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Johnson's Russia List
 

 

July 20, 1998   
This Date's Issues: 2273  2274  

Johnson's Russia List
#2274
20 July 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Harley Balzer: Comment on IMF bailout.
2. US News and World Report: Christian Caryl, MOSCOW MELTDOWN.
Is the Russian flu contagious?

3. Ronald Pope: The View from Vladimir Oblast. (DJ: I want to thank Ronald
Pope and Dan Panshin for their first-hand reports from outside Moscow. I would
like to encourage more original commentaries of this sort.)

4. Mark Scheuer: RE: 2273-Clarke/Blockading Russia's "Reforms."
5. Michael Beck: Russia Cracks Down On Missile-Tech Leaks to Iran: 
IMF inspired?

6. Interfax: Duma Chairman Calls For Presidential Republic.
7. Reuters: Games Reflect Political Ambitions of Moscow Mayor.
8. Russia Today: Jennifer DeLay, Running in Place: IMF Bailout Not Enough to
Fix Russian Economy.

9. New York Times letter from Jack Kemp: I.M.F. Austerity May Deepen Crises.
10. Reuters: Finnish General Says Russia Should Return Karelia. 
11. The Times (UK) editorial: TURKIC TURMOIL The lack of democracy breeds
rebellion in Central Asia.

12. Time magazine: Paul Quinn-Judge, Final Rites For The Czar. After 80
years, 

the Romanovs are laid to rest with more Russian politics than national
repentance.]

********

#1
Date: Mon, 20 Jul 1998 
From: Harley Balzer <Balzerh@gunet.georgetown.edu>

Subject: Comment on IMF bailout

David:

I was out of the country for much of June and part of July, so I
apologize in advance if I have missed comments on the IMF issue by others.
I returned to find a number of sharp critiques by Peter Reddaway and
others. While they make a number of imporrtant points, I believe that they
often represent an attempt to fight old battles rather than evaluating the
present situation.
It is difficult to respond to Peter Reddaway's sweeping condemnation of
Boris Yeltsin without being cast in the role of defending Yeltsin's
unspeakable acts, like the war in Chechnya. But dragging in the entire
history of the past seven years may not be the best way to make a wise
assessment of the current need for the IMF loan.
Crime, corruption and the amoral ethos pervading Russia were not created
by either Yeltsin or Western aid. The Soviet Union was the globe's first
kelptocracy (read Konstantin Simes's superb "USSR: The Corrupt Society," a
far richer source than Haneleman's oft-quoted "Mafiya"). It would have been
naive to expect the society that emerged from this world of underground
exchange relationships to be based on trust and resepct for law.
The important question concerns the effects of helping or not helping
Russia at the present moment. Professor Reddaway believes that the IMF
package is a clear case of throwing good money after bad. He might be
right. But he might not. Suppose the IMF program does help to stave off
devaluation for six months, the new tax system does generate a bit more
revenue, a new Japanses Prime Minister gets serious about dealing with his
country's recession and the Asian mess, and OPEC manages to get the price
of oil back up to last year's levels. This is not a scenario for everyone
drinking champagne, but it is probably preferable to the alternative.
What is that alternative? In Mexico, the peso crisis made imported food
and other products unaffordable for large numbers of middle- and
working-class people. In Thailand and Korea, devaluation has significantly
shrunk the recently-formed middle classes. In Indonesia, devaluation has
pushed the number of people living in poverty from roughly 20% (about the
real poverty figure in Russia) to over 50% of the population. Indonesians
in many areas responded by attacking the Chinese minority, driving many of
them out of the country. It is not clear whom Russians might attact. But it
is clear that economic dislocation on this scale in Russia would imperil
not only the economies of the former USSR but Eastern and Central Europe as
well. Might a ruble devaluation double the nubmer of seats the far right
would win in the coming German election? Would this derail the euro?

Despite all the distortions, resort to barter, reliance on survival
strategies, etc., the Russian economy is now generating a reasonable
lifestyle for close to 50% of the people. Some, but far from all of these
individuals are criminals. The vast majority make a clear moral distinction
between paying bribes or evading taxes and "real" criminal behavior. They
deserve a bit more time to find ways to assert their political voice.
Who would benefit from a devaluation of the ruble? Certainly not the
workers or nascent middle class, who would have to pay far more for
imported food and consumer goods. Rather, the winners would be the very
crony capitalists and oligarchs with natural resource monopolists Prof.
Reddaway reviles. The would be in a position to sell their oil and gas
abroad for foreign currency while using devalued rubles to buy up
additional enterprises and resources in Russia. If the mafia has been
exporting billions of dollars, they, too, could acquire legitimate Russian
businesses for a song. As in Asia, the situation would also create
opportunities for foreigners to acquire assets at bargain prices. This is
not a path designed to empower the Russian people, or to assuage their
animosity toward the West.
We might speculate about possible scenarios indefinitely. But it is
worth making three points: 1) The causes of Russia's problems are much more
complex than any one individual or even one individual institution; 2) The
success or failure of policies will depend on an enormous number of factors
and actors, in many countries, not all of which we can envision at the
current moment; and 3) Loathing for Boris Yeltsin is not a reason to punish
the Russian people.

********

#2
Date: Mon, 20 Jul 1998
From: Christian Caryl <110317.1466@compuserve.com>
Subject: Moscow meltdown (this week's USNWR)

US News and World Report
July 27, 1998
MOSCOW MELTDOWN
Is the Russian flu contagious?
BY CHRISTIAN CARYL

If any country ought to be immune to Russia's economic upheavals, the
United States is it. The volume of American business with Russia is a
relative pittance: Even Singapore accounts for a larger share of U.S.
trade. U.S. officials acknowledge that in pressing the International
Monetary Fund to grant Russia a $17.1 billion rescue package last week,
they were motivated less by worries about an economic ripple effect than by
concerns that a Russian financial collapse could imperil President Boris
Yeltsin's hold on power.

But precisely because worldwide markets are interwoven in so many ways
nowadays, even the indirect fallout from a Russian meltdown could hit home.
And what has some economists worried is just how hard those indirect
consequences are to predict. For a variety of reasons, for example, debt
markets in Russia and Latin America--especially Brazil--tend to fluctuate
in exactly the same ways; when foreign investors take flight from Russian
bonds, says Eric Kraus of Regent European Securities, markets in Latin
America also sag. Kraus fears that a financial collapse in Russia would
lead to a downward spiral in Latin America along the lines of the Mexican
crisis of 1994. And that would mean real pain for the United States.

Russian flu could also infect the United States via Europe. American
companies have made big investments in Poland, Hungary, and the Czech
Republic; financial turbulence farther east would hit those countries hard.
German banks have lent $55 billion in Eastern Europe overall, including $40
billion in Russia, raising dangers of a run on the deutsche mark. "A German
banking crisis triggered by instability in Russia would have a strong
recessionary effect on Western Europe," notes Kraus.

Some experts also worry about Russian investment in U.S. equity markets.
Estimates of surreptitious capital flight from Russia in the 1990s run into
the hundreds of billions of dollars, and at least some of that money has
probably found its way into the U.S. stock market. It's anyone's guess how
Russian moneybags who have bet their money on U.S. markets would react if
they became seriously spooked by events at home.

Financial analysts warn that despite the IMF bailout, the long-term
problems of the Russian economy remain. Some experts say that a total
collapse was dangerously close in the days before the IMF rescue, which can
buy only a temporary respite. The loans are "sort of a Band-Aid and they've
given some breathing room for reforms to be pushed through," says Robert
Hanania, an analyst at the Moscow office of Coopers & Lybrand. "Now it's
really going to be a test to see whether the Yeltsin administration can get
them passed." Until then, Russia will continue to serve as a harsh reminder
of one of the disadvantages of the new global economy: There's no safety in
distance

********

#3
Date: Sun, 19 Jul 1998
From: Ronald Pope <73123.3543@compuserve.com>
Subject: The View from Vladimir Oblast

This is a response to Dan Panshin's request for information on the state of
affairs in different Russian Oblasts ("A View from Another Oblast," JRL
#2271, 18 July 1998.)

I have visited Vladimir Oblast several times a year since 1990. In 1992 my
organization built a model American home there, and we began teaching
English that fall. We are involved in a number of primarily small scale
commercial and not-for-profit projects. (See our website: 

http://www.serendipity-russia.com/default.html.)

In contrast to Prof. Panshin's description of the situation in
Voronezh--and more in keeping with Vologda (Scott Ferency)--although there
are still a large number of very important problems, the situation has
improved in Vladimir in many ways during the last 8 years. 

When we were building the American Home in the spring of 1992, for all
practical purposes, we weren't able to find any materials or tools in
Vladimir. Everything from nails to lumber had to be shipped from the
U.S.--except for the concrete. (The American builder who poured the
concrete said he wished he had been able to bring that too--although it has
held up fine so far.) It wasn't until the spring of 1994 that a sufficient
assortment of building materials was available in Moscow for us to be able
to start a remodeling business in Vladimir. Even then, many basic tools
such as decent quality metal cutters still had to be brought from the U.S. 
Now almost everything that is needed for this business is available in

Vladimir.

(One "downside" to this greater availability of building materials and
tools is that our remodeling business has much more competition than four
years ago. But this definitely benefits the community as a whole.)

In September of 1992 we started offering English classes at the American
Home. The teachers are young Americans recently graduated from college. 
For the first several years they regularly asked--actually begged--me to
bring a variety of things from the U.S. that they simply couldn't find in
Vladimir--and frequently not even in Moscow. These ranged from good
quality paper to decent pens and pencils to junk food treats. Now about
the only things that can't be found in Vladimir are contact lens supplies
and dry erase markers for our white boards, along with specialized teaching
materials. (When we began offering classes, there were no decent English
language textbooks available in Russia. Now a growing variety of materials
can be ordered through distributors in Moscow. The things we still need to
bring from the states include videos--that haven't been pirated and dubbed
into Russian--restaurant menus and similar teaching aids; that is, things
you wouldn't expect to find outside the U.S.)

In general, since 1992 retail trade in Vladimir has gone from state stores
with hardly anything worth buying and people standing on the side walks
selling sometimes a single item, to small generally dingy shops and kiosks
carrying unlikely mixtures of goods (e.g., auto parts and women's bras in
the same shop) that changed from one day to the next (e.g., the shop that
had fruit juice and eggs yesterday might not have either tomorrow) to
today's increasingly larger stores that are decently laid out, well lit,
generally clean, and which carry a more or less rational selection of goods
on a much more consistent basis.

Vladimir has also gone from a "cash only" economy to the point where you
can at least cash travelers checks at most local banks or get a cash
advance on your credit card. Also, the local banks have gone from taking
weeks to transfer money within Russia and more than a month to transfer it
abroad, to being able to send or receive transfers within two days at the
most. (The fees are relatively high, and they increase with the size of
the transfer which clearly isn't rational, but at least it is no longer
necessary to carry large amounts of cash in and out of the country or to
wait weeks for a transfer to be made from Vladimir to Moscow. Among other
things, this has made doing business much safer.)

The service sector also has grown substantially. For example, there is now
at least one reliable delivery business, and several firms provide high
quality printed materials (in full color), etc.

For those who are earning a decent salary, Vladimir has become a much more
comfortable place to live than was the case just a few years ago. 

Unfortunately, most of the large Soviet-era plants have still not
successfully restructured, so a lot of people aren't being paid regularly,
if at all. And everyone--teachers, doctors, police, pensioners--who is
being paid out of the government budget is having a hard time. As in

Voronezh, for most people a large garden is a necessity. 

Also among the problems are pollution; growing problems with, for example,
the city water system; corruption (although apparently not on the scale of
some other communities); and a lack of significant investment. (Among
other things, the city still doesn't have a decent hotel where prospective
investors can stay--but the restaurant situation has improved.)

Concerning corruption, I recently completed a two year involvement with the
criminal justice system. A former employee had embezzled a substantial
amount of money from our remodeling business. She did manage to use her
connections to get the initial investigation halted. However, she was
ultimately tried and convicted. She is now serving a 5 year sentence. In
short, to the surprise of many, the system worked. (See JRL #2264, 14 July
1998.)

Each year more progress is being made. More people seem to be trying to
make a place for themselves under the new conditions. For example, our
English program doesn't have a shortage of students as people seek an edge
in the job market.
Young people in particular seem highly unlikely to want to give up the
opportunity to travel--and study--abroad, to freely meet (and even take
classes from) foreigners at home. Most of the older generation doesn't
really want to go back to spending the whole day looking for some decent
sausage or cheese, toilet paper or aspirin.

I strongly suspect that the difference between Voronezh and Vladimir lies
in the extent to which private initiative has been allowed vs. the extent
to which the local authorities have tried to "preserve the past."

*********

#4
From: "Mark Scheuer" <MarkS@DIV317.T185.cpmspc.mail.saic.com>
Subject: RE: 2273-Clarke/Blockading Russia's "Reforms"
Date: Mon, 20 Jul 98 08:06:00 PDT

Thanks to Renfrey Clarke for his description of the blockage of the 
Transsib by local workers (JRL 2273). I do have a question that Mr. 
Clarke himself may be able to answer or, if not, a JRLer in the know may 
comment on. Mr. Clarke states, "Implicitly, the Kuzbass militants have 
set themselves the goal of constructing a political movement that fights 
for the interests of the working population." In light of what seems to 
be a belief among Russians I've met and spoken with-that Russia will not 
return to a communist system-are the present structure and goals of the 
Russian Communist Party seen by the workers as the "political movement" 
they are searching for or are the workers striving for something 
different? If so, has that resulted in a notable increase in 
local/region strength of the KPRF? Finally, if there ever was legitimacy 
to my understanding that Russia will not "go back", do we need to start 
thinking of the present worker movement as a strong signal that Russia 
can "go back"? (I'm hoping for more on the analysis of the impact of this 
movement on the communist party than on a prediction of the future.)

********

#5
Date: Sun, 19 Jul 1998 
From: Michael Beck <mikebeck@arches.uga.edu> 
Subject: Russia's Move to Tighten Control on Strategic Exports

Russia Cracks Down On Missile-Tech Leaks to Iran: IMF inspired?

What concessions did Russia make in order to get an IMF loan? Perhaps
another item to add to the list should be Russia's recent attempt to
punish and investigate Russian enterprises that transferred sensitive
missile technologies to Iran. The Russian Government Export Control
Commission recently promised to investigate alleged violations by several
Russian enterprises including the INOR Scientific and Production Center,
the "Graphite" and "Polyus" research institutes, the Tikhomirov
Instrument-building Research Institute, Glavkosmos, the Komintern plant in
Novosibirsk, the "MOSO"company, and the Baltic State Technical Institute.
The Russian Ministry of Defense simultaneously announced that it was
strengthening control over export of defense materials and technologies.
Finally, Russia's FSB director traveled to Israel to brief officials on
efforts by his agency to crack down on illegal technology transfers to
Iran. 

A few months ago the Russian government issued new regulations which call
upon Russian enterprises to regulate more strictly their export
activities. The regulations were largely a gesture to appease the United
States that it was acting responsibly to curtail missile technology
exports to Iran and elsewhere. Understandably, the U.S. government
wanted to see evidence that "heads are rolling" and that those responsible
for transferring sensitive items to Iran are punished. This latest
promise to investigate Russian companies is part two of a public relations
campaign by Russia to convince the United States that it is taking steps
to block the transfer of sensitive technologies to Iran. The Russian
government also understands that its failure to address the problem could
result in sanctions that would undermine financing for the Russian Space
Agency which relies primarily on U.S. and other Western funding to stay
afloat. 

How effective are these measures likely to be in curtailing illegal
transfers over the long run? Not very-- for the Russian government
nonproliferation ranks relatively low on the foreign policy agenda (in
spite of official statements about Russia's commitment to international
norms, etc.). Second, the economic conditions which prompted Russian
companies to bypass the system have not disappeared. Thus, even if
Russian authorities sincerely attempted to crackdown on illegal exports,
they would have little success. Third, many Russian officials believe that
the United States is using export control as a pretext to deny Russia
access to markets. 

Another problem rests with Russia's participation in multilateral regimes
(the Missile Technology Control Regime, Nuclear Suppliers Groups, and
Wassenaar Arrangement). By joining the Missile Technology Control Regime
and other multilateral export control arrangements, Russia was able to
gain access to Western technology and markets. As a member of these
regimes, Russia now has the means to veto attempts by the United States
and others to target states with which Russia seeks to trade. Finally,
Russia has been able to exploit ambiguities in several regimes to

rationalize exports to several suspect states. Russia has even been able
to use the vague language of the NPT to rationalize sensitive nuclear
exports. Some officials from the Ministry of Atomic Energy even go so far
as to insist that they were "obligated" to supply Iran with civilian
nuclear assistance under Article IV (Part 2) of the NPT which states that:
"All Parties to the Treaty undertake to facilitate and have the right to
participate in the fullest possible exchange of equipment, materials and
scientific and technological information for the peaceful use of nuclear
energy." Russian officials point out that Iran is a member in good
standing with the IAEA and therefore entitled to civilian cooperation. 

In general, Russian foreign policymakers spend more time engaging in
"window dressing" than actually implementing an export control system.
Russia has developed an extensive array of decrees and regulations
governing the export of strategic dual-use technologies but this was done
largely for economic reasons-Russia wanted the West to lift trade
restrictions left over from the Cold War (COCOM restrictions)-not to
address a security threat. In fact, most changes in Russia's export
control system and export behavior can be understood as a response to
Western sticks and carrots. 

The United States will likely have some limited success in pressuring
Russia to control sensitive exports in cases where it has incentives to
offer and is willing to impose sanctions. However, the United States can
do little to block "illegal exports" by Russian enterprises that are more
willing than ever to bypass official channels because of economic
hardship. 

While Russia has plenty of holes in its export control system, there are
some officials and a small nonproliferation community in Russia who have
made important strides. We also should not expect too much from Russia.
The United States, after all, has had decades to develop an effective
export control system, yet our system too remains flawed. Recent U.S.
exports of satellite technology show how vulnerable the U.S. export
control system is to the business lobby. 

********

#6
Duma Chairman Calls For Presidential Republic 

MOSCOW, July 20 (Interfax) - The constitution must be revised and Russia
must become a parliamentary republic, Duma Chairman *Gennady Seleznyov*
told the weekly Versiya. 
"I oppose a presidential republic. Ideally, we should revise the
constitution and come back to a normal parliamentary republic with two
houses of parliament and a strong government wielding numerous powers that
the president has now," he said. 
The president, elected at a joint session of the two houses, "will have
his scope in representing the state in the spheres defined by the law,"
Seleznyov said. 
"If we say, let us distribute our power in a clear cut and equitable way
for the sake of orderliness, let us form a coalition government which will
submit to parliament a true anti-crisis program understandable to every
citizen of Russia," the people would welcome and support this, he said. 
If the president called together the leaders of several parliamentary
groups and asked them to form a government, "competent people would be
nominated who are capable of managing today's situation in Russia,"
Seleznyov said. 

As a result, "political and social tension would ease" because
parliament would be responsible for the program that the government would
carry out, he said. 
"At the moment our president does not want to understand this. I believe
that either he will understand or all the Russian regions and republics
will call for an early ending of his powers," Seleznyov said. 
"In Russia today conflicts cannot be resolved militarily through the
imposition of emergency or martial or any other law. Even if the president
follows some crazy advice and sends tanks against the lawmakers, the tanks,
I believe, will turn against the Kremlin. Nobody, no armed unit will
execute such an order today, I think," he said. 
Yeltsin should not "speak any more about his third presidential term
because such speculations make society very angry. The people are irritated
by reports on the president's doubts and hesitations about running for a
third term," Seleznyov said. 
The State Duma will debate next fall a law or amendments to the existing
legislation on the legal protection and material provisions for the
country's president and his family following his departure from that
position, he said. 
"He must have a pension, must have protection for himself and his
family, a state country house or residence, bodyguards, a car, whatever is
needed," Seleznyov said. 
The retired president might be made honorary member of the Federation
Council. "If we are building a law abiding state, if there are no specific
criminal cases against the president, he must be 

*******

#7
Games Reflect Political Ambitions of Moscow Mayor 
July 19, 1998

MOSCOW -- (Reuters) The crowd was bused in. Television stations were
ordered to broadcast. The final soccer match provided a rousing victory for
the home team. 
The first World Youth Games proved a success of sorts but one that may
have said more about the political ambitions of Moscow's mayor than the
future of the teenage Olympic movement. 
In a country where many workers have not been paid for months, Mayor
Yury Luzhkov has won a reputation as one of the few politicians who gets
things done. The games, which closed on Sunday evening with much pomp, was
a typical example. 
Streets were repaved, grass planted and buildings repainted. The city
was festooned with lights, posters and banners, bearing grandiose slogans
such as "Moscow! Capital of Youth and Sport!" 
Moscow hosted young athletes aged from 11 to 17 from 139 countries.
Concerts were held throughout the city and planes seeded rain clouds in a
desperate attempt to control the weather. 
"Our slogan has been fulfilled. Moscow is indeed an open world for
children," Luzhkov told reporters on Sunday. 
In spite of the hoopla and the mayor's hard sell, something about the
games seemed to strike a sardonic chord among Russians more concerned with
their country's financial crisis than with an event which Luzhkov promised
would be "remembered as a watershed in the history of sport." 
The TV-Tsentr network, controlled by the city government, gave the games
blanket coverage. But all other networks, and most newspapers, virtually
ignored them or relegated them to the end of the sporting news. 
The daily Novye Izvestiya lampooned the event with a front-page
headline: "Olympic Record: Police Win 20-1." It published a picture of
hundreds of the nearly 140,000 police officers protecting just 7,000
athletes, saying the massive police presence had "left our foreign guests
in shock." 

Moscow's 83,000-seat Luzhniki stadium was packed for the opening and
for the final ceremonies but tickets were not made available to the public.
Most were given to sport clubs and summer camps, who bused their
enthusiastic fans in. 
The resulting spectacle might have seemed puzzling to a Western
observer: thousands of fans packed together in sections, wearing identical
T-shirts and baseball caps, identifying them by color as residents of this
or that district of the city. 
Yet members of the crowd with memories of the Soviet era found the scene
not unfamiliar. "I kept waiting for Brezhnev," said one journalist. 
Many matches took place in empty halls. 
The games were one of Luzhkov's most ambitious projects yet. Asked just
how much the city spent on them, his deputy Valery Shantsev said "about
$100 million rubles ($16 million)." He added: "You don't regret money spent
on children." 
Such evasive responses are not unusual in Moscow where no formal public
account has been made of hundreds of millions of dollars spent on many of
Luzhkov's pet projects. 
The mayor has rebuilt a 19th century cathedral, dug a three-story
underground mall near Red Square and hosted a lavish 850th birthday bash
for the city last year. 
Luzhkov's next headline-grabbing extravaganza is expected to be Russia's
presidential election in 2000. The capital's financial clout should help
make him one of the front-runners. 
For now, the future of the youth games -- Luzhkov's own idea -- remains
unclear. The International Olympic Committee (IOC) did not let Luzhkov use
the title "Youth Olympics," although Moscow was allowed to display the
five-ring Olympic symbol and to light a torch from the official Olympic
flame in Athens. 
Luzhkov said the IOC promised to discuss making the youth games an
official four-yearly Olympic event. If no other city can be found to host
them in 2002, not to worry. "We're ready to hold them again ourselves," he
said. ( (c) 1998 Reuters) 

********

#8
Russia Today


http://www.russiatoday.com
July 20, 1998
Running in Place: IMF Bailout Not Enough to Fix Russian Economy 
By Jennifer DeLay 

The International Monetary Fund's decision to lend Moscow $17.1 billion
as part of a $22.6 billion bailout package was described by Anatoly Chubais
on July 13 as a vote of confidence -- "a restoration of faith in Russia's
ability to overcome its difficulties." 
Strange choice of words, given that Russia might not have needed the
money in the first place if its economy were really in such good shape. 
Indeed, there are plenty of reasons to wonder why the IMF chose this
moment to extend another loan to Moscow. Its resources are already strained
from a series of multi-billion dollar bailouts for ailing economic tigers
in Asia, and Moscow is in some ways not an ideal borrower. 
The last time the fund extended a helping hand was in the summer of
1996, and most commentators agreed then that its offer of an Extended Funds
Facility (EFF) worth $10.2 billion was more or less a contribution to Boris
Yeltsin's flagging re-election campaign. 
This time, the presidency is not at stake. Even with public confidence
in the president at its nadir and the state of his health uncertain,
Yeltsin looks set to remain where he is for the time being. Opposition
parties in the Duma are threatening once again to impeach him. But they
have done this so many times since 1993 -- when Yeltsin forcibly deposed
left-wing legislators who opposed his reforms and put a new constitution in
place to make sure nothing of the sort would happen again -- that the words
have lost much of their meaning. 

But even with the threat of political upheaval minimal, the IMF appears
to have believed that its money was necessary to avert a crisis. 
During negotiations over the international loan package, the Duma was
threatening to reject a package of economic stabilization measures proposed
by the government and miners, angry at not receiving their long-delayed
salaries, were pressing on with strike actions that interrupted crucial
rail transport lines. 
Neither of these worrisome events was unprecedented. But these strikes
and political battles took place at a time when general unease stemming
from the financial crises in Asia was pushing the Russian stock exchange
down. The Russian bourse, in turn, was pulling Central and East European
exchanges down with it, threatening to spread Russian-style disaster across
the continent. 
The IMF may then have helped banish the specter of financial crisis from
a wide swath of Europe. But it is by no means certain that the billions of
dollars extended to Russia by the fund, the World Bank and the Japanese
government will help eliminate the problems that created the need for the
bailout in the first place. 
Russia's industries and tax collection system are still a mess, and they
cannot be cured of their ills with a quick cash injection. Even the strict
reform measures recommended by the IMF may not suffice. 
Indeed, the fund's actions since the granting of the EFF package in the
summer of 1996 seem to have taught the Russian government that it was not
necessary to implement wide-ranging reforms in order to receive cash from
the IMF. 
The fund has repeatedly -- in October and November of 1996, in
January-March and October of 1997 and in May-June of 1998 -- postponed
disbursement of tranches from the EFF, usually on the grounds of lackluster
tax collection. But it has generally shelled out once Moscow loudly
proclaimed its commitment to stepping up fiscal discipline and then made
highly publicized yet half-hearted attempts to do so. (Witness the
government's stabilization package, which the Duma predictably whittled
down to size.) 
The IMF's money seems to be keeping Russia afloat and chaos at bay in
the financial markets of Central and Eastern Europe. But it has certainly
not induced the Russian government to carry out any wide-ranging reform
programs, and -- as the protests over salary arrears show -- it has not
sufficed to fill in the gaping holes in the federal budget. 
The IMF loan has apparently done much to maintain confidence and
preserve the status quo but little to encourage the change needed to make
multi-billion dollar bailouts unnecessary. One wonders, then, what will
happen when it comes time for Russia, whose financial problems remain
massive and unresolved, to pay the fund back.

********

#9
New York Times
20 July 1998
Letter byJack Kemp
I.M.F. Austerity May Deepen Crises 

To the Editor: 

Your July 16 news article on a House panel's approval of $3.5 billion in
new borrowing authority for the International Monetary Fund suggests that
Dick Armey, the majority leader, has "virtually conceded the fight" against
the I.M.F. Giving it one more penny without insisting on personnel and
policy changes not only concedes the fight but also condones policies that
are so destructive of the poorest countries. 
I oppose any financing until we are confident the I.M.F. will stop
imposing austerity measures and currency devaluations. I do not, however,
agree with Republicans who would shut the agency down now. 

For several years, I have called for the resignation of the I.M.F.'s
managing director and top managers. 
The I.M.F. now proposes to lend Russia $11 billion, but the conditions
it seeks would push Russia deeper into crisis and perhaps to the point
where the Russians might yearn for a return of authoritarianism. 
Only a new management team committed to pro-growth policies of stable
currencies and low tax rates would justify the full $17.9 billion being
sought by the Clinton Administration. 
JACK KEMP 
Washington, July 16, 1998 

********

#10
Finnish General Says Russia Should Return Karelia 
July 17, 1998

HELSINKI -- (Reuters) A serving Finnish general broke Finland's top foreign
policy taboo on Friday by demanding a return of a province that was annexed
by the Soviet Union during World War II. 
His remarks in a newspaper interview drew immediate rebuke from Prime
Minister Paavo Lipponen and the army's headquarters which said the
general's call was "private and personal." 
Gen. Kari Hietanen, a commander in the southeastern region adjacent to
Russia, told a local newspaper that the government should try to amicably
negotiate with Moscow over the issue. 
Hietanen said the issue was ripe for addressing because the end of the
Cold War had already brought about a major realignment of borders in Europe. 
"The historical wrongdoing should be rectified," he told the newspaper
Etela-Saimaa. "The starting point should be that in today's world things
are neither impossible nor evident." 
"I have looked at the issue against the background of what has been
happening in the world -- Germany has been unified, the Baltic States are
independent," he added. 
Finland had to cede Karelia, a stretch of land around the northern half
of Lake Ladoga near St. Petersburg, after being defeated by the Soviet
Union in 1944. 

More than 400,000 Karelians, or one-tenth of Finland's pre-war
population, were expelled by the Russians from the area. 
During the uneasy friendship between the two countries during the Cold
War, the subject of Karelia was anathema for Finland's political
establishment and grass-root groups trying to keep the issue alive were
ignored. 
This was because Finland feared giving Soviet leaders any pretext to
exert even greater pressure on Helsinki to abandon its policy of opening up
to the West. 
The issue became topical for a while when the Soviet Union collapsed in
early 1990s, but consecutive governments, seeking to build trust and
balanced relations with the democratic Russia, have refused to reopen old
wounds. 
Lipponen made clear on Friday this approach was in force, saying the
general's remarks should be ignored and suggesting he might be reprimanded. 
"He has to answer for whether it was wise or not to say it," the prime
minister told reporters.

********

#11
The Times (UK)
20 July 1998
Editorial 
TURKIC TURMOIL 
The lack of democracy breeds rebellion in Central Asia 

Cholpon-Ata, in Kyrgyzstan, is a beautiful but surreal place; a beach
resort thousands of miles from the nearest sea, 6,000 ft above sea level,
on a lake where tourists paddle pedalos against the snow-peaked backdrop of
some of Asia's highest mountains. Leaders of the Central Asian Economic
Community's four member states (Kazakhstan, Uzbekistan, Tajikistan and
Kyrgyzstan) have been meeting there to take the waters, attend the wedding
of the son of Askar Akayev, the Kyrgyz President, to the daughter of
Kazakhstan's President Nursultan Nazarbayev and pull a little wool over
international eyes. The purpose of the summit, thwarted by Uzbek President
Islam Karimov's absence, was to sign a security agreement to counter the
perceived Islamic threat to the CAEC. Yet though two of the four share a
border with mostly-Taliban-ruled Afghanistan, the threat of Islamic
fundamentalism is too easily invoked by all four leaders against all
political opposition. 
Tajikistan is trying to emerge from a civil war between the Government
and a professedly Islamic opposition. But the theological grip of the Sunni
Islamic Resistance Party and the Ismaili Lali Badakhshan is elastic; the
conflict has been more about regional and clan rivalries than religion. It
suits both Russia, which maintains a sizeable military presence there as
combatants and UN-monitored peacekeepers, and Tajikistan's illiberal
Government, to present the latter's enemies in fundamentalist terms.
Uzbekistan is conducting a series of show trials. The accused are
self-confessed Islamist rebels from the fundamentalist hotbed of the
Ferghana Valley. But they are on trial for crimes (murders of policemen)
that bear the marks of the mafia, not Islamists, and could have been
motivated by clan or money disputes rather than religious fanaticism. 

In April, Kyrgyz police arrested ethnic Uighur exiles from China's
troubled western Xinjiang, which borders on three CAEC states, and
announced them to be Islamists. But the Uighurs' armed opposition to
Chinese rule, which even a million Xinjiang-based troops have been unable
to quell, is secular in aim; and the arrests (and convenient
categorisation) immediately preceded President Akayev's visit to Beijing,
where extensive trade deals were signed. As for Kazakhstan, it is more
worried about keeping its Slavic majority - and Russia - happy, than about
Islamist sedition in a nominally Muslim Turkic population. 
The real problem in the CAEC is that only one of its members,
Kyrgyzstan, is close to being a genuine pluralistic democracy. Tajikistan
and Uzbekistan are led by former pillars of the ex-Soviet Union who see
opposition as tantamount to rebellion. Mr Nazarbayev, though carefully
walking the Russian tightrope - recently moving the Kazakh capital north to
the Russian-inhabited steppes - still lacks the confidence to lift all
restrictions on the media or political activity. Only Mr Akayev, the IMF's
regional darling, has enough legitimacy to resolve clan and regional
differences. It is unwise for CAEC leaders to brand all dissent with the
label of Islamic sedition. The lack of democratic pressure-valves risks
turning political opposition into armed rebellion. 

*******

#12
Time magazine
JULY 27, 1998 
[for personal use only]
Final Rites For The Czar 
After 80 years, the Romanovs are laid to rest with more Russian politics
than national repentance 
By PAUL QUINN-JUDGE /ST. PETERSBURG 

The funeral last week of the last Czar of Russia and his family, held in
the austerely beautiful confines of St. Petersburg's Peter and Paul
Fortress, was originally intended to be an act of national repentance for
80 years of death and division. It turned out to be a symbol of the
dominant feature of Russian politics today: the fine art of cutting a deal. 

For the priests and the President in the cathedral last Friday, the
small coffins in front of them were not those of Nicholas II, his wife,
three of his children and four faithful retainers. (The remains of two
children, Alexei and Maria, have yet to be found.) In the view of the
church, the boxes draped with the imperial flag contained the skeletons of
anonymous victims of the political terror that engulfed Russia after the
overthrow of autocracy in 1917. The head of the Russian Orthodox Church,
Alexi II, who has been accused by former dissidents of collaboration with
the Soviet-era KGB, expresses doubts about the authenticity of the bones,
despite positive DNA tests. He calls them the "Yekaterinburg remains," a
reference to the town in the Urals where the imperial family was killed in
the early hours of July 17, 1918. President Boris Yeltsin--who as Communist
Party chief there in 1977 had destroyed the site of the massacre--denounced
the murder during his funeral address but stuck to the official church
description of the remains as innocent and unnamed victims. 
Yeltsin's mere presence at the rites was an unexpected act of political
daring. The idea of national repentance for the murders was dropped months
ago after the Patriarch withheld his blessing, and most leading
politicians, with the exception of the ambitious Alexander Lebed and
opposition leader Grigori Yavlinsky, found other things to do that Friday.
Yeltsin's sudden decision to appear achieved the effect he so clearly
enjoys, catching his rivals off balance and making them look foolish. This
time, however, his about-face may have been inspired by more profound
considerations. The day before the funeral, the one living Russian with any
claims to sainthood, Dmitri Likhachev, 91, spoke on the phone with the
President and urged him to attend. Yeltsin is reputed to be in awe of
Likhachev, a specialist in early Russian literature and a survivor of one
of the worst of the early Soviet political prisons, where in previous
centuries the Orthodox Church sent its dissidents. Soon after the call,
Yeltsin announced he would travel to St. Petersburg, and during the
ceremony Likhachev stood just behind the President. 
Surviving members of the Romanov family--who had come from addresses as
diverse as Paris; Oakland, Calif.; New South Wales; and East Sussex--kept a
low profile. Those who spoke Russian did so in an archaic St. Petersburg
accent that has all but disappeared. Some, such as the mayor of Palm Beach,
Fla., Paul Ilinsky, never learned the language. They were restrained in
their comments on Nicholas and made no claim to any stake in Russia's
political future. 

The Russian media showed no such restraint. In the days preceding the
funeral, the country's largest privately owned network, NTV, ran a series
of programs and discussions that all but canonized Nicholas and endorsed
autocracy. His Russia, NTV told its viewers, was a country of "order and
prosperity." One young historian argued that Nicholas was a statesman of
almost supernatural insight, though he gave himself away when he went on to
suggest that Rasputin--the Czarina's "spiritual adviser" whose scandalous
reputation did so much to discredit the Czar--was given a raw deal. The
guiding logic of the programs seemed to be that if the Bolsheviks hated
Nicholas, he must have been a wonderful man. 
In fact, Nicholas II is viewed by most historians as a mediocre
personality, deeply flawed and sometimes sinister. Popular unrest was
ruthlessly suppressed by his army in 1905 and again in 1917, until the
troops themselves mutinied that February. The Czar presided over a court
and political system so byzantine that several of his ministers were
assassinated by "revolutionaries" who were in reality secret police, and a
Prime Minister, Sergei Witte, suspected until the end of his life that the
identities of those behind a plot to kill him were known to the Czar. These
defects were erased in most people's minds by the manner of the Romanovs'
death: the massacre in the cellar of the Ipatiev house in Yekaterinburg,
the 12 bullet holes in the body of Alexei--"a beautiful child," one of the
executioners recalled--and the way some of the women who hid behind
cushions were finished off with bayonets. The killers took a certain pride
in their work: in a 1964 interview taped for secret Communist Party
archives, one of the execution party jovially referred to the corpses as
golubchiki--the little dears. 
Many networks--as well as a site on the Web--offered Russians live
coverage of the events. But life in St. Petersburg went on as usual. The
center of the city is turning into a smaller version of Moscow, with Gucci
shops and bodyguards, hotels with London prices and unofficial landmarks of
the new order--like the spot on Nevsky Prospekt, the city's most famous
shopping street, where a top government official was gunned down last year
in a highly professional contract hit. As the funeral proceeded, city
streets were busy, shops and offices were open as usual and few people
seemed touched by the event. "I'll catch it on the news," said Lyudmilla
Petrova, a shop worker on Nevsky Prospekt. Tanya, a slender 19-year-old in
a miniskirt waiting by a chauffeured Mercedes for her businessman
boyfriend, said she had not missed a single TV program on the Romanovs all
week. "It was so sad," she said, "but it doesn't seem like it happened
here--it's like a miniseries." The muted response to the funeral, in
political circles and on the street, suggests that Russians have not yet
found a way of coming to terms with their past. The real question is
whether they are even trying anymore. 

*********
 

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