Auguust 6, 1998   
This Date's Issues: 2299• 2300• 

Johnson's Russia List
#2300
6 August 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Masha Gessen: Carol Williams' piece on St. Pete's literary museums.
2. Lucy Komisar: email Duma Deputy Nevzorov?
3. David Mendeloff: Re: Cohen/Romanov #2299.
4. Jamestown Foundation Monitor: WOMEN'S PARTY TO BE SET UP IN 
RUSSIA and GOVERNMENT VOWS TO PRESS AHEAD WITH LAND REFORM. 
5. RIA Novosti: AGRICULTURE, RATHER THAN OIL AND GAS, WILL REVIVE
RUSSIA'S ECONOMY, SAYS MINISTER VIKTOR SEMENOV.
6. RFE/RL: Robert Lyle, Russia: Reform Program's Success Critical To Global 
Economy. (Larry Summers).
7. Segodnya: COMMUNISTS PROMISE ANOTHER "HOT AUTUMN."
8. Ekonomichesky Soyuz: BUSINESS CHRONICLE. (Foreign debt).
9. AP: Russia Limits Religious Visas.
10. Journal of Commerce: Michael Lelyveld, World Bank tries to put lid on 
Gazprom pipeline.
11. Moscow News: Andrei Piontkovsky, SEASON OF DISCONTENT: Gang of Four 
Shows Ignoble Indignation.
12. Adil Rustomjee: Role of foreign advisers in the Russian Privatization
Program.]

*********

#1
From: "Masha Gessen" <mgessen@glasnet.ru>
Subject: Carol Williams' piece on St. Pete's literary museums
Date: Thu, 6 Aug 1998

Regarding Carol Williams' piece on St. Pete's literary museums:

The temptation to oversimplify the story is just too great, isn't it? Too
bad for the facts, which are that collections of both Anna Akhmatova's and
Mikhail Zoshenko's works were published in the Soviet Union during the
Stagnation Era. Yes, following the infamous Zhdanov statement, for a time
both writers were excluded not only from the literary establishment but
from virtually all social institutions. Yes, both of them suffered greatly.
But starting in the late 1950s, Akhmatova's poetry, along with the verses
of other Silver Age poets, was typed and re-typed and distributed among
young people in Moscow, Petersburg and elsewhere. Not only was Akhmatova
not "virtually erased by the Communist culture conspiracy," as Williams
writes, but her poetry and she herself became a source of inspiration for
an entire generation of writers and poets, many of whom continue to write
today. Among her younger friends/students were Joseph Brodsky and his
circle of young Leningrad poets, the 1996 Russian Booker laureate Andrei
Sergeyev and many others.

Before Akhmatova died in 1966 she saw a collection of her work published in
Moscow. Her collections were included in both Sovetsky Pisatel publishing
house Poets' Library series, the "small" one and the "big" one--and these
were both avilable in all major and many not-so-major libraries, which, I'm
afraid, throws some doubt on Williams' lead. The "big" volume, I believe,
continues to be the best single-volume collection of her work--with the
notable exception of "Requiem," of course, but it's actually amazing what
got in there. This annotated 558-page edition had at least two printings,
the second of which, in 1977, had a press run of 40,000 (I don't have the
first one on hand). It is painstakingly annotated and indexed by Viktor
Zhirmunsky, a literary critic and scholar who was himself a victim of
Stalinist repression. Let's not write him and his labor our of history--or

the labor of editors who saw this collection to publication (a process that
took years). And, without exonerating the censors, let's not pretend that
pre-perestroika Soviet Union was a vast cultural wasteland, even if that
does mean the story isn't as simple as one might wish.

Masha Gessen
Chief Reporter
Itogi Magazine

*******

#2
Date: Thu, 6 Aug 1998 
From: Lucy Komisar <lkomisar@echonyc.com>
Subject: email Duma Deputy Nevzorov?
Does anyone have the email address of Duma Deputy Aleksandr Nevzorov?

Lucy Komisar
LKomisar@echonyc.com

*******

#3
Subject: Re: Cohen/Romanov #2299
Date: Thu, 06 Aug 1998 14:58:23 EDT
From: David Mendeloff <dmendel@MIT.EDU>

If, as Ariel Cohen argues ("Will Lenin Follow The Romanovs?" #2299),
the reason for Nicholas II's burial last month, and a future burial of
Lenin, is to "bury the past in order to define the future," then we
all have a lot to worry about. Instead of burying the past, they
should be staring it in the face. In fact the problem is that too
many in Russia simply want to forget about the painful past (precisely
because it is too painful) and just move on. That is a big, big
mistake.

Most of the press coverage of the burial has been about the conflict
among the different branches of the Orthodox church. But the
important issue is, among those Russians who actually care about it,
what does it mean? The implication from Cohen's piece is that
Russians want to bury the past and look to the future: Let's bury the
tsar (and eventually Lenin) and just forget about it. This was
certainly the view of Prince Nicholas Romanov (JRL #2299): "I have
always said that not only were we burying the czar and those who died
with him, but we were also burying the most bloodstained pages of our
past. Leave them to scholars. Russians should look forward."

Having a single memorial service is not the kind of acceptable bold
direct acknowledgment and confrontation with the past that Russia
needs. Last week the historians Nina Tumarkin and Suzanne Massie were
on Christoper Lydon's local Boston radio show (syndicated in some
other markets) arguing that the burial--and Yeltsin's "brave and bold"
remarks--was one of the most significant events in Russia in the past
80 years. I couldn't disagree more.(I think that impression was
distorted by the fact that they were present at the funeral service
and were perhaps captured by the spectacle of it.) Aside from the
fact that Yeltsin's remarks (see JRL #2270)--such as "any attempts to
change life by violence are doomed"--were profoundly hypocritcal, his
emphasis was on "expiating the sins of our ancestors". . . and moving
on.

A country that has experienced as much human brutality and as many
crimes as Russia in the twentieth century, should in fact never bury
the past. Indeed it is in the west's interest that they never do so.
Only by acknowledging that past can they ever move beyond it. While
we focus on the importance of rationalizing tax collection, defining
property rights, creating sound legislative institutions, ensuring
free elections, etc. we tend to ignore at least one important first
principle that goes hand in hand with political and economic

institutional reform: Critical self-evaluation is a fundamental
principle of democracy. Thus, while contributors to this list have
fruitfully and insightfully debated the obstacles to democratization
and market reform in Russia, the recent burial reveals yet another
obstacle: the de facto whitewashing and mythmaking about the past--a
belief which cuts across ideological and party lines. Indeed this
tendency to want to move on from the painful events of the past rather
than critically confront them is prominant even in the one area
where such an idea should be condemned as heretical: in the
educational system. (My own research on Russian history education
since the collapse of the Soviet Union shows that even the most
progressive (Soros-funded) textbooks (although to a lesser degree than
others) still tend to glorify and/or whitewash painful and shameful
historical events in the recent and distant Russian past. Russian
schools can teach all the western-style civics courses they want, but
democratic values will never be instilled if history education avoids
critical self-evaluation.)

And that leads me to comment on Cohen's belief that Lenin should be
removed from Red Square. Despite the efforts of some, there is a
dearth of memorials in Russia to the victims of the communist regime
(instead we have Zhukov on horseback!). Therefore, I say, let the
mummy stay! What better way to remember the horrors of the past. Let
most Russians continue to be ashamed and embarassed by the sight of
Lenin's corpse and what he represents, and understand that they can
not bury an unseemly past--either literally or symbolically.

David Mendeloff 
Department of Political Science & Center for International Studies 
MIT

********

#4
Jamestown Foundation Monitor
August 6, 1998

WOMEN'S PARTY TO BE SET UP IN RUSSIA. A political party representing women's
interests is to be set up in Russia. At a meeting in Moscow yesterday,
Tatyana Roschina, head of an organization called Women for Russia's Future,
was elected to head a working group that will organize the founding
conference of the new party. To be called the Russian Party for the
Protection of Women (RPZZh), it will campaign for legislation ensuring
better living standards for women with young families, single mothers,
children and elderly people. (Russian agencies, August 5)

GOVERNMENT VOWS TO PRESS AHEAD WITH LAND REFORM. Seleznev's threat that the
Duma may review the land issue at its extraordinary session increases the
chances that the session will be acrimonious. Land reform remains a major
bone of contention between the Duma and the Yeltsin leadership. The two are
already set on a collision course: at the end of last month, Prime Minister
Kirienko promised the World Bank that the government would press ahead with
land reform. The pledge was one of a raft of liberalizing measures aimed at
securing the World Bank's tranche of the multibillion-dollar bailout being
overseen by the IMF. (Itar-Tass, July 30; AFP, August 1)

Kirienko promised that the government would approve a federal land reform
program by the end of August and that it would be enacted by presidential

decree and enter into force by the end of September. The program would, he
stated, reaffirm the constitutional right of Russian citizens to purchase,
sell, rent and mortgage land. Among other measures, the government would
simplify procedures regulating land deals and set up a state land register.
These measures are sure to run into opposition from the Duma, which is
determined to prevent the creation of a free market in farmland. It has
already approved its own land code outlawing the sale of agricultural land,
but the measure has been vetoed by President Yeltsin.

*******

#5
AGRICULTURE, RATHER THAN OIL AND GAS, WILL REVIVE
RUSSIA'S ECONOMY, SAYS MINISTER VIKTOR SEMENOV

//MOSCOW, AUGUST 6,1998 /RIA NOVOSTI/--
##"Agriculture, rather than oil and gas will revive
Russia's economy," said in a RIA Novosti interview Viktor
Semenov, Minister of Agriculture and Foodstuffs of the Russian
Federation. The minister has just made the round of a number of
agrarian enterprises in the Moscow Region.
Many have the false idea that agricultural production is a
"kind of black hole into which all state money disappears,"
noted Semenov. He referred to the results of the work done by
the Moscow Region's agrarian sector: last year the workers of
that branch of the Region's economy turned out 2.7 trillion
roubles' worth of products, getting from the state only 340
billion roubles in terms of 1997 prices. "Have you ever seen any
other branch that is as profitable" asked the minister. 
Assessing the results of his trip round the Moscow Region,
Semenov said that he had again seen that every region of the
country needs to find its own individual market trend in the
development of its agricultural products." In the Moscow Region
the development of major vegetable- and potato-growing, as well
as pedigree livestock breeding farms, and support of experienced
and skilful farmers could become such a trend. The Minister
considers it also important to define the levers of state
regulation of the agricultural produce market, to weaken the
onslaught of poor-quality Western food products and unite
Russia's commodity producers into associations that would defend
their economic interests. "Such associations could, by only
fulfilling the state order on the delivery of food products for
the Russian Army, earn for themselves, on a more qualitative and
reliable basis, up to 12 billion roubles annually," stressed
Semenov." 

*******

#6
Russia: Reform Program's Success Critical To Global Economy
By Robert Lyle

Washington, 5 August 1998 (RFE/RL) - The U.S. government's top official 
dealing with international finance says the success of the Russian 
government in carrying out its reform program is of the "utmost 
importance economically and politically" to the global economy.

Deputy U.S. Treasury Secretary Larry Summers says Russia's continuing 
structural problems have been exacerbated by "contagion effects" from 
the Asian crisis. However, he says, these problems raise serious 
questions about the future because Russia's troubles have the 
"potential" to become those of Central Europe and the world.


Summers spoke to the Association of U.S. State Governors meeting in 
Milwaukee, Wisconsin Tuesday. He noted the increasing effects on the 
American economy of the Asian financial crisis -- such as dramatically 
falling exports of farm products from some U.S. states -- and underlined 
how important it is that other countries, like Japan and Russia, do 
their part to deal with their own problems.

Summers said national financial crises have elements of a 
"self-fulfilling prophecy," like bank runs, where everyone expects 
failure or everyone expects everyone else to expect failure which leads 
to a rush to be the first one out and thus causes failure.

That is where temporary, conditioned international support provides a 
"bridge" to overcome this self-fulfilling prophecy, said Summers, and 
provides a vehicle for countries to get their policies in order and to 
strengthen their financial systems.

He said it is important that international assistance packages, like 
those put together for Asia and Russia recently by the International 
Monetary Fund (IMF), maintain a balance between building confidence and 
avoiding bailouts for investors and bankers who should have known 
better. 

While the rescue package must not protect those who willingly assumed 
serious risks, said Summers, it is "imperative to create confidence and 
to avoid disaster (which) in some circumstances compel actions that do 
benefit some creditors."

This shows, said the Deputy U.S. Treasury Secretary, that the role of 
the IMF is "essential" in dealing with financial crises.

To abandon the fund now, he said, would be "like canceling your life 
insurance when you have just gotten sick."

Summers called again on the American congress to approve the U.S. share 
of the IMF's quota, or member's fee increase, as a necessary step to 
assure that its capital base remains large enough to deal with the 
current global economy.

The U.S. Congress has balked at approving the $14.5 billion American 
share of the quota increase, as well as a U.S. contribution of $3.5 
billion to a special fund for lending to the IMF when its own resources 
run short.

Most congressional opposition has come from Republican party members who 
either object to all international organizations or who believe IMF 
assistance is a short-term panacea and eventually only makes things 
worse for a national economy.

Summers said, however, that this failure to act, combined with the 
refusal of Congress to pay back dues owed the United Nations, leads to 
the conclusion "that we are fighting another swing of the pendulum into 
perilous isolation."

Summers said America's success and economic strength is not in question, 
but what is in doubt in the country's "ability to invest that success 
wisely." 

******

#7
>From RIA Novosti
Segodnya
August 6, 1998
COMMUNISTS PROMISE ANOTHER "HOT AUTUMN"
Communist Seleznev Comes To Terms With Government,
Central Committee Calls For National Strike
By Alexander KORETSKY

Ten days from now, Duma members will cut short their
summer recess to gather for an extraordinary session of the
lower chamber in order to consider a new package of the

government's anti-crisis legislative initiatives, Duma speaker
Gennady Seleznev and premier Sergei Kiriyenko agreed yesterday.
The sides agreed that their dialogue should be
"constructive": the Cabinet will not present for the
consideration of the Duma any laws previously rejected by it,
and the lower house will try and approve, within the shortest
possible span of time, those bills which the Duma approved in
the first reading in July. 
This agreement could have been anything but predictable,
if it were not for a little concession that Kiriyenko talked
Seleznev into: the government may present what it calls "new
proposals" - five or six bills in all - for the consideration
of the Duma sometime before this coming Saturday. The Duma has
no idea about the content of the "proposals". 
One can surmise that they will be redrafted versions of
the bills that the Duma has already angrily rejected. If this
is the case, the Duma is in for some stormy weather: its
members, distracted from lying in the sun, will tear
Kiriyenko's new "proposals" apart.
Once the premier comes to the lower house, he may face
devastating criticism: the Left majority makes no secret of
their intention to bill Kiriyenko for his actions in the first
100 days in office when the Communist Party's top functionaries
believe the nation has "made not a step out of the deepening
crisis."
The Left opposition's wrath is easy to explain: the
government and the president have "ignored" the Duma's stance,
transformed all "stabilisation bills" which the lower house has
rejected into presidential decrees and government resolutions
and thus enacted them. 
The KPRF Central Committee's presidium announced yesterday
that such "illicit" measures are violating Article 75 of the
Constitution (another plausible pretext for demanding the
president's impeachment) and, moreover, are forcing the nation
to pay "for yet another experiment of the executive authority."
The "experiment" is said to be combined to an "information
blackout" concerning the terms of the latest foreign loans. 
The Central Committee's presidium is going to apply a
tried and tested method of saving Russia: a national political
strike. As usual, the Communist Party intends to launch it in
the fall. 
The objectives are known: the president's resignation, a
change of the course, and a government of popular trust. Still,
one can expect that the hot "political" autumn will start
earlier than the calendar fall this year - on 19 or 20 August
when the roused Duma members flock to the monumental Okhotny
Ryad building in downtown Moscow.

*******

#8
>From RIA Novosti
Ekonomichesky Soyuz, No. 30
August 1998
BUSINESS CHRONICLE
By Alexei ALEXEYEV

As of January 1, 1998, the aggregate foreign debt of the
CIS countries exceeded 150 billion dollars, including Russia's
debt (with account taken of the former USSR's debts) of 124
billion dollars.

An increase in foreign debt is explained by a growth in
the volume of credits and loans granted to the CIS republics.
According to their estimates, by January 1999 the CIS

countries' total foreign debt will exceed 170 billion dollars,
with account taken of the payment of interest and penalties.
The amount of this debt is already close to the critical
threshold accounting for 65-70 percent of the republics' GDP.
The "leaders" on this indicator are Tajikistan, Kirghizia,
Moldavia, Armenia and Turkmenistan.
The situation is aggravated by an increase in the negative
balance of foreign trade of the majority of CIS countries. It
has been caused, primarily, by a fall in world prices of
industrial and energy raw materials which account for 50 to 70
percent of these countries' export earnings. This is why the
CIS republics' foreign debt is growing at priority rates
compared to the growth in export receipts.
In these conditions, the continued orientation of foreign
trade towards raw materials exports leads to an increase in the
share of new foreign borrowings being spent on repayment of the
previous debts and on compensation for the falling receipts
from raw materials exports. Therefore for the CIS countries,
like for the majority of the developing nations, a long-term
industrial policy relying on domestic financial resources and
on integration cooperation within the entire CIS framework is
high on the agenda.
However, in the opinion of experts of the World Bank and
the International Monetary Fund, the burden of payments on
foreign debts may hinder the pursuit of such a policy (given
the unfavourable world market situation on energy resources and
industrial raw materials). The situation could be saved only
if the payments on CIS countries' debts are postponed. True,
the international financial structures agreed to take this 
measure once. But it was applied to such countries as Taiwan,
South Korea, Singapore, South Africa and Kuwait.

******* 

#9
Russia Limits Religious Visas 
By Nick Wadhams
August 6, 1998

MOSCOW (AP) -- Foreign religious workers are only allowed to stay in Russia
for three months at a time under a new government regulation, religious
groups said Thursday. 

Most foreigners in Russia can have their visas renewed for a year without
leaving the country. But now, when foreign religious workers go to renew
their visas they are told they must go to a Russian Embassy or consulate
abroad for a renewal four times a year. 

Russia came under international criticism last year for a law that places
limits on foreign religious groups, and the latest regulation could further
complicate the work of missionaries and churches that come from abroad. 

``It will make it all much more expensive,'' said Donald Jarvis, head of
the Mormon Church's Yekaterinburg mission in central Russia. 

Jarvis runs a mission with more than 100 missionaries, most from the United
States. He said they may have to travel to Mongolia or some other country
every three months to renew their visas. 

Some see the new regulation as an outgrowth of last year's law on religion
that enshrined the Russian Orthodox Church as the country's predominant
religion and curtailed the rights of many other churches. 
``This step has been indirectly inspired by the new law,'' said Mikhail
Osadchev, an official of the Russian parliament's Committee on Public and
Religious Organizations. The parliament, which is controlled by Communists,
has been harshly critical of President Boris Yeltsin's policies. 


Osadchev called the directive ``another move against religious rights and
freedoms and another unfriendly act in relation to foreign religious
organizations.'' 

The U.S. Senate Foreign Relations Committee has said that American aid to
Russia should be cut if the religious restrictions were implemented. But
the Russian government has not strictly enforced last year's law, and
religious organizations say they generally have been able to operate as
before. 

The foreign religious groups, including many Christian denominations from
the United States, started coming to Russia in 1991 after the Soviet
breakup ended many of the communist-era restrictions. 

*******

#10
Journal of Commerce
August 6, 1998
[for personal use only]
World Bank tries to put lid on Gazprom pipeline 
Expense, need cited as reasons for a delay 
BY MICHAEL S. LELYVELD
JOURNAL OF COMMERCE STAFF

The World Bank is trying to convince Russia's gas monopoly Gazprom to 
put off a mammoth pipeline project linking Siberia with Europe, arguing 
that it should turn to cheaper supplies from other former Soviet 
republics instead.

Doubts about the huge project to develop and pipe gas from the arctic 
Yamal Peninsula, at a cost of up to $45 billion, is at the heart of 
World Bank efforts to rationalize Russia's gas market. 

Russia wants it

Western experts see the plan for a new pipeline to Germany and France as 
expensive and unnecessary. But Moscow considers it strategic because 
existing export lines to Europe run through perennial debtor nations 
like Ukraine, which have diverted gas in the past. Current gas fields in 
Siberia are also expected to decline after 2001.

The opposing visions of what is good for Russia have been spotlighted in 
recent weeks because of the $22.6 billion bailout plan for the economy 
and concerns that Gazprom accounts for one-fourth of all taxes owed to 
the federal budget.

An auction for 5% of the 40% state-owned monopoly is also expected to 
draw major foreign investment and offset tax shortfalls. Revenue at 
Gazprom, the world's biggest gas company, reached $23 billion last year.

But as a result of Russia's cash crunch, Gazprom's grandiose plan for a 
2,500-mile pipeline is facing even longer odds. Last week, company Vice 
President Pyotr Rodionov told a press conference that customer 
nonpayments have forced management to cut capital construction by more 
than 50%, Intercon's Daily Report on Russia said. 

Reform may be under way

The long-stalled attempt to reform Gazprom, which has been widely 
misidentified as an International Monetary Fund program, may finally be 
under way.

At the World Bank's urging, Gazprom is now considering the creation of a 
separate pipeline subsidiary to promote rational transport pricing and 
transparency. But Mr. Rodionov stressed that the company has been 
studying restructuring for over a year. Officials would like to avoid 
any inference that reforms are being imposed from outside.

Prime Minister Sergei Kiriyenko was set to meet Thursday with Gazprom's 
chief, Rem Vyakhirev, to discuss plans for the industry, Bridge News 
reported.


Attempts to change Gazprom have been attacked in the Russian press as a 
Western plot to displace Moscow as a gas supplier to Europe, favoring 
isolated republics like Turkmenistan as alternate sources.

There is some truth to the argument for alternative supplies, but no 
plot, according to officials familiar with the World Bank initiative. 

Boost expected

Reform plans would boost both domestic Russian suppliers and those in 
other republics. For example, the World Bank believes that many smaller 
gas sources in Russia, which are currently being wasted by venting and 
flaring at oil wells, could be used by demand centers with market 
pricing.
Much of the debate about opening access to Gazprom's pipeline network 
has to do with transporting gas from such fields at reasonable rates.

But access for Central Asian republics like Turkmenistan also enters the 
picture because its gas is available and cheaper than developing Yamal.

"It's not needed if they can get other sources of gas," said Julia 
Nanay, director of Petroleum Finance Co. in Washington.

Instead, Gazprom has frozen Turkmenistan out of the European market for 
political and competitive reasons by offering prohibitive transport and 
sales terms since March 1997. The World Bank is aware of the political 
pressures involving possible routes for Turkmen gas through Russia, Iran 
or across the Caspian Sea, but it is dealing with the issue solely in 
economic terms, an official said. 

Rescue plan

Using available gas from Turkmenistan or Kazakstan to supply Europe 
could save Russia from an enormous boondoggle in Yamal. While some 
pipeline work has taken place in Belarus and Poland for the Yamal route, 
the long line through Siberia has yet to be built.

But the Yamal plan may already have gone too far to stop without 
repercussions. Last year, Western banks lent Gazprom a total of $7 
billion for the project, to be repaid by gas deliveries. The banks were 
led by Credit Lyonnais of France and Germany's Dresdner Kleinwort Benson
. What happens to the eight-year repayment schedule is unclear if the 
Yamal project is delayed.

When tenders were announced in 1995, Gazprom said the line would carry 
2.37 trillion cubic feet (67 billion cubic meters) of gas annually to 
Germany and France. The project was scheduled to be completed by 2010. 

******

#11
Moscow News
August 6, 1998 
SEASON OF DISCONTENT: Gang of Four Shows Ignoble Indignation 
By Andrei Piontkovsky
Special to The Moscow Times

Today's chaotic political times are constantly giving rise to farcical 
events and documents. Last Thursday, we discussed the "Word to the 
People" of the patriotic oil generals. Another message from even greater 
representatives of the Russian political bestiary also merits our 
attention: the letter of Viktor Chernomyrdin, Alexander Lebed, Mintimir 
Shaimiyev and Boris Berezovsky on the catastrophic situation in 
Chechnya. 

What is most telling is the list of signatories itself. Until March 23, 
Chernomyrdin was prime minister of Russia. Under his government, tens of 
thousands of civilians in Chechnya were killed and the republic itself 
was shelled into the Stone Age. What more catastrophic event could have 

occurred in Chechnya than that in the meantime to cause such noble 
indignation on Chernomyrdin's part? 

During the Chechen catastrophe, Berezovsky was the owner and main 
idealogue of Channel One. The information that ORT television provided 
about the war in Chechnya was full of war propaganda and ethnic hatred. 
It is enough to recall the disgusting weekly broadcasts of Alexander 
Nevzorov -- a favorite of Berezovsky's -- in which he presented the 
cut-off ears of slain or hostage Chechens as a mark of valor of a 
Russian soldier. Berezovsky's informational activities alone during the 
war are enough to qualify him as a war criminal. But he was also engaged 
in financial activities. The war and so-called reconstruction were big 
business. 

One of the co-authors of the letter, Lebed, saw this side of 
Berezovsky's multifaceted talents better than anyone. On several 
occasions during his numerous interviews, Lebed recounted how he was 
reproached by Berezovsky after the conclusion of the Khasavyurt 
cease-fire agreement. 

"Ah, Alexander Ivanovich, what a remarkable business you have destroyed. 
Well, people did kill each other a little, but people are always killing 
each other somewhere. Then again, what a remarkable business that was." 

In this instance, I have no reason to doubt the words of the general. 
Moreover, Berezovsky himself has never tried to refute them. But this is 
not even the main thing. It is very difficult to understand how people 
who make such accusations against one another about their role in the 
war in Chechnya could sign any kind of joint letter on the situation in 
the republic. Such letters can only speak of the lack of principles of 
their authors, and about their complete contempt for public opinion. 

A lack of principles or of any kind of conviction is a trademark of 
Lebed, who is dying to be president. Now, he gladly accepts awards from 
naive Western intellectuals for his "peacekeeping role in Chechnya." But 
after he was named Security Council secretary in July 1996, he said that 
"the army had to fight until victory," and supported and encouraged his 
friend General Vyacheslav Tikhomirov in his last and most barbarous wave 
of shelling and "cleansing" of Chechen villages. Peace in Chechnya was 
brought about not by General Lebed, but General Aslan Maskhadov, who two 
years ago seized Grozny. After this, someone was obliged to sign the 
capitulation agreement. That someone was Lebed. 

Putting his signature to the letter of four, he signed another 
capitulation -- political capitulation before Berezovsky -- admitting 
that in the current presidential race, he is just one of several horses 
(together with Chernomyrdin) in the stable of the Great Manipulator. 

*******

#12
From: Arustomjee@aol.com (Adil Rustomjee)
Date: Thu, 6 Aug 1998 13:18:14 EDT
Subject: Role of foreign advisers in
the Russian Privatization Program.

From:
Adil Rustomjee
Yale University
135 Prospect Street 
New Haven, CT 06511
Email: adil.rustomjee@yale.edu

Dear David,

Many thanks for your superb news service. Johnson's Russia List is fast
becoming an excellent resource for those who work, who have worked on, or who

just share a fascination with that disturbing country. I am writing this
letter to humbly suggest a research topic that should be of great interest to
JRLs readers. It is a subject that deserves better treatment than that
received to date. The topic itself is the exact role of foreign advisers in
the Russian Privatization Program.

It is a marvelous tale waiting to be plainly told. The Russian Privatization
Program, despite its subsequent vilification, ranks as one of the great
experiments at social engineering in the twentieth century. It attempted an
authoritative allocation of property rights - and consequently of power -
within society on a scale never attempted before. It is therefore a very
significant historical process, more significant in the long reach of events
than even Stalin's collectivization campaigns of the 1930s. It deserves its
own Robert Conquest. 

The process itself went through two distinct phases - the voucher phase, and
what for want of a better word, we call the "loans for shares" phase. It is
the "loans for shares" phase of the program that has attracted the most
attention, primarily because of its spectacular abuse by Russia's oligarchs.
The real story is in the first voucher stage of the process and the dubious
principles it was based on. 

The entire voucher program was a product of foreign economic advice. Consider
the basic timeline. The Soviet Union itself was dissolved in December 1991.
In June 1992, the crucial document governing the voucher privatization effort
came out - the State Privatization Program. This seminal document outlined
the basic concepts behind the voucher phase of the program. It also
rationalized what became a state sponsored giveaway of Russia's national
patrimony to the country's managers. The implementation of the State
Privatization Program document took a little over two years. By June 1994,
Anatoly Chubias , Russia's privatization chief, was announcing the end of the
voucher program. In a scant two years, Russia had gone from a communist
country with no private sector, to a country with a private sector - that on
paper at least - was larger than Italy's !!! Such progress could never have
been possible without substantial foreign economic advice. It is a
commonplace that privatization is essentially a "learning by doing" process.
Russia could never have gone through a learning curve in such a short time
span. Its reformers basically rubberstamped a scheme conceived by Western
economists in the crucial 6 month period between December 1991 and June 1992. 

Yet despite this, the precise story of the economists behind the entire effort
has not been told. Good attempts have been made by Janine Wedel and Anne
Williamson - and I will discuss them later - but from a technical standpoint,
the story has yet to be told well. 

Who were these advisors and what did they achieve? Three groups of actors may
be identified - academic economists, bureaucrats from the World Bank, and
Western consulting firms. A close examination of the interaction between
these three groups itself will offer interesting insights into the birth and

dissemination of ideas. For the major ideas behind the Russian program came
from a group of academics - many associated with Harvard. These ideas were
picked up in the early years and became established "transition economics"
orthodoxy at the World Bank. The substantial implementation of the basic
ideas was carried out by consulting firms like the Big Six working (often) on
USAID contracts.

This is as it should be. Academia is usually the source of the most original
thinking on economics. International bureaucrats - particularly those
associated with the World Bank - are surprisingly timid and cautious people.
They are institutionally incapable of boldness - and great audacity was called
for in the Russia of 1992. 
Was this boldness misplaced? I believe it was. A rational examination of the
process will, I suspect, lead to a damning indictment of Russia's foreign
advisors. They created desolation and called it reform. The defining feature
of the program was based on remarkably dubious ideas. Foremost among these
was the belief that privatization was a series of payoffs - or bribes, as one
of its leading advocates, Harvard's Andrei Shleifer, called it - to various "
stakeholders" in the program. Given an uncertain legal environment and some
appropriation of state assets by these stakeholders, - euphemistically
referred to as "spontaneous privatization" - , better to legalize what was
believed to be a trough feeding frenzy. This was the program's dominant
idea. 

There is little empirical evidence from the early years about the exact extent
of " spontaneous privatization". Anecdotal evidence abounds, especially from
many near - hysterical accounts of the early 90s but the actual empirical
evidence is slender. The decisions to sell a great nation's patrimony - a one
shot historical phenomenon with irreversible long range implications - were
basically conceived within a six month time frame by a bunch of frightened
foreigners, using dubious assumptions, with little basis in empirical
understanding. Astonishing. 

The actual privatization was accomplished through basically giving away large
segments of Russian assets - and consequently cash flows - to these
stakeholders. The most notable insider stakeholders - the managers - ended up
the biggest winners. They ended up owning most of Russian industry. This
august group, more often than not, makes the Marx Brothers seem like models
of German efficiency. For a variety of reasons, insider-owned firms are very
inefficient, and indeed a long list of papers from the Bank - Fund complex
testifies to this. Consequently, Russia is today reaping the whirlwind of
its privatization policy. The long delayed supply-side response of the
economy, that is supposed to be led by these insider-owned firms, simply
refuses to happen. 

To round out this stupidity ( and to make it theoretically neater), the
advisors had to deal with the problem of insider ownership. They dealt with
it in time honored economist fashion - they assumed it away. This was done
by trotting out that most venerable of economic propositions - something
called the Coase Theorem. In a series of seminal papers written at Chicago

in the thirties, Ronald Coase reached a blindingly obvious conclusion on
property rights. He proved that the initial allocation - or misallocation -
of property rights would not matter as long as those rights could be traded
till they found their highest valued end use. In other words, the advisors
told the Russians, "Sure, we're making second-best or third-best policy
choices on privatization , but hey guys, it doesn't matter. Through the magic
of Coase, even if we misallocated the rights, they'll trade up to their
highest valued end user, and we'll all live happily ever after ".
Consequently, nothing mattered except getting the assets away from the
government (depoliticization) and into the "private sector", thereby allowing
the Coase Theorem to work its magic. 

The Russians believed this nonsense. The problems with using Coase as a
rationale were commonsensical : too much monopoly power in the Russian
economy and the fact that Coase himself never had anything remotely resembling
Russia in mind, when he formulated the theorem. More crucially, capital
markets which would be needed to trade property rights to their highest valued
end use, were nonexistent or nascent, and continue to be so. One marvels at
the Russians' own capacity for advice of this nature. My comfort is
philosophical : It has often been said of the Russians, that they exhibit in
extreme form, certain universal characteristics of the human condition.
Perhaps this tendency to extremes applies to their propensity for social
engineering too. 

In response to critiques of their advice, the foreign advisors resort to a
"burden of proof " defense. In other words, they say, " What a pity it's a
mess and had to be this way, but you'll have to prove it could have been
otherwise". It is this "proving otherwise" that is a key issue. " Proving
otherwise" would require a person with substantial economic expertise.
Unfortunately most of the critiques of the advisors in Russia have come from
people outside the economics community, which on Russia is quite tight knit.
Janine Wedel and Anne Williamson have made good first attempts . But given the
enormity of the catastrophe in Russia that the advice has wrought, the
definitive account will have to be from a person with some economic stature. 
Who were these people anyway ? They include, Wedel and Williamson point out,
Andrei Shleifer a Harvard economics professor, Jonathan Hay a freshly minted
Harvard Law graduate, and Makim Boycko who was their man in Moscow. Shleifer,
a Russian émigré who remains a tenured professor at Harvard, must have
possessed the great advantage of speaking native Russian. In December 1991,
Shleifer on a World Bank consultancy authored a paper titled Privatization in
Russia - First Steps. It is, I believe, the first systematic attempt at
outlining the program's defining feature - privatization as a series of
payoffs (or bribes as he called it) to key stakeholders in the process.
Later explications of the basic idea may be found in articles he co-authored
with Robert Vishny on the process. Both the unpublished document and later
articles remarkably parallel the basic philosophy of the State Privatization

Program of June 1992. 

A sense of moral outrage over the effects of their policies - while a great
temptation - has to be avoided at all costs. This is especially difficult
when one considers that the principal protagonists - Andrei Shleifer and
Jonathan Hay - are under investigation for alleged insider trading and
conflicts of interest in Russia. [ GAO and USAID having found that they
"abused the trust of the US government " etc ]. The temptation might therefore
be to focus on that entire shabby episode as Wedel and Williamson have done (
in part, but only in part). There is no need for this. The charges are
unproven. Besides the amounts Shleifer and Hay are accused of improperly
dealing in, are a pittance, compared to the wholesale thievery their ideas
sanctioned. The real story is in the voucher scheme they designed and
implemented. Told coldly, rationally, and solely concerned with the truth, it
will still be a great story. Behind the story after all, loom the long
shadows of the millions of Russians whose lives were effected by these
disastrous policies. They deserve the truth. 

Will the story be told with integrity. I am afraid not. There are too many
reputations and too much credibility at stake. The usual candidate would be
someone of stature in academia. This is not really an option. The old
Kremlinologists have been largely rendered irrelevant by the pace of events
and are struggling to retool themselves. The younger economists who work on
Russia, who have access to the data and hands-on experience, are the least
likely candidates given the devastating outcomes of the policies they
advocated. Self serving rationalizations with little intellectual integrity
are all that can be expected from this group. Witness for example, Anders
Aslunds' comic absurdity "How Russia became a Market Economy". If Russia is
a market economy, then I, sir, am a monkey's uncle ! Finally it would be too
much to expect the protagonists themselves - Shleifer and his collaborators -
to say " We were wrong, terribly wrong". An old man named Robert McNamara
looking back on his life, said that about a war that ended twenty five years
back, and look at the condemnation that brought him. It would be too much to
expect Shleifer and the others - all reportedly in their late thirties and
early forties - to make such an admission. 

The World Bank is another candidate, but they will distort the tale. The
Bank's division that does such studies - the Operations Evaluation Department
- will use the standard bureaucratic boiler plate it excels at. Besides the
Bank itself picked up the substantial ideas and policies from the Harvard
group, and has its own credibility at stake. While some hand wringing can be
expected, so can a less than zealous concern for the truth. Besides, even if
it is honest, the drama of the story will be lost in the telling. 

Source material may not be a problem. The basic documents, in all
probability, can be found at the World Bank , Harvard, and USAID. A whistle
blower might be necessary at the Bank and at Harvard. Interviews with the key
protagonists would also help. The problem is none of them are talking much -

either to the press or to a potential researcher (legal concerns raised by
GAO or USAID investigations may be a reason). They might talk some years
later - as MacNamara did after Vietnam - but that would entail a long wait. 

The effort calls for a person with the technical acumen of a Milton Friedman,
the long historical sweep of a Jim Billington, and the aloofness of a Padma
Desai. It also calls for substantial intellectual integrity. While on the
subject of the ideal candidate, it would not hurt if the person had something
of a literary touch - just a touch ( this is Russia after all)!!!!! Consider
for example, Tolstoy as the supreme example. In War and Peace , he looks at
the Teutonic military advisors who advise Napoleon at Borodino. How Tolstoy
mocks them - these pedants who reduce war in all its fog and chaos to absurd
geometric theorems and matrices. Were Shleifer and gang a little like that
too? Perhaps. Russian privatization will after all, prove as significant to
Russia's future, as Borodino was to Russia's past, and the fog of economics
hangs thick on the country. If Tolstoy could analyze and mock Napoleon's
foreign advisors, and reveal them for what they were, why can't our ideal
candidate do the same for Chubias' ??

Is there such a person out there? 

I'd appreciate a discussion. 

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