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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

Auguust 4, 1998   
This Date's Issues: 22962297  

Johnson's Russia List
#2296
4 August 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Washington Times: Andrew Borowiec, Wealthy Russians romp along
Riviera.

2. Nezavisimaya Gazeta: BORIS YELTSIN IS THINKING. Yeltsin and Chubais 
discussed only economic problems.

3. AFP: Former Nuclear Testing Site Comes to Terms with Past.
4. Financial Times (UK): Lex, RUSSIA: New cash-raising wheeze.
5. New York Times: William Safire, You Had to Be There.
6. Reuters: Economist Hits Back at Central Bank "Lie."
7. AFP: Moscow Vows Land Reform to Secure World Bank Cash.
8. Reuters: Russia crisis spreads alarm in Ukraine.
9. Reuters: U.S. cancels naval exercise near Russian port.
10. Jamestown Foundation Monitor: LEBED'S PARTY HOLDS CONGRESS. 
11. RFE/RL: Paul Goble, Primakov's Nineteenth Century Model.
12. Reuters: Way open for Yeltsin foes if reforms fail.]

*******

#1
Washington Times
August 3, 1998
[for personal use only]
Wealthy Russians romp along Riviera
By Andrew Borowiec

CANNES, France
While President Boris Yeltsin pleads for Western funds to save Russia's 
economy, his compatriots along the strip of opulence known as the French 
Riviera are spending as if there were no tomorrow.
     Nothing is too good or too expensive for the "tourists who came 
from the cold" or "the new czars," as some French headline writers have 
dubbed them.
     They rent superluxury villas for $20,000 a week, 120-foot motor 
yachts with a full crew for $5,000 a day and stay in such hotels as the 
Negresso in nearby Nice -- where the cheapest rooms cost about $400 a 
day.
     One visitor from Russia rented two rooms for $1,000 a night 
because, according to a hotel receptionist, "he wanted to be more 
comfortable."
     Moscow reeled under a crisis atmosphere last week, with Mr. Yeltsin 
cutting short his summer vacation as the stock market plunged in spite 
of a $22.6 billion loan package organized by the International Monetary 
Fund.
     In the latest blow, the international rating agency Fitch IBCA cut 
Russia's foreign long-term debt rating to BB- from BB amid worries about 
poor tax collection and looming political confrontation over a tough 
1999 budget.
     But on the Riviera, French hotel specialists say they have not seen 
anything like the Russian taste for opulence since before World War I, 
when Russian dukes and Polish counts arrived in Pullman cars using their 
own bed linens and accompanied by liveried servants.
     Detractors of the "new Russians" complain that they get the money 
for their lavish living from money laundering, tax fraud and other 
illicit activities of the so-called "Russian mafia."
     But discreet hotel managers and tour operators prefer to describe 
them as "import-export managers," "captains of industry" or high 
officials who have cashed in on privatization ventures.
     The Russians, who began appearing on the French Riviera shortly 
after the collapse of the Soviet Union in 1991, don't distribute tips of 
hundreds of dollars like Arab sheiks at the height of the petrodollar 
euphoria a couple of decades ago. In fact, hotel personnel consider the 
Russians poor tippers.
     But at one stage they were known to shell out as much as $100 for a 
soft drink simply because they were not familiar with the value of the 
money which they carried in thick bundles, usually in dollars.
     They are still willing to pay whatever they are asked -- but now in 
plastic. The new Russians have become mesmerized by that Western 
invention -- the credit card.
     They don't know much about French wines but prefer to judge them 
according to the price. Paying $2,000 for a bottle of great vintage 
Burgundy does not seem too excessive for them.
     Cannes, Nice and Antibes abound with stories about the spending 
habits of Russian visitors, some real, others exaggerated. Staff of such 
hotels as the Negresso, Carlton or Martinez have been given strict 
instructions to be discreet.
     "Our Russian clientele is sacrosanct," said Negresso director Guy 
Hellet.
     And no wonder. The Russians rank third in numbers of visitors to 
the coast and first in per capita spending. Their presence has been 
especially felt in the luxury hotels along the Riviera between Monte 
Carlo and Cannes.
     Some hotels have even printed menus in Cyrillic, despite severe 
difficulty in translating such delicacies as "ravioli d'abbat poele" 
(ravioli stuffed with braised offal) or "poupetons de pigeonneau fermier 
aux cepes" (pieces of domestic pigeon with wild mushrooms).
     Oleg Kholkov, who runs the Inexco tourist agency organizing Russian 
trips to France, feels hotels should make more of an effort to humor 
Russian visitors.
     "They must not kill the goose that lays golden eggs," is his 
favorite saying.
     Many French hoteliers agree --and adjust their prices accordingly.

*******

#2
>From RIA Novosti
Nezavisimaya Gazeta
August 1, 1998
BORIS YELTSIN IS THINKING
Yeltsin and Chubais discussed only economic problems
By Natalia KONSTANTINOVA

Contrary to all forecasts, Boris Yeltsin did not offer
Anatoly Chubais a new post during their meeting in Gorky-9
yesterday. Official sources say that Chubais preserved his post
in RAO EES Rossii. 
During that working meeting, which lasted over two hours,
Chubais reported to the President about the so-called
Zadornov-Dubinin action plan in the financial sphere for the
second half of 1998. This plan provides for the full and timely
servicing of the state debt on the basis of a limited programme
of external loans and stricter collection of taxes. They also
discussed the situation on the world financial scene. 
Boris Yeltsin highly assessed the actions of the
government and the Central Bank, whose efforts glossed over
difficulties on the Russian financial market, the presidential
press service reported on the results of the meeting. 
We can assume that even if the President offered a
government post to Chubais, this country's most popular
resignee would have most probably rejected it, otherwise the
president and the head of RAO EES would have found themselves
in a laughable situation.
Why? First, because even the most apolitical citizens of
this country would be surprised to see how the President treats
his subordinates, scolding some even when they did not make any
mistakes, disregarding the obvious flops of others, and
regularly fires still others (like Shakhrai and Chubais), only
to give them a new posting several months later. This is bound
to provoke laughter, even if through tears. 
Second, Anatoly Chubais does not need a government status.
No wonder some analysts say that "There is a new post in
Russia, called Chubais." This is true, to a degree, because no
matter what post Chubais holds (or does not hold) in the
government register, he did not stop his contacts with the
world financial magnates for a day. Far from weakening, his
contacts abroad grew stronger. 
The current premier, Sergei Kiriyenko, probably thanked
God for what happened today, for nobody know who would have
been considered the head of government de factor if Chubais was
appointed a vice-premier. 
And the third reason for Boris Yeltsin's unwillingness to
hold another personnel reshuffle, although he had returned to
Moscow ahead of time and summoned Chubais, is that the
President used the "working meeting" as a pretext for sounding
the ideological situation. In other words, he is collecting
information about the situation in the country and in the
political camp. 
It appears that Boris Yeltsin has at long last seen that
the situation in Russia is so unstable and is fraught with such
explosions that he stopped trusting the reports of his
assistants and their digests of the mass media.

******

#3
Former Nuclear Testing Site Comes to Terms with Past 
August 1, 1998

KURCHATOV, Kazakhstan -- (Agence France Presse) Outsiders call this city 
Konnechnaya -- the Final Stop -- but the young scientists and military 
personnel who arrived here to develop the nuclear bomb for the Soviets 
and test its effects on the population thought themselves lucky. 

Lydia Sysoyeva, 52, remembers moving to the closed city of Kurchatov 
with her husband, an engineer at the National Nuclear Center, and the 
droves who came to work at the nearby Polygon in the 1950s and 60s. 

"The town that first struck my eyes was a green oasis on the steppe," 
said Sysoyeva, now the administrator of what is fast becoming a ghost 
town. 

"All the buildings were inhabited. Each year, one or two five-story 
buildings were constructed, and the entire population was young." 

Today, Kurchatov is a town of 10,000 with blocks of apartment buildings 
abandoned after more than half the population packed their furniture 
onto railroad boxcars and left in 1993 and 1994. 

Just as the radiation from the more than 460 nuclear tests the Soviets 
conducted from 1949 to 1989 at the Polygon -- now a virtually barren, 
restricted area of 18,500 square kilometers (7,400 square miles) -- 
still sets Geiger counters beeping, the region's past weighs heavily on 
people's minds. 

Nearly every adult remembers the trauma of seeing the modern-day symbol 
of Armageddon -- the mushroom cloud -- followed by a blinding light and 
tremors. For many, the monthly or bimonthly nuclear tests were a part of 
life. 

Villagers calmly recall how authorities told them to leave their homes, 
even during above-ground tests, and how they lay on the banks of the 
Irtysh River with their arms over their heads. 

But others, like Aleksander Shevchenko, 71, a former forced laborer who 
helped build a metro, bridges and buildings inside the Polygon so the 
Soviets could see how a nuclear war would affect urban structures, are 
still suffering emotional trauma. 

Shevchenko, who channels his emotions into horrific oil paintings of the 
mushroom clouds, watched the first atomic bomb in 1949 with pride at 
having caught up with the Americans. But his pride was short-lived. 

During the tests "everything went white, a frightful white. There was no 
light. These rays penetrated a person through like x-rays." 

"What happened to us was we were absent at this moment. This explosion 
was unsettling. You watch yourself as if from the side. ...It's shock. 
Then gradually you come to, and the real suffering starts here," he 
said. 

Only after the Nevada-Semipalatinsk Movement lobbied to stop the testing 
did the population, which today suffers from higher than normal rates of 
cancer, blood diseases, mental retardation and grotesque deformities 
like babies born with cone-shaped heads, learn of radiation's effects. 

Dr. Boris Gusev, today the deputy director of the Kazakh Research 
Institute for Radiation Medicine and Ecology in Semipalatinsk, knew 
before many others that the Soviets were using the local population as 
human guinea pigs. 

Gusev worked in one of four dispensaries, institutions created in 1957 
to secretly study the effects of radiation by telling "patients" they 
were being treated for an infectious disease. 

Gusev, who said he could have been shot or imprisoned had he told his 
patients the real nature of his work, is not apologetic. "Now I feel 
very good because the things I knew and saw ... I could somehow help 
these people. I helped them from the first second of my work to the 
present day," he said. 

Surprisingly, few Kurchatov residents, unlike those in the villages 
around the Polygon, complain about the effects of the nuclear tests on 
their health. 

They are more concerned with moving on. Privatization is only now coming 
to Kurchatov since it became an open city last September, Sysoyeva said. 

Ironically, the past that destroyed so many lives still provides the 
livelihood of most of Kurchatov's residents -- the Polygon and the 
Nuclear Center are the main employers. 

Kairat Serimov, whose youngest brother has Down's syndrome, works at a 
nuclear reactor in the Polygon, but he doesn't consider radiation a 
problem. 

"Here where we live it's normal. If I lived anywhere else, there 
wouldn't be enough radiation," he said.

*******

#4
Financial Times (UK)
AUGUST 3 1998
[for personal use only]
Lex column 
RUSSIA: New cash-raising wheeze

Desperate situations call for innovative measures. And so it is for 
Russia. Given the government's liquidity crisis, financiers are coming 
up with wheezes for raising cash. The latest, from Robert Fleming 
Securities, suggests Russia should issue "sovereign equities" - a new 
type of instrument whose return would track the dollar performance of 
the Russian stock market.

The thinking is beguiling. Moscow finds it extremely expensive to raise 
cash through conventional bonds because of high yields. But it is also 
hard to raise money quickly through privatisation. So-called sovereign 
equities, by contrast, could be sold quickly; and, given the 1.4 per 
cent yield on Russian equities, the annual funding cost would be cheap. 
Of course, if the stock market soared over the life of the instrument, 
Russia would have to pay back much more than it borrowed. But that is a 
high-class problem. Presumably, if the stock market did rise, the crisis 
would be over. Moreover, the government is hedged because the value of 
its stakes in Russian companies would also be rising.

But would investors want to buy these sovereign equities? While the term 
"sovereign" ought to be reassuring, in Russia's case it could be a 
turn-off. Investors might think they are better off with real equities 
than paper promises from a cash-strapped government. Flemings' answer is 
that such sovereign equities should be backed up by collateral. Even if 
that slightly defeats the purpose of the scheme (why not just sell the 
collateral?), the idea looks worth exploring.

******

#5
New York Times
August 3, 1998
[for personal use only]
ESSAY / By WILLIAM SAFIRE
You Had to Be There

MOSCOW -- A hole the size of a football field was dug just outside Red 
Square and a glitzy three-level shopping mall sunk inside it. A 
flowering park sits on top, with benches for sightseers on this summer 
night, and from it you can contemplate Kremlin towers and the odd facade 
of the huge old Hotel Moscow. 
The underground mall is the symbol of the new Russia: its overpriced 
foreign shops attract more lookers than buyers and the only money-makers 
are the fast-food shops. 
The front of the massive 15-story hotel symbolizes the old Soviet Union. 
The middle part is square, but its two wings seem off-center, 
asymmetrical, as if the architect couldn't decide which style he liked. 
That's because the facade was submitted for Stalin's approval with 
alternative designs on the same sheet. The dictator, not realizing he 
was supposed to choose only one, wrote his approval across the center of 
the drawings. Nobody dared to tell him that -- making Stalin look 
foolish was an invitation to execution -- so they built one style on one 
side, a different style on the other. Soviet-era Muscovites pretended 
not to notice. 
How do you explain to youthful visitors to this bustling, noisy and 
advertising-bedecked Moscow that a climate of fear stultified city life 
not so long ago? 
"In Communist time," as residents say now, a bureaucrat's scowl would 
deny access to the countryside or censor your story beyond recognition. 
You were followed, your room routinely bugged and searched, the people 
you interviewed interrogated by thugs and sometimes jailed. Oppression 
was palpable; clothing was drab and expressions were dull. Everyone was 
afraid; the outside world was cut off and no telephone books existed. A 
Moscow visitor's greatest pleasure was going home. 
Tell that to a visitor now and you get a look that says: Who needs such 
creepy recollections? I remember, as a draftee enjoying my 
army-of-occupation tour in Germany in the 50's, rolling my young eyes at 
the interminable stories of veterans complaining about how awful 
Frankfurt was under the Nazis. To a teen-ager, a previous decade is 
ancient history. 
Journalists are pressed to treat news not as a current of events but 
strictly as what is happening today -- "as we speak," so to speak. 
Accordingly, we observe that although Moscow is booming, one-fourth of 
the Russian population lives in poverty. We accurately report that a 
criminal oligarchy owns major media, molds opinion and can make or break 
politicians. We dutifully note how the unpaid employed are restive, that 
a hungry Red Army is tempted to sell its nukes, that the stock market is 
sinking and capital is in flight, that everybody smokes and nobody wears 
seat belts. 
But living in the moment does not reflect life in our times. 
News, like all reality, has three dimensions -- not just the happenings 
of now, but the memory of then and the prospect of soon. 
These Russians have climbed a long way in a short time. They have pulled 
themselves out of a swamp of phony stability and are working their way 
through a painful neo-freedom toward a way of life that will probably be 
quite unlike our own. 
Should we help? Yes -- when they head toward personal freedom, open 
markets and global safety. No -- when they let a mafia masquerade as 
enterprise, or supply nuclear know-how to help Iran threaten Turkey, or 
support Saddam's Iraq against the U.S. and Israel. By conditioning our 
help on Russian behavior, we provide strategic structure. 
We do not help Russia by submitting to extortionists who warn that 
unless we pour in money, economic chaos will bring back dictatorship. 
This generation of Americans has learned that welfare wins no gratitude 
when given and triggers resentment when ended. As Russians feels the 
urgency to discipline their internal predators, they will. 
That's because Russians are escapees from their terrible past. 
Outsiders, unscarred by tyranny, cannot feel that past's presence. 
A few moments ago, an American teen-ager came up out of the underground 
mall cheerfully bearing a T-shirt that features golden arches over the 
caption "McLenin's." He cocked his head at the edifice (that he could 
not know stands as mocking memorial to a tyrant's wrath) and said to his 
girlfriend: "Funny-lookin' front on that hotel." 

*******

#6
Economist Hits Back at Central Bank "Lie" 
August 1, 1998

MOSCOW -- (Reuters) A Russian economist and former government adviser on 
Friday denied personal accusations leveled at him by the head of the 
central bank, heating up a war of words over the fate of the ruble. 

"The statement by Central Bank chairman Sergei Dubinin is not only 
absurd but a clear and conscious lie," Andrei Illarionov, a former 
government adviser, said. 

A day earlier, Dubinin, who once told Russians to "spit in the eye" of 
anyone who advocated devaluing the ruble, told a news conference he had 
heard rumors Illarionov might have a personal financial interest in 
seeing his predictions of an imminent devaluation come true. 

Illarionov said Dubinin's accusation only reinforced his conviction that 
the government's financial situation was more serious than it might 
appear.

*******

#7
Moscow Vows Land Reform to Secure World Bank Cash 
August 1, 1998

MOSCOW -- (Agence France Presse) The Russian government has vowed to 
push ahead with a controversial package of land reforms vehemently 
opposed by leftist deputies, to secure the World Bank's tranche of a 
multibillion-dollar international bailout. 

The pledge was one of a raft of promises made by the government to 
obtain a third structural adjustment loan from the bank worth $1.5 
billion, funds which are part of a $22.6 billion IMF-led rescue for 
Russia. 

Details of the conditions of the loan, which a World Bank spokeswoman 
said the bank would consider Thursday, were published by the Russian 
Finance Ministry on its official Web site. 

In the letter, signed by Prime Minister Sergei Kiriyenko and central 
bank chairman Sergei Dubinin, the Russian government undertook to 
approve by Aug. 30 a "federal program for the development of land 
reform" up to 2001. 

A presidential decree would guarantee the provisions of the plan by 
Sept. 30, the official statement said. 

"The program will guarantee the rights of citizens of Russian Federation 
to make land deals, including the purchase, sale, rent and mortgage of 
land," and includes the right to lease land for 49 years, it said. 

An action plan to implement the program must be approved by Oct. 30, it 
added. 

However, it was unclear what practical effect the undertakings would 
have, as land reform has been the source of a long-running battle 
between President Boris Yeltsin and parliament. 

Earlier this month Yeltsin sent back to the Duma, dominated by his 
communist and nationalist opponents, the latest stage in a four-year 
battle over the right to trade land. 

The bill, which provides a legal framework for the private ownership, 
sale and purchase of agricultural land, has been the object of 
negotiations with the various political groups. 

On June 5, Yeltsin vetoed a version of the draft law passed by both 
houses of parliament which would have banned agricultural land sales, 
which are anathema to the leftist-dominated Duma. 

*******

#8
FEATURE - Russia crisis spreads alarm in Ukraine
By Christina Ling

KIEV, Aug 3 (Reuters) - Slow but steady may win the race for some, but when it
comes to economic reform, Ukraine -- where the pace has been far more slow
than steady -- has reason to wish these days that it had started faster. 

With Russia still floundering in the throes of financial crisis, its smaller
neighbour to the west is viewing with alarm the wide ripples encircling its
own economy. 

``The financial crisis in Ukraine is no less complicated and frightening than
in Russia,'' President Leonid Kuchma told visiting U.S. Vice President Al Gore
in July. 

Ukraine, perhaps the republic most closely integrated with Russia before the
collapse of the former Soviet Union in 1991, has been one of the hardest hit
of the former Soviet bloc economies amid Russia's problems. 

``Russia is a very important benchmark for Ukraine,'' said Tomas Fiala,
director of Kiev's Wood & Co. ``(They) were one economy for 70 or 80 years and
they have similar problems.'' 

Those problems, to name just a few, include capital flight, chronically low
revenue collection, non-payments and wage arrears, as well as burgeoning
shadow economies as a result of burdensome and opaque tax systems. 

And as emerging market sentiment has turned sour, investors fleeing Russia --
perceived as one of the least restructured and riskiest markets in the region
-- have left Ukraine in the dust. 

Ukraine's PFTS stock market index has slumped to below 40.00 from 100.00 at
its launch in October, 1997 and treasury bill yields have soared to around 60
to 70 percent. 

Interest rates have risen sharply since the end of September 1997, and long-
term government debt regularly fails to sell at weekly auctions, tightening
the government's painful short-term debt crunch. 

Ukraine got a powerful shot in the arm on Friday when an IMF mission said it
would recommend approval of a three-year Extended Fund Facility of $2.2
billion, with a first $200-250 million tranche likely at the end of August. 

But with fears resurfacing about Russia's ability to improve tax collection
and avert serious labour unrest over chronic wage delays, the outlook for
Ukraine, struggling to get reforms back on track in a race against time, is
still hazy. 

UKRAINE'S FINANCIAL ``CRISIS'' IS SLOW BURNING 

Signs of deepening economic distress in Ukraine can be hard to see, as wage
arrears and other cash-flow problems have been a persistent problem in recent
years. 

Nor have the main fiscal achievements of the past two years -- a stable
currency and inflation rate -- yet been breached. 

The hryvnia, introduced in September 1996, has held a steady course since
then, and exchange rates are still within the corridor of 1.80-2.25 hryvnias
to the dollar set for 1998. Inflation, targeted at below 12 percent in 1998,
is also stable. 

The low level of development of Ukraine's financial markets also helps to
disguise the state of alarm felt by investors watching reserves, $1.77 billion
on July 1 according to official data, dwindle as debt repayments start to
mount. 

``In Ukraine they have the dubious luxury of having relatively closed markets
so the pain can be dragged on for a much longer period of time,'' said Roland
Nash, head of credit research at Moscow-based MFK Renaissance. 

But looming ever closer on the horizon is at least $1 billion in domestic and
foreign debt redemptions due in August, including a $450 million bond led by
Japan's Nomura. 

TURBULENCE IN RUSSIA MEANS A BUMPY RIDE FOR UKRAINE 

Economists differ on how long Ukraine's reserves would have lasted without IMF
support, and the IMF mission's decision was met with relief after gloomy
warnings last week from S&P and Moody's rating agencies. 

``For Ukraine it is very good news and for markets it is also good news. It
means the threat of default is not an immediate one,'' said ING Barings
emerging markets economist Caren Gaboutchian. 

Underwriters have said Ukraine will use proceeds from a new $250-million
hryvnia-linked bond to part-repay the Nomura bond. 

The IMF's stamp of approval is expected to unlock funds from other
international lenders and soften investors toward Ukraine, thus easing its
return to capital markets to finance repayments. 

But in the context of ongoing bearishness on Russian markets, despite the
support of $11.2 billion from the IMF, Ukraine may not see smooth sailing for
some time yet. 

``Unfortunately both from a fundamental point of view and purely sentiment
point of view the issues of Russia and Ukraine are interlinked,'' Gaboutchian
said. 

``If things go well in Russia then chances are Ukraine's market will also go
quite well. If sentiment turns bad in Russia that will affect Ukraine.'' 

Dangers also lurk for Ukraine's real economy, if markets in Russia, which
accounts for about a quarter of all Ukraine's exports and a little under half
of its total imports according to official figures, continue to slide. 

If Russia was forced to devalue the rouble -- despite steely statements to the
contrary -- analysts say Ukraine's hryvnia could be dragged from its pedestal,
too, making Ukraine's foreign debt repayments much harder. 

Ukraine also owes millions of dollars to Russian natural gas monopoly Gazprom,
which is itself under intense pressure at home to collect payments. All of
which comes as Ukraine is gearing up for presidential elections next year. 

UKRAINE'S BEST DEFENSE IS REFORM 

Kuchma will be forced to toe a strict fiscal line under the IMF's
restructuring package, something which is unlikely to go down well with unpaid
miners and other public sector employees and which will certainly be grist to
the mill of his opponents. 

``It's the worst possible time to be in this position,'' said a foreign
diplomat. ``If they had been doing all this in 1996 and 1997...they would have
been much more favourably placed.'' 

But whatever happens in Russia, Ukraine is its own worst enemy, economists
stress, pointing to the relatively minor effect Russia's woes have had on more
economically reformed former Soviet bloc countries, such as Poland. 

``They're both near to Russia, so the problem is that Poland has undertaken
reforms where Ukraine hasn't,'' said David Snelbecker, macroeconomic policy
adviser to Ukraine from the Harvard Institute for International Development. 

Like it or not, reform remains the single most effective means of weathering
the storm, analysts say, applaudung Kuchma's recent spate of reform decrees
and parliament's decision to hand him control of budget cuts, both of which
cleared the way for the IMF loan recommendation. 

But Ukrainian reform, traditionally a hostage to the lack of cooperation
between Kuchma and parliament, has derailed before under lesser pressures than
the coming year is likely to exert, and observers are withholding judgement
for now. 

``I don't think it's a sign of a new era yet -- that would have to be
confirmed by more decisions,'' said Wood & Co.'s Fiala. ``It's a sign that
(Kuchma) understands the seriousness of the matter.'' 

******

#9
U.S. cancels naval exercise near Russian port
By Denis Dyomkin

VLADIVOSTOK, Russia, Aug 3 (Reuters) - U.S. paratroopers have called off an
amphibious landing near the Russian Pacific port of Vladivostok because of
protests by local Communists and nationalists, the Russian Pacific Fleet said
on Monday. 

Some joint exercises will, however, still go ahead at a Russian Marine base
200 km (125 miles) south of Vladivostok, a spokesman said. 

Marines from the U.S. 7th Fleet had been scheduled to storm beaches on the
outskirts of the city on August 6-8 as part of joint exercises with the
Russian navy. 

The marines would have landed at Ketovaya and Gornostai bays just outside the
city and then were to have staged a 20 km (13 mile) march accompanied by 15
armoured vehicles. 

But Communists and ultra-nationalists in Vladivostok said they would bring
their supporters into the streets to block the manoeuvres. 

The head of one protest group said his followers would organise a human chain
around the shores of the bays and motor out in fishing launches to hamper the
landing. 

The U.S. 7th fleet, based in Japan, could not be reached for comment and U.S.
officials in Moscow declined to say anything. 

The Communists and nationalists have recently been staging protests outside
the U.S. consulate and the headquarters of the Russian Pacific Fleet in
Vladivostok. 

The local governor, Yevgeny Nazdratenko, said he considered the amphibious
landing near the city inappropriate. 

``There are enough other places in the Primorsky Region where Russian-American
joint exercises can take place,'' he said, adding that the authorities were
obliged to take public opinion into account. 

Vladivostok, a city of 600,000 which was closed to outsiders during the Soviet
era, is the capital of the Primorsky Region. 

Many Russians, smarting at the loss of superpower status that accompanied the
fall of Soviet communism, resent U.S. military and economic preeminence and
are suspicious of plans to to expand the Western NATO military alliance. 

But the protesters did not oppose similar naval exercises last week with
Japan, another Cold War opponent which remains locked in a decades-old
territorial dispute with Moscow and has still to conclude a formal peace
treaty after World War Two. 

``(The planned U.S. marine landing) is not exactly what was needed to smooth
contacts between the navies of Russia and the United States,'' said Sergei
Dudnik, head of the local assembly. 

``It looks more like a show of force by the U.S. 7th Fleet. 

Alexander Rezchenko, a leader of the protest movement, said his organisation
would continue its protests in the hope of forcing the exercises to be
cancelled altogether. 

*******

#10
Jamestown Foundation Monitor
3 August 1998

LEBED'S PARTY HOLDS CONGRESS. Aleksandr Lebed's Russian People's Republican
Party (RNRP) held its third congress in Krasnoyarsk on July 31, and chose
Yuri Shevtsov to head the party in place of Lebed, who may not by law
combine the post of party leader with that of Governor of Krasnoyarsk Krai.
Lebed told journalists it was a matter not of "choosing a successor" but
merely of "appointing a professional" to manage party affairs. Lebed himself
intends to maintain close links with the party. Although many congress
delegates urged Lebed to put himself forward for president in 2000, Lebed
insisted that the top priority of both the party and the "Honor and
Motherland" movement that supports it must be next year's elections to
Russia's State Duma. The RNRP will enter the election as "the party of the
regions," carrying the standard of the cash-strapped and investment-starved
provinces against what Lebed called the "outrageous" imbalance of power and
financial resources between Moscow and the regions. Eighty-one of Russia's
ninety-one regions were represented at the weekend congress. (ORT, July 30;
Nezavisimaya gazeta, NTV, July 31)

*******

#11
Russia: Analysis From Washington -- Primakov's Nineteenth Century Model
By Paul Goble

Washington, 3 August 1998 (RFE/RL) -- Russian Foreign Minister Yevgeniy 
Primakov has identified his nineteenth century predecessor Aleksandr 
Gorchakov as a model for Moscow's approach to the world in the aftermath 
of the collapse of the Soviet Union. 

In a speech on the 200th anniversary of Gorchakov's birth published in 
the current issue of the Russian foreign policy journal "International 
Affairs," Primakov notes that Gorchakov was able to rebuild Russia's 
power and influence after its defeat in the Crimean War with Great 
Britain. 

When Gorchakov assumed office after that defeat in 1856, Primakov 
argues, many people "thought that they were present at a funeral for the 
Russian Empire, or at any rate witnessing its turning into a second-rate 
power." 

As Primakov notes, such a conclusion seemed reasonable: The Crimean War 
had demonstrated a variety of internal weaknesses in the Russian Empire. 
Most of the important powers were "rallied against Russia." And the 
North Caucasian leader Shamil was able to stage a daring raid into 
Russia itself. 

Given these obstacles, Primakov points out, many in the Russian Empire 
argued that it had to turn inward, "resign its great power status," and 
accept the leadership of others. That had been the policy of Gorchakov's 
predecessor Count Nesselrode, who went so far as to propose abolishing 
the foreign ministry altogether. 

But Gorchakov urged "a different course of action," one that Primakov 
not only approves of but argues should be a model for Russian actions in 
the future. 

According to Primakov, Gorchakov believed that "a vigorous foreign 
policy" was essential for creating the conditions that would allow 
Russia to renew itself at home and regain influence abroad. 

And over the next 30 years, Primakov says, Gorchakov did just that, far 
more successfully than many of his contemporaries assumed he could. 

Primakov draws five lessons from Gorchakov's approach, lessons that he 
argues should guide Moscow's actions today. 

First, Primakov says, Gorchakov demonstrated that Russia, even when 
weakened by defeat, can pursue an active foreign policy. Indeed, 
Primakov insists, his predecessor showed that it has no other choice. 
Second, Gorchakov insisted that Russian foreign policy must not be 
limited to a single direction or area of concern. Instead, it must seek 
to be active in all areas. 

Third, as Primakov notes with approval, Gorchakov had no doubt that 
Russia at all times has "enough strength" to play a leading role in the 
world. 

Fourth, Gorchakov understood that Russia could always exploit the 
resentment many smaller powers inevitably feel at larger ones to rebuild 
and then expand its own influence. 

And fifth, Gorchakov's actions provide one negative lesson. According to 
Primakov, Gorchakov's maneuvering among the great powers of Europe is 
now "out of date." Instead, Primakov notes, Moscow must seek 
constructive partnerships with all countries rather than seeking some 
"mobile" or permanent coalition. 

Together, these five principles show that Gorchakov understood what 
Primakov argues is the fundamental basis of Russian foreign policy: 
"there are no constant enemies but there are constant national 
interests." 

According to Primakov, that principle means that Russian foreign policy 
must adopt a balanced approach, neither advancing "excessive claims" 
that fail to recognize what has happened in the last decade nor setting 
"deliberately low standards" that ignore Moscow's continuing 
possibilities. 

And it also means, Primakov continues, that Russia will not seek 
improved relations with what he calls "the 'civilized West' at any 
cost." 

In his concluding remarks, Primakov focuses on one foreign policy area 
where Gorchakov's approach would seem not to apply but in fact does. 

As Primakov points out, his nineteenth century predecessor was "striving 
to consolidate the Russian Empire's territorial integrity." Now, 
Primakov acknowledges, the situation has changed: both the Empire and 
the Soviet Union are "gone" and he argues that "the present reality is 
such that sovereignty of the ex-USSR republics should not be subject to 
any doubt." 

But at the same time, Primakov concludes, Moscow must do everything it 
can to bring "the states formed on the territory of the former Soviet 
Union" closer together through economic integration and "the creation of 
a single economic area." 

Many people in both these countries and the West are likely to see such 
a proposal as anything but reassuring, particularly since Primakov 
advances it even as he praises one of 19th century Russia's most 
passionate defenders of empire. 

*******

#12
FEATURE - Way open for Yeltsin foes if reforms fail

By Timothy Heritage
MOSCOW, Aug 4 (Reuters) - While President Boris Yeltsin and his young reform
team struggle to rescue Russia from financial crisis, his rivals are rubbing
their hands in glee. 

Economic success is widely regarded as vital for Yeltsin to have even an
outside chance of victory if he decides to contest the presidential election
due in 2000. Signs of success would also be useful just to help him hold on to
power until then. 

But the omens look bad for Yeltsin and his team of ``radical reformers'' if
his government's anti-crisis plan and a multi-billion-dollar international
loan package fail to lift Russia out of the rut of economic crisis. 

``It's fair to say that the longer the crisis goes on, the worse the chances
are of the reformers staying in power,'' Andrei Kortunov, head of the Russian
Science Foundation think-tank, told Reuters. 

``The failure of their reforms would make it much more likely a more
authoritarian leader came to power in the next election.'' 

Government officials say they are optimistic about economic recovery. Foreign
leaders are backing Yeltsin and Prime Minister Sergei Kiriyenko to the hilt. 

YELTSIN LOOKS ISOLATED, POLLS SHOW RUSSIANS WANT CHANGE 

If everything went badly wrong, the economic and political fallout would be
far-reaching. Yeltsin might limp to the end of his term but the chance of him
stepping down or being ousted, though slim now, would rise. 

Most experts believe market reforms are now irreversible and that only the
pace and emphasis of the reforms would change under a new leader. 

Although the West would be nervous about the departure of the man they regard
as the standard-bearer of reform, opinion polls suggest Russians are ready for
a change. 

Yeltsin, 67, seems increasingly reliant on a narrow circle of aides, does not
have his own political party to back him and the huge public support he had in
the early 1990s has gone. 

He has also lost the support of most of the tycoons known as ``oligarchs'' who
helped bankroll his election campaign in 1996. 

``The decisive difference about the current situation is that today the
president is under a massive attack and pressure from people who yesterday
were his most reliable allies,'' said political analyst Andranik Migranyan. 

``What are the aims of this group of oligarchs? To force the president to say
once and for all that he will not seek a third term...to force the president
to step aside and give the oligarchs a chance to approve a suitable candidate
who they think can win the 2000 election.'' 

MAIN RIVALS VAGUE ON ECONOMIC POLICY 

Most of the likely contenders to replace Yeltsin have outlined vague economic
plans and only the credentials of Viktor Chernomyrdin, sacked as prime
minister in March, are clear. He avoided radical steps as premier but oversaw
slow reforms. 

The front-runners to be the next president are Moscow mayor Yuri Luzkhkov and
Alexander Lebed, a gruff reserve general and Yeltsin's former security
adviser. 

Both have been busy promoting themselves as the financial crisis rumbles on.
Luzhkov hosted the first World Youth Games to great fanfare in Moscow in July
and Lebed has taken every opportunity to snipe at Yeltsin and the government. 

Luzhkov, 61, has a reputation as an efficient and tough manager. But his
commitment to genuine democracy and his knowledge of the economy have been
questioned. 

Lebed, 48, has forced himself back into the reckoning by being elected
governor of the vast, resource-rich Krasnoyarsk region in Siberia. He has no
economic experience and his commitment to market reforms seems vague. 

``Luzhkov and Lebed are the strongest presidential candidates today. If
Luzhkov does not run, Chernomyrdin would have a slight chance,'' said
political analyst Vyacheslav Nikonov. 

He ruled out Deputy Prime Minister Boris Nemtsov, a young reformer who is
closely associated with Yeltsin, becoming president in 2000. 

Nemtsov's chances are tied closely to the fate of reforms. The longer they
take to produce tangible results for ordinary people, the faster his election
chances recede. 

Communist Party chief Gennady Zyuganov leads opinion polls. But he is widely
thought unlikely to win outright in the first round of an election and most
opinion research indicates he could not win a two-candidate, second-round run-
off. 

Even so, the Communists dominate the lower house of parliament and further
economic decline would improve their chances of retaining their strong
position in the chamber in a parliamentary election due in December 1999. 

Less clear is whether there could be a nationalist backlash. 

THREAT FROM WORKERS' PROTESTS 

Yeltsin has raised the spectre of fascism. But the mainstream nationalist
force, the Liberal Democratic Party led by Vladimir Zhirinovsky, seems on the
wane and gives no sign of trying to forge a ``red-brown'' coalition with the
Communists. 

Even so, some analysts and politicians say the failure to put Russia's economy
in order by the autumn or winter could have dire consequences. 

Most rule out the danger of serious street clashes or civil war. But they say
there is a risk of major labour unrest which could put fierce pressure on
Yeltsin and Kiriyenko and perhaps make their positions untenable. 

Kiriyenko's fate is entirely dependent on Yeltsin, who has the power to
dismiss him at any moment. The president's own days could also be numbered if
his economic reforms collapsed rapidly around him. 

A Kremlin aide said in July that Yeltsin should state clearly now that he will
make way for a younger man in 2000. Another said he had told Yeltsin not to
run in 2000 -- and was promptly fired. 

Some analysts say Yeltsin could be ousted if the situation deteriorated
significantly. The president seemed to acknowledge this possibility in July by
saying he would put down any attempt to unseat him. 

``We have enough force to cut short any extremist plans to seize power,'' he
said. 

Few leaders give up power willingly and Yeltsin seems no exception. Former
Kremlin press secretary Vyacheslav Kostikov said after his dismissal that
power was Yeltsin's ``ideology, his friend, his concubine, his mistress, his
passion.'' 

How he might be removed is unclear. Most defence experts say the armed forces
are too divided and disorganised to pull off a military coup. An impeachment
led by parliament is widely thought to have little chance of success. 

One possible scenario is that strikes might cripple the country and he would
be forced by circumstances to step down. Another is that regional leaders and
parliamentarians join forces against him, perhaps with the military's vocal
support. 

Western leaders would be horrified. Ordinary Russians might see it otherwise. 

``The only silver lining would be that Yeltsin's demise would at least give
Russians some light at the end of the tunnel,'' Peter Reddaway, a professor of
political science, and research scholar Dmitri Glinski wrote in the Moscow
Times newspaper. 

``New leaders would make a fresh start. This could hardly be worse for Russia
and would probably be better.'' 

*******

 

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