This Date's Issues: 2323
Johnson's Russia ListReturn
to CDI's Home Page I Return
to CDI's Library
August 24, 1998
[Note from David Johnson:
1. AFP: Kiriyenko swansong explains his "political suicide."
2. AFP: Chernomyrdin took premiership on condition of free reign.
3. AFP: Communist party chief slams lack of consultation over new premier.
4. Financial Times (UK): John Thornhill, RUSSIA: Yeltsin acts to save his
5. The Times (UK): Ekaterina Likhoda, From boom to bust. How one woman's
story illustrates all that is wrong with Russia.
6. Christian Science MOnitor: David Francis, Russia to Clinton: Bring Your
7. The Independent (UK) letter: Ravaged Russia.
8. The Times (UK) letter: Funds 'wasted' in Russian chaos.
9. VOA: Peter Heinlein, government change.
10. The Independent (UK): Andrew Garfield, Russia debt restructuring
'hanging in the balance.'
11. Nezavisimaya Gazeta: Svetlana ILYINA and Sergei MULIN, CHERNOMYRDIN
IS REHEARSING A "MAJORITY GOVERNMENT."
12. Reuters: Rules for appointment of Russian PM.
13. AFP: The five-month life of the dismissed Russian government.]
Kiriyenko swansong explains his "political suicide"
MOSCOW, Aug 24 (AFP) - In an interview granted just hours before his
abrupt dismissal, Russia's ex-premier Sergei Kiriyenko told Monday's
edition of the news weekly Itogi why he had stood by policies he knew
were "political suicide."
Despite the storm which broke over his head when he cut the ruble from
its dollar peg and announced a freeze on billions of dollars of
government debt, Kiriyenko defended his actions as "only possible
response" to the crisis.
And he said his critics in parliament who spiked his attempts to rescue
the nation's crippled finances by gutting or throwing out key sections
of an austerity plan, shared the blame for the crisis that was to bring
his government of technocrats down.
"The emergency measures (were) drawn up when the situation deteriorated
suddenly and unexpectedly" in mid-August, he told Itogi.
"It is clear that with more than 100 billion dollars in foreign debt and
more than 400 billion rubles (57 billion dollars) in internal debt, we
could not survive without borrowing again to pay off our old debts," he
"We were paying each week six to seven billion rubles in GKOs (treasury
bills), or 35 billion a month. But our entire budget receipts in May
were only 20-21 billion.
"And even if though we managed to increase them gradually, we were
getting around 23-24 billion," said Kiriyenko. The government opted to
grasp the bull by the horns and order a radical restructuring of the
domestic debt market, which would allow it to pay its bills and a huge
state sector wages backlog.
The debt move was "the only possible solution," Kiriyenko said, adding:
"Believe me, it is extremely unpleasant to put one's signature to such a
Asked if he realised that his decisions amounted to political suicide
Kiriyenko, appointed just five months ago to right Russia's listing
economy, said: "Yes, I understand that."
Kiriyenko, 36, said he accepted "personal" responsibility for last
Monday's de facto ruble devaluation and debt default, but said the
crisis could have been averted had deputies approved his anti-crisis
plan over the summer.
"In July, the package of measures that we put forward to the State Duma
could still have been enough," to avoid a full blown crisis, but most
were dumped by the lower house of parliament, he said.
"Some of the suggestions were flatly rejected, and those that we did
manage to get adopted by government order and presidential decree have
been challenged in the Constitutional Court," he said.
The premier, battered by ferocious storms on financial markets
throughout his brief five-month tenure, said the Duma's actions had
"made it very difficult to convince investors" to remain in Russia.
International experts said the situation in Russia in July was better
than in another emerging market, Brazil, last October, he said.
"According to the experts our (anti-crisis) programme was better than
Bresil's. But in Bresil, the measures were passed in a day and were
applauded by the executive and legislative branches working in concert,"
Last October, battered by the financial storms sweeping through Asian
markets, Brazil doubled interest rates and announced a budget deficit
reduction plan. Its swift action calmed markets and was rewarded with a
return of investors.
In Russia, however, deep spending cuts and increased tax revenues had
encountered "strong social resistance," said Kiriyenko.
The Russian government, he said, "is only fighting the financial crisis
... not the opposition, not the Duma, not the oligarchs (powerful
business elite)," he added. "And sometimes, I get the impression that we
are fighting the crisis alone."
Chernomyrdin took premiership on condition of free reign
MOSCOW, Aug 23 (AFP) - Russia's new acting premier Viktor Chernomyrdin
only accepted the job on condition President Boris Yeltsin does not
meddle in his choice of cabinet or his government's programme, Moscow
Echo radio reported Sunday.
Citing sources close to Chernomyrdin, the radio said the interim prime
minister had agreed to return to the post from which he was
unceremoniously dumped in March on condition he was given a free hand.
Chernomyrdin demanded "total personal control over the nomination of all
members of the government, and no interference by the president in the
work of the government," the unnamed source told the radio.
Communist party chief slams lack of consultation over new premier
MOSCOW, Aug 23 (AFP) - Russia's Communist Party chief Gennady Zyuganov
on Sunday criticised President Boris Yeltsin's decision to appoint a new
prime minister without consulting parliament, the Interfax news agency
Zyuganov, whose party roasted ex-premier Sergei Kiriyenko on Friday over
his handling of the country's financial and economic crisis, accused the
president of making a purely emotional decision.
The communists have led calls for Kiriyenko's resignation and have
bitterly opposed the ex-premier's monetarist policies which sought to
slash spending and increase tax revenues.
"It is a topsy-turvey decision," Zyuganov said of Yeltsin's decision
Sunday to sack his government and appoint former premier Viktor
Chernomyrdin as interim premier.
"The president had another possibiltiy, first to consult lawmakers,
define the priorities, and act only afterwards," he said.
The communist chief refused to comment on the appointment of
Chernomyrdin, but said most of the opposition would refuse to consider
his confirmation in office until there had been negotiations with
parliament on "a real programme of radical change of (economic)
direction and concrete proposals on the make up of the government."
Financial Times (UK)
August 24, 1998
[for personal use only]
RUSSIA: Yeltsin acts to save his presidency
By John Thornhill in Moscow
President Boris Yeltsin is famed for his erratic behaviour, whether it
is failing to get off his aeroplane on a visit to Ireland or playing the
spoons on the head of the visiting president of Kyrgyzstan.
But Mr Yeltsin wrote a new chapter in his history of unpredictability
yesterday by firing Sergei Kiriyenko as his prime minister and
reinstating Victor Chernomyrdin, just five months after his abrupt
dismissal. As if Russia's financial crisis was not enough, Mr Yeltsin
has now instigated a political one.
Unless Mr Chernomyrdin can quickly form a government commanding cross-
party support, his confirmation as prime minister could be bogged down
in parliament for weeks. Just as Russia's financial markets threaten to
spiral out of control, the country's acting government will be paralysed
There is no doubt that Mr Yeltsin had been under enormous political
pressure over the past few months and was growing increasingly isolated.
In Moscow, once-loyal coal miners are camped outside the government's
headquarters and have been chanting for Mr Yeltsin's resignation for
The Communist-dominated parliament has launched impeachment proceedings
against him, alleging his behaviour threatens Russia's national
security. Even his allies have begun shifting their support to future
presidential contenders, such as Yury Luzhkov, the populist mayor of
Moscow, and Alexander Lebed, the general-turned-governor of the Siberian
region of Krasnoyarsk.
In such circumstances, it seems, Mr Yeltsin calculated he could ill
afford to carry the inexperienced and politically lightweight Mr
Instead, he has summoned back the trusty warhorse, Mr Chernomyrdin, to
carry his regime a little further. But the burning question now must be
for how long?
Russia's newspapers have been speculating that Mr Chernomyrdin would
return to the prime minister's seat before assuming the presidency at
some point later this year. Under the terms of Russia's constitution,
the prime minister temporarily takes over from the president should he
be incapacitated while in office. The acting president must then
organise presidential elections within three months.
"This appears to be a form of political coup," said one observer last
During his five-year tenure as prime minister, Mr Chernomyrdin became
deeply unpopular with the electorate for his halting reforms. But he
succeeded in forging an effective "clan" of interests, including
Gazprom, the gas monopoly, and powerful commercial banks. He also heads
the Our Home is Russia party. This power base would provide Mr
Chernomyrdin with a solid launch pad for any presidential campaign.
"Tsar" Boris may enjoy toying with the careers of his courtiers. But the
biggest question to arise from his latest reshuffle is whether he
himself is about to be eclipsed.
The Times (UK)
24 August 1998
[for personal use only]
>From boom to bust
How one woman's story illustrates all that is wrong with Russia.
By Ekaterina Likhoda
0n March 9, 1992, The Times published a translation of a letter from
Ekaterina Likhoda, a 35-year-old Russian living in Nizhniy Tagil. She
wanted to take advantage of improved conditions in Russia to support
herself and her three daughters by starting her own business. She
envisaged a shop and appealed for advice about how these things were
done in the West. About 20 people responded (Bernard Levin wrote a
piece, What about the workers?, urging readers to reply positively) and
later that year Katya left Russia for the first time and spent two weeks
in the UK as the guest of the Institute of Chartered Accountants.
Despite the tremendous encouragement she was given here and her
determination to succeed, things have gone disastrously. This is her
ON OCTOBER 22, 1992, I arrived home from Great Britain after two weeks
studying small business organisations. During my stay I visited eight
cities and saw many shops, from Marks & Spencer to DIY and baby clothes
shops. I went to a teddy-bear factory in Pontypool and a market in
Cardiff, where people kindly advised me on how to start a business.
Then I decided to organise my own shop based on the best traditions of
the West: polite and helpful service, the proper ordering of available
goods and consultation with qualified people.
The shop would sell both foodstuffs and manufactured goods. I began on a
modest scale, using my only savings, after selling vouchers that had
just been introduced by the Government.
I filled in all the papers for renting the premises. With my voucher
money I repaired and redecorated the shop, using some bought items and
others borrowed. By new year 1993, Anastasia - named after my youngest
daughter - had opened.
I began by buying goods and agreed with suppliers the pay-back period.
Everything was working well until late one January night. I was visited
by a young man I knew who proposed that I take him on as a security
guard - not just as a watchman, but as someone who would give me
"protection". My refusals resulted in physical threats, which I didn't
take seriously. But half an hour later, after I had gone to bed, there
was an explosion. He had blown up a car parked outside the entrance.
The police took over but I was contacted by an acquaintance who hinted
that I might do well to drop the charges. I did so because I was afraid
for my daughters and my business. I am not sure whether this was
cowardice or just the realisation that this was the way things were
going in our society: if you open a business you must put gangsters on
the payroll, too.
I had no alarm system and no window grilles, so I hired three security
guards. But even they were useless and spent their shifts drunk.
The next incident was at 10 o'clock one morning when a stranger with a
sawn-off shotgun walked into the shop and murdered a young girl
assistant and wounded a guard. An investigation revealed that the girl
was the intended target and that this had nothing to do with the shop or
my activities. But still the shop's reputation suffered. I was in
Not long afterwards I was approached by both the local criminal gang and
by the sports club, offering "security services". I chose the sports
club. At first they helped me on the selling side: they had things like
cognac to sell, but no outlet.
They then installed a friend as an assistant. And I installed an alarm,
heavy metal doors and window grilles. But none of this helped. In April
a large sum of money and some tracksuits were stolen from the shop. I
still do not know who took the money because they never caught the
thieves. But the sports club insisted that I had to pay up as soon as
possible and they did not care where I found the money.
I was forced to take out a bank loan, covered by two insurance
companies. I worked and worked to pay off my debt. I bought some wine
from a factory, sold it in the shop and passed on some bottles to
another shop to sell. But they refused to pay me, or to return the
goods. My own "security" people were no help.
Out of desperation I turned to a man from another gang for help. This
gang certainly got into action, but in a most unprofessional way - if
you can call what they do a profession. It ended in a shootout.
The involvement of gangs was a big mistake and nearly cost me my life.
Not long afterwards, three men burst into the shop waving knives and I
was brutally beaten about the face and head. My crime? I had caused bad
blood between the two gangs. They left me, only to return the next
I was bundled into a car and they threatened to kill me if I cried out
or attempted to escape. It was then that I thought the end had come. I
thought they might dump me in the quarry just outside town, but when we
got there, they shoved me into the boot and drove on for about another
30 minutes. It was quite light when we stopped at a place that turned
out to be a holiday resort for employees of one of the major state
undertakings in the town. They took me into a house, where there were
more than 30 young men with shaven heads. They pushed me into a room
where a young man was crouched and handcuffed to a bed. He had been
badly beaten - his face was a bloody pulp but they carried on beating
him all that day. They began to beat me again and although I am writing
this a number of years later, I cannot stop myself shaking from the
horror of it all.
As night fell they became restless and handcuffed me to a bed alongside
the young man. They threatened to shoot us that night and for about five
hours we stayed there without moving a muscle. Mentally, I said goodbye
to my family. Then they took the lad away and I swear I heard a shot.
After a short time they told me I was going out. I don't know how to
explain it, but I was quite calm; all the same, I was praying furiously.
They led me out of the house and gave instructions for me to be taken
back into town.
I was locked in a cell in a building with metal doors and shutters. I
snatched a glance at my face in a mirror: it was like a nightmare. My
eye was swollen, my lips split.
What I did not know was that my sister had missed me from the first day
of my kidnapping. After two days she went to the police with my
photograph and made a television appeal on Rozisk . After four days, my
kidnappers got wind of this and they drove me back to my house.
It was not a long journey - seven to ten minutes. My younger brother was
there with friends. There was no conversation about what had happened,
either then or later.
The next morning we were visited by two men who identified themselves as
officers from the Department Against Organised Crime. They asked where I
had been, why the shop had been closed, why I was bruised. I lied. I was
unsure just how dangerous this conversation would be for me - I need not
mention that there was corruption in the police. Then I was "invited" to
go to the police station and write out everything that had happened. I
couldn't refuse to go, but I did refuse to write anything down.
The officer in charge emphasised how important it was to control crime,
but he could not guarantee my safety or the safety of my children. I was
advised to leave town.
After a short break with my mother in the country, where my children
were staying, and when the pressure from my creditors grew, I started
work again in the shop, although I was scarcely in a mood to do so.
I met the town's criminal boss who promised to help - but nothing
Then the tax inspectors descended on the shop. A fortnight earlier,
President Yeltsin had published his decree about cash registers. Since
my cash register had not been registered, I was threatened with a fine
of 300 times the minimum wage. This was yet another financial blow.
At the end of August, the children returned home and I came face to face
with the insurance society.
Although I was sure that I could repay the money when I was working
again, I was made to sign a document agreeing to hand over my personal
property in default of repayment of the loan. Later I discovered that by
law I was under no obligation to repay the loan and that their action
was illegal. Since they threatened to keep me there until I signed, I
had little choice.
How my middle daughter cried when they took away the piano. They took
away the sewing machine, the television, the sofa where I slept and the
Right now, the insurance company is bankrupt, but at that time they had
everything, power and prestige.
Throughout September and October I tried to work. I applied to the city
prosecutor's office: in 1992 one of Yeltsin's decrees declared that if
the police failed to catch those responsible for the theft of personal
property, the State would pay. But robbery and theft were on such a
massive scale that although applications were accepted no awards were
being made. Now, nobody even remembers the decree.
In November my "security" - the sports club - insisted that I quit the
premises because they had decided to use them for a leather goods
workshop. I asked them to pay for the metal doors and shutters that I
had installed. They were not prepared to pay and would not allow
anything to be removed.
Four years on, I am trying to find work. But there is no work for
self-employed people and any that does exist is poorly or erratically
paid. The choice for me is limited because I am now over 40.
I simply do not know what to do.
Christian Science MOnitor
August 24, 1998
[for personal use only]
Russia to Clinton: Bring Your Wallet
David R. Francis, Staff writer of The Christian Science Monitor
BOSTON -- When President Clinton arrives in Moscow for a summit with
Russian President Boris Yeltsin next week, Russia will still be in a
financial crisis after its devaluation of the ruble last week.
Russian expert David Kramer calls the visit "utterly foolish." "It is a
particularly awkward moment to be in Russia," he says. "Mr. Clinton
might be better off canceling."
The decision to go was announced last month, about the time the
International Monetary Fund (IMF) reached a deal with the Russians on an
extra $11.2 billion loan aimed at preventing devaluation.
The White House made the summit call. It was not pushed by the State
The suspicion is that Clinton hopes to repeat the diplomatic success of
his trip to China that began June 25.
That trip also diverted attention, if briefly, from the Monica Lewinsky
But the mood may be bad in Moscow when Clinton arrives. The Group of
Seven industrial nations decided not to provide more funds when a run on
the ruble got going about 10 days ago. They want more Russian reform
first. The IMF has only $10 billion of loan money left.
Russians may hope Clinton will come bearing financial gifts. But that's
"Congress would string him up if he tried to do that," says Mr. Kramer,
an economist with the Carnegie Endowment for International Peace in
Many Republicans in Congress regard more money for Russia as a waste.
"It is a Russian problem," Kramer says.
Other experts agree.
"The Russians are a victim of their own doing," says Marshall Goldman,
an economist at Wellesley College, Wellesley, Mass.
Many Russian businessmen, he charges, are "robber barons." They feel
free to steal from the state, buying state properties at prices far
below their value. They have an "ambivalent attitude" toward foreign
investment, often mistreating foreign minority owners of a company.
Yet Clinton may face allegations by the Communist opposition in Russia
that the West is trying to weaken their nation by refusing further help.
The immediate cause of the problem was a loss of confidence by investors
and the West in Russia's efforts for economic reform. The financial
crisis in Asia compounded these fears. Investors began to move buckets
of money out of the ruble. The government was faced with a critical
short-term funding crisis.
Russia's central bank chief Sergei Dubinin said last Wednesday the bank
had spent $3.5 billion to $3.8 billion to support the ruble since July
The ruble support was in vain.
Last Monday the Yeltsin government widened the bands for trading the
ruble on the official foreign exchange market, in effect a devaluation.
And it imposed a 90-day moratorium on some foreign-debt servicing and a
restructuring of billions in government treasury bills, one-third of
these owned by foreigners attracted by fancy interest rates.
The government's actions are complex and not yet entirely clear.
The ruble by last Wednesday had fallen to 6.99 for $1. The government
said it would not intervene until the rate reached 9.5 rubles per $1.
Deputy Prime Minister Boris Fyodorov said details of the plan for
restructuring short-term government debt would be announced today.
Many foreign investors are trying to figure out if they are caught by
the moratorium or not. The government has proposed that Russian banks
meet with their Western creditors to work out repayment schedules.
"I don't see Western investors being enticed to return there for a
while," says Matthew Sherwood, an economist with a Washington consulting
Russia faces more inflation, a domestic banking crisis, and a recession
that could last two years, Mr. Sherwood predicts.
That has political significance. Russia's lower house of parliament,
faces an election at the end of 1999 and the presidency is up for grabs
Sherwood sees some stability as essential in Russia for economic reforms
to continue. Ironically, the present government is the most reformist
ever, he figures. That stability is now at risk - and so are reforms.
signs of trouble:
An employee from the Moscow currency exchange switches rates on a
sidewalk sign. last Monday.
Russia devalued the ruble after weeks of financial turmoil., so a dollar
now buys almost twice as many rubles.
The Independent (UK)
August 24, 1998
Sir: Professor Norman Stone ("Can Russia survive...?", 18 August)
appears to delight in running down Turkey's neighbours since he went to
work in Turkey.
Yes, the poor Russians, so unfortunate that they have followed the
nostrums of shallow Reaganites like Professor Stone and landed in this
A society is a human ecosystem, and even if it was inefficient and its
prospects of further progress were limited, the socialist society in the
Soviet Union had developed an intricate network of connections which
worked quite well, and might have gradually been altered.
Instead, the West sold them a pup - tear out all your roots and start
again. If you plough up the soil of an established forest, then for many
years the plants that will thrive will be the weeds. And we see this in
Russia - the Mafia and the profiteers and the religious superstitions
take root first, because it takes a long time for weedkillers like law
and order to be developed, and for a new set of balanced societal
connections to grow.
G A Roussopoulos, Hindhead, Surrey
The Times (UK)
24 August 1998
Funds 'wasted' in Russian chaos
Sir, It is time for the West to stop funding the Russian Government with
credits and loans. These merely pay for internal current account debts
and enrich the "fat-cat oligarchs" who run Russia's federal, regional
and city governments in their own personal interests and those of
companies which export raw materials in order to turn them into cash
abroad, possibly at a profit. One suspects that Western motives for this
funding are based on political support for Yeltsin rather than on true
economics; but the oligarchs will find another figurehead when it suits
The Russian stock market is a casino, confined to a closed circle of
punters, Russian and foreign, and Russian banks rarely invest in an
economy which still subtracts rather than adds value, demands state
subsidies, and seldom pays taxes in cash. The Western demand for better
tax collection as a condition for granting more loans is illusory.
The internal Soviet economy was mostly cashless and ran on illusory book
transfers; so does the post-Soviet Russian economy. Very few purely
Russian firms run on capitalist lines; their transfer prices, costings,
turnover and profits are still illusory. Every sector demands support
and those few which know how to undertake genuine market reforms are
prevented from doing so by powerful men whose interests lie in
perpetuating the past. Many Russians blame the West for Russian economic
Ordinary Russian people suffer as a result and are not helped by Western
policies based on the belief that the Russian economy is in a process of
genuine reform which, as many in the West also believe, will be assisted
by Western money. A few analysts, such as the Brookings Institution, the
Carnegie Foundation and the Russian Research Centre at Harvard, know
these beliefs to be an illusion. It is time for the likes of the IMF to
recognise these facts and to act accordingly.
I am, Sir, yours faithfully,
Conflict Studies Research Centre,
Camberley, Surrey GU15 4PQ.
Voice of America
INTRO: PRESIDENT BORIS YELTSIN HAS AGAIN UPSET RUSSIA'S POLITICAL
EQUILIBRIUM, FIRING THE ENTIRE GOVERNMENT FOR THE SECOND TIME
THIS YEAR, AND REAPPOINTING AS PRIME MINISTER THE MAN HE
DISMISSED IN MARCH. V-O-A MOSCOW CORRESPONDENT PETER HEINLEIN,
IN THIS NEWS ANALYSIS, REPORTS FIRING MINISTERS, AND EVEN
GOVERNMENT, IS ONE OF MR. YELTSIN'S FAVORITE TACTICS WHEN
TEXT: AN OMINOUS SILENCE HUNG OVER MOSCOW'S POLITICAL SCENE THE
PAST FEW DAYS. EVERYONE KNEW SOMETHING BIG WAS GOING TO HAPPEN.
BUT NO ONE KNEW EXACTLY WHAT.
PRESIDENT YELTSIN WAS ANGRY. LITTLE MORE THAN A WEEK AGO, HE HAD
INTERRUPTED HIS VACATION TO STATE FLATLY THE RUBLE WOULD NOT BE
///YELTSIN ACT IN RUSSIAN, THEN FADE TO...///
HE SAID, "THERE WILL BE NO DEVALUATION. THAT IS FIRM AND
BUT ONLY THREE DAYS LATER, PRIME MINISTER SERGEI KIRIYENKO
ANNOUNCED A PACKAGE OF POLICY CHANGES, INCLUDING AN EFFECTIVE
DEVALUTION. IN THE DAYS THAT FOLLOWED, THE RUBLE LOST MORE THAN
TEN PERCENT OF ITS VALUE.
IF THERE IS ONE THING ALL MOSCOW POLITICAL ANALYSTS AGREE ON, IT
IS THAT PRESIDENT YELTSIN DOES NOT LIKE TO BE EMBARRASSED --
AND WHEN SOMETHING GOES WRONG, HIS USUAL RESPONSE IS TO FIRE
SO FOR NEARLY A WEEK, THERE WAS AN AIR OF UNEASY EXPECTANCY. BUT
THAT ALL ENDED SUNDAY AFTERNOON WHEN THE KREMLIN ISSUED A TERSE
THREE POINT DECREE. ONE, THE GOVERNMENT IS DISMISSED. TWO,
VICTOR CHERNORMYRDIN IS NAMED TEMPORARY HEAD OF GOVERNMENT; AND
THREE, THE DECREE IS EFFECTIVE IMMEDIATELY.
VYACHESLAV NIKONOV, HEAD OF THE FOND POLITIKA RESEARCH
INSTITUTION, SAYS THIS IS CLASSIC YELTSIN.
HE JUST CHANGED HIS MIND ANOTHER TIME. IT HAPPENS WITH
HIM. I DON'T THINK HE REALLY UNDERSTANDS WHAT IS GOING
ON IN THE COUNTRY. HE HAS NO DEEP UNDERSTANDING OF
THE ECONOMY, AND IN THIS DIFFICULT ECONOMIC SITUATION HE
PREFERS HIS OLD BUDDY TO HEAD THE GOVERNMENT.
IF SERGEI KIRIYENKO WAS KNOWN AS A YOUTHFUL TECHNOCRAT COMMITTED
TO REFORM, VICTOR CHERNOMYRDIN HAS THE OPPOSITE REPUTATION. AT
THE AGE OF SIXTY, HE IS KNOWN AS A COMPROMISER, A SOVIET-STYLE
BUREAUCRAT WITH CLOSE TIES TO THE POWERFUL BANKERS AND BUSINESS
TYCOONS KNOWN AS THE OLIGARCHS.
RUSSIAN TELEVISION ANALYST IRINA KOBRINSKAYA SAYS UNDER MR.
CHERNOMYRDIN, IT IS HARD TO IMAGINE THE GOVERNMENT WILL MAKE THE
HARD DECISION NEEDED TO PUSH AHEAD WITH ECONOMIC REFORM.
IT LOOKS LIKE THE SORT OF DISARRAY AND SORT OF LACK OF
DECISION-MAKING WILL IN THE KREMLIN. NOBODY SPEAKS
ABOUT REFORMS (OR) WHETHER CHERNOMYRDIN WILL DO
SOMETHING. NOBODY IS WAITING FOR A MIRACLE.
WESTERN ANALYSTS ARE EVEN MORE GLOOMY AFTER HEARING NEWS OF THE
GOVERNMENT'S DISMISSAL. ONE DIPLOMAT CALLS IT THE WORK OF A
PANICKY PRESIDENT WHO FEELS HIS POWER THREATENED. ANOTHER SAYS
IT IS ALMOST CERTAIN TO PROMPT A CUTOFF OF CRITICALLY NEEDED
LOANS FROM THE INTERNATIONAL MONETARY FUND AND OTHER LENDERS.
BUT ANALYST VYACHESLAV NIKONOV SAYS MR. YELTSIN IS WILLING TO
ABANDON REFORMS TO BRING A SENSE OF STABILITY BACK TO THE
GOVERNMENT AND EASE POLITICAL PRESSURE ON HIMSELF.
///2ND NIKONOV ACT///
YELTSIN IS QUITE SECURE. AND WITH CHERNOMYRDIN, HE'S
BECOMING SAFER. BECAUSE THE DUMA WILL DISCUSS THE NEW
CABINET, THINGS LIKE THAT, AND TURN ATTENTION FROM THE
MR. NIKONOV SAYS PRIME MINISTER CHERNOMYRDIN IS LIKELY TO COBBLE
TOGETHER A COALITION GOVERNMENT, INCLUDING A NUMBER OF COMMUNIST
MINISTERS SOLIDLY OPPOSED TO THE AUSTERITY MEASURES FAVORED BY
ONE WESTERN ECONOMIST IN RUSSIA SAYS, "IT IS HARD TO IMAGINE
REFORMS WILL CONTINUE". HE SAYS, "IN THE INTERESTS OF SHORT TERM
STABILITY, PRESIDENT YELTSIN HAS PUSHED RUSSIA TOWARD AN EVEN
BIGGER CRISIS IN THE FUTURE."
The Independent (UK)
24 August 1998
[for personal use only]
Russia debt restructuring 'hanging in the balance'
By Andrew Garfield, Financial Editor
The Russian financial crisis deepened last night after President Boris
Yeltsin sacked the entire cabinet, casting new doubt on a crucial debt
restructuring plan which was to have been announced today.
The new government moved last night to quell Western concern of a full
or partial default by putting its deputy prime minister, Boris Fyodorov,
directly in charge of working out restructuring details. A spokesman for
Mr Fyodorov said he was still hopeful a resolution could be announced
Mr Yeltsin's dramatic action came less than a week after Russia devalued
its currency by a third and suspended payments on government debt in a
series of moves which damaged the country's financial credibility and
badly shook investor faith in emerging markets.
Share prices in London, New York and other major financial centres were
severely hit last week amid fears that the contagion would spread to
other heavily-indebted economies in Latin America, where Western banks
are heavily committed.
The sacked prime minister, Sergei Kiriyenko, had only been in office for
four months, having been brought in to replace Viktor Chernomyrdin,
ostensibly as new blood to speed up the space of financial reform.
But since then the Russian economy has continued to deteriorate to the
point where last week's devaluation became unavoidable. Mr Kiriyenko, as
the man behind the latest measures, had incurred a spate of criticism
from Western banks, many of whom are facing big losses as a result.
Credit Suisse First Boston, which is believed to have suffered most from
the crisis, warned that the measures would lead to Russia's being
"locked out of the global capital market" at a time when the country
needs to lay its hands on more foreign cash.
However, the decision to remove Mr Kiriyenko appears to be motivated
less by a need to placate irate Western bankers than be by Mr Yeltsin's
own instinct of self-preservation. It followed a strongly-worded
resolution in the Duma, Russia's parliament, at the weekend calling on
the Russian President himself to resign.
Analysts said that the big business clique which effectively calls the
shots in Russia had been prepared to dump MR Yeltsin. Mr Chernomyrdin,
60, believed to be one of the largest shareholders in Gazprom, the gas
group, has a reputation for backing the interests of traditional heavy
industry against the newer entrepreneurial class emerging from
The sudden dramatic change in government has caught Western investors on
the hop. It came as representatives of the big banks were locked in a
power struggle with the Russian government over a plan to restructure
the government's debt. The initial plan announced last week, but
withdrawn in the teeth of storms of protest from disgruntled Western
investors who saw it as highly discriminatory against foreigners and
tantamount to a partial default.
It was not clear last night whether the talks would continue under the
new government. However, initial reaction was that it was highly
unlikely given the confusion in Moscow last night that the negotiations
could be included on any meaningful basis. Talks had been heading for a
deal which would have restructured Russia's stock of one- to two-year
debt on a five-year basis at a fixed interest rate. Sources said the two
sides were still some way apart on whether the deal would include a
partial write-off of the government's obligations, to which Western
creditors are strongly opposed.
Analysts fear that without the deal which investors expected today,
markets could react badly to the news.
>From RIA Novosti
August 21, 1998
CHERNOMYRDIN IS REHEARSING A "MAJORITY GOVERNMENT"
The NDR (Our Home Is Russia) leader hopes to triumphantly
return to the corridors of power
By Svetlana ILYINA, Sergei MULIN
The crisis on Russia's financial market has brought back
to Moscow not only State Duma deputies who did not want to
interrupt their vacations, but also Viktor Chernomyrdin, their
favourite politician in the "reserves." Dismissed in March,
the (former) premier of the government has not only taken
advantage of his successor's mistakes, but also made a
successful "debut" as a "crisis manager." Recently he, and not
the president Boris Yeltsin, took upon himself the role of
arbiter in the dispute between the law-makers and the
executive branch of power which was strongly in the wrong. The
schedule of the NDR leader's meetings, apart from the
customary names of the State Duma speaker Gennady Seleznyov
and the chairman of the CC KPRF (Central Committee of the
Communist Party of the Russian Federation) Gennady Zyuganov,
includes now the leaders of other Duma factions and Alexander
Lebed who is rather popular among the governors. At the same
time, it seems that the mission of the former head of
government will hardly be limited to an attempt to protect his
protege Sergei Dubinin, chairman of the Central Bank, from the
According to the information obtained by a Nezavisimaya
Gazeta source, Chernomyrdin's near circle, in confidential
talks with well-known politicians, discuss the possibility of
creating a "government of the parliamentary majority," relying
on support in the Duma of the KPRF, NDR and the Russian
Regions factions. Some observers believe that in this way the
NDR leader decided to snatch from Gennady Zyuganov his recent
initiative to rally all anti-government forces.
Chernomyrdin, a veteran economic executive, believes that
the main reasons behind the present crisis are mistakes and
incompetence of the young prime minister, and is prepared to
personally rectify other people's mistakes. Several months of
freedom from public policies and of stay outside the corridors
of power have not only strengthened his determination
(proclaimed by him in Orenburg) to return to those corridors
and become the leading figure there, but also considerably
boosted self-confidence of the former "always second man" in
the state. Now Chernomyrdin demands, besides the premier's
seat, the right to carte blanche in the choice of personnel
and in economic policy.
According to the information from another source of
Nezavisimaya Gazeta, it was decided, for the time being, to
omit a couple of phases in the multi-phase effort aimed to
triumphantly bring Viktor Chernomyrdin back to power. At
first, the premier Sergei Kiriyenko will have a chance to
display his utter helplessness as head of government, and then
Boris Yeltsin will be given an opportunity to see for himself
the uselessness of the recipes of the Chubais team, now at the
Rules for appointment of Russian PM
MOSCOW, Aug 24 (Reuters) - Russian President Boris Yeltsin, who sacked his
government on Sunday and appointed Viktor Chernomyrdin as acting prime
minister, has wide powers to force parliament to accept his choice for
Following are the rules for appointing a premier as set out in Russia's 1993
The president has two weeks to offer his candidate for full-time prime
minister to the State Duma lower house of parliament after dismissing his
The 450-seat Duma has one week to approve the president's choice with a simple
majority of 226 votes or reject him.
If the Duma rejects the president's candidate, he has a week to offer the same
person or someone else for parliamentary approval.
If the Duma rejects the presidential candidate or candidates three times, the
president automatically dissolves the Duma and names the full-time premier.
Timing for early parliamentary polls is set so that the freshly-elected
legislature can meet within four months after dissolution.
However the president cannot dissolve the Duma one year after a parliamentary
election and six months before a presidential election. The last parliamentary
election was held in 1995 and the next presidential election is due in 2000.
The president also cannot dissolve the Duma if it has formally started
impeachment proceedings against him. The Duma has made first steps to start
the impeachment proceedings against Yeltsin, charging him with ruining the
Soviet Union, starting war in rebel Chechnya and several other points. But
parliamentary experts say the 450-seat chamber is most unlikely to rally the
300 votes needed to formally launch impeachment.
The five-month life of the dismissed Russian government
MOSCOW, Aug 23 (AFP) - Sacked premier Sergei Kiriyenko suffered a
five-month tenure every bit as stormy as his confirmation vote in
parliament. The following charts the government's progress from
formation to dismissal:
March 23: Kiriyenko is plucked by President Boris Yeltsin to replace
prime minister Viktor Chernomyrdin.
April 10: Kiriyenko loses a first confirmation vote in parliament by
184-143. He warns parliament that Russia's debt situation has become
"intolerable" and that only a government of "professionals" can get to
grips with the situation
April 17: Kiriyenko loses a second vote in parliament by 115-271
April 21: Russia issues 750-billion-lire eurobond
April 24: Kiriyenko wins approval in parliament by 251-25
April 28: Yeltsin appoints Kiriyenko ally Boris Nemtsov, Viktor
Khristenko and Oleg Sysuyev as deputy premiers in a young new cabinet
April 30: Arch-reformer Anatoly Chubais, sacked as deputy premier, is
appointed head of electricity monopoly Unified Energy Systems, a further
sign of impending reform efforts.
May 8: Kiriyenko admits budget revenue shortfall of 26 percent
May 15: Strike of miners protesting back wages spreads to Trans-Siberian
railroad. Kiriyenko proposes cuts in spending on bureaucracy to free up
funds for the miners.
May 18: Stocks plunge 10 percent and bond yields spiral amid growing
fears over the hole in the budget.
May 19: Central bank hikes interest rates to 50 percent to defend ruble.
May 26: Kiriyenko admits that landmark privatisation of oil company
Rosneft, which was to bring the government 2.1 billion dollars, has
failed due to market conditions
May 27: Central bank hikes interest rates to 150 percent amid market
turmoil as stocks plunge 10.5 percent. Kiriyenko rules out ruble
May 29: Government announces an economy crisis package designed to plug
the budget gap. Kiriyenko repeats that ruble devaluation not possible
Jun 1: Stocks shed 10 percent investors shrugging at the government's
austerity plan and saying massive international aid will be needed to
bail the country out.
Jun 4: Russia issues 1.25-billion-dollar eurobond to fill public coffers
Jun 5: Central bank slashes interest rates to 60 percent citing
"normalisation on financial markets" following the successful eurobond
Jun 17: Chubais appointed international loan liaison officer for Russia
Jun 18: Russia launches another eurobond, a 30-year bond worth 2.5
billion dollars. Chubais says country needs 10-15 billion dollars to
avert financial collapse
Jun 29: Central bank hikes interest rates to 80 percent
Jul 1: Kiriyenko urges parliament to approve his crisis plan
Jul 10: Rosneft oil privatisation fails again to attract bidders
Jul 13: IMF leads 22.6 billion dollar bailout for Russian economy.
Jul 17: Kiriyenko vows to bypass parliament and enact his economy crisis
package by decree after deputies refuse to approve the legislation
Jul 20: IMF approves its portion of the international bailout for Russia
-- 11.2 billion dollars in fresh loans for 1998
Jul 21: Kiriyenko hails IMF loan as "outright victory" but markets start
Jul 23: Stocks shed another seven percent as bond yields start to spiral
Aug 6: Kiriyenko says Russia will drum up three billion dollars in
eurobonds by year-end
Aug 10: Stocks crash nine percent, bond yields burst through 100 percent
Aug 11: Oil prices sag to 11.86 dollars a barrel, putting further
pressure on the Russian budget
Aug 14: Yeltsin rules out devaluation. Central bank steps in to grant
credits to struggling banks. Dollar shortage in banks and on the streets
starts to be felt.
Aug 17: Government and central bankcut the ruble free from its previous
corridor of 5.25-7.15 to the dollar, giving it leeway to drift as low as
9.5 to the dollar by year-end. Govt also announces debt default.
Aug 21: Parliament demand that Kiriyenko -- and Yeltsin -- resign.
Kiriyenko warns that the economic crisis has only just begun
Aug 23: Yeltsin fires Kiriyenko and the rest of his government.