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Johnson's Russia List


August 13, 1998   
This Date's Issues: 2305 2306   

Johnson's Russia List
13 August 1998

[Note from David Johnson:
1. Reuters: Russia seeks to stay course amid turmoil.
2. Reuters: Soros urges Russia to devalue rouble.
3. Reuters: Russia says its missiles are millennium bug-free.
4. Journal of Commerce: John Helmer, MR. NO AND MR. YES ARE HISTORY, 

7. Boston Globe: David Filipov, Concerns over turmoil in Asia and
own economy maul Russian markets.

8. Moscow Times: Stephanie Baker-Said, NEWS ANALYSIS: Markets Don't
Buy IMF's Sell On Russia.

9. Reuters: Yeltsin seeks support on world stage.
10. Nezavisimaya Gazeta: Alexander Konovalov, SHAKHRAI, CHERNOMYRDIN
AND TANKMAN BELYAYEV. On the recent signatory events.

11. The Times (UK): Taleban advance sparks Russian alert. Moscow fears 
the Muslim militia may have designs on the Central Asian states, 
Christopher Thomas.]


Russia seeks to stay course amid turmoil
By Adam Tanner

MOSCOW (Reuters) - Prime Minister Sergei Kiriyenko vowed Wednesday to stick to
a painful course of reform as Russia's badly battered markets calmed somewhat
and striking miners agreed to end a railway blockade. 

But in signs of the Hydra-like nature of the country's financial crisis, a
central bank official said some banks were suffering problems with routine
operations, and the country's leading oil and gas labor union threatened an
October strike. 

``There will be no changes to the declared monetary policy of the government,
no changes of the economic program, which has been considered and approved,''
Kiriyenko said. 

``The worse the situation, the more firmly and precisely we must carry out our
program,'' he said. 

Russian shares closed little changed Wednesday, tracking domestic debt markets
for most of the day and eventually succumbing to pressure from foreign selling
in thin volumes, dealers said. Shares fell 9 percent Monday and Tuesday. 

Prices of Russian debt stabilized Wednesday. 

In July, the government won a $22.6 billion IMF-led package of bailout loans
to try to prop up the ruble and help the government to continue paying back

The State Duma lower house of parliament last month passed parts of an
austerity package that helped win the new credits, but the government wants
deputies to interrupt their summer recess to pass more legislation next week. 

Deputy speaker Mikhail Yuryev told reporters no special session would take
place before early September, although parliamentary leaders plan to meet
Monday to decide if and when they will hold such a session. 

Russian markets have continued to suffer despite the new international credits
and the austerity program, raising the question of whether it is all enough to
avoid devaluation. 

Finance Minister Mikhail Zadornov said the government would have to spend $1
billion of $4.8 billion already received from the IMF to meet its budget for
August and pay off debts. 

He said, though, that Russia would not need to tap international markets for
new cash any time soon. An excess of Russian bonds has already helped drag the
price of Russian debt to historical lows, making international financing
prohibitively expensive. 

Central bank Deputy Chief Sergei Aleksashenko told Reuters Wednesday that some
of the country's banks were in trouble and failing to make loan repayments to
each other but said he saw no threat of an overall banking sector collapse. 

``A crisis of liquidity is evident on the interbank market. In the last two
weeks, banks have been actively buying hard currency and have exhausted their
reserves of liquidity,'' he said. ``According to our estimates, interbank
ruble and foreign currency exchange has virtually halted.'' 

The government heard some good news from another front when miners near the
southern Urals city of Chelyabinsk agreed to lift a 3-week-old blockade of the
Trans-Siberian railway. 

Striking coal miners have blocked parts of the Trans-Siberian railway
sporadically since May. Although previous deals to end the strike have fallen
through, a local government spokesman said: ``The conflict is solved for the

The government still faces a potential wave of labor unrest. The leadership of
the country's oil and gas workers' union -- who work in the country's most
important industry -- threatened to join a nationwide strike Oct. 7. 


Soros urges Russia to devalue rouble

LONDON, Aug 13 (Reuters) - International financier George Soros called on
Thursday for a devaluation of the Russian rouble and suggested the
introduction of a currency pegged to the dollar or euro. 

In a letter to the Financial Times, Soros said Russia's financial markets had
``reached a terminal phase.'' 

He conceded the currency board he was proposing for Russia was ``too rigid,''
but said that ``in the present circumstances, it is the most efficient way to
stabilise the situation.'' 

The billionaire philanthropist, who made a fortune betting against the
European exchange rate mechanism in 1992, said Russia would need $50 billion
of reserves to back a currency board, whereby it would be committed to
exchanging roubles for dollars or euros at a set rate. 

Soros said this rate should be 15 to 25 percent below the current exchange
rate, to reflect the impact of the collapse in the oil price. 

The Financial Times said Russia had more than $17 billion of reserves, with
the International Monetary Fund and World Bank having agreed to provide a
further $17 billion of assistance. 

Soros said the Group of Seven leading industrial nations should provide a
further $15 billion to shore up confidence in the new regime, adding any delay
would be disastrous. 


Russia says its missiles are millennium bug-free

MOSCOW, Aug 12 (Reuters) - Sleep easy. The millennium bug which doomsayers say
could melt down the world's computer-run transport and financial systems will,
at least, not trigger World War Three. 

So Marshal Igor Sergeyev, Russia's defence minister, said on Wednesday,
denying U.S. suggestions that Moscow's vast and underfunded nuclear arsenal
could be launched into action by a simple computer glitch at the dawn of the
third millennium. 

Sergeyev should know. Until joining the government last year, he was the
commander of the Strategic Missile Forces. But he gave no secrets away at a
news conference in Moscow. 

``This problem affects more those spheres where mass-market computer
technology is used. In Russia's Strategic Missile forces, there is no risk
because special computer technology is used,'' he said. 

Quite how special, he would not say. He gave no indication of why it was not
affected by the millennium bug, a fault in which computer software first
developed in the 1960s and 70s fails to recognise the year 2000 and thinks it
is back in 1900. 

American officials have voiced concerns that, a decade after the end of the
Cold War, the bug could trigger an unintended Russian nuclear attack by
blanking out command computers and panicking officers into suspecting an enemy
first strike. 

Two months ago U.S. Defence Secretary William Cohen offered Sergeyev American
expertise and ideas to help Russia handle the issue. Russia told Washington it
did not have a problem. 


Date: Tue, 11 Aug 1998 
From: (John Helmer)

Dear David:
The interesting discussion about what Prince Gorchakov actually did
to deserve Foreign Minister Primakov's endorsement has retrieved some 
interesting history, but not much parallel. What, I wonder, are your 
correspondents prepared to say that Primakov has done? The attached piece, 
which ran in the Journal of Commerce on August 12, is one answer to kick off 
Moscow. Among his diplomats, and at ministry headquarters in Moscow, 
Russia's Foreign Minister, Yevgeny Primakov, is passionately admired and 
supported. The more the American establishment attacks him -- revealing
most recently his Jewish origins and his original family name, Finkelstein --
the more his subordinates love him.
As one of Primakov's diplomats commented recently, "we hated
Gromyko. We hated Kozyrev. We love Primakov." He was referring to Andrei
Gromyko, the long-serving Soviet foreign minister, who was widely known for
his intransigence by the nickname, Mr. Nyet (No). Before Gromyko, Stalin's
Foreign Minister, Vyacheslav Molotov, was the first to be called that.
Andrei Kozyrev was Russia's foreign minister after the collapse of the 
Soviet Union, and Primakov's predecessor. He was so obliging, especially 
towards Washington and Tokyo, his moniker at the ministry was Mr. Da (Yes).
Primakov is unique in having virtually no vocal critics in the government
itself, or in the opposition-dominated parliament. But he has had 
personal rivals, as well as policy rivals. In fact, when 
asked to name an instance where Primakov's policy prevailed over
anyone else in the Kremlin, or among Russia's powerful business
elite, not even Primakov's most loyal diplomats can name one.
This makes Primakov the man who articulates the reason for doing
everything, and nothing. Hence, the nickname Mr. Mozhet bit (maybe).
Primakov almost never gives interviews to the press, and his friends,
colleagues, and former students over the years are reluctant to speak about 
his views. They say he was a strong opponent of the Soviet intervention in
Afghanistan that began in 1979. Likewise, they say he opposed President
Boris Yeltsin's war in Chechnya. This isn't obvious from anything
Primakov said at the time.
Regarding China, which the Kremlin describes as Russia's "strategic 
partner", Primakov, who was in Beijing again recently, has never been 
precise. Unlike others with his intelligence background -- he headed Russia's 
foreign intelligence service between 1991 and 1996 -- he has never referred 
to the numerous instances of Chinese espionage and technology diversion that 
have been detected inside Russia in recent years. He has never been critical 
of Chinese trade policy, which recently began to discriminate against Russian
steel imports.
In the Middle East, where Primakov's diplomatic shuttling has made him 
very visible, he is thought to be a critic of American support for
Israel; an advocate for the Palestinians; and an opponent of military
measures against Iraq's supremo, Saddam Hussein. A senior Arab diplomat in 
Moscow comments that Primakov's reputation is exaggerated. "His position on 
Iraq represents the consensus of Kremlin thinking," he said. "His position 
on the Arab-Israeli conflict is the same. The latter is insubstantial, and 
lacks consequences."
As for Africa, Primakov spent his formative years as a correspondent in
Cairo. But his interest in sub-Saharan Africa has been far less
than his predecessor, Kozyrev. South African diplomats say they can't
recall that Primakov has ever visited their country. The preparations
for President Nelson Mandela's unfulfilled visits to Moscow, and for Vice
President Thabo Mbeki's coming trip in September, have been conducted by other
Russian officials, most of them outside the Foreign Ministry.
In the Caspian Sea, and in Russia's relations with its Central Asian
neighbours, Primakov's reputation is also much higher among the Russians
than among their counterparts. They claim he has never won a policy
contest with the Russian oil companies. On Russia's ill-fated union
with Belarus, they suggest Primakov let rivals take the blame for
a policy he had advocated.
This was the context in which, not long ago, Russian newspapers participated
in a plot to discredit Primakov, and force his resignation. They were doing 
the bidding of Russia's large oil companies. The Foreign Minister survived
unscathed in his post. The oil companies got out of the Caspian what they 
wanted, too. 
In a recent essay in Russia's "International Affairs" journal, Primakov
argued from 19th century examples that Russian policy should be based
on the principle that "there are no constant enemies, but there are
constant national interests." Ask his subordinates in the Foreign Ministry's
geographical divisions what national interests, even trade or financial 
interests, Primakov has pursued with effect in their regions, they struggle 
for answers.
When Russia's debts were being negotiated -- the biggest increase in
foreign obligations in Russian history -- Primakov was uninvolved. When
the United States, the European Union, and the Asian states imposed trade 
penalties on Russian exports, he was somewhere else. On the direction 
Russia's economic reforms should take, he has been silent.
His diplomats acknowledge that Primakov's history demonstrates he has 
rarely been on the winning side in Kremlin decisions. "All the more reason 
we love him," confided one diplomat. "But it's no secret to say that
he is leaving soon."


Date: Tue, 11 Aug 1998 
From: (Alex Goldfarb)
Subject: Russian News Report on MDR TB 

Obschaya Gazeta - August 6-12, 1997
New form of TB travels quickly in Russia
by Vladimir Pokrovsky

Alexander Goldfarb, Director of the George Soros' 10 million dollar Anti-TB
Program in Russia, beats an alarm. Our country is becoming a veritable
incubator for a new incurable form of this disease.

Recommendations made by the World Health Organization provide for the
appropriate methods of TB treatment. This is a strict scheme of treatment
with four drastic remedies which kill practically all tuberculous
Mycobacteria in six months on average. The course of treatment in the
United States, Mr. Goldfarb says, costs only USD 100 per person (by our
accounts, in Russia it is much more expensive due to the high prices of
medicines). Moreover, the guaranteed result is achieved in 96 percent of

However, medics recently registered a new form of the disease. This is a
drug-resistant strain of TB, which remains immune to one or two pellets of
a complex of four drugs needed. In the United States a course of
drug-resistant TB treatment costs USD 200,000 instead of USD 100, and the
estimated results still remain obscure. In Russia where the appropriate
drugs are in critically short supply, the resistant strain of TB is
effectively incurable. This strain of TB can cause death, almost like AIDS,
the only difference being that you need a used syringe or infected sexual
partner to get HIV infection, while it is well enough to go by metro with a
TB-infected person to catch TB.

Drug-resistant TB is a direct consequence of poor or insufficient
treatment, which has only partial effect on tuberculous Mycobacterial
population resulting in mutation and development of drug-resistant Mtb.
After a time, persisting Mycobacteria multiply causing the relapse of TB in
a new drug-resistant form.

By estimates, at least 4 percent of TB patients in Russia are
drug-resistant. Today's Russia is the biggest incubator of drug-resistant
TB infection in the world. As to our prisons, the situation there is more
than critical.

"In recent years, the supply of anti-TB drugs seldom meets more than 20-25
percent of the prisons' requirements", Mr. Golfarb said. "People who know
how to treat TB, are few in prisons, so they treat every which way, often
giving one tablet instead of four or reducing the 6-week course of
treatment to two weeks. As a result, the Russian prisons have become
veritable factories of drug-resistant strains of TB. Currently about 12
percent of TB infected inmates have a multi-drug resistant strain which is
especially difficult to cure.

As we know, one of the main goals of the George Soros' 10 million dollar
Anti-TB program is to test the WHO recommendations on the Russian ground.
His interest in TB treatment in prisons is not purely accidental, it flows
not only from a critical TB situation in our penitentiary system, but also
from the fact, that this system does not fall under authority of Minzdrav
(the Ministry of Public Health). The Ministry of Public Health gave Soros a
lukewarm permission to start three "civil" pilot projects in Tomsk, Ivanovo
and Marii El, and it seems unlikely that it would be able to get a go ahead
to something else, Mr. Goldfarb said.

"Minzdrav is persistent in rejecting the WHO recommendations, " said
Goldfarb. "Russia is one of the few countries where the WHO recommendations
have not been recognized."

Most Russian medics regret it, as the recognition of these recommendation
might help to open the way for the wide-ranging Western support in
combating TB. To be fair, even the supporters of the program agree, that
the WHO recommendations have certain limits in today's Russia.

"Recommendations by the World Health Organization have been designed to
combat the TB epidemic, rather than to treat TB cases," said Mikhail
Perilman, Director of the Institute of Phthisiopulmonology. "They are
efficient in killing Mycobacterial population, making a patient
non-contagious. They are good for treatment of non-destructive phases of
TB, but in difficult cases one should exercise an individual approach."

As to Americans, they think that the Russian approach to treatment is
archaic and thrown back to "the days of Chekhov and Feliks Edmundovich
Dzerzhinsky" and is incapable to reverse the TB epidemic. Moreover, it
demands plenty of money which Minzdrav, to speak plainly, lacks.

"I have letters from 25 Russian Governors in my hands," Goldfarb said. "And
all of them ask to extend the program's reach to their regions. TB makes
them feel bad about the future. But, on the one hand, Minzdrav's approach
will be detrimental to further "expansion" of the WHO recommendations, and
on the other hand, the program is running out of money with eight millions
out of ten having been already distributed."


>From RIA Novosti
August 4, 1998
BySergei NIKOLSKY, Ph.D., adviser to the Chairman 
of the Federation Council on agrarian policy

Of the 1,700 million hectares of the land stock in Russia,
agricultural lands account for 13% (221.6 million hectares),
including 7.5% ploughland and 5.1% fodder lands. More than 
50 million land users possess all this land, primarily as 
joint owners, previously or currently working at agricultural
enterprises, as well as in private farms, personal subsidiary
holdings, gardening and other associations. About 38.4 million
citizens have already received documents certifying their right
to land. The process of the transition from state monopoly to
different forms of private land ownership, in the course of
which 115.9 million hectares were privatised, was very swift;
it took only several years. The land has started bringing in
substantial revenues to the budget (3.3 trillion roubles in
1995, 5.4 trillion roubles in 1996, and 9.4 trillion roubles in
1997). The number of land transactions reached 450,000 last


Boston Globe
August 12, 1998
[for personal use only]
Concerns over turmoil in Asia and own economy maul Russian markets 
Stocks fall 11.8% before trading halted; treasury yields soar
By David Filipov

MOSCOW - Amid new financial turmoil in Asia and nagging doubts about the 
government's ability to stem Russia's economic crisis, Russian markets 
yesterday took a beating so hard that trading had to be temporarily 

Russian treasury bill yields soared as high as 130 percent, up from 100 
percent Monday. Stocks plunged 11.8 percent on the main RTS index, 
forcing a suspension of trading. Forty five minutes later, trading 
resumed, and the index closed at 109.91, still down 9.1 percent from 
Monday's close of 120.91. 

Officials and analysts in Moscow partially attributed the rise in 
interest rates and the drop in stock prices to worldwide flight from 
emerging markets and new currency turbulence in Asia. But they also 
pointed to investors' lack of confidence in the anticrisis plan of 
Russian Prime Minister Sergei Kiriyenko. 

Despite landing a $22.6 billion rescue package from the International 
Monetary Fund and other sources last month, the government has been 
unable to convince investors that it can turn around Russia's economy. 
The IMF and the World Bank have demanded Russia cut spending and reform 
its much-criticized tax system, but analysts here are skeptical that the 
government will be able to drastically increase revenue. 

``The situation did not change after Russia received a credit from the 
IMF,'' commented Sergei Babayan of Troika-Dialog. ``We haven't noticed 
economic growth ... and there are no big amounts of revenue coming into 
the budget.''

Yesterday, Russia outlined terms for the sale of a 5 percent stake in 
the state-owned gas monopoly Gazprom and just under 25 percent of 
Svyazinvest, the Russian telecommunications giant. The government is 
desperate to raise cash after plans to auction off a 75 percent stake in 
the state-owned Rosneft oil company were twice postponed earlier this 
year as potential buyers stayed away with oil prices at a low. 

The consensus in Moscow is that the IMF-led package has bought the 
Kiriyenko government a few month's breathing room. But even Kiriyenko 
said last week that the country has not moved back from the brink of 
collapse. At the same time, protests by miners, nuclear power plant 
workers, teachers, and doctors, many of whom have gone unpaid for 
months, are increasing throughout the country. 

Russia's Central Bank continues to intervene heavily to support the 
ruble, but a growing number of observers believe the government will not 
be able to prop up the Russian currency indefinitely, even with the new 
rescue package. 

The government denies it is planning a devaluation, which many here fear 
could lead to increased social tension and a new round of 
hyperinflation. Meanwhile, the Kremlin has been forced to fend off a 
growing rumor that Russia will default on its foreign debts. Recently, 
communist and ultranationalist politicians, saying that six years of 
reform have produced nothing but a few rich people and much pain among 
ordinary Russians, have vowed not to pay Russia's debts to foreign 

Deputy Prime Minister Viktor Khristiyenko denounced such a threat 
yesterday: ``Default is not an issue here.''

But whether the government can get its austerity package through 
parliament is very much an issue. The lower house, the 
opposition-dominated State Duma, refused to approve measures to raise 
taxes last month, saying that they constituted an attempt by the 
government to foist the toughest measures on the poorest segments of the 
population. The Duma shows no signs of agreeing to raise taxes in a 
special session planned for next week. Without parliamentary approval, 
the government has decreed some tax increases, but their legality is in 

Russia's tax chief, Boris Fyodorov, has promised to improve compliance 
with existing tax laws and increase collection of an estimated $50 
billion in back-owed taxes and fines by 5,000 Russian companies. But 
most of these companies are essentially bankrupt. 


Moscow Times
August 13, 1998 
NEWS ANALYSIS: Markets Don't Buy IMF's Sell On Russia 
By Stephanie Baker-Said
Staff Writer

A month ago, the International Monetary Fund helped craft a $22.6 
billion aid package that was supposed to put an end to Russia's 
financial crisis. 

The loan and the surrounding hype were meant to restore confidence in 
Russia's sagging markets and buy the government time to bring its public 
finances under control. 

But now, just weeks after the IMF deal was approved, investor confidence 
has hit a new low and Russian markets are being rocked by talk of a 
default on government debt or a devaluation of the ruble. 

The government's official line has been to tough it out in the hope that 
calm will eventually return to financial markets. "We are proceeding 
according to our program," Finance Minister Mikhail Zadornov said at a 
news conference Wednesday. The trouble is that financial markets just do 
not believe him. 

The government's basic problem is simple: By the end of this year, it 
must find the cash to pay $20 billion of maturing state debt, known as 
treasury bills or GKOs. 

Only last week, the IMF signed off on a plan that would have met this 
debt but the very keystone of the plan is now looking suspect. The basic 
idea was that the government would borrow another $20 billion, selling 
more T-bills to refinance the maturing debt. 

In theory, markets were supposed to be heartened by the IMF's ringing 
endorsement and by the government's tough fiscal austerity plan. This 
would encourage them to buy back into Russia. 

But buffeted by a new crisis in Asia and a correction on Wall Street, 
the markets are not willing to give Russia the benefit of the doubt any 
more. The government has for the past three weeks been forced to cancel 
sales of the T-bills, which it uses to borrow in rubles because no one 
wanted to buy them. This week it announced it would not even try again 
until next month. 

This is all making the IMF fund-raising plan look very shaky. "Some of 
the numbers simply don't add up," said Parvoleta Shtereva, a debt 
strategist at MFK Renaissance. 

With new debts coming due, the government is now scraping the bottom of 
the barrel to find money. With $2.08 billion maturing in August, 
Zadornov said the government would use $1 billion of IMF funds, which 
was to have been set aside to build up Central Bank reserves, to pay off 
its debts. "We have no problems servicing our debts," he said. 

Although economists say Russia can soldier on until September, they 
believe the government could face a cash crunch sometime this fall if 
markets remain bearish and the government has to cancel more T-bill 
auctions. "They can't go on like that forever without additional 
financing," said John Orford, an economist at Robert Fleming Securities 
in London. 

Economists say that if confidence fails to return, Russia faces several 
options to meet its debt repayments. It could try to boost domestic 
sources of revenue through additional tax collection and accelerated 
privatization. The government is believed to be trying to secure bridge 
loans from Western commercial banks that would be backed up by 
privatization proceeds. 

The government had also been planning to raise another $2 billion to $3 
billion through Eurobond issues in the fourth quarter, but Zadornov said 
Wednesday there were no plans to tap foreign markets due to weak demand. 

It could also carry out a debt swap, similar to one effected last month 
in the wake of the IMF deal. This allowed Russia to exchange short-term 
ruble-denominated T-bills maturing this year for longer-term dollar 
bonds. In that deal, Russia allowed investors to voluntarily swap out of 
$4.5 billion of short-term T-bills for longer-term Eurobonds. 

But investors who took part in the swap lost out due to sagging prices 
for Russian dollar debt. There have been persistent market rumors that 
Russia would force another swap, although Zadornov ruled out that 
possibility Wednesday. 

Devaluation of the ruble is considered the last resort. Some believe it 
is unavoidable given the government's lack of funds. "A ruble 
devaluation is likely. There is no way out of it," said David 
McWilliams, an economist at BNP in London. "Either Russia pays its debts 
or it monetizes them." 

Under a devaluation scenario, the government would use its limited hard 
currency resources, including IMF funds and Central Bank reserves, to 
repay its domestic debt obligations. These dollars would buy a lot more 
devalued rubles. 

But other economists believe a devaluation would do little to solve 
Russia's debt problems because it would deal a final blow to market 

Moreover, many fear that a controlled devaluation of about 20 percent 
would be difficult for the government to pull off. A devaluation could 
spiral out of control, as events in Indonesia have shown. 

"A devaluation can never be controlled unless it is backed up by some 
substantial policy package," said Shtereva. 

Over the past month, the government has sent conflicting signals to the 
market about its borrowing plans and failed to spell out how it plans to 
meet its domestic debt obligations. 

More worrisome, say some economists, is that the Central Bank recently 
appears to have wavered in its exchange rate policy of keeping a steady 

Russia has adhered to a currency corridor pegged to the dollar which 
gradually devalues the ruble in line with inflation. But over the past 
two days, the Central Bank has allowed the ruble to dart outside its 
daily band. The ruble was bid at 6.32 to the dollar Wednesday, outside 
the Central Bank's corridor of 6.241-6.296. 

"This is not a policy," said Shtereva. 


ANALYSIS-Yeltsin seeks support on world stage
By Timothy Heritage

MOSCOW, Aug 12 (Reuters) - Russian President Boris Yeltsin has set himself an
unusually busy foreign policy agenda in an effort to prove that he is healthy
and to rally support on the world stage, political analysts said on Wednesday.

``There's no grand design, no change in policy. But Yeltsin wants to show he
still has the support of world leaders and that he is in good form,'' Viktor
Kremenyuk, deputy director of the USA and Canada Institute think-tank, told

The 67-year-old president, who is on holiday until the second half of this
month, faces what could be a punishing schedule for a man who had heart
surgery in November 1996 and has suffered constant speculation about his
health ever since. 

Yeltsin is due to meet Vietnamese President Tran Duc Luong on August 25,
Bulgarian President Petar Stoyanov on August 28 and then host a summit with
U.S. President Bill Clinton on September 1-3. 

In the following weeks he is due to receive the presidents of China and Italy,
as well as Japan's new prime minister. 

He plans to visit Kazakhstan, Ukraine, Uzbekistan, Malaysia and Austria, which
holds the European Union's rotating presidency, and has Poland pencilled in
for December. 

Despite the surprisingly full agenda, which suggests Yeltsin will travel much
more than last autumn, analysts say his priority remains internal politics and
above all the economy. The chances of major foreign policy breakthroughs are

``Internal policy is much more important for Yeltsin right now,'' said Andrei
Piontkovsky, head of the Centre for Strategic Studies think-tank. 

``Foreign policy is not a number one priority and I see no bright points
coming up in foreign policy. Even in foreign policy Yeltsin has a domestic
audience in mind -- to show he is fit, respected abroad and a statesman.'' 

Even so, there are deeper political and economic motives behind some of the
planned meetings. 

Russia's financial problems mean economic matters are likely to play a big
role in anything Yeltsin does in the next few weeks and months. 

Turmoil has continued on Russia's financial markets, despite agreement on a
multi-billion-dollar international loan package for Moscow, and Yeltsin will
be keen to win at least the verbal support of his allies even if big new loans
are unlikely. 

``Yeltsin would like additional support from Western leaders, and maybe even
from China,'' said political analyst Andrei Kortunov, head of the Russian
Science Foundation think-tank. 

``He'll try to advertise Russian reforms and ask for deals to be cut and new
investments to be made in Russia.'' 

Yeltsin's schedule also reflects the overall aim of Russian foreign policy --
to build up good relations with major powers in a ``multi-polar world'' where
no single country has dominance. 

Although ties with the United States remain of paramount importance to Moscow,
Russia has sought to improve relations with China and Japan in particular. 

The meetings in Russia with Chinese President Jiang Zemin in early September
and Japanese Prime Minister Keizo Obuchi, who is due to visit some time in the
autumn, offer a chance to answer questions that have arisen in the last few

``Yeltsin will want to compensate for the rapprochement between China and the
United States,'' analyst Kremenyuk said of Clinton's recent summit in China. 

Obuchi's visit, his first to Russia since he became Japan's prime minister,
will indicate whether Tokyo plans any changes in the Russian policy of his
predecessor, Ryutaro Hashimoto, although Japan has already said Russia remains
a top priority. 

The visit will also show how dependent a recent improvement in ties between
Japan and Russia -- long strained by a dispute over ownership of four islands
seized by Moscow in 1945 -- was on the relationship between Hashimoto and

Clinton's visit offers a chance to discuss arms control and regional issues
such as Iraq, Yugoslavia's Kosovo province and Russia's cooperation with Iran.

But the main exercise may be to show that Russian-U.S. relations remain sound,
even if not as warm as in the honeymoon period that followed the collapse of
the Soviet Union in 1991. 

``They want to show their relationship has not been broken, that it is still
business as usual,'' Piontkovsky said. 

Yeltsin is likely to seek more of real substance from his trips to three
former Soviet republics -- Kazakhstan in the second week of September, Ukraine
later that month and Uzbekistan in October. 

He says relations in the Commonwealth of Independent States (CIS), which
groups 12 former Soviet republics, are a priority this year and hopes to forge
much loser economic and political ties within the alliance to prevent it


Nezavisimaya Gazeta
August 8, 1998
On the recent signatory events
By Alexander KONOVALOV, President, Institute of Strategic Assessments

The economic and non-payments crises and miners' strikes
are a bitter reality, but hardly something fundamentally new.
The fundamental features of the current situation become clear
if we determine which of them are the signatory ones. 
Let's discuss three of such events, which are seemingly
not linked with each other and did not happen simultaneously. I
mean the resignation of Sergei Shakhrai from the Presidential
Administration, the long talk between Boris Yeltsin and Viktor
Chernomyrdin in the presidential residence, and the strange
strike of Major Belyayev of the tank corps. 
Sergei Shakhrai was fired from the post of presidential
representative in the Constitutional Court immediately after
his speech at the 5th congress of his Party of Russian Unity
and Accord, where he said that Luzhkov and Lebed would be the
most probable presidential candidates at the 2000 elections,
and that he would support Luzhkov. 
The reaction of the President and his team was quick and
absolutely predictable. When the man who is duty bound by the
virtue of his post in the Constitutional Court to protect the
right of the President to run for reelection at the 2000
elections states that he would support Luzhkov, such a man must
be fired. But Shakhrai had clearly calculated the consequences
of his statement and hence made it deliberately. 
That event was made signatory not by the political weight
of Shakhrai, or the influence of his party, which does not
represent anyone other than Shakhrai himself. His resignation
was predetermined by three reasons, which are vital for
understanding changes in the Russian political situation. 
First, by his move Shakhrai showed that he does not see
any legal ways for nominating Boris Yeltsin for reelection. A
professional lawyer, officially representing the President, by
his statement in support of Luzhkov, he conveyed a message to
the Constitutional Court that the only justified ruling which
the court may pass in October would be to reject Yeltsin's
request for the right to reelection in the year 2000. 
Second, that story showed that Yeltsin had serious plans
(at least until Shakhrai's statement) to storm the Kremlin once
more. Otherwise why did the President react so painfully to the
fact that a mere cog in his administration said who he would
support at the next elections? 
And third and the most important circumstance is that
Shakhrai has a very good political intuition and the ability to
survive in the power structures. 
So, a smart courtier chose "political suicide" to provoke
his firing. This move can mean only one thing - Shakhrai thinks
that the time has come when he would be better off not as a
close associate of the President, but as a victim of his
persecution. If such men as Shakhrai are leaving Yeltsin, this
can only mean that the President's boat will not remain afloat
for much longer. So, the resignation of Shakhrai, although
outwardly not significant, signified a fundamental change in
the rules of the game on the Russian political scene. It showed
that those who want to have a political future must change
their strategy now, and distance themselves from the President,
rather than seek a place at his throne.
The second key political indicator was the long talk
between Boris Yeltsin and ex-premier Viktor Chernomyrdin. The
public was not informed about the details of their
conversation, but the result was the presidential statement to
the effect that Chernomyrdin should be brought closer to the
power structures and offered a chance for a more active
involvement in Russia's political life. It should be remembered
that Chernomyrdin had been fired precisely because, as Yeltsin
thought, he became too active on the political scene.
It is an open secret that the President chose Sergei
Kiriyenko as the Premier not only for his business and
professional qualities. It was more important that Boris
Yeltsin used traditional methods in an attempt to reinforce his
political standing and remove a rival at the forthcoming
presidential elections, who was gaining too much weight. He
also resolved a more immediate political problem. Under the
Russian Constitution, presidential powers are turned over to
the Premier in case of force majeure circumstances. 
When Chernomyrdin was the premier, the possible transfer
of presidential powers was less risky, as Chernomyrdin had a
considerable political weight, was accepted by the State Duma
and respected abroad. 
By replacing him with Kiriyenko, the President tried to
close this loophole, which could be tempting to his political
opponents. Even those who wanted him out of the office as soon
as possible knew that it would be too risky to turn over his
powers, even for a short time, to the young Premier, as this
could completely destabilise the situation in Russia.
The fact that Yeltsin is looking for ways to bring
Chernomyrdin back to the political scene can be explained by
different reasons. The most probable of them is that Boris
Yeltsin has decided not to run for reelection. It is possible
that he might leave the office for health and political reasons
even before the year 2000. This amounts to another radical
change in the Russian political situation and Yeltsin's
If his plans for reelection forced him to mercilessly get
rid of relatively weighty political figures on his team, new
plans for early resignation will engender completely different
priorities. The presidential task now is to allow his successor
to mature, so that this new man would help Yeltsin to leave in
style and provide reliable guarantees to his family. (Yeltsin
knows better than anyone else that collective beatings of the
old leadership, which cannot hit back, by the new one have
always been the traditional pastime of the Russian political
The ex-premier suits this role better than many others.
Although Yeltsin stated soon after Chernomyrdin's resignation
that "we did not trust him," he trusts everyone else still
less. If our suppositions are correct, Yeltsin now regards
Chernomyrdin as the most desirable and the least dangerous
On the other hand, in this case he will have to admit that
Chernomyrdin's resignation was a hasty decision. It would have
been much simpler to help Chernomyrdin win the elections if he
still were the Premier, rather than simply the head of a weak
political group (Our Home Is Russia). But this absence of logic
proves that Yeltsin decided not to run for reelection only
recently, which adds a fundamentally new feature to the
political situation in the country. 
And now for the third signatory event. Protesting against
chronic wage arrears, Major Belyayev drove his tank out of his
unit outside Nizhni Novgorod and stopped it as a sign of
protest in the central square of a nearby town. It was a
perfectly peaceful protest. The tank was brought to the square
not to shoot at anyone. It was not an instrument of violence in
this case, but an instrument of the major's profession. In this
sense, it was not unlike the miners' helmets. 
But the action of Major Belyayev and the spontaneous and
immediate support he was given by the people show that another
fundamental line has been crossed in the development of the
political situation in Russia. A tank left a military unit
without the warrant of the unit command, which spent nearly 24
hours trying to convince Belyayev to return to the unit. The
crowd in the square hailed the major as a hero, rather than a
violator of military discipline. The attempt to use another
tank to tow the "deserter" back to the unit failed. The people
in the square did not permit the removal of the symbol of their
common protest. 
Imagine for just one second that not one major, but a
whole tank regiment where he serves would decide to protect and
join the miners on the Gorbaty Bridge in front of the
government building in Moscow. A peaceful protest, mind you.
Like the miners, the military might want to be heard in Moscow
and to knock their helmets on the government fence. Imagine
that, and then try to answer the following question: Who would
try to stop them, and how? 
The desperate action taken by Major Belyayev means that
the military have reached a line, dangerous to the country and
themselves, where the army might leave the barracks without
order to express its protests and outrage at what is happening
in the country.
The authorities cannot use force against the miners or
Major Belyayev, although this is stipulated by law, and prefers
talks. This is happening for the sole reason that both the
authorities and the working people have long been operating
outside the sphere of law. Indeed, it is a crime to blockade
the railway, but it is also a crime not to pay wages. 
So, let's sum up results. A belief has appeared and is
growing stronger in Yeltsin's team that staking on the
President would be politically hopeless. Yeltsin appears to
regard his resignation as politically inevitable now, and is
looking for a successor to whom he could turn over the reins of
power and thus ensure his own security and the interests of his
family. The weakness of the political regime has reached a
critical line beyond which the social protect actions might be
joined by the army, which would act not as an instrument of
armed violence but as one of the most suffering social groups. 


The Times (UK)
August 13 1998
[for personal use only]
Taleban advance sparks Russian alert 
Moscow fears the Muslim militia may have designs on the Central Asian 
states, Christopher Thomas writes 

TALEBAN troops moved to within five miles of Afghanistan's border with 
the Central Asian states yesterday, prompting an appeal by Tajikistan 
for international intervention to save it from what it said was a 
security threat. 

Moscow has 25,000 troops in Tajikistan, which have been put on alert in 
case Taleban forces attempt to move across the frontier. Voice of Moscow 
Radio issued a warning that Taleban might cross the border to assert its 
belief that Central Asian states with a Muslim majority should abide by 
stricter Islamic edicts. 

It added that Tajikistan was the weakest link in the Central Asian 
defence system and Taleban might use the country as a springboard to 
other areas. The warning came as President Rakhmonov of Tajikistan held 
an emergency meeting with defence force commanders and Russian generals 
in charge of frontier troops guarding the border with Afghanistan. 

Igor Sergeyev, the Russian Defence Minister, announced last night that 
Russia was strengthening defences along the border between Afghanistan 
and the former Soviet Union. 

"Naturally we are taking every appropriate step to strengthen our 
contingent of troops, including the 201st Mechanised Infantry Brigade," 
he said. 

Russia has no border with Afghanistan, but regards the former 
Soviet-Afghan frontier - running along Tajikistan, Uzbekistan and 
Turkmenistan - as its line of defence against the spread of radical 

Reports from Dushanbe said the Tajik Government had ordered mobilisation 
of its reserve forces. There were also expressions of alarm from 
Uzbekistan, which has closed the bridge across the Oxus, which marks the 
boundary with Afghanistan. Concrete barricades, barbed wire and 
anti-tank devices have been erected along is length and explosives have 
been placed to blow it up if necessary. 

Tajikistan appealed to the warring sides within Afghanistan and to the 
United Nations to act urgently to stop the conflict. Taleban insists 
that it has no territorial ambitions. 

The one country in the region that may not be displeased with Taleban's 
advance is Turkmenistan, which has vast quantities of natural gas that 
could be piped through Afghanistan to the Arabian Sea with a branch line 
supplying Pakistan, which already has a gas distribution system in 
place. The region has the world's last unexploited land-based oil 
reserves and several multinational companies are ready to compete for 
the contracts to build pipelines to the sea.... 



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