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Johnson's Russia List
22 July 1998
[Note from David Johnson:
1. Moscow Times: Sophia Bogatyreva, ESSAY: In Defense of the Cold, Callous
2. Gary Krueger : Re: 2275-Gaddy&Ickes/True Structural Change Needed.
3. AP: Russia Military Recruiting Mentally Ill.
4. The Guardian (UK): James Meek, KGB spins its Web even in afterlife.
5. Peter Heinlein: Running.
6. Jamestown Foundation Monitor: RUSSIAN ECONOMY CONTINUES TO STAGNATE.
7. Rossiiskaya Gazeta: RUSSIAN GOVERNMENT READY TO IMPLEMENT ANTI-CRISIS
8. Russky Telegraf: POLICE KNOW WHERE THIEVES ARE. Russian Criminals Have
Strong Patrons in Political Community.
9. Reuters: Police Say Criminals Penetrate Gov't.
10. Reuters: Elite Nuclear Workers Plan Strike.
11. RFE/RL: John Varoli, St Petersburg Joins Buy Russian Movement.
12. AP: Russia Investigating Art Thefts.
13. AP: Oil Firms Criticize Russia-IMF Plan.
14. Moscow Times EDITORIAL: Tax Reform A 3-Way Dilemma.
15. The Electronic Telegraph (UK): RObert Uhlrig, Russians launch new
moon to help
them see the light.
16. Reuters: Poverty Breeds Big Problems for Central Asia.]
July 22, 1998
ESSAY: In Defense of the Cold, Callous American Way
By Sophia Bogatyreva
Special to The Moscow Times
"They say Americans are terribly hard, is that true?"
"What makes you say that?"
"Well, they say that if a woman were standing on the street crying, no one
would even come up and ask her what's wrong."
These were the kinds of questions I was pestered with upon my return from
the States. After a while, I began to hate this imaginary crying woman. Why
would a grown woman cry on the street? Incidentally, it's hard to picture a
contemporary American woman doing such a thing. But if she were crying on
the street, the last thing she'd want is strangers asking her questions. It
would be difficult to get near her anyway. A slap in the face would be her
most likely response. The moral: Mind your own business.
Americans aren't hard. From my observations, friendliness is practically
their most striking characteristic. It struck us straight away.
It was the coldest part of winter and we had barely moved in when something
happened to our heater. I went to our neighbor, Leslie, with whom we had
not yet been properly acquainted to find out who we should call. She became
concerned and literally forbade me from calling a repairman.
"Today is Saturday. You'll have to pay triple. My husband will be home
soon. I hope he can help us."
Her husband, it turned out, was supposed to return from New York where he
had been for some time. I expressed doubt that after such a long trip he
would be thrilled at the prospect of having to go right to work on a
"He'll be happy to," Leslie proudly assured me.
I couldn't tell how George felt about it. Whether he was happy or not, he
came to see us just as soon as he got home. Unfortunately, he couldn't do
anything about it, as he was unfamiliar with the system. But without
hesitating, he and Leslie went through the entire neighborhood to find
someone familiar with my model. That person happened to have guests at the
time. But the host set down his beer and plate, gave his guests a nod in
departure and set off to help us. After fiddling around for some time, he
found the extinguished pilot light and lit it. And then to our horror he
blew it out again.
"You have to know how to fix it yourselves," he said. "What if I'm not
home next time?"
He spent another 30 minutes instructing us on our heater, having us find
the pilot light and ignite it. Only then did he return to his guests, warm
beer and cold hamburger.
You say hard? They're not hard. They simply do not like to stick their
noses in other people's business.
Americans are always ready to come to one's aid. It's just that their way
of being friendly, among many other things, is very different from ours.
Their friendliness has to be summoned or switched on. Ours, on the other
hand, works on autopilot. Where it's needed, and even where it's not needed.
I once visited some friends in Moscow whom I have known for a long time. I
was treated to a nice dinner and tormented to the depths of my soul for the
entire evening: The whole house was panicked about the possibility of
catching cold. They had the windows sealed and the heat cranked up.
Luckily, a slight draft of fresh air was blowing through a crack in the
window frame. But no! My attentive host mercilessly slammed the window shut
over my head.
Protest was pointless. She was convinced that my health was her problem,
and she would deal with it as she saw fit.
Each one of us has what in Russia is called a "bottom drawer" filled with
important but nonpressing matters for which there is never enough time and
which constantly burden our memory and conscience. All-out attack is the
only way to resolve such matters. I had such a fit right before vacation
once. I was forced to make a sacrifice, to send the family off to the cool
sea and stay home for a week in the hot city. I could get everything done
faster on my own, I thought. With the apartment empty, I could spread the
paperwork out all over the floor where it would be easier to work.
Seeing that I had remained in Moscow all alone, my friends decided to
"save" me. Every day, someone would come check up on me (which meant that I
had to pick up the papers, make coffee and then, when they left, lay out
the papers once again). In the evenings, there were tickets to the theater,
concerts, movies and invitations to friends' homes. All attempts at
resistance were put down from the very start by their unstated "It's not
good for you to sit at home all alone. We know best."
To display a greater degree of obstinacy would have meant offending
friends. It would have meant unconscionably driving them away, as
everything they were doing was with good intentions and for my own good.
They sincerely believed that passing my time was their problem. The result
was that I accomplished nearly none of what I had planned to do. My
friends, however, were satisfied. After all, they knew what I needed better
That's where the question arises: Is the empathy for which we are praised
always as selfless as we like to think? In fact, we are quite pleased with
ourselves when pushing our unsolicited services. How wonderful it is to be
a good person in our own eyes. We certainly don't want to be challenged on
the issue of how appropriate it is, whether our charity is needed by anyone
other than ourselves.
There is another side to all of this, one that I believe is more serious.
When we get involved in the affairs of others, we tend to think that
someone else will handle our own.
About 20 years ago, some friends of mine emigrated from the Soviet Union to
the United States, where they lived with some older relatives at first.
They laugh now when they remember how they were constantly hungry during
their first few months in their new country, and how no one would offer
them anything to eat. Their hosts rightly assumed that adults could take
care of themselves: The refrigerator was full, there were plenty of plates
and cups, make what you want. But my poor friends sat starving all day,
every day waiting for everyone to gather for dinner, and ashamed to take
second portions unless they were offered at least twice. But no one ever
offered twice. Trivial? Obviously so, since none of them starved to death.
But such trivial things bear witness to more serious matters. They bear
witness to our infantility, our dependency, our foolishness, or more to the
point, our unwillingness to tackle our own problems. It's easier for us to
sacrifice comfort, to suffer, than to make any effort on our own behalf.
Yet we are all so good at solving others' problems. We are each a master at
giving out so-called "free advice." This is why we are so surprised by
Americans' delicate caution when discussing others' affairs. It's not
hardness. It's respect for privacy -- including your own privacy.
Date: Wed, 22 Jul 1998
From: Gary Krueger <firstname.lastname@example.org>
Subject: Re: 2275-Gaddy&Ickes/True Structural Change Needed,
Here is a small contribution to the "virtual economy" debate.
A nice turn of the phrase, one sure to catch the eye of a newspaper
editor, the Gaddy -Ickes virtual economy thesis is a vast
oversimplification of Russian economic reality. I've been in 50 or so
formerly state owned (I.e., pre-existing the transition) firms over the
past five years. Many of these firms were far from virtual, much less
value subtractors as Gaddy/Ickes seem to think is true of Russian
firms. What needs to be recognized is that Russian industry has cleaved
along industrial and regional fault lines (read Moscow). Firms with
access to cash due to proximity to the retail customer- like bakeries
and breweries--operate "normally" in that they pay wages timely at
levels above average (up to $400) and don't, for the most part, use
barter. Some good examples here are the Tver Brewery--maker of
"Afanasi" and Cherkizovsky meat factory (anyone whose been near a Moscow
metro station will recognize their trucks.) Cherkizovsky has added
almost 5000 employees since 1992. (By the way I've eaten their meat and
it is far from virtual).
The Gaddy/Ickes thesis may apply to firms in machinery and chemicals,
which are far removed from retail customers, rely heavily on barter (up
to 90 percent of output in many cases), pay low wages, late or not at
all. But even here the market is "working" in that these firms are
shrinking rapidly reducing their "subtraction" of value to the overall
economy. An example here is the Krasny Proletarie machine tool factory,
once one of the Soviet Union's largest makers of machine tools. This
firm has seen employment fall from pre transition levels of 6500 to less
than 1500 in 1997. This firm paid very low wages (less than one quarter
the level of wages paid in Cherkizovsky) and used barter
extensively--upwards of 60 percent of total production went for barter
in 1997. Firms with no cash can no longer pay competitive wages (at
least on a timely basis) which induces good workers to leave. The low
wages and decline in employment go hand in hand -good workers are
finding employment elsewhere. What is happening in these firms is that
they are becoming decapitalized as their best workers are the first to
leave. In the Slava watch factory the average age of their (now much
smaller) work-force has increased from somewhere in the late 20's in
1992 to nearly 50 by 1996.
Yet, even in machinery not all of these firms are dinosaurs and it
should be recognized that not all barter is dysfunctional in that it is
dinosaur sustaining. In the Tver Excavator plant, which relied heavily
on barter, management used its scarce cash to retool the factory in
order to widen its profile from three to nine variants of excavators--
landing the firm a contract with the Japanese heavy equipment firm
Komatsu in late summer of 1997.
What is criminal and uniquely dysfunctional about Russia's economy is
the near total absence of a capital market, which forces firms to rely
on retained earnings as a source of finance. The banking system has so
far been completely absent from the restructuring process. Rather than
behave as bankers ought- lending to businesses--they have spent the last
six years speculating against their own currency or playing in the
market for government debt.
Unlike the old-Soviet days, Russian economic reality is far too
complicated to make quick generalizations. Many firms, in spite of
tremendous obstacles, are making substantive changes in their operations
and are positive forces in the Russian economy.
Date: Tue, 21 Jul 1998
From: Chuck Spinney <email@example.com>
Subject: Russia Military Recruiting Mentally Ill
Dave .... don't know if you've seen this, but I thought I'd forward it
MOSCOW (AP) -- The Russian military is so desperate to fill its ranks
that recruiters have accepted mentally ill or diseased conscripts --
including one who shot up the prime minister's residence, news reports said
In an incident kept secret until recently, a mentally ill soldier
guarding former Prime Minister Viktor Chernomyrdin opened fire outside his
summer residence, Gen. Mikhail Kislitsyn, the chief military prosecutor for
the Moscow district, told Ru
The soldier, who had a history of mental illness, stabbed a fellow guard
and then sprayed the premier's house with automatic gunfire before being
killed by the soldier he had wounded. Chernomyrdin was inside the house
when the January incident o
ccurred and "had to endure many unpleasant minutes," the daily Segodnya
quoting Kislitsyn as saying.
Checks of military garrisons around Moscow in the past two years
revealed 128 HIV-infected soldiers, 111 of whom had the disease before the
conscription, Kislitsyn said.
Most conscripted men try to dodge the draft, and only about 20 percent
of those conscripted actually join. The dreaded military is plagued by
delayed paychecks, low morale and vicious hazing of young recruits by older
Suicides and shootouts among soldiers have risen steadily. According to
official estimates, 50 soldiers were killed by fellow servicemen last year,
and about 500 committed suicide.
"Imagine what a mentally ill person or a drug addict can do if you give
him an assault rifle," Kislitsyn said, according to the business daily
President Boris Yeltsin promised during the 1996 election campaign to
end the unpopular military draft by 2000.
He has said he wants to cut 500,000 soldiers from the bloated armed
forces -- now estimated at 1.7 million to 2 million -- to create a smaller,
professional force that would be better-equipped and better-trained.
The Guardian (UK)
July 21, 1998
[for personal use only]
KGB spins its Web even in afterlife
By James Meek in Moscow
Russia's secret police would be able to monitor, in real time, every e-mail
message and Web page sent or received by Russians under a project,
codenamed Sorm, which is alarming the country's growing host of Internet
A draft Sorm, being discussed by the country's communications agencies, is
truly Orwellian in scope. It would force all providers of Internet services
to install a "black box" snooping device in their main computers and build
a dedicated information superhighway connecting it with the security agency
FSB, formerly the KGB.
Sorm stands for "system for ensuring investigative activity". It seems to
have been created by state communications researchers and officials at the
behest of the FSB.
The draft project, published by a Russian Website, says the system had to
enable the security service to "uplift all information, incoming and
outgoing, for individual subscribers of each network".
Internet providers would be obliged to build a high-speed data link to the
security service's Internet control room so that FSB operators could access
a vast amount of information about any user.
In theory, under Russian law, the FSB would be restrained by the same legal
requirements as those covering phone taps or letter-opening, where it must
make a formal application to the courts. But Russian Internet users doubt
that the agency would be able to resist the temptation to use its secret
system to spy on the innocent.
"The installation in an Internet server of a 'black box' over which the
server's administrators have absolutely no control creates all sorts of
dangers," said Anatoly Levanchuk, an electronic documents consultant who
published the Sorm draft.
It would be, he said, "like having the FSB's word of honour that they won't
switch on the listening device they've just installed in your apartment or
office unless they really need to".
An FSB official told the Guardian yesterday that he could not confirm the
existence of Sorm. But a spokesman for the Russian Association of Network
Services, an Internet providers group, confirmed that the association had
held four meetings to discuss the project's implications.
Russia's looming battle over Internet privacy is part of a wider
international struggle between governments and Net users. In the US, the
federal government has provoked opposition with a plan to keep copies of
all commercial encryption keys in secure depositories, available when
required to the FBI, the CIA or the communications intelligence agency, the
NSA, to crack codes used by criminals or terrorists.
Unlike Russia's secret police, however, the US government is not demanding
Internet providers install a direct data link to CIA headquarters.
In Russia, no one seems sure what the next step will be to move the project
from draft plan to reality; a presidential decree or parliamentary law may
Andrei Sibrant, marketing director of Glasnet, a pioneer of low-cost
Internet access in Russia, said Russian Internet providers had to comply
with new requirements or risk losing operating licences.
One of the main concerns was the Sorm demand that the exclusive FSB data
connection be as fast, or faster than, the fastest link between provider
If the project became law as drafted, Mr Sibrant said, Glasnet would be
obliged to mark the dawn of the information age by building a costly
high-speed optical fibre data link from its offices to secret police
"As an employee of a company obliged to obey the terms of its licence, I'm
not concerned," he said. "But as a citizen I'm seriously worried."
Many Internet users would respond to Sorm by encrypting e-mail using widely
available software, he added. But nothing would stop the FSB building up
profiles of users.
"This is information which is supposed to be secret," Mr Sibrant said.
"But, as you know, the Russian language has no adequate translation for the
Information on Sorm can be found at http://www.fe.msk.ru
From: "Peter Heinlein" <firstname.lastname@example.org>
Subject: Running, etc.
Date: Tue, 21 Jul 1998
Reading back issues on our return, we enjoyed the conversation you started
on running in Moscow.
I must say I agree with Patricia Kranz, who runs along the river below
Moscow State University, known as Vorobyovskaya Naberezhnaya. For my money,
it's the best in Moscow. We, however, usually run the far stretch,
beginning almost across from the Novodyevichy Monastery, where the
embankment road begins. (it's closer to home). The embankment there is very
quiet. It's especially beautiful during the autumn, when for a couple weeks
the forest erupts in a riot of russet and gold. When its dry, there are
also some wonderful (but quite hilly) forest trails that go past the ski
jump and the old abandoned metro station (quite a startling sight if you're
not expecting it). If you persevere (there's one point at which you have no
choice but to go down to the embankment to get around a railroad bridge)
the trails wind all the way into the Neskuchny Sad ("not boring garden")
area where almost any day you'll find chess addicts hovering around the
On days when the Gorky Park gate is open, it's possible to continue on down
the road, under the highway bridge, past the outdoor art market, all the
way to the Peter the Great statue.
I must admit that due to a recent flareup of what I guess is sciatica, I
haven't really run the whole thing in months.
A neighbor of mine, a Swedish journalist, regularly runs out the front of
our apartment block here on Kutuzovsky Prospect, jogs all the way to
Vorobyovskaya, (there are some ugly stretches on the way), then up the
steep hill to Ulitsa Kosigyina, where he catches a bus back home. He swears
its great. In theory, it would also be possible in the summer to run out
and come back on one of the numerous tourist boats that ply the river in
the area. The boats are slow, and priced for tourists, but there are a few
stops along the route. You could just run as far as you wanted, then catch
a boat back.
I must admit, since coming to Moscow, I've become a fan of cold weather
running. If dressed properly, running at -10 degrees Celsius can be much
more pleasurable than running in a muggy +20 Celsius. Unfortunately, it
does tend to aggravate the sciatic nerve a bit more. Damn.
And by the way, recalling the original Moscow Times article that started
the conversation on Moscow running, when Pernille returned to work last
week, (at the Danish embassy), the guys there had posted the article, with
the part about the pretty Scandinavian runner underlined, on her office
One last note. I suppose you've heard of VOA's misfortune at losing Michele
to NPR. I don't want to use you as as employment service, but if you know
of a bright broadcast journalist looking for work in Moscow, send him/her
Pernille Dahler Kardel/Peter Heinlein
Kutuzovsky Pr. 7/4, kv 69-70
Ph: (7095) 243 0783
Jamestown Foundation Monitor
July 22, 1998
RUSSIAN ECONOMY CONTINUES TO STAGNATE. Data from Goskomstat for the first
half of 1998 show Russian GDP down by 0.5 percent compared to the first half
of 1997. Thus the recovery proclaimed by many Western observers in mid-1997
has failed to materialize. Industrial output was also static, rising by a
borderline 0.1 percent.
Consumer inflation was running at the low level of 8.2 percent per annum,
while producer prices actually fell by 0.9 percent in first half of year.
Real incomes fell by 9 percent, and retail spending by 1.8 percent. In June,
the average wage was 1,110 rubles ($185). Thirty-two million people--22
percent of the population--were living below the poverty line.
New surveys by the International Labor Organization have led to revised
unemployment figures. The total unemployed is now estimated at 8.3 million
persons, 1.5 million higher than previously reported. This amounts to 11.5
percent of the labor force. Only 2.5 percent of the labor force bother to
officially register as unemployed, since benefits are very low. (Kommersant
Daily, July 21)
>From RIA Novosti
July 22, 1998
RUSSIAN GOVERNMENT READY TO IMPLEMENT ANTI-CRISIS PROGRAMME
By Vladimir KUCHERENKO
Russian Prime Minister Sergei Kiriyenko said the other
day that a decisive stage of his Cabinet's activities has now
been crowned with success.
According to Kiriyenko, it has become possible to approve
the entire range of normative acts, which aim to implement the
Cabinet's anti-crisis programme. For its own part, the State
Duma has failed to okay some of the Government's bills,
thereby reducing possible federal budget revenues from 102.2
billion roubles to 37.8 billion roubles. Nevertheless, such
missing revenues have been compensated for by an impressive
array of presidential decrees and governmental resolutions.
Consequently, the budget would be expected to get an
additional 105.2 billion roubles.
The Prime Minister believes that a decree on drastically
raising land payments, as well as a sharp reduction in the
number of goods being covered by easy-term VAT (Value-Added
Tax) rates, fit nicely into the list of such compensation
measures. Unfortunately, the President was forced to veto
various laws on reducing profit tax and oil-production excise
tax. However, all this will be enacted, if the Russian
Parliament continues to cooperate with the Government.
Some emergency action also had to be taken. For example,
it has been decided to introduce 3-percent additional import
duty, which apply to all foreign-made goods, until the end of
1998. This measure is needed to replenish the federal budget;
apart from that, it would be expected to even out the national
balance of payments (just because Russia continues to get less
impressive hard-currency revenues because of plunging raw
Kiriyenko also dwelt on his Government's second victory,
e.g. the IMF decision to furnish Russia with a stabilization
credit. That loan's first tranche was eventually reduced from
$5.6 billion to $4.8 billion; however, the Premier believes
that the remaining $800 million will be obtained some time
later (provided that the Parliament continues to work on the
stabilization programme's bills). The reduction of the first
tranche doesn't spell any disastrous consequences because the
Government has managed to borrow an additional $500 million
(while exchanging GKOs for new bonds).
According to Kiriyenko, concerted efforts on the part of
all state power branches are also seen as an undoubted
success; in fact, one could only dream about such efforts a
short while ago. The financial market has already reacted
favourably to such measures. For instance, it has become
possible to scale down the annual GKO profitability from 120
percent to 50 percent (and even less).
The second stage of the Government's economic policy is
now beginning. Boosted tax proceeds, as well as an industrial
recovery, are seen as its top-priority objective. Therefore
the Premier believes that his Government is in for some
restructuring just because the situation has changed a lot
since April 1998. According to Sergei Kiriyenko, some new
people, e.g. experienced industrialists, regional and
municipal administrators (who have won a reputation for
themselves) might well be appointed to specific government
positions. Besides, some bright opposition members also have a
chance to make it into the Government. Among other things, the
post of industry minister still remains vacant.
>From RIA Novosti
July 22, 1998
POLICE KNOW WHERE THIEVES ARE
Russian Criminals Have Strong Patrons in Political Community
By Vladimir YERMOLIN
The struggle against crime in Russia has a strong
political overtone. Political interests which are tightly
connected with economic ones lie behind the majority of crimes
committed in this country. Small wonder that by "diving" into
the criminal world, policemen often "emerge" in politics.
Vladislav Selivanov, chief of the Main Anti-Organised Crime
Department, or GUBOP, said all this at his press conference on
Tuesday. Big-time mafia bosses are trusted with legislative
powers, he went on. "According to our information, there are
members of criminal structures and their patrons in the local
and federal legislatures."
The connection between criminal groups and people from
the upper echelons of power is no sensation at all. The only
news that the GUBOP chief told journalists was probably the
admission of the police's limited possibilities because of the
constant interference of high-ranking officials in the process
of investigation. But this, too, can be called "news" only
symbolically. It is common knowledge that the investigation
into one or another case can be either accelerated or slowed
down not by law-enforcers alone. Hence the steady growth of
crime in the country.
According to the GUBOP, about 9,000 criminal groups set
up according to all the criteria of the international
organised criminal community operate in Russia today. They
have the state-of-the-art weapons and means of communications,
their own intelligence and counterintelligence services and
connections with corrupt officials and politicians (not only
among the legislators).
The Shadow Business profits eloquently show what a
criminal monster is hovering over Russia. Selivanov cited
Swiss federal prosecutor Carla del Ponte who said that
approximately 40% of the 40 billion dollars kept by Russians
in Swiss banks are of criminal origin. We do not know what
methods the Swiss Prosecutor's Office uses to determine
whether the money is clean, but we are quite ready mentally to
believe this information. If the working capital of the
Russian criminal community is estimated in tens of billions of
dollars, it is then crystal clear that Selivanov's department
is unable to cope with its task by acting on its own. Money
like this can determine the economic health of whole
countries, especially the CIS states. It was strange to hear
that cooperation between the CIS and the Baltic law-enforcers
has not gone any further than the creation of a common data
base. After seven years of talk on the need to work together
for combatting crime in what used to be the Soviet Union,
agreement on information exchange may not be regarded as an
There is ground to talk of the criminalisation of the
state and the criminal world's real threat to national
security. Taking this into consideration, Selivanov told
journalists, the Russian Security Council is going to discuss
the problem of combatting crime at one of its nearest
sessions. It is more likely than not that the issue at hand
will again be the creation of a certain coordinating authority
to pull together the efforts of all the departments involved,
at least on the level of information exchanges and
coordination of urgent actions. Professionals, however, are
rather sceptical of such kind of projects which are discussed
from time to time. Brigades belonging to different departments
coordinate their efforts sooner at the level of personal
contacts than with the help of any high-profile commissions.
Police, judging by many things, suffer not because of the
absence of any supra-departmental authority but because of the
imperfection of the legislative base which makes it possible
the free replenishment of Swiss bank accounts and does not
prevent interference by high-ranking officials in police work.
Furthermore, like any serious cause, the struggle against
organised crime requires vast financial support, among other
things. It is rather doubtful that the Security Council can
help solve these problems. The best it can do is to declare
the intention to draw up a government program for combatting
crime or set up a corresponding commission.
Police Say Criminals Penetrate Gov't
July 21, 1998
MOSCOW -- (Reuters) Russian criminal groups have successfully penetrated
the Russian government and have members serving on local and national
levels, a senior police official said on Tuesday.
"We have information that members of criminal structures and their patrons
are located in both local legislatures and in the center," Interfax news
agency quoted Vladislav Selivanov, head of the Interior Ministry's
organized-crime division, as telling reporters.
Russian officials have made similar statements in the past. However the
latest warning comes immediately following the International Monetary
Fund's approval on Monday of an $11.2 billion loan to help boost the
Officials now acknowledge that millions of dollars in past international
aid packages were diverted illegally for private profit.
"It is an unfortunate fact that much of Russia's ruling class has created a
kleptocracy masquerading as a democracy," U.S. Rep. Christopher Smith,
Republican of New Jersey, said during a congressional review of Russia last
On Tuesday Communist deputy Victor Ilyukhin said the new loans would again
provide opportunities for illicit self-enrichment.
Peter Rodman, director of national security programs of the Nixon Center,
told the U.S. Congress panel on Russia last week that fear of
misappropriation had led to internal Russian opposition to new credits.
"I'm also told every opposition political figure in Russia, from (Grigory)
Yavlinksy to (Aleksander) Lebed, is against this, thinking the money will
only go to line the pockets of the kleptocracy and will not promote real
reform," he said.
The new loans are aimed at stabilizing the ruble and helping Russia find
the path out of economic crisis.
Selivanov said Russia's advisory Security Council would soon meet to
discuss the fight with organized crime, Interfax said.
He said an estimated 9,000 criminal groups were now operating across Russia.
Experts say many of these groups have impressive sophistication in weaponry
and technological equipment, as well as deep knowledge of money laundering
and illicit financial dealing.
Elite Nuclear Workers Plan Strike
July 21, 1998
MOSCOW -- (Reuters) Workers in Russia's closed nuclear city of Sarov are
planning a one-day protest strike, officials said on Tuesday.
"About 15 to 20 percent of the workers have announced their intention to
strike for the entire day on July 23," said Atomic Ministry spokesman
"Their protest is connected with unpaid wages. Many in the nuclear industry
are now suffering difficulties."
Sarov, known until recently as Arzamas-16, was the most secret, elite
center of nuclear research during the Soviet era and was the research home
for Andrei Sakharov, father of the Soviet hydrogen bomb.
The planned strike in such a hallowed corner of the country is another sign
of widespread labor discontent with many enterprises across Russia paying
their workers late rather than facing bankruptcy.
Svetlana Sachkova, a spokeswoman for the Russian Union of Atomic Workers,
said workers in Sarov have threatened strikes before but have never taken
Other nuclear enterprises have held strikes in recent years, but she said
such actions do not endanger public safety.
"Those who work in radiation-sensitive areas of the plant will not
participate in the strike to assure nuclear safety," Sachkova said. "They
have a level-headed approach to nuclear- related issues."
In May Prime Minister Sergei Kiriyenko visited Sarov, which is 400 km (250
miles) east of Moscow, to reassure scientists that money "would always be
found" to fund their vital research.
Russia: St Petersburg Joins Buy Russian Movement
By John Varoli
St. Petersburg, 21 July 1998 (RFE/RL) -- Last week (July 18)
representatives of St. Petersburg's leading industrial enterprises met to
join a national movement, "Buy Russian Goods," which strives to instill
"consumer patriotism" in Russians.
The meeting criticized the Russian government's monetary policies as having
hampered Russian industry, and called for a new economic strategy with
emphasis on 'consumer patriotism'--- not so much in "actual economic policy
as in economic thinking."
Deputy Prime Minister Boris Nemtsov was on hand to officially sanction the
movement and promised the government's support to Russia's business
leaders. Last February Nemtsov inaugurated the "Buy Russian" association,
which is designed to support domestic producers and fund a multi-million
dollar advertising program.
At that time, some of the successful Russian food and beverage companies
backed the program, including the popular St. Petersburg brewery Baltika
and the Red October Chocolate Factory.
"This is an important day in the history of St. Petersburg, and maybe
Russia," said Nemtsov. "Today, Russian industry is banding together to help
each other amid the current difficult economic circumstances."
Nemtsov then said that the he government is to launch a policy of
"reasonable protectionism," saying that Russia needs to avoid the "extreme"
of the Soviet period, when the Iron Curtain kept all foreign goods out, and
the current "extreme," demanding that the government dismantle all barriers
to foreign goods.
Still, Nemtsov criticized protectionism as such. In his own words,
"protectionism is both a blow to our people, who would have to bear the
burden of expensive goods, as well as a blow to our industry which would
stagnate if not forced to compete."
Roland Nash, an economist at MFK-Renaissance, a Moscow investment bank,
told RFE/RL that any protectionist measures would be a "step back for
reform," forcing the consumer to pay more and doing a disservice to
industry, depriving them of the stimulus to be competitive.
So far, the Kiriyenko government has not enacted any protectionist
measures, instead pushing for greater competition in the economy
Kiriyenko wants to kick start the economy and he has chosen the path toward
macro-economic stability on the financial front, restructuring the tax
system, going after the natural monopolies, and attacking non-payments of
St. Petersburg vice-governor Ilya Klebanov, who heads the Committee for
Economics and Industrial Policy, also attended the "Buy Russian Goods"
meeting. An avowed liberal he challenged local business leaders to
"Industry needs to restructure and orient itself on the market in order to
become profitable," was Klebanov's main message.
A number of representatives from local industry expressed their anger at
the poor showing of Russian goods against foreign competition. But the
problem of quality seemed to be secondary.
The Buy Russian Goods movement looks to Tsarist-era Minister of Finance,
Sergei Witte, for inspiration. In one of their declarations they quote
Witte as saying it would be a great mistake to open the country to foreign
Witte's protectionist policies did make Russia one of the world's fastest
growing economy before the First World War.
Still the new Buy Russian movement invited skepticism from some people. One
woman who wished not to be identified told RFE/RL that over the years a
large number of industrial associations have been formed to advance their
common interests. Few have had success.
"Until this latest one actually gets something done, I will remains a
skeptic," she said.
Russia Investigating Art Thefts
July 22, 1998
MOSCOW (AP) -- The Russian Interior Ministry is investigating 2,500 cases
of stolen art and other cultural treasures, a news agency reported.
More than 30,000 items have been stolen, mostly from state museums,
libraries and art galleries, senior Interior Ministry investigator Yuri
Isayenko was quoted by Interfax as saying. Many such items are sold abroad.
Isayenko blamed the collapse of morals, the breakdown of border controls
after the 1991 collapse of the Soviet Union, increased migration and other
socio-economic factors, Interfax said.
``The amount of pilfering is not declining, but the number of solved cases
is increasing,'' he said, crediting better cooperation among Russian law
enforcement agencies and Interpol and other foreign agencies.
Isayenko said the Western market has had its fill of Russian icons and is
now interested in works of Russian realism from the 19th century. Old coins
are also are in demand, he said.
The Russian Foreign Ministry recently lodged a complaint with the U.S.
Embassy over what it called attempts by a diplomat and a group of American
archaeologists to smuggle antiquities out of the country.
The ministry accused Philip Hatch, a military attache, of trying to
illegally export 44 cultural items when he shipped his household goods from
Russia in June.
The complaint also referred to a group of amateur American archaeologists
who were found carrying dozens of medieval coins when they left Russia last
Oil Firms Criticize Russia-IMF Plan
July 22, 1998
MOSCOW (AP) -- Russia's largest oil companies accused the government today
of carrying out ``irresponsible'' and dangerous policies at the behest of
the International Monetary Fund and other foreign lenders.
The government is implementing an economic austerity program demanded by
the IMF as a condition for a multibillion dollar loan package. The program
includes spending cuts and improved tax enforcement.
``We are forced to state that the economic policy of international
financial organizations toward basic industries is irresponsible,''
Russia's largest oil companies said in a statement reported by news agencies.
``It deepens the crisis, aggravates the social situation and is fraught
with the risk of bankruptcy for enterprises that are unable to work
effectively,'' the statement said, according to the ITAR-Tass and Interfax.
Government policies may lead to ``irreversible social consequences'' in the
next two to three months, it said.
Such predictions, common among Communist lawmakers, are unusual from oil
companies, who generally enjoy a good relationship with the government and
are favored in its policies.
The new austerity program calls for enforced tax collection from oil
companies, which provide a large share of budget revenues. But it also
calls for rescheduling the companies' tax debts, and shifting the tax
burden from producers to consumers.
After showing its first signs of growth last year, Russia's economy has
been collapsing for months.
The first, $4.8 billion, installment of the IMF loan is to be deposited in
the Central Bank this week. The loan is also expected to clear the way for
additional lending from the World Bank and the Japanese government, which
will bring Russia's bailout to $17 billion this year and next.
July 22, 1998
EDITORIAL: Tax Reform A 3-Way Dilemma
During the debate over the government's "anti-crisis" program in the State
Duma, Russian opposition politicians often repeated the populist slogan
that the crucial priority was to lower the tax burden.
This is nonsense. The federal government only collects tax worth about 11
percent of gross domestic product, a low figure by world standards. Even
throwing in the various taxes paid to pension funds and to regional and
local governments, Russia's level of taxation is not high.
In fact, the problem is much more complex. On the one hand, Russia needs to
raise its overall tax take to cut the budget deficit. But on the other, the
taxation system here is economically inefficient. Huge sections of the
economy -- for instance, income earned by individuals -- go almost entirely
There is also a third priority -- that of equity. Russia must strive to
adjust the tax mix in a way that protects low income earners, ideally by
replacing regressive flat taxes with more progressive ones.
Resolving these conflicting demands is the fundamental problem as the
government now formulates its so-called anti-crisis plan. In fact, there
are several crises to be resolved at once.
Despite what the Yabloko faction in the State Duma may say, there is no
easy or sweeping solution to this dilemma. Some deputies, perhaps familiar
with "supply side" economics theories popular in the United States in the
1980s, suggest it is possible to resolve all problems at once by cutting
tax rates across the board.
This seductive theory holds that tax cuts will engender a virtual cycle
where tax compliance will rise, economic growth will speed ahead, and the
government will receive more revenues. Bunk. Russia cannot afford to cut
taxes across the board.
The government now says it has resolved the first problem in Russia's tax
system -- that of raising revenue. Adding together the sales tax increases
passed by the State Duma and the import tax, land tax and value-added tax
increases passed by decrees and government resolutions, the government says
it has raised the extra 105 billion rubles ($16.9 billion) it needs to
steady its finances.
There is, however, little to show in the battle to rationalize the tax
system. The government has failed to increase income tax collection, which
in other countries provides the biggest share of revenues. It has also
failed to cut the burden on overtaxed industrial corporations.
And as for equity, the reliance on flat sales and VAT taxes will be a blow
to the poor. This will be compensated, however, if the government can pay
wages and pensions on time.
The Electronic Telegraph (UK)
22 July 198
[for personal use only]
Russians launch new moon to help them see the light
By Robert Uhlig, Technology Correspondent
RUSSIAN scientists are planning to put what will appear to be a second
moon, 10 times as bright as a full Moon, into the night sky above London
and other cities in November as part of a scheme to end night-time.
The orbiting space mirror will pass across the night sky quickly, up to 16
times in 24 hours, but will last only one night - Nov 9 - before burning up
in the atmosphere. The reflecting spacecraft, Znamya 2.5, is part of a
Russian-led consortium's plan which bears some similarities to the plot of
the Bond film Diamonds are Forever.
The Space Regatta Consortium, a group of companies led by Energia of
Korolev, near Moscow, wants to launch a constellation of several hundred
mirrors, each up to 100 times brighter than the full Moon, to cast sunlight
from the far side of the globe into the darkest corners of Siberia during
the Arctic winter and make city street lights obsolete.
But the proposal has alarmed environmentalists and astronomers. Daniel
Green, of the Harvard-Smithsonian Centre for Astrophysics, said: "I cringe
to think that we could lose the night sky because of all these companies
with brain-dead ideas."
David Thomas, of Bangor University, told BBC Wildlife that almost any
ecosystem "would get completely screwed up" and that the permanent daylight
could cause more Arctic ice to melt. He said plants and animals depended on
darkness. He said: "Everything - sex, movement, feeding - is triggered by
Provided that there is little cloud on the night, London, Brussels,
Frankfurt, Kiev, Seattle and Quebec are among the cities that will be lit
up by what will appear to be a disc between five and 10 times as bright as
a full Moon. Some estimates say it could appear to be up to half the size
of the Moon. The previous experiment with Znamya 1, a 60 ft wide space
mirror, was hampered by cloud. At best, it was only half as bright as the
Moon since the reflector did not form a full disc.
Poverty Breeds Big Problems for Central Asia
July 21, 1998
ALMATY, Kazakhstan -- (Reuters) Widespread poverty in Central Asia
following the collapse of the Soviet Union has brought rising unemployment,
drug addiction and crime, experts said on Tuesday.
In a region where around half the population lives below officially
recognized poverty levels, wealth generated by enormous natural resources
and the sale of state assets has been slow to trickle beyond the most
"Poverty has increased with independence and is continuing to increase and
to deepen," said Jane Falkingham of the department of social policy at the
London School of Economics.
She told a conference in Kazakhstan's financial center that by 1993-94,
half of the 16 million Kazakhs were living in poverty, or earning less than
$120 per capita per month at 1990 purchasing equivalent. In 1987-88 the
level was 5 percent.
The proportion was slightly lower in Uzbekistan, the most populous Central
Asian state of 23 million, where 47 percent lived below the poverty line.
The highest poverty level was in tiny Kyrgyzstan, at 84 percent of the 4.5
Around 53 million live in the region of five former Soviet republics.
Central Asia links Russia to the north with China to the east and Iran to
Economic turmoil following the demise of central planning and the loss of
captive Soviet markets has sent unemployment in the region sharply higher
and created a wide gulf between rich and poor.
While the masses struggle to make ends meet, a small elite has concentrated
significant wealth in its hands, said Keith Griffin, an economics professor
at the University of California.
"Since 1991 state enterprises have been disposed of and distributed to the
private sector," he said. "This has led to a small, wealthy capital class
and a highly polarized society."
The swift influx of wealth has created a bizarre mix in the region's cities
of super-rich tycoons and five star hotels alongside impoverished beggars
and ramshackle, makeshift homes.
Griffin said the region could not live by its mineral and hydrocarbon
"We cannot expect to refloat society on a pool of oil," he told the
Kazakhstan, and to a lesser extent Turkmenistan, have attracted major
foreign investors to tap huge oil and gas reserves, and the region is
pinning its economic future on becoming a global energy supply hub early
The cost of economic collapse has been high.
Falkingham estimated unemployment in the five former Soviet republics at
between 20 percent and 30 percent of the workforce, far above official
She said health expenditure had slumped, contributing to a "dramatic"
increase in cases of tuberculosis and sexually transmitted diseases
"We've seen quite a dramatic growth in diseases associated with poverty,"
she said "An epidemic of HIV and AIDS is waiting in the wings."
Social structures have also come under increasing strain.
"We have seen a fall in marriage rates, a rise in divorces and a growing
reliance on abortion," Griffin said. "There has been a sharp rise in crime,
drug and alcohol addiction and suicide."
Paul Ross, the International Monetary Fund's representative in Kazakhstan,
said Central Asian states needed to stimulate growth through structural
reform and low inflation policies while providing an adequate safety net
for the needy.
"Implementation is possible, but will require determination and
persistence," he said.