August 27, 1998   
This Date's Issues: 2328  •2329

Johnson's Russia List
#2329
27 August 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Yeltsin struggles to retain role as West's darling.
2. Reuters: Russia PM, parliament consider price controls.
3. Gunnar Hybertsen: Trip to Komi republic.
4. John Dabbar: Re 2322-Williams on agriculture.
5. New York Times: Floyd Norris, Editorial Observer: Russia Delivers a 
Blow to Global Capitalism.
6. Victor Kalashnikov: scenarios.
7. Jerry Hough: Re 2327-Darden/Oligarch Myth.
8. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Russia Has
No Political Elite, Only Greed.
9. Reuters: West says no financial bail-out for Russia.
10. AFP: Yeltsin dives for cover as critics write his political obituary.
11. Reuters: Nemtsov: Yeltsin Resignation Would be Disaster.
12. Reuters: Russia crisis to overshadow US-Russia summit.
13. Itar-Tass: Yeltsin Orders Political Role for Russian Navy.
14: RFE/RL NEWSLINE: SOME DUMA FACTIONS UNCOOPERATIVE and CRISIS TO 
CREATE NEW RICH, POOR.]

******* 

#1
Yeltsin struggles to retain role as West's darling
By Philippa Fletcher

MOSCOW, Aug 27 (Reuters) - Boris Yeltsin will wave a tried and tested trump
card at the West next week when he looks for renewed international support for
a country that is on its knees. 

Amid the friendly back-slapping and carefully-staged jokes which characterise
the Russian president's diplomatic encounters, the world will be watching
closely when he hosts U.S. President Bill Clinton to see how strong the card
still is. 

Since he took over the remains of the Soviet superpower he helped to destroy,
Yeltsin has played on the threat of a retreat towards Communism to win ongoing
support from the West as a guarantor of continued market-oriented reform. 

He has done so even as his foreign ministry has edged away from an overtly
pro-Western policy towards the anti-American rhetoric of Cold War days, while
also carefully rebuilding some of the alliances of the Soviet-era. 

The success with which former spy chief Yevgeny Primakov has overseen this
transformation since 1996, when Yeltsin made him foreign minister in place of
Western-friendly Andrei Kozyrev, is shown by the praise Primakov gets from
Yeltsin's Communist foes. 

``I believe our Foreign Ministry is not giving us any grounds to accuse it of
dancing to somebody else's tune,'' Gennady Seleznyov, Communist parliamentary
speaker, said this week even as he called for Yeltsin to resign. 

Sergei Rogov, head of the USA and Canada Institute, agrees. 

``Mr Primakov was rather successful in trying to pursue a more independent
foreign policy despite the financial and economic dependence of Russia,'' he
said. 

``The question is whether the Clinton administration is willing to accept this
separation or force Russia to play by the rules. If the West is paying the
money, it assumes Russia should just follow the lead and not ask any
questions.'' 

As the price of supporting Russia rockets skywards -- the first $4.6 billion
of a $22.6 billion international loan package agreed last month has already
been swallowed up trying to halt the freefall in the rouble -- the West may
step up the pressure. 

Yeltsin has already fallen into line over NATO expansion, signing a Founding
Act with the Western defence alliance last year in a tacit acceptance of
NATO's plans to expand eastwards. 

But Moscow has gone its own way over crises in the Middle East and Kosovo,
provoking exasperation in Western capitals by resisting calls for a strong
line on Iraq and Yugoslavia. 

And the START-2 arms reduction treaty signed in 1993, the honeymoon period for
Russian-U.S. relations, remains unratified by Russia's Communist-dominated
lower house of parliament. 

Yeltsin, 67, reaffirmed his determination to take a firm stance with
Washington last week, when, just days before his summit with Clinton, he
described U.S. airstrikes against Islamic extremists in Afghanistan as an
``act of terrorism.'' 

The tough talk appears to have a two-fold purpose -- to mask Russia's parlous
financial state and dependence on the West while underlining that rhetoric
could become action if the international community stops bankrolling Yeltsin. 

But with Yeltsin himself weakened by a freefall in the rouble which has
threatened the fledgling banking system and raised the spectre of
hyperinflation, the question arises as to whether he is in a position to shore
up the country. 

Kremlin aides have been forced into damage control during foreign policy
forays over the past year in which Yeltsin has named non-existent nuclear
states and wars which never happened, appearing at best confused, at worst
completely out of touch. 

``It's rather difficult to say who is in charge of Russia today, who is
minding the store,'' Rogov said, referring to growing concern over Yeltsin's
absence from the political scene. 

While acting prime minister Viktor Chernomyrdin struggles to stem the
financial bloodletting, his boss has stayed outside Moscow. 

Clinton will urge Yeltsin to ensure reforms will continue when they meet on
Tuesday and Wednesday, trying to get the Kremlin leader to toe not just the
economic line, but the political one too. 

Russia's objections to international pressure for military intervention to
stop a crackdown in Kosovo by Moscow's traditional ally Belgrade and its
insistence on an end to U.N. economic sanctions on Iraq may also be on the
agenda. 

In a sign that Washington is still betting on Yeltsin, Clinton agreed to the
summit despite earlier signs that he would like START-2 to be ratified first.
But he will press the case for ratification while discussing further arms
control plans. 

Sergei Markov, head of the Institute of Political Studies, says for all the
tough talk, Russia in practice always ends up toeing the West's line when it
comes to the crunch, adding that Yeltsin's love of the international stage is
to blame. 

``Yeltsin pays too little attention to the interests of Russia and too much to
his personal relations with leaders of other states,'' he said. ``It means
that he is very easy to manipulate.'' 

Yeltsin's position has been weakened by Russia's political shake-up in which
he appears to have granted Chernomyrdin wider powers than he had in his
previous spell as premier. 

Opposition pressure for his resignation has mounted and public confidence in
him seems lower even than during the war he launched against separatists in
Chechnya from 1994-96. 

It is a far cry from the mass following he had while fighting communist rule
in Soviet days and at the time of the Soviet Union's collapse in 1991, just
after he was elected president of Russia for the first time. 

His grip on power was also weak when he had bypass surgery in November 1996
after at least two heart attacks, but he recovered from that to win re-
election against the odds in 1996. 

********

#2
Russia PM, parliament consider price controls
By Philippa Fletcher

MOSCOW, Aug 27 (Reuters) - Russia's acting Prime Minister Viktor Chernomyrdin
and parliament are mulling extreme measures to halt the rouble's slide,
including price controls and a halt to convertibility, a key Chernomyrdin ally
said on Thursday. 

Alexander Shokhin, head of Chernomydin's parliamentary party, said a document
being drawn up by the acting government and parliament's lower house would
contain ideas which now seem less ``exotic'' because of Russia's acute
financial situation. 

``The discussion includes specific administrative controls to the currency
situation,'' Shokhin told reporters. 

``There will be demand for control on the currency market: administrative
control, and perhaps even a temporary closure of the market, with a cancelling
of internal convertability of the rouble.'' 

It is one of two radical proposals being drawn up by a three-way commission
consisting of representatives of both houses of parliament and the government.

The other proposal outlines a deal to persuade Yeltsin to hand some of the
president's vast powers to parliament in return for immunity from prosecution
once he steps down. 

Parliament, scenting blood amid a growing chorus of calls for Yeltsin to step
down over the financial crisis, wants Yeltsin to sign the deals before it will
approve Chernomyrdin's candidature as prime minister. 

Kremlin spokesman Sergei Yastrzhembsky said on Thursday that the part of the
political document which was drawn up the day before and covered a handover of
some powers went too far. 

``At the same time he noted that there were fresh, original ideas in the
document,'' Itar-Tass news agency said, quoting Yastrzhembsky, who added that
the Kremlin had sent its own proposals back to parliament. 

The Kremlin has not commented on the economic document, which has yet to be
finalised, and it is not clear what legal force either agreement would have. 

``The ideas contained in the economic project...which seem at first glance
exotic, they are no longer so, because the government of (former Prime
Minister Sergei) Kiriyenko and the central bank provoked these decisions,''
Shokhin said. 

Other measures being mulled included setting prices to fight inflation or
selling off all the central bank's and the government's hard currency income
to support the rouble. 

But he said the government would try to balance urgently needed controls with
the demands of a free market. 

``It is very important now not to go back to 1991, not to return to
administrative-command methods,'' he said. 

The main task was to ``save those benefits of the market economy which can
still be saved, and, on the other hand, protect the population, banking system
and the economy from the negative consequences of declaring the country
bankrupt.'' 

*******

#3
Date: Thu, 27 Aug 1998
From: Gunnar Hybertsen <Gunnar.Hybertsen@nrk.no>
Subject: Trip to Komi republic

I am planning to go to Vorkuta in the Komi republic to see how the economic
crisis is affecting people there. I need a contact person (journalist or
other) who can do some research for me and help me with translation into
English. Thankful if you could somehow help me through your network.
Sincereley, Gunnar Hybertsen, Norwegian Radio. 

*******

#4
From: John Dabbar <Dabbar@cpc-r.msk.ru>
Subject: Re: 2322-Williams on agriculture
Date: Thu, 27 Aug 1998 15:58:51 +0400

David: Farmland is the last untapped source of natural resource wealth
in Russia.

Land reform and land ownership has never been a "silver bullet" as
Michael Kagalenko pointed out in JRL 2328. Land distribution in the USA
was a highly politicized process that primarily benefitted the 19th
Century American robber barons. Land allocation along railroad rights-of
way and within towns was designed to help the railroads profit by
controlling access to the rail terminals. However, significant portions
of US land were given to private owners for agricultural use.

The passage of the Homestead Act by Congress in 1862 was the culmination
of more than 70 years of controversy over the disposition of public
lands. From the inception of the United States there was demand for
liberalism in the disposition of these lands.

The Act, which became law on Jan. 1, 1863, allowed one to file for a
quarter-section of land (160 acres or 64 hectares). The land
belonged to the homesteader at the end of five years if the homesteader
had built a house on it, dug a well, plowed 10 acres (4 ha), and lived
there. Additionally, one could claim a quarter-section of land by
"timber culture". This required that the homesteader plant and
successfully cultivate 10 acres (4 ha) of timber.

Of course, as proponents of the Russian land code point out, an owner
gets title to land upon which liens can be placed, and such title may be
conveyed to the lienholder in case of default. Several US states provide
a method for protecting the owner -- in case of bankrupcy proceedings
against the owner, who must call this property his primary residence,
some percentage of land value is protected from repossession; this is
generally known as a "homestead exemption". This prevents hardworking
but financially naive farmers from going broke by borrowing prior to a
poor harvest, and essentially transferred the cost of mortgage insurance
to the lender in the form of inviolate equity.

Is this a silver bullet? no, but it does provide farmers with the means
to raise credit and to unlock the value of public lands.

*******

#5
New York Times
August 27, 1998
[for personal use only]
Editorial Observer: Russia Delivers a Blow to Global Capitalism
By FLOYD NORRIS

Russia's huge default on its debts, and the harsh terms it is offering to
those foreigners who made the mistake of lending money to it, have petrified
investors and are making capital much harder to get for other countries around
the world. For that reason, the default is also increasing the risk of global
recession. 
Economically, Russia has never been as important as it was politically.
Investors had assumed that the West would do whatever was necessary to prop up
the Russians, if only to keep nuclear weapons from falling into the wrong
hands. 
In fact, there seemed to be an assumption that private loans to nearly any
government carried an implicit Western guarantee, although none had been
promised. 
"I would not give one nickel to help any creditor or investor," said
Treasury Secretary Robert Rubin. Nevertheless, in previous bailouts engineered
by Mr. Rubin, whether in Mexico in 1995 or Korea last year, investors in
government bonds did well because that seemed necessary to avoid economic
collapse. 
It was not news that Russia had big economic problems, or that the
Government had been unable to solve them. But until last week investors still
thought default was all but impossible. In June Russia was unable to borrow
all the rubles it needed, even at extraordinarily high interest rates. But it
was able to borrow $1.25 billion in dollars from foreign investors, who were
promised about 12 percent a year for five years. 
An investor who bought one of those bonds in June, and tried to sell it now,
would lose nearly two-thirds of the money invested. And naOve investors are
not the only ones who have suffered. Funds managed by the international
financier George Soros lost a lot of money, as did Credit Suisse First Boston,
the big investment bank. 
What went wrong? The International Monetary Fund package assembled this
summer proved to be far too small, given the chaos in the Russian Government.
The I.M.F. lacked the money to put together the much larger package of aid
that would have been necessary to avert default, and major Western
governments, including the United States, refused to put up their own money.
In an interview with a German newspaper, Stanley Fischer, the deputy director
of the I.M.F., blamed Chancellor Helmut Kohl of Germany for the West's failure
to act. 
Now, with the safety net withdrawn, the ruble appears to be in free fall.
Those who lent money to Russia are being forced to trade in their old
securities -- which promised extraordinarily high returns for lending money
for only a few months -- for securities yielding lower interest rates over a
longer time. The risk is that, even assuming Russia is able to honor its
latest promises, the rubles it pays back will be worth far less than the ones
it borrowed. 
It is not clear now who is really in charge in Moscow. President Yeltsin's
choice of Viktor Chernomyrdin as prime minister needs parliamentary
ratification, which may not be forthcoming unless he can reach agreement with
the Communist leadership of the Duma. And even if that happens, there is no
guarantee the Government will be able to collect taxes and actually administer
the country. 
The outlook for the Russian people is grim. 
So too may be the outlook for countries far away from Russia, with economies
and governments in far better shape. Investors, having awakened to the reality
of risk, now are pulling money out of emerging markets from Hong Kong to
Brazil. At best, many governments will have to pay higher interest rates to
borrow, putting a damper on growth. At worst, they will find new capital
unavailable at reasonable costs, and will have to strain to repay loans as
they come due. Russia's direct importance to the world economy may turn out to
be far smaller than its impact on investor psychology. 
Perhaps the damage can be limited, and investors will decide that Russia's
problems should not affect their views of, say, Argentina. But if not,
economic incompetence in post-Soviet Russia could prove to be a bigger threat
to world capitalism than Stalin ever was. 

********

#6
Date: Thu, 27 Aug 1998 
From: machinegun@glas.apc.org (Victor Kalashnikov)
Subject: scenarios

David:
There's an analytical exercise. Let's see where I'll get it
wrong.

1. Rb/$ free exchange has ceased to exist in Russia. 
It's impossible for authorities to introduce a more or less 
stable/controllable Rb rate. Be that 100 Rb for a $ 
tomorrow - everyone will immediately start to give his Rbs 
away. There's no trust in this regime and economic 
management it may provide whatsoever.
2. Two basic scenarios occur: 
Scenario A. To abandon Rb as a national currency and to 
switch officially to $. This would imply quitting gradually 
Russian statehood as such. Chernomyrdin (and, of course, 
the 'oligarchs' - Western audience looks feeling uneasy if 
that brand goes unmentioned) SURELY WOULD WELCOME 
AND ACCEPT IT. They've, in fact, drifted into this direction 
during the latest years and months while they - voluntary or 
not - have been destroying this state and distancing 
themselves from its less valuable remnants (army, the 
Kremlin towers, population). Gasprom already is something 
exterritorial here. While it (i.e. its owners - lead by 
Chernomyrdin & Vyachirev) makes its revenues almost 
exclusively in the West, it gets only troubles and heavy 
losses in Russia, the latter thus becoming a heavy, 
economically implausible burden. Moreover, the latest 
crash has obviously barred Gasprom from drawings at 
international financial markets - the actual sources for 
investment projects it has planned jointly with foreign 
partners. Being part of Russia becomes financially 
unbearable. 
On the other hand, Gasprom and some others know well 
that their market value would soar had their international 
affiliation changed. So - they urgently must out from this 
'Russia' mess. It's not their malevolence. It rather is an 
economic & survival imperative.
What may follow? Parts of Russia, unnecessary in big 
gas/oil calculations, may be 'set free', some of them 
joining neighbouring states or sticking to new entities 
together. There're there 3-4 clear candidates for this 
already now. This would, in fact, constitute a logical 
continuation of the USSR's dissolution. Moscow-based 
gas/oil establishment was at that time eager to consolidate 
its positions and to push forward into international markets. 
Losing vast parts of the USSR - deemed as 'parasites' or as 
uncontrollable - was quite coherent with their strivings.
A smaller and cheaper 'Russian Federation' may emerge. 
Or - international organisations may step in offering a kind 
of transitional status or protectorate. Today's geopolitics 
proved quite creative in this regard. P.e., the EU will find a 
solution to incorporate Gasprom, with its major gas fields 
and infrastructure, for sake of own energy supply and 
security. The 'Northern Dimension' strategy, promoted by 
Nordic countries and backed by Brussels, may be a 
framework. This strategy embraces Northwest Russia (with 
substantial proportion of Finno-Ugric people), incl. Yamal 
gas field, as parts of a long-term energy-supply concept. 
The Northern Fleet is, of course, one of the problems. But 
withdrawal from the Baltics implies that a solution still could 
be found.

Scenario B. Those who find no place for them within the 
Scenario A will offer resistance and eventually consolidate 
themselves along a GKTshP model. Army, security ('force' 
ministers), segments of military industry - HEADED, 
POSSIBLY, BY YELTZIN. His latest moves let suggest that 
something like this may indeed be on the agenda. 
In this case, Rb will reinstalled with a Soviet-style vodka-
monopoly firmness. $ will be squeezed into underground 
and currency shops. 'Free movement of people and ideas' 
will be limited, of course. Etc., etc. The material 
foundations for this restoration are all present regarding 
barter-based real sector. Soviet economy (which was a 
barter market, in reality) has never left the scene and 
proved resistant against all monetarists' tricks. It has, 
indeed, sustained even Hitler invasion before. Mr. 
Maslyukov (former Gosplan chief) knew what he was doing 
by inciting his comeback into practically the same position.

3. What would Chernomyrdin do? A very good question. 
When the new GKTshP - the Yeltzin-lead one - will be 
proclaimed, we will see him in an existentialistic 'edge-
situation'. He will, at first, be confronted with an incredibly 
painful choice between nomenklatura-boss and a $billion-
heavy magnate identities. My guess is that he, if survives 
the stress, will appear keen to forge a combination of the 
two, thus displaying the XXI-century nomenklatura type and 
overplaying old-timer Yeltzin once again and forever.

4. Now, there's election fuss starting to broil in Moscow 
once again. Politologists/consultants are visibly getting into 
agitation, sensing long-awaited demands for their - 
meanwhile somehow enfeebled and discredited - abilities. 
Yet, nation-wide elections (Duma, President) will, evidently, 
deliver the final blow to Russian finances. Elections have, 
indeed, proved one of the key perils to economy in this 
country during post-Soviet years. The results speak for 
themselves. So, the new boss will, probably, come out 
through bargaining of a consensus within the assembly of 
bosses, just along Berezovsky - a politics/finances 
calculator - lines. 

********

#7
Date: Thu, 27 Aug 1998
From: "Jerry F. Hough" <jhough@acpub.duke.edu>
Subject: Re: 2327-Darden/Oligarch Myth

Keith Darden is on the money. He should also remember that the 
Russian intellectuals still think in Marxist terms. They first thought 
the bureaucrats--the managers of the means of production--had all power 
and were conservatives. (Our polls in 1993, 1995, and 1996 showed the 
high and middle managers were stronger supporters of economic reform 
even than professionals.) Now they have moved from Marxism to 
Lenin's Imperialism: all power is in the banks, Wall Street, financial 
capital. They are at least consistent in not having a clue.
In addition, Chubais and Nemtsov used--and use--them as a scapegoat 
just as Yeltsin had used the Congress, the bureaucrats, the Central Bank, 
inter-enterprise lending, etc.

*******

#8
Moscow Times
August 27, 1998 
SEASON OF DISCONTENT: Russia Has No Political Elite, Only Greed 
By Andrei Piontkovsky 

In December of last year, at the height of the economic crisis in 
Southeast Asia, I met with a South Korean diplomat. Fortunately, he was 
not included on the FSB's list of alleged South Korean spies, so I can 
tell about our discussion with no fear of being accused of collaborating 
with foreign special services. Being not a spy but an accredited 
diplomat in Moscow, my interlocutor, of course, was interested in the 
internal political situation in Russia. And, naturally, he was 
interested in my point of view. He asked some questions. I forget what 
about; perhaps about the oligarchs' latest intrigues. 

As I tried to explain something to him (and to myself first of all), I 
noticed that he was not listening to me and was immersed in his own 
thoughts, eternally far from the sacred war between Boris Berezovsky and 
Anatoly Chubais. 

Suddenly he burst out with a prolonged monologue full of 
self-recrimination. 

"We, who received an education, we on whom there was such responsibility 
for the country, we did not fulfill our obligations, we did not heed the 
warnings and allowed a crisis in the country, we lost its prestige, we 
brought disaster to so many of our compatriots." 

I saw that my interlocutor was truly suffering, worrying about the 
events in his country. But why did he feel such deep personal guilt and 
personal responsibility for what had happened? Was this comparatively 
young man, who served in Moscow and who had no connection to running the 
Korean economy, really guilty of economic overheating, of chaebol 
arrogance, of their incestuous collusion with power? 

But he obviously felt he belonged to the Korean political elite, to the 
cast of the chosen, and his feeling of guilt was a feeling of the 
chosen's collective responsibility. 

That evening I understood that Korea would overcome its difficulties and 
I was already unsurprised when I saw on television lines of Koreans who 
were turning in their valuables to a fund to support the economy. 

In various societies the structure and traditions of the elite varies. A 
Japanese samurai and an English gentlemen have very little in common 
except for one thing: Both of them make much more harsh demands on 
themselves than on society, both take a lot more responsibility on 
themselves. This is what genuine aristocracy consists of, if it actually 
exists. 

Nobody likes to say the word "political elite," whether it is needed or 
not, as much as Russian politicians and political scientists do. Using 
these words really swells their smugness. But they get very lost in the 
semantics of that word makeup. They interpret it as "people who are in 
power and in proximity to power," and under such an interpretation they 
automatically classify themselves as belonging to a "Russian political 
elite." 

But the most fundamental reason for the Russian predicament is simply 
the absence of a political elite in the true sense of this word. All the 
Russian political class -- the presidential family, the prime minister, 
conservatives, liberal economists, red directors and oligarchs have been 
indulging in a carnal orgy of self-enrichment at the expense of the 
state budget and state property without any remorse or excuses. 

People in power and beside power in Russia deserve rather to be defined 
as a Russian political brotherhood -- or bratva. 

*******

#9
West says no financial bail-out for Russia
By Robert Mahoney

BONN, Aug 27 (Reuters) - Germany, Russia's biggest creditor, led Western
countries on Thursday in warning Moscow it would receive no cash bail-out
without sweeping economic reform. 

German Chancellor Helmut Kohl voiced concern about the financial crisis in
Russia, where the central bank suspended currency trading to stop the rouble
extending Wednesday's 40 percent plunge against the mark. 

German officials said Kohl would speak to U.S. President Bill Clinton and
British Prime Minister Tony Blair about the economic and political upheaval in
Russia which has rattled world financial markets. Kohl had already spoken to
French President Jacques Chirac, they said. 

``Without the reforms it will not be possible to mobilise money either from
international financial organisations or from Germany,'' Kohl told reporters
on a visit to Berlin. 

He said he wanted to sound out Western governments about how to help Russia
restructure its tottering economy. 

``If they don't follow through (on reforms) the situation will look bad,''
Kohl said. 

Panic spread across Russia as people tried to swap fast depreciating roubles
for scarce dollars. 

Acting Prime Minister Viktor Chernomyrdin was trying to put together a
government, while President Boris Yeltsin, whose authority is in question, was
holed up at a residence outside Moscow. 

Western leaders fear the Russian crisis could spill over to other financial
markets. 

French Finance Minister Dominique Strauss-Kahn said the West was willing to
help out Russia, but Moscow must do its part by pushing through economic
reforms. 

``What must be seen is that we are all committed to doing our best to help the
Russian economy,'' he told Reuters television. ``We are totally committed to
helping Russia.'' 

Strauss-Kahn said the impact of the Russian crisis on France would be
``limited but real'' and said he was considering revising down his forecast
for French economic growth next year. 

He also confirmed that he and his German counterpart Theo Waigel were mulling
sending a joint letter to Chernomyrdin on the crisis, but had not yet agreed
to do so. 

In Frankfurt, the Xetra DAX stock index fell more than four percent to nearly
four-month lows after the Russian central bank suspended roubled foreign
exchange trade. German banks, which have an estimated $30 billion exposure to
Russian debt, were the heaviest losers. 

In Tokyo the share market dropped three percent to close at a six-year low. 

``The Russian factor seems to have had some impact on Latin American markets
and we can't deny its impact on Japanese stocks either,'' said Japan's Vice
Fiance Minister Koji Tanami. 

``We are very worried about this,'' he said. 

Western officials said it was not clear how the industrialised powers could
help turn the tide in Moscow but they ruled out fresh cash to prop up an
ailing system. 

Last month the International Monetary Fund put together a $22.6 billion rescue
package but Moscow spent most of the first tranche of this on its failed
defence of the rouble. 

``There are no shortcuts in restoring market confidence, and the next steps
are up to the Russians,'' White House deputy spokesman Barry Toiv told
reporters in Edgartown, Massachusetts, where U.S. President Bill Clinton was
on vacation. 

``Now more than ever it's critical that they get their fiscal house in order
and establish policies on the rouble, on government debt and the banking
system that will lead Russia back to financial stability,'' he said. 

Amid rumours of an economic meltdown Yeltsin sacked his entire government four
days ago and brought back his old ally Chernomyrdin, whom he had fired just
five months earlier. 

Chernomyrdin has not said how he intends to handle the crisis. But Germany's
Economics Minister Guenter Rexrodt dismissed suggestions that Chernomyrdin was
hostile to reform. 

``I have never had this impression. Chernomyrdin wants reforms and will also
engineer them,'' Rexrodt said. 

With his pragmatic nature, the new prime minister could get more happening
than all those who talked about reforms but could not bring them about,
Rexrodt added. 

Rexrodt said the Russian crisis would not have any serious effects on the
German economy or on local investors here. 

******

#10
Yeltsin dives for cover as critics write his political obituary

MOSCOW, Aug 27 (AFP) - President Boris Yeltsin remained holed up in his 
country residence outside Moscow Thursday as the comeback king of 
Russian politics appeared fatally wounded by an unprecedented economic 
crisis.
Newspapers and political analysts said it was only a matter of time 
before Yeltsin quit in face of a ruble rout and an economic meltdown 
which threatened one of the few achievements of his reign: a stable 
currency and prices.

Amid the mounting clamour for the head of state to resign, former 
national security chief Alexander Lebed -- a virulent Yeltsin critic and 
presidential contender -- was emerging as a key figure in the new 
political landscape.

Commentators said the Kremlin had tacitly admitted that Yeltsin's 
entourage was now preoccupied with securing the president a reasonably 
dignified exit.

A sign of how far the president's political stock has fallen, the 
respected business daily Kommersant pasted a withering "He is alive" 
headline above a front-page article about the Kremlin chief's fate.

An accompanying picture showed a smiling but dazed-looking Yeltsin 
waving as he left the Kremlin in his official car.

The paper said Yeltsin's role in resolving the current economic 
emergency consisted in signing whatever documents were placed before 
him, adding that reports he had suffered a stroke were unimportant, 
"because it has been clear to everyone that he is no longer capable of 
really running the country."

Kremlin aides now "barely disguise" that one of Viktor Chernomyrdin's 
main goals is not just to overcome the financial crisis, but also to 
secure from the State Duma lower house of parliament special guarantees 
for Yeltsin in case the president voluntarily resigns.

A highly placed source cited by the paper said the Duma must vote a 
special law guaranteeing Yeltsin's status, personal security and the 
financial future of him and his family, as well as immunity from 
prosecution.

Andrei Piontkovsky, director of Moscow's Centre for Strategic Studies, 
said Yeltsin's decision Sunday to recall Chernomyrdin as premier, five 
months after dismissing him, and designate him as his successor showed 
the president was preparing to abdicate.

"My guess is that during the talks on Sunday when" Kremlin 
administration chief Valentin Yumashev and Yeltsin's eldest daughter and 
top advisor Tatyana Dyachenko visited Yeltsin, "a kind of deal was 
agreed that Yeltsin in a few months will leave his position and that his 
personal security, wealth of his family will be guaranteed."

Gennady Seleznyov said Wednesday deputies were preparing a bill which 
would make former presidents a life senator. Speculation of an early 
Yeltsin departure was fuelled when Kommersant cited chief Kremlin 
spokesman Sergei Yastrzhembsky as blandly stating that such a move would 
be "another sign that we leave in a civilised country."

Newspapers were awash with speculation about who would enter the Kremlin 
in the event of a swift Yeltsin departure. Vyacheslav Nikonov, of the 
Fond Politika think-tank, told the Sevodnya daily he could "not rule out 
that the powers that be would go for a Chernomyrdin-Lebed pairing."

A constitutional compromise could see the restoration of the post of 
vice president, but it remained unclear who would enjoy the ascendency 
in such an arrangement, he said, predicting it would be short-lived.

However, having been brought into the Kremlin in 1996 after backing 
Yeltsin's reelection bid, only to be dumped a few months later, Lebed 
could be wary about hitching his rising star to Chernomyrdin, who has 
the support of Russia's powerful business clique but is deeply unpopular 
among voters.

Andrei Ryabov, analyst at the Carnegie Endowment in Moscow, however said 
the economic situation in Lebed's Siberian fiefdom of Krasnoyarsk was 
too difficult for the Kremlin hopeful to play an active role in Moscow 
politics.

And he cautioned it was too early to write-off Yeltsin, who bounced back 
from dismissal from the Communist Party politburo to win election as 
president of the Russian Federation in 1991, and secured re-election in 
1996 despite being at an all time low in opinion polls.

"Yeltsin could adopt a low profile, something he knows how to do so 
well, and see whether Chernomyrdin manages to stabilise the banking and 
financial sectors and stop the collapse, which is more important that 
forming a government right now.

"If Chernomyrdin fails, Yeltsin could again return to the political 
front stage," however, if Chernomyrdin fails to stop the rot, a Yeltsin 
resignation was possible, he said.

*******

#11
Nemtsov: Yeltsin Resignation Would be Disaster 
August 26, 1998

MOSCOW -- (Reuters) Top Russian reformer Boris Nemtsov, who 
resigned from the government this week, said on Wednesday that President 
Boris Yeltsin's resignation would be disastrous for the country. 

Yeltsin has looked increasingly isolated and vulnerable in recent days 
amid Russia's deepening political and financial crisis, sparking doubts 
about his ability to survive in office. 

"It is natural for Yeltsin to control the situation, not to go for 
resignation. This would be a total disaster for the country," Nemtsov 
told reporters, speaking in English. 

"The history of the country shows us this. Nikolai II, the last Russian 
czar, abdicated. ... Mikhail Gorbachev also sent a letter of resignation 
and you know what happened to the country," he added. 

Nikolai abdicated in 1917 in favor of his brother in a vain bid to shore 
up the Romanov dynasty but the monarchy collapsed. Bolshevik 
revolutionaries gained power and shot the czar and his family a year 
later. 

Soviet President Gorbachev had to resign in December 1991 after Yeltsin 
and other republic leaders declared the Soviet Union defunct. 

Yeltsin, who has a history of ill health, has appeared confused and 
distant in some recent public appearances, triggering fresh speculation 
about his own fate. 

Asked whether Yeltsin understood the current crisis, Nemtsov said: "In 
general he understands what is happening. But in details? I am not 
sure." 

Nemtsov was a deputy prime minister in the outgoing government of Sergei 
Kiriyenko sacked by Yeltsin last Sunday, but has said he will not join a 
new Cabinet being stitched together by Victor Chernomyrdin. 

In an interview published earlier this week, Nemtsov blamed Chernomyrdin 
for the current crisis, saying he did not think the former gas industry 
chief would cut state spending and raise taxes to steady the budget and 
open up the economy. 

On Wednesday, Nemtsov reiterated his criticisms. 

"Russia needs very strong restructuring, including bankruptcy of 
inefficient banks and companies. ... I am not sure the existing 
government is ready to do this," he said. 

Chernomyrdin, who is struggling to put together a Cabinet that can win 
parliamentary approval, served Yeltsin loyally as prime minister for 
five years until the president sacked him in March for failing to push 
reforms strongly enough. 

Chernomyrdin, 60, has said he will run for the presidency in 2000 and 
Yeltsin has effectively named him as his heir apparent. 

Asked about Chernomyrdin's chances, Nemtsov said: "Now he has no big 
chances in an open election." 

The telegenic 38-year-old Nemtsov said he would take a holiday in the 
Black Sea resort of Sochi and would then make a decision about his 
future, adding that he had received offers to work in business, 
including from foreign firms.

******

#12
Russia crisis to overshadow US-Russia summit
By Timothy Heritage

MOSCOW, Aug 27 (Reuters) - Russia's financial crisis looks set to dominate a
long-delayed summit between Boris Yeltsin and Bill Clinton next week which
brings together two presidents weakened by unprecedented pressure to resign. 

Both leaders are anxious for a foreign policy success at the first Russia-U.S.
summit for 18 months to lift their standing and deflect attention from their
political problems at home. 

But the chances of major agreements are slim at the two-day summit on Tuesday
and Wednesday, and Russia's dire financial problems threaten to push
discussion of arms control, regional problems and nuclear non-proliferation
into the shadows. 

Critics say Yeltsin is so weak that Clinton would be better off talking to
acting prime minister Viktor Chernomyrdin, the man the Kremlin chief says he
wants eventually to succeed him. 

``Never have the two presidents had such a weak internal political position
simultaneously. It's a unique situation where there is talk of impeachment in
parliament in both countries,'' said Sergei Rogov, head of Moscow's USA and
Canada Institute. 

Predicting the summit would ``produce nothing in practical terms,'' he said:
``It's not even clear who they (the Americans) should talk to in Moscow and
what they should talk about.'' 

Clinton and Yeltsin have met regularly on the sidelines of international
meetings in the last 18 months but this will be their first full summit since
March 1997 in Helsinki. 

The timing is in many ways unfortunate because the leaders are preoccupied
with internal problems rather than Russian-U.S. relations. Both could face
impeachment proceedings, although neither is in direct danger so far. 

Clinton is under growing pressure to resign because of revelations about his
relationship with White Hosue intern Monica Lewinksy. He has also been busy
with a foreign policy crisis -- the attacks on U.S. embassies in East Africa. 

Yeltsin's authority has never been weaker since he became president in 1991
and his performances on the international scene have been erratic. He has
often seemed confused and his ability to grasp details at negotiations is in
question. 

Can meaningful agreements be reached in such cirumstances? Political analysts
in Moscow say no. 

``They will just be going through the ritual of meeting,'' said Russian
political analyst Andrei Piontkovsky. 

Washington initially hoped the Russian parliament would ratify the START-2
nuclear arms reduction treaty signed in 1993 before Yeltsin and Clinton held
their next summit. 

But as Russia's economic crisis deepened, the White House put aside that
desire in recognition of the urgent need to discuss Russia's growing problems.

Talks on START-2 are likely to be overshadowed by the economic crisis. Clinton
will want firm guarantees that market reforms will continue under the next
government, which may not be installed by the time he arrives. 

``Now more than ever it's critical that they get their fiscal house in order
and establish policies on the rouble, on government debt and the banking
system that will lead Russia back to financial stability,'' White House deputy
spokesman Barry Toiv told reporters on Wednesday. 

Yeltsin, 67, hopes Clinton will rally behind him as he has done so often in
times of trouble, but his hopes of winning new financial assistance look slim.

``There are no shortcuts in restoring market confidence, and the next steps
are up to the Russians,'' Toiv said. 

Russia's financial crisis has highlighted the difference in the status Moscow
and Washington enjoy on the world stage. Even so, Yeltsin will do his best to
boost Russia's standing. 

This could mean he simply restates Moscow's differences with Washington over
Kosovo, Bosnia and Iraq. He may also reiterate Russia's outrage at the U.S.
air strikes against targets in Afghanistan and Sudan following the bombings in
East Africa. 

The successful nuclear test explosions by India and Pakistan are also expected
to be on the agenda. The test brought those two countries into the exclusive
club of nuclear powers, and Russia and the United States have urged them to
show restraint. 

Clinton is likely to repeat Washington's fears that Russian technology sales
are helping Iran produce a nuclear arsenal. Yeltsin is likely to dimiss his
objections and tell him Russia will continue helping Tehran build a nuclear
power plant. 

*******

#13
Yeltsin Orders Political Role for Russian Navy 

BOARD OF "PETER THE GREAT" CRUISER (the Barents Sea), August 21
(Itar-Tass) - The Russian president ordered that the Russian Security
Council draft a plan of the political use of the Russian navy, secretary of
the Security Council Andrey Kokoshin told reporters. Kokoshin, together
with the president, is staying on board of the "Peter the Great"
guided-missile cruiser.
According to Kokoshin, due to its high mobility, the Navy is "the most
flexible military instrument of politics."
Kokoshin also noted that the recent Security Council session discussed
aspects of the nuclear strategy of Russia and at that time it also
considered the possibility of creating a North strategic bastion. "The
North Fleet," said Kokoshin, "is the nucleus of this bastion."
Today's exercise at the Barents Sea which was monitored by the
president, should show how the nucleus of this bastion acts," according to
Kokoshin.
Speaking about the cruiser, Kokoshin said that this ship with the
unique armaments "raised the might of the North Fleet to a qualitatively
new level." The cruiser, he said, has excellent electronic reconnaissance
equipment on board and in this sense it works not only for its needs but
also for the entire North Fleet.

*******

#14
Aides hints Yeltsin may cede some power to parliament

MOSCOW, Aug 27 (AFP) - Kremlin spokesman Sergei Yastrzhembsky hinted 
Thursday that President Boris Yeltsin may be willing to cede some of his 
powers to parliament, ITAR-TASS reported.
The spokesman said it would be "asking too much" of Yeltsin to surrender 
authority to the State Duma, the lower house of parliament. But he said 
that proposals from opposition deputies contained some "fresh, 
non-trivial ideas," the news agency reported.
In the wake of an unprecedented financial crisis in Russia, opposition 
lawmakers have been calling in recent days for Yeltsin either to resign 
or to cede his powers to a special inter-governmental committee.
Yeltsin has brushed off suggestions that he should resign.

******

#15
RFE/RL NEWSLINE Vol. 2, No. 165 Part I, 27 August 1998

SOME DUMA FACTIONS UNCOOPERATIVE. Chernomyrdin's attempts to
establish a coalition government is meeting with resistance
from some Duma factions. Grigorii Yavlinskii, leader of the
Yabloko faction, told Interfax on 26 August that his party
will not negotiate for seats in the government and will vote
against Chernomyrdin as prime minister. He said that the
"downfall of the ruble, which is not over, is a direct
consequence of the earlier Chernomyrdin government." ITAR-
TASS reported on 26 August that the Agrarian faction has
also threatened that it will vote against Chernomyrdin if
the two documents being drawn up by a "trilateral
commission" of Duma and government officials are not
approved in advance. Those two documents are the political
treaty between the executive and legislative branch and the
new anti-crisis plan. Chernomyrdin has been insisting that
the Duma consider the issue of his candidacy first. JAC

CRISIS TO CREATE NEW RICH, POOR. "Russkii telegraf" on 25
August predicts that the current banking crisis will trigger
a "second" large-scale redistribution of wealth. Corporate
clients who keep their working capital in banks rather than
engage in barter will suffer. It added that some will likely
go bankrupt, while those companies that operate primarily
with cash, such as export-oriented companies, will sell "for
a song to domestic investors." Moreover, the "financial
exhaustion of the center" will accelerate separatist trends
in the regions, who will be forced to rely on their own
resources to survive the current crisis, according to the
newspaper. JAC

*******