 
If parliament rejects Yeltsin's economic plan, then the IMF and other
lenders might withhold the loans. 
Finance Minister Mikhail Zadornov told lawmakers the loans were granted
on the best possible terms. ``Softer credits than those issued by the
international financial organizations do not exist,'' he said. 
But lawmaker Alexander Shokhin, a member of a faction that usually
supports the government, said conditions set by the IMF were harsh. 
The debate moved slowly, and by this afternoon parliament had only dealt
with a few of the bills, including one designed to protect the rights of
foreign investors. 
The foreign loans are designed to calm the stock and bond markets, stave
off a devaluation of the Russian currency and restore confidence among
investors who have been fleeing the country. 
The stock market, which has lost more than half its value this year,
soared by about 25 percent on Monday and Tuesday in response to the loan
agreement. But the markets remain volatile and could again crash if
parliament opposes the government's proposals, analysts say. 

Yeltsin's plan includes calls to shift the tax burden from producers,
such as oil, gas and electricity companies, to consumers, who currently
face relatively light taxes. 
But millions of Russians are battling to make ends meet and such
measures could prove extremely unpopular among ordinary Russians. 
The proposed loans are to come from three sources: the IMF, the World
Bank and the Japanese government. When combined with already-negotiated
loans, the package totals $22.6 billion spread over this year and next. 
The IMF board meets in Washington on Monday to review the loan
agreement, and it could send $5 billion or more to Russia as soon as next
week. 

********

#2
Washington Post
15 July 1998
Letter from Paul Saunders
Boris Yeltsin's Milch Cow

Anders Aslund is right that "Russia is in a rampant financial crisis,"
but he seems to ignore how it got there in his call for new assistance to
Moscow from the International Monetary Fund ["If the Ruble Goes Under, So
Could the Region," Outlook, July 12]. While the IMF has played an essential
role in many other parts of the world, it holds no small measure of blame
for Russia's economic and political mess.
Instead of insisting on the development of real protections for
investors and other legal conditions necessary for significant foreign
investment in Russia, the IMF has made its support contingent on Russia's
meeting unnecessarily tough macroeconomic criteria. This has repeatedly
encouraged the Yeltsin government to give in to the authoritarian
temptation and to treat the popularly elected parliament, the Duma, with
contempt. The latest IMF loan package, announced yesterday, also
facilitates Yeltsin's rule by decree.
Under the circumstances, it should be no surprise that the Duma has not
passed the legislation necessary to encourage significant investment even
by Russia's own business leaders, who prefer to keep their assets in
Switzerland. Only one paragraph after arguing that an IMF rescue package
would help to "raise a lot of private investments in the next six months,"
Mr. Aslund himself admits that until Moscow really protects property rights
"few dare invest in Russia."
It is unclear that new IMF funds would go to their intended purpose.
Visiting Washington in late May, Russia's top independent auditor revealed
that some $2 billion disappeared without explanation from the Central
Bank's hard currency reserve accounts in 1995. This and the many other
documented cases of misuse -- and outright theft -- of government funds
should make us think hard before opening up the till again.
In general, Mr. Aslund's article is an example of scare tactics at their
worst. If we do not pay up, he argues, Russia's economy will collapse,
catapulting vile nationalist dictators to power. But if one looks carefully
at the real Russia today, there is no reason to believe that the Yeltsin
government is any more democratic, any more pro-Western or any less corrupt
than the likely alternatives.
All of Russia's major opposition parties are committed to political and
economic reform and to good relations with the West. Moreover, to the
extent that anti-Western and specifically anti-U.S. sentiment has grown in
recent years, it has been fueled significantly by resentment of the IMF,
which the Yeltsin government has used as a convenient alibi for its own
failures.
Fortunately, there is still hope -- Congress has yet to vote on
supplemental funding for the IMF. And it doesn't scare easily.


PAUL J. SAUNDERS
Director
The Nixon Center
Washington 

*********

#3
Subject: Liewen and Matsuk
Date: Wed, 15 Jul 98
From: ray.smith@ndf.org (Ray Smith)

David:

I also found Anatoly Liewen's piece on the Chechen war and Russia 
outstanding. I don't agree with it entirely. I think Russia's history 
and political culture do shape, if not deterimine, how it deals with 
contemporary issues (and thinking that does not make me a Russophobe). 
That said, Liewen's piece was thoughtful, stimulating and persuasive. 
Would that it elicits as much commentary on JRL as the issue of whether 
eXile should be banned.

Tatyana Matsuk's piece on Russian women (and men), reprinted from the 
Moscow Times in JRL 2266 was also excellent. This is a subject on which 
a man comments only at substantial risk of overstepping the bounds of 
gender correctness. Nevertheless, as a consultant dealing with this part 
of the world, I often have to give my clients advice on personnel 
matters. My experience is that Russian women are strong, sober, capable 
and responsible. I tell my clients to hire them if they want to get the 
job done.

*********

#4
From: CMacvayia@aol.com (Cali Ruchala)
Date: Wed, 15 Jul 1998
Subject: Alexander Bovin's Isvestia Piece (JRL#2265)

I'd like to respond to the Izvestia article by Alexander Bovin,
"NATO's Enlargement to the East a Folly", in JRL #2265.

First of all, my bias: I admit to being born in Yugoslavia (which is
something to
admit to these days). I'm sure that visions of 1948 and my nation's
withdrawal from the Warsaw Pact are probably dancing in people's heads, but in
reality, our nation had very good official relations with the Soviet Union
after Stalin's death. The "unofficial relations", if you want to call them
that, are outlined below.

I would normally allocate the tone of this article to Izvestia's well-worn 
paranoia, if it wasn't the same attitude so often parroted by Western analysts
and reporters. The simple fact of the matter is that 9/10ths of Eastern
Europe's
leaders are screaming for NATO membership and willing to face the prospect of
another Christmas Night of Ceausescu for the austerity measures and big-budget
spending that it will take.

Mr. Bovin, in noting that this was only the much-heralded "first wave"
of presumably several eastward expansions of NATO, passed over the key point
in a manner I have seen time and time again from both Russian and Western 
critics of expansion: the make-up of the countries which were selected for
first 
entry. NATO *should* have chosen Slovenia, with demarcated borders beyond 
dispute (unlike, say, Poland, Hungary, and Czechia, all of whom have disputes
with neighbors to varying degrees), a peachy economic outlook, absence of
irredentism 
and numerous military treaties recently concluded with Austria and Italy. I
have a 
hard time believing anyone could get upset about anything having to do with 
Slovenia. They should have, but they didn't. The first three nations to be
included 
in eastward expansion are precisely those three that have in recent history
the 
most pressing reason to sell their soul to Boeing: they are the ones who have


uffered most visably from Soviet (and Russian) aggression.
It's an easy sale to tell the Poles, "Look, we'll end this [Russian legions
riding
West] forever." No one can doubt the "Westernness" of the Czechs. The
Hungarians have been an unbelivable bulwark of stability and restraint in
resisting nationalism and wholesale slaughter to reclaim lost territories,
unlike my country. No one in these articles mentions the 1956 Hungarian
Uprising, the Prague Spring, or the countless times Poland faced down Soviet
(and Russian) bayonets--but I can tell you, these are the precise reasons that
public opinion has swayed to the pro-NATO side in these countries, and what
made them so attractive for NATO's first thrust East to begin with.

No one of the preceding generation in Belgrade can forget the year 1948. The
reason the nations of Eastern Europe are willing to suck the cells from their
own veins for early admittance? The "springboard to the West" that Mr. Bovin
talks about is part of it, but pay attention: three times as many nations were
invited for negotiations with the EU's Eastern expansion than to NATO's. The
OSCE, the Council of Europe--these are the preliminary bodies which draw one
closer and closer to the axis of the common market--which is the thing that
everyone everywhere is salivating over. The simple fact of the matter is that
the NATO ceremony in Czechia will take place in Wencelaus Square where Jan
Palach burned himself alive to protest the Soviet invasion. I don't know any
reporter or correspondent who is going to miss that photo-op.

It's easy to take these considerations and assign them to a bygone era.
It's even
easier when almost no one has *gone* to Prague, Warsaw, or Budapest before
they file these stories. It's the Great Power mentality all over again.

Eastern solidarity (and, by implication, solidarity with Russia) ended in
1989. I 
myself was sad to see it go. But a lot of people evidently never noticed it's
passing to begin with.

And I have repeatedly heard the call that "this was the Soviet Union, not
Russia."
Hungarians didn't run for the cellars saying "The multiethnic force from the
collection of 
states known as the Union of Soviet Socialist Republics are invading!" THE
USSR 
was only one of five states that invaded Czechoslovakia. The simple fact of
the matter is that no one--least of all Aleksandr Dubcek or Imre Nagy--was
confused by the "consensus" of these or other actions. You're talking about
public opinion and fear, which does not see things so coolly. You're talking
about a violent anti-Russian prejudice, which definitely sees the Soviets and
Pan-Slavism as fronts for Russian imperialism.

What is Russia to do? For the moment, if anyone believes that *anything* the
Kremlin says about foreign policy is more than negotiating for more hard 
currency, they're in for a shock. Once people begin to understand the role of
national debt in Eastern Europe from 1989 to the present--and it's role in who
the West supports and who it doesn't--perhaps the very concept of a nation
sabre-rattling on Monday and passing the hat for itself on Tuesday will
finally

strike attentive journalists and academics who ask repeatedly "Who Lost
Russia?" 
for the absurdity that it is. Yeltsin bellyached over NATO expansion--and
the G-7
became the G-8. Yeltsin bellyached about the NATO run over Bosnia and came 
home with a few more kopeks. Right now, Russian foreign policy in Europe is 
little more than rhetoric and windowdressing, and the Yeltsin regime (in my 
estimation) is doing more damage to international prestige and sowing more
discord in the nationalist circles they wave before the eyes of Washington
like shrunken heads by issuing idle 
threats and dark warnings about "a new Cold War" (which has come up twice in 
the past two months alone) than if they sat on their hands and said nothing.

Cheers,
Cali Ruchala
Editor, *Delusions of Grandeur*
an East/West Cultural Exchange
E-mail: cmacvayia@aol.com

*******

#5
From: "Lance Crist" <crist@ifc.glasnet.ru>
Date: Wed, 15 Jul 1998 
Subject: Running in Moscow

David,

My wife Maria and I are fairly regular runners in Moscow, and in many ways we
share Ivan Watson's amusements and frustrations. The traffic, pollution, lack
of "greenways" and heavy work orientation of the expat lifestyle in Moscow
make it less than conducive for would-be runners. However, there are options.

For running on one's own, we have found that a number of parks have extensive
walkways and trails that make for great evening or weekend running when you
have the time to get to them. In addition, rather than being the
lone foreigner on the road, in the parks there are usually quite
a few locals running as well. Sokolniki, Izmailovo, Bitsevski, and Filevski
Parks all have metros nearby and extensive running routes. Also, the roads
and trails around Lenin Hills/MGU, and the "velotrasse" (paved roads for
cycling) at Filevski Park offer good opportunities for hill workouts.

For group running, we've found a more serious alternative to the Hash
(self-proclaimed "drinking club with a running problem"). There is a Russian
club called "Fakel" which meets several times a week at varying park locations
for runs that range in length from 4K to 20K (generally 8-10K). On any given
Saturday or Sunday there are usually 15-25 people (primarily locals) aged 20s
to 70s, with fitness levels from advanced competitor to "Sunday driver". We'd
be happy to give more details on the club to anyone interested to contact us
by email at this address.

We've been less successful at plugging into the local racing scene, but there
are two big long distance runs coming up for anyone interested in a challenge.
The 2nd Annual Zelenograd Half-Marathon (13.1mi) will be run outside Moscow on
July 26. We have a growing group of Americans planning to run, and
encourage anyone else interested to participate. Contact: Boris at (095)
534-6215, 535-0543, and 530-8084. In August, the Siberian International
Marathon will be run in Omsk. We ran this last year and it is reportedly the
best organized marathon in Russia (our letter on it is featured in the
just-released August issue of "Runners World" magazine). Contact by email at:
"root@sim.omsk.su".


*******

#6
Moscow News
July 15, 1998 
NEWS ANALYSIS: Russia's Debt Seen Under Control 
By Sujata Rao
Staff Writer

The long period of maturity of foreign debts will allow Russia to easily 
meet its obligations. 

As Russia's equities markets rocketed to a record daily gain Tuesday on 
news of the International Monetary Fund's bailout package, skeptics 
voiced concern that Russia's growing debt may be snowballing out of 
control. 
"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 back. It 
will be left to our grandchildren," wrote the Noviye Izvestiya 
newspaper. 

But Prime Minister Sergei Kiriyenko quickly moved to calm fears Tuesday, 
saying Russia's overall debt is "controllable" at just 44 percent of the 
gross domestic product. 

Most economists too believe that the potentially huge size of Russia's 
economy, and the long maturity period of most foreign debt will allow 
Russia to easily meet the obligations. 

Russia's external debt is 34 percent of its GDP as compared to 39 
percent for other emerging markets like Brazil and Argentina. 

In proportion to annual exports the figure is even more favorable --190 
percent compared with Brazil's 380 percent. 

"Compare $200 billion with the size of the economy which is $450 billion 
annually," said Dennis Smyslov, economist at Global Fund Management. "I 
think the next generation should be able to pay back [the debt] without 
too much trouble." 
Part of Russia's $140 billion external debt was inherited from the 
Soviet Union but the government last year struck debt restructuring 
deals with the London and Paris Clubs of creditors. The debt, amounting 
to almost $70 billion, will mature only in 2015 and 2020. 

But more alarming is Russia's $70 billion domestic debt, most of which 
is too short and too costly to service. Though roughly half of this is 
held by the Central Bank and Sberbank, about $35 billion worth of 
treasury bills is expected to mature this year. 

Analysts have backed Russia's attempts to place Eurobonds even at high 
yields as it allows the country to substitute longer-dated dollar debt 
for shorter and more expensive ruble debt. 

So far this year Russia has placed $4.8 billion in Eurobonds, one of 
which was a relatively costly 30-year issue. Yields on Eurobonds are 
lower than the yields on treasury bills. 

The government has also announced plans to restructure GKOs into 
dollar-denominated bonds with maturity over a much longer period. 

This will ease the need to spend 30 percent of the budget expenditure on 
debt servicing and could instead be used to pay wage arrears, analysts 
said. 

"In the coming year Russia will need to walk along the razor's edge," 
Smyslov said, adding that the government must trim the budget deficit, 
pay off maturing domestic debt and wage arrears and prepare for a more 
effective fiscal system. 

Analysts also pointed to the need to boost tax revenues and cut down on 
expenditure while boosting domestic production. 

"The key question is the extent and the speed at which Russia's economy 
grows and reduces debt dependency," said Philip Poole, East Europe 


economist at ING Barings in London. He cited the case of Hungary, which 
managed to cut down its debt from 282 percent of exports in 1993 to 110 
percent at present. 

*******

#7
Journal of Commerce
15 July 1998
[for personal use only]
As Gazprom goes, so goes Russian bailout
IMF says energy firm must pay taxes in cash
BY MICHAEL S. LELYVELD
JOURNAL OF COMMERCE STAFF

An agreement to rescue Russia's floundering economy may finally put its 
biggest tax dodger on the road to reform.

As a condition of a $22.6 billion loan package, giant Gazprom, the 
world's largest gas company, is being asked to settle its accounts in 
the rarest of all Russian resources -- cash.
The International Monetary Fund and other lenders agreed Monday to $17.1 
billion in new loans as part of a bailout designed to prop up Russia's 
crumbling financial markets and prevent a collapse of the currency. When 
combined with already-negotiated loans, the package totals $22.6 billion 
over this year and next. 

The IMF board meets in Washington on Monday to review the loan 
agreement, and it could send $5 billion or more to Russia as soon as 
next week. 

Under Russia's pact with the IMF, Gazprom will be required to settle its 
value-added taxes on an accrual rather than a payments basis, said 
Anders Aslund, senior associate at the Carnegie Endowment for 
International Peace.
In other words, it will pay tax on the gas it delivers rather than the 
bills it collects.

The change is much more than a bookkeeping trick. If it works, it could 
break the gridlock in the entire Russian economy, averting the collapse 
of the crippled superpower, which last year did $7.68 billion in trade 
with the United States.

"It will have an enormous effect on the monetization of the economy," 
said Mr. Aslund. "Gazprom lives in a barter world."

Gazprom owes 12 billion rubles in taxes, or $1.9 billion. But it is owed 
more than 100 billion rubles. The company claims that government 
agencies and enterprises alone have 13 billion rubles in unpaid gas 
bills, but the government can account for only 5 billion, Mr. Aslund 
said. 

Gazprom's debt equals 25% of all taxes owed to the federal budget in a 
country where only 5% of citizens pay taxes at all.

At first glance, the problem seems little more than a paper chase.

Because the government owns 40% of Gazprom, it would essentially be 
paying itself.

But the company has not even paid dividends to the government, said 
Marshall Goldman, associate director of Harvard University's Davis 
Center for Russian Studies. The result is a deadbeat contagion.

"Why should I pay my taxes if Gazprom doesn't?" Mr. Goldman said, 
describing the Russian attitude. 

Ordinary citizens suffer

Ironically, the biggest victims of the deadbeat disease are ordinary 
citizens who have fallen behind on both their taxes and gas bills. While 
Russian workers are not paying Gazprom or the government, they are also 
not being paid.

As of June 1, wage arrears in the Russian economy had risen to $10.7 
billion. The government owed more than $1.7 billion, despite periodic 
efforts to settle accounts. Part of the $4 billion in World Bank loans 


under the finance package will be used to pay miners and other desperate 
workers who have blocked the Trans-Siberian Railway.

Gazprom and the electricity monopoly UES are a big part of the problem 
because they have been supplying energy to cash-strapped enterprises, 
either collecting nothing or accepting barter payment in the goods they 
produce. The enterprises have also been paying their workers with goods.

On the other end, Gazprom has been settling up to 90% of its taxes to 
the government in kind, in other words, with gas.

"The whole Gordian knot of nonpayments won't be cut until Gazprom and 
UES pay their debts," said Keith Bush, director of the Russian and 
Eurasian program at the Center for Strategic and International Studies. 
"This could get the thing moving."

The arrears problem has become so staggering that unpaid liabilities at 
the end of last year totaled nearly a third of Russia's gross domestic 
product, CSIS said in a report.

Gazprom can get away with supplying nonpayers because of the gridlocked 
system and its enormous size. The company controls one of the only 
industrial sectors that has not been significantly hurt by the Soviet 
collapse. 

Awash with gas

While industrial output has fallen 53% since 1990, according to official 
figures cited by the Economist Intelligence Unit, gas production is down 
only 15% over the same period, a recent report by the Davis Center said. 
In other words, Russia is awash with gas.

Gazprom's probable and proven reserves are estimated at 28.1 trillion 
cubic meters, or over 990 trillion cubic feet -- enough to last Russia
and all its European customers for 51 years at current rates, even if 
no new discoveries are made. Last year, the company had net income of 
$1.7 billion on $23 billion of revenue.

But last month, when the new government of Prime Minister Sergei 
Kiriyenko tried to put the bite on Gazprom to make a monthly tax payment 
of $394 million, the company protested that it was owed too much and 
would only pay $128 million a month instead. Combined with falling oil 
revenues and the Asian crisis, the shortfall pushed finances over the 
edge.

Russia's new tax chief, Boris Fyodorov, seized Gazprom's superfluous 
assets, such as its dachas, or summer vacation homes, demonstrating that 
the monopoly had more than ample means to pay. The crackdown worked. 
Gazprom has since agreed to pay $644 million a month. 

Customers cut off

Gazprom also passed the crackdown on to its customers, cutting some off 
for the first time. On Monday, the company told Moldova and Russian 
client state Belarus that it will block their gas if they don't pay 
their debts by Aug. 1. Belarus owes $240 million, while Moldova's tab is 
over $200 million, Bridge News said.

On Tuesday, Gazprom threatened cutoffs to the regional administrations 
of Volgograd and Sverdlovsk, Agence France-Presse reported. The move is 
likely to be political. President Boris Yeltsin once served as 
Sverdlovsk's Communist Party boss. 

The risk now is that the Parliament will not go along with the IMF deal. 
Gazprom's defenders see it as the last Russian resource that Western 

capitalism has not tapped. Multilateral lenders also want to split off 
Gazprom's pipeline affiliate to make finances more accountable.

But Marty Kohn, director of the Asia department at economic consultants 
WEFA Inc. in Washington, sees another risk.

The gridlock-breaking plan assumes that many Gazprom customers can pay 
cash but have chosen to hide from the tax man instead.
"This has to rest on the assumption that the money is there," Mr. Kohn 
said. But if it isn't, Russia may suffer an even greater disaster with 
the destruction of both its cash and non-cash economies.

Mr. Aslund said that only 40% of the barter payments to Gazprom are 
involuntary. In other words, 60% of the company's customers can pay cash 
but choose not to do so.

Even so, when 40% of the customers for the world's largest gas company 
are broke, it's a big problem. 

*******

#8
RUSSIA'S PRE-1997 IMPERFECT LEGISLATION ENABLED SOME
WINNERS OF INVESTMENT TENDERS FOR THE SALE OF STATE
PROPERTY TO EVADE MEETING THEIR OBLIGATIONS
MOSCOW, JULY 14. /FROM RIA NOVOSTI CORRESPONDENT DMITRY
ZNAMENSKY/. Russia's pre-1997 imperfect legislation enabled some
winners of investment tenders for the sale-and-purchase of state
property to evade meeting their obligations, Deputy Premier
Boris Nemtsov said at today's meeting of the Russian
government's executive commission.
According to data of the Russian Federal Property Fund, as
of July 1 this year, there were 1,789 agreements concluded on
the sale-and-purchase of state-owned facilities. Of the total
number, 1,063 have been recognised as fulfilled, and 259
cancelled over failures of the winners of tenders to meet their
obligations. Still under control is meeting of the investment
obligations by the buyers of Federal property under 467
agreements. As of July 1 this year, the aggregate volume of
investments based on the results of tenders came to
9,430,500,000 roubles, as well as 4,384 million dollars, 138
million German marks and 150 million Swedish kronor. Actually,
however, only 5.8 billion roubles, 3.1 billion dollars, 101
million German marks and 150 million Swedish kronor were
received.
As emphasised by Boris Nemtsov, a major problem lies not
only in the difficulty of cancelling the agreements on the
sale-and-purchase with those who fail to meet their obligations
but also in the complexities connected with a return of the
package of shares of the enterprises in question to state
ownership. For instance, according to him, as a result of the
cancellation of 18 agreements, the shares of seven enterprises
have not been returned as yet. Among others, Nemtsov said, in
spite of the court's rulings, the shares of the Volzhsky
Pipe-Making Works, Korund, Orgsteklo and Biotekhnologiya
Joint-Stock Companies are yet to be returned.
At the same time, the Deputy Premier believes, the figures
submitted do not show the real state of affairs concerning the
receipt of funds from the purchase-and-sale of state property,
nor regarding investments funds. 

*********

#9
Christian Science Monitor
JULY 15, 1998 
[for personal use only]

Risky Game in a Russian Republic
Millionaire president of Kalmykia caught in swirl over death of biggest critic
By Judith Matloff 

ELISTA, RUSSIA 

Look anywhere in Elista and you see Kirsan Ilyumzhinov's face. He beams 
on billboards alongside Buddhist and Christian leaders. His white-fur 
hat adorns calendars. His portrait hangs in offices, reminiscent of 
Soviet leaders.
But these days it's hard to actually find Mr. Ilyumzhinov, the president 
of Kalmykia, a semiautonomous republic on Russia's steppes north of the 
Caspian Sea. He has been keeping a low profile since his most outspoken 
critic, newspaper editor Larisa Yudina, was killed last month after 
investigating alleged abuses of official funds.

Hundreds of miles away from Moscow, many of Russia's semiautonomous 
regions do what they like. Tatarstan and Bashkortostan join Kalmykia in 
defiantly trying to gain control over their own finances, regardless of 
what Moscow thinks. Some analysts say this tendency will deepen with 
time as the central government frays at the edges.

Outrage over the murder has flared up in Moscow, which normally leaves 
its 21 ethnic republics alone.

"We must find the murderers," declared President Boris Yeltsin, keen to 
get to the bottom of a potential financial scandal. State 
law-enforcement officials say it was a political contract murder. The 
Russian parliament has called for a new probe into Ilyumzhinov's 
finances, which have already been investigated six times by Moscow.

In such an obscure part of the world as Kalmykia, a journalist's murder 
might ordinarily have attracted little outside attention. But 
Ilyumzhinov is chief of the World Chess Federation and a self-proclaimed 
candidate for Russia's 2000 presidential elections. And suspicions were 
aroused when two of the four suspects arrested turned out to be his 
close former aides.

A self-proclaimed millionaire, Kalmykia's president presides over this 
republic of Buddhist descendants of Genghis Khan with a strong cult of 
personality. He came to power in 1993 promising to provide a cell phone 
to every shepherd and to make Kalmykia a second Kuwait. Neither has been 
realized.
This personalization of power is not atypical in the region. In nearby 
Turkmenistan, for example, President Saparmurad Niyazov's portrait 
adorns many public buildings in the capital, Ashkhabad, and is visible 
on the high-rise office of the national airline.

Many of the people here, known as Kalmyks, applaud Ilyumzhinov's efforts 
to promote their ancient culture and beautify the capital, Elista, with 
huge stone sculptures. Some applaud his practice of locking up drunks in 
metal cages on the main street, to be humiliated by passersby. Others 
say he has gone too far.

But the mystery here is where he gets his lavish funds in a place that 
survives mainly on sheep raising, caviar smuggling, and handouts from 
Moscow. That was what Ms. Yudina - editor of the newspaper Sovietskaya 
Kalmykia and an activist with the liberal Yabloko Party - was 
investigating when she died.

After her death, Ilyumzhinov went on the defensive. His aides asserted 
his innocence, claiming that jealous enemies committed the murder to 

sully his reputation. "Our president is forceful, powerful, on the 
international scene. Someone does not like that," says Konstantin 
Maximov, the local parliamentary head and a close aide of Ilyumzhinov.

But others are dubious of the president's innocence. A recent Human 
Rights Watch statement reported that "it is widely believed that 
President Kirsan Ilyumzhinov is behind the murder."

Yudina's husband, Gennady, says her death followed years of 
intimidation. She had been shot at before. In 1994, authorities closed 
down her newspaper, forcing her to print it in Stavropol and bring the 
editions to Elista by car.

"Of course her death was linked to her political activities," he says. 
He believes that the four detained suspects "were merely pawns."

Mr. Yudina says that someone was particularly upset about his wife's 
investigations into offshore funds. According to Kalmyk government 
officials, companies from across Russia get tax breaks in return for 
funneling money into a special presidential fund. The fund finances the 
$35 million Chess City.

While not strictly illegal under Russian law, it is a lucrative 
initiative that has caught the eye of federal investigators.

Yudina says that on the night of his wife's death, she went to meet a 
man who claimed to have information about the funds. Her body was found 
the next day in a pond nearby the Chess City site.

The game of chess involves outwitting an opponent, and Ilyumzhinov, a 
chess enthusiast, knows strategy well. So far, federal investigations 
have failed to jail him.

Ilyumzhinov plays his game carefully, as he indicated in a July 
interview with the Moscow-based news magazine Vlast.

"To win a game, it's necessary to play by your own rules," he said.

******

#10
Washington Post
July 15, 1998
Editorial
Another Russian Bailout

WHO DOES NOT feel uncomfortable supporting the Russian bailout now being
promoted by the International Monetary Fund, the World Bank and the U.S.
Treasury? Not that general agreement is lacking on the urgency of restoring
Russia's economic health. But the instruments -- international loans --
available to serve this purpose have been tried before, with disappointing
results. Russia has taken the money and asked for more but has only
episodically made good on the reforms and policy changes that were supposed
to be the quid for the quo of the loans. What assurances are there that it
will be any different this time around?
The best case that can be mustered for the new $22.6 billion in
low-interest loans that Russia is being offered over the next 18 months is
that some of the factors contributing to its economic slump are not of its
own making. The Asian economic turmoil, for instance, and the falling world
prices of oil and gas, Russia's big exports.
But other parts of the Russian equation are very much the country's
responsibility. The slowness in boosting tax revenues, for instance, the
hesitation to trim the budget deficit, the tardiness of a list of internal
reforms, including an inexcusable failure to provide legal protections for
private foreign investment. These items are caught up in a bitter internal
Russian political struggle not likely to be resolved soon.
In the end, nonetheless, the United States and the other lenders face an
inescapable dilemma. There can be earnest promises but no guarantees that
this time Russia will deliver on reform. Not to provide the new money,
however, is to tempt default on large foreign loans, devaluation of the
ruble and resulting chaos -- perhaps even a coup, some Russians suggest:
all in all, an unthinkable result.

The IMF bravely promises to make its economic judgments "in light of
whatever decisions the Duma makes." The Duma, of course, is notorious for
the resistance of its resident communists and nationalists to Russian
cooperation with the international lenders. Boris Yeltsin went right to
Bill Clinton, Helmut Kohl and the others to induce the lenders to put up.
These Western leaders are under a great burden to show they are serious
about getting their taxpayers' money's worth. 

********

#11
Los Angeles Times
July 15, 1998 
Editorial
Lifeline for Russia 

President Boris Yeltsin has appealed to the patriotism and good sense of
Russia's parliamentarians to gain their support for more than a score of
proposals to reform a scandalously inefficient tax system, slash the
government deficit and arrest a growing financial crisis. Failure of the
Communist-dominated Duma to give Yeltsin what he seeks could imperil the
extraordinary international loan package agreed to this week under strong
urging from the United States. 
The International Monetary Fund, the World Bank and the government of
Japan are prepared to extend $17.1 billion in new loans to Russia over the
next two years, bringing to $22.6 billion the bailout commitments made to
Moscow. But the new rescue package will reduce the IMF's reserves to about
$13 billion. That makes it urgent for the U.S. Senate to act promptly on
President Clinton's request for a new $18-billion line of credit for the
IMF, the organization dedicated to monetary cooperation and currency
stabilization that Washington was instrumental in founding more than 50
years ago. 
Word of the agreement with the international lenders gave a big boost
to Russia's shaken financial markets. Stocks, which had lost more than half
their value this year, rallied and the government's borrowing costs fell to
about half their level of recent days. But long-term market confidence
depends very much on achieving stabilization and implementing fiscal
reform. The loans that have been offered Moscow are contingent on progress
in these areas. 
A key need is to prevent devaluation of the ruble, which would set off a
fresh round of inflation, propel millions more Russians into poverty and
almost certainly ignite a new political crisis. Yeltsin has already spoken
ominously of a possible coup by "extremists" if matters deteriorate
further. Any hint that Russia faced a period of prolonged political
uncertainty would drive away investors and deepen a dangerous condition in
which Russia might not be the only victim. 

Conversely, a commitment to reform by the Duma should raise foreign
investors' confidence, strengthen the Russian ruble and give the government
a chance to restructure its enormously costly debt. What the international
lenders ask is, in fact, what Russia in its own interests should have begun
doing long ago. That is the message Yeltsin preached to his parliamentary
opponents over tea and cookies in the Kremlin. Whether there will now be
unaccustomed political unity could shape Russia's destiny for some time to
come. 

********

#12
VALENTIN KUPTSOV SLAMS RUSSIAN MASS MEDIA
MOSCOW, JULY 15, 1998 /FROM RIA-NOVOSTI CORRESPONDENT
GALINA AMELKINA/ -- Today's plenary session of the Russian State
Duma began with a statement by deputy CPRF (Communist Party of
the Russian Federation) faction chief Valentin Kuptsov, who
thinks that the nation's mass media have offered biassed
coverage for the July 14 meeting between President Boris Yeltsin
of the Russian Federation and the leaders of State-Duma factions
and deputy groups. According to Kuptsov, such a biassed attitude
is as follows -- the meeting was portrayed as a friendly
conversation over a cup of tea between members of one and the
same team. Kuptsov disagrees with this opinion, noting that
yesterday's conversation between the head of state and the
leaders of State-Duma factions and deputy groups was a working
meeting that wasn't prepared in advance.
According to Kuptsov, the deputies drew Yeltsin's attention
to the fact that the Government's projected program doesn't
solve the economic-stabilization task; besides, it requires
active work (on the part of the President and the Government)
for the sake of finding additional budget revenues. Apart from
that, we posed the question of the expediency of introducing a
state monopoly on all vodka-and-liquor production, Kuptsov went
on to say. In his words, the deputies also voiced their support
for this country's natural monopolists, e.g. RAO Gazprom and RAO
UES (United Energy Systems), noting the "raw" nature of the
government program's social section.
Kuptsov also stressed that, apart from statements by
Shokhin and Zhirinovsky, the termination of the impeachment
procedure was not discussed at the meeting. 

**********

#13
Lawyer Targets New Religion Law 
July 14, 1998

MOSCOW -- (Reuters) Vladimir Ryakhovsky has set himself an ambitious task
-- to strike down a law that has the might of Russia's establishment, from
devout Orthodox churchmen to atheistic Communist lawmakers, ranged behind it. 
But the middle-aged lawyer is undaunted by the scale of the challenge
facing him and says he has Russia's post-Soviet constitution firmly on his
side. 
The target of his ire is Russia's 10-month-old law "On freedom of
conscience and religious organizations," which has been condemned by human
rights groups, the United States and the Vatican as discriminatory and
repressive. 
"It contradicts both the Russian constitution and all Western legal norms
on human rights," Ryakhovsky said of the law, which has been approved by
both houses of parliament and signed by President Boris Yeltsin. 
On a wall of his Moscow office hangs a frame bearing excerpts of
Russia's 1993 constitution proclaiming a secular state in which all
religions are equal. 
Ryakhovsky, a practicing Protestant, and several evangelical Christian
groups have appealed to the Constitutional Court. If the court backs them,
part or even the whole law would have to be dropped, embarrassing Russia's
establishment. 

Orthodox Church Accused of Trying to Gag Rivals 

The law requires religious organizations to re-register by a December
1999 deadline and imposes a 15-year waiting period for groups deemed
"nontraditional." 
The preamble to the law identifies Orthodox Christianity, Islam,
Buddhism and Judaism as Russia's traditional faiths. 

Unregistered groups lack full legal rights and cannot conduct
missionary work or educational activities. 
The law's defenders say it is needed to halt the spread of dangerous
sects trying to exploit a spiritual vacuum left by the fall of the Soviet
Union. 
But Ryakhovsky and other critics accuse the church, still rebuilding
itself after decades of official harassment and persecution, of wanting to
monopolize Russia's spiritual life. 
They have strong allies abroad. Pope John Paul has said the law
threatens the survival of the Roman Catholic Church in Russia. 
The U.S. Senate has said it would withhold aid to Russia if the law were
implemented. In May, President Bill Clinton said the law was not being put
into effect but the issue would require "continued and close monitoring." 

Law Seen As Open to Abuse by Local Bureaucrats 

Most Russian observers agree with Clinton's assessment. 
Sergei Zuyev, leader of Russia's 120 Hare Krishna communities, said the
law so far was having little effect on his movement. "But let's wait and
see. Much will depend on local bureaucrats and how they interpret the law,"
he said. 
Ryakhovsky said religious minorities were already on the defensive. "On
the federal level there are no serious problems facing religious
organizations but at the local level we are being confronted with
violations of minorities' rights." 
"If the letter of the law is only just beginning to operate we can say that
the spirit of the law is already very much at work," Ryakhovsky added. 
He said the law's vague wording and its ambiguities gave a green light
to provincial bureaucrats to harass and hamper minority religious groups in
ways eerily reminiscent of Soviet-era repression. 

Danger Is Petty Harassment 

This view was borne out by Lawrence Uzzell, Moscow representative of the
British-based Keston Institute which has for decades monitored religious
freedom in Russia. 
"Fully fledged religious persecution -- of the sort seen in China, where
one can be arrested simply for organizing a prayer group in one's own home
-- is virtually nonexistent in Russia," he said in a recent report on the
impact of the new law. 
"But religious repression -- the denial to disfavored confessions of the
right to worship and proclaim their beliefs in public -- is scattered but
growing," he added. 
Uzzell said there was a danger that repression would be stepped up after
the re-registration deadline had passed. 
"Any church that has been denied re-registration will have lost the
legal basis for its existence," he said. 
"Even if this sword of Damocles never drops, the mere existence of the
1997 law will perpetuate a climate of intimidation," said Uzzell. 
Ryakhovsky cited cases of religious groups being denied permission to
rent premises for meetings and of heavy-handed policing -- sometimes with
the blessing of the local Orthodox priest. 
"A typical example is a Pentecostal pastor whose flock now meets in a
private garage instead of at a school because they are no longer allowed
there, even though they had been paying for use of the school," he said. 


Opponents Demand New Standards 

Alexei Malashenko, a political analyst at the Carnegie Endowment for
International Peace think-tank in Moscow, said the law's fate was tied
closely to the broader political situation in Russia. 
"Without amendments the law is bound to cause more problems after the
next presidential election in 2000," he said, noting that the strongest
candidates to replace Yeltsin were nationalists little swayed by Western
ideas about human rights. 
Lawyer Yekaterina Smislova, who is involved in the bid to overturn the
law on religion, said she hoped the Constitutional Court would make its
ruling within the next six months. 
The court's judges are appointed by Yeltsin but are not blindly loyal to
him. Some activists have even suggested the president himself really wants
the law to be struck down and signed it only to appease nationalists in
parliament. 
Yeltsin rejected an original version of the controversial law on the
very grounds that it was anti-constitutional. 
If the new law is struck down he personally cannot be blamed by the
nationalists -- and a prickly issue in Russia's relations with the United
States will have been removed from the agenda. 
Smislova said reworking the law was essential if Russia were to honor
its post-Soviet democratic commitments. 
"Russia is now a member of the Council of Europe and a signatory of the
European Convention on Human Rights, so this law has attracted great
interest abroad," she said. 
"Russia's credentials as a free, open society that respects basic human
rights are what is at stake here," Smislova said.

********


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