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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

August 22, 1998   
This Date's Issues: 2320  2321


Johnson's Russia List
#2321
22 August 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Fred Weir in Moscow on the latest.
2. The Economist editorial: Russia devalued.
3. Reuters: Upper house speaker defends Yeltsin and PM.
4. Bloomberg: Russia Sees Crisis Worsening; Duma Calls for Change.
5. New York Times: Michael Wines, Yeltsin and Crew Are Sinking Like 
the Ruble. (DJ: !)

6. New York Times editorial: Russia's Environmental Dissident.
(Nikitin).

7. RIA Novosti: RECENT WORDS OF ALEXANDER LEBED ARE 'PROVOCATIVE LIES', 
SAYS MAYOR LUZHKOV.

8. RIA Novosti: YURI LUZHKOV REJECTS TO HEAD GOVERNMENT OF PUBLIC 
CONFIDENCE.

9. Journal of Commerce: Suzanne Possehl, Russia's Far East goes its 
own way.

10. Itar-Tass: Novgorod Governor Views Situation as 'Power Crisis.' 
(Mikhail Prusak).

11. RFE/RL: Paul Goble, The Struggle For Politics.]

*******

#1
From: fweir@rex.iasnet.ru
Date: Sat, 22 Aug 1998 14:43:24 (MSK)
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT Aug 23) -- Russian politics are spiralling into
confrontation as the opposition-led parliament continues an
emergency session, requested by the Kremlin to pass urgent anti-
crisis legislation, that has instead moved to censure the
government and urge President Boris Yeltsin to resign.
"Russia has entered a period of very serious financial
crisis," Prime Minister Sergei Kiriyenko told the special
assembly of the State Duma, Russia's lower house of parliament,
on Friday.
"It's very unpleasant to take responsibility for the
unpopular actions, but there is no pleasant and popular way out
of the crisis."
But the Duma appears in no mood to pass the 17 draft laws
the government says are needed to raise taxes, slash spending and
halt the collapse of Russia's public finances.
Instead, deputies seized the opportunity Friday to pass a
resolution, by 245 votes to 32, calling on Mr. Yeltsin to quit.
The usually pro-government Our Home is Russia party and the
liberal Yabloko party joined Communists in voting for the
measure.
"The country is in a deep crisis and the president is not
taking measures to protect the constitutional rights of citizens.
This has created a realistic threat to Russia's territorial
integrity, independence and security," the resolution said.
"The State Duma recommends that President B. N. Yeltsin stop
fulfilling his presidential powers before the end of his term."
The resolution, which is not legally binding under Russia's
president-centred Constitution, was greeted with derision in the
Kremlin.
"People seem to forget that Russia already has a president,"
the official ITAR-Tass quoted Mr. Yeltsin as saying.
But analysts say the situation is dire. Russia's worst
economic crisis since the collapse of the Soviet Union grows
harsher by the day while parliament appears to have abandoned
any semblance of cooperation with the government.
The Duma is slated to continue its emergency session on
Tuesday.
Communist leader Gennady Zyuganov, whose party controls half
the seats in parliament, said he has collected the necessary 90
signatures of deputies to place a motion of no-confidence in the
government before the session. And he said the Duma must accelerate a 
process launched two months ago to impeach Mr. Yeltsin.
"We are now in a new situation that has brought Russia to
the edge of an abyss," Mr. Zyuganov said.
"Russia has devalued itself to the point where a single
multibillionaire can buy it. This is the full collapse of the
course carried out in the past seven years," he said.
Despite a $4.8-billion cash injection from the International
Monetary Fund barely a month ago, the Russian government was forced 
to stop defending the battered rouble last week and declare a
moratorium on repaying domestic and some foreign debt.
Experts say the plunging rouble threatens a wave of bank
failures and a new round of heavy price inflation for long
suffering consumers.
Russia's main stock market index has crashed from almost 600
points a year ago to just 82 points at its close on Friday.

*******

#2
The Economist
August 22, 1998
[for personal use only]
Editorial
Russia devalued 

IT HAS not been a good week for Russia. The bundle of measures thrown to 
the financial wolves on Monday amounts to the end, for the time being at 
least, of all prospects of further economic reform. It may also mark the 
start of a political degeneration that sees the country slide towards 
nationalism, autocracy or something nastier. It consigns to the dustbin 
the last boast of the government’s battered reformers, that their 
policies have at least brought currency stability and steady prices. And 
it leaves Boris Yeltsin, who has presided over one shambles after 
another, looking ever more inadequate. 
A currency devaluation does not, in itself, automatically mean bad news 
for a country; sometimes it can be a tonic. Nor is a moratorium on debt 
repayment necessarily a sign of collapse. In Russia’s case, however, 
these measures (see article) are poorly suited to remedy the economy’s 
ills and, coming after nearly a decade of extreme hardship, are bound to 
deepen most Russians’ cynicism about their political masters. They have 
been imposed, it should be remembered, only four weeks after the IMF and 
other foreign lenders agreed on $23 billion-worth of props for the 
Russian economy, and only three days after pledges from Mr Yeltsin that 
there would be no devaluation and vows from his ministers that all debts 
would be honoured. What went wrong? 
The short answer is that much of the lending has gone not to guarantee 
the deposits of deserving savers, nor even to pay the pensions of 
impoverished old folk or the wages of unpaid miners. Rather it has been 
squandered, or perhaps stolen. That hardly represents a change, but nor 
has it done anything for confidence in the system, and that, after all, 
was the problem the IMF agreement was meant to fix. That deal was a 
worthy bet, that time could be bought while new reforms would rebuild 
institutions and raise tax revenues. But confidence continued to ebb, 
the banks began to teeter and the men who run them—the “oligarchs” who 
paid for Mr Yeltsin’s re-election in 1996 and have gobbled up quantities 
of privatised assets—began to squeal. Thus Russia’s true priority 
re-emerged: these banks and their owners are now to be saved. 
The danger is that the loss of confidence will continue. If so, the 
rouble—freed supposedly to float, but in reality to sink—could merely 
gurgle on downward, the banks could be besieged by depositors large and 
small and, if no more credit from abroad is forthcoming, the government 
could be tempted to resort to the printing presses to meet their 
demands. That is the road to hyperinflation, which Russians experienced 
as recently as 1992 (when, in December, year-on-year inflation reached 
2,500%), by which time they had seen their savings vaporised. Even if 
this is averted, import prices will surely rise, giving an inevitable 
impetus to inflation. Foreign investors, meanwhile, will have had a 
cautionary shock from the devaluation, just as lenders will have from 
the debt freeze. In other economies, some of these disadvantages might 
have been compensated for by a boost to exports, but Russia is at 
present incapable of producing much that foreigners want to buy except 
oil and gas, and even the energy industry is badly in need of foreign 
investment. 
Such a grim economic outlook has a grim political counterpart. Even 
before the latest debacle, nationalist and communist candidates were 
manoeuvring to succeed Mr Yeltsin in the presidential election two years 
hence, if not before. Russians had plenty to complain about: a 
government so incompetent at collecting taxes that it could provide few 
services; a payments system so constipated that soldiers, miners, 
teachers and a host of other workers went without wages; appalling 
living standards even for those in work; ill-equipped hospitals, 
overcrowded prisons, pollution, early death. Plenty of politicians are 
ready to offer remedies for these ills. Some exploit nostalgia for the 
certainties of the Soviet past; many attribute Russia’s troubles to 
unbridled capitalism and market economics; few are friendly to the West. 

Good aim, bad execution 

It was to forestall the rise to power of such politicians, and to keep 
Russia on some sort of democratic, capitalist path, that the West, 
through the IMF, has been ready to lend it money. The aim was, and 
remains, admirable, but the policy has not worked. The trouble is that, 
though the Russian government has been able to put forward plausible 
reformers like Anatoly Chubais, it has not been able, or perhaps 
willing, to use western money for proper ends. Quite simply, Russia 
lacks institutions and officials capable of applying large quantities of 
money honestly and efficiently. The IMF was right to extend a helping 
hand, but it should have insisted that the money it was providing was 
properly spent. 
If lending is now to resume, it must only be on the strictest of terms. 
That should mean explicit conditions about what the money is to be used 
for—for instance, to guarantee small deposits in commercial banks. It 
should also mean stern supervision of how it is spent, preferably by 
appointing foreigners to run the banks in question. Similar oversight 
over the tax and customs services will have to be imposed if any support 
is to be given to the balance of payments. 
And if the Russians say no? Or, just as likely, say yes but mean no? 
Then the West should also say no. The West has an interest in promoting 
democracy and market economics in Russia, though it stands to lose much 
less than the Russians themselves if these concepts fail to take root. 
It also has an interest in seeing a country that remains infested with 
nuclear weapons peaceful and non-belligerent. But it would be wrong to 
assume that it is in the West’s power to bring all this about, certainly 
not through economic assistance alone. The unfortunate truth is that 
Russia is condemned by its own history, and its own people, to a period 
of acute unhappiness: all happy families resemble one another, Tolstoy 
might have written, but the Russian family is unhappy in its own way. In 
the end it will be Russians, not foreigners, who bring its period of 
misery to a close. 

********

#3
Upper house speaker defends Yeltsin and PM
By Timothy Heritage

MOSCOW, Aug 22 (Reuters) - The speaker of Russia's upper house of parliament
rallied behind President Boris Yeltsin and Prime Minister Sergei Kiriyenko on
Saturday, dismissing calls for them to resign over the country's financial
crisis. 

``I think it would be premature to remove the government,'' Yegor Stroyev told
Interfax news agency, one day after the State Duma lower house criticised
Kiriyenko and adopted a resolution urging Yeltsin to quit. 

``The difficulties and mistakes we are now suffering are the result of the
irresponsible work of the previous government and errors regarding the GKO
(treasury bill) market.'' 

Stroyev, 61, defended Yeltsin as he has done regularly since becoming upper
house speaker more than two years ago and called for cooperation to take the
place of confrontation. 

``We've had enough state coups,'' he said. ``We must learn to reach
constructive agreements.'' 

The opposition-dominated Duma slammed the four-month-old government on Friday
at a special session on the crisis. It particularly attacked this week's de
facto devaluation of the rouble and what many analysts said amounted to a debt
default. 

The Federation Council, as the upper house is known, holds its own special
session on the crisis next Friday. It is made up of regional leaders and so
gives a chance for Russia's 89 regions to express their views of the economic
problems. 

Russian newspapers said trust in Yeltsin was at a new low after months of
crisis in which shares have sunk and treasury bill yields -- the return
investors demand for lending money to the government -- soared. GKO debts are
now to be restructured. 

``It is hard to imagine a more unpleasant political situation in Moscow for
the president following yesterday's Duma session,'' said the liberal
Nezavisimaya Gazeta. 

``The confrontation line between the president and parliament brings to mind
the start of the autumn of 1993, but now the president's position is in some
ways weaker.'' 

Yeltsin faced a stand-off with hardliners in parliament in 1993 which he
resolved by using tanks. Yeltsin had much more public support then than now. 

Because of the fall in his support, there was a hollow ring to a written
statement issued by Yeltsin on Saturday to mark the anniversary of the failed
coup against Soviet leader Mikhail Gorbachev in 1991. 

Despite his opposition to Gorbachev, Yeltsin helped rally people against the
coup plotters, and the anniversary of the failure of the coup is now known as
Russian State Flag Day. 

``Under this flag we united seven years ago in a striving for changes, renewal
and truth,'' Yeltsin said in his statement. 

Russian newspapers noted that Yeltsin's opponents now say renewal and change
can be achieved only if he steps aside. 

``Today the president's political weight has just about reached a minimum and
the reserves of trust in him among his opponents have practically run out,''
the respected Kommersant Daily newspaper said. 

Foreign leaders are showing their concern. They are worried the financial
problems could spark concerted labour or social unrest in Russia and that the
crisis could have a knock-on effect on other countries' economies. 

German Chancellor Helmut Kohl said on Friday he would discuss the situation
with Yeltsin by telephone on Saturday. French President Jacques Chirac had a
similar telephone conversation with Yeltsin on Thursday. 

U.S. President Bill Clinton discussed the crisis with his advisers in
Washington on Friday, the White House said. 

``They've been very closely monitoring the situation in the Russian markets
and the Russian economy. Obviously the president wants to be very well-briefed
on that subject prior to his trip to Moscow,'' a spokesman said. 

Clinton and Yeltsin meet for a summit on September 1 and 2. 

*******

#4
Russia Sees Crisis Worsening; Duma Calls for Change

Moscow, Aug. 22 (Bloomberg) -- Russia's financial crisis spilled into the
political arena as leaders of the Communist- dominated parliament threatened
to try to bring down Prime Minister Sergei Kiriyenko over his handling of the
country's economy. 

The prospect of a power struggle further unnerved foreign investors, who
dumped Russian bonds and stocks amid mounting concern over just how much
they'll lose through the country's plan to restructure $40 billion in ruble
debt. 

The yield on Russia's Eurobond due in 2001 soared 854 basis points to 54.531
percent. The bond is trading at 34.125 cents on the dollar, less than half its
value two weeks ago. The benchmark RTS stock index slid 5.6 percent and is now
down 79 percent in dollar terms this year. 

``This crisis has only just begun,'' Prime Minister Sergei Kiriyenko told the
Duma, the lower house of parliament. 

The political showdown underscores just how difficult it will be for the
government win approval of a plan to bolster its finances, and comes ahead of
a week of domestic and international loan negotiations that promise to spark
further investor concerns. 

On Monday, the government has promised to detail just how it plans to swap
ruble debt expiring through the end of next year for longer-term securities.
The plan, which is expected to offer investors less than 100 cents on the
dollar, has drawn widespread criticism from foreign investors who fear they
won't be treated equally with Russian owners of the debt. 

At the same time, the government will convene a meeting between Russian
private borrowers and their western creditors in a bid to reschedule an
estimated $40 billion in additional debt. Payments on those obligations were
suspended for 90 days last Monday, the day the government announced the ruble-
debt rescheduling and said it would allow the ruble to fall by as much as a
third this year. 

The ruble has since declined by more than 9 percent and is now trading at
7.005 per dollar. 

``Investors are coming more and more to the view that problems in Russia have
always been political, and the symptoms have been the economic and financial
chaos that has ensued,'' said Philip Manduca, chief investment officer at
London-based Eldon Capital Management, with $100 million invested in Russia. 

Credit Suisse 

Credit Suisse Group shares fell 3.5 percent after a newspaper report -- which
the bank denounced as preposterous -- said its investment banking unit may
have lost as much as $1.5 billion because of the financial turmoil in Russia.
Germany's biggest banks met to discuss their exposure to Russia. German banks
held loans to Russia of more than $30.5 billion in 1997, according to the Bank
for International Settlements. 

The Duma opened an extraordinary session today with speeches from Kiriyenko,
central bank chief Sergei Dubinin and Finance Minister Mikhail Zadornov on the
country's financial crisis. 

The Duma then approved a draft resolution calling for Yeltsin to fire the
government, a decision which isn't legally binding, and another resolution
calling government and central bank policies unsatisfactory. 

The Communist Party, the leading party in the Duma, also collected enough
signatures to force a vote of confidence in the government, expected early
next week. 

If parliament votes against the government, Yeltsin can either dismiss
Kiriyenko and his four-month-old cabinet or ignore the vote. If the Duma
approves the same resolution again, within three months, Yeltsin must either
dissolve the Duma or dismiss the government. 

`Time for Change' 

``It's time for major political change,'' said Gennady Zyuganov, head of
Russia's Communist Party. ``The government is not in any condition to work.'' 

If the Duma fails to back government measures, Kiriyenko said, the government
is prepared to proceed on its own. 

Speaking on Bloomberg Television, Anatoly Chubais, Russia's envoy to
international lenders, said investors should be concerned about the political
developments. 

``The government decided (on) dramatic steps in order to avoid a `alternative
political regime,''' Chubais said. 

``We are either going to see Yeltsin bite back and bite hard in the next few
days, dilute the democratic process and establish a more authoritarian
implementation'' of government measures, or presidential elections may be
called by year-end, Manduca at Eldon Capital said. 

Currency Controls 

The emergency measures unveiled Monday, which were largely intended to avoid a
string of bank failures, haven't been enough, government officials said.
Zadornov said stricter currency controls are needed to stabilize the financial
situation, as well as laws to protect citizens' bank deposits. The government,
he said, must control import contracts because in some cases money is leaving
the country without any goods coming in, a commonly used way of shifting
capital out of a country without drawing too much attention from authorities. 

Some Russian leaders warned that the government will pay a heavy price for its
actions in the form of sharply-reduced confidence among foreign investors and
Russians alike. 

``No matter what they do, the government won't have the faith of the market or
the population,'' said Alexander Shokhin, head of the Our Home is Russia
parliamentary faction. 

The government ``cut itself off from both its domestic and foreign resources
by declaring default and devaluation at once,'' said Grigory Yavlinsky, head
of the Yabloko party. 

Russians have rushed to banks this week to exchange rubles for dollars,
putting further pressure on the nation's biggest banks that are already short
of cash to meet payments. Investors said the government risked cutting itself
off from further international financing. 

No Borrowing 

Zadornov said Russia now won't be able to borrow for a year and must depend
only on revenue it can collect. 

``We limited the possibility to borrow internally and externally,'' he said.
``We can count only on government- collected income.'' 

Later, central bank chief Dubinin told journalists the government is
negotiating with Western banks for loans guaranteed by the nation's reserves
of gold and platinum. 

The government's decision to let the ruble fall has allowed the central bank
to husband its dwindling foreign currency reserves. The central bank's
intervention to prop up the ruble this week, he said, ``is three times less''
than it had been in previous weeks. Central bank reserves stood at $15.1
billion as of Aug. 14, down from $17 billion on Aug. 7. 

The Duma called the extraordinary session to hear reports on the government's
ruble and debt restructuring measures. Next week, it's expected to debate
revenue-raising legislation it failed to adopt in July. The measures were
ultimately implemented by executive decree. 

Foreign lenders led by the International Monetary Fund that have pledged
Russia $22.6 billion in financing this year and next have tied disbursement of
loans to the government's success in improving tax collection and cutting the
budget deficit. 

Russia has already spent $3.8 billion out of the first $4.8 billion of the
loan to support the ruble. 

``Investments are not going to a country where officials can't decide what to
do,'' Kiriyenko said. 

******

#5
New York Times
22 August 1998
[for personal use only]
Yeltsin and Crew Are Sinking Like the Ruble
By MICHAEL WINES

MOSCOW -- The man who climbed atop a tank and led Russia out of communism in
1991 has scarcely been seen in public since his country's financial markets
and currency fell off a cliff last week. 
The big question -- for him and for the reforms he champions -- is whether
Russians any longer care. 
President Boris Nikolayevich Yeltsin, already deeply unpopular, now seems to
have sunk even lower in political and public esteem than his country's ruble.
The Duma, Russia's lower house of Parliament, voted 245-32 Friday to ask him
to resign. Newspapers are savaging him with headlines like, "The Devaluation
of the President." 
Political experts say the week's events all but abort prospects that
Yeltsin, now 67, might seek a third term in 2000. His top aides, a best-and-
brightest crew widely admired abroad, are now so tarred by failure at home
that their own political prospects are slight. 
In fact, there is nobody on Russia's political horizon who embraces the
president's westernized brand of economic policy and has a chance of winning a
presidential election. 
"There is nobody to continue the reforms," said Otto Latsis, the deputy
editor of the newspaper Noviye Izvestia and a highly regarded political
analyst. "We can only pin our hopes on some semi-miracle that, in two years,
Russia's savior may emerge." 
Latsis and others are quick to stress that predicting Russia's future is a
fool's job, and that Yeltsin in particular has risen from the dead before.
Still, the devaluation and debt restructuring of this week almost certainly
will mean inflation, recession and less government revenue at a time when
Russians are clamoring for stability, growth and billions of rubles in back
wages and pensions. 
None of that bodes well for market-style reforms or their proponents. To the
contrary, political experts say the crisis has strengthened the two left-of-
center politicians already regarded as the early presidential front-runners:
Alexander Lebed, the former general who now governs the vast Siberian region
of Krasnoyarsk, and Yuri Luzhkov, the canny mayor of Moscow. 
Both men are strong-willed, even authoritarian rulers. Though Lebed can be
unpredictable, both lean less toward free markets than toward centralized
control of the economy. Luzhkov has a smooth political style. Lebed is
rougher-edged but trying hard; his aides are discussing political and economic
cramming sessions with officials at Harvard University. 
Neither would be a president even remotely like the mercurial but
steadfastly Western-oriented Yeltsin. Nor would the other current major
contender, Gennady Zyuganov, the Communist who ran second behind Yeltsin two
years ago. 
Two other assumed candidates, Victor Chernomyrdin and Gregory Yavlinsky, are
more reform-minded, but neither has a large following. Chernomyrdin also
suffers because he was Yeltsin's prime minister during the birth of the
policies that led to this month's economic catastrophe. 
Friday, in the first hours of an emergency session on the fiscal crisis,
members of the Duma put aside Yeltsin's demands to overhaul the country's
Gordian tax system and spent several hours flaying him and his advisers. "I
think it would be a blessing if Yeltsin and his entourage resigned
voluntarily," Zyuganov said. 
Prime Minister Sergei Kiriyenko gave no quarter. Warning that the nation's
financial crisis has just begun, he said Yeltsin's team "cannot afford the
luxury of being a popular government." 
"I am criticized on the ground that the government has no political support
-- that is true," he said. "But let us honestly admit that there is no
political force in the country which is prepared to assume the responsibility
for the economy with elections not far off." 
Kiriyenko explicitly included the Duma among those forces, noting that
Parliament had refused Yeltsin's pleas to raise taxes or reorder spending this
summer, even though the government's debt payments alone were running 11
billion rubles a month above its income. 
Yeltsin, on vacation for five weeks now, has struck a strange pose through
all this. Almost a week ago, in Novgorod, he thundered that the ruble would
not be devalued and that he would not cut short his rest to return to Moscow
because that would be viewed as evidence of a "disaster." Within hours, both
events came to pass. 
One newspaper account of his visit to a Novgorod factory described Yeltsin
as confused, tempestuous and, at one point, gasping for air. Atop other
reports, including his seeming infirmity at last month's funeral for the long-
dead Czar Nicholas II and a visit to Sweden notable for his misstatements, the
weekend appearance raised new questions about Yeltsin's health and command of
events. 
The president seemed generally serene Friday in his only other recent public
appearance, to oversee naval maneuvers off the Arctic Circle town of
Severmorsk. He literally waved away the Duma's request that he quit, saying
the legislators did not appear to understand that Russia needs a president. 
Some outsiders say that while Yeltsin still holds the reins, able to veto
his aides, he obviously has lost steam. "It seems clear that Yeltsin has never
been weaker," said Rory MacFarquhar, a political scientist at the Russian
European Center for Economic Policy in Moscow. "It's clear he's confused. He's
not in a position to throw his weight around." 
For reformers, the problem is that Yeltsin, for all his problems, remains
the weightiest force they have. "Without his active support, it's hard to
imagine the reformers' making any serious changes," MacFarquhar said. 
Change is what they now need. Besides pushing the Duma into approving a
series of tax increases, the Yeltsin government needs, in Western economists'
view, to rein in a banking system controlled by some of the country's richest
and most powerful figures and supported by parts of the bureaucracy, including
the Central Bank. 
Both moves could be crucial to the economic course after devaluation and
debt restructuring -- and crucial to public opinion in the next election. The
question is whether a weakened Yeltsin can or will push them. 

*******

#6
New York Times
August 22, 1998
Editorial
Russia's Environmental Dissident

Few Russians can do more to help their country solve one of its most
perilous radioactive waste problems than Aleksandr Nikitin. Mr. Nikitin was an
engineer on a nuclear submarine in the Soviet Union's Northern Fleet and a
nuclear safety inspector in the Soviet, and then the Russian, defense
ministry. Later, he raised public alarms over nuclear waste left in the Arctic
by submarine accidents and haphazard disposal of spent reactor cores. But
instead of listening to Mr. Nikitin's recommendations, Russia is prosecuting
him for high treason and disclosure of state secrets. Amnesty International
considers him its first major Russian prisoner of conscience case since Andrei
Sakharov. His trial is likely to begin next month, underscoring the risks that
environmental activists face in a Russia whose security service and justice
system can still be twisted against dissidents, Soviet-style. 
Mr. Nikitin works for the Bellona Foundation, an environmental group with
offices in Norway and Russia. He was arrested in 1996 after contributing to a
Bellona book on the Northern Fleet's radioactive waste. He was jailed for 10
months, and has been confined to St. Petersburg for the past two years. While
the group was researching its report, the Russian F.S.B. -- the K.G.B.'s
successor -- raided its Murmansk office and confiscated all its materials. But
Bellona was able to reconstruct its research from open sources, which bolsters
its credible claim that it revealed no secrets. 
The indictment of Mr. Nikitin cites classified decrees that are still kept
from his lawyer, which violates the Russian Constitution and hinders his
defense. At least one was issued after Mr. Nikitin's arrest. He will be tried
in secret by a judge and two laymen, who will be chosen by the F.S.B. The
American State Department says that the facts of the case suggest his
detention was politically motivated. Vice President Al Gore has taken up Mr.
Nikitin's cause in meetings with Russian leaders, but has not raised the
matter in public. 
The attack on Mr. Nikitin has paralyzed Russia's few environmental groups,
which fear that the use of even public sources about sensitive issues or
affiliations with Western groups could open them to treason charges. The
nuclear and environmental disasters that the Soviet Union inflicted on itself
pose dangers that need to be cleaned up and removed. Mr. Nikitin is not an
enemy, but an ally in that struggle. 

********

#7
RECENT WORDS OF ALEXANDER LEBED ARE 'PROVOCATIVE LIES', SAYS MAYOR LUZHKOV

MOSCOW, AUGUST 22, 1998 /FROM RIA NOVOSTI CORRESPONDENT
YEKATERINA ISTOMINA/ -- Recent words voiced by Alexander Lebed,
governor of the Krasnoyarsk Territory, are 'provocative lies'
said Yuri Luzhkov, Moscow mayor. At issue are Lebed's words that
accuse Yuri Luzhkov of giving money to some media aiming to
bring governor Lebed failures to surface. Yuri Luzhkov sharply
brushed aside allegations that he had allegedly spent 'enormous
currency reserves' to buy up mass media.
According to Moscow mayor, governor Alexander Lebed
'seemingly fails to settle economic issues of his territory, and
tries to find a scapegoat located outside the Krasnoyarsk
territory.' With this in mind mayor Luzhkov wished the former
general 'to carry out his work more firmly, trying not to shift
his burden on other shoulders.' 

*******

#8
YURI LUZHKOV REJECTS TO HEAD GOVERNMENT OF PUBLIC CONFIDENCE

MOSCOW, AUGUST 22, 1998 /FROM RIA NOVOSTI CORRESPONDENT
YEKATERINA ISTOMINA/ -- Yuri Luzhkov, Moscow mayor, sharply
brushed aside the idea of Andrei Nikolayev, Duma deputy and
leader of the public political movement People Power and Labour
Union. The latter proposed the mayor to head the government of
public confidence. 'I have a lot of problems in Moscow that keep
me occupied and I can't ignore them,' Yuri Luzhkov told a RIA
Novosti correspondent. 

*******

#9
Journal of Commerce
August 24, 1998
[for personal use only]
Russia's Far East goes its own way
As Moscow struggles, its Far East turns to nations such as China, Japan 
and the United States for economic independence.
BY SUZANNE POSSEHL
JOURNAL OF COMMERCE SPECIAL

VLADIVOSTOK -- "No free tickets for military men because the Ministry 
of Defense has not paid its bills," reads a block-letter sign in the 
window at the Khabarovsk train station, on Russia's eastern border with 
China.

This sort of slap-in-the-face protest is a poignant indicator of just 
how far the Russian Far East is pulling away from Moscow as the central 
government can no longer afford the plump salaries and other niceties it 
once showered on this strategically important shore.

While Russia's capital boils with economic revival, the Far East is 
enduring a second year without salaries. An energy crisis has left 
villages and cities darkened and without water for most of the day.

Protests directed at Moscow wracked the region last summer. A year 
later, Moscow still has not paid what the region says it is owed. The 
debt skirmish, more an appendix to the old central accounting system 
than any real money owed, resembles the spat between Russia and Ukraine 
at the demise of the Soviet Union.

Separated from the capital by 6,000 miles of taiga and seven time zones, 
the Far East is largely untamed territory where Russians and many 
indigenous peoples are suspicious of Moscow, much like Alaska once was 
of Washington.

The rift cuts like a seismic fault along the eastern shore of Russia and 
includes 8 million residents, two of Russia's most important cities, 
Vladivostok and Khabarovsk, regions rich in oil, gold, timber, fur and 
fish, and territories that once belonged to China and Japan -- nations 
the Far East is now looking toward for economic camaraderie. 

What is happening in the Far East is a flashback to the early 1990s when 
the son of a wealthy Swiss merchant, Yul Brynner, was growing up in 
Vladivostok. 

There were as many foreigners, Europeans and Asians, as Russians here, 
and cross-border trade was fierce. The only difference today is that the 
Pacific Rim economy has widened to include the United States, South 
Korea and Australia. 

California wines, Australian beer, Italian negligees and French 
cosmetics are all for sale in Vladivostok, a city that in the last five 
years has become more like an Oriental bazaar than the crisp, Navy town 
it once was. 

Domestic production has dropped for several consecutive years, from $22 
million in 1996 to an estimated $5 million this year. But there are some 
bright spots. A cement factory to the north is starting to produce 
high-quality cement for several U.S. housing projects in the area. 

People abandon villages

Also good news for foreign exporters, the number of consumers 
concentrated in the cities is increasing as people abandon the villages.

The Far East, like the rest of Russia, has a growing middle class, able 
to buy cars and first homes. Their earnings -- from trade, tourism, 
service industries and light manufacturing -- are estimated to be 
between $500 and $800 a month, two to three times official salaries.

While still low in comparison to U.S. salaries, the buying power is 
significant.

South Korea, China, Australia, Japan and the United States are all 
gambling for stakes in this newly emerging economy, two-thirds the size 
of the continental United States and with the buying fever of college 
graduates having landed a first job.

According to Russian Customs, 30% of goods imported into the Russian Far 
East is from South Korea, 15% from the United States and 10% from China. 
The U.S. share has doubled since 1994 and represents $470 million, 
according to the U.S. Commercial Service in Vladivostok.

Geographically, the U.S. West Coast is well-positioned as a trading 
partner with the Far East. Through its trade office in Vladivostok, the 
state of Washington floods the region with hot dogs, raspberry wine, 
chicken and building materials. 

One-sided trade

So far, the trade remains one-sided, as the West Coast has little desire 
for Far East fur and timber. "The trade imbalance is growing," says Olga 
Romanjuk, director of Washington State's office.

Joint ventures have either bloomed or failed. The shining example is 
Coca-Cola. It has reportedly invested $20 million in its factory outside 
of Vladivostok and is about to invest another $20 million. Mars, the 
candy maker, has succeeded in making Snickers almost as venerated a name 
in villages as Lenin once was.

In a smaller joint venture, Bellingham Cold Storage of Seattle is 
operating a refrigerated warehouse at the Port of Vladivostok. Another 
venture, the cash-and-carry Giant, failed. The problems most joint 
ventures in the region face, says Ms. Romanjuk, are mismanagement, theft 
and the difficulties defining Russia's commercial and tax laws.

What ameliorates trade is the improving port infrastructure. 

"Vladivostok is expanding its container terminal and is in better shape 
than three years ago," says Andrei Akhalin, deputy general director of 
Fesco Intermodal Inc. in Vladivostok, a subsidiary of the Far Eastern 
Shipping Co.

The Port of Vostochnyi is now two ports, one operated in a joint venture 
with Sea-Land. The other handles domestic freight. Magadan is the 
trouble spot. 

"The port is falling apart. There are constant strikes, and the future 
is unclear," Mr. Akhalin says. Strikes have also slowed traffic along 
the Trans-Siberian land bridge.

While the ports are finally improving, U.S. exporters encounter tough 
competition, mainly from China, which enjoys reduced tariffs. 

South Korea, the region's biggest trading partner, expects an end to the 
Fesco and Hyundai shipping monopoly that kept container prices between 
the ports of Busan and Vladivostok at $1,000, as much as between Europe 
and the Korean port. "That will soon change," says Mr. Akhalin. 

Wanted: Russian partners

Excise taxes for U.S. goods are as much as 10% to 250%, added to a 
value-added tax of 23% and import tariffs of 14% to 15%. To avoid these 
tariffs in the past, U.S. exporters have sought Russian partners, but 
with the commercial laws still being written, many of these partnerships 
have ended in unresolved disputes.

"Many Americans are here now," Mr. Akhalin notes. "They are trying to do 
business. But they're not doing well. Only Russians who have offices on 
both sides (of the Pacific Ocean) are making it."

The situation with Russian customs has reached the point of absurdity. 
In order to avoid paying full tariffs, Russian importers of goods from 
Japan or the West Coast send sealed containers along the Trans-Siberian 
rails to Moscow where the containers are broken, duties paid and the 
merchandise shipped all the way back to the Far East.

Even with the cost of shipping an extra 16,000 miles added, it's cheaper 
because Moscow importers enjoy special privileges from customs in 
Moscow, says Mr. Akhalin. Consumers in the Far East end up paying from a 
third to double more for Japanese and U.S. goods.

"Moscow keeps its hand on everything," comments Derek Norberg, vice 
president of the U.S. Russian Investment Fund and director of its Far 
East office in Khabarovsk. "It's a conscious effort to boost Moscow's 
economy at the expense of the rest of the country. That's been Russia's 
history for hundreds of years." 

********

#10
Novgorod Governor Views Situation as 'Power Crisis' 

Moscow, August 19 (Itar-Tass) -- Governor of the Novgorod region of
the Russian Federation Mikhail Prusak regards the present situation in
Russia as "the crisis of power but not the financial crisis."
It is possible to find a way out of the current situation "only with
the help of a broad coalition by way of convening the Constitutional
Assembly", and this must be done by the president of the Russian Federation
who "has a good understanding of the situation," the governor believes who
recently received President Boris Yeltsin in Novgorod.
"Nobody but the president has the right to do this," Mikhail Prusak
told Itar-Tass. "Neither the upper house nor the lower chamber of the
Federal Assembly can do anything alone. Only the head of state together
with the parliament and the government can do this," he considers.
Today, on the seventh anniversary of the August putsch of 1991, the
governor said, on that day Boris Yeltsin made "an important and resolute
step for Russia's history."
And now Prusak is sure that "it is necessary to make the next one --
it is imperative to bring the form of the state system in conformity with
real life."
In view of the head of the Novgorod administration, Russia's state
system under the Constitution "has not corresponded with the present time
already for several years."
It was justified during the first post-Soviet era when it was
necessary to transfer from one system to another, he thinks.
"Now the next stage is needed -- the creation," Mikhail Prusak
explained. According to him, "we have been carried away too much by a
financial market, financial manipulations, different monetary methods and
theories, nobody has been seriously engaged in economics but only
distracted the population."
"It is folly to act now against a market economy, but taking part in
the market must be the interests of both a private person and the state,"
the governor noted stressing that for Russia "the most dreadful thing is a
vacuum of power."

*******

#11
Russia: Analysis From Washington -- The Struggle For Politics
By Paul Goble

Washington, 21 August 1998 (RFE/RL) -- Many post-Soviet countries are
finding it extraordinarily difficult to overcome a deep-seated hostility
they inherited from communist times to any political struggle rooted in
interests rather than ideology. 

But unless they are able to do so, many of them may find it almost
impossible to develop as civil societies with democratic political systems.
And instead, they may slip backwards on both counts. 

As Michael Urban points out in his recent book, "The Rebirth of Politics in
Russia," the Soviet system was profoundly "anti-political." That is, the
communists did everything they could to prevent the emergence and clash of
interest groups typical of civil society. 

Instead, the communist party operated on the basis of a fundamentally
corrupt system of clan-like organizations within the party nomenklatura,
the system of appointments that allowed party leaders to coopt and control
interests that would normally compete. 

And even the dissident movement that arose to oppose the communist system,
and to which many post-Soviet democrats trace their origins, did not so
much challenge this anti-political attitude as to form a mirror image of it. 

Denied the possibility of reaching out to interest groups by Soviet
repression, the dissident movement tended to attack the system as a whole
rather than advance the interests of a specific constituency. 

And consequently, both the communists and the dissidents pursued a kind of
either/or politics on the grand scale, one that was often emotionally
satisfying to those who practiced it but seldom led to the kind of less
exciting compromises that allow a political system to develop. 

When the Soviet system collapsed, many assumed that politics there would
rapidly evolve toward one based on interest groups and in which political
parties reflect specific constituencies. But that has not happened. 

As in Soviet times, few political figures have yet been able to reach out
to specific interest group constituencies. And consequently, they have
continued to rely on global rhetoric rather than the delivery of results to
advance themselves. 

And many presidents in these countries have played on the anti-political
attitudes of the population to present all political choices in equally
stark black-or-white terms and to build their own power at the expense of
often fractious parliaments. 

Some presidents in the post-communist countries have come to rely on clan
structures that are analogous to those that existed in Soviet times. 

While not based on a formal system of appointments as the nomenklatura was,
the emerging clan system in many post-Soviet states does have a number of
features in common with its communist predecessor. 

It is based on personal ties rather than constituencies. It is not
answerable to the public. And it is openly hostile to the representation of
interests through political parties that seek to find agreements through
compromise. 

In those post-Soviet countries where the clan system is especially strong,
civil society remains weak, and politics in the normal sense of
representing interests and constituencies remains largely impossible. 

Moreover, in those countries where the clans dominate political life, many
people are increasingly cynical about the possibilities of democratic,
interest-group based politics. Instead, those who stay focused on politics
often follow those with ideological agendas. 

And such developments have led many in these countries and abroad to doubt
whether a genuine democratic politics will ever emerge. 

But despite the problems that those struggling for politics in this sense
now face, there are three reasons for optimism. 

• First, in many of these countries society is becoming ever more diverse
and that diversity is demanding representation even if few political
leaders have either the understanding or the skills to respond. 

• Second, the problems facing the entire political class are now so great
that presidents and parliaments often are forced to cooperate and
compromise, a pattern that will also help to institutionalize a more normal
politics. 


• And third, in many of these countries competitive elections are leading
to a new class of politician, one that seeks to represent constituencies
rather than wants to express a commitment to one or another set of ideas. 

Consequently, the struggle for politics in the post-Soviet states is likely
to generate some victories as well as produce some defeats in the years ahead. 

*******





 

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