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Johnson's Russia List


August 20, 1998   
This Date's Issues: 2316  2317

Johnson's Russia List
20 August 1998

[Note from David Johnson:
1. RIA Novosti: Hot line.
2. Reuters: Gorbachev slams Yeltsin over devaluation.
3. The Nation: Stephen Cohen, Why Call It Reform?
4. Leonid Bershidsky: Re 2314/Hough.
5. Ray Finch: rough best.
6. Michael Intriligator: NEW YORK TIMES Letter on Russian economy.
7. Nezavisimaya Gazeta: Natalya Konstantinova, CHUBAIS ADMITS THAT

8. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Crisis 
Is Moral As Much As It Is Economic.

9. AFP: Prices Spiraling up in Moscow Shops.
10. Anne Williamson: "Sdyelka", Adil Rustomjee? [JRL #2300, August 6] 
11. RFE/RL: Paul Goble, Russia: Analysis From Washington -- A Coup 
That Shook The World.]


##The hot phone line with the government where residents
can report unreasonable price boosting will be in service from
9:00 tomorrow.
According to the Department for governmental information,
the hot line will be in operation on working days from 9:00
through 20:00 Moscow time. Its numbers are 205-5459, 205-5322,


INTERVIEW-Gorbachev slams Yeltsin over devaluation
By Timothy Heritage

MOSCOW, Aug 19 (Reuters) - Former Soviet leader Mikhail Gorbachev urged
Russian President Boris Yeltsin on Wednesday to call early elections to
restore confidence in the country's leaders and help resolve a financial

He told Reuters in an interview that this week's de facto devaluation of the
rouble would deal a colossal blow to the economy and major strikes were
possible if Yeltsin did not call presidential and parliamentary elections. 

``The president must come up with an initiative to halt the destruction of the
economy, of this country. To do this, he must call elections in the autumn or
spring,'' Gorbachev said. 

``If he did this now, it could be his last good deed for his people. But it is
hard to count on him doing this. I don't think he realises what the situation

He said the government and Yeltsin had lost the confidence of their people and
the final straw had been the president firmly ruling out a devaluation just
three days before the rouble was allowed to devalue. 

``Didn't they know (there would be a devaluation)? If so, everyone knew but
them and they are just wasting their time and should quit quickly,'' Gorhachev
said. ``How can you trust them? How can you entrust the future of the state in

The next presidential election is due in 2000 and the next parliamentary poll
is due at the end of 1999. 

Gorbachev, 67, has little influence in Russia despite his popularity abroad
for his role in ending the Cold War. His public feuding with Yeltsin goes back
more than a decade. 

But he has experience of some of the problems Yeltsin and Prime Minister
Sergei Kiriyenko now face. 

It was Gorbachev who launched the ``perestroika'' reforms and promised his
people a turnaround in the economy, something which never came during his

Those dreams were in effect ended by an attempted coup which was begun by
hardliners on this day in August 1991 and which Gorbachev said hit his reforms
``just when the light had appeared at the end of the tunnel.'' 

Yeltsin's promises of relative prosperity have also proved a distant dream for
all but a few Russians. 

Gorbachev said Monday's decision to allow the rouble to fluctuate more than
previously, effectively letting it devalue, would affect ordinary people by
making imports more expensive and by reducing the real value of wages and

``It has been done at the people's expense,'' he said at the Gorbachev
Foundation think-tank which he set up after he fell from power and the Soviet
Union broke up in 1991. 

``I think the most dangerous thing is the rise in prices. The other thing,
which is not being talked about, is that there is no indexation of savings or

Predicting the collapse of many banks, he said: ``This is a colossal blow.'' 

He said protests, threatened by trade unions over the government's failure to
pay milions of workers for months, were likely in the autumn if Yeltsin did
not act now. Instead, he said, Yeltsin remained on holiday outside Moscow. 

``That is simply not serious,'' Gorbachev said. 

Gorbachev, who suffered a crushing defeat in the 1996 election, said he did
not plan to run for president again. 


The Nation
September 1, 1998
Why Call It Reform?
By Stephen F. Cohen
Stephen F. Cohen is a professor of Russian studies and history at New
York University. His most recent book, Rethinking Russia, will be
published next year by Oxford.

As Russia’s economic collapse spirals out of control, rarely if ever has
American discourse about that country been so uncaringly and dangerously
in conflict with reality. With its endless ideological mantra of a
purported “transition from Communism to free-market capitalism,” almost
all US government, media and academic commentary on Russia’s current
troubles is premised on two profoundly wrong assumptions: that the
problem is essentially a “financial crisis” and that the remedy is
faster and more resolute application of the “reform” policies pursued by
President Boris Yeltsin since 1991.

Treating Russia’s agony as a case of the “Asian flu”—as merely a matter
of bolstering a faltering stock market, banking system and currency with
more budgetary austerity and tax collection, ruble devaluation and
Western financial bailouts—is like rearranging deck chairs on the
Titanic. Russia’s underlying problem is an unprecedented,
all-encompassing economic catastrophe—a peacetime economy that has been
in a process of relentless destruction for nearly seven years. GDP has
fallen by at least 50 percent and according to one report by as much as
83 percent, capital investment by 90 percent and, equally telling, meat
and dairy livestock herds by 75 percent. Except for energy, the country
now produces very little; most consumer goods, especially in large
cities, are imported.

So great is Russia’s economic and thus social catastrophe that we must
now speak of another unprecedented development: the literal
demodernization of a twentieth-century country. When the infrastructures
of production, technology, science, transportation, heating and sewage
disposal disintegrate; when tens of millions of people do not receive
earned salaries, some 75 percent of society lives below or barely above
the subsistence level and at least 15 million of them are actually
starving; when male life expectancy has plunged to 57 years,
malnutrition has become the norm among schoolchildren, once-eradicated
diseases are again becoming epidemics and basic welfare provisions are
disappearing; when even highly educated professionals must grow their
own food in order to survive and well over half the nation’s economic
transactions are barter—all this, and more, is indisputable evidence of
a tragic “transition” backward to a premodern era.

Even if economic growth were miraculously to resume tomorrow, Russia
would need decades to regain what it has lost in the nineties, and
nothing can retrieve the millions of lives already cut short by the
“transition.” Indeed, as a careful statistical study by Professor
Stephen Shenfield of Brown University shows, an even greater and
possibly inescapable economic and social disaster is rapidly

Why call this “reform,” as does virtually every US commentator?
Certainly, very few Russians any longer do, except to curse Yeltsin and
his policies, especially those long and zealously promoted by the
Clinton Administration. Russian economists and politicians across the
spectrum are now desperately trying to formulate alternative economic
policies that might save their nation—ones more akin to Franklin
Roosevelt’s New Deal than to the “neoliberal” monetarist orthodoxies of
the State and Treasury departments, the IMF, World Bank and legions of
Western advisers, which have done so much to abet Russia’s calamity.
But when President Clinton goes to Moscow in early September, he will no
doubt tell Yeltsin publicly, as he often has done in the past and Vice
President Gore did when he visited in July, “Stay the course!” For many
Russians, it will mean that America welcomes what has happened to their
country and does not care about their ruined lives. 


Date: Wed, 19 Aug 1998 
From: (Leonid Bershidsky) 
Subject: Re: 2314/Hough

Dear David,
I have generally avoided getting involved in debates on your list because
analyzing Russia is a thankless task and I don't want to be held up to
ridicule each time I'm wrong. Of course, like everyone (including those not
willing to admit it), I am wrong about my country all the time.

But this time I've got to put in my two cents' worth in response to
Professor Hough's comments in the LA Times (JRL 2314) primarily because Dr.
Hough is more wrong than someone of his stature has a right to be.

Leonid Bershidsky
Kapital weekly

Proferssor Hough writes,
"Devaluations help countries with trade deficits. But Russia continues to
run a large foreign trade surplus."
That would have been correct last year, when oil and gas prices were high.
This year, there are serious doubts that Russian will indeed have a trade
surplus because its main export, energy resources, is considerably cheaper
than last year, export growth has stopped and import volumes are not
dropping because Russia is dependent on imported food, clothing and
machinery. The devaluation helps Russia's exporters stay solvent under
unfavorable world market conditions because it makes labor and
transportation cheaper in Russia. In fact, the devaluation helps
uncompetitive industries working for the domestic market becaue imports
grow more expensive, making domestic goods more attractive to Russians. One
example in the grossly inefficient car factory AvtoVAZ, which makes clunky
Lada cars. The day after the devaluation, AvtoVAZ, which has had problems
selling the cars since late last year, announced it was increasing

Professor Hough goes on: "Russia's difficulty is a massive 10-year
depression, and Yeltsin has tried to ward off the political consequences of
this in the large cities by keeping their standard of living artificially
high, especially in Moscow. To pay for the subsidies to these cities,
Yeltsin cut investment over 80%, refused agricultural reform so he could
pay collective farmers very little for their harvest, cut medical services
outside the largest cities and paid wages in these areas with great delay."

This seems to be a totally crackpot theory. What subsidies is Dr. Hough
talking about when Moscow supplies 25 per cent of the federal budget?
Yeltsin cannot do anything to keep the standard of living in Moscow high or
low because he has no money and no resources to distribute. Moscow is
significantly wealthier than other Russian regions, and the standard of
living is higher here, largely because most of the foreign investment goes
to the Russian capital. As a result, a significant percentage of Muscovites
work for foreign companies which pay better than Russian employers. Most of
the multinational companies exploring the Russian market start with Moscow,
which means there are more quality goods in the stores and the competition
is more fierce than in the provinces, helping keep prices affordable. With
the influx of foreign investment, some local industrial companies have been
able to retool and improve the wellbeing of their workers.

Also, most large Russian companies, even those with operations primarily in
the regions, are headquartered in Moscow. They pay taxes here, and that
makes thew capital the wealthiest municipality in Russia.

Other large cities also attract more investment, both Russian and foreign,
than rural areas, which explains the relatively high standard of living in
places like St. Petersburg, Nizhny Novgorod and Yekaterinburg. Yeltsin has
nothing to do with this, or with the deteriorating quality of health care
in rural areas. He cannot do anything to change the economic conditions
that play a major role here, unless he suddenly decides to create tax
havens in poorly-developed rural areas and root out corruption among local

Add to this the fact that Yeltsin never "refused agricultural reform." The
Russian parliaments, dominated by Communists ever since 1991, have
consciously held up these reforms, refusing to permit a free market in

Someone who has more espertise than I do should probably comment on the
following statement by Professor Hough: "Life expectancy for men, already
abysmally low under communism at 63 years,
fell to 57. Some 3 million people in Russia died who would have been alive
if the old life expectancy rates had been maintained. Lack of medicines and
a balanced diet were key reasons. " I am pretty sure I saw more recent life
expectancy figures, something like 61 for men, but correct me if I'm wrong.
Also, probably the biggest factor that drove down life expectancy was
alcoholism, not malnutrition.

But I guess I know enough to say the following passage is sheer nonsense:
"As the system ran down at home, Yeltsin increasingly turned to foreigners
for money. But it was a a ponzi scheme in which foreign money received one
month was used to pay high interest rates on last month's 30-day bonds. As
the pyramid grew, so did the interest payments. "

To begin with, governments working under Yeltsin resumed paying Soviet
foreign debts, on which Gorbachev's government had defaulted. The Russian
government's improved credit rating, as recorded by the likes of Standard &
Poor's, Moody's and Fitch IBCA, made Russian debt attractive to Western
investors, who bought up Russian Eurobonds like hotcakes before the crisis.

The way a ponzi scheme works is that old securities are redeemed with money
received from new investors. The Russian government started running that
scheme in 1993, then only with domestic investors' money. Until August,
1996, foreigners were not even allowed to buy GKOs, or short-term
government bonds (though never as short-term as 30 days; 90-day bonds were
the shortest ever traded) on the primary market. Then foreigners were let
into the market when the government hoped to drive yields down. Last year,
yields did drop to around 24-25 per cent. But then the Asian crisis hit
and, as Dr. Hough points out, people refused to play the game. On its own,
the pyramid (and, admittedly, this was a pyramid) could have kept building
up much longer, and foreigners would have been happy to keep playing it for
the huge returns it offered.

I will leave arguments about the political profile of General Lebed aside,
though I must point out that, as a Jewish reporter who has interviewed him
on a number of occasions, I know he is not an anti-Semite (can Dr. Hough
quote Lebed on Jews, anyway? I doubt it). I also wonder how Lebed's views
on Shevardnadze and the Mormons could reflect on his policies as governor
and, in the future, possibly Russia's president. But anyone if free to like
or hate Lebed -- the basic economic mess is out of his control, as it is
out of poor disoriented Yeltsin's.

I will also leave Dr. Hough to defend protectionism and government
investment. Devaluation is basically a protectionist measure; government
investment is only possible when the government has money. I am sure the
Communists have a lot to say in support of Dr. Hough's stand, but these
guys really do hate Jews, Mormons and Shevardnadze.

But I absolutely must object to what Dr. Hough suggests in terms of a new
Western approach to Russia:
"We need a major humanitarian
program--not a loan, but a gift--of food and medicine to get the Russians
through the winter. It is not only in our vital interest, but a moral duty
given our role in imposing our brand of economic reform since 1991."

Thanks, but no thanks. Humanitarian aid from the West came to Russia in
1991 and 1992; not only was it not appreciated by most people (who threw
away the powdered milk and wondered at the biscuits in Grerman army
survival kits that got sent here), but it helped create an image of the
West as a place that pretends kindness by dumping stuff in Russia that is
not needed by the donors. There is plenty of food and medicine to "last
Russians through the winter"; Russian pensioners, in case Dr. Hough has not
heard, receive their medicine free because the government subsidizes it,
and there is more domestically-produced food in the stores than there was
in 1991 and 1992. The West should watch what happens here next and, when a
new government comes to power, set new rules of the game with it. Neither
humanitarian efforts nor new attempts to bail out Yeltsin will be effective
or appreciated.


Date: Wed, 19 Aug 1998 
From: "Ray Finch-Kroll Associates, Moscow" <> 
Subject: rough best

In my last submission (warning of a possible economic collapse #2306), my
former mentor and good friend, Dr. Jake Kipp asked if the mood and situation
in Moscow had significantly changed or did it still belong to the "hopeless
but not serious" category? The following is my reply which might be of
interest to other DJL readers. 
Regarding your question as to the mood in Moscow, and whether or not it has
gone from the "hopeless but not serious" to something more ominous is
difficult to say. Certainly, there is no panic in the streets and on the
surface all seems to be proceeding in the same chaotic, Moscow fashion.
Young people are falling in love, couples marry and at least a few Russian
babies are being born. Something, however, is brewing beneath the surface.
Just what this thing is and whether or not it is likely to break the surface
anytime soon is the subject of my epistle. 
I caught a dim intimation as to the specific form this thing might take
upon leaving the metro stop near my apartment last week. There I saw two
young men dressed in their RNE (Russian National Unity) finery, complete
with the large red RNE swastika on the forearm. They were walking through
the market area near the metro stop handing out copies of their newspapers
to those who might be interested. They walked through the crowds
unaccosted, or barely even noticed, except by those who requested a copy of
their newspaper. 
What made this incident so troubling was not the content of their
literature (filled with all sorts of ranting and ravings about Zionist and
CIA plots against the sacred Russian homeland), but rather the apathy, and
perhaps even the tacit support of the Russians with whom they were mingling.
This incident was even more troubling if you consider that the government
just recently introduced legislation banning these types of symbols and
literature. The more moderate newspapers have all recently carried stories
documenting the dangers and growing influence of the RNE. If the influence
of this organization can be measured by the quantity of its placards pasted
near my metro stop, then the RNE is becoming a force to reckon with. 
Related to the above are the increasing number of uniformed and armed
(official) defenders of the state patrolling the streets of Moscow. If you
didn't know better, you'd think there was a war going on. One might presume
that this show of force reflects the current strength of the Russian
authorities. Perhaps it's just prejudice on my part, but I don't feel any
more secure with all these armed goons hanging around. The troubling and
somewhat frightening thing is that both the official authorities and groups
like the RNE are striving for the same goals: order and Russian prosperity.
Moreover, they both largely despise the current regime and are looking to
clean their sacred homeland of easy targets (just ask any Chinese or
Caucasian-type how many times his papers have been checked in the past
week). It is easy to imagine a future marriage of these two "restorers of
I don't want to sound apocalyptic, and Russia will likely stumble through
this latest political-economic crisis. But some rough beast is beginning to
slouch its way toward the surface. And this thing is not going to look like
anything from the past. The Russian monarchist party has a better chance of
seizing power than the flaccid communists or fattened followers of Zhiri.
It will be something lean and mean, with the fanaticism of a Taliban
fighter, the politics of a prison warden and the conscience of a Timothy
McVeigh. And a large number of Russian people will adore him.


Date: Wed, 19 Aug 1998 
From: "Michael D. Intriligator" <> 
Subject: My NEW YORK TIMES Letter on Russian economy

Dear David:
My August 5 letter to the NEW YORK TIMES, along with its shortened
version, as published on Sunday, August 9, 1998, may be of interest to JRL
readers. Note that it preceded the recent devaluation and default, but it
did anticipate that "The latest IMF attempt will fail."
Best regards, Mike

August 5, 1998
To the Editor:
The August 4 Op-Ed, "Russia Needs True Reform, Not Higher Taxes," by
Michael McFaul, correctly critiques the latest attempt to deal with the
deepening crisis of the Russian economy - - the deal by Russia to reform its
tax system in return for yet another IMF bailout. The current IMF approach
is merely a continuation of its failed policies of stabilization of the
macroeconomy, liberalization of prices and trade, and privatization of
state-owned enterprise. 
By contrast, the Economic Transition Group, a group of American and
Russian economists, including five American Nobel Laureates in Economics and
five Russian Academician economists, has been advocating a new approach to
economic policy in Russia based on three new fundamental reforms. 
First is the creation of market institutions, without which a market
economy cannot function, including property rights, banks and other financial
institutions, accounting, advertising, and insurance. Second is competition,
which lies at the heart of market economies but which was not achieved by the
privatization that only created private monopolies. Third is a proper role
for government taking initiatives in a modern mixed economy, as seen in every
market economy in the world. Without these three fundamental reforms, none of
which is part of the current IMF approach, the Russian economy will continue
to decline precipitously. The latest IMF attempt will fail, as have all
previous ones that have witnessed Russia losing half of its total output,
plunging it into a depression deeper than the U.S. Great Depression.
Professor of Economics, Political Science, and Policy Studies, UCLA
Member, The Economic Transition Group
Los Angeles, August 5, 1998

SECTION 4, p. 18
To the Editor:
Michael McFaul (Op-Ed, Aug. 4) correctly critiques the deal by
Russia to reform its tax system in return for another International Monetary
bailout. The I.M.F. approach is a continuation of its failed policies. By
contrast, the Economic Transition Group, a group of American and Russian
economists, of which I am a member, advocates a new approach to economic
policy in Russia based on three new fundamental reforms. 
First is the creation of market institutions, without which a market
economy cannot function. Second is competition, which lies at the heart of
market economies but which was not achieved by the privatization. Third is a
role for government taking initiatives in a modern mixed economy, as seen in
every market economy in the world.
Los Angeles, Aug. 5, 1998


>From RIA Novosti
Nezavisimaya Gazeta
August 19, 1998

There is reason to believe that the Russian leaders will
soon overcome the psychological taboo which prevented them for
several weeks to admit the terrible but obvious fact that at
least during the past five days Russia was not only on the
brink of bankruptcy and budget collapse, but also political
catastrophe. All that time the highest-ranking Russian
bureaucrats, let alone the President, whose Friday statement in
Novgorod that there would be no devaluation of the ruble drove
all his economists, financiers and negotiators with the
International Monetary Fund into a corner, refused to admit the
obvious thing for fear of causing panic among bankers, foreign
investors and ordinary Russians, whom constant surprises had
already driven crazy. Kiriyenko, Zadornov and Livshits did not
say what everyone else kept saying all the time because Yeltsin
did not allow them to. 
That argument, as might be expected, fired back:
fortunately, it has only upset the IMF and has not caused a
protest march to the Government Building. As a matter of fact,
Government officials do not preclude this possibility.
Although "we have not made any serious blunders", as a
high-ranking source in the Russian Government has told this
correspondent, and it is mostly the external factors that are
to blame, the Government lost in that critical financial
situation from the viewpoint of the reaction to the
developments, that is psychologically. This does not matter now
anyway, because in private the premier, Sergei Kiriyenko, and
Russia's chief negotiator with the IMF, Anatoly Chubais, and
some analysts close to the Government depict the present
situation in Russia in the following way.
Until the last moment the authorities had realised that
the sign of change in Russia's relations with the IMF and the
main psychological indicator would be in the long run the
admission of the fact that Russia was fulfilling its
obligations and the IMF trusted its Government.
For three days the Government also hoped that the
situation in the world and Russian markets would change for the
better, but the market did not believe us and confronted the
Government with an almost hopeless choice: realising the
disastrous reality, the Government had either to make decisions
that would have extremely serious consequences for the economy
or continue to pretend that nothing happened. In both cases (to
a lesser extent in the second case), according to Chubais, the
country would face a collapse of the banking system, the
failure of many big banks and, finally, inflation with all its
social and political concomitants and aftereffects. 
In addition, the situation was compounded all the time by
the lack of unity in the IMF leadership on the night of Sunday
to Monday. At about 3 a.m. Moscow Time a high-ranking IMF
official told Chubais that the IMF was severing all relations
with Russia. Two hours later when Moscow made the decision on a
new ruble/dollar exchange rate band, which had not yet been
announced, the IMF demanded that this decision be cancelled and
that the State Duma convene immediately to approve tight fiscal
measures. According to eye-witnesses, the whole affair looked
like a conversation of a deaf person with a madman.
At 7 a.m. the Government discussed such possibilities as
urgent talks between Yeltsin and Clinton or Yeltsin and
Camdessus, but Chubais assumed the responsibility for just
It may seem at first sight that the devaluation and other
tough economic measures such as the moratorium on debt payments
to foreign creditors and the freeze on the treasury-bill market
are illegal, because they mean, in effect, confiscation of
property and capital, but the people who are linked with the
Government's Monday decisions reject this view and claim that
there have been no violations of law.
In any case, there have been no complaints or legal suits
from any victims of the new economic policy. Although the
number of such victims is growing, bankers are sticking to some
strange gentleman's agreement and this may only please the
Government and negotiators with the IMF.
However, there is a question that can't be ignored: who is
to blame? "If there are no culprits, they must be found by all
means," the same sources involved in the elaboration of the
climacteric decisions told this correspondent. 
Yesterday in the afternoon Boris Yeltsin accepted the
resignation of his top economic advisor Alexander Livshits. No
other resignations and dismissals have been announced yet.
According to Yeltsin's spokesman, Sergei Yastrzhembsky, 
personnel changes in the Government are possible, but there
will be no immediate shake-up. 
As a matter of fact, Anatoly Chubais is categorically
against replacing Sergei Dubinin and Mikhail Zadornov, because
the replacement of the Bank of Russia Chairman and Finance
Minister is "fantastically dangerous" now.
No one can say how and when the President's "effective"
personnel policy will manifest itself and in what form. 


Moscow Times
August 20, 1998 
SEASON OF DISCONTENT: Crisis Is Moral As Much As It Is Economic 
By Andrei Piontkovsky
Special to The Moscow Times

One of the main obstacles on the path to civilized reform now is not the 
leftist opposition but the oligarchical opposition. 

After Viktor Chernomyrdin, who was useful to the oligarchs, was removed 
from his post as prime minister, the oligarchs made noise through the 
news media that belong to them about the need for a more "manageable" 
and "cheaper" president. This is not an opposition of ideas or even an 
opposition of any kind of a narrow social group. 

This is an opposition of a small clique of persons who were designated 
to be super rich by the powers that be and who are prepared to betray 
these political authorities in order to maintain their position under 
new authority. 

Unlike the government, they have a rather logical and thought-out 
anti-crisis program. The document that is now being circulated among 
those in the banking and political establishment has a rather long name: 
"Anti-Crisis Report: A medium-turn scenario of government and corporate 
policies under conditions of self-destruction of the country's financial 
system and the return to a mobilization model of development." 

Acknowledging that the state is financially bankrupt, the program 
proposes to carry out a transition to a New Mobilization Economy, or 
NME. The key provisions of the report are worth citing for their 

"The budget situation of '96-'97 has shown that too many government 
kryshas, [or roofs,] arose relative to the declining liquidity, and the 
government cannot collect the means to cover even the most elementary 
expenses from various [mafia-] protected structures. Consequently, after 
the transition to NME, only one 'government krysha' will remain covering 
members of a 'core group' whose makeup will be formed under the leader 
who wins out in the current crisis. 

"The size of the elite will be decreased drastically and an attempt to 
solve budget problems, above all payment of wages, pensions and 
benefits, will be made at the expense of those who have not entered the 
'core' of the moneybags. This will probably be enough to have 3,000 
families to 5,000 families of the new administrative-money aristocracy 
-- instead of the current several tens or hundreds of thousands of New 

Finally, here is a magnificent passage: "The superprofit that is 
received from exports after a ruble devaluation this time will go not 
only to offshore accounts and benefit a small group of people, but will 
serve the state-power goals of the 'ruling core.'" 

The "ruling core" hopes that by devaluing the ruble it can continue to 
exploit the country's raw materials while at the same time, of course, 
hiding behind state power demagogy. Leaving aside the moral aspect of 
this "anti-crisis program," we should note its complete impracticality 
given that the raw-materials export model of the country has become 
exhausted. It is high time people understand that in view of the current 
tendency in world prices for energy, Russia does not have significant 
natural resources. 

The problem of getting Russia's economy and society out of the crisis 
cannot be solved exclusively through the macroeconomic technology of the 
Central Bank and the Finance Ministry. What is needed are fundamental 
changes in the relationship between power and money and an 
acknowledgement of the moral nature of the crisis we are undergoing. 


Prices Spiraling up in Moscow Shops 
August 19, 1998

MOSCOW -- (Agence France Presse) Prices began rising here Wednesday as 
Russia's shop owners and market traders, faced with a ruble crisis, 
re-priced goods, locked up stock and canceled sales. 

As the Russian banking system teetered on the brink of collapse and 
after the ruble's de facto devaluation Monday, many traders preferred to 
hoard their stock rather than sell at current prices. 

"Prices went up immediately," sighed Tatiana Alexeyevna, after shopping 
in the Savelovsky market in the north of Moscow Wednesday. 

"I'm not going to panic, I've seen it all before," said another 
middle-aged shopper -- referring to price shifts in 1992, when inflation 
mounted to 2,500 percent for the year, and in 1993 and 1994 when prices 
rose by 900 percent and 300 percent respectively. 

Monday's devaluation has led to fears of a return to skyrocketing 

"Everyone is putting up their prices, we have decided to do the same," 
said Anton, a salesperson in a sports goods shop in the capital. At the 
counter, sales assistants were hunched over a pile of new price tags. 

Sales, which started this month, have been canceled, said director Mark 

Aleksander Chubayev, manager of a large food store, spent the day on the 
telephone speaking to suppliers in a bid to settle prices for new stock. 

"Deliveries have been stopped for three days. The suppliers just don't 
know how to react," he said. 

Chubayev said he had not yet increased prices, but added that was sure 
to come. He said the prices of meat and cold cuts would be hit very 

In Moscow, 90 percent of food products are imported so they will be hit 
by the devaluation of the ruble. 

Even the cost of bread is rising. 

"A small loaf which yesterday cost 1.5 rubles (23 cents), is 1.90 rubles 
today," said baker Elena Beliayeva, adding manufacturers of other bakery 
products, such as cakes, were threatening to raise their prices. 

The daily Rosiskaya Gazeta, which sent reporters to wander the streets 
of Moscow talking to shoppers and checking on traders, said some shop 
owners were clearing their shelves of non-perishable goods, hoping to 
sell them at higher prices later. 

"In total, prices in the markets have risen by between 20 and 30 
percent," the daily reported. 

It said the provinces had also felt the change.


Date: Wed, 19 Aug 1998 09:45:47 -0400
From: Anne Williamson <> 
Subject: "Sdyelka", Adil Rustomjee? [JRL #2300, August 6]

Hey! You in the Yale beanie, yeah you! Adil Rustomjee! Come on down!
We’ll be mighty glad to have you join the Truth Brigade, even if you are
about six years too late. Why’ve you been so long in the tall grass?
Nevermind, you don’t have to answer that! Honest, it’s not as if we’ve got
so many recruits here we can afford to start giving them interrogatory buzz
cuts upon induction.

After reading that mighty fine plea for an economic treatise cum literary
masterpiece on Russian privatization you cranked out for the JRL, I gotta
hand it to you, Adil. You were the clever one to hold off sounding a
clarion call until after the bondsmen had swallowed their commissions, the
bankers their underwriting profits, the bondholders their giddy yields,
the consultants their yummie fees, the Big Six their tax-payer subsidies
for their foreign start-up costs, the academics their grants and fees and
the multilaterals, well, gee, like those ingenious parasites modern
science has developed to eat oil spills; they just swallow and swallow and
swallow and go on swallowing and now it turns out they’ve swallowed an
entire people, culture, nation! Holy Moses, Adil, how we gonna wipe those
whiskers clean? But sure a fella like you knows, there’s no glory amongst
that crowd for letting cats outta bags.

But first, you gotta catch the cats.

So your secret decoder ring is in the mail along with your first
personally-tailored assignment, as follows:

Why has the Academy stood by in silence while a single, foreign "scholar"
with broadly-based financial interests in Russia, a hefty file at the
Russian Federation’s Interior Ministry, a long history of pumping sunshine
within the conference rooms of global investment banks, of shilling behind
closed doors at the US Treasury and NSA on behalf of a certain billionaire
speculator philanthropist moralist and one perky Harvard University public
relations genius masquarading as an economist in pursuit of yet more US
taxpayers’ cash, while posing under cover of well-known think tanks as an
"objective" analyst? Hmmm?

Oh, and while you’re at it, why don’t you drop round the editorial offices
of the NYT, the FT and the Weekly Standard and ask why they publish
regularly said "scholar’s" analytical pieces and letters-to-the-editor
written to perfume a dubious role in formulating self-serving, boneheaded
policies without - here’s the unique part - informing their readers of that
fact? I say we need a slew of truth-in-scholars or maybe truth-in-byline
regs, Adil! That way we could clear up some of those pesky

Oh, and Adil, since a certain allegedly heroic Russian "reformer" advised
certain well-connected Russian Washingtonians that same said "scholar" is
his personal emissary, don’t you think it best to check to see if this
diplomatic retread has complied with US legislation and registered as a
lobbyist for a foreign power? Oh, I almost forgot, see if you can get the
rundown on exactly why a nascent Moscow investment bank, which said
"scholar" advises, aced out the august Kleinwurst Benson in getting the
particularly handsome mandate of handling Gazprom’s new 5% foreign share
offering? That wouldn’t be some kind of pay-off to an accomodating
mouthpiece, would it? Do you think? Could it be?

Like I said, Adil, we acolytes of the great god Shoe Leather, are just
thrilled you’ve thrown your beanie in the ring. And I for one am bursting
with anticipation of the literary triumph that you - "in all probability" -
will spin "from basic documents found at the World Bank, Harvard, and
USAID". How could the finished product be otherwise with gripping primary
sources like that?

Best of luck, Adil. (Fake ruby on ring is a 2-way radio, just twist.) 


Russia: Analysis From Washington -- A Coup That Shook The World
By Paul Goble

Washington, 19 August 1998 (RFE/RL) -- Seven years ago today, an 
attempted coup in Moscow set off a series of shockwaves that continue to 
reverberate through the Russian Federation, her neighbors, and the world 
at large and define developments there. 

When it began on August 19, the Soviet Union still existed, Mikhail 
Gorbachev was its president, and the post-Cold War international system 
appeared to be in order. When it ended three days later, each of these 
had been called into question. 

But despite these dramatic changes that followed, the coup itself -- why 
it was organized, why it almost succeeded, and why it ultimately failed 
-- was in fact a manifestation of three underlying features of political 
life that continue to resonate there as well. 

•First, the August 1991 coup was made and opposed by two relatively 
small groups of people, each of which was convinced that the country 
faced a crisis and that its future depended entirely on the outcome of 
that crisis. 

The Emergency Committee as events quickly showed had very few people 
behind it. But despite the heroism of the defenders of the Russian White 
House, the number of people involved there was small as well. 

But both were united in a sense that the country would be doomed if the 
other won and by an understanding that the number of people actually 
involved in the political struggle was and would remain small. 

Most people in the Soviet government and in the country at large did not 
participate on either side. Instead, they adopted a wait-and-see 
attitude and probably would have been willing to support whoever came 
out on top. 

And that absence of involvement and sense that the country will develop 
by crisis rather than organically continues to characterize political 
life across the post-Soviet space. 

•Second, the coup almost succeeded and inevitably failed because 
individual loyalties to particular leaders proved to be greater than any 
attachment to political institutions. 

The Emergency Committee that launched the coup thought it could count 
both on the deference of the population to anyone claiming to speak in 
the name of the government and on the obedience of their subordinates. 

While members of the committee they may have been correct in their first 
assumption, they were clearly wrong on the second. Not only had the 
bonds of obedience already snapped, but their own all-too-obvious 
disobedience further severed the ties on which they had counted. 

But those who opposed the coup, including Russian leader Boris Yeltsin, 
also adopted a personalist approach. 

On the one hand, Yeltsin sought to portray himself as a personal 
hero-leader rather than an elected representative. And on the other, his 
demand that Soviet President Mikhail Gorbachev be returned to Moscow 
clearly had little to do with his respect for the office itself. 

That absence of support for institutions independent of the people who 
occupy them continues to dominate political life in this region. 

Indeed, it remains one of the major reasons why the people in so many 
post-Soviet states have found it difficult to make the transition to 
democracy, a system that insists that institutions are more important 
than the individuals who occupy them. 

•And third, the coup inevitably failed not so much because of the 
actions of those who opposed it but because the collapse of the coup and 
the ensuing developments served the interests of those who many supposed 
would be its most interested defenders. 

By mid-1991, the officials on whom those who launched the coup thought 
they could count had in many cases already decided that they could 
profit more from reforms than from a return to the past. 

Such officials thus did not support the coup. But even though most did 
not oppose it either, they rapidly changed their political affiliations 
in its aftermath in order to continue to benefit from the new 

And that pattern, one not typically revolutionary, has had some very 
serious consequences for political life in the post-Soviet states. It 
has meant that there has not been a clean break with the past in terms 
of those in power or in the ways they do business. 

It has increased cynicism both about the declarations of these leaders 
and about the ideals -- democracy and free markets, for example -- that 
these now ex-communists claim to support. 

Finally, it has left many in these countries with the sense that once 
again the elite has found a way to take care of itself at their expense, 
an attitude that may produce a revolution but is certainly not the 
product of one. 

On the seventh anniversary of the aborted coup, Russia and many of its 
neighbors are developing in ways that reflect both the shockwaves of 
that event and the continuities it revealed -- a collection of new 
bottles that in many cases contain old wine. 



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