July 23, 1998   
This Date's Issues: 2278 • 2279• 

Johnson's Russia List
#2279
23 July 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Fred Weir on attempt on life president of Chechnya.
2. David Filipov: Taibbi, Crowley comments on miners.
3. Bloomberg: Russians' Tax Receipts Up in 1st Half; '97 Shortfall.
4. Reuters: Timothy Heritage, Russia parliament head attacks govt 
plan.
5. Reuters: Peter Henderson, Why doesn't Russia have money? Half 
don't pay tax.
6. Obshchaya Gazeta: Sergei Gavrilov, NEW TAXATION TIME.
The Government Starts a Massive Fiscal Onslaught.
7. Boston Globe editorial: Stopgap measures in Russia.
8. RFE/RL: Michael Lelyveld, IMF Rescue Does Little For Gazprom's
Suppliers.
9. Journal of Commerce: John Helmer, US businesses have a list of 
concerns for Gore. They say their exports to Russia have been hurt by
financial crisis.
10. Reuters: Adam Tanner, Russia plans ``subcritical'' nuclear test
this year.
11. The Times (UK): Michael Binyon, Crime wave threatens Russian art 
heritage.
12. Komsomolskaya Pravda: Aleksandr Gamov, "Will 'Stakhanovite' Chubays
Become a Hero of Russia?" 
13. Rossiiskaya Gazeta: Anna Kozyreva, MUCH ADO AND "PERSISTENT 
INABILITY." (Re law "On Ensuring the Continued Exercise of the Powers of
the President of the Russian Federation in Case of Their Untimely
Termination").

*******

#1
From: fweir@rex.iasnet.ru
Date: Thu, 23 Jul 1998 15:03:21 (MSK)
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT July 23) -- The separatist president of Chechnya
narrowly escaped death Thursday when a powerful car bomb
exploded, killing a bodyguard and leaving a huge crater in the
road.
The attempt on the life of Aslan Maskhadov, Chechnya's
elected president, is the latest shock in a deteriorating
situation that some observers fear is leading to new civil war in
the breakaway Russian region.
Mr. Maskhadov told a press conference immediately after the
attack that his four-wheel drive vehicle was damaged and two
accompanying cars destroyed when a bomb planted in a parked car
exploded as he drove through the streets of Grozny, Chechnya's
capital.
"It is the fourth attempt on my life, and the first since I
was elected president last year," Mr. Maskhadov said. "To my
great regret, my best bodyguard was killed."
No one immediately claimed responsibility for the blast.
Chechnya fought a 20-month war against Moscow between 1994
and 1996, which ended in the withdrawal of Russian troops and the
de facto independence of the tiny republic.
Mr. Maskhadov, who led the separatist army during the
conflict, was elected last year amid hopes that he might find
terms of reconciliation with Moscow and revive Chechnya's wrecked
economy.
But the politically moderate and secular Mr. Maskhadov has
found himself under sharp attack from Moslem fundamentalists, who
want to complete the break with Russia and construct an Islamic
regime based on Shariah law.
Last week nine people died in pitched battles after Mr.
Maskhadov ordered the disbandment of two military units dominated
by fundamentalists of the Wahhabi sect, who are among his most
radical opponents. A state of emergency was declared and reserve
troops brought in to enforce order in Grozny.
Mr. Maskhadov said Thursday's bomb attack against him was
carried out by unnamed "special services", a veiled reference to
Moscow, but observers believe local Islamic militants are the
more likely culprits.
"Explosions and incidents are inevitable in a country that
has gone through such a grave war," Mr. Maskhadov said. "The most
important thing is that I have not allowed the situation to
develop the way it did in Tajikistan, Afghanistan or Algeria,"
all countries torn by civil strife between secular authorities
and Islamic radicals.
Russian experts fear that a new outbreak of fighting in
Chechnya could spill over into neighbouring regions, where a
potent mix of ethnic and religious groups could turn it into a
general conflagration.
"If Chechnya is engulfed in the flames of civil war, the
conflict will not be confined to within the borders of the
republic," Ivan Rybkin, the top Russian official dealing with
Chechnya, told journalists this week.

*******

#2
Date: Thu, 23 Jul 1998 
From: David Filipov <dfilipov@glasnet.ru>
Subject: Taibbi, Crowley comments on miners

A few comments on the miner discussion, based on my own recent experience
from Vorkuta and frequent conversations with the miners on Gorbaty Most
outside the White House.

Patrick Armstrong asks:
<3) The impression Mr Taibbi gives is that the mine
<management is cheating the miners, if so, why do
<they blame Yeltsin? Surely they know who's doing
<it to them.

<And Matt Taibbi answers: Most of the companies the miners are dealing <with
(both VorkutaUgol and its
<clients) are majority state-owned companies, so they see the government,
<ultimately, as the boss. They know who's cheating them, but they have
<reason to see the company, the government, and the unions as a united
<front against them, and nothing but a total change in leadership is going
to <wipe that away.

<Also, cynically, some of the unions are working with the company-- which
<they know to be cheating the workers-- in protesting against Yeltsin. It's
<a temporary alliance intended to extract money from the government. No <one
has any illusions about the company being an innocent party in this.

Filipov adds: Some of the miners in Vorkuta I spoke to confirmed what Taibbi
says about the deep sense of mistrust of management. And it is true the
miners are in general very cynical about their ability to attract attention
to their plight through protest in Vorkuta, no matter how radical the form.

But when I first visited the miners in front of the White House, I was
amazed to see the general director of VorkutaUgol, Viktor Ekgardt, stroll
up, have a friendly chat with the protesters, hang out for a while, and
leave, unscathed. This was the very same Viktor Ekgardt who is responsible
for the non-payment of salaries while the company buys computers and tv
sets, as documented in Taibbi's excellent piece; the same "General" whom the
miners "took hostage" for ten days in May. 

When I asked what was going on, the miners were the ones who were surprised.
Didn't I know? "Ekgardt is a hostage of the north just like we are. He just
lives better," said one miner. Even after I insisted that I'd talked to
other miners in Vorkuta who swore that the company was ripping them off, and
described some of the schemes management employs to avoid paying workers I'd
heard about, the miners on the bridge outside the White House were adamant
that I had it all wrong, that the government, not the managers, were
responsible, full stop.

Aside from Taibbi's (correct) observation that the unions, which organized
the protest outside the White House, appear to be in collusion with
management, the best explanation I can come up with for this is that a
segment of the miner population has, for now, bought the company's own
explanation (that the government is at fault.) Miners in Vorkuta are like
people anywhere -- they will clutch at any straw of belief held out to them.

Steve Crowley writes:
<Russia's miners, other workers and a large
<segment of society are in a real bind: many are deeply dissatisfied and
<angry, yet they lack effective political institutions that might channel
<their grievances, and they lack an ideological alternative to fight for.
<This does not mean that fascism looms on the horizon,

My sense from talking to the miners on the bridge over the past few weeks is
that as time goes by, the extremist political parties out there seem more
and more enticing. They were pretty apolitical when they got to Moscow.

When Nikolai Ryzhkov, former Soviet premier and head of the People's Power
faction in the Duma, dropped by for a chat, the miners listened politely,
but came away unimpressed. Ryzhkov is still famous in Vorkuta for the
blizzard that snowed him in during his trip there during the big strikes of
nearly a decade ago. But he talks, and is perceived, as yesterday's man. 

A totally different effect was achieved by the people from Russian National
Unity, who offered simple, brutal solutions to the miners' problems
(renationalize, impose order, get rid of 'non-Russians' in governnment and
'speculators of foreign capital' in the economy). Now, a number of the
miners are sporting Russian National Unity badges. 

David Filipov
The Boston Globe 
Moscow

*******

#3
Russians' Tax Receipts Up in 1st Half; '97 Shortfall

Moscow, July 23 (Bloomberg) -- Russia collected 3.8 percent more in individual
tax receipts in the first half of the year than in the same period last year,
tax authorities said. 

The government collected 30.5 billion rubles ($4.9 billion) in the first half
of this year in income tax withheld from paychecks. As a result of raids
staged this year, the tax service found more than 250,000 tax evaders, about
170,000 of them foreign citizens, said Sergei Shtaryov, deputy head of the tax
service. 

Overall last year, he said, individual Russian taxpayers should have paid 40
percent more than they did. The government is trying to boost tax collection
this year to increase revenue and narrow the budget deficit. 

``Collection of the income tax fell an estimated 40 percent short of what
should have been collected in 1997 if everyone paid in full,'' Shtaryov said. 

Tax authorities collected 350.4 million rubles of income tax from 3.7 million
self-employed workers who submitted declarations for 1997 by the April
deadline. That's down 1.5 percent from a year earlier. 

Shtaryov said scarce financing of the tax servi

******

#4
Russia parliament head attacks govt plan
By Timothy Heritage
July 23, 1998

MOSCOW (Reuters) - Parliamentary speaker Gennady Seleznyov sided with Russia's
oil barons Thursday in a battle against the government over its IMF-backed
plan to end the current financial crisis. 

Seleznyov, chairman of the State Duma lower house, said powerful oil companies
had been right Wednesday to criticize the austerity plan which enabled Russia
to win an $11.2 billion loan from the International Monetary Fund. 

``I'm glad the 'oligarchs' share the opinion which I expressed a month ago,''
Itar-Tass news agency quoted Seleznyov, a Communist, as telling reporters on
his return from a visit to Turkey. 

Interfax news agency quoted him as saying: ``Even the 'oligarchs' understand
these things and it is strange that the Russian president and the new
government of (Prime Minister Sergei) Kiriyenko don't understand it fully.'' 

His reference to oligarchs was aimed at influential tycoons, many of whom have
stakes in oil companies and do not want to meet government demands to pay
their huge tax bills. 

Seleznyov made clear he did not want to be closely associated with the
tycoons, saying although he shared their opposition they should not be allowed
to amass political influence. 

But his comments were a sign of the growing resistance to the government's
plan. It is intended to cut spending and raise revenues to end the crisis, but
the oil barons said it could cripple their industry and increase the risk of
social unrest. 

Seleznyov's remarks were not surprising for a member of the opposition
Communist Party but they were a blow for Kiriyenko because of the influence
the speaker wields. 

Seleznyov had also seemed more ready for compromise Wednesday, when he said
the Duma was likely to meet in mid-August to reconsider parts of the
government plan which deputies balked at when discussing them last week. 

Another senior member of parliament doubted the emergency Duma session would
take place. A decision was expected by the chamber's managing council this
week. 

Kiriyenko and President Boris Yeltsin, who is on vacation in northwest Russia,
have seemed isolated as the financial crisis rumbles on, dragging down share
prices and putting pressure on the ruble. 

Foreign exchange reserves were also depleted, but the central bank said
Thursday they had now recovered thanks to IMF credits. 

Deputy Chairman Alexander Potyomkin said the bank had received $4.3 billion of
a $4.8 billion IMF credit tranche, approved by the Fund Monday. Gold and
foreign currency reserves had risen to more than $18 billion from $13.6
billion on July 17. 

The remaining $500 million from the IMF will land in the next two days,
Potyomkin said. 

The IMF has approved $11.2 billion in new funding for this year under an
international rescue deal totaling $22.6 billion for this year and next year.
The package also involves World Bank and Japanese credits. 

Kiriyenko hoped stabilization of the economy would also bring political
stability. But he has few obvious allies apart from Yeltsin, and the
resistance to some of his planned measures by deputies and oil companies is a
setback. 

Stocks have also not rallied as much as Kiriyenko would have liked. Prices
rose last week after an initial loan agreement was reached with the IMF, but
they have slipped again this week even though the fund has now formally
approved the loan. 

Stock slipped further in early trade Thursday. The real-time Reuters composite
index fell 4.44 percent by around 5 a.m. EDT to 111.17 and volumes were small.

Labor unrest has also continued to simmer. Workers at an elite nuclear
research center east of Moscow were planning to protest for three hours in the
latest sign of discontent over unpaid wages. 

*******

#5
Why doesn't Russia have money? Half don't pay tax
By Peter Henderson

MOSCOW, July 23, (Reuters) - You are someone special if you pay taxes in
Russia -- the tax service said on Thursday that most people do not. 

The rich do not pay, the poor do not pay and aside from raids which mostly
uncover deadbeat foreigners, tax officials do not have any special means to
force people to pay up. 

Deputy Tax Service Head Sergei Shtarev, asked at a news conference how to
strike fear into the average tax payer's heart, responded, ``We don't have any
goal to scare anyone.'' 

The journalist muttered back, ``Then no one will pay.'' 

Seemingly mundane, the question of tax is critical to Russia's future, since
deteriorating government finances sent foreign investors packing earlier this
year, and rouble stability was only assured this week when the International
Monetary Fund gave new aid. 

Government officials say they have until about November for new reforms and
tax collection measures to kick in, since breathing space bought by short-term
debt restructuring and the $11.2 billion in IMF aid will run out about then. 

The IMF also has stopped funding in the past because of low tax collection. 

Russia's long-term solution is to collect lower taxes from more people,
chiefly among citizens rather than companies, the tax service chief, former
banker Boris Fyodorov, has said. 

The government has proposed lowering income tax to encourage payment but is in
a row with parliament over the details. 

But the government succeeded in passing regressive taxes, which are easier to
collect but take a larger part of income from the poor, like higher value
added tax on many essential goods. Regions will be able to levy a five percent
sales tax. 

In addition, the average worker, who earned $170 per month in the first half
of this year, will see income tax rise by two percent so the government can
chip away at pension fund arrears. 

The tax hike is necessary, because many Russians, who paid no taxes during
Soviet times, see no reason to do so now. 

``In general, less than half pay taxes,'' Shtarev said. 

Indeed, only 3.8 million of Russia's 150 million people had handed in tax
declarations by the due date, April 1, this year. 

``It is a question for experts, but I think we could raise 40 percent more,''
Shtarev told journalists after announcing income tax collections at federal
and regional levels of 30.5 billion roubles ($5 billion) in the first half of
the year. 

That was four percent higher than the first half of last year. 

Shtarev said IMF experts were helping to revamp the clunky tax system. Many
tax payers must submit a tax estimate, wait for a confirmation from the tax
service, and then personally go with cash in hand to the tax service to pay
up. 

Armed tax police can enter buildings without warrants and their raids turned
up 250,000 who paid less than they should have, including 170,000 foreigners,
Shtarev said. 

Inspectors had means to pursue middle class non-payers, but are building lists
of the rich, despite major disadvantages. 

Shtarev said inspectors had little training, and their salaries had also been
cut by about a third from around the national average to 600-700 roubles
($100-$113) per month. 

``How can you work with such big businessmen and earn that kind of money?'' he
asked. 

*******

#6
>From RIA Novosti
Obshchaya Gazeta
July 23, 1998
NEW TAXATION TIME
The Government Starts a Massive Fiscal Onslaught
By Sergei GAVRILOV

The events of the past few days disclosed the essence of
the government's anti-crisis initiatives and the government's
intention to pull the country out of the crisis by the slavery
taxpayers' efforts.
Last week the State Duma completed the discussion of the
government draft laws. The deputies approved somewhat more
than a half of the package submitted to them, having failed to
justify rather moderate expectations of the executive
authorities. After tiresone debates, the Duma agreed to pass
the tax novelties which are not too attractive for the budget.
SALES TAX is the most scandalous and, at the same time,
the most significant fiscal innovation. By the government's
preliminary estimates, it should give the treasury some 40
billion rubles. It was passed in the course of harsh battles
and deformed by such a great number of deputies' amendments
that in its final version stopped being a hyperprofitable
measure. The law was approved in the Federation Council's
version and gives regional authorities a free hand in putting
it into effect. First of all, the regions have the right not
to introduce it at all though it is doubtful that any of them
will dare do so. Second, they are allowed to independently
establish the tax rate which should not exceed 5 percent. And
the main thing: the authorities of the Federation members have
the right to draw up the list of taxable and non-taxable
goods. Such commodities as bread, milk and children's clothes
are mandatorily exempt from this tax, while the tax is
mandatorily imposed on the so-called luxury goods. Disputable
situations are unavoidable here, since what is luxury for one,
for another is the necessary means of transportation. Besides,
the introduction of the sales tax will inevitably entail a
proportionate rise in prices - the salesman will have to
compensate for his losses at the buyer's expense.
TAX ON THE PURCHASE OF FOREIGN CURRENCY. This tax existed
before, but now its rate will increase from 0.5 percent to 1
percent. Knowing the habit of the more well-off citizens to
keep their savings in dollars, the government decided to
profit from it. It is expected that the increase of this tax
rate will give the treasury up to 100 million rubles a month.
TAX ON IMPUTED INCOME FOR SMALL BUSINESSES. It is to
replenish the revenue section of the budget by 15 billion
rubles. The uniform tax rate constitutes 20 percent. The
introduction of this tax will also result in price increases
and, by the most pessimistic forecasts, can put an end to
small businesses on Russia's territory. 
TAX ON INTEREST FROM DEPOSITS. It will concern those who
keep their money in banks. It is envisaged to deduct 15
percent from the accrued annual interest being in excess of 10
minimum wages. The people's natural reaction may be the
division of deposits - the depositors will open many smaller
accounts in several banks.
Besides these draft laws, the Duma passed the laws "On
Tax on the Gambling Business" and "On State Regulation of the
Production and Sale of Alcohol." 
Though Sergei Kiriyenko implored the deputies not to cut
out pieces from the program, this is precisely what happened.
The law-makers approved only two draft laws which are
obviously loss-making for the budget and are acceptable only
if the whole package is adopted. They introduced amendments to
the law "On Tax on the Profits of Enterprises and
Organisations" to reduce the tax rate from 35 to 30 percent
and voted for the introduction of amendments to the law "On
Excise Duties." The treasury could have lost more than 16
billion rubles from these moves but Boris Yeltsin managed to
veto both laws. 
One, however, can say with certainty that the Duma
frustrated the government's napoleonic plans: at first, the
anti-crisis package was estimated at 102 billion rules; what
has remained of it costs no more than 28 billion rubles.
Despite all this, the Cabinet of Ministers has not sunk
into despair and is going to formalise the draft laws rejected
by the parliament as government resolutions and presidential
decrees.
The executive authorities have already managed to do
something. A government's resolution increased import duties
by 3 percent (the inevitable consequence is an increase in the
prices of imported goods). Apart from this, the president
signed the decree on indexing land tax rates which increases
the tax rate for the use of land for other than designated
purposes by 2-4 times (the indexing of the payment for land
must give the budget about 32 billion rubles). Besides, the
uniform rate of value-added tax (VAT) is to be introduced as
of August 1 (20 percent). In the near future, such a
high-yielding draft law as that on the establishment of a new
scale of income tax rate may also become a reality.
There is no doubt that the draft laws rejected by the
Duma will be implemented without its participation. However,
the government is going to go beyond the Duma set of tax
initiatives. The last session of the Cabinet of Ministers
discussed new tax projects. The government fears that it will
not be able to collect a considerable part of taxes and tries
to make as many of them as possible. The main thing here is
not to overwork.

********

#7
Boston Globe
23 July 1998
Editorial
Stopgap measures in Russia 

Improvising to make the best of a bad situation, Boris Yeltsin issued 
presidential decrees last weekend to compensate for the Duma's failure 
to enact the entire austerity budget required by the International 
Monetary Fund. The constitutionality of some of the decrees might be 
questionable, but timorous parliamentarians are reported to be just as 
happy to shirk their responsibilities and let Yeltsin become the 
scapegoat for the anger of Russians who will be hurt in the short term 
by higher taxes and reduced government spending. 

Political bobbing and weaving of this kind happens in the US Congress 
all too frequently. And just as if he were in what Russians like to call 
a ''normal'' country, Yeltsin fled Moscow after issuing the decrees for 
a bit of fishing among the pines in Russia's cool northwestern 
countryside. 

But contemporary Russia is not a normal country. And that is why the 
IMF's pending loan of $22.5 billion can only be regarded as a risky, 
albeit necessary, measure to prop up the Russian economy a while longer 
and avoid panic in international financial markets. 

It is possible, or course, that the government of the young Prime 
Minister Sergei Kiriyenko will put to good use the time bought by the 
IMF's loans and its issuance of dollar-denominated bonds to ease 
Moscow's short-term debt burdens. Last week the key Russian stock market 
index rose 31 percent, a sign that investors appreciated the 
international rescue package announced a week ago Monday. Certainly 
German bankers, who hold an inordinate amount of Russia's debt, were 
pleased that Yeltsin, the Duma, and the IMF all acted to avoid a 
calamitous financial collapse this summer. 

Nonetheless, Russia will not be a good place to invest - or to be a 
miner, a scientist, or a pensioner - until the state creates a workable 
system for collecting taxes, starts paying wages and pensions, and 
creates a genuine rule of law that can be applied to both commercial 
contracts and criminal wrongdoing. In most normal countries, bankers and 
journalists are not killed with impunity by mafias that are intertwined 
with financial oligarchies. 

*******

#8
Russia: IMF Rescue Does Little For Gazprom's Suppliers
By Michael Lelyveld

Boston, 23 July 1998 (RFE/RL) -- The International Monetary Fund (IMF) 
has come to Russia's rescue once again this week, but it seems to have 
done little for other republics that depend on Russia's Gazprom for 
energy and exports.

After tough talk on the need to collect tax payments in cash from the 
gas monopoly, the IMF approved an $11.2 billion loan package amid 
lingering doubts that cash would be paid.

Prime Minister Sergei Kirienko denied that Gazprom would again be 
allowed to pay part of its taxes with offsets despite a reported deal 
that would allow the world's largest gas company to reduce its planned 
monthly payments from 4,000 million rubles to 2,500 million.

Gazprom has threatened Russian regions with cutoffs because of the 
government's collection pressures, and there have been reports of a 
draft agreement that would turn state enterprise gas debts over to 
regional governments, potentially giving them funds to buy gas. Other 
reports suggest that Gazprom's tax arrears may be restructured or 
deferred.

But while Russia and Gazprom seek solutions, the furor over cash 
collections has spread to Gazprom's customers in the near abroad.

Gazprom is at the center of Russia's tax and cash problems, but it also 
stands in the middle of inter-republic flows from gas suppliers like 
Turkmenistan to consumers like Ukraine, Moldova and Belarus.

The IMF call for cash payments instead of barter or offsets has started 
a chain reaction. Gazprom has increased its pressure on Moldova, for 
example, to pay its gas debts in cash by August 1. Moldova's initial 
response has been to threaten a cutoff of Russian gas that transits the 
republic to other customers in Turkey, Greece, Bulgaria and Romania.

The pattern is a familiar one that has also helped to shape Russia's 
relations with Ukraine since the winter of 1993-94 when the republic 
diverted Russian gas bound for Europe in response to supply cuts and 
debt collection pressure.

Despite its regional power, Russia's isolation from European markets and 
lack of direct pipelines on its own territory make it less likely that 
it will succeed in squeezing western republics for cash. The situation 
is critical for Russia which has depended on gas for 23% of its exports 
so far this year.

But supplier republics in the east are even more isolated and more 
likely to suffer. They are also feeling the cash squeeze because Russia 
has been slow to pay its own inter-republic bills. In the case of 
Turkmenistan, Russia recently proposed to settle its $107-million 
commercial debt to the republic with a 70% payment in goods rather than 
cash.

Turkmenistan President Saparmurat Niyazov blasted the proposal as 
"unacceptable," noting that his country is also in dire need of funds. 
Gazprom has refused to carry Turkmen gas over former Soviet pipelines 
for a reasonable fee since March 1997.

Debt settlement with Turkmenistan is not a condition of IMF loans to 
Russia. In spite of its new financing, Russia is likely to cite its 
continuing cash needs as an excuse to delay repayment to Turkmenistan. 
It will also claim that it needs pipeline capacity for Russian gas to 
earn all the income it can get.

Turkmenistan's choices are few. It has no recourse to the IMF because it 
has yet to negotiate a lending program. It also appears that a World 
Bank plan to split off Gazprom's pipelines into a separate entity has 
gone nowhere. There has been an outcry over Western demands to allow 
pipeline access by users other than Gazprom. These proposals have drawn 
strong opposition from Russian newspapers like Segodnya, which have 
raised fears of a conspiracy to shut Russia out of European markets in 
favor of Turkmenistan. Whether those fears are justified or not, Gazprom 
may have succeeded in defending its position of power again. It hardly 
comes as a surprise. Gazprom's revenues were about 10 times the amount 
of Turkmenistan's entire gross domestic product last year.

Turkmenistan may also be the loser as the result of an agreement by 
Kazakhstan last week to supply Turkey with 30,000 million cubic meters 
of gas annually.

Details of the deal between Kazakh President Nursultan Nazarbayev and 
Turkish President Suleyman Demirel are still sketchy. But some analysts 
believe the arrangement is taking place in cooperation with Russia to 
exclude Turkmenistan from the Turkish gas market.

Julia Nanay, director of the Petroleum Finance Co. in Washington, said 
the plan appears to be part of a strategy to use lower-cost gas from 
Kazakhstan to fulfill Russia's commitments to Turkey. The gas may be 
piped through Bulgaria or over a new line on the eastern shore of the 
Black Sea that has reportedly been discussed with the Belgian firm 
Tractebel, which runs Kazakhstan's power sector.

Either way, the gas is likely to bring rewards to Gazprom while 
competing with Turkmenistan's plans to supply Turkey with lines through 
Iran or across the Caspian Sea. Russia may also favor Kazakhstan because 
of its recent agreement on dividing Caspian sectors with Moscow. 

There appears to be one constant in all the Russian crises and strategic 
maneuvers over energy in the region. They all eventually work to 
Gazprom's advantage, leaving other republics to serve Russia's interests 
or pay a high price. 

*******

#9
Journal of Commerce
23 July 1998
[for personal use only]
US businesses have a list of concerns for Gore
They say their exports to Russia have been hurt by financial crisis
BY JOHN HELMER
JOURNAL OF COMMERCE SPECIAL

MOSCOW -- Vice President Al Gore arrives in Moscow for a 26-hour visit 
this evening. But U.S. business interests say that's not enough time to 
pay attention to new concerns about recent shifts in Russian policy that 
threaten their activities here.

The trip is billed by administration officials as the first opportunity 
for Washington to get to know the new Russian prime minister, Sergei 
Kirienko. His first 90 days in office have been a desperate struggle to 
stave off defaults by the government and commercial banks, prevent 
devaluation of the ruble and win Washington's backing for the $22.6 
billion bailout that was agreed two weeks ago.

Mr. Gore is also laying the groundwork for President Clinton's meeting 
with President Boris Yeltsin in Moscow, scheduled for early September. 
When American traders are asked what they believe should be on the 
Gore-Clinton agenda in Moscow, they say exports from the United States 
to Russia have already been hurt by Russia's financial crisis. They are 
likely to be hurt even more, they say, by the remedies the Russian 
government has begun implementing in conjunction with the International 
Monetary Fund. 

Duty increase 'alarming'

"The most alarming thing for us," said a leading American meat trader, 
"is the across-the-board 3% increase of import duties. We think that's a 
step in the wrong direction. The Russian market should be protecting 
itself from imports of processed meats, not raw meat, which supplies 
domestic manufacturers."

American poultry and red-meat exports are the single largest category in 
the U.S.-Russian trade balance.

The food traders acknowledge that imposing the additional import duty is 
a more reliable way of raising government revenue than through income 
and corporate taxes. But they are concerned that higher import duties, 
together with a new 5% regional sales tax, and an increase of 
value-added tax for food, will cut into domestic demand and reduce 
orders.

Government statistics just released for the first half of 1998 show 
Russia's gross domestic product contracted by 0.5%, compared with the 
same period of 1997. Real disposable income, however, has dropped 9%.

According to the food traders, the government's moves to raise tax 
collections and reduce credit in the economy have cut deeply into the 
order-books of the meat trade.

"We lost an entire month of sales," said one American trader, "because 
our clients couldn't pay, and we were forced to delay shipments from the 
U.S."

American oilmen and their attorneys in Moscow expressed disappointment 
that Mr. Gore hasn't asked for meetings with them on this visit. They 
say there are several new and worrying developments. One of them was 
prompted by a little-known court decision in the oil-rich Tyumen region 
recently. In a case involving the Canadian investor Robert Friedland, 
the Russian court ruled that licenses issued to foreign companies for 
developing oil field and mineral deposits, according to current 
practice, are invalid. 

Complaints about fraud

The new legal doubt, plus complaints of license fraud and extortion of 
mining companies from North America, South Africa, have virtually halted 
foreign investment in the mining sector.

Peter Charow, an Amoco executive in charge of commercial development, 
says that changes in the existing legislation on production-sharing 
agreements, voted last week by the lower house of Parliament, could put 
a stop to Amoco's bid to develop the multibillion dollar Priobskoye oil 
field. This is because of a provision in the proposed law setting a cap 
on production-sharing agreements to cover no more than 20% of Russia's 
overall oil, gas and mineral reserves.

"If you count the agreements already in place for Sakhalin, we are close 
to the 20% mark already," Mr. Charow noted, revealing a concern that has 
yet to surface, even in the Russian press that is controlled by major 
oil companies. 

Exxon wants assurance

Exxon also has been unwilling to invest in oil-field projects, unless it 
is assured the terms and tax regime can be fixed by a production-sharing 
agreement. Exxon's license to develop an Arctic deposit was cancelled 
last year, when it raised this concern.

Bruce Bean, a veteran Moscow-based attorney with Clifford Chance, said 
Mr. Gore should realize that the latest Russian law on protecting 
foreign investors has a serious loophole. The legislation, passed by 
both houses of Parliament last week and likely to be signed by President 
Boris Yeltsin, sets a new 5-year limit on tax relief, royalty 
provisions, and other terms that foreign investors want included without 
time limit in production-sharing agreements. 

*******

#10
Russia plans ``subcritical'' nuclear test this year
By Adam Tanner

MOSCOW, July 23 (Reuters) - Russia plans to carry out a ``subcritical''
nuclear test in the next few months, a top atomic official said on Thursday. 

During a subcritical nuclear test, which is allowed under the Comprehensive
Test Ban Treaty, scientists stop short of triggering a nuclear reaction and so
there is no radioactive yield from an explosion. 

``This is ordinary work that we carry out periodically and we will continue to
do so this year as well,'' First Deputy Atomic Energy Minister Lev Ryabev told
Reuters. ``It is needed to maintain our military stockpiles in an appropriate
condition.'' 

Ryabev said the the Atomic Energy Ministry would carry out the test
underground on the Russian Arctic island of Novaya Zemlya, 1,800 km (1,100
miles) northeast of Moscow, before the onset of winter. 

The United States has carried out three underground subcritical tests since
last year, prompting criticism that such efforts offered Russia and China
cover to continue underground nuclear testing. 

``If the United States and Russia, two world leaders, continue with these
tests, it could invite similar tests by other nuclear states and thereby stir
up a new nuclear arms race,'' the mayor of Nagasaki, Japan, wrote to U.S.
President Bill Clinton in March. 

Soon after his letter, both India and Pakistan carried out full underground
tests with nuclear explosions that released radioactivity. 

``They can criticise, but there are specialists responsible for overseeing the
readiness of military stockpiles here and in the United States, so we must
have faith in these specialists,'' Ryabev said in an interview. ``These tests
are conducted with strict adherence to international agreements barring
nuclear tests which we have signed but not ratified. 

``As regards the environment, all necessary measures are taken, so there is no
danger. There is no spread of radiation,'' he said. ``Of course, as with any
explosion it needs to be carried out in a distant place rather than a central
square of Moscow or somewhere in a city.'' 

Experts say such experiments allow scientists to test plutonium and develop
new nuclear bombs without a full-scale nuclear blast. 

``The U.S. conducted two such tests last year and Russia is working on doing
the same things,'' said Igor Kudrik, a researcher at the environmental Bellona
Foundation in Oslo. ``It would allow the development of nuclear bombs without
violating the Comprehensive Test Ban. 

``That means that countries such as Russia and the U.S. can continue to
develop nuclear devices.'' 

The test ban has barred all nuclear explosions since 1995, although both India
and Pakistan have refused to sign the agreement. 

On Thursday, thousands of Russian workers at the Institute of Experimental
Physics in the closed nuclear city of Sarov, which is helping to prepare the
next subcritical test, went on strike for three hours to protest against
unpaid wages. 

Some experts say protests like the one in Sarov, until recently called
Arzamas-16, could undermine safety standards as workers focus on economic
demands rather than scientific work. 

*******

#11
The Times (UK)
23 July 1998
[for personal use only]
Crime wave threatens Russian art heritage 

Anatoli Vilkov, of the Russian Culture Ministry, displays two stolen 
paintings, each worth about £20,000, recovered after they were offered 
for auction in London in 1996. Police are investigating 2,500 similar 
thefts of paintings, icons, rare books and cultural treasures as a wave 
of crime has put much of Russia's priceless art heritage at risk 
(Michael Binyon writes). 

Yuri Isayenko, a senior investigator at the Interior Ministry, told a 
press conference that about 30,000 artistic treasures and cultural 
artefacts had been stolen in the past two decades, most in an "explosion 
of crime" after the collapse of communism in 1991. Old coins and 
archaeological finds also fetched high prices on the black market, he 
said. The Orthodox Church is a particular target. Hundreds of village 
churches have been plundered, with thieves threatening clergy and 
ransacking poorly guarded places of worship in search of icons, vessels, 
vestments and decorations. A spokesman for the Moscow Patriarchate said: 
"Recently a thief tried to rob a church in Moscow while a service was 
going on, and even got to the altar to steal censers before he was 
caught." The treasures are usually smuggled abroad to be sold to rich 
Western collectors. But so many icons have now left Russia that the 
Western market is sated. Foreign connoisseurs are instead trying to buy 
paintings and classical Russian art from the last century, Mr Isayenko 
said. Russia has recently begun a vigorous campaign to identify its 
stolen works, using courts and police channels to ensure their return. 
Any stolen work worth more than $1,000 (£600) is now routinely reported 
to Interpol. The recovery of the two £20,000 paintings, which was 
reported on Tuesday, was a modest victory. 

Mr Vilkov, head of the Culture Ministry's department for the protection 
of cultural treasures, said the paintings had been stolen from a museum 
in 1992 and were spotted at Sotheby's and Christie's auctions in 1996. 
They had previously been sold at auction in Finland, but no one had 
realised they were stolen. 

********

#12
Reasons for Chubays's 'Stakhanovite' Conduct Examined 

Komsomolskaya Pravda
July 18, 19989
[translation for personal use only]
Article by Aleksandr Gamov: "Will 'Stakhanovite' Chubays
Become a Hero of Russia?"

Some $12.5 billion is about to come our way from the IMF.
Anatoliy Chubays's watch has been a busy one. And sleepless. By day
he would persuade IMF mission members to "enter into our crisis situation."
They naturally refused because they were afraid. And when night fell in
Moscow and day broke in New York the indefatigable Chubays would spend
hours hanging on the telephone canvassing transatlantic financial bigwigs.
At night they seemed to be providing handouts but by day the process
once again came to a standstill. And so it went on, day in day out, night
in night out... Sometimes, admittedly, Chubays would curl up and fall
asleep on some government couch.
It is said that a few days ago among a small group of people he was
asked a time-honored question: What personal benefit was he pursuing
during his talks with the IMF? Chubays allegedly retorted: "I would not
want there to be a change of political regime as a result of the crisis in
Russia and myself to be strung up by the feet. If this is considered
personal benefit, it does exist, as you can see." That is the "percentage
on the deal."
Although this explanation should hardly be taken completely seriously.
If Chubays was indeed haunted by a sense of fear, it was more likely of
something else. Namely, robbed of his vice premier's post, he was afraid
of being unwanted in Russian big-league politics. And the collapse of the
reforms, in which he himself had a hand, and more than one, would
inevitably spell personal tragedy for him.
Chubays's ambitions, even with his current lofty position within the
YeES Rossii [Unified Energy System of Russia] Russian Joint Stock Company,
go far beyond the power industry. He himself has had more than enough of
these kilowatts. That is why he agreed on a voluntary basis to become the
president's special representative for relations with international
financial organizations. At the same time he is not officially ranked as a
member of presidential or government structures, he receives no pay, and
claims no wages. No more and no less than an unadulterated Stakhanovite
enthusiast!
However, there is another explanation for Chubays's heroic conduct. 
Evidently, the proud, ambitious Chubays is fed up to the back teeth of the
image of the "Red Demon" who is "to blame for everything." So, he has
decided to adjust or rather correct his image and at the same time save
Russia from impending catastrophe.
Well, President Yeltsin, who has in many respects thanks to Chubays
gotten a political breathing space and is even about to set off on vacation
again, has no option now but to pin a star on the lapel of his savior's
jacket. Or at least a medal. After all, Comrade Stalin once did the
record-breaking Stakhanov a big favor. How is Chubays inferior?
[Komsomolskaya Pravda: One of Russia's largest-circulation and most
outspoken dailies, now controlled by Vladimir Potanin's Oneksimbank.]

*******

#13
>From RIA Novosti
Rossiiskaya Gazeta
July 23, 1998
MUCH ADO AND "PERSISTENT INABILITY"
By Anna KOZYREVA

The Federation Council discussed and rejected the federal
law "On Ensuring the Continued Exercise of the Powers of the
President of the Russian Federation in Case of Their Untimely
Termination," approved by the State Duma.
The story began in 1996, when the Communists lost the
presidential elections and immediately started talking about
impeachment. When Yeltsin fell ill, this gave the opposition a
new chance to shout about removing the President for health
reasons. A corresponding law was drafted but never approved.
After that the indefatigable deputies sent a request to the
Constitutional Court, demanding to know which term the Russian
President is serving, the first or the second? 
The opposition did not rest on its laurels while the court
was analysing the matter. It gave birth to another draft law, "On
Ensuring the Continued Exercise of the Powers of the President of
the Russian Federation in Case of Their Untimely Termination."
The law was drafted for the eventuality of resignation,
"persistent inability for health reasons to carry out the powers
invested in him (her)," or impeachment.
Indeed, the President can decide to resign, but the law was
not drafted for this eventuality. The deputies are worried by the
"persistent inability."
Everything seemed to be clear, as Part 2 of Article 92 of
the Russian Constitution says what should be done in this case.
But it is not enough for the opposition, and hence it drafted a
law which enumerates reasons for requesting that the Supreme
Court determine the "ability" or "persistent inability" of the
President to carry out his power.
And now the Federation Council rejected the law. The
conclusion of its committee on constitutional legislation and
judicial-legal matters says: "The law does not fully comply with
the Constitution and other federal laws," and has legal errors.
For example, it does not define the meaning of "the failure to
fully exercise his powers" and "medical reasons for reducing the
work load." The upper house members decided that this will
complicate the interpretation of the law. 
In addition, the procedure of forwarding a medical statement
on the President's health to the Federation Council clashes with
the norms of civil law of procedure. But the main thing is that
the law is dubitable from the viewpoint of ethics and medical
secrecy. 
So, the idea was doomed to fail. Why attempt to push it
through then? The answer is very simple: To fan political
tensions, which create a perfect background for pretending to be
the defender of the people. But it is clear whose interests will
be held closer to heart when election time is approaching. 

*******