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Johnson's Russia List


July 30, 1998   
This Date's Issues: 2289  2290  

Johnson's Russia List
30 July 1998

[Note from David Johnson:
1. Reuters: Russian critic says rouble devaluation inevitable.


3. Claudiu Secara: RE: #2286: Jerry Hough: The current crisis 
in Russia.

4. Tate Ulsaker: Mike Snow's Piece Response. (Russian women).

5. Komsomolskaya Pravda: Kovalev Dismissal Theories Viewed.
6. Moskovskiy Komsomolets: Nemtsov Comments on Oligarchs' Role.

7. Georgetown University Center for Eurasian, Russian and East
European Studies (CERES): Job posting.
8. Executive Intelligence Review: Rachel Douglas, `Alternative' 
debated, in case Russian finance package fails.

9. Reuters: Russia seeks billions to convert nukes.
10. Journal of Commerce: Jack Payton, Russia's dangerous perch.


Russian critic says rouble devaluation inevitable
By Peter Henderson

MOSCOW, July 29 (Reuters) - An independent Russian economist who has split
from the government's reform team said on Wednesday the government was
technically bankrupt and would have to devalue the rouble by 50 percent. 

Andrei Illarionov was a leading adviser to Russia's early-1990s reformers but
in recent years has become a fierce critic of the government's monetary

His warning that the central bank had squandered reserves comes after Russia
received pledges this month of $22.6 billion in foreign aid which the IMF has
said would give it breathing room to push through reforms. 

Illarionov told a news conference that Russia's Achilles heel was short-term
debt which it could not repay and could not renew because investors would not
buy domestic paper, fearing for rouble stability due to low levels of foreign

Low oil prices and other measures suggested a price of nine roubles to the
dollar was fair, he said. 

``The government is not able to refinance and service its domestic debt in a
traditional manner. That is what has happened in the last two months. From a
technical standpoint, the Russian government is already in the state of
bankruptcy,'' he said. 

Russia cancelled an auction for 13 billion roubles of bonds on Wednesday,
saying there was insufficient demand, though the domestic paper market rallied
on the news, considering it a sign of prudence. 

Average t-bill yields, still showing investor edginess, dropped to 63 percent
from 75 percent. 

Illarionov dismissed widespread fears that such a sharp change of policy,
abandoning the strong rouble which has also helped stabilise inflation, would
lead to rapid inflation or a run on the banks as ordinary Russians bought

He said if Russia did not print new money, inflation could be kept to 10
percent annually, versus around six or seven now. 

Russia could repay maturing t-bills until October or November using aid from
the International Monetary Fund and other sources but the central bank had not
kept enough reserves to protect the rouble much longer, he said. 

``Supporting the rouble effectively supports the banking sector at the expense
of the real sector,'' he said. Many foreign loans to the Russian banking
sector fall due in October. 

``I would not be surprised if in the second half of October or in November we
witnessed the first changes in the currency corridor of the central bank.'' 

The government has already said that higher foreign and gold reserves, boosted
to over $18 billion with IMF help, would raise investor confidence. 

New tax measures would raise more funds, creating a virtuous circle where
foreigners invested new money into Russian debt, taking more pressure off the
budget and the rouble. 

Analysts have welcomed the plan though initial market enthusiasm has waned.
``Both from an economic and political viewpoint we expect a very tense end of
summer/beginning of autumn,'' Moscow investment bank Alfa Capital said

The central bank has raised speculation of faster depreciation by widening the
daily band at which it buys and sells roubles in the last two weeks. 

A central bank representative had told Reuters that the bank was allowing the
tightly controlled market more freedom. 

``We have slowly widened the spread for a long time,'' he said. ``Ideally, we
would like to move to a spread so that the market worked by itself and did not
come to us.'' 

``But the market is never satisfied... We were told we were squeezing too
tightly. Now we let go and were told the market has no orientation.'' 



MOSCOW, JULY 29 (from RIA Novosti's Alexander Ivaschenko) -
Mutual corporate debts reached a total trillion roubles, Deputy
Prime Minister Boris Nemtsov announced to members of the Russian
Interbranch Association for Manufacturer Support.
He traces these debts to overdue federal allocations--
currently at R100 billion, industrial companies working at a
loss, substandard produce failing to find its customers, and
ruinous banking interest rates, again stemming from overdue
federal payments.
Mr. Nemtsov thinks the situation demands an ad hoc
government team on corporate arrears, and considers Victor
Khristenko, another Deputy Prime Minister, the best person to
lead it. It will be expedient for the association to be
represented on the new thinktank, he said. 


From: "Claudiu A. Secara" <>
Subject: RE: #2286: Jerry Hough: The current crisis in Russia.
Date: Wed, 29 Jul 1998 

The ironic thing about Jerry Hough's commentary on democracy is that he
is mostly right in every detail, but that only shows how confused the
American academic mind is on the whole. He recognizes that, by strict
technical definition of democratic participation, Stalin and Yeltsin are
equally authoritarian/democratic ("Those in the so-called conflict school in
the past raised questions about whether Stalin and Khrushchev were real
dictators by pointing out that others sometimes made decisions and that even
their decisions had either been opposed by others or were influenced by
others." ). Hough makes these healthy reminders in considering the reality
of a dictator in the sense of: 1. participation of "others" in the decision
making 2. elected authoritarianism, 3. dictatorship of the majority, and 4.
stylistic authoritarianism.
But he is not troubled about the inevitable conclusion ("Democracy does
not mean what Lenin and the American democratization program
say--dictatorial rule by the financial elite.") but goes on to make even
more complicated distinctions between "this" democracy and "that" democracy.
The American obsession of having to fit everything into its own version of
the ideology of democracy inevitably makes the distinction between
democracy/nondemocracy just a fiction. After all, "democracy" is not the
point of real history, at all.
Luckily, the universe in itself -- as is our little human colony also --
is fundamentally democratic "in toto" and any imbalances or wobbles within
its temporal states of existence, ultimately, get a sharp correction. We
call that a "revolutionary" event (as in physics: restoring to the
preexisting order in the revolving movement).
The point is whether the leadership of Lenin or Bismarck, Yeltsin (a
memorable impostor) or Clinton, etc. is farsighted, socially balanced and
successful or not. So the objective is not democracy, but social well-being
(wealth, education, industry, and um, what else ? ?)

Claudiu A. Secara


Date: Thu, 30 Jul 1998 
From: Tate Ulsaker <>
Subject: Mike Snow's Piece Response

Feminism has nothing to offer here.

The day of the feminist is gone, thank God! That was one of the first
things I noticed about Russia. Mike Snow only echoes what everyone knows
who has visited Russia for 2 days or more. Feminism can never take hold
here and a good guy with a strong head on his shoulders is always wanted.
What a change from the US where men are asked to be the impossible
combination of woman and man at the same time. The roles are all mixed up
in the US as indicated by the fact that the term "equal rights" now means
"equal roles". The whole political correctness fad where we all have to
chant "he or she" as we talk about a military general or a 'homemaker' is a
dishonest way to evaluate the world we live in. The twisted ideology is
yet unchallenged by all spheres of culture in America. It is amazing.
Equal rights today in America means equal in every way. Mention that man
and women have different roles to play as a union and you are immediately
the one waving red flags... a male cheauvanist for all to despise. 

Male chauvinist, I haven't heard that empty phrase in over 4 years now.
Since that time I have been in close contact with several hundred Russian
women and none of them has ever gone out of their way to make me feel
unwanted. In fact, that is the problem in this society. A man who doesn't
hit his woman too much and drink every day is in such demand, is pampered
so much, that he begins to believe he is actually worth all that attention.
No longer kept in check, desirable men roam any city in Russia (especially
outside of Moscow) with an address book that grows as fast as he can write. 

So if life in a developed system gives people independence, and
independence is a way for women to not need men, then life in an
undeveloped system is where interdependence is needed. Interdependence
relies upon the union of different strengths. Both men and women abuse
their market power when they are in high demand. In the US, women put the
men out of demand. In Russia, men put themselves out of demand. In all my
travels through Asia, Africa, Europe, I have never seen a greater contrast
between this 'law of demand of the sexes' question than between the US and
Russia. And what a relief Russia is for those of us who like to treat a
woman like a queen but hardly have the chance (between insults) to do so. 

Tate Ulsaker
(095) 252-2266
Director of Operations
Direct INFO


Kovalev Dismissal Theories Viewed 

Komsomolskaya Pravda
28 July 1998
[translation for personal use only]
Article by Igor Chernyak: "One More Kovalev Has Gotten Burnt;
Why Did President Give FSB Leader a Dressing Down?"

That is the question which the ruling echelons and grass roots have
been discussing for three days now.
There are several scenarios.
Kovalev was preparing the coup whose impossibility was recently
announced to the country by Boris Yeltsin. Who informed the president
himself of the coup is unimportant but in any case his enemy who had
organized the crime should have been sent to Lefortovo [prison] with those
who thought the same way. Yet here we have the premier expressing, it must
be supposed, the viewpoint of the president, thanking him for his work and
promising to make further use of him "for the benefit of the
Kovalev failed in the attempt on Maskhadov's life. It all fits
perfectly: Immediately after the attempt Basayev made a statement about
"the hand of Moscow," Boris Yeltsin immediately expressed condolences to
his Chechen counterpart and ordered Kiriyenko to fly to Groznyy, and, as
though in apology to the Chechens, dismissed the director of Russia's
leading special service. Only one thing is unclear: Why should the FSB
[Federal Security Service], where there would seem to be no mental
defectives, kill Maskhadov, thus clearing the "ground" for an even more
radical man? Somehow Kovalev bears no resemblance to a "hawk." If he is to
be dismissed for Chechnya -- then it should be with Savostyanov [deputy
chief of the presidential staff] who also committed quite a few blunders
there. And then, even if some special service did organize an unsuccessful
act of terrorism, there are no precedents in history for its chief to be
dismissed literally the next day: That is a scandal to end all
Kovalev was too obsessed with machinations against FAPSI [Federal
Government Communications and Information Agency] chief Starovoytov, to
whom Boris Yeltsin is allegedly indebted for the "correct" counting of the
votes at the last presidential elections. That looks rather naive: The
Boss is not indebted to many people. After all, Korzhakov actually saved
him from death, Serov gave up his post at a difficult time, and Grachev
defended him with tanks. But where are they now?
Kovalev's boys "screwed up" over the treason of the high- ranking
Foreign Ministry official Moiseyev [suspected of passing secrets to South
Korea]. And Kovalev himself displayed excessive independence, giving the
go-ahead without authorization from higher up to work to intercept nuclear
contacts with Iran. Even less likely is the claim that our officials have
always been recruited and the story involving Iran began a long time ago
and many people received awards for it a long time ago.
Under Kovalev something unheard-of happened: For the first time in the
history of the Lubyanka a gang of "FSB guys" responsible for a number of
serious crimes was operating in Moscow. The story of the murder of Boris
Berezovskiy which the Lubyanka was allegedly planning and Berezovskiy's
desire to replace the FSB leadership at any price is in the same category.
But the magnate's "order" was a fiction, the "traitors in their ranks" were
uncovered not without Kovalev's assistance, and Berezovskiy could hardly
have reckoned as a victory for himself Kovalev's replacement with V. Putin,
who is reputed to be a Chubays supporter.
But there is also a sixth, "humdrum," scenario. Rumors of Kovalev's
dismissal have been circulating for a long time. Many people close to the
president were concerned that the FSB chief did not bow to anyone in
particular and did not swear loyalty to the Boss at every turn and
constantly stressed that he took no part in political games. So they
impressed little by little on the president: He is not reliable, he is not
one of us, and in terms of personal loyalty he is the wrong man.... Things
were more or less calm in the country -- B.N. [Yeltsin] was patient. But
when talk turned to various coups and to the forthcoming "hot fall" and
when there are various viewpoints of the 2000 presidency, then his patience
was exhausted.


Nemtsov Comments on Oligarchs' Role 

Moskovskiy Komsomolets
14 July 1998
[translation for personal use only]
Interview with Vice Premier Boris Nemtsov by Natalya
Gotova; place and date not given: "Boris Nemtsov: 'Let's Appoint
Berezovskiy As Prime Minister': In Moscow the Vice Premier Had To
Face Idiocy, Envy, and Meanness"

The government of Sergey Kiriyenko is liked neither by the
people nor by the oligarchs. It is understandable that people are
not ecstatic over the new cabinet of ministers. When the country is
facing a crisis and the treasury does not have enough money to
support retirees and recipients of budget subsidies, any government
has to implement unpopular measures--tighten tax policy, reduce the
financing of budget programs...
Oligarchs, in fact, are also part of the people. Like
everybody else, they do not particularly like to share their profits
with the state. The mass media coached by tycoons is trying to
convince the public of the absolute political "impotence" of the
White House inhabitants. It is easy to believe in this since
"technocrats" in mousy gray suites in fact were not able (or did not
want) to implement their own "promotion." On the contrary, they
started casting a spell over the people by chanting such
unintelligible words as "restructuring" or "limits of energy
consumption for budget recipients."
Big business instantly offered assistance to officials at
Krasnopresnenskaya embankment. During the period of "water truce"
with the authorities, the oligarchs attempted to establish a Council
on Economic Interaction (which was instantly labeled as an
"alternative government"). Presently, they are actively promoting
(through the mass media controlled by Boris Berezovskiy) the idea of
a State Council that would push Kiriyenko into an even further
For a long time the government pretended nothing was
happening. Although, in last week's comments to Moskovskiy
Komsomolets on the economic situation in the country, Nemtsov--for
the first time ever!--categorically rejected the possibility of
creating a "government of oligarchs" in Russia...
[Gotova] Boris Yefimovich, during your recent visit to
Magadan, you mentioned that the scandal between the government and
Gazprom was blown out of proportion by the mass media controlled by
the oligarchs. Why do you think this?
[Nemtsov] I believe that there is a quite understandable
desire (on the part of Gazprom--MK) to keep the money for itself and
not give it to the state. The oligarchs, who also do not want to
pay taxes, share this desire. In principle, the oligarchs realized
that if the authorities were capable of collecting taxes from
Gazprom, it would be their turn tomorrow. Hence such strong
counter-measures. Including through the press.
[Gotova] Not long ago, CIS Executive Secretary Boris
Berezovskiy stated that the government should be strengthened. It
seems he meant giving authority to someone from the ranks of the
oligarchs. How do you view such an initiative?
[Nemtsov] As a complete stupidity. It is an extremely
dangerous proposition in a crisis situation. ...Obviously, we can
lead the situation to absurdity in order for everybody to understand
fully. It is even possible to appoint Boris Abramovich
(Berezovskiy--MK) as prime minister, and then ask people how they
view such an appointment. I believe that such a personality will
not be met with great enthusiasm either in the Far East or in
Moscow. Although, I don't want to subject the country to such an
[Gotova] It is possible to interpret your words in a way that
after a short period of truce, the government again declared a war
on oligarchs. Does this mean that the anticipated alliance between
the authorities and oligarchs--in the form of the Council on
Economic Interaction--will not take place?
[Nemtsov] I am a proponent of dialogue between the authorities
and business, between the authorities and the intelligentsia. It is
absolutely normal, because no authorities can use only a single
social group or a single political force as its basis. Although,
unfortunately, attempts to develop such dialogue are viewed today by
many oligarchs as the possibility of strengthening their positions
at the government's expense. We do not need such "interaction." It
is dangerous, it destroys Russia, and it creates favorable
conditions for corruption.
[Gotova] Did representatives of big business, as reported by
some media institutions, in fact demand a devaluation (lowering the
rate) of the ruble from the government?
[Nemtsov] Nobody had the nerve to say so out loud. Since, in
principle, everybody understands that devaluation means the possible
collapse of the banking system, Russia's bankruptcy. It is an
exodus of capital, dollarization of the economy, impoverishment of
the people, and even further aggravation of the social situation.
Devaluation is dangerous for the entire country, including those who
could make a lot of money from it.
[Gotova] In other words, it is impossible to say that
devaluation is one of the main reasons the government is presently
under massive pressure?
[Nemtsov] There are so many people who would like to pressure
the government that we will go insane if we pay attention to each
attempt. We need to do what is underwritten in the anticrisis
program, and not dash from one side to the other.
[Gotova] What is the government planning to introduce as a
counter-measure to the next aggravation of the situation in the coal
mining industry?
[Nemtsov] To pay off the debts that federal agencies owe
energy workers in order to provide an opportunity for energy workers
to settle their arrears with the coal miners.
[Gotova] How high is the risk that the money, as often
happened in the past, will disappear without a trace in the darkness
of the coal mines?
[Nemtsov] Presently, I am not too concerned at such a problem,
since today the coal industry trade unions in fact control the
distribution of the money.
[Gotova] The congress of oil industry trade unions was
conducted in Moscow recently, and concerns were expressed that due
to curtailing production, a wave of social protests could also
affect this branch of industry. Did the government consider
[Nemtsov] I had meetings with all the leaders of oil and gas
trade unions. They have many reasonable demands related, for
example, to the tariff policy and the reconstruction of debts to the
budget. Such demands can be met and, most importantly, without
expenditures on the part of the treasury.
There is an objective factor--low prices on oil and decreased
prices on gas that make the situation more complicated. Although,
it seems to me that the owners of private oil companies should make
their companies more cost-efficient, and find qualified managers who
can work even in a crisis situation. Furthermore, work without
social upheavals, as in Nefteyugansk.
[Gotova] But it seems the oil industry has already used up all
its internal reserves. Moskovskiy Komsomolets is aware of LUKoil's
plans to sell its share in the Caspian Pipeline Consortium in order
to sustain the wellbeing of its workers. This could harm not only
the company, but the entire country as well...
[Nemtsov] This is not entirely true. If I am not mistaken,
LUKoil has 14 percent, while Russia has 24 percent. Russia's share
will in fact decrease, although if it aids in the stabilization of
LUKoil, it is the correct decision.
[Gotova] Your recent public appearances reflect your growing
weariness of the misunderstanding and hostility of members of
parliament and other political forces towards the government's
actions. Are you getting tired of the bumpy road?
[Nemtsov] Not really. When I relocated to Moscow, I had to
face idiocy, greed, envy, meanness, impudence, and cynicism... At
first, I really felt somewhat disillusioned. Although I got
accustomed to it. People can get accustomed to anything...


Date: Wed, 29 Jul 1998 
From: "Cheryl C. Sawyer" <> 
Subject: job posting 

Georgetown University
School of Foreign Service
Vacant Position Announcement

Center for Eurasian, Russian and East European Studies (CERES) 
Program Assistant
Job #980343A

CERES announces a vacancy for an organized, self-motivated, task oriented
program assistant. The incumbent serves as the first point of contact for
CERES and provides administrative and clerical support to Director and
Associate Director in both ongoing tasks and special projects. Additional
duties include maintenance of data files and mailing lists; routing of
inquiries from prospective students, public and media; support for program
events and publications 

Qualifications: Prefer BA or equivalent in relevant training and
experience. Familiarity and skill with office technology. Strongly prefer
experience with international or relevant area studies and proficiency with
Russian or East European language. Candidate should have ability to think
independently yet work as a team player, and flexibility to work on several
tasks at once. Prefer a highly-organized and meticulous individual with
great attention to detail. 

Salary: Grade 5, $22,403 - 28,003 + benefits

To Apply: External Candidates must submit resume and cover letter with job
title and number to Ms. Pat Connelly in Human Resources, G-01 Healy Hall,
Georgetown University, Washington, DC 20057. Please include reference


Date: Wed, 29 Jul 1998
Subject: EIR article (from Rachel Douglas)

Executive Intelligence Review
Vol. 25, No. 30, July 31, 1998
`Alternative' debated, in case Russian finance package fails
by Rachel Douglas

It took rule-by-decree in Russia, as International
Monetary Fund Deputy Managing Director Stanley Fischer had
proposed it would, for the IMF Executive Board to approve
$11.2 billion in ``financial support'' to Russia, beyond
previous loan commitments. This is the portion of a $22.6
billion two-year package, announced by IMF Managing
Director Michel Camdessus on July 13 as an emergency
measure, justified by the ``systemic'' nature of Russia's
financial crisis, that represents new funding from the IMF
this year. The approval was announced late on July 20.
As of July 17, the Russian State Duma (lower house of
parliament) recessed for the summer, without passing the
entire ``stabilization program,'' upon which the new credit
lines were contingent. Premier Sergei Kiriyenko announced
that night, that the failure to pass certain tax measures
and enact further budget cuts, meant that the Cabinet and
the President would resort to decrees. The Duma had only
approved legislation accounting for 28.2 billion rubles of
additional annual revenues, whereas the assignment was to
bring in 102 billion. ``Regrettably, we have failed to
reach a comprehensive solution on how to boost revenues,''
Kiriyenko said. ``We can't stop at that, and will now have
to act ourselves''--by government and Presidential decree.
Kiriyenko announced that he had readied a decree to
levy a unified Value Added Tax, which the Duma had
rejected. (Even under President Boris Yeltsin's Executive
branch-oriented 1993 Constitution, only the parliament is
supposed to be able to change taxes.) On July 18, he
enacted an immediate 3% increase in import duties, which
will raise $160 million per year. Interfax quoted
Kiriyenko, saying, ``This is a harsh measure, which will
entail a rise in prices for imported goods, but the
government has been forced to take it to increase state
Yeltsin decreed that the government must submit the
1999 budget to the Duma by Aug. 26, announced the Kremlin
press service; the document is supposed to meet IMF
austerity demands, for a budget deficit even lower than
the European ``Maastricht'' terms: no greater than 2.8% of
GDP. On July 19, President Yeltsin's Deputy Chief of
Staff, Aleksandr Livshits, announced that the vacationing
President had vetoed two laws passed by parliament to
lower taxes--a cut in the tax on profits, and a law
lowering excise duties on oil sales--and had also
introduced a fourfold hike in land taxes by decree.
The first tranche of IMF funding was reduced from a
planned $5.6 billion, to $4.8 billion, because, as Fischer
put it, ``Unfortunately, parliamentary backing has not been
forthcoming.'' Kiriyenko and Central Bank Chairman Sergei
Dubinin sent a written pledge to the IMF, carried by
negotiator Anatoli Chubais, that the negotiated terms will
be implemented by decree, with or without the Duma's
action. At the same time, Fischer said he welcomed the
convening of ``a special parliamentary session'' in August,
to approve more of the austerity package. The $4.8 billion
is in the form of a credit line to the Central Bank of
Russia, to bolster hard currency reserves in an emergency.
On July 21, the Russian government announced the
results of another part of its package deal with the IMF,
which increased the country's dollar-denominated debt by
$6.4 billion in one swoop. The government accepted bids of
$500 million cash plus 27.5 billion rubles ($4.4 billion)
of GKO short-term treasury bonds, for the issue of $6.4
billion in long-term, dollar-denominated bonded debt at
15% interest. (The discrepancy between $4.9 billion and
$6.4 billion is due to the bonds' carrying a coupon payout
level, less than the 15%, with the uncollected interest
being capitalized.) Deputy Finance Minister Mikhail
Kasyanov said that about 60% of the conversions of GKOs to
Eurobonds were done by foreigners, but that some Russian
banks had also grabbed the dollar-denominated instruments.
``After what has happened in the last few weeks, this
is absolute victory,'' exulted Kiriyenko at his press
conference on July 21.
From other government officials, a consistent
cautionary phrase sounded. Livshits told a news briefing,
that ``the international community has met us half way for
what I think will be {the last time}.'' Deputy Finance
Minister Mikhail Kasyanov, who coordinated the conversion
of GKO debt to Eurobonds, temporarily reducing the
unbearable weekly debt interest and redemption burden,
said, ``We did it not because it was such a good operation.
We believe this is {the last market instrument} to resolve
the problem of debt. Russia has no other market
instruments to do this.''

- Opposition -
What if it doesn't hold?
Russia's disintegrating capital markets were supposed
to be stabilized by the international financial support,
and, during the week of July 13, the Moscow stock market
did surge from the vicinity of 150 on the RTS share price
index, to the 190s, only to crash again. From July 20
through 23, the RTS index fell 23%, to 159.
Besides the impact of falling markets abroad, Russian
stock shares fell after an action that heralds political
opposition to the government's tax collection pledges,
from the major Russian oil companies. On July 22, six
firms released an open letter to President Yeltsin, in
which they accused the government of acting under pressure
from international financial organizations. The companies
included Yukos and Sibneft, owned by the interests of M.
Khodorkovsky and Boris Berezovsky, respectively, but also
the giant LUKoil. The open letter charged that the ``unwise
and irresponsible'' recommendations of the IMF would lead
to social unrest.
LUKoil Vice President Leonid Fedun, according to NTV
television's report, threatened that the oil companies
would slash output, if the Russian government continued to
signal, by its policies, that it has no use for an oil
production sector. In Fedun's scenario, mass layoffs would
ensue, while the Russian market would be flooded with oil
imports from Azerbaijan and Kazakstan--whose oil fields

are being developed by ``American'' oil multis; this, in
Fedun's presentation, is the motive for the ``American'' IMF
to put the squeeze on the Russian oil firms.
The oil firms are protesting the shift of taxation on
oil deals from the moment of payment, to the moment of
shipment, as well as the Presidential veto of a reduction
of oil excise taxes. Gazprom, whose chairman Rem Vyakhirev
reached agreement on July 21 with Kiriyenko on a tax
payments schedule, denied that it was party to the open
letter, although the copy shown at LUKoil headquarters
included a Gazprom official's signature.
Whether by political opposition at home or from the
pressure of the next round of international financial
panic, the IMF pact with the Russian government may well
go up in the flames of a ``hot autumn.''

- An alternative -
On July 20, while the IMF Executive Board was meeting
in Washington, Academician Leonid Abalkin gave a press
conference in Moscow, to attack the government's so-called
anti-crisis program, crafted to meet IMF austerity
demands, as a conceptual, practical, and political
disaster. Abalkin made extensive reference to the work of
his organization, the Economics Institute of the Russian
Academy of Sciences, and others, including the alternative
program drafted by Dr. Sergei Glazyev (see {EIR}, July 17,
pp. 6-9)--as among the available alternative approaches,
to put economic policy-making in Russia on a sane basis.
Concerning the Glazyev program, Abalkin said, ``it was
initially planned that at the June 23 government meeting,
[Federation Council leader] Yegor Stroyev would present an
alternative program, different from the government
program. Yegor Semyonovich [Stroyev] did not take that
step, perhaps because the program had not been
sufficiently polished. Another reason was his status as
Federation Council head because, as I understand it, he is
most concerned about a public response, about the risk of
an explosion, with people pointing their fingers at him as
the one who would like to provoke a split. That was why
his remarks were critical, but reserved, and he did not
mention that program at the government meeting.''
The week of the IMF agreement, the daily
{Nezavisimaya Gazeta}, of which Berezovsky is part owner,
printed several scenarios for emergency reform of the
Russian government, through creation of a Provisional
State Council, and deployment of ``a mobilization model of
development'' for the economy. According to sources in
Moscow academic circles, the publications of
{Nezavisimaya} editor Vitali Tretyakov and his staff
reflect intense discussion of what economic recovery
policy should be on hand, for ``Day X''--when the next
crisis explodes, and there is no Western institution
capable of providing a bailout.
Abalkin asked why the country of (turn-of-the-century
reformers, students of the American System of Political
Economy) Sergei Witte and Pyotr Stolypin, and of the
Soviet mathematical economics school, should be following
imported, disastrous economic prescriptions. If it were
not for capital flight and triple-digit interest rates,
said Abalkin, Russia would have no budget deficit. He said
that his findings on flight capital are confirmed by
reports from Academician Yevgeni Primakov, the Russian
Foreign Minister. Recently, in London, Primakov attacked
the IMF and called for Franklin Roosevelt-type economic measures.
Abalkin hinted that ideas such as his and Glazyev's
have sympathy in some quarters of the Russian government,
but that the ``anti-crisis'' program is incompatible with
them, and incorporates no ``industrial policy'' to speak of.
He attacked as nothing short of lunacy, the tax-collection
drive that is going to cut off electricity and gas to
near-bankrupt companies. The academician also outlined a
conception of how to redefine the role of the Central
Bank, as a source of relatively cheap credit for the
economy, instead of an agency to lend for
budget-financing, at usurious interest rates.
On July 22, President Yeltsin appointed Yuri
Maslyukov as minister of industry and trade. He is a
former deputy defense minister of the Soviet Union for the
defense industry, the last chief of Gosplan, and, as a
Communist Party member of the State Duma, is the head of
its Committee on Economic Policy. In 1996, Maslyukov was
CP Presidential candidate Gennadi Zyuganov's economics
adviser, presenting a program co-authored by economist
Tatyana Koryagina, for what they called ``New Deal''-type
measures to revitalize Russian industry.
Maslyukov was one of only two CP deputies in the
Duma, who broke party discipline to approve Kiriyenko as
premier. According to Abalkin, however, Maslyukov has
recently blasted the IMF-mandated ``anti-crisis program'' of
the Russian government, saying at the June 23 government
meeting where it was presented, ``If you want to overcome
the crisis, you should not entrust the drafting of the
program to those who got us into the crisis.''


INTERVIEW-Russia seeks billions to convert nukes
By Adam Tanner

MOSCOW, July 29 (Reuters) - Russia is seeking up to two billion dollars in aid
from the international community to convert plutonium from its nuclear weapons
into fuel for atomic power plants, a top official said on Wednesday. 

Last Friday Prime Minister Sergei Kiriyenko signed an agreement with U.S. Vice
President Al Gore under which both nations pledged to convert plutonium from
dismantled nuclear weapons. 

But in an interview on Wednesday, First Deputy Atomic Energy Minister Lev
Ryabev said Russia could not afford to spend its own money to fulfil the

``If there is no help, we won't be able to convert the plutonium,'' he told
Reuters. ``If the world community does not come up with funding for this
programme, we'll keep this plutonium in storage under scrupulous guard.'' 

Ryabev said Russia has about 50 tonnes of plutonium from Soviet-era nuclear
weapons to convert, and gave a parallel U.S. amount of 37 to 38 tonnes. That
amount comes from a few thousand warheads on both sides. 

``It's in the world community's interest that Russia cut its real nuclear
potential so that there is no possibility that this nuclear potential will
return in rearmament,'' he said. 

Russia is dismantling several hundred nuclear warheads a year in line with
agreements signed as the end of the Cold War and collapse of the Soviet Union
eased nearly half a century of tensions between Washington and Moscow, Ryabev

Under the U.S.-Russia programme likely to last 15 years if it gets off the
ground, the old plutonium will be used to generate electricity. 

``The biblical prophecy about turning swords into ploughshares is actually
illustrated in this kind of a programme,'' an enthusiastic Gore said last

U.S. Undersecretary of Energy Ernest Moniz said the United States, France and
Germany had preliminary talks on assisting Russia in building the first plants
to convert the plutonium. 

Moscow is now building two special storage facilities for its plutonium
removed from warheads, one in Siberia and the other in the southern Urals, the
first deputy minister said. 

Only a few dozen people will guard each facility because automatic mechanisms
provide most of the protection. Ryabev said even well-armed terrorists could
not penetrate the facility. 

``The storages will correspond to all security requirements, including
international ones, so there is no danger,'' Ryabov said. ``A cannon shell
would not break through the warehouse, and even if a plane fell on it it would

Russia will first ship plutonium to the storage in 1999. 

Like the rest of the country, Russia's atomic sector has been suffering
difficult financial times. 

Last week thousands of workers at Russia's top nuclear weapons research centre
at Sarov, the former Arzamas-16, went on strike for three hours to demand
unpaid wages. 

``The main reason is that our nuclear disarmament programme is taking place
more quickly than our conversion process,'' Ryabev said. 

A day after the strike, Siberian governor Alexander Lebed said he might take
over a missile unit in the Krasnoyarsk region he runs if Moscow did not pay
its troops. But the first deputy atomic energy official called Lebed's
announcement posturing that did not pose a real threat. 


Journal of Commerce
July 28, 1998
[for personal use only]
Guest Opinion
Russia's dangerous perch
Jack R. Payton writes for the St. Petersburg Times. This article was 
distributed by Scripps Howard News Service. 

It's starting to become clear why the United States and its wealthy 
friends are forking over billions of dollars to prop up Russia's economy 
even when they suspect it might not do any good.

The theory I've come up with after several months of listening to all 
kinds of experts on the subject -- from the United States, Europe and 
Russia itself -- is fairly straightforward.

Nobody, not even the Russians, can figure out what's going on in Moscow, 
so they've decided it's better to throw money at whatever it is than not 
do anything at all. That way nobody can accuse them of not trying to 
prevent Russia's total economic and social collapse.

This is an oversimplification, of course, but less of one than you might 
think. Look at the situation this way:

Seven years after the Soviet Union and its Communist empire fell apart, 
it's still not certain what kind of country has taken its place. But 
whatever kind of country Russia happens to be -- or is in the process of 
becoming -- it still has a big army, thousands of nuclear weapons and 
intercontinental ballistic missiles and can still cause trouble in a lot 
of places.

So nobody wants to see it fail. Its democratic tendencies may be shaky, 
and its embrace of Western-style capitalism far from assured. But nobody 
wants to deal with the awful things that could happen if there's another 
collapse in Moscow.

The psychology behind this occurred to me the other day while listening 
to Anatoly Chubais. He's Moscow's point man in dealing with the 
International Monetary Fund and was in Washington last week to nail down 
a $17 billion IMF loan package, the latest in a series of international 
efforts to bail out Russia's sinking economy.

Now Mr. Chubais is a great salesman, no doubt about it. He had to be to 
persuade tough-minded IMF officials to come up with such a huge loan. 
And when you factor in that Russia's recalcitrant Parliament wouldn't 
even approve a few economic austerity measures to keep the IMF happy, 
Mr. Chubais' talents must be considerable, indeed.

But even Mr. Chubais seemed hard-pressed to come up with specifics the 
other day when asked what Moscow was doing to deserve such IMF largesse. 
Speaking at the American Enterprise Institute, a Washington think tank, 
Mr. Chubais fell back on generalities.

The United States and other influential members of the IMF board had to 
trust in Russia's future, Mr. Chubais said, because the democrats and 
economic reformers were running Moscow now. Even the Communists, he 
said, were coming around to the conclusion that democracy and capitalism 
were "absolutely irreversible in Russia."

Fine, but what were President Boris Yeltsin and Prime Minister Sergei 
Kiriyenko doing to control rampant corruption? And when would the 
country's primitive barter economy be dragged into the 20th century 
(much less the 21st)? And when would the government actually start 
collecting taxes instead of decreeing new taxes that nobody intended to 

In short, when would the rule of law be imposed on Russia's increasingly 
evident economic and political chaos?

Again, no specifics, but Mr. Chubais was ever the optimist. With 
economic reformers now completely in charge, he said it was "no longer a 
question of whether to reform, but how to reform."

And the latest IMF loan, he concluded, "will give us the time we need to 
get out of our current financial difficulties."

But a huge IMF bailout package hasn't salvaged Indonesia's economy. 
Other than its army, its nuclear warheads and missiles, what made Russia
so different from Indonesia?

Once more, Mr. Chubais offered no specifics, but repeated assurances 
that Moscow was, indeed, on the path to Western-style democracy and 
free-market capitalism.

Which brings us back to all those bombs and missiles and another Russian 
I saw only a few hours after Mr. Chubais. This one -- Stanislav Lunev -- 
used to be a colonel in the GRU, the old Soviet military intelligence 
service, and once spied for Moscow while posing as a Russian reporter in 

After defecting in 1992, Mr. Lunev is now in a witness protection 
program and consulting for the FBI and CIA. He's also peddling a book 
about his past, a point to keep in mind when he issues dire warnings 
about how the Russians are still intent on subverting America.

The Cold War is far from over, warns Mr. Lunev, and Moscow still 
maintains an army of spies -- even undercover special operations 
troopers -- to cause mayhem here in the United States when the time is 
right. All that talk about democracy and friendship, he says, is a big 
lie intended to gain time while Russia's hard-liners regroup.

The fact that Mr. Lunev was made available through the auspices of a 
conservative think tank here may say something about where he and the 
conservatives are coming from. Even so, it doesn't completely erase the 
doubts somebody like Mr. Lunev can sow.

The fact is that nobody can really say for sure where Russia is headed 
these days. Is it destined to become a Western-style capitalist 
democracy, as Mr. Chubais insists? Or is it still some kind of paranoid 
regime harboring dark plots, as Mr. Lunev would have us fear?

Even some of the top Russia scholars from Europe and America couldn't 
answer those questions at a seminar I attended last March. The best they 
could come up with was a variation of that old platitude: Only time will 



SHMONOVA. The Moscow Inter-Bank Currency Exchange and Expert
Institute have prepared for publication Russia's first guide 
"Top 1,000 Companies." Andrei Neshchadin, Director of the
Expert Institute, said at a press conference in the Russian
Union of Industrialists and Entrepreneurs that the publication
is meant for the broad readership, as well as for experts in the
financial and investment spheres, foreign investors, trade and
marketing organizations.
The new guide will help Russian and foreign investors to be
more substantiated in taking economic decisions, believe its
compilers. In future, the guide will come out in several
languages and will be sent out to investment banks. That will
enable Russian enterprises to receive direct investments from
abroad. Some foreign countries have already shown interest in
the guide, and its publication is currently prepared in the FRG.
The guide was compiled on the basis of financial
information on enterprises for the first six months of 1997,
provided by the State Statistical Committee of Russia. Among the
companies selected for the publication are the principal
manufacturers in the Russian Federation whose financial and
economic performance is the best in the country. The selection
was made in 14 branches of industry and communications. The
studies made have revealed the leaders in Russia's industry,
i.e., the light and food industries that are capable of
producing commodities that enjoy the highest demand among



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