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Johnson's Russia List


August 21, 1998   
This Date's Issues: 2318  2319

Johnson's Russia List
21 August 1998

[Note from David Johnson:
1. Chicago Tribune: Colin McMahon, THE HIDDEN FIGHT OVER THE RUBLE.
2. Journal of Commerce: Scott Pardee, What next for Russia?
3. Berlin's Die Welt: Interview with Mikhail Gorbachev. "Yeltsin Is 
Afraid, He Doesn't Know How To Go On."
4. Moscow Times editorial: Pay Workers, Then Pay Investors.
5. Agency for Social Information (Moscow): Sexual Culture and 
Behavior in Russia. 

6. Reuters: Russian opposition set for offensive on Yeltsin.
7. The Independent (UK): Rupert Cornwell, Here's a novel idea: the West 
takes over Russia's management.

8. Itar-Tass: Chernomyrdin: Central Bank Should Have Defended Ruble.
9. AP: Russian Emigres Worry About Crisis.]


Chicago Tribune
August 20, 1998
[for personal use only]
By Colin McMahon, Tribune Foreign Correspondent. 

George Soros was under attack.
The international financier had advocated last week that Russia devalue its
sinking ruble and tie it to the dollar. Soros was quickly accused in Russia of
fueling market panic merely to make a killing on his currency holdings.
Soros said he was offended by the backlash, but knowing Russia as he does,
he should not have been. It was nothing personal--nearly everyone in business
or government is assumed to be ruled by ulterior motives.
During their long and losing battle to stave off a ruble slide, Russian
authorities despaired about the faceless and soulless nature of international
bond and equity markets. Yet those markets are far more transparent than the
actions of powerful Russian business magnates who also were lining up against
the Kremlin's plans.
The cynicism bred by the behind-the-scenes jockeying for power and the
manipulation of the news media is all part of the murk that obscures how
policies are crafted and decisions made in Russia, even when the decisions
affect billions of dollars in investments and millions of working people's
The ruble, which the Russian government is allowing to fall as much as a
third before year's end, dropped again Wednesday in official trading to about
7 to the dollar. That is 11 percent lower than Monday's opening of 6.3. The
stock market also tumbled anew in light trading, closing at a 27-month low.
Meanwhile, the government delayed announcing how it plans to overhaul its
short-term debt market. Under pressure from foreign investors who fear they
will be forced to shoulder most of the expected losses, the government will
consult with Western bankers before making public on Monday the restructuring
Russia's lower house of parliament is to convene Friday to consider new
anti-crisis legislation and to study why, after months of promises that Russia
would neither devalue nor default, Prime Minister Sergei Kiriyenko did just
Trying to calm public anger over the devaluation, Kiriyenko said funds
saved from a moratorium on debt payments would go to pay overdue wages and
"We want to get to the bottom of things," the house speaker said.
The prospects of that are not good, partly because so many Russians have
doubts about the motives of the deputies themselves.
Some are accused of wanting to cripple Russia's economy for political gain.
More darkly, some are alleged to be on the payroll of Russian tycoons,
commonly referred to as "the oligarchs," who see the country as their personal
"Kiriyenko is under great pressure from powerful interest groups, and not
just the oligarchs," said Sergei Komakov, a political and economic analyst in
Moscow. "All those who are exporting--aluminum companies, oil companies,
metallurgy companies, the arms dealers--they all want a weaker ruble."
The devaluation should benefit such companies because their revenues are in
dollars, but their costs remain in rubles. Their ruble-based tax bills also
will be easier to pay.
Komakov and other analysts believe the oligarchs will try to use the
ruble's fall to weaken Kiriyenko and derail his efforts to impose more state
control over big business.
"Some of the oligarchs are waging a war of extermination against the
Kiriyenko government," Komakov said.
Among their weapons are the newspapers and the radio and television
stations that the tycoons control.
Although Moscow's serious newspapers produce much that is credible, they
aren't trusted because some are in the hands of such people as Boris
Berezovsky, an oil and auto magnate who controls Nezavisimaya Gazeta. As
Russia's markets melted down over the past several weeks, government officials
accused some media of intentionally fanning the panic.
Average Russians do not know what to believe, and what little exists of
public debate suffers.
Several weeks ago, economist Igor Illarionov called for a controlled
devaluation. He raised reasonable questions about government debts and laid
out some convincing arguments for change, particularly regarding the deeply
troubled banking system.
Government officials dismissed his report, and Central Bank Chairman Sergei
Dubinin implied that Illarionov was driven by a personal, financial agenda.
Not that everyone is sure about Dubinin's independence. Even a Western
diplomat who scoffs at most conspiracy theories expressed doubts. "I can't
quite figure if anyone is behind Dubinin, and if so, who," the diplomat said.
As Soros learned, not only Russians get dragged through the mud. The
International Monetary Fund is a favorite target.
Duma deputies say IMF loan conditions are aimed at killing off Russian
companies and opening the way for an invasion of Western firms.
Others contend the recent IMF-engineered package of more than $17 billion
in new loans was crafted for the sole purpose of allowing Western investors to
get their money out before Russia's economy crashed. Even some thoughtful
analysts think there might be something to that latter criticism.
After Soros got hammered in Russia last week, he went on Russian radio to
further explain his proposal and deny allegations that he was trying to profit
from the ruble's slide.
Some Russian media had already reported, however, that Soros used the
situation to launch a lucrative attack on the German mark. For opponents of
Soros' ideas, no other evidence was needed.
President Boris Yeltsin, on summer holiday outside Moscow for the past five
weeks, had no plans to make a public comment about the crisis, the Kremlin
"We don't have an exact date of when he is finishing his holiday," said a
spokeswoman. "He is up to date on all matters."
He planned a one-day visit on Friday to the Far Northern military base at
Severomorsk to observe exercises by the Northern Fleet, but no meetings before
then, a spokesman said.


Journal of Commerce
August 21, 1997
[for personal use only]
Guest Opinion
What next for Russia?
Scott E. Pardee is a senior lecturer and executive director of the 
finance research center at the Sloan School of Management at the 
Massachusetts Institute of Technology. This article was distributed by 
Bridge News. 

Now that the Russian government has unpegged the ruble, ordered a 
restructuring of its domestic debt and initiated a 90-day moratorium on 
repayments of foreign debt by Russian corporations, what's next?

Unfortunately, there will be pain. Domestic prices are already beginning 
to rise, such that inflation will rebound to 20% or more annually in the 
year ahead.

Many Russian companies and organized labor groups have learned how to 
keep up with inflation, so they will exert their market power to pass 
the steeper prices along. Those who can't will be squeezed further.

Needless to say, pressure will be placed on the lower house of 
Parliament, the Duma, to raise salaries of government workers and 
payments to pensioners at a time when the government already isn't 
collecting enough taxes to meet its payroll and pension-plan expenses.

And there is a loss of credibility. President Boris Yeltsin and his 
chief policy-makers were all committed to a slowly crawling peg to help 
wind down inflation. It was working, but could not have been sustained 
in the face of the recent capital outflows. Nevertheless, any new 
policies relating to Russian debt, as well as the exchange rate, will 
face severe market skepticism.

Unfortunately, Russia is in this mess because its decision-makers 
disagree on just about everything. For now, Mr. Yeltsin is supporting 
the reformers. Sergei Kiriyenko, his latest prime minister, has set 
forth a reform agenda.

Several of the other main players in the current battles are also 
reformers, including Anatoly Chubais, who Mr. Yeltsin has once again 
pulled into the government to deal with the International Monetary Fund, 
the U.S. Treasury and the international financial community.

The Duma is split in all directions. Reformers are in a minority, and 
even most of them consider Mr. Yeltsin too autocratic. Communists and 
Nationalists form a larger bloc, but are still a minority. Members of 
this bloc have varied agendas but join to vote against measures proposed 
by either Mr. Yeltsin or the reformers.

Many of them want to revert to a command economy and want to revive the 
U.S.S.R. And many are linked to one or another of the power brokers who 
have emerged from the Soviet structure and seek to carve up the nation's 
assets among themselves.

Michel Camdessus, managing director of the IMF, rightly focuses on the 
continuing need for swift action on fiscal policy. After the latest 
agreement between Russia and the IMF, the Duma passed only $4.8 billion 
of the $16.4 billion of revenue-raising measures. Continuing support 
from the IMF is contingent on completion of these measures.

It's easy to see why members of the Duma have tried to duck this tax 
package. They, after all, are politicians who want to be re-elected. The 
package features substantial tax increases for most of their 
constituents (value-added taxes and sales taxes) as well as specific 
measures that effectively redistribute the tax burden among constituents 
(abolition of regional taxes, quadrupling of the land tax).

Understandably, the Duma's first effort was to approve the easy measures 
and reject the hard ones. But this is what the Duma has done all along, 
leaving Russia with many hard problems to solve.

Mr. Yeltsin is calling the Duma back to press ahead and pass the 
remaining measures. Also, the Finance Ministry is cracking down on the 
big companies -- state-owned and otherwise -- that are not paying taxes.

Of course, Russia has been hit with the drop in energy prices and 
commodity prices. But the devaluation will help only if Russia can limit 
the inflationary fallout from the devaluation itself, which is still an 
open question.

Also, Russia has been caught up in the contagion from the crises in 
Asia. The ruble is just another domino in a long line of currencies that 
were pegged in one way or another to the U.S. dollar and have now 

The Russian economy is still not big enough or integrated enough into 
the global economy to have a major impact. But many countries are now in 
recession, and a recession in Russia increases the risk of a global 
downturn. The bottom line is that over the next year or so Russia will 
continue to be an uncertain place to invest your money.

The ruble will effectively be allowed to float, and it will float 
downward. Inflation will be up. Gross domestic product will probably 
drop by 2% to 3% over the next year, by official figures, probably by 
more unofficially.

Russia's debt situation, public and private, will remain a headache, as 
will Russia's banks, many of which will be merged or closed. And we will 
face the political uncertainties of the next round of elections for the 
Duma and the presidency.

And yet, looking at how far Russian bonds and stocks have fallen in 
recent months, Russian assets are once again vastly undervalued relative 
to long-term prospects for the country.

Russia is in transition to a vigorous democracy and to a form of 
free-market economy. A whole new generation of business and political 
leaders are coming forward who can thrive in this new environment. This 
crisis may be yet another buying opportunity for patient investors who 
are willing to accept short-term risks for longer-term benefits. 


Gorbachev Cited On Yeltsin, Crisis 

Berlin's Die Welt
August 19, 1998
[translation for personal use only]
Interview with Mikhail Gorbachev by Mathias Doepfner and Karl-
Ludwig Guensche, in Germany, date not given: "Yeltsin Is Afraid,
He Doesn't Know How To Go On"

Berlin--Former Soviet President Mikhail Gorbachev today is chairman of
the international environmental organization, Green Cross. On his visit to
Germany, he spoke with Die Welt on the financial crisis in Russia, his own
political future, and about his fate since he was taken prisoner in the
August coup d'etat seven years ago today.
Welt: Mr Gorbachev, seven years ago today you were taken prisoner at
your Foros vacation resort by rebels. Have you, and especially your wife,
overcome the psychological and physical consequences of those days of
Gorbachev: Yes, we are over it, although it took a long time. I was
certainly helped by being descended from a peasant family. Psychologically
and physically, I have inherited a good constitution.
It was much harder on Raisa. She suffered for a long time from the
consequences. But now we are both well again.
Welt: The coup d'etat of 19 August 1991 was the climax of your
opponents' fight against perestroika and glasnost. But it had started
Gorbachev: As early as the fall of 1986, there was clear resistance by
the nomenklatura when I embarked on my course of perestroika and glasnost.
But the Politburo panicked for the first time when in 1989, in the
first free elections in the then Soviet Union, 35 district and regional
secretaries of the KP [Communist Party] simply lost, although they had all
the means of power and the media in their hands.
Some members of the Politburo then were very hard on me, which I
simply did not understand. But it gave me a foretaste of what was to come.
Welt: You have passed through high and low points in your political
life. What was your worst and your best moment?
Gorbachev: I have 40 years of life in politics behind me. So it is
difficult to answer this question.
My time as KP regional secretary in Stavropol was very happy for me,
because I set many things in motion there. That time also shaped me
Overall, I must say: I have been very fortunate. For who ever gets
the chance to push through such far-reaching changes, changes which are now
linked in the whole world to the concepts of perestroika and glasnost? This
process of perestroika and glasnost is by no means completed. It is only
The most horrible moment for me was certainly the coup d'etat. At that
time, we had a new Union treaty practically ready for signing, which
provided for the transformation of the Soviet Union into a federation of
democratic, independent states. That went to hell overnight.
Welt: What role did President Yeltsin play?
Gorbachev: Whoever wants to assign me the decisive role in the
downfall of the Soviet Union does not have history on his side. All
documents prove: I did everything possible to preserve the Union. Yeltsin
was the driving force. He had early on pursued Russia's autonomy. I was
to play the role of scapegoat.
But the picture is changing. In television discussions [in Russia],
it is now being debated what actually happened at that time.
Welt: You are among the very few heads of state in world history who
have accepted their own loss of power in order to effect a change in the
system. Have you regretted this decision?
Gorbachev: No. I am satisfied. Totalitarianism in Russia is now in
the past, Stalinism has disappeared. My country is free, it has freedom of
religion and speech, there is freedom to travel.
When Russia finds its way out of the present crisis, much will have to
be done yet. But despite the attempts of the present regime to curtail
some of these freedoms, this process is unstoppable.
Welt: Did you have the vision of a radical reform already when you
entered politics as a young man?
Gorbachev: No, that was a very long process. I was a good and
believing communist. But the more I learned about the country, the more
deeply I understood the inner structures, the clearer it became to me that
we were in dead-end street, although the Soviet Union had become the most
powerful country in the world.
Due to totalitarianism, the country lived in a kind of mental serfdom.
Perestroika was not some kind of inspiration, not a Messianic mission. 
Like Leonid Brezhnev, I could have gone on like that for another ten or 20
years. The regime could have managed that.
Welt: You say that perestroika is not yet completed, it is only
interrupted. What else must still happen?
Gorbachev: Russia's future lies in freedom and democracy. It is also
important how the state fulfills its social responsibility. But look at our
country: the economic course has failed, culture and science languish,
economic relations with our neighbors have broken down.
The consequences of the breakup of the Soviet Union have not yet been
overcome by far. The great upheavals in world history always take time. 
In China, the reform process has already lasted 25 years. And how much
time did I have?
Welt: Mr Gorbachev, how could Russia have better coped with the
present financial crisis?
Gorbachev: True, we have primarily an economic and financial crisis.
But behind it stands a political crisis.
Yeltsin cannot admit that he made a mistake. Yeltsin is by no means a
villain or a puppet for someone whose plans he is implementing. No, his
concept of detaching Russia as the most powerful republic, at the expense
of the disintegration of the Union, has failed.
I have always warned against it and had to put up with severe personal
disadvantages. But that is past.
To save Russia now, the present leadership team would have to be
replaced. I also believe that Yeltsin is afraid. He does not know how to
go on.
Welt: Who will succeed him?
Gorbachev: If the situation does not get out of hand--and this danger
undoubtedly exists--and if we use the breathing spell given us by the
International Monetary Fund, then there could be a democratic process of
change in power.
There are definitely pretenders: Lushkov and Lebed have probably
prepared themselves best so far. Chernomyrdin and Yavlinski probably also
have hopes, but they will be forced to look for coalitions. But I could
well imagine that totally new constellations arise. There are very capable
people among the governors.
It will become really bad only if the situation in Russia gets out of
control. It is very difficult to predict what will happen then.
Welt: Will it get even worse?
Gorbachev: The crisis in Russia has not yet hit rock bottom. In my
country, a new class of oligarchs has arisen which has made a lot of money
with speculations.
But they have never experienced industry from the inside. They do not
know how a country's economy really functions. Therefore, they depend on
the specialists of the old nomenklatura who thereby are again rising to the
It would be important for Russia that these new power structures earn
a capital of trust among our own people, and also abroad. There are no easy
solutions for resolving the problems. There must be painful cuts. There
are only the bad and the very bad variants for the way out of the crisis. 
But whatever Yeltsin is saying, no one reacts. Therefore, what we have at
present is above all a crisis of power.
Welt: Who would you personally consider capable of leading Russia out
of the crisis?
Gorbachev: The Russians themselves must decide that. However, I will
not stand aside, I will give my advice. I shall say that the power
concentration in the office of president as a kind of super-presidency
republic is not good, and that we shall have to change our constitution
again in order to cut back the powers of the president.
Welt: Could you imagine assuming once more a political office in the
reconstruction of your country?
Gorbachev: For a while, I was a kind of dissident in my homeland. But
now I have been asked this question several times. I have always said: no,
I won't do that. If desired, however, I shall not refuse to give my advice
and help. But I believe that my main mission has been fulfilled. Fate
does not give everyone such a chance--but neither is everyone so sorely
tried by fate.
Welt: How would a change of government here affect German-Russian
Gorbachev: Quite independent of the election result in Germany, our
two peoples must use their historic chance to expand and deepen relations. 
Chancellor Kohl will continue his policy if he is reelected. But Gerhard
Schroeder will also continue this course in principle. I have no doubt
about that.
Welt: Would you wish Helmut Kohl to remain chancellor?
Gorbachev: Actually, I had thought he would leave on his own. He has
accomplished a great deal for Germany. The greatness and wisdom of a
politician are also demonstrated by how and when he goes. But he has
decided differently--and he will be better able to assess the situation
than I.


Moscow Times
August 21, 1998 
EDITORIAL: Pay Workers, Then Pay Investors 

When a Western company is declared bankrupt and the courts step in, the 
company's employees are among the first creditors to be paid. 

Not so in Russia. Although the government was only this week broadly 
recognized as in default, it has actually been in this state for years. 
The only difference is that until now, those going unpaid were 
rank-and-file citizens -- teachers, miners, nuclear power plant workers 
-- whereas now, those being cheated are financial institutions, a third 
of them foreign. 

Russian workers are owed about $10 billion in back pay, much of it 
directly or indirectly by the government. Millions have had to 
compromise on staples like food, clothing, education and health care. 
But ordinary people don't fund expensive election campaigns run by the 
likes of Boris Yeltsin or Bill Clinton, and they do not own television 
stations and newspapers. Up to a point, they therefore can be -- and 
have been -- ignored. 

Holders of Treasury bills are owed about $50 billion, a debt that is now 
being actively restructured. They have for years earned excellent, at 
times fantastic, returns. But T-bill holders fund politicians and own 
media; they are never, never ignored. 

Among major T-bill holders are the so-called oligarchs. For years they 
have grown fat by siphoning off government budget streams and 
privatizing the nation's key resources -- oil, gas, precious metals -- 
for next to nothing. 

The government is broke not only because of "Asian flu" and dropping oil 
prices, but also thanks to that same corruption and to a chronic 
unwillingness to adopt a realistic national budget. Had Russia been more 
cleanly and responsibly run, the government would not now be breaking 
its deal with T-bill holders. 

Then again, the government's borrowing has been expensive, and the money 
earned too often used wastefully. And T-bill holders share blame for 
this. They were sophisticated enough to understand the level of state 
corruption. They knew workers were owed billions. Yet they whistled 
their way past the graveyard and quietly raked in their returns. 

Now Uneximbank and CS First Boston are suddenly in the same boat as the 
miners and teachers: All owed by a government with near-empty pockets. 
So who ought to get paid first? The workers. T-bill holders took a 
calculated business risk. Workers lacked that luxury of choice; they 
simply weren't paid. 

Foreign lenders and governments ought to get behind this simple moral 
principle, and encourage Russia to put its own people at the head of the 
line. Angry miners sit down on railroads; can we expect more 
constructive behavior from international lenders and leaders? 


Date: Thu, 20 Aug 1998
From: Center for Civil Society International <> 
Subject: Sexual Culture and Behavior in Russia (ASI #29)

CCSI periodically receives special "info-analytical" bulletins from the
Agency for Social Information, its partner in Moscow. These bulletins
contain in-depth articles on themes related to Russia's third sector; for
example, prison reform, the AIDS crisis, or crime. The following excerpts
were taken from ASI's Special Bulletin No.29 on sexual culture and
behavior of young Russians. The bulletin contains four articles:

* the results of a survey conducted among Moscow State University students
by the Center of Population Research;
* a comparative study of behavioral differences among Swedish and Russian
* "sex profiles" of men and women in Russia created by Russian and Finnish
sociologists from Helsinki University and the Independent Institute of
Sociological Research in Saint Petersburg; 
* a discussion on communication between sexual partners by Yekaterina

Excerpts from "Sexual Culture and Sexual Behavior", ASI Special Bulletin
No. 29, translated by Maria Kozhevnikova

by Mikhail Denisenko, Center of Population Research

Surveys on sexual and social behavior were conducted at Moscow State
University as early as 1905 and 1923. The main goal of the present survey
was to find answers to the following questions:
--What kind of sexual behavior is prevalent among young people today, what
are the circumstances under which their first sexual encounters take
place, what are their pre-conceived attitudes toward sex?

--How aware are young Russians of risks associated with AIDS and its

--What do they know about contraception, abortion and what are their views
on marriage and pregnancy?

The questionnaire was compiled in such a way that sociologists could
develop social and demographic profiles for the surveyed, e.g.,
information about their religious beliefs, marital situation, the number
of sexual partners, use of contraception. etc.
The results of the survey demonstrated that on average Russian men
are likely to have their first sexual encounter earlier than their
European peers, whereas Russian women tend to begin such relationships
later that Western women. In Russia it is more customary for a women to
have a partner who is at least 6 years older, but young Russian men often
have their first sexual relationship with a female of a similar age. 
Students' knowledge about contraception was somewhat inadequate. 
The majority thinks that condoms serve only as a means of contraception
and do not see them as protection from STDs. Of those students who had a
steady partner only 35% used condoms and this figure was even lower for
those students who changed partners frequently (30%). Among students at
the Sorbonne (University of Paris) the percentages were 21% and 51%,
More than 28% of men and 16% of women in Russia will have had more
than 6 partners by the age of thirty... The majority of students in Russia
and Great Britain demonstrate a negative attitude towards male
homosexuality (63% of men and 44% of women in Russia and 68% of men and
52% of women in Great Britain). Young Russians however are more tolerant
towards lesbians than their Western counterparts.
Answers to questions related to AIDS revealed that Russian
students have two misperceptions about this disease. First of all, 20% of
Russian students believe that they can be infected through an everyday
contact, such as eating from the same plate with an HIV-positive person.
Secondly the majority of young Russians (70%) believe that they do not
face a serious risk of contracting AIDS from an occasional sex encounter
and more than 14% believe that such risks are fairly small even if
partners are changed often. The results of the survey showed that on
average Russian youth is less educated about AIDS and its risks than their
Western peers.

by Tatiana Yakusheva, Moscow State University

The attitudes of Russian and Swedish women toward sex reflect the
differences in their upbringing...Women in Sweden are more independent.
The majority of Swedish women live either by themselves or with their
friends and [ed. very few] women lived with their families. In the lives
of Russian women there is no 5-10 year interval during which they could
live independently as is customary with the Swedes. 14% of Russian women
lived with their grandmothers and they admitted that their grandmother
played an important role in their lives, whereas none of the Swedes lived
with a grandparent, and only 5% stated that their grandparents had a lot
of involvement in their lives.
In Sweden 34% of young women lived with their boyfriends, whereas
in Russia only 1% do that. For young Russian women personal independence
and success (career, money, good education) proved to be more important
than the so-called "traditional" values: family, marriage, power,
compliance, religion, children and patriotism. Career is one of the most
important things for 38% of Russian women and only 5% of Swedes, money is
important to 43% of Russians and 10% of Swedish women, marriage was more
important for Russian girls (29%) than for Swedes (8%). 
Family and love proved to be almost equally important both in
Sweden and Russia. Russian women are less likely to have an abortion if
they become pregnant by a person they do not love and they are prepared to
form a family for the child's sake. 
Russian women are more determined to be successful in their
professional careers because they want to break the dependency circle. At
the same time many Russian women still view marriage as a way to escape
parental influence.

To obtain the full Russian electronic version of ASI Bulletin No. 29, send
an e-mail request to Center for Civil Society International at The document size is approximately 110KB.


Russian opposition set for offensive on Yeltsin
By Timothy Heritage

MOSCOW, Aug 20 (Reuters) - President Boris Yeltsin's political opponents
promise a fierce attack on him and his government on Friday in a special
parliamentary debate on Russia's financial crisis. 

The president himself will be out of Moscow when the State Duma lower house
meets for an emergency session. He will be making his first public appearance
for a week by attending a naval exercise off the Arctic Kola peninsula. 

Yeltsin in particular is under fire over Monday's de facto devaluation of the
rouble because he had ruled out such a move just three days earlier. Russian
shares have been sliding all week and the rouble has been losing value day-by-

``Nothing can be solved without Yeltsin's resignation,'' Communist Party
leader Gennady Zyuganov, whose opposition party is the dominanant force in the
Duma, told reporters on Thursday. 

At the other end of the political spectrum, the liberal Yabloko is also

``Yabloko believes the president is not making decisions that could help
resolve the crisis and his assessment of the situation is very far from
reality,'' Yabloko leader Grigory Yavlinsky tolds a news conference. 

The Duma, which is interrupting its summer vacation to hold the emergency
session, is widely expected to criticise the government, the central bank and

It could press for widespread sackings and urge Yeltsin and Prime Minister
Sergei Kiriyenko to step down. 

The criticism will sting, especially as many of the deputies' comments will be
seen on television news programmes across Russia. But any Duma resolution will
be non-binding and unlikely to do the authorities any direct harm. 

The deputies say the crisis, which has continued despite a multi-billion-
dollar international bail-out, is largely caused by mismanagement by political
leaders who have left millions of workers unpaid for months. 

The government and the Kremlin say the crisis is to a large extent caused by
factors they cannot control -- economic problems in Asia and a fall in world
oil prices, Russia's main export item. They say tax evasion deprives them of
vital funds. 

Yeltsin has said nothing in public since he visited the provincial city of
Novgorod on August 14. He has a chance to hit back at the criticism and to
rally the support of the military on Friday in Murmansk, the main city on the
Kola Peninsula. 

He will watch an exercise involving about 30 vessels, a nuclear submarine and
30 planes and helicopters, defence officials told Russian news agencies. 

``It is very important for Yeltsin in this unstable time to have the support
of the military,'' said defence analyst Pavel Felgenhauer. 

``The military is the biggest contingent of people owed money by the federal
government. Many of them have not been paid since April. He's going out there
to say that he understands their problems. That's becoming a priority.'' 

He might also face some awkward questions. The region's inhabitants live in
freezing darkness for two months of the year and no longer have the privileges
they enjoyed in Communist times. 


The Independent (UK)
21 August 1998
[for personal use only]
Rupert Cornwell - Here's a novel idea: the West takes over Russia's 

Reykjavik 1986, when Mikhail Gorbachev and Ronald Reagan came within an 
ace of renouncing nuclear weapons in their entirety? Or Malta 1989, 
where Gorbachev and George Bush pronounced the Cold War over? Or, for 
readers with even longer memories, the Yalta and Potsdam conferences, at 
which Stalin and the Americans carved up the post-war world ? Well, next 
month sees the linear descendant of those epochal encounters. Presidents 
Clinton and Yeltsin are to hold a summit in Moscow. A meeting of the 
degenerate and the dispossessed, you may say. Oh for the great men of 
yesteryear, those of us reared in the bipolar world of rival superpowers 
are tempted to sigh. Now, the saddest aspect of the occasion will be its 
sheer lopsidedness. 

The current trivialisation of America's political debate may be 
regrettable, even dangerous. But the miasma that envelops Bill Clinton 
cannot obscure the fact that not since Britain at its Victorian apogee 
has one country called the shots like today's United States. And at this 
moment, when the gathering crisis seems financial rather than political, 
the embarrassment caused by Clinton's follies matters less than it 
might. Arguably indeed, the most powerful men in the world are the ones 
who control America's purse-strings: Alan Greenspan at the Federal 
Reserve and Robert Rubin, the Treasury Secretary. But Russia's 
degradation is in an entirely different league. 

Not that it is exactly a surprise. I remember arriving in Moscow for 
this newspaper in the frigid early January of 1987. I beheld the queues, 
the bleakness and corrosive shoddiness of everything in the capital of 
world Communism, and, like generations of correspondents before me, I 
asked myself, was this it? Was this what I had been raised to fear? Was 
this the mega-state whose GNP was computed by clever men at the Central 
Intelligence Agency to be the equal of America's own? So I imagined 
another and shimmering Soviet Union, a parallel secret country beyond 
the snows which we foreigners were never allowed to visit, where you 
would find futuristic cities, and terrifying technical virtuosity. Then, 
when Mikhail Gorbachev eased the rules, I went to the once forbidden 
industrial centres such as Chelyabinsk and Kemerovo. I saw obsolete 
factories spewing out pollution of every imaginable hue, to produce 
goods no one could afford. I saw at first hand places whose male 
inhabitants were lucky if they lived to 50. I realised at once that it 
would require half a century, and money undreamt of, if these people 
were to become like us. 

But the illusion lived on. As in the story of the emperor with no 
clothes, we witnesses and bystanders became accomplices in the deceit. 
At first the pretence was essential. Bush played the Soviet endgame with 
consummate skill. For that, rather than for his defeat of Saddam Hussein 
or for his daily massacre of the English language, we should remember Mr 
Clinton's predecessor. Bush was accused of being too passive. But he had 
grasped that ultimately even the US with all its might could do little 
to shape events. Never did he humiliate Moscow; never did he treat 
Gorbachev as anything less than an equal. That is one reason why one of 
the more brutal empires in history came to an end with but a handful of 
lives lost. 

But tact in excess, the continuing propagation of the lie, ultimately 
benefits no one. Russia was granted full membership of the G-8 as though 
it were one of the globe's financial heavyweights, not a beggar of the 
second rank, whose latest currency devaluation has not exactly sent 
tremors through new York, Frankfurt and London. And the charade goes on. 
American astronauts continue to tie their fates to Mir, that orbiting 
Intourist hotel of a spacecraft, again in the interests of preserving 
Russian dignity. 

Above all, there has been the spectacle of the International Monetary 
Fund bending its rules, time and again, to allow more billions to flow 
to Moscow, waiving conditions that it has imposed uncompromisingly upon 
Asian countries whose economic health is far more important to world 
financial stability than is that of Russia. The cost of such folly is 
now apparent. Sergei Dubinin, the head of the Russian central bank, 
admits that $3.8bn of IMF money has been lost, probably for good, while 
the fund has virtually run out of fresh money to lend. If those 
right-wing dinosaurs of the US Congress take a pretty dim view of this, 
for once you can hardly blame them. 

The inconvenient truth, which can be avoided no longer, is that the 
emperor is naked, that Russia hardly matters in world affairs in any 
positive, constructive sense. Its influence is almost solely negative, 
wielded by the veto and the refusal to co-operate. In that perspective, 
American policies might have been deliberately tailored to achieve the 
worst - above all Mr Clinton's foolish decision to expand Nato eastward. 
Moscow warned countless times against it - but still Washington seems 
surprised when the Russians play odd-man-out over Bosnia and Kosovo, 
oppose Western sanctions against Iraq, and play fast and loose with 
nuclear proliferation in countries such as Iran. 

Of all the indignities of post-Soviet life, this slide down the 
international league table has been among the most difficult for 
ordinary Russians to bear. Communism, for all its failings, offered a 
sort of a bargain, of privation at home in exchange for clout abroad. 
Now the privations, for all but a few, are worse than ever, and the 
might and respect have all but evaporated. In this dispirited, enfeebled 
land, shorn of its self-respect, Bill Clinton will arrive next month 
like Superman. But what is he to do there? 

For one thing, he might follow the example of George Bush and do 
nothing. Of course, the preservation and fostering of democracy in 
Russia is hugely important. But if no one quarrels with the goal, what 
means do we have to attain it? The IMF has promised $23bn, but not even 
double or treble that sum would do the trick in Russia - short of the 
politically impossible, the full-scale subcontracting of the Russian 
government and economy to Western management. Why otherwise throw good 
money after bad, when there are a score of more deserving recipients to 
be found around the world? 

That said, one tantalising historical precedent does exist. In 1867, 
America purchased the 600,000 square miles of Alaska from the tzars for 
a few million dollars. What about Russia now selling an even larger 
swath of Siberia to the US for a few trillion dollars, payable in 
instalments over several decades? Let me say at once that the idea is 
not mine. It was advanced, and not wholly in jest, by some academics a 
few years ago, when Russia's future was a matter for hope rather than 

But the scheme has a compelling, if simplistic, symmetry. Russia would 
be assured the colossal sums it needs, over the period it needs, to turn 
itself into a clean and modern country, without running up debts it can 
never repay. Western expertise would be able to exploit Siberia's huge 
resources. As for this further act of US expansionism - well, America 
can hardly become more powerful than it is already. Would Russia buy the 
scheme? Probably not. But only by asking will Mr Clinton find out. 


Chernomyrdin: Central Bank Should Have Defended Ruble 

Moscow, 19 Aug (ITAR-TASS)--After meeting each other at the State Duma
today Gennadiy Seleznev, chairman of the lower house of parliament, and
Former Prime Minister Viktor Chernomyrdin told journalists they had
exchanged views on the situation that has developed in the country since
Referring to the reasons for the meeting, Seleznev explained that
Chernomyrdin headed the Russia is Our Home movement and Russia is Our Home
is the second biggest faction in the State Duma. "Therefore, we exchanged
views on the situation in the country," the chairman of the chamber said.
He stressed that "the crisis is becoming worse and therefore fairly
effective steps must be taken."
Seleznev recalled that a special plenary session of the chamber will
be held on 21 August, at which "the deputies will receive detailed
information from Prime Minister Sergey Kiriyenko, Finance Minister Mikhail
Zadornov, and Central Bank Chairman Sergey Dubinin, so that we can decide
on future arrangements for the work of the government and State Duma in
extricating the country from the crisis."
Seleznev feels the government's priority should be "immediate payment
of all debts owed to the army and other power-wielding agencies and an
examination of the Pension Fund's condition." The chairman of the chamber
said another priority should be "indexation of pensions in the fourth
quarter of this year." "These will be priority measures," he stressed.
For his part, Chernomyrdin noted that "this is not the time to talk
about resignations, but about measures that must be taken urgently." 
According to the Former Prime Minister, it is important to ensure that "we
do not slide further." Chernomyrdin stressed that "the ruble should not be
devalued under any circumstances." "It is hard to understand why the
government and Central Bank decided to introduce this `floating corridor',"
Chernomyrdin said. He believes "all is not yet lost." Today the Central
Bank has the means to regulate the processes that have arisen, Chernomyrdin
remarked. At the same time, he said, "panic must not be allowed."
Chernomyrdin questioned why it was necessary to widen the currency band to
R9.5 to the dollar. "Seven rubles would have been enough," he noted,
adding: "Given the current resources of the Central Bank, the exchange rate
of the ruble against the dollar should not be allowed to rise above R7."
Chernomyrdin stressed that in his view "Russia has a chance of
surmounting the crisis, but this will require confidence in the


Russian Emigres Worry About Crisis
August 20, 1998

NEW YORK (AP) -- Seated in a classroom at the Shorefront YM-YWHA community
center in Brighton Beach, 65-year-old Vladimir Shapiro is supposed to be
learning English. Instead, he's worrying about his native country -- and the
two brothers he left behind.

Shapiro hopes his brothers are weathering the financial storm that has added
more woes to Russia's already weak economy.

``It's much worse than it was before,'' Shapiro said this week. ``No one knows
what is going to happen next.''

Shapiro moved to the United States five years ago, joining thousands of
Russian emigres in Brooklyn. His brothers, both engineers, are managing to get
enough food, he said, but they are struggling. He wants to help, but at this
point can offer ``only moral support.''

The recent devaluation of the ruble, and the instability of Russia's banking
system and stock market have heightened worries among many Russian expatriates
in the United States.

The Russian government last week allowed the ruble to devalue by up to 34
percent. For many people, however, that brought recollections of the rampant
inflation of the early 1990s, when the country switched from a communist
command economy to a free-market one.

Then, the ruble's value plummeted from about six to the dollar to a few
thousand to the dollar. ``Right now, the changes are on the order of 20
percent. It's not a question of being wiped out,'' said Ilya Lapshin,
publisher of a Boston-based Russian newsletter.

Mark B. Levin, executive director of the Washington-based National Conference
on Soviet Jewry, said many emigres from the former Soviet Union are watching
the situation closely for political reasons as well.

He worries that if Russia's financial situation is not stabilized soon, ``the
blame could very well be turned in a certain direction, namely the Jewish

Many emigres still have family back in Russia. Especially for the elderly
there, the devaluation can only make things harder.

``It's a very bad situation, very bad for people with low income,'' said Raisa
Khaimchayev, a former Muscovite living in Brighton Beach.

She still has a sister-in-law, niece and grandnephew back in Moscow. They say
extra items are scarce. ``I try to send things to the boy,'' Khaimchayev said.

Sergei Alievsky, editor of the Boston-based Russian Yellow Pages, said most
emigres are concerned about Russia's financial situation but are taking a
wait-and-see attitude. He thinks things can easily get worse.

``Everyone thinks that the crisis will last another couple of years,'' said



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